I’ve been trying to think of ways to explain the benefit of long-term investing. I’m not a big beer drinker, but given that when I do go to a pub, I’m always shocked at how much a pint of beer is. According to the ONS, the average pint of beer in the UK was £3.67 in January this year. Clearly a  national average, because that wouldn’t buy much in London.

30 Years Ago… 1989

Anyway, let’s suppose I am someone that likes to buy the occasional pint of beer. As I get older, like most people I tend to remember elements of the past fondly. Particularly this time of year as students return to University. 30 years ago, perhaps you were at University or had long since left. 1989 – the time when Nigel Lawson was replaced as Chancellor by John Major. Simply Red had a hit album “A New Flame”; Challenge Anneka had aired for the first time and Nick Faldo won the Open. A pint of beer back then was £1.03.



Let’s suppose you had £1000 you wanted to do something with. The memory of Michael Fish and the great storm closely followed by Black Monday was fairly fresh in your memory. You didn’t fancy the stock market. So you found a decent deposit account, rates were high causing problems for borrowers but great for savers at 14%.

Thirty years later that £1000 had risen to £2,080 by January this year. You had forgotten about it except for when you sighed with relief as economic recessions came, Y2K, Dotcom bubble, Korean crisis, 9/11, credit crunch – you had avoided them all.

Yet there is a problem. In 1989 your £1000 would have bought a 30-year younger you 970 pints of beer. Today your £2,080 would only stretch to 566 pints.

Your Uni Friend John had a PEP

Your good friend John from University had put his money into the UK stock market, he put £1,000 into a Personal Equity Plan, some quirky idea brought in by Nigel Lawson. He bought a FTSE100 tracker fund (ok, maybe not, but stay with me). He had to live with the same economic stresses and saw the topsy turvy workings of the stock market. However, at the end of 30 years his £1000 was worth £11,494. He hadn’t touched it (neither had his adviser) and so all dividends were reinvested. This sort of money enables John to buy 3,131 pints of beer. That’s 5 times more than your 556 pints.

Julia also had a PEP

John is fairly happy, but his girlfriend Julia at the time also put £1,000 into a PEP, but she put it all into the FTSE250 tracker. She figured that slightly smaller companies might do a bit better than bigger ones. Lo and behold, Julia’s £1,000 has turned into £20,818. Julia can buy 5,672 pints of beer, that’s ten times (10x) TEN TIMES as much as your 556 pints.

OK – Smallprint (or not) Caveat Emptor…

Admittedly I have taken some liberties with costs, charges and the available funds in 1989. The biggest liberty I really took was suggesting that people leave their money alone. They/we don’t. We all tend to fiddle around, attempting to find a slightly or perhaps considerably “better” option.

Long story short, when considering investment for decades, what on earth does “risk” really mean? The risk of the power of the money in your pocket being worth less (or worthless) due to rising prices? The risk of seeing your money stagnate in cash? The risk of seeing the value of investments rise then fall?

30 Years £1000

Monsters grow

What ought to be blindingly clear…. don’t let your anxiety dictate your financial planning and investment strategy. It is a dreadful guide to future performance. The monster at your door is inflation, however small it seems today, feed it for 30 years and it’s still hungry and likely to eat you alive.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk


Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084


If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.



Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084


If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.


970 BOTTLES OF BEER ON THE WALL2019-09-30T18:23:04+01:00

The Fuss About Platforms

Head Over Heels [81] – the fuss about platforms

You may have come across news in various papers (The Telegraph for example) about some investment platforms being costly and offering inducements to advisers to use them. I couldn’t miss the opportunity of commenting about this.

A platform is basically an online administration service. This enables your investments to be traded, bought, sold and rebalanced. Some enable you to hold all sorts of investments, others are more restricted to mainstream funds. The platform has legal responsibilities in delivering its service and providing statements, contract notes and so on. Every financial adviser that decides to use a platform on which to hold your investments, must justify why it is selected.

Money, Money, Money [76]

Some people will always see price as the first hurdle, if one platform is much like any other. Some charge a fixed fee, most charge a percentage. Most have a sliding scale, so that the more you have “on the platform” you begin to have charges reduced through a tiered charging system. However, this is your money, not a takeout meal. Reliability is crucial.

Ring, Ring..[73]

You can have a platform with rather more “bells and whistles” but invariably, this comes with additional costs. The ability to hold investment property within a pension, shares and so on, all have various additional costs. Some also charge for each type of “wrapper” which is really a charge for a product – a SIPP, Flexible Drawdown Pension, ISA etc.

Naturally these costs all begin to add up and a valid question is really whether you would make use of all the “bells and whistles”. Many will not, but some certainly will. So, selection of a platform ought to suit you more than your adviser. One of the main advantages of any platform is the saved aggravation in attempting to deal with different companies or constructing a portfolio of funds from very different investment groups. I cannot repeat what I think of some providers but let’s just say that they give the impression that they have only just come across a fax machine.

Move On [77]

One of the age-old problems of financial services is inertia. Many will stick with what they know, despite the reality that there are better alternatives. The hassle with all those forms can seem overwhelming. In addition, any adviser that guarantees that moving from A to B will be better, is delusional, the new arrangement may be considerably, better, cheaper, faster etc, but it is not possible to guarantee a better outcome. In the same way that I cannot guarantee that I will rise from my bed tomorrow, I should, but I may not.

The temptation for clients and advisers is to believe the marketing. In addition, advisers may receive helpful bits of kit to enable them to do a better job. This then begins to blindside and erode impartiality.

Knowing Me, Knowing You..[76]

So, what do we do at Solomons? Well we pay for all the tools we use so that we can deliver the service we want. These evolve. This year I have started to use at least 3 new different tools. I’m aware of bias and so we get an independent company to research and assess platforms for us. We do not influence the research or results. We provide details about who we currently use and an overview of the sort of clients and their holdings that we have. We do this once a year.

Most of our clients do not need all the bells and whistles, so we use platforms that suit their requirements. There are lots of unused funds, but that’s not the same thing.  If I want to buy a suit I go to a shop that sells suits, I don’t by them all, some would be too small (most) and some too large, wrong style, colour and so on. That does not mean I am paying for the other suits, merely going to somewhere to obtain what I want.

Another Town, Another Train [73]

If there are good reasons to change your platform, we will advise you to do so. There will not be any new costs because we treat this as a part of the annual fees that we charge for your investments on a platform. All the platforms we have selected to date do not apply exit charges, unlike Waterloo [74]. This was done deliberately.

Cheapest is not best. Back to the suit buying… (surely you bright folk get it) price is one element of the purchase. Does it do the job? Well, when it comes to technology, sadly, all too often platforms break, which is more than a minor irritant when attempting to comply with regulations, designed to protect investors, albeit often with utterly daft realities.

The Winner Takes It All [80]

Good platforms are about two things – sustainability and innovation. The price differential between good platforms is nothing like as significant as these two. Is their business model sustainable? Most platforms do not make a profit, which to put it bluntly means that something must change. That’s just The Name of The Game [77]. Those that do not innovate will eventually be left behind, and when your business is essentially a technology solution, that is a bad business plan.

In summary, we do not use platforms because of the tools they provide, or any other incentives. We will move you from one platform to another if there is good reason to do so. All platforms that we have advised, do not apply exit charges. We tend to only use platforms where the bells and whistles come at no extra cost or are not charged if not used. We like innovation but above all, the business model of the platform needs to be robust.

When All is Said and Done [79], we look after our clients for decades, not months or a couple of years, but On and On and On [80]. Decades. So there seems to me to be no point in ripping anyone off. What goes around comes around and all that…. and with the idea of A to B, platforms and things coming around again, its all about money, money, money… so here’s the trailer for Mamma Mia 2.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Email me to get in touch
The Fuss About Platforms2018-07-23T15:56:33+01:00

What’s the row over pension charges now?


What’s the row over pension charges now?

You may have been listening to Radio 4 or perhaps seen the TV news, Steve Webb the pensions Minister is doing the media rounds having announced that charges on pensions should be capped at 0.75% which he announced yesterday and has been plugging his cause since. There is no doubt that there are many very expensive pensions and I would go as far to say that there have been lots of “rip off” pensions. There are too many vested interests, this has broken out in a row over pension charges.

Is there any such thing as a free lunch?theawfultruth

We now have various think tanks and Providers all taking the opportunity to price to the bottom and distance themselves from “rip off pensions” as quickly as possible. An assortment of spurious views about the impact on the final value of a pension fund is now doing the rounds. The vast majority of this is utter drivel. We are all to blame for this (advisers, providers, investors, regulators and Governments) why? Well because over the years we have colluded in the deceit that anything to do with financial services is free. It isn’t. I had hoped that this delusion would have been put to bed by the introduction of RDR, yet AE (auto enrolment) exposes the deep resistance to a shift in mindset.

Can a pension have low charges?

It is perfectly possible to use a pension that has low investment charges and by low I mean less than 0.30%. However this is merely one element of the piece. The administration costs are high due to well intentioned regulation. The “sales costs” are high due to well intended regulation. The regulation is designed to protect the investor and the wider market.

Why does AE have unique charging problems?

The unique problem that AE brings is that there are some very tiny premiums. Suppose you earn £10,000 a year and in several years time you will have contributions of 8% a year (£800) a cap of 0.75% on this would be £6… ok its based on the value of your fund, but given that most will not be more than £4,000 that’s £30 to cover the investment and administration for the year (and by the way you can opt in and out, switch funds, vary the payments creating more administration). It’s a nightmare for pension providers. Some have come up with some low cost solutions (hardly any investment choice) and some have a fixed monthly fee. Well even at £1.50 a month (£18 a year) that’s a higher proportional charge on a small fund of £1,000 (1.80% to be precise). The Government backed (taxpayer funded) NEST is loss making and will be for many years. This is typical of Whitehall delusion that they then expect commercial enterprise to replicate. We all know Governments are not good at maths… don’t we?

The solution is right under their noses

Stakeholder pensions (with low charges) failed because there were other better alternatives at a lesser or more competitive price. The Government (this one and the previous one) believe compulsory membership isn’t quite ok, so we have a “difficult not to join” approach. However, I would argue that today employers and employees already have a proper pension system. It’s called National Insurance and the State pension. We know it’s not good enough, so why not simply make it better for everyone? It has no investment risk and is already set up. For those that want (and need) more than the State pension (most of us) then there are plenty of very good pensions around, any decent adviser can structure a sensible plan – but it is not free… neither should it be. If we want to create a society of that is independent of the State, we all need to face some adult truths.

Dominic Thomas: Solomons IFA

What’s the row over pension charges now?2017-01-06T14:39:43+00:00

It happened on the way to Essex (warning: dangerous information)

 I was in the car, on the way to a client listening to the radio. Possibly I should have stuck with my own music, but decided to listen to some “news”. It was Thursday (yesterday) and the media was agitated about pension charges. The panel discussion was about as badly informed as it gets and if this was designed to reduce or remove confusion about pensions, then it failed spectacularly even on explaining the difference between a Defined Benefit and a Defined Contribution pension and proving the adage “a little knowledge is a dangerous thing”. Why a sensible IFA wasn’t asked to speak I have no dangerous-to-knowidea. So I had better explain.

Firstly there are broadly two types of pension. A Defined Benefit, so called because it defines what you will get. More commonly known as a final salary scheme. This sort of pension is based entirely on your service and your final salary. Each year of service in such a scheme is built up at the rate of a fraction each each. So take a doctor or nurse, 1/80th each year. So a doctor or teacher that works for 30 years, the sum is 30/80ths (37.5%) of their final salary = annual pension (for life). Ok these schemes are changing, but the principles are remaining pretty much the same.

The other type of pension is an investment based pension. If you are employed and in such a scheme it is often called a defined contribution scheme… it won’t surprise you to learn that it is aptly named, because the contribution (the amount paid in by you and/or the employer)  is defined – eg 5% of salary. However as its just an investment, the value of the pot will change… daily. So the value you end up with is based on what the pot is worth.

The row is over the charges applied to investment based schemes and whether they actually offer value for money as a result. A lot of hot air on the radio resulted in my exasperation fogging my windscreen, not a good idea on the M25 when it is grey and wet. There were a lot of inaccurate statements and very little placed into a context. So at the risk of boring you, I will attempt to do so.

Back in the 1980’s investment based pensions began to take the place of final salary schemes. Why? because of the liberated stock market (big bang) and a desire for people like you and I to capitalise on capitalism. There was also a growing (albeit muted) appreciation that people are living longer and therefore the old style final salary pensions were going to have to pay out for longer, costing employers a lot more money. Divorce rates were also rising, meaning that the spouses (and ex-spouses benefits) might also last a very long time. The rise of retail investment funds (Unit Trusts) which only began life in 1931 (thanks to M&G)  became more widely available. Pension companies (a considerable number back then) ran their own investment funds using their own fund managers. Financial advisers were largely sales people that worked for pension providers. They were paid to sell pensions (and other products) from commission in the same way that pretty much every other type of selling works… the more you sell the more you earn (as a salesman/person)

Now you and I might think it a pretty bad idea that people are paid a commission to sell financial products. The advantage of hindsight is a wonderful thing isn’t it. However, most people, even in 2013, do not wake up and think that they should start a pension, or take out life assurance and sadly some people (most) need to be “sold” the wisdom of doing so (unless it isn’t appropriate for them = very few people). So “advisers” needed an incentive to incentivise the public. Yes it was a silly system, but in January it all changed. Every adviser must charge fees – properly. Surprisingly people are not jumping up and down with enthusiasm about this (on both “sides”).

Taking a step back in time, commission was paid based on the products type, the premium and the term of the “policy”… more for more. Then factor in some pension companies thought that they could offer a bit more for the “same thing” .  This led to bias (you are not surprised). Bias between financial product and also financial provider. Simple example… you have £300 a  month to invest. You could do so into a variety of “products” a pension, an endowment or a PEP (old form of ISA). The commission might range from £5,000 to £9 for a PEP.

Eh? well endowments paid very large commissions, they were generally 25 year policies and if I recall paid more than a pension. A pension though has tax relief but couldn’t be touched until 50 (back then) most though retired at 65, an extra 15 years on the policy term (commission is related to policy term too). A PEP, well it doesn’t have a term, its not a policy. It was a single investment of £300 that happened to recur. 3% of £300 is £9… each month. Not many advisers were going to advise a PEP not because they thought it was bad, but you would have to sell a lot of them to make a living. Other products though were “contracts” so you were agreeing to pay for 25 years. The product provider (names you know and possibly loathe for a variety of reasons) had a separate agreement with the adviser (well the adviser firm). Rather than pay £9 a month, they paid it upfront (£9x12monthsx25years = £2,700) for example. How? (with only £300 a month going into the pot)… it would surely take 9 months before £2,700 was even in the pot right? Well thats where some very “clever” accounting and charges and types of units comes into play. The details varied from provider to provider, making it hard for even good advisers to accurately compare one with another. In short, the commission was really a loan, if the investor (you) reduced or stopped paying, the commission loan would have to be back in full or in part.

This approach led to two key things. Firstly, people took out policies that they didn’t need or couldn’t afford. As a result advisers had to pay back commissions, invariably leading to a very high rate of staff turnover. Secondly there was an obvious pressure to sell, sell, sell… which meant a focus on new business and not servicing existing clients. The regulation at the time was as divided as the industry, independent advisers regulated by FIMBRA and Tied advisers by LAUTRO. The latter working for the insurance company, the former doing your shopping. However, even being independent did not prevent bias between solution (product) and provider selected. So in 1995… that’s 18 years ago!  commission disclosure was introduced and at around the same time a single regulator was introduced (the Personal Investment Authority – PIA). You (and the adviser) could both see what the adviser would be paid. However both relied on standard projected rates of returns to work out which provider was cheaper than the other. Still smoke and mirrors, but in all honesty, nothing to do with the advisers.

Stay, with me…if you can. The regulator then decided that advisers should write proper reports, “reasons why letters” and also provide better data about who they were placing business with. The profession of advice began to evolve (slowly catching up with the IFP Institute of Financial Planning, born in the UK in 1984).  The PIA became the FSA in 2001 and with it decided to end polarisation (tied/IFA) and added a third option “multi-tied” which confused things even more and enabled certain high street Banks to give the impression that they weren’t only peddling their own stuff. However to be independent, you had to at least offer clients the option of paying a fee rather than a commission. In January 2013, advisers were to be defined as either Independent or restricted and with both options, if you are arranging any form of investment, a fee must be agreed and paid – not a commission. Hooray, we finally got there and with another version of regulation – the FCA. In practice the regulator has said, your advice must not be biased and your client must agree the amount they pay for it. The results are yet to be seen, but in reality, most people cannot or will not pay for financial advice, because most people’s experience has been bad, sold duff products, that didn’t deliver and weren’t serviced.

The role of the adviser has altered dramatically, for all but the dinosaurs or stupid. A financial adviser is ADVISING you what you should do. A good adviser will be doing proper cash-flow planning, working with you on your actual goals and figuring out what you need to do to get there. A great adviser will also be helping you to assess risk and the returns you need, adjusting your portfolio and minimising the number of bad decisions you would otherwise make. A brilliant adviser will also keep you disciplined and focussed on what your goals are and help you avoid the 98% of the financial media that is a complete red-herring to your goals and life story. These people tend to call themselves financial planners, wanting to emphasise the planning work and disassociate themselves from selling products.

In short the skill set has evolved. You wouldn’t believe the level of research that is done these days. This is possible because of better technology and frankly better skills and a much better context. The truth, as painful and sad as it may be is that we have all messed this up at some point. Investors in believing in “free advice” and advisers in not being clear that it wasn’t, perhaps afraid to be. The product providers are guilty of making highly complex charging structures in order to pay for sales, and they have also effectively bought and bribed business. The fund management industry has overcharged and underperformed, manipulated data and set in motion a system that rewards big bets. The regulator has invariably focussed on the wrong things and hasn’t evolved as quickly to cope with some very complex financial instruments. In fairness though, it has had to take on more and more – now it is also taking on regulation of consumer credit – everything from a washing machines to a Ferrari (or Aston to Zanussi). However, the myth that is still perpetuated is that investing is easy and it is cheap. It is neither. I don’t care what massive “discount brokers” say or “money saving experts” they have all come from the same place and are focussing on the wrong things.

So (if you are still with me) back to the radio show. Statements about charges on pensions are very flawed, as flawed and silly as the charging structures themselves. Old style pensions were very pricey by today’s standards. Sometimes it is worth getting out of them, sometimes it isn’t. This needs careful consideration. Suggesting that 25% of a fund will be wiped out by charges is a foolish thing to say. It won’t, because you cannot invest for free. The charges are projections about a future that will not even happen. Returns are unknown. You are unlikely to have the same investment in 30 years time that you have now. The real menaces to investors are these:

1. Not reviewing your portfolio at least annually (and not being disciplined)

2. Not having clearly defined goals and objectives

3. Not assessing your attitude to risk and ability to cope with market volatility and therefore figuring out what returns you can accept and therefore what it will produce.

4. Running out of time, or money.

5. Not having a proper financial plan, that tells you when you have reached your goal and have “enough” (by your definition of “enough”)

6. The utter rubbish talked,written, recorded,filmed about money and investing

7. What the FTSE does is largely irrelevant to you

8. Government policy that messes with and creates a tax regime so complex that you need to pay an expert’s expert to decipher it.

9. Inflation, inflation, inflation, inflation…

10. The myth that you can get something for nothing, falling for the latest investment fad or fear.

You can have a successful investing experience, but you also need to be realistic. There are, and always have been some good advisers, some good fund managers, some good product providers and some good regulation. Life is not as binary as many would like to suggest. Over the years I have met some thoroughly decent people from all these camps. I have met advisers that I would trust with my own money – or my widows/children’s.

What’s more, this is not new. I set up my firm 14 years ago. I created a product neutral playing field, charging the same fee structure for investing in any form, in any product. I removed commission from new protection policies (which by the way is still available to advisers). I began to develop a proper investment philosophy and service and gradually began to use proper cash-flow planning. I have evolved, grown and learned. I made mistakes along the way, taking too long to improve in some areas and doing others too soon. That’s life. However I have remained consistent to the notion that my job is to improve my clients position, not make it worse. My long-term interests are best served by serving yours. Yes the financial services industry has a lot to answer for, it is miles from perfect.

One final point, here in Britain we seem to think that someone else will pay, that things are actually without cost. The very real and difficult truth is that we don’t really want to acknowledge that things have a price. Whether this is social security, care of the elderly, good education, quality teachers, good government, protecting children on the internet, a watchdog for the police, media, government, NHS, utility companies, stock market, financial advisers…or helping refugees and decommissioning weapons. Everything has a price and pretending that it doesn’t or it can be cheap is… well its like that big river in Egypt…. denial.

Footnote: By the way, the regulator does not think investors are capable of working out charges in a percentage format. They want charges expressed in monetary terms. So what hope do we have if people cannot even calculate what 1% is?

Dominic Thomas – Solomons IFA

It happened on the way to Essex (warning: dangerous information)2017-01-06T14:39:46+00:00

Skandia Increase Charges

Skandia Life are increasing charges on several of their older policies. Skandia call this the monthly maintenance charge, most call it a monthly policy fee. As inflation appears to be falling, it is a little surprising that Skandia have decided to generally increase their charge by over 5% in most instances. However be advised that these charges apply to pretty old style policies. If you have one of these old style policies, you will be contacted by letter from 22nd October. Skandia have historically only worked with independent financial advisers, so the policies listed below are those that you would have taken out through an IFA at some point in the last 20 years or so.

Skandia Increase Charges

Life products Percentage increase
Maximum Investment Plan Maintenance charge to increase from £3.27 to £3.45 a month. 5.5%
Skandia Endowment Plan Maintenance charge to increase from £3.27 to £3.45 a month. 5.5%
Skandia Lifetime Plan Maintenance charge to increase from £3.27 to £3.45 a month. 5.5%
The Skandia Plan Maintenance charge to increase from £3.27 to £3.45 a month. 5.5%
High Investment Bond Maintenance charge to increase from £40.56 to £42.84 a year. 5.6%
Pension products Percentage increase
Executive Pension, Free Standing Pension and Personal Pension – series 4 Maintenance charge to increase from £2.85 to £3.01 a month. 5.6%
Executive Pension, Free Standing Pension and Personal Pension – series 3 Maintenance charge to increase from £4.33 to £4.57 a month. 5.5%
Executive Pension, Free Standing Pension, Personal Pension and Trustee Investment Plan – series 2 Maintenance charge to increase from £4.17 to £4.40 a month. 5.5%
Personal Pension Income Plan – series 1 Maintenance charge to increase from £4.17 to £4.40 a month. 5.5%
Executive Pension, Free Standing Pension and Personal Pension – series 1 Maintenance charge to increase from £4.17 to £4.40 a month. 5.5%
Executive Pension Plan Maintenance charge to increase from £4.06 to £4.28 a month. 5.4%
Skandia Pension Plan Maintenance charge to increase from £4.06 to £4.28 a month. 5.4%
Self Administered Pension Plan Maintenance charge to increase from £4.06 to £4.28 a month. 5.4%
Skandia Professional products Percentage increase
Executive Retirement Account Fixed rate administration fee to increase from £3.59 to £3.79 a month. 5.6%
Free Standing AVC Account Fixed rate administration fee to increase from £3.59 to £3.79 a month. 5.6%
Personal Retirement Account Fixed rate administration fee to increase from £3.59 to £3.79 a month. 5.6%
Select Personal Pension Account Fixed rate administration fee to increase from £3.59 to £3.79 a month. 5.6%
Personal Retirement Income Account Fixed rate administration fee to increase from £3.59 to £3.79 a month. 5.6%
Skandia Increase Charges2017-01-06T14:39:53+00:00
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