Investment Update

I have updated the data within the guide "Our Approach to Investing". This now includes the 2010 data which was recently compiled and released by Towers Watson. An interesting note, for the long-term investor, there has not been a single 20 year period where the rolling average returns from equities have been negative in the last 25 sets of 20 years. You'll need to see the document to get this.

FUNDS: Jupiter Environmental Income

I have only just been informed that the Jupiter Environmental Income Fund has been renamed as the Jupiter Responsible Income Fund - which actually happened last Monday. Not only is there a name change but also a reclassification of sector, from UK All Companies to UK Equity Income (IMA sectors). Jupiter believe (and presumably the IMA agree) that this is a more appropriate category. The objectives and charges of the fund remain the same.

Interestingly the reclassification has not exactly helped the performance ranking of the fund, which now sits in a group of 70 or so similarly categorised funds. The UK Equity Income sector is defined as "Funds which invest at least 80% in UK equities and which intend to achieve a historic yield on the distributable income in excess of 110% of the FTSE All Share yield at the fund's year end."

The latest data from the IMA for July 2011, shows that the UK All Companies sector has £106,461million under management compared to £55,732million in the UK Equity Income sector - so half as much. The newly named Responsible Income Fund is a fund that some of our ethical investors will be familiar with.

I'm sure that Jupiter are hoping that the current Fund Manager, Chris Watt will be a rising star as he searches for income returns where... well probably quite a few have gone before. Sorry I couldn't resist the temptation to somehow get in a Star Trek line. Chris Watt, manages the Jupiter with around £35m in the pot, the 2009 Paramount Star Trek film directed by JJ Abrams has recorded gross sales of $385m. So some catching up to do...

The Complexity of Winning

I'm often to be found in Richmond Park walking my dog, which at this time of year is more awkward than usual due to the rutting season as stags begin to fight their way to the top of the food chain. This is an amazing spectacle, but one that is also somewhat dangerous and walkers (and dogs) need to be careful as the mood of deer is not that predictable. Certainly antlers can be rather sharp and the prospect of being gored by a stag who just doesn't like your company is not something to take too lightly. Several people have been injured in the last few days. 

All the gesturing reflected so evidently in nature is also witnessed amongst politicians as we are now in the mid-flow of conference season and of course in the combatant world of commerce and high finance, which appears to be finally approaching some form of agreement, though there are concerns that the inevitable problems are merely being pushed further into the future. One would like to think that being human and thoughtful would have meant that there is rather less bullying and fighting to get to the top, indeed a lot more thoughtfulness is required to "win ethically".

As I dodged the deer and hundreds of cyclists speeding around Richmond Park at the weekend, I was reminded of World Road Cycling Championship in Copenhagen. Britain now has a new World Champion in the form of Mark Cavendish. A man that is now at the top of his sport. To be a World Champion in pretty much anything requires a huge commitment and focus. However spare a thought (as he did) for the other seven British riders that helped him get to the line first. These are all people that presumably train just as hard and bar the last 500 metres, were protecting him and leading him to the front. It takes a different sort of person to put aside their own ambition to help another win and a reminder that playing your part is more important than everyone trying to be the same (world champion). The end of the race was incredible. Have a look at the clip on the BBC Sport website. 

The Best Laid Plans might involve an alternative or two

Yesterdays stockmarket falls are very unwelcome news, but perhaps it will cajole the politicians and bureaucrats into action to address the problems within global economies. As a part of my role, I seek out a range of investment opportunities, besides those simply of shares. Shares (or equities) are obviously volatile but have a proven long-term track record, however there are other forms of investing that can be helpful to those looking to diversify beyond the available cash, gilts, bonds, property and equity funds. One such opportunity might be to consider investing in the film industry.

Most people will be aware that there are many films that don't make it to the big screen - a serious number. This may have little to do with the quality of the film (think of all the dire blockbusters that you have seen over the years) yet every once in a while a "small film" finds massive commercial success. In recent years, from a British perspective this might have included "Slumdog Millionaire" and "The Kings Speech". These are generally unexpected and very welcome successes. Most of the time, films do not find such international success.

That said, success is a term that can be rather misleading. As an investor what one really wants to achieve is a positive return on capital. Investing in film needs to be done carefully, largely due to the way that films are financed, not the way they are edited. Commercial and financial success hang upon the way a film is distributed and in 2011 this includes DVD, rental, pay-per-view, download and cinema release as well as the possibility of merchandising.

Last night I was doing some research on your behalf at a private screening of "Best Laid Plans" which is produced by Molifilms, whose MD, Mark Foligno also executive produced "The Kings Speech" whilst at Molinaire. The film is one of several that are part of a financing investing opportunity for those with a minimum of £25,000. This would be an investment in an Enterprise Investment Scheme and therefore would qualify for tax relief on the investment of up to 30% (this was increased from 20% in the last Budget but not yet finalised). So a £25,000 investment ought to see £7,500 returned to the investor in tax relief (a net investment of £19,250). In addition, provided the shares are held in the company for 3 years there is no capital gains to pay. Sounding better still. Of course how the EIS is structured, the underlying financing and management of the business (Mark Foligno who has a strong pedigree with considerable success) are all vital elements in assessing whether this is a good investment, let alone an appropriate one.

As for the film itself, it is a pithy, dark tale of a life of grime and crime in Nottingham.  In many ways not unlike "One Flew Over The Cuckoos Nest" with one of the main characters having significant learning difficulties - the gentle giant who is taken advantage of my some fairly unsavoury characters. Unlikely to have box office "success" but a movie that many will probably see. The lead actor, Stephen Graham, who recently appeared in "Tinker Tailor Soldier Spy" is particularly good. It is not everyones cup of tea, its a raw life urban Brit flick.

As an investment - well I'm still conducting my "due diligence" but if this sort of investment appeals to you, then you could have a look at the prospectus yourself, or call me once I have completed my research. This article is in no way advice, merely commentary on the diversity of investments available and the sort of things I get up to seeking out opportunities for clients.

NEST: State Pensions, Hope and the Road to Utopia

Political conferences often seem like an opportunity to spell out a Utopian version of life.  This week, the pensions minister Steve Webb has spoken at a meeting at the LibDem conference. He outlined the Government's broad intention to remove means testing from the State Pension and provide a pension that would eventually be capped at £140 a week in total (£7,280pa). Some receive a larger State Pension than this now and a few nearer to retirement expect to do so. This is primarily due to the SERPS or S2P element of the State Pension - or even delaying receipt of it. Mr Webb suggested that those entitled to larger State Pensions would retain their benefits, but going forward everyone else should expect the same amount. At the moment, irrespective of your entitlement everyone ends up with a minimum of £135 a week if you have no other (or very little) resources. This is known as pensions credit and is designed to ensure that retired people are not "poor". It is a means-tested benefit.

This is a planning nightmare for the Bureaucrats - the current State Pension is linked to National Insurance contributions and therefore UK earnings as well as age and gender. The entire system needs to be very carefully unpicked to prevent a "series of unintended consequences". It is interesting to see that Mr Webb is citing projections that 1 in 6 people alive today in the UK will live to 100 and one in three females born today will live to that age. This is also the main reason for the ambitious and hopeful aspiration of the Universal Credit System that the Coalition are introducing.

Mr Webb also suggested that NEST and its auto enrolment should be unaffected by means-testing - which is something that I blogged about yesterday as a result of further news from the conference. 

The prospect of living until 100 or longer does rather complicate financial planning and your assumptions about the future need to be considered and reviewed in line with your expectations. You may have read that Bob Hope's wife Delores died on Monday at the age of 102. She had been married to her husband Bob for 69 years. Bob Hope died at the age of 100. Bob Hope once said "You know when you're getting old when the candles cost more than the cake!".

10,000 hits on our Financial Advice blog how do we do it?

We have reached over 10,000 visits to our Solomons IFA blog and we are every proud of it. It's probably because we have got something to say! This is what our customers have to say about us:

Dominic has been my financial adviser for 7 years. I have found his advice, in the minefield of financial regulation and option, to be invaluable. He has an approachable manner, which allows one to ask the silliest of questions without feeling foolish. He does not talk in jargon and always explains things in a financial language I can understand. And, perhaps above all, he is scrupulously honest. I know that he will give me objective advise that will always be in my interest. I simply could not have asked for a better financial adviser.

Martin Evans September 2011

We have been with Dominic for over 10 years, recommended by my late father. His advice is always clear, straightforward and to the point backed up by obvious in-depth knowledge and research. You feel you are in the hands of an expert – and one who cares!

Jamie and Ruth Lyons July 2011

I want to thank you for your help, advice and very smooth running of my planning, especially in these last few months building up to my retirement. It has been excellent. My only regret is that I wish I had been with you years earlier...

Steve Hepden: July 2011

We have been with Solomon’s for over ten years; Dominic has been an excellent financial advisor. He is good at making you think about your financial priorities over the coming years, and seems to get the balance of portfolios just right. He is easy to talk to, and has an excellent knowledge of a range of financial products. He has always made us feel comfortable with our decisions, and never pushed us to take on more risk than we were happy with. He is reliable and efficient and I would highly recommend Solomon’s and especially Dominic.

Fiona Middleton & Henry Dowson: 2011

We met Dominic and Solomon’s in 2004 when our family finances were in a state of transition, as we had both recently lost parents. We were dealing with paying off a mortgage, receiving inheritances and disposing of family properties. We had a collection of policies acquired piecemeal over the years and Jo was having to negotiate a redundancy package. Seven years on, with Solomon’s help, we have a well-structured portfolio of savings and investments, have become adept at budgeting and have put two children through higher education. We have rationalised pension plans and put a retirement strategy in place. But it’s not all been about saving – we’ve spent money on property development as well as hobbies and holidays, having acquired a better sense of our resources and how we want to use them, both now and in the future.  t’s been immensely helpful to be able to talk about finances with a trustworthy and knowledgeable source, and to place decisions in a wider context than just the nature of financial products.

Jo and Chris Walker - May 2011

We are celebrating by enjoying a nice cup of espresso coffee from aromo coffee - a great place to get your ESE easy serving espresso pods in the UK - another great website designed by Solomons Design.

NEST: Feathers in a fluster at LibDem conference

Money Marketing report that at the LibDem conference today, there has been a call for those over the age of 50 to be given a one hour consultation about their pension in relation to the new auto-enrolment pension scheme (NEST). It is reported that Lord Oakeshott is concerned about the prospect of yet another pension mis-selling scandal. He has tabled a motion in the House of Lords for all those over 50 to receive an hours consultation. It seems that he is primarily concerned about the best use of money when debt might be repaid or benefits lost if only small sums are going towards a pension.

Lord Oakeshott is of course quite right to be concerned that people use their money wisely, but the main point of NEST was to provide a low cost pension that required little advice and possibly set up by an employer (which includes sole traders). This is not good news for employers or advisers who technically could be caught out advising those on low incomes to save for their retirement, when in practice (and with the advantage of hindsight) it may have been better for such a person to spend their money or clear debt rather than save, if the benefit system means losing benefits which they may have otherwise qualified for. To my mind this merely highlights the mess that our benefit system is in. We should never be in the situation where taking responsibility for your future is penalised.

I would certainly agree that advice about whether to join a pension would be preferable, but precisely who provides this and whether the advice is any good is of course unclear. Attempting to assess a 50 year old's existing pension planning to date and presumably debt levels, expenses and planned goals does not take an hour as any good financial adviser will know. Perhaps Lord Oakeshott has never met one.

Similarly, Dr Ros Altmann of Saga is concerned that certain people over the age of 50 should not be saving into a pension. She would like to see risk warnings for NEST, as she argues that it is not always appropriate for low paid workers to pay into a pension.

As I hope is clear, I agree with the notion that for some people saving into a pension is not a good idea, if the benefits system remains as it is. If advice is to be provided, qualified and competent advisers should be the ones providing this - which costs money, which is entirely counter-productive to the intention of NEST. If advice is going to be provided and paid for, there are far better alternatives for employers to offer their staff than NEST. It is about time that this matter was properly finalised before it turns into yet another white elephant. We only have a year to go before the first NEST schemes must launch.

If you are old enough to have gone to the cinema to see "The Time Machine" with Rod Taylor which was released in 1960, you are one of those that is being "warned". A time machine would certainly be of use when it comes to investing, but given that I'm not Doctor Who and don't know anyone that has the benefit of being a Timelord, though if I may presume - we all need some time M'Lord!

European Lottery - all in the numbers

You will be familiar with all the doom and gloom surrounding the financial system and in particular the European region. There are a plethora of statistics about each country and I have recently been reviewing data from "The Economist", the IMF and the World Bank.

One of the basic economic measures of a nation is their GDP - Gross Domestic Product, which broadly means the market value of all goods and services produced by the nation. This is where statisticians have a field day - because bigger means more (by and large). If you have a big population, more is produced - well maybe, maybe not. The biggest populations are found in China (1.33bn) and India (1.18bn) which accounts for about a third (37%) of the planet's population. However between them they "only" account for about 1/8th of the worlds GDP - though this proportion is rising rapidly. India has a younger population with a median age of 25 - one of the very lowest (15 being the lowest in Niger). None of the top fifty countries (on GDP terms) has a median age below 21.

Over the last 3 years or so, GDP in Europe has generally been falling (comparing different sources of data). The bulk of the growth has come from emerging nations in the Far East / Pacific and South America. This is where my attention has been focused over the same period. These nations have a median age of population of 29.4 against a median of 37.4 for the worst of the top 50 performing nations in the same period.

The data suggests that younger populations (but old enough to be established economies) are rising in their economic productivity and power. The older economies are less productive by comparison. Reading that sentence back to myself, would draw the conclusion - isn't that obvious?  Here in the UK we have a median age of 39.9 reflecting our ageing population. For the record, France have a median age of 40.1; Spain 40.2, Denmark 40.8, Portugal 41, Greece is 41.6, Switzerland 41.9 Italy 43.3, Germany 44.3 and Japan 44.7. In the US, the median age is 36.6 - lower than Taiwan's.

I appreciate that one must be careful extrapolating too much from statistics. This is evidenced by the best performing GDP per head of population with Norway, United Arab Emirates, Singapore, USA, Hong Kong and Switzerland all appearing to be rather "superior". However with the exception of the USA, all have small populations of under 10 million - most being under 5 million.

Perhaps rather than comparing the UK against the world, we should attempt to compare like with like. Those closest to the UK in terms of GDP and population size and age are France and Italy. So perhaps our politicians should chose their words rather more carefully when likening economics to war.... after all there are 4 Chinese for every American and about 25 for every Briton. The balance of power is shifting.

NEST - Pushed out next year?

Employers wishing to know when they are scheduled to begin payments towards the new NEST pensions can find a list of dates by clicking here. In practice it will be a year until the first NEST scheme is implemented (October 2012) and then, this is only for the very largest of companies, employing over 120,000 people. Smaller companies and organisations will have until March 2014.

If you would like to set up a NEST scheme, you can do so "very easily" by visiting the NEST website. However be warned that there are limits to the amount that can be contributed and significantly a very small choice of funds (currently just 5). The main advantages of the NEST arrangements are:

1. The investment charges are low

2. The scheme is relatively easy to set up

3. Staff can access and view their account

4. Everyone is opted in if they have not opted out.

In addition, contrary to initial information, it would appear that when moving between jobs it will be possible to consolidate NEST pensions, however it is my understanding that it is not possible to move NEST into other pensions and vice versa.

NEST is aimed at low income earners who are not providing themselves with pensions. It remains to be seen if this will "solve" the problem. It may form part of a range of options available to employers. Importantly, the contributions will be 5% from the employee and 3% from the employer in due course. Contributions are currently limited to £4,200 per tax year, so anyone with an income above £52,500 will find that they cannot contribute significantly towards the pension. Many people will however find this allowance significantly more than they had been contributing. The current tax year restricts pensions contributions to the larger of £3600 or 100% of earnings, up to £50,000.

Contributions start with 1% from the employer and 1% from the employee (2% in all) until September 2016, thereafter 2% from the employer and 3% from the employee (5% in all) until October 2017 when employers must contribute 3% and employees 5% (8% in all).

The alternative is arranging your own pension arrangements, ideally one that has a good choice of funds (after all the size of the pension will be based on how much the pot is worth). This also allows more choice and flexibility for staff. However, having fund choice is only an advantage if it is used.

The NEST site is fairly good, although it is quite easy to find yourself using it in a rather circular fashion. In summary this is a pension for low earners, there is very limited investment choice and charges are low. Alternatives (individual or group personal pensions, or SIPPS) will be more expensive but offer considerably more investment options. It might be reasonable to say "you get what you pay for".

Here is a video from NEST, I'm not sure if it was deliberate that one of the characters wears a hat rather like Jack Nicholson in the movie poster for "One Flew Over The Cuckoos Nest" but it may be a deliberate intent to appeal to blue collar workers, mind you, quite how much a pint of beer will cost in 40 years time is anyones guess.

Hope for Europe this weekend?....always.

The constant news about economic troubles around the world is depressing. There is a fairly high chance that the eurozone will have to alter dramatically - many will say "not before time" and probably "we told you so". There are obvious advantages to a stable European market and it is certainly helpful to commerce and travellers to have reduced complexity with a single currency.

The problem though is something rather more fundamental that Europe seems to forget on a frequent basis. One size does not fit all. There are cultural differences and ways of living that differ between nations (indeed we are aware of this even within our own small island). We can be thankful to Gordon Brown for not taking the UK into the Euro, which his then boss (Tony Blair) was very keen to do. Certainly it would be nice to live in a world where each nation values life and personal freedoms, but we are acutely aware that this is not the case in many parts of the world, including Europe and on occasion even here within Britain. 

This weekend, finance ministers will be meeting in Poland to discuss and hopefully take action on the problems relating to the Greek national debt. However, before we rush to chasten the Greeks, our own situation is not that much better and the North American (USA) numbers are even more terrifying. Change is needed and this needs to be done thoughtfully and carefully. The problems are enormous, but we are (well I certainly include myself) not without hope, which reminded me of this rather powerful little poem.

Gold and all that glistens

Image from WGC website

If the markets and the general debate about the merits of Eurozone leave you feeling rather cold, perhaps some inspirational gold accessories will brighten up life... The World Gold Council produce a variety of information about gold, including fashion designs of a rather high quality. Given the current price of gold I would advise being careful about where such pieces are worn and you may wish to secure a price in advance.

Designers in the latest WGC issue include Tre Spighe, Malcolm Betts, Paloma Picasso, Fred, Lorenz Baumer, Solange Azagury-Partridge, Pomellato and Kim Kaufman.

Creatives Required for Great Financial Planning

Like most people in work, my job involves rather more than simply the job description, which is a good thing I guess. By way of example, a typical week  tends to involve at least one training seminar and probably one or two exploratory meetings with various industry consultants.

Last week I attended yet another training session about the retail distribution review (RDR) and the changes that impact me, the firm and our clients from 2013. The morning event was held at Grocers Hall, a fairly plush venue a stones throw from the Bank of England. The speakers were all of very high calibre, but all reflected on the sad state of the changes that are in motion but by no means finalised or clear. There are now only a few months to go (15 and a bit to be precise) yet there are still significant unresolved issues. This has considerable impact on financial advisers across the country. It is my belief that very little will change for our clients or our firm, after all we have always operated on a transparent fee system, however the bulk of advisers in Britain still operate on a commission basis. The change from one to another is considerable, and one that doesn't take a couple of weeks to implement.

The new rules are probably beyond the reach of a considerable number of IFAs at present with many now taking early retirement and attempting to sell their business. There will be fewer advisers from 2013. I regularly receive emails that ask if I am seeking to sell my business (I'm not!).

Sadly, I do not believe that even with fewer and better qualified advisers to regulate, that all advice will be good. Technical knowledge is one thing, but being able to apply good financial planning principles based upon a deeper understanding of your objectives is vital. In reality, most of us have little interest in financial products or in financial services generally. What people are far more interested in is whether they will have enough money to have the life they want and guidance about what to do if not. The concept is pretty simple, the putting a great financial plan together requires thoughtful creativity as well as technical know-how.

If you have not seen the Warner Brothers film "The Bucket List" directed by Rob Reiner and starring Jack Nicholson and Morgan Freeman, here is the trailer, which may provide some thoughts.

Statistics and Persistency - Seeking Winners

Andy Murray continues to make progress towards a grand slam win. This is one way to view his recent attempt to win the US Open in New York. Unfortunately Andy was beaten by Rafael Nadal in the semi-final but remains firmly in fourth position in the ATP world rankings. The top four are seemingly some distance ahead of the chasing pack. Congratulations naturally go to Novak Djokovic who won the mens singles.

It is worth remembering that fortunes can change quickly. Four years ago at roughly the same point, Andy was ranked 18th with a fairly large gap between him and the top four, who then also included Nikolay Davydenko. Murray broke into the top 4 a year later and has remained there ever since. No small achievement. By comparison, Mr Djokovic was ranked 21st 5 years ago and broke into the top four a year later in 2007. So whilst we may be tempted by our media to think that British tennis still has not got recent grand slam winner, the signs are certainly good for Andy Murray, provided that he can remain fit and continue to improve his game.

There is also some encouraging news in the women's singles with several encouraging signs. Elena Baltacha and Laura Robson both progressed to the second round. Anne Keothavong and Heather Watson didn't make it past the first round, but certainly Heather Watson's match against Maria Sharapova must surely be encouraging. Particularly worth noting is that in the boys juniors tournament, there were three British boys in the semi finals. The boys number 1 Jiri Vesely (CZE) beat the unranked Kyle Edmund (GBR) to reach the final. The other semi-final between Oliver Golding and George Morgan. Oliver Golding went on to win the final against Vesely. So several to watch out for in the years to come... of course much like investing, past performance is no guarantee of future performance, but it probably is unwise to throw it out as merely a collection of statistics.

After all the years of delays and wet summers we have had here in Wimbledon, I think that its possibly a little early to suggest that New York should invest in better protection such as a roof.. after all they have had a month of earthquake, hurricane and rain... not exactly the same as a poor English summer! However, it would clearly be wise for the Open organisers to reflect on New York weather statistics to help them determine if investing in a new roof would be a wise use of money so that their future returns are protected.

Funds: Fidelity Rename and Shuffle

Fidelity are due to rename a couple of their funds on 28 September. The Income Plus Fund will become the MoneyBuilder Dividend Fund and the UK Opportunities Fund will become the UK Smaller Companies Fund. I'm advised that there are no changes to the objectives, risk profiles or charges.

Fifty Percent Tax can be avoided: Enterprise and Entrepreneurialism

There has been coverage in the media this week about the high profile group of economists that suggested that the 50% tax rate is counter-productive and results in reduced tax collection. This is a debate that is probably most likely argued based upon which side of £150,000 your income falls.

In practice there are things that can be done to reduce income tax for any individual, however in practice it is generally the more affluent that can really use allowances fully.

Pension contributions up to £50,000 would attract tax relief at 40% and perhaps 50% depending on income. In other words a 50% taxpayer is really investing £25,000 to get £50,000 invested. This does of course depend entirely on the figures involved and in theory under the new rules unused allowances from the two previous years could be used as well.

ISAs are not tax reducers immediately, but they grow free of capital gains tax and the bulk of income tax. £10,680 is the current full allowance, per person over 18.

Anyone can gift money and this acts in a similar way to pension payments, in that the charity receive the extra grossed up payment.

For those that are keen to help the UK grow businesses and create jobs, there are Enterprise Investment Schemes, which can provide 30% tax relief on the investment and can also be used to defer capital gains tax. These are higher risk investments than the majority of normal investment funds. An EIS can swallow up to a £500,000 investment from an individual, providing a tax relief of £150,000.

So there are things that can be done to reduce taxable income and use allowances (there are other too). Those least able to take advantage are those in good pension schemes and high incomes, who may get caught out by new rules that would mean paying even more tax - even if they already pay 50% on some of their earnings.

I think it unlikely that the Coalition Government will remove the 50% rate at the moment, preferring to wait until the economy is obviously improving.

Base Rate Held

Following a turbulent time on the markets and the Americans effectively outlining that they will hold their rates for 2 years, it was little surprise that the Bank of England announced that the base rate would remain at 0.50% today. The economic data about the UK and other economies is looking pretty poor and whilst normally rates should be rising (to dampen inflationary pressures) they are "unable" to do so without potentially damaging growth.

The Federal Reserve committee members have been pushing for the Fed to produce more explicit information about longer-term interest rate plans. They made positive steps forward in this regard by agreeing that the target range for Fed rates is 0 - 0.25% until mid 2013.

There is a little bit of smoke and mirrors going on though. Rising inflation is good for debt as it reduces it in real terms. The concern about inflation seems to be evident in that National Savings (NS&I) withdrew their index-linked (inflation-linked) certificates, which suggests that a good deal should not bee too good.

Losing it with Ruby Wax

Ruby Wax is currently on tour with her comedy show "Losing It" in which she partners musician Judith Owen. Having completed a stint at the Edinburgh Fringe and pilots throughout NHS hospitals they have brought the show to the Duchess Theatre in the West End.

The show is poignant and hilarious in parts, relating Ruby's much publicised struggle with mental illness. She provides some great insights and finds humour in the madness of contemporary life. The pair intend to get the discussion started about the supposedly taboo subject of mental health, which suggests that 1 in 4 adults will suffer from poor mental health at some point in their lives. I'm not sure about the accuracy of the statistics or how this is measured and it would seem that all of us are prone to depression at times. The main thing about mental illness is that it is not generally well understood. A broken arm or serious illness such as cancer invokes sympathy generally, but mental health problems are often dismissed as they are not seen in the same manner. This makes life harder for those suffering with the problem.

One has to wonder at the madness displayed rather obviously in the media and financial services sector. An industry full of people believing that repeating the same behaviour will lead to a different outcome, despite the evidence and experience of the opposite. I could rant on for ages about this, but in essence the credit crunch happened and nothing has really altered to stop it happening again. Indeed the madness is that as taxpayers we merely handed over lots of money to some very overpaid people who have not yet been made to change their ways.  Frankly much delusion exists within financial services and I see evidence of it each week. So the latest revelations of the former Prime Minister and his Chancellor being "at odds" with one another over economic policy, but left in charge of the country and then their plans initially being lauded as "leadership" is hardly surprising.

However, unlike Ruby, who seemed to suggest that pill popping was the answer (which it may be in part, but certainly is not the entire solution) the pill popping of quantitative easing is only a temporary measure. The fundamental reasons and cracks in the system need to be properly examined. There are no easy answers, but only because the questions are pretty difficult and painful to ask, sometimes scary to ask. The markets are finally coming around from a heavy dose of anti-depressants, but now the hard work must begin with some thoughtful, serious thinking and counselling of experts who may well think there is another way to live. This sort of work takes time (good therapy does). Some of it will be painful, but real change won't simply happen - it has to be thoughtfully planned and implemented. There are no shortcuts.

Ruby Wax's show is running in London until 1st October. It's a good show, although the second half (a Q&A session) is probably much more hit and miss. If you have an interest in mental health issues, perhaps because of someone you know, SANE are running events with Ruby Wax at the Duchess Theatre on Tuesday's.

Funds: Aegon gone as Kames not able

I imagine that somewhere there are printers and marketing departments rubbing there hands with glee at the constant name changing that goes on within the financial services industry. I have no idea why, but Aegon Asset Management was rebranded as Kames Capital yesterday.

The press release was sent out yesterday and much of the news only came through once we had all packed up and gone home. Why they were not able to communicate this sort of change in advance I have no idea - but it doesn't sit well with me and one can only be left thinking "why the rush?". Most of us were only really getting used to the Aegon name having had the Scottish Equitable Asset Management name dropped in 2001.

This means extra work for everyone, writing to investors with holdings in Aegon funds and updating a myriad of data files and entries. This now seems to be a part of the normaly way things are in financial services - and there seems to be something like this on at least a monthly basis. To my mind this seems incredibly wasteful and not doing the financial services industry or investors any favours. If anything this always smacks of a smoke screen.

Some of our ethical investors use the Aegon Ethical Equity fund which will now be called the Kames Ethical Equity Fund... see what they did there... genius!

Click here for the Kames Capital press release - be warned it contains the usual corporate news release terminology. Sorry for my rather expasperated tone, but this is no KC and the sunshine band.

Its not just Fantasy Football but fantasy Funds too

I know, I know.. football is about as overexposed as it gets. Yesterday saw the end of the "transfer" window. This is the biennial shuffling of cards that seems to amuse oligarchs as much today as it did in the playground swap market. All that really happens is that a lot of agents make a lot of money by getting hapless footballers to switch teams, hopefully to get a better chance of playing for more money. The slight twist being that some will now consider moving to a lesser team in order to play more frequently, but perhaps not as well paid but compensated by the increased visibility and revenue from other "endorsements". Amusing in some respects as Managers reverse opinions and decisions that they were holding as fact just days earlier.

It was with interest then that I came across an article in my quality trade press by Paul Farrow. He was berating the Fund Management industry for failing to heed its own advice - to stay true to core principles and the long-term strategy. He points out that for almost every new fund launch another is closed. He states that since 1999 2,660 funds were launched and 2,486 were closed. As a result, invariably the duff funds (or "poorly perfoming" funds) are regularly taken out of the statistics, which in turn hides the real story of massive under performance of the market. As a result the "league tables" or rather performance tables are highly inaccurate and should not be relied upon. Add to this the comings and goings of Fund Managers, mergers of Investment Houses and you quickly get a sense that perhaps the investment industry does just as much shuffling of the pack as the football business. However rather than farming out an under performing striker to lesser divisions they simply get discarded to non-league and non-statistic status.

This explains why Fund Management groups have a reasonably large marketing budget. It would certainly be a full time job trying to massage data to show a poor fund in a good light, making it appear difficult to select anything else. Yet selecting the right Fund Manager is a process that is riddled with problems, so much so that to pick the winning team in say 10, 20 or 30 years time is about as pointless a task as gluing the leaves back onto trees in the hope of delaying Autumn. This merely adds to my conviction that in practice selecting the best Fund Manager is not possible consistently and why we use cheaper funds that track the market, providing a market return less costs. This is something that over the long-term the overwhelming majority of Fund Managers fail to achieve. You may find the document on my website a helpful resource in this regard. In truth, I have no idea who the next "Anthony Bolton" will be any more than I know who will be the next Alex Ferguson.  

New Student Loans Won't Be Cleared

I wonder if you ever have dreams that you are sitting your O or A'Levels or your degree finals? These are a very distant memory for most of us, but for those about to embark upon University life the exam nightmare may become rather more prevalent than it is for the majority of the population.

For students starting University in a years time the new fee system will commence. University fees will be generally in the region of £9000 a year, though of course this will depend on the University and the course. In addition, living costs will need to be met - this is a variable amount, but for those living away from home and outside of London the maximum living cost grant is £5,500 which increases to £7,675 for those living in London (but not at home). These can all be converted into the student loan. So on the face of it you can quickly see how a 3 year course in London can quickly cost over £50,000.

However, unlike the current system, the debt is linked to inflation with a further 3% added on top of this. Inflation in the UK is currently around 4.20% - so the debt would rise by 7.20%. Repayments of the loan need to begin after 3 years - irrespective of whether or not the course has concluded. However payments do not need to be made unless earnings are more than £21,000. Many graduates may struggle to find employment initially and whatever the level of earnings, the debt will increase by inflation+3% each year. The loan lasts 30 years.

Once earnings are £21,000 or more, 9% of income over £21,000 is paid to the Student Loan Company to reduce the debt. So if the graduate earns £21,500 the repayment to the £50,000 loan (plus inflation) will be 9% of £500 which is £45 and is paid as £3.75 a month. Alternatively the graduate is earning £28,000 and pays £630 towards the debt (£52.50 a month). In essence the repayments are small and frankly unlikely to reduce the outstanding balance by very much. This is more like a form of taxation akin to National Insurance rather than a traditional loan.

The biggest problem for the graduate is that of inflation as the debt is linked to inflation plus a further 3%. The expectation for many will be that salaries rise quickly due to early career progression as a result of having a degree. So a graduate that progresses to an income of £50,000 will be repaying £2,610 a year or £217.50 a month. This is collected directly from PAYE earnings. But this all takes time and whether deliberate or not, I don't see much evidence that the debt will actually be cleared over 30 years for most students. Career breaks, redundancy, life throwing a curve ball - all impact the maths. Only those earning significant incomes will actually get close to clearing the loan.

So some of the "facts" that have been presented in the media are somewhat erroneous in practice. Whilst mortgage lenders say that the loan will not count against graduates, should they wish to borrow other funds for a home or car, the reality is that this is a long-term commitment that the graduate must meet, so in effect does reduce the affordability of a loan and the amount that can be borrowed by something like 3.5 times the annualised repayment.

My own calculations with inflation at only 1% (4% to the loan) for the debt and the income increase a graduate earns is that there is no chance of the debt being cleared over 30 years. Indeed the repayments do not cover the original starting amount of the loan and hardly clear a third of the loan.  Higher rates of inflation make the likelihood of debt repayment lower. Incomes may well rise far faster for graduates, but this remains to be seen in practice. So this may be some comfort to students and their parents. However, the impact of  beginning a loan at say 21 and only finally seeing it end at 51 is not a prospect that I would wish on anyone. Any balance at the end of 30 years is written off. So I think that the Government have got their sums wrong (they won't get much of the debt repaid).

Thoughts? well... this is really a tax. Graduates will have to be careful to ensure that their reporting to HMRC is very accurate every year under self-assessment. The Government seem to have taken the view that the majority of the loans will never be cleared, but they do get a steady stream of additional revenue for 30 years. The real question will be how the graduating generation manage their finances to provide for their futures and provide homes for themselves and their families. At this point in time, these same graduates will be pretty much forced to pay 5% or more towards their pensions and have a harder time building a sufficient deposit for a home and they won't get their State pension unti they are 68. So I wonder if there is something rather naive in the assumption that they will look after us in our old age!

Whatever your view, paying a £50,000+ loan at a rate of £52.50 a month for someone earning £28,000 is about equivalent to a mobile phone contract. To say that the loans have been poorly explained and pitched to UK plc is an understatement. Context is everything.