Facing the questions

It occurs to me that as a nation, we are avoiding many rather important questions. I love Britain and the freedoms we enjoy. I want a fair welfare system. However, until politicians, economists, financial advisers and the public at large face a few important questions, we seem destined (in the main) for more people reliant upon State support. In essence we collectively seem to agree that it is better for each of us to gain financial independence from the State or any other source of funds. There are variety of questions that come to mind, which challenge this assertion.

  • Why is it easier to get into debt than to save?
  • Why is it easier to borrow money at 100%+ interest than 4%?
  • Why is it easier to open an online gambling account than an ISA?
  • Why do more people play bingo than save for their pension?
  • Why do more people spend more money on a mobile phone than invest into their pension?
  • Why do so few people write a Will?
  • Why do more people take out travel insurance than suitable financial protection?
  • Why has betting become so popular and investing so problematic?
  • Why have we become such a litigious society, yet unwilling to take personal responsibility?
  • Why do so many people complain about low interest rates, yet do not invest?
  • Why is the financial community obsessed with the risks of investing but not the purpose?
  • Why do so few people take action?
  • Why do so many fail to review their arrangements?
  • Why do so many pay for a gym that they don’t attend?

To my mind, it seems that financial planning is rather like a diet. I accept that this is a contentious statement. Most people do not like dieting (by which I mean observing, controlling and restricting what is consumed). A “healthy” diet is only one part of the equation, we all know that regular exercise when combined with a good diet will yield results. I am someone that wrestles with this very issue. The problem most of us have is that we want quick results, we are generally unable to take a long-term perspective. Little wonder, given a culture obsessed by image and reaction. It doesn’t really matter how much you spend on a gym, how many books you read, how many videos/DVDs you watch, how much kit you buy… it all boils down to what’s going on in your head. Despite many motivational guru’s that have some considerable results for a few people, we all know that there are very few short-cuts and its all about a long-term perspective and a change in lifestyle. A key question is really are we prepared, willing and able to change?  I don’t subscribe to the belief that this is a simple “change of attitude” but it certainly requires change.

I am open to thoughts, insights, suggestions and answers..

Dominic Thomas: Solomons IFA

Facing the questions2025-02-03T14:48:50+00:00

Rip off Britain – the end is nigh?

Today the FSA launched a consultation paper about rip off Britain, sorry I mean, how to regulate credit companies. By credit companies, I mean those that offer money to you and I. That includes those wonderfully cheery puppets and reworked versions of old familiar tunes to bombard us with the opportunity to borrow. The Government have finally drawn up some headline principles (Lord knows why it takes politicians so long to do anything that really matters) and put this into the safe hands of the FSA (not to be confused with Food Standards Agency).

So the FSA has outlined its initial thoughts and guidance in CP13/7 a consultation paper. You really ought to read this if you have the vaguest concern about the easy credit that is available at 1000%. Mind you, I’m guessing if you are like most people, the small-print is often overlooked (its small right?). You always read the small-print… except for those wretched 1000 pages from a well known online music rental company that you thought you were buying music from (and many others) as you tick that, well.. yes you did read the terms and conditions..but you didn’t. CP13/7 has 201 pages – good luck. Designed to be thorough or off-putting… you decide.

So why is this important? well first of all because people that lend money need regulating. This is and always will be, the most obvious form of exploitation in Britain – providing people that cannot afford something with ability to spread payments that feels less painful, but is invariably 2 or 4+ times the original price. This is the most basic financial planning building blocks – yet our politicians, think tank experts all believe that borrowing is the way to get us out of recession. Paying off debt is the opposite of what Government wants us to do personally, but precisely what they want us to do with public finances. Spot the irony?

Ok, we don’t want a nanny State, well I don’t, but I would like a society that enables people to borrow money sensibly and not at exorbitant rates of interest, and yes provided by institutions that are accountable rather than the local mob and bully. Sadly, when people get into money problems it isn’t very easy to get out of them and the numbers are continuing to go in the wrong direction for those that are in the deep stuff. This then comes back in two forms – more assistance from the State and more money owed, never to be repaid to businesses of all sizes, threatening viability and so the cycle continues. At some point, someone has to be told a truth. No. But a cold reality is not enough without a proper plan and strategy to recover. Obvious lessons from AA or any addiction teach us this (we have to alter belief and behaviour, which is more complex). This is of course precisely what the public finances have been grappling with, not just here but also in Europe and, well everywhere. Whilst we might want to blame “the bankers” (without really understanding what that means) actually this is the result of not living within our means and this is precisely why having a financial plan is not just “nice to have” but frankly pretty vital. So I was fairly amazed to learn that most financial advisers still don’t do any proper financial planning for their clients (that means cash-flow planning). I will guess that few will offer thoughts to the FSA and this will be yet another missed opportunity. Rip off Britain (well parts of it) will probably continue to thrive…unless you and I take some action…over to you.

Rip off Britain – the end is nigh?2025-02-04T10:56:55+00:00

The Truth About Mortgages

1997: The Borrowers – Hewitt
The FSA published its review of the mortgage market on Friday. This did not make happy reading. Since the credit crunch crisis began (and yes I do not believe it is over) the difference between the rate that people borrow at and the Bank of England base rate has widened. Prior to the crunch, the average difference or “spread” between 2005-2007 was only 0.50%, it is now above 3.0%. The difference might be described as profit to the lender.
I’m still amazed to see that as of Q1 2012, income is only verified for around 70% of  “low risk” borrowers – meaning that they are remortgagers and movers. “Higher” risk borrowers such as first time buyers have their incomes verified in 87% of cases, which the FSA think is an improvement on the lower level of around 70% in 2008. I don’t see why income is not verified in every case, unless there are exceptional circumstances. Even assuming sensible lending based on verified income, this would suggest that there is a margin for error of around 30% which is hardly inspiring confidence in the market.
Financial Advisers (rather than Banks) used to arrange around 64% of mortgages, now this has reduced to around 46%-56% according to the FSA. This reveals a growing market share of mortgages sold directly to consumers by Banks and Building Societies.
In terms of what people can borrow, there seems to be a shift by lenders, some of whom are lending 4.5x to 5.5x income. However compared to pre-crunch, lenders are not offering as many high multiple lending. This is precisely why a specialist mortgage broker (not me) is required to source the best mortgage based upon your circumstances, particularly as the number of mortgage products is returning to pre-crunch levels, but still lower at 2,991 different mortgages available. This is despite the fact that there are still relatively few mortgages requiring a deposit of 5% or less, although more are becoming available. The bulk of borrowers  now have 25%-50% deposits. The proposition of interest-only mortgages has also reduced considerably, though this was a general trend over the last 10 years. The balance of power has altered, in part due to the collapse in the number of financial advisers offering mortgages, (which would include ourselves) almost halving since 2005. The result has been that the top 20 mortgage lenders have gained an increased market share, now at 94% of the entire mortgage market, I suspect you could name them all. On the whole, though mortgage sales have remained fairly static since 2009 at less than half the amount it was in 2005.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
The Truth About Mortgages2025-02-04T11:08:15+00:00

Mortgage Comparison Tool

2009: Which Way Home – Cammisa
Which? Money has launched an interactive mortgage tool. They claim that this covers the whole of the market, which by my definition means every possible mortgage available. I’m not entirely convinced, but it is certainly a good place to start your research once you have spoken to your existing lender.
 
Frankly my advice is to speak to a mortgage broker and I do know a good one that I can refer you to (we don’t arrange mortgages). You can spend hours doing your own research only to find that the lender doesn’t really deal with people like you because of something about your income, credit history or the property. If you are happy spending your time doing this sort of thing, then fine, but for those that want to spend their time enjoying life or otherwise working on your life, then a mortgage broker can be a very worthwhile investment. Which? freely admit in their FAQs that their results may differ from those of a mortgage broker as “they will reflect things like availability and affordability in their advice”- which is surely the point of a mortgage search to my mind. However, this is a helpful tool.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Mortgage Comparison Tool2023-12-01T12:22:20+00:00

How To Clear Your Mortgage

2008: Fix – Ruspoli
If you thought interest rates were low and can only go up, then give a thought to HSBC’s new 5 year and 7 year fixed rates. These have been set at just 2.99% and 3.99% respectively. This gives an indication of what HSBC think will happen to interest rates. The rates are available to those with 40% equity in their home. If you have a mortgage, it is worth reviewing it with a mortgage broker who should be able to source a suitable rate and product for you. I’m not a mortgage broker (way too stressful for me). However, we provide a debt elimination programme for clients. Typically this is a properly put together plan to clear your mortgage (and any other debt) over a short period of time, certainly much shorter than the original mortgage schedule.
Clients tend to be in one of three programmes (unless they are a business owner, where things are a little more complex and certainly different). In essence the service we provide depends on your life stage, by that I mean financial life. This is debt elimination, wealth accumulation and finally wealth preservation. Now, there may be some overlap, but in general the overarching goal or focus will be on the associated stage.
A mortgage is a big commitment, clearing it feels very liberating and can open up new possibilities for you – perhaps changing your role or even your job, now that you don’t have to pay a mortgage each month. I also encourage clients to regard their house as a home, not as an investment. It doesn’t form part of their portfolio. Indeed it only ever could if equity is released from the house, either due to selling and moving to a less expensive property or using an equity release scheme, which is generally an action of last resort and only available to those in retirement.
So if you would like to know more about our debt elimination programme, get in touch (it is not debt counselling). If you want your mortgage reviewed, I can put you in contact with a great mortgage broker.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
How To Clear Your Mortgage2025-02-04T15:00:04+00:00

The Value of the Third Eye

1942: Thru Different Eyes – Loring
Times are harder. It is often difficult to face up to harsh facts. I have been working with a lovely couple for several years and we recently reached the point, where some difficult things needed to be said. They had been having a very tough time. Business was not going anything like as well as hoped, for a variety of reasons, many of which were beyond their control. Sadly the situation needed some significant surgery and resulted in having to sell and downsize the family home. This was very difficult as you might imagine (and many that run their own businesses can imagine such a scenario).
Unfortunately the advice from their Accountant and Solicitor was good but wrong and they were due to follow through on it. Fortunately our meeting revealed further information and deeply held values that the other professional advisers had missed. It wasn’t their fault, they were not “lacking”, merely that a good financial planner has a very different relationship. It is perhaps surprising to many that the Accountant was focused on the money, as was the Solicitor – but missed the bigger picture. Their advice was “fine” but wrong in the context of what was really wanted and needed, because this is rarely within the remit of either, yet many might presume that it was, because, to simplify matters, it was about protecting the home from a future that may not go as well as hoped. I’m not for a moment knocking Accountants or Solicitors, merely attempting to explain that as a financial planner (a good one) my role is to help clients to verbalise what they really want from life and then provide solutions. This involves looking beyond the presenting problem and invariably goes far deeper and then shapes the advice from the client’s real perspective.
I work with other professionals like Accountants and Solicitors. My role is to help each perform their own to the best of their ability and it is helpful that like most financial planners, I can re-interpret what other professionals say to a client in a way that makes sense, which is quite an unusual position to be in when my own profession is known for talking in jargon all too often.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
The Value of the Third Eye2025-01-28T09:56:53+00:00

Good Bank… Bad Bank?

1945: The Lost Weekend – Billy Wilder
The most expensive financial costs are probably your pension, closely followed by a mortgage. So today’s news of further lenders increasing their standard variable rate, despite the Bank of England retaining their base rate at 0.50% will cause many to question the ethics of Banks again. Today, Clydesdale and Yorkshire (readers of this blog will know that they are part of the same organisation) have decided to increase their standard variable rate from 4.59% to 4.95% from 1st May. This will mean increased borrowing costs for about 30,000 of their customers. However there is a slight twist, they also seem to suggest that if you wish to move to a different lender and do so before the end of July any exit fees (early redemption penalties) will be waived.  One might question why lenders would be helpful, I would suggest that this is all part of a timed strategy to tidy up a mortgage book and continue to work on improving their own balance sheet.
It often surprises me when I read industry statistics about how few people review their mortgage, yet will seem to get very worked up over the price of petrol – which is an insignificant cost when compared against a mortgage. This is something that as a financial planner I would encourage you to do. Solomon’s do not arrange mortgages, but we can put you in touch with an excellent mortgage broker that can help you. However the first thing you should do is to contact your existing lender to determine what deals they would offer you as an existing customer, once you have this information a full assessment of the market will have some context.
Banks and Building Societies are set up to make money from you and whilst it may appear to be a significant effort to move from one to another, these days things have improved. The market is a competitive one, but most rely on your inertia to make the bulk of their profits, which in turn makes them lazy and makes for a less competitive market. So as you head off for the weekend, get out your mortgage statement and have a look at your rate, compare this against a Bank of England base rate of 0.50% and consider how much over the odds you are really prepared to pay, then consider how you might better use some of this to achieve other goals, even if its just being able to feel a little better at the petrol pumps.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Good Bank… Bad Bank?2025-02-04T16:02:42+00:00

What the Dickens?

1935: David Copperfield – George Cukor
Financial Planners often quote Mr Micawber a character created by Charles Dickens who would be 200 years old today, born 7th February 1812. The quote often referred to is commonly known as the Micawber principle.
“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
In short, spend less than you earn. However Mr Micawber was also something of an optimist, or hopefully expectant, asserting that “something will turn up”. However Micawber experienced various financial difficulties and eventually emigrated to Australia. Whilst fresh starts are certainly possible, emigration is perhaps a little extreme in 2012, though I’m sure that many Greeks may be considering just this over the coming weeks. Most of us probably would find ourselves rather like Oliver Twist asking for a little more. However a good financial plan will help identify the bumps in the road before you reach them and also help provide information about how to reduce or even avoid them entirely. Good financial planning is not optimistic maths, but the thoughtful and realistic application of assumptions (which are reviewed) and then structured around your specific goals and ambitions, paying close attention to your personal values.
 
There are celebrations throughout the year to mark the 200th birthday of one of England’s most celebrated writers. The Charles Dickens Museum in London is running various events throughout the year.
 
 
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
What the Dickens?2025-02-04T16:05:21+00:00

More Unintended Consequences?

1932: Winner Take All – Roy Del Ruth
The efforts of Europe to sure up the way that everyone borrows money and how Banks lend money has broadly been welcomed. After all, it was primarily the overborrowing that caused the credit crunch. You may be aware that Banks need to lend more carefully… which in theory is a good thing, at least if one assumes wisdom and care are linked in this instance. As a result they have to hold more reserves themselves and effectively ask borrowers to do the same with larger deposits. Interestingly here in the UK loans are not treated as being in default until they are 180 days in arrears. In Europe and in the new proposed legislation this is 90 days… so what? well the so what is that Banks use this as a part of their risk pricing and consequential fees to the borrower. In short, if the rules are applied in Britain in the same way, without doing anything else, we are likely to see borrowing costs increase. I dare say that Banks will take the opportunity to charge more because more work needs to be done proving the loan is “safe” and ultimately it will be borrowers that lose out and I doubt anyone will be too surprised that Banks will probably come out on top.
As you hopefully know, I do not arrange mortgages, this is work that I tend to refer to a mortgage broker. However, how you plan to repay debt, with a proper debt reduction strategy is a different matter. Importantly I believe that most debt is not good, so it should be minimized or cleared, there are occassions though when debt can work powerfully for your advantage. But be warned, utlimately all debts need to be repaid. Lenders tend to hold property as security and here in the UK, debts must be serviced with significant consequences for those that fail to do so.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
More Unintended Consequences?2025-02-04T16:04:52+00:00

Performance Anxiety? What Do You Measure?

2005: Rent – Chris Columbus
Last weekend a friend commented to me how good it was to meet some positive young people (by which she meant teenagers) who had been at the same event as us. It seemed that she was surprised by this, given the general way in which teenagers are depicted in the media as the cause of most social ills, a sadly inaccurate assumption held by many. Last night my experience of bored teenagers was rather different and one that merely pandered to the tabloid stereotype. On reflection, their behaviour, however depressing and deeply frustrating, needs understanding. Their poor form of “protest” merely likely to encourage deeper enrenchment of outlook by both “adult” and “young adult”. A thought that occurs is that inspriation is somewhat lacking in a world that largely seems beyond their reach. This is where youthworkers, mentors, parents and teachers can all have a vital input. However, it is not just these people, we are all to some extent role models, whether we like it or not, we are the example. I am also meant to be the example, which to my mind means how I conduct myself, run a business, parent, manage, relate and so on. Like everyone else, (footballers take note) I get this wrong, often. Sorry! (Bankers and Politicians take note).
I wonder what sort of example I will be setting to my own children this Christmas. They know me well and would spot fakery, but equally notice genuine attempts to improve and be better, of course forgiveness is the key ingredient for this, being given another chance (again). For many people Christmas is not a joyous occassion, it is a time of stress and performance anxiety, will the food be ok? will the presents be what they wanted? enough? There are many that this year will already be regretting having spent too much – and we still have a few days left to spend even more. Families can be places of comfort and warmth, but they can be places of deep discomfort. The marketing hype of the “perfect Christmas” has little to do with reality or of course Christmas itself and can lead to further frustration that life is not all it is cracked up to be. The assertion that money will solve this awareness of “lack” is evidently misplaced, but as Jonathan Larson suggests in his muscial “Rent” a post-modern reworking of La Boheme (and one of my favourite musicals, but most disappointing translations to film): “I think that they meant it when they said you can’t buy love, now I know you can rent it” (from the song I’ll Cover You). It may sound like an odd thing for a financial adviser/planner to say, but investing for your future, has relatively little to do with financial wealth. I’m no believer that there is some sort of nobility in poverty, I believe in creating wealth and financial independence (I hope that is obvious), as a financial adviser I help measure how well your investments are doing, and for those clients that permit the discussion, help make sure that any financial plan is deeply rooted in your values – which has little to do with the size of yacht you want, but the depth of experience and relationships. As someone once put it – making sure your funeral is well attended.
Just a thought to leave with you for Christmas as perhaps you also reflect on yet another set of New Year resolutions. I guess that part of the reason behind the blog is to help you to see who is behind the marketing of the firm, which I think requires a certain level of self-disclosure, albeit in a “professional” capacity. Here is a video from Rent, the song called “Seasons” (a repeated idea in the score). How will you measure your next 525,600 minutes?
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting
Performance Anxiety? What Do You Measure?2025-02-04T16:05:22+00:00
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