NFT – NEW FAIRYTALE

TODAY’S BLOG

NFT – NEW FAIRYTALE

Perhaps you haven’t heard about NFTs, if not give yourself a pat on the back. However, it’s possible that you have seen something online or had a younger person mention it to you and perhaps it left you a little perplexed. I am not a fan. To me this is yet another of “The Emperors’ New Clothes”. I am concerned that a lot of people will say goodbye to their hard earned savings for fear of missing out and not understanding investing, in a culture that appears to tell us not to invest in the stock markets. Give me a moment and I will try to explain why.

One of the main reasons for people being scammed is due to a fear and lack of understanding about the stock markets. The market volatility is regularly reported by what passes as news, keeping you informed about the latest FTSE100 movement. “Billions were wiped off the markets today” is a phrase that regularly rolls off news presenters’ tongues, yet rare is the day (have I ever?) when we hear the “billions wiped on”. We are all kept in a state of anxiety about impending doom and it is quite deliberate. It gets your attention.

SO WHAT… HOW DOES THIS ENCOURAGE SCAMS?

Well, fearing the investment of your money in the most regulated, scrutinised exchange, where data is published and reviewed every day of the year and has been for decades, it seems that the volatility and the anecdotal “I lost money” or “my dad lost money” triggers the big red panic button that most of us have. So many turn to alternative forms of investing in the mistaken belief that they are less ‘risky’ (in fact some seem to be a ‘sure thing’). Oh, and for good measure, we humans are impatient, we love a happy ending and have a tendency to ignore the hard work that went into creating one (if it even is an ending). Or to put it another way, to approve of and want successful investments once they have happened.

INVESTING IN REAL COMPANIES

When you invest money into the stock market or funds of equities (as is more likely) you buy shares in companies that trade internationally. They do so by making or providing goods and services that we want, need or require. As markets are generally competitive, they strive to improve what they do to ensure their own sustainability. Where companies often go wrong is cutting corners to reduce costs and increase profit rather than improving what they do and communicating this properly. On occasion, you may have an objection to the company, or its sector or the people that lead it. So you can (we can) screen out some of these based on ethical, environmental, social or governance standards. At the same time, you know that ‘cheap’ is unlikely to be high quality, but you also know that we don’t all need our weekly shopping from Harrods. There is a range; a spectrum. Sometimes we pay more for things because of the feelings that it evokes, sometimes we do so because we instinctively know it to be better.

Your investment appreciates in time as the company you invest in grows. You also receive a share of the profits made (dividends). Quite how much and how well these companies ‘perform’ is largely down to how well they run and… luck. By luck I mean – the right place at the right time, for example being a PPE manufacturer and a pandemic arrives.

You get your money back when you sell your investment. In the interim, you’ve hopefully had some dividends and an improvement in the value of the share. If you hold a handful of companies and one or two fail (such as the Kodaks of the world) then you have a proper loss. If you hold thousands, perhaps an entire market, then the impact of any failure is significantly reduced.

INVESTING IS NOT GAMBLING

Placing a sporting bet or a stake in a casino, you are hoping for a win, or something close to that to get your money back, plus the incentive to make the bet in the first instance. You may get back nothing – which is far more likely. That’s gambling – the risk of complete loss. For some people this is a small bit of fun (I can think of many better things, but I won’t judge), for others it becomes an addictive habit that can destroy families.

When you consider investment in proper companies (shares in them) over time, going back to the start of your lifetime, there is only one direction of travel for the combined value of your investments. Upwards. Yes there are bumps along the way (volatility) but you own real assets (companies) making and providing real products and services.

THE NEW CLOTHES

The digital world and our obsession with it, has given some people the idea that a digital image is worth something. These NFTs (Non-Fungible Tokens) are in my opinion the equivalent of the Emperor’s new clothes. The value is talked up by nefarious online forums and chatrooms and ‘traded’. I would not touch them with the proverbial barge pole. If in the event I am wrong about this in say three decades time, that’s fine with me as I will be holding assets that provide regular income from actual profits from making real products and services. I can and will happily live with that and until proven otherwise, I will not aid anyone into deliberate folly.

HMRC’s NFT SEIZURE IS A WARNING TO ‘INVESTORS’ AND TAX CHEATS

The UK tax authorities have confirmed their first ever seizure of a non-fungible token (NFT) following a probe into an alleged £1.4million VAT fraud. Her Majesty’s Revenue & Customs (HMRC) said it had confiscated three NFTs, along with £5,000 in other crypto-assets, and arrested three people as part of a fraud investigation concerning around 250 sham companies. It claims the three suspects, who have not been publicly named, used a variety of ‘sophisticated methods’ to try and conceal their identities, such as false invoices, pre-paid unregistered mobile phones and virtual private networks.

NFTs are tokens representing the ownership of a digital asset, which could be an artwork, an image, music, or even a tweet that have their own unique signature and cannot be exchanged for another asset of the same type. But there has been increasing worries that these digital tokens, as well as cryptocurrencies, are being used by criminals to hide their illicit financial gains. Nick Sharp, the Deputy Director of Economic Crime at the HMRC, said: “Our first seizure of a Non-Fungible Token serves as a warning to anyone who thinks they can use crypto-assets to hide money from HMRC.”

Understand the real risk and buy real assets. You have been warned.

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

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NFT – NEW FAIRYTALEDominic2023-12-01T12:12:53+00:00

MORE MARKET VOLATILITY – UKRAINE CRISIS

TODAY’S BLOG

MORE MARKET VOLATILITY – UKRAINE

The depressing news that Russia has invaded Ukraine will please nobody. The tension has been building and reflecting in global prices of all assets. The value of something is always spurious. The stock market is about as regulated and wrapped in red tape as it is possible to be, constantly monitored around the world, it is arguably the purist, cleanest way to value companies and trade currency, bonds and commodities.

As a client, you have ample experience to know that markets rise and fall. The forward rise of markets is a permanent state (when considered properly) the declines are temporary. This is how things are, this is the uncomfortable truth. That means there are occasionally very large temporary falls in value… which then recover.

A loss is only created when you sell for less than you paid. If you sell holdings in a market low, you are likely to have lost money on your investment. If you wait – until you need the money, as we have carefully planned with you, then you will ride out the storm of the day.

UNKNOWN FUTURE

I do not know how the situation in Ukraine will unfold. Nobody does. I think it likely that we can all agree that world leaders don’t really seem to be very good these days, inflated egos and social media soundbites are no basis for running a country well. There are an array of reasons and motives behind the Russian aggression, maybe this has been many years in the making. A weakened EU, a divided UK (most nations now seem to be), the stalwart of Germany out of the way, a pandemic that has cost billions and an energy ‘crisis’. Opportune or designed? Or perhaps this is ‘nothing more’ than a long-held grudge about the expansion of NATO. Or perhaps this is purely about the energy supply lines that go from Russia through Belarus and Ukraine and it makes up the majority of their income from abroad (worth a glance at a piece from five years ago here). Here is an image from the Economist to provide a little illumination.

We do know that Mr Putin is certainly someone that is capable of playing the long game, unlike our own Prime Minister. Has he underestimated his opponents and the degree of international outrage? Perhaps. He probably took reassurance from Syria, Afghanistan or Yemen where the world basically made an noise and then left quickly. I have no idea, neither do you unless you are at GCHQ or MI5 or some similar organisation – and I suspect even then you are guessing.

What I can tell you is that markets will recover. Politicians do not get to shape your financial plan. It is built with market volatility in mind. Whilst we are again confounded by the folly of war by the few on the many, we can hope that this ends soon with minimal loss of life. Yet we are realists and know that egos need to be nursed into a state of calmness before aggression ends. There is much work to do, but worrying about your portfolio is not on the list. If anything, the temporary decline in value is another opportunity to buy at a discount.

We are all concerned about the lives of people in Ukraine and the surrounding region, that is an entirely proper response. But this time it’s different… well, the events maybe (though they echo history) but actually these dreadful events are sadly all too normal and familiar.

Dominic Thomas
Solomons IFA

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MORE MARKET VOLATILITY – UKRAINE CRISISDominic2023-12-01T12:12:54+00:00

IN SEARCH OF ANSWERS

TODAY’S BLOG

IN SEARCH OF ANSWERS

I had the unwelcome task of writing to clients to advise that the value portfolios have fallen by over 10% since the start of 2020. The emails that I sent seemed to be well received. Today has been another very tough day for investors (and their advisers). The charts are rather frightening, this comes at a time when we are all (most of us anyway) rather anxious about the state of the world and a deep sense of unease.

So, without wishing to fudge any issues, I thought it best that I re-use the bulk of the content that I have been sending.

It is now a regulatory requirement to tell you when a portfolio falls by 10%. This is a new experience for me, despite being an adviser for several decades. I genuinely believe that this new requirement comes from well-meaning regulation, but is entirely counter-productive, because it is essentially alarmist. I will endeavour to add a little more flesh to the bones.

SHOULD YOU WORRY?

Should you worry? No; but anxiety and concern are normal responses to ‘seeing’ the value of your portfolio fall. Anxiety or fear are normal responses to ‘danger’ or bad news. We are built that way and it is why we have survived as a species for as long as we have. However, the instinct of ‘flight’ is of no use to investors. The stock markets of the world fall in value each year. I would refer you to the various articles I have written about this over the years and remind you that 1 in 4 calendar years have negative returns. This is part of ‘the norm’ and indeed we don’t get the positive returns without the negative. However yesterday’s headlines of the FTSE’s second largest fall in a single day does not really help calm nerves.

UNCERTAINTY IS NORMAL

The problem with investing is that markets are not predictable, despite appearing so. What is predictable is irrational investor behaviour. This is precisely why we ask you to complete an attitude to risk questionnaire. So that a suitable portfolio is constructed for you – one that provides the chance of delivering the returns you need whilst enabling you to sleep at night. You will have experienced similar falls in value before, but either didn’t notice, or were reassured.

WHAT IS A LOSS?

When the value of anything falls, it only impacts those selling. A crash in property prices, impacts those selling their home, most of us do not notice, although it may provide conversation around the dining table with friends or colleagues. Unlike property, the value of equities and bonds are transparently priced throughout the day in a highly regulated market. When you sell your home, frankly the price is a bit of a guess by the estate agent, surveyor and then haggled over by seller and buyer … in practice, a very small and biased market.

The key is not to panic; not to sell. You know this, but we also know it is hard to do. You know that you should sell at the top and buy at the bottom, however as humans we tend to do the exact opposite. I’m not going to pretend that this doesn’t make us all wince and wonder, but equally I will remind you to stick to your plan – yours; not those of a media which seems only intent on making you miserable.

Your portfolio is globally diversified, it is well balanced, it is low cost and it is properly reviewed. We have biases towards smaller and value equities which over time will demonstrate to be better value. There is a huge amount of research that should you wish it, I can point you to. However, I tend to think of that as my job … to help you make better decisions with money and help reduce or avoid all the daft ones.

THE UNCOMFORTABLE TRUTH

If you are investing on a monthly basis, the fall in prices is a bit of a bonanza – because you buy more for the same money. We expect values to rise. They will; it’s just a question of when. For those who add lump sums, similarly now is essentially a discount sale that will not last.

Those who are withdrawing money have a much tougher time. The fall in prices means you sell more holdings to get the same figure out. Thereby not benefitting as much when prices rebound. They will, and you will, but not as much. In an ideal world, you will have discussed and outlined your plans for income or lump sum withdrawals and we have already factored this in. If you need to review this, then please get in touch.

DO NOT OBSESS OVER THIS

Looking at your portfolio each day will never help anyone. It will rarely provide comfort. Worry will not help you to live your life well. You have to trust that the fundamentals of investing will remain true today, next week and next year as they have done over the decades. Yes – there are ‘bad times’, but remember that market returns are positive 3 in 4 years on average, we simply don’t know the order or reason.

You are investing for decades and I have no doubt that this too will pass.

Dominic Thomas
Solomons IFA

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IN SEARCH OF ANSWERSDominic2023-12-01T12:13:22+00:00

YOUR PORTFOLIO

TODAY’S BLOG

YOUR PORTFOLIO

I suspect that you have heard the expression “look after the pennies and the pounds look after themselves”. Well, a small win this week in that your investment costs will have reduced for clients using our portfolios. One of the fund management groups that we use (Vanguard) decided to reduce their annual management charges. Its not a massive reduction when taken in the context of a larger portfolio of funds, but every little helps. The reduced charges have been applied already.

We have also been reviewing our ESG portfolios. I was challenged the other day by suggesting that clients be opted into ESG portfolios with the option of opting out rather than being asked if they would like to opt in. I can see some merit in this, but it seems somewhat problematic when you consider that ESG portfolios are generally a little more expensive.

Dominic Thomas
Solomons IFA

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YOUR PORTFOLIODominic2023-12-01T12:17:09+00:00

America, you are better than this!

Solomons-financial-advisor-wimbledon-blogger

America, you are better than this

There are times, when I watch or read the news and am flummoxed by what I learn, particularly when it involves America. I don’t know why particularly, but I’m often left thinking – America, you are better than this!

Perhaps its due to personal contact with Americans, which to date has always been a good experience. Trips there over the years have been wonderful experiences and of course I’m a consumer so have enjoyed many aspects of this… let alone the many wonderful artists, film makers, sport stars and musicians.

We all know that we have a special relationship with North Americans, largely because we speak the same language and tend to fight the same fights. We share common values. Of course American foreign policy and politics is something rather different (and I won’t get into it now).

Liberty and Freedom

Whilst we are all aware that nations are scratching around for money and tax evaders are public enemy number one. It does seem somewhat at odds with any sense of American values. I’m talking about FATCA (Foreign Account Tax Compliance Act). This is based upon old tax rules about ensuring income is properly reported to the IRS (American form of HMRC).

Sledgehammer and Walmart… or rather Walnut

Due to the more sanguine approach to tax evasion (surely a good thing) there has been a series of “unintended consequences”. In essence, as the IRS demand income is accounted for, they require all foreign entities to report holdings of US citizens. As the significance of this has gradually dawned on the world, most financial institutions are avoiding the problem by ceasing to provide financial products and services to Americans. This is because, the US seems to wish to take the stance of applying onerous fines, in advance to the financial institutions.

As the rules about how income within investments or indeed from any assets is taxed operates differently from one country to another, but the US does not apply the local rules, deciding to apply their own. This makes a mockery of most of our normal arrangements such as pensions, property, ISAs, Trusts and so on which are essentially just treated as “savings”. There are complexities as you may imagine, but I won’t bore you with them here.

In essence, every US citizen, wherever they live has to submit a tax return. This has come to be understood that almost without exception, no financial institution wants to deal with American citizens for fear of being fined first and having to spend huge amounts of time justifying the whys and wherefores of common sense.

As a result Americans living outside of the US are finding it increasingly difficult to get basic things like a bank account, let alone anything as sophisticated as a UK pension!

Handing in US Passports

This has resulted in the bizarre situation of many Americans being essentially forced to renounce their US citizenship. Something that is frankly “nuts” in a costly process that seems akin to a public shaming with a Headmaster. There are about 9 million Americans living outside of the US. If you were born in the US, you have American citizenship – like the current Mayor of London, Boris Johnson, who was born in New York, you will be faced with the requirement to comply or say goodbye. He ended up having to pay the IRS various taxes on his UK assets, then declared he would be giving up his US citizenship.

There is a good piece on the BBC site about how American’s are finding this “hard going” with a bit more context. However, it is creating serious problems for UK financial institutions and advisers who are finding solutions very difficult to achieve for anyone with less than £500,000 of investments… and as you may imagine, the price for something of this importance (and risk to the organisation) isn’t as competitive as it might otherwise be.

America, you are better than this!…. at least that’s what I hope.

As for a film connection, if you are an American citizen living in Britain, you may feel as though you are being unfairly targetted… as though you are an enemy of the State. So here’s the trailer to this Will Smith and Gene Hackman movie.

Dominic Thomas
Solomons IFA

America, you are better than this!Dominic2025-01-27T16:52:48+00:00

Gold and the ATM give away

Dominic Thomas
July 2015 • 3 min read

Gold and the ATM give away

The continued fall in the price of gold reminded me of a 4 years ago (Gold to Go). This was a short piece about the arrival of an ATM that dispenses gold bars, rather small ones! in exchange for cash..

At the moment gold is at its lowest price in 5 years. The World Gold Council who recently issued their Q2 report, acknowledges the continued decline in the price of gold this year, but point to their belief that this is in part due to a possible increase in interest rates in the US.

Gold is really part of a defensive portfolio, not being cash, bonds or equities and an asset class that investors return to in times of uncertainty – or at least that tends to be the view based upon historical data.

I tend to take the view, from experience, that when investment advice is dispensed freely by those who clearly don’t have the qualifications to provide it, then there are serious signs of a bubble. An ATM dispensing gold at a shopping centre, placed their in July 2011… well the price of gold peaked in August 2011 $1,821 per oz. At the moment its around $1,093 per oz.

The price of gold soared from $431.65 per oz in July 2005, had a wobble from March 2008 until September 2009 as it eventually broke through $1,000 per oz, climbing further until August 2011. The price has been in decline ever since and returning to the $1,000 per oz level, (no this is not a forecast) in part reflecting a higher degree of confidence in world economies.

Boutique Design

I’m not sure if the ATM is still at Westfield, but a quick online search suggests that there are a few in London, largely in International foreign Banks. Being a German machine (the Gold to Go one) it is incredibly reliable and prices are updated every 10 minutes, so the vending machine may easily provide you with a different price for your gold bar in-between coffee breaks.

Anyway, just so that you know, gold is fine as an element of a portfolio, but it really should not be too significant an element. Having all your investment in one asset class is very unwise – precisely why gold is one option of many. Here is the video of the Gold to Go ATM… please do not take this as advice to use the machine or indeed to buy gold, I am merely commenting on general principles and all investments ought to be made in consideration of your own context, plans, attitude to risk and capacity for loss.

BACK TO ALL BLOGS

Gold and the ATM give awayDominic2024-03-13T15:56:43+00:00

How is your fake detector?

Sadly there are many investment “opportunities” that are most definitely not in your best interests. Unfortunately these are not always easy to spot and it is important to have a good “fake detector” which is a polite way of putting things. Often, though not exclusively there will be a variety of investments that dress themselves up as one thing, when they are quite another. I don’t know the detail of the Icebreaker tax scandal involving members of Take That, but I suspect that they didn’t know what they were getting into… but someone did.

Too good to be true?

Invariably the sort of financial products that are prone to the excesses of the worst sort of marketing, are those that are fairly “exotic”. These often include Enterprise Investment Schemes, Venture Capital Trusts, Film Partnerships and Unregulated Collective Investment Schemes. That is not to suggest for a moment that all of these products are “duff” but clearly they need to be researched very carefully indeed.

Lessons from Bakersfield Mist

Malcolm Gladwell in his book “Blink” which has received widespread coverage suggests that experts instinctively know when something is off. So it was with interest that I was at the very cosy Duchess Theatre last night to see Kathleen Turner and Ian McDiarmid in Bakersfield Mist, which is currently still in previews. This is a Stephen Sachs story about authenticity and centres around determining whether a painting is a real Jackson Pollock or a fake, a mere $100m at stake. It is marvellously performed by two great actors and directed by Polly Teale. The set design by Tom Piper itself breathes authenticity. Many will have seen both actors in various films, I was lucky enough to see Ian McDiarmid many years ago in Bath, at my first Shakespeare live performance. Kathleen Turner returns to London following her highly acclaimed performance in “Who’s Afraid of Virginia Woolf?” You will be hard pressed to find two more authentic performances which are scheduled to run until 30th August and I would rate this highly.

As in the play, one of the questions posed is being clear about motives. When assessing investments, the main motivation for an investor is whether or not the investment being proposed is likely to assist you in achieving your goals. The investment itself may have different objectives, perhaps creating a gain for the investment management team and not the investor, this is where impartial advice is crucial, but of course you need to ensure that your adviser’s motives are aligned with yours, by having one that you trust, not to mention the relevant expertise. So how is your fake detector?

Dominic Thomas: Solomons IFA

How is your fake detector?Dominic2025-01-28T14:57:29+00:00

How does 2014 Budget make ISAs NISA?

You will probably have gathered that the Budget 2014 announced improvements to ISAs. This is good news for investors who have been making use of their annual ISA allowance each tax year. As a reminder, if you haven’t yet used your 2013/14 allowance, you have until 5^th April to place £11,520 into tax free savings… you had better hurry.

ISAs got NISA

So what has changed? Well from July the new ISA (NISA) allowance rises to £15,000 and the restrictions for cash and investment ISAs ends. Today you can convert a Cash ISA into an investment ISA, but not the other way around. This will help clients who are low risk in nature, but also anyone else seeking to hold cash for the short-term, perhaps when planning a significant withdrawal.

Over £443 billion in ISAs

If you followed my recent blog about the ISA millionaire, one has got to now wonder how long ISAs will have before they are attacked. There are now an estimated 3.8million people with at least £30,000 in ISA with around £443bn held in all forms of ISAs by around 15m people (almost 1 in 4).

Tax free income

Let’s take a theoretical example. Ivor is 65 and has around £400,000 in his ISA portfolio. He expects to live to 85 and has a State pension and employers pension providing him with an income of £20,000 a year. He would like to spend £45,000 a year and so draw £25,000 from his ISA each year. So his income is £45,000 a year. I won’t get into the detail of the tax calculations, but this would normally trigger higher rate tax; however only about £10,000 is taxable at 20% due to his personal allowance and ISAs providing tax free income. He pays £2,000 tax on £45,000 an effective rate of tax of 4.4%. Now call me a pessimist, but I cannot imagine that many UK Governments are really keen for pensioners with incomes of £45,000 to pay less the same in tax as someone earning £20,000.

Will you outlive your money?

Just for your information, if the £400,000 ISA grows at 6% a year and he takes income of £25,000 a year and increases this by 3% each year (to keep pace with inflation) he will run out of money in the 23rd year… at which point, he would be 88 (8 years above the average male life expectancy).

Dominic Thomas: Solomons IFA

How does 2014 Budget make ISAs NISA?Dominic2025-02-03T10:37:44+00:00

Everyone Can Achieve Financial Independence

You can be financially independent

I can pretty much guarantee that I can ensure that anyone can achieve financial independence. This is what the financial services industry, the Government and media all suggest is the main objective of financial planning. What they don’t tell you is how easy it is obtain this. If you live in Britain, I can pretty much guarantee your financial “freedom”.

Achieving financial independence is easy

Here is how. Sell everything you have and move to a warmer climate, in a country with a similar population size to the UK – The Democratic Republic of the Congo, the poorest country in the world based on per capita GDP. There you can buy a house, (or probably an entire town). You will almost certainly have enough money to live there, not that life is easy for the majority of the people there, but coming from Britain, you will achieve financial security. I cannot guarantee your personal security or indeed an anxiety free life, but that merely underlines my point.

The financial services industry talking about the wrong stuff

Of course, I’m being somewhat silly, but you appreciate the idea that financial independence is not really what great financial planning is about. I would argue that great financial planning is all about your lifestyle. How you want to live your life and the choices that you make is really what financial planning is about. The only person to set the objective for your lifestyle is you. As a financial planner my job is to help you to verbalise and clarify what lifestyle you want. It is not to judge your choices, after all these will be born from your values. My job is to assess if can afford to maintain your lifestyle for as long as you want it or if you are going to be forced to alter your lifestyle. Most financial advisers act as though what you really need is the best pension or the most fantastic investment. Sorry, but this is completely missing the point, financial products and investment strategies are nothing more than instruments to get you where you need to go, but unless you have been properly asked “to where ?” how can you have confidence in YOUR financial PLAN? So isn’t it about time that you were asked the right questions? Great financial planning is about YOU.

Everyone Can Achieve Financial IndependenceDominic2025-02-04T11:06:57+00:00

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