Nucleus and James Hay

TODAY’S BLOG

NUCLEUS AND JAMES HAY

The world of Financial Services can often seem dull, but many of us that have been around for a little longer than a week are very familiar with the frequent merging of financial services companies. This morning it has been announced that Nucleus have accepted an offer to be acquired by the James Hay Group. Many of our clients have holdings on the Nucleus platform.

Change is unsettling, the reality is that we can never prevent change, we simply must face it. Nucleus is, to be blunt, a rather brilliant company that we have been using for many years. The technology works and the culture which in no small part directly derives from David Ferguson have been a beacon in my sector. One of integrity, innovation, and transparency.

James Hay is a very large financial services company that mainly specialises in pensions. We have always been able to use them for our clients. We review the platforms we use each year and this is based on various criteria from “does it work?” to financial resilience. In truth, it would be improbable that Nucleus remains your platform forever – technology will always evolve.

Nucleus and James Hay

THE EVOLUTION CONTINUES

On the face of it, this looks like a sensible and good deal, but as always, we will keep things under review. Should we advise something different, we will do so. However, at this stage that would seem highly unlikely. We will watch the usual criteria and hope, as I am sure both firms do, that 1+1=3 where there are improvements and advantages (such as price reductions for clients on either or both).

David Ferguson, the Nucleus CEO who I interviewed for our last edition of Spotlight, says

Since we launched in 2006 we’ve always put the customer centre stage and while that has made us a little bit different it’s carried us to £17.4 billion in AUA and to a point where the sentiment of our users and our people has never been better. Becoming part of this enlarged group gives us a key role in a much bigger story where we can create a leading independent platform of scale with a high tech, high touch proposition and philosophy. I think the combination of our people’s talents and the size of the opportunity can see us carefully navigate the roadmap to deliver on this collective medium-term goal. I look forward to getting to know our new colleagues and moulding a group culture that is centred on doing the right thing and building a market-defining product that really delivers for advisers and their clients.”

I remain open-minded and aware that change ushers in anxiety. There is nothing significant that has altered but in time we hope for improvements, if these are not forthcoming we shall of course review the platform we are using for you. Please also note that one of the many reasons for selecting Nucleus is that there are no exit penalties. It is my hope that this will simply be nothing more than an advantage.

In the interests of the absence of doubt, I have never directly owned shares in any financial services company. In the beginning advisers were very much part of the Nucleus set-up and it was a requirement for them to have some financial stake in the company as part of its backing. I felt that this was a potential conflict of interest and didn’t buy shares (so I do miss out on this deal). I believe that I was the first or certainly one of the first advisers that Nucleus permitted access without buying shares. I may be wrong on that, but that’s what I understood to be the case.

In summary – I am not concerned, if this changes we will make changes – as you would expect.

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

GET IN TOUCH

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Nucleus and James Hay2023-12-01T12:13:10+00:00

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

The Fuss About Platforms2023-12-01T12:17:56+00:00

Can the Money Box Producer invest £5,000?

Solomons-financial-advisor-wimbledon-top-bannerCan the Money Box Producer invest £5,000?

Earlier this month Money Box, the BBC Radio 4 programme decided to find out how easy it was for a complete novice to do their own investing. He has a sum of £5,000 representing his life savings, which is otherwise held on deposit in his bank earning less than 1% interest.

Financial Planning Basics

It is true to say that basic financial planning is straight-forward, yet most people fail to do the most basic tasks. Financial advisers may therefore spend considerable time, helping clients to get the basics in place. This was touched on in the programme, but very briefly. In essence, ensuring that your finances are under control, knowing what you spend and what you earn, having suitable reserves (3-6 months of spending). Having a Will, adequate financial protection and clearing debt etc.

Too small-fry?

allIsLost

As a result the starting premise of the show is how to invest £5,000. In truth the vast majority of financial advisers are not really interested in this level of work. Its not financially worthwhile and its not satisfying work. A good planner will take investors through a risk assessment, invariably a questionnaire which helps start the process of explaining and understanding investment “risk”. In truth this ought to be a straight-forward process, but it often isn’t. DIY investing is fine for low levels of funds, but when the sums get bigger, so does the complexity.

How much is a pint of milk?

Sadly Wesley didn’t really do DIY investing. He asked for advice and then went to the investment company to find that they required £100,000 as a minimum to invest directly through them. Alternatively he could access the fund through a platform. He then asked a very good chap Mark Polson, who assesses platforms for people like me, about which platform to use. This is an art and science. However, Mark rightly points out that using a platform will cost typically 0.25%-0.35% for using their administration. That’s £12.50 – £17.50 for a £5,000 investment. I’d call that peanuts, though I’m sure Money Box would disagree.

Investing is not gambling. Gambling is gambling.

I was also disappointed to hear the description of investing as a “gamble” from someone in the know (Candid Money). It carries risk but it is not gambling. Thankfully ludicrous questions were kicked into touch and Mark also pointed out that “best” and “cheapest” are two different things. Paul Lewis also seems to think that charges are a loss. They are a cost of investing, not a loss (and free banking isn’t free, its cross subsidized by loans etc).

The DIY Investor

I have lots of sympathy with people that find financial planning expensive and also have had bad experiences.  I recently met with a potential client who is a DIY investor, but really wanted to know how to minimise capital gains tax. He was a bright guy, but fairly unusual, holding shares in just two companies worth a good six-figure sum. Whilst he seemed to appreciate the risk he was taking, I had serious doubts. He had no clear idea of the returns achieved and not kept any good records. For all I know he may be a genius investor (unlikely) but my suspicion is that his approach was born out of an understandable mistrust and fear of being ripped off, yet in practice he was (and is) in serious problems should his two shares take a turn for the worse. The main winners will be HMRC as he has not used any capital gains tax or ISA allowances over the last 20 years (use it or lose it).

DIY is spending time to save money, yours.

DIY investing is not something to be undertaken lightly. I am learning new stuff almost each day and I’ve been doing this for over 20 years. Frankly, any professional skill can be learned by most people. Yes I could even learn to be a brain surgeon… but do I want to? am I actually playing to my natural interests and skills? if time is short, why would I waste it learning about stuff an expert can do for me? (and with whom I have a professional relationship). I tend to find people tend to fall in one of two camps – spend time to save money, or spend money to save time. DIY investors are the former (by doing it themselves) but beware it takes a lot of time, whereas you could focus on the things that actually improve your employed skills and therefore your income, or simply spending time on doing the things you love. Oh and Money Box – “ad valorem” is a fee based on the value of a portfolio, in short a percentage. There is definitely a need and place for DIY investing, but check where you are really coming from before you embark on this rather lonely and arduous venture. You don’t want to find that all is lost…

Dominic Thomas: Solomons IFA

Can the Money Box Producer invest £5,000?2023-12-01T12:38:59+00:00

Moneybox and Platforms

Solomons-financial-advisor-wimbledon-top-banner

Moneybox and Platforms

platform 934

This week BBC Radio 4 Moneybox featured the running spat that seems to be developing in the investment platform market. Platforms are online administrative services that both advisers and clients can use to buy, sell and value investments. To say that they vary considerably in price and functionality would be an understatement. There’s an entire market for helping advisers assess what platform is best for their clients (which I pay for and use for no small sum of money). In essence there is a price war or what I might call a race to the bottom. Cheap is not always good, but then neither is expensive. Moneybox kicked the tyres on the new Hargreaves Lansdown (HL) platform, which is really aimed at DIY investors. As far as I’m aware (which means from the latest research data) they have a decent platform with a reasonable range of funds. Their new charges aren’t that competitive and whilst they provide extensive fund information (most now do) as the HL spokesman said on air, there is the belief that they provide “the best funds at the best prices”. Whilst I can understand this statement, it rather betrays the belief that selecting “the best” fund is easy to do. It isn’t. This is a convenient belief, I might suggest delusion and one that DIY investors also suffer (hence a marketing match made in cyberspace).

Here’s the big one

Ok, here’s the big issue that the financial services industry generally doesn’t want to acknowledge, but when you read the next statement, and reflect on it, you know it is true. Here it is. It is not possible to consistently outperform the market without taking additional risk to the market. You might want to re-read that. Now there are some that that do outperform, but do so over the very short-term. Given that most fund managers do not manage their fund for very long, (a cynic might suggest that they quit whilst ahead) looking at the longer term performance of winners is equally unhelpful. Suffice to say a very small percentage outperform the market over 20 years… and the proportion that do is about the same as random chance. Its also depends on when you buy into a fund and don’t forget that hundreds of awful funds are closed and if had been included, would demonstrate that an even smaller proportion outperform over the long-term. Here is a chart a friend of mine shared recently.

underperformance

Experience isn’t priceless, but it is highly valuable

As for the platform, well on one hand it is an administrative system. They are not all equally as good as each other, they all have different charging structures and functionality. A key issue for me is “does it work?” and you’d be surprised at how many fail the test. Theory is one thing, reality is another. A good financial adviser will review the platform you use, sometimes it is better to move, sometimes it isn’t. Whilst it is important (always) to challenge the way things are to improve, the assertion that there is “one way” of doing things, that “cheapest is best” or that similar products are in fact  “all the same”, is simply not accurate. Experience isn’t priceless, but it is highly valuable.

Profit or profiteering?

However, let us not ignore some obvious facts, there are vested interests. Financial advisers (myself included) are not charities, we are businesses. Platforms are businesses, Fund Managers are businesses. All need to make a profit to continue to exist, the real question is what level is reasonable and fair – which is almost impossible to answer to everyone’s satisfaction. Moneybox challenged the 71.5% profit margin that HL make.

Dominic Thomas: Solomons IFA

Moneybox and Platforms2023-12-01T12:38:48+00:00
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