Happy Christmas



2010: The Nativity - Coky Giedroyc

Happy Christmas. Peace and goodwill to all.

Andrew Buchan and Tatiana Maslany play the leading roles of Mary and Joseph for the BBCs mini series. Tatiana writes about playing the role on the BBC blog, which can be found here.

Perhaps the most retold story in history and undoubtedly the oldest and most well known of all the Christmas newsletters. The traditional nativity story presented in primary schools is certainly contentious and scholars would generally agree lacking the accuracy of the chronology of events. However it is worth remembering that historians have evidence for the census, Quirinius and Herod the Great and his massacre of children. It is ironic that this date, upon which our entire calendar hangs is almost certainly not "year zero" but probably 4BC. 

DT

Performance Anxiety? What Do You Measure?

2005: Rent - Chris Columbus

Last weekend a friend commented to me how good it was to meet some positive young people (by which she meant teenagers) who had been at the same event as us. It seemed that she was surprised by this, given the general way in which teenagers are depicted in the media as the cause of most social ills, a sadly inaccurate assumption held by many. Last night my experience of bored teenagers was rather different and one that merely pandered to the tabloid stereotype. On reflection, their behaviour, however depressing and deeply frustrating, needs understanding. Their poor form of "protest" merely likely to encourage deeper enrenchment of outlook by both "adult" and "young adult". A thought that occurs is that inspriation is somewhat lacking in a world that largely seems beyond their reach. This is where youthworkers, mentors, parents and teachers can all have a vital input. However, it is not just these people, we are all to some extent role models, whether we like it or not, we are the example. I am also meant to be the example, which to my mind means how I conduct myself, run a business, parent, manage, relate and so on. Like everyone else, (footballers take note) I get this wrong, often. Sorry! (Bankers and Politicians take note).

I wonder what sort of example I will be setting to my own children this Christmas. They know me well and would spot fakery, but equally notice genuine attempts to improve and be better, of course forgiveness is the key ingredient for this, being given another chance (again). For many people Christmas is not a joyous occassion, it is a time of stress and performance anxiety, will the food be ok? will the presents be what they wanted? enough? There are many that this year will already be regretting having spent too much - and we still have a few days left to spend even more. Families can be places of comfort and warmth, but they can be places of deep discomfort. The marketing hype of the "perfect Christmas" has little to do with reality or of course Christmas itself and can lead to further frustration that life is not all it is cracked up to be. The assertion that money will solve this awareness of "lack" is evidently misplaced, but as Jonathan Larson suggests in his muscial "Rent" a post-modern reworking of La Boheme (and one of my favourite musicals, but most disappointing translations to film): "I think that they meant it when they said you can't buy love, now I know you can rent it" (from the song I'll Cover You). It may sound like an odd thing for a financial adviser/planner to say, but investing for your future, has relatively little to do with financial wealth. I'm no believer that there is some sort of nobility in poverty, I believe in creating wealth and financial independence (I hope that is obvious), as a financial adviser I help measure how well your investments are doing, and for those clients that permit the discussion, help make sure that any financial plan is deeply rooted in your values - which has little to do with the size of yacht you want, but the depth of experience and relationships. As someone once put it - making sure your funeral is well attended.

Just a thought to leave with you for Christmas as perhaps you also reflect on yet another set of New Year resolutions. I guess that part of the reason behind the blog is to help you to see who is behind the marketing of the firm, which I think requires a certain level of self-disclosure, albeit in a "professional" capacity. Here is a video from Rent, the song called "Seasons" (a repeated idea in the score). How will you measure your next 525,600 minutes?

DT

New Media for New Beginnings

1946: It's a Wonderful Life - Frank Capra 

So today is the last day of work in 2011 for me and the staff of Solomon's. So that in mind, I thought I'd share a little video to help with the Christmas spirit that I was sent. To say that it's "little" only describes it's length - but I imagine that it took a considerable effort to put together. In a world where many of us spend our time in front of a computer or using one throughout the day, this is quite a novel re-telling of the nativity story. I think its great - particularly the speed that the lead character works!

2011 has certainly had its ups and downs and 2012 doesn't look as though it will be any less uncertain, perhaps the Frank Capra film "It's a Wonderful Life" is more poignant now than in many previous years since it was released in 1946 and has many timely reminders and life lessons that will hopefully serve us well into the New Year and beyond. 

Have a very happy Christmas.

Best wishes,

Dominic

DT

Shooting the Messenger

1994: Il Postino - Michael Radford

As if to add weight to the piece I wrote about the blame game and needing someone to divert responsibility to, this morning's news is that last night European ministers believe that a change to the significance and dominance of the big three ratings agencies is required. If ever there was a case of not liking the message, so shoot the messenger, this is probably it. I certainly agree that far too much attention is paid to ratings agencies now and their views (which are often wrong) trigger reactions from investors -  but no more than most other news and this is now all part of the normal backdrop of a media frenzy to have something to report, whatever the consequences and an investing public that pay far too much attention to short-term "noise". Good investing requires a long term outlook and sound philosophy.

The Economic and Monetary Affairs Committee called for there to be less reliance on the credit ratings of the big three ratings agencies (Fitch, Moody's and Standard & Poor's) and limit their direct impact on countries' borrowing costs. Conflicts of interest between agencies and the companies that they assess should be addressed, eg by introducing civil liability for ratings, they added. This is frankly old news and something that could have and should have been actioned once it became clear that the ratings agencies seriously messed up in their assessments pre-crunch. Numerous groups have been calling for "clear water" between the agencies and those that they rate.

Anyway, now Mr Domenici (an Italian) is going to attempt steer the proposal through the Parliament and will "scrutinise the three key issues in depth". These are firstly competition, secondly conflicts of interest and thirdly greater transparency in sovereign debt rating. A draft report will be presented on 28 February 2012 with a committee vote planned for May. If you would like to email Mr Domenici with your thoughts you can do so, such is the availability of information on the EU website. British interests (yes contrary to media and political nonsense we still have them) are represented by Sharon Bowles, Arlene McCarthy, Godfrey Bloom, Syed Kamall, Peter Skinner, Kay Swinburne, Marta Andreasen, Vicky Ford and Ashley Fox. That's nine British MEPs on the committee.

This "new initiative" comes on the back of our own Treasury Committee announcing on Friday last week, that it is to begin an enquiry into Credit Ratings Agencies. The Committee has invited evidence and information from interested parties to address specific issues (mainly independence) by 2nd February 2012 - with a maximum of 3,000 words.

DT

The Debt Crisis and Alternative Reality

2011: Another Earth - Mike Cahill

Here is an interesting short video providing an explanation about the current credit crisis and why the actions that are currently being taken are unlikely to help. To suggest that it is a controversial video would be an understatement, but for anyone wanting further information, this is a useful part of the discussion. Remember that pioneers are invariably thought to be mad. One might say that the approach is something of an alternative reality - another Earth.

Positive Money want us all to be better educated about the financial system, after all it has a huge impact on all of our lives. So for free thinkers everywhere this is an opportunity to hear another side of the story. This is a very short and punchy video, and given the inevitable number of repeats on television this Christmas, perhaps you will find it provocative and/or helpful to review the trailer and free video online. I will provide my own thoughts in due course, but certainly welcome contributions from all those interested. If you would like to email me your thoughts and contributions I can put these up on the blog in an anonymous style and/or include my responses as appropriate to anything that you raise.

DT

Christmas Break - Holiday Hours

2006: The Holiday - Nancy Meyers

Christmas is a time that I ask all of our staff to have a well earned rest. As a consequence, the office will be closed from the end of Thursday 22nd December 2011 and will reopen on Tuesday 3rd January 2012. Emails will be collected and read in the order of receipt. If you have anything desperately urgent over the break, I am able to read emails and will attempt to respond appropriately. May I take this opportunity to wish all our clients, potential clients, suppliers and partners a very happy Christmas.

DT

Ask No Questions, Hear No Lies - More Madoff

1951: No Questions Asked - Kress

I wonder if you have ever played the blame game? In times of trouble there are those that duck and those that walk into the light, which requires both courage and humility.  The media is still naval gazing as further revelations about the phone hacking scandal lengthen. My only surprise is that so many people are surprised. Magazines and newspapers exist to make money, no problem with that. The vast majority of revenue is generated from advertising, which has obviously reduced for a number of reasons - new media, price and significant difficulty proving it works. How much "investigative journalism" is performed on advertisers is presumably a question that is rarely asked or answered. The alternative (or more accurately vital element) is to provide the sort of news that the readership want, to my mind, this is where the boundaries have become increasingly "stretched".

Today we have learned that a former Madoff employee has been charged with covering up the truth about the now infamous ponzi scheme. An employee of 30+ years, yesterday pleaded guilty to conspiracy, falsifying books and records, and making false filings to the SEC. Ms Pitz (you couldn't make it up) worked with Madoff and of course this begs the question "who else knew or was involved?" (sound familiar?). The Washington Post and Huffington Post suggest that she may face up to 50 years in prison (sentencing will take place on 22nd June 2012). She is currently 53 and claims that she was not aware of the ponzi scheme - which in fairness does seem possible given that she and her husband also appear to had funds of $3m invested with Madoff, either that or she was incredibly foolish.  Mr Madoff is currently serving a 150 year prison sentence who obviously made off with billions. The SEC are meant to protect American investors and maintain fair and orderly markets. One wonders why an employee is tempted to participate in such a cover up. Perhaps a $450,000 salary might provide a partial answer, but it does seem odd for her to have her own portfolio with Madoff as well.

Asking the right questions is vital when money is involved. Headline figures, marketing speel make pretty reading but invariably do not reveal the full picture, which is of course rather more complex. A good financial planner spends time asking questions about your plans, aims and ambitions. This takes time and skill so that your real plans are clear, not simply the ones you think you should have, or those that are simply unrealistic. That is why a large part of my time is spent listening to clients, helping to draw out what it is that they really want to achieve. Part of my role is also to ask questions of product providers, fund managers and other relevant parties. The questions are rather vital.

DT

Sixteen Thousand Hits

1984: Sixteen Candles - John Hughes

Thanks to all those of you that follow my blog which has today passed the 16,000 mark. Small beer for many websites I know, but a fairly impressive start for a small firm of financial planners that believe in the benefit of providing a personal service. Hopefully the information is helpful and providing food for thought and debate.

Please let me know if there are financial topics that you would like me to cover. Just send me an email - to the usual address.

DT

Radical Idea - Tax Everyone?

1955: Rebel without a Cause - Ray

Yesterday I blogged that the "Taxman Cometh" who prosecuted a man for unpaid taxes (and undeclared income). Today there is news that HMRC make deals with some big businesses regarding the payment of taxes - with MPs fairly cross that the taxman is not cometh enough! and rather too cosy with some of the big businesses in the UK to the tune of £25bn - one notable company being Goldman Sachs. Certainly it is very tempting to believe that HMRC are not being tough enough on large companies, however the story has two sides. Personally I doubt very much that HMRC are lenient, the real issue is the UK and global corporate tax system that enables both individuals and companies to create and register companies around the world, in more "favourable" tax regimes. The rules of corporate taxation are complex and frankly this is the realm of the big Accountancy firms that exist to reduce taxes for big business. There is an obvious correlation between the two. The existence of different tax regimes and rules that permit their use make such tax avoidance legal, yet clearly morally questionable. HMRC are unable to collect taxes that are legitimately avoided.

So whilst MPs and the media might wish to wag a finger at HMRC, I suspect that this has something to do with there being a need to apportion blame to someone for the lack of tax revenues and consequential spending cuts across the country. One might say a story of convenience.

Any Government wanting to reform our welfare system and improve the transparency of the tax system could make very radical reforms. None have the desire or courage to do this believing that providing a genuinely transparent tax system would result in many large business, supposedly providing both employment and taxation would leave the UK and therefore leave us worse off. They believe that the gamble would not be worthwhile. I have a very radical approach to this, which most will find surprising given that I spend most of my time advising relatively wealthy individuals and helping them make the most of their income and investments by making use of the available allowances. Here's my radical suggestion - have one rate of tax payable by all on all income or capital gains for individuals and organisations. This would mean that everyone pays tax and therefore "contributes" to the State upkeep (provided that they have income/gains). There would be no need for the very wealthy to hide income or gains if the rate of tax was the rate as everyone else. All income/gains earned or paid to or generated from the UK would be subject to tax. Those that have more pay more, but proportionally the same.

The consequences are of course unknown, but I suspect that there would be little need for HMRC beyond purely collection, or Accountants beyond accounting or financial advisers beyond planning. The State should then live within its means and perhaps we would actually achieve a genuinely creative culture that improves itself.

I warned you it would be radical! Perhaps not as radical as some of the suggestions from UK Uncut, who are, whatever you think of them, at least providing alternative ideas for a system that seems largely bereft of them. If this is our country, then surely we should all be taking an active interest in the society that we want it to become. As I hope is obvious, I believe in enabling people to prosper, creating wealth and independence. We need the rich to help create wealth. I'm not convinced by arguments to cap incomes, I am convinced by the notion that ones own security also lies in the prosperity of neighbours, a society that is full of envy can surely only generate greater insecurity.

DT

The Taxman Cometh and taketh away

1951: Father's Little Dividend - Minnelli

Remember that under self-assessment rules everyone is responsible for accurately reporting their income and capital gains or losses accurately to HMRC. The big date after Christmas is 31st January when payments need to be made to HMRC - particularly for those with self-employed income. This is both a balancing payment and a payment in advance.

One local family that will be spending time in prison this Christmas for a variety of crimes - importantly failing to declare the right income and therefore pay the right tax as well as money laundering, are the William family who have been found guilty of various financial crimes. Mr William ran a business that supplied security guards to the construction industry. The parents Isaac and Venus and their three adult daughters Maria, Sylvia and Sophie were all given prison sentences, although the daughters all had their sentences suspended and given community service orders by Kingston Crown Court for Money Laundering. One of the companies that Mr William ran was called Solomon Co-Operative Services, which obviously has nothing to do with me! The HMRC press release states that 

Isaac William failed to declare his company’s income or pay taxes of £1.1m from his business activities. The amount he owes now stands at £2.6m including interest. His wife and daughters then continued the web of deceit by laundering over £1.3m through their personal bank accounts. Their criminal activities ensured they were able to fund luxury lifestyles and further increase their wealth at the expense of the taxpayer. We will continue to pursue those involved in this type of criminal activity and bring them before the courts. We will now work to reclaim the proceeds of their crime.

It is also reported that two of his daughters worked in the banking sector (The Daily Mail suggests this to be Lloyds and Barclays) and had been trained how to spot money laundering and then used this knowledge to launder around £1.3m of income. Sadly, this man is alleged to have been a pastor and a fund raiser for the poor, running a charity called "The Great Commission Evangelical Fellowship" from Tooting, which began in 2007. However it would appear that he exploited his own family, church, illegal immigrants and the British taxpayer. Charities are responsible for accurately reporting their income too - and the trustees of a charity are personally liable. The Charity Commission website provides details on the responsibilities of Trustees. This is just another sorry tale of one person using his position of trust to manipulate those around him and a reminder that abuse takes many forms. Mr William is reported to still owe HMRC over £2.6m.

DT.

Mortgage Rules Changing to "Common Sense"

1954: Jubilee Trail - Joseph Kane

Over the last year or so most Governments, companies and individuals will have come to appreciate more of the corrosive aspects of debt. Debt has been one of the main tools used over the last 20 years or so to fuel our way of life, though few actually appreciated the degree to which indebtedness would become a problem. The notion of saving has been lost for the majority of a generation (on a generalised national basis) a culture of buy it now, pay for it later, following the widescale adoption of HP (Hire Purchase) in the US in the last century. However borrowing is nothing new, it is as old as human culture, one of the first recorded words of wisdom about debt can be found in Proverbs. Chapter 22 (verse 7) says "The rich rule over the poor, and the borrower is servant to the lender." In 2011 we still find this verse to be a rather sad statement of fact. The concept of debt being wiped off after 25 years is known as "Jubilee" and might be regarded as a principle for life.

Today the FSA have announced some new rules in relation to mortgages, following its Mortgage Market Review (MMR). You may be surprised at the key principles, which any reasonable person would have probably assumed were already a part of the borrowing process. To paraphrase:

1. Mortgages and loans can only be advanced where there is a reasonable chance of them being repaid, without including the possibility that property prices will rise.

2. Lenders should assess the afforability of the loan, allowing for the possibility that interest rates might rise. Borrowers should not enter contracts on the assumption that interest rates will remain low forever.

3. Interest only mortgages should be assessed as though they are on a repayment mortgage basis. Assumptions about the ability to repay debt from rising property values are not to be permitted.

In short, plain English - don't enter into a loan that you cannot genuinely afford and allow reasonable assumptions about changes in the future. I assume that this new approach (which seems like common sense to most of us) has clearly not been applied by most of the Governments in the West and in particular in Europe, with some obvious and notable exceptions.

The FSA also propose banning self-certification mortgages (where the borrower provides minimal information but confirms that the loan is affordable). In addition, the proposals include banning "non-advised" mortgages - in other words a proper dialogue and presumably therefore a proper assessment will need to take place by the lender of the borrower, with the exception of high net worth borrowers (who presumably the FSA believe never make such mistakes with finance). A statistic that I find somewhat staggering and highly alarming is that something like 50% of mortgages are currently "non advised" according to the FSA, which does rather pose a few questions doesn't it and once again suggests further evidence of negligent lending and borrowing which one would like to have believed would have been spotted some time ago.

The FSA Consultation Paper (CP11/31) will be followed with consultation and it is expected that new rules will be brought into effect from the summer of 2013. The FSA are very keen to ensure that responsible lending is achieved (and by inference, responsible borrowing).  The report is based upon reducing the number of people that experience problems with repaying debt. The majority of mortgage arrears are caused by unemployment/redundancy  (32%), relationship breakdown/divorce (26%), serious illness/accident (15%), extended work break to care for young children (11%), partner serious illness/accident (7%), no self-employed income (6%), business failure (3%) and finally time caring for parents (2%). Those mathematicians amongst you will figure out that there must be an error in the data as this amounts to more than 100% (102%) which again is a little concerning that the regulator cannot check its own data.That said, clearly the relevant point is that life changes, stuff happens - be as prepared as you can be, reasonbly.

What this means for most of us is that lenders will now probably charge more for the extra work that they do, so expect loan and mortgage fees to rise. Borrowers will probably also find themselves wasting more time and by going direct to a lender, may be deterred by the lengthy experience from shopping around. Therefore having a top rate independent mortgage adviser with access to the entire market should be a significant advantage. We don't arrange mortgages any more, but are ideally placed to put you in touch with one.

DT

Peace on Earth, Goodwill to all men (mankind)

1967: The Thief of Paris - Louis Malle

Are you in the Christmas spirit yet? today is the day that many businesses have their office party, known by paramedics as "Black Friday" as it ends up being one of their busiest nights of the year - today probably not helped by the sleet across the country.

It would seem that the head of the Bank of France or Banque de France, Mr Noyer, is clearly not in a Christmas mood, calling for credit ratings agencies to downgrade the UK ahead of France. This follows an interview given to Le Telegramme. It seems that rather than taking responsibility it is far easier to carp about others. On Monday Moody's published an Outlook report on the French Banking sector which was not as golden as the Banque had hoped. France had "erroneously" had its credit rating downgraded earlier ion the year, which was then corrected.  This follows news from Paris that yesterday the court decided that Jacques Chirac was found guilty of embezzlement (specifically redirecting public funds) and whilst unable to remember anything (medics say his memory is poor - he is 79 years old) was given a suspended prison sentence.

One gets the sense that a number of European Governments will be looking to kick the proverbial cat and the UK seems a likely target due to Mr Cameron's decision not to give control of Britain's tax and financial system to the EU. One does wonder why the Europeans believe that they are so well qualified to act as guardians of the financial system when the Euro has clearly been a complete mess. Joyeux Noel!

DT

Busy Little Bee

2009: Vanishing of the Bees - Langworthy

As the countdown to Christmas continues and the anxiety about whether parcels from online retailers will turn up in time, many of us will be finding the tempo significantly increases in preparation for the Christmas "break". Like busy bees many of us will be going from one task to another in the merry-go-round of shopping, wrapping and cooking. Taking a moment is now the real luxury.

As I begin to count (not really) the emailed Christmas wishes, I'm reminded that we get what we measure. Sadly many people (and organisations) measure the wrong things. In the context of financial services, our industry is awash with outrage as yet more duff companies and products that very few financial advisers sold are expected to subsidise by way of compensation. Now there is even the suggestion that UK advisers will be asked to pay compensation to Americans that invested in MF Global (whose demise I blogged about a few weeks ago). The FSCS have issued a warning that IFAs may need to find a few million more - perhaps 40, perhaps 100..we will know in the new year.

As I regularly meet with other advisers at conferences etc increasingly I am left with the impression that there will be a significant culling over the next 12 months. Many are tired of an industry that seems to only ever be wise after the event, never learns and applies rules retrospectively. There is a very real sense that only a few of us will be left standing. I want to make it clear that I intend to continue to work for my clients for many years to come. The IFA may become an endangered species - rather like the humble bee.

Bees are under serious threat and it is not really clear why. Bees play a significant and vital part in pollination (you know that). We take them for granted and tend to underestimate their importance. IFAs are not bees. I would prefer to save bees than IFAs (no contest) most IFAs are creative enough to find alternative ways to earn a living - but without bees, one begins to wonder if life would be considerably "less" and not in the sense that less is more, but less is most definitely less. Anyway, I came across this website (vanishing bees) and a new film about the plight of bees, which may be worth a look. As for IFAs - well hopefully common sense within financial services will prevail one day - though that day may be well past my time, but I certainly hope that 2012 will be a better year for investors, IFAs and bees. I doubt anyone would adopt an IFA, but you can adopt a beehive from the British Beekeepers Association.

DT

Homeless for Christmas? Past, Present and Future

1997: The Borrowers - Peter Hewitt

The FSA are reported to be claiming that repossession increased 5.88% from 9,134 to 9,670 between the third quarters of 2010 and 2011. However the Council of Mortgage Lenders state that the figure is 9,200 for the third quarter of 2011 compared to 8,900 for the same period in 2010. The CML figures would suggest a rise of 3.3% over the year. It is possible that the difference in figures is due to the fact that CML cover 94% of the residential lending market, not all of it. Back in 2010 there were 11.4million mortgages in the UK with loans amounting to £1.2trillion. In 2011 there are 11.2 million mortgages in the UK with loans amounting to £1.2trillion (no difference).

Perhaps in the big scheme of things, the difference in the numbers is fairly inconsequential - unless of course you are someone that has been repossessed. These figures are useful indicators about the health of the economy. We currently have the lowest interest rates for many years, yet clearly for some people mortgage payments are still too onerous. Indeed the CML would argue that their data for October 2011 shows that mortgages are the most affordable that they have been in 8 years. In October of the 28,000 mortgages taken up and £4,500m borrowed across the country the average mover took out a 69% mortgage equating to 2.89 times gross income with payments costing 9.2% of income. The typical first time buyer (all 16,400 of them) borrowed a total of £2,000m (average £121,950) with a 20% deposit (£30,500) and had an average income of £38,110 - which is above the national average wage. Lending levels fell by 10% against the September 2011 figures for first time buyers.

The Christmas nativity reminds us of a couple that ended up in a stable and whilst the forecasters appear to have over-estimated the figures for repossessions, they are still very high and over 102 a day. Making sure that your financial planning is properly budgeted is vital to avoid the sort of pressures that some fall victim to. That's why each year we issue a Financial Statement, showing our clients precisely where there money has been spent - but this should be a tool for also looking forward and planning spending in 2012 which ought to take account of yesterdays announcement that CPI is 4.8% and RPI 5.2%. Preparation is everything.

DT

RBS, £45billion and Nobody to Blame?

2002: Catch Me If You Can - Spielberg

The depressing news today is that the £45.5bn  or so that you and I (and the rest of the country) coughed up to pay for RBS cannot be blamed on anyone in particular. The regulator has admitted to a raft of mistakes regulating RBS, but seems to have slightly side-stepped taking responsibility suggesting that Mr Brown's light touch approach, a general widespread belief about the stability of the financial system and having limited skills, experience and resources were all contributing factors. In addition, legal advice was presented that essentially says you cannot prosecute for a law that does not exist.

RBS seem guilty of being "somewhat foolish" (massive understatement) in their assessment of ABN AMRO who they took over without adequate due diligence (which comprised of two lever arch files and a CD) and was funded the purchase with debt. According to the Chairman of the FSA, this degree of due diligence is typical of contested takeovers (gulp, surely the big Accountancy firms would not be guilty of yet another Enron?). The 452 page report will probably leave most wondering how on earth many of the "glaring errors" were not picked up before. IFAs are pretty livid citing the fact that had an IFA been responsible for such systemic poor governance, they would be fined heavily and probably have their license revoked permanently. They have a point, but clearly have not even attempted to read the report but simply respond to industry media headlines, which sadly will simply provide further belief that few of them actually do any proper research before commenting.

The FSA Chairman's forward to the report makes interesting reading and states that the "RBS executive and Board were ultimately responsible". So there it is - the RBS Board are/were responsible for basically being pretty hopeless, these people are listed on page 342 of the report, Appendix 2H, however a word of caution, not all were in-situ during the two key "hostile" takeovers of NatWest and ABN Amro.

I believe that the FSA are to be congratulated on a thorough report, one that offers much very valuable information to any organisation - small or large. Whilst the world remains in difficult economic conditions, surely we should be learning from the recent mistakes and ensuring that they are not repeated.

DT

FTSE 100 - Top of the Pops

1965: Life at the Top - Kotcheff

The FTSE 100 index had its quarterly review on Wednesday and saw three companies dropped from the index (Investec, Lonmin and Inmarsat) replaced by CRH, Evraz and Polymetal International. The index is reviewed every quarter (every day would simply create an unnecessary administrative burden as companies towards the bottom of the top 100 list would alter far too often). The FTSE100 is based on the largest UK listed companies, by value. It includes well known names and companies that most people would not have heard of.

Lonmin, is the worlds third largest platinum mining company, based in South Africa. The latest results for the company revealed improvements in profit and debt reduction against 2010 figures. However its share price has gradually collapsed to about half value over the last 12 months.

Inmarsat are a satellite company - the space technology type. The company was promoted to the FTSE100 in September 2008 but has now been "relegated" though this information does not appear on their website. The third quarter 2011 figures show improving revenue, up nearly 18% to $364m, however the share price has fallen around 40% over the year.

Investec are an investment company originally from South Africa. They provide financial products here in the UK and of course globally. You might have seen their adverts which tend to include a zebra. They would describe themselves as a specialist bank and asset manager. In the UK and Europe they manage around £45bn where operating profits increased by 8% in their last financial year. However their share price has also fallen significantly this year - by around 30%.

As a result, these three companies have dropped out of the FTSE100, which means that anyone with a UK FTSE100 tracker fund will have minor adjustments being made. The replacements are Evraz, a steel company with significant production in Russia. A theme continued with the inclusion of Polymetal International, a precious metals mining company with significant production in Russia and Kazakhstan. CRH are a building materials company with its HQ in Ireland. It was originally formed as a merger between Cement Ltd and Roadstone Ltd in 1970.

Never forget the adage - where there's muck there's brass.

DT

Funds: Blackrock Cash

1955: Bad Day at Black Rock - Sturges

Blackrock are amending the investment objective of their Cash Fund. This is a fund that investors tend to use for short-term holdings or something akin to a deposit fund. The changes come into effect on 30th December 2011. I am not unduly concerned by this change, but will be keeping an open mind, there are numerous alternatives for a similar fund, but this is one of the better ones generally. If you have holdings in this fund and want to discuss the changes with me please get in touch - though I suspect it will not be high on the Christmas "to do" list. If I believe that a change should be made I will write to you about this. I do not believe that there is anything to be particularly concerned about, however the timing of the announcement could have been rather better than during the run up to Christmas.

DT

Why All The Movies?

1985: Back to the Future - Zemeckis

You will probably have gathered that I'm something of a film fan. Well in truth, I enjoy pretty much all of the arts and like a good story. Hearing the stories of my clients also gives me a buzz, I really enjoy learning about people - where they've been and where they hope to go. Film also provides another opportunity to work or an alternative form of investment and this is something that is also relevant to some clients.

Film is a culturally relevant medium for today and has been so for most of our lives. The way films are made and promoted has certainly changed (which is interesting anyway) but invariably we find many stories being repeated. One reason for citing the year the film was released is to remind myself and any other reader, that of course, many of our struggles have been faced before, at different times, in different contexts.

One of the great problems with much current media is the fixation with the present and a fear induced approach to the future. I also love history and whilst not an expert beyond A'level and general interest, am struck by how little we draw on the wealth of experience of others throughout history. Its not that I think that the past was better, just that it can teach us or remind us of many timeless principles. Given the long-term nature of investing, I believe it is just as important to look back as it is to look ahead, but of course live in the present. The financial planning process can seem a little like time-travel, but not in the sense of science fiction, more like - learning from what went before and taking stock of where it is we want to go.

DT

ISA Rule Change - Never say Never Again

1983: Never Say Never Again - Kershner

The Treasury has announced a change in the ISA rules. It is my sincere hope that these are not rules that any of our clients will benefit by - as they are only enacted once an existing ISA provider company has gone bust. The change will enable investors that see an ISA provider go bust, maintain their previous ISA allowances rather than having to start again. Of course, one would hope and expect that should an ISA provider go bust then there is protection or at least compensation - but in some recent cases (Keydata) the value of the investment collapsed along with the product provider. This new change to the rules means that once the dust has settled, ISA allowances and previous contributions will be effectively protected.

Mark Hoban is reported to have said that this "will enable investors whose ISAs are affected by the failure or default of a financial firm to continue to benefit from tax-advantaged savings."

Frankly, I hope that none of our clients ever see a day where their ISA product provider goes bust, but should that day ever arrive, this is at least good news.

DT

Premiums Rising - Run for Cover

1955: Run for Cover - Nicholas Ray

The cost of new life assurance, critical illness and income protection policies is expected to rise. This is due to the European directive forcing insurance companies to hold more reserves (known as Solvency II). The planned implementation date is 1st January 2013, but it is widely expected that there will be a 12-month delay due to the current economic conditions. Premiums are expected to increase between 4% and 10%. So it would seem that reviewing any cover you have now may be cheaper than delaying a protection review.

Currently a £500,000 level term assurance policy lasting until age 65 for a non-smoker male aged 45 is quoted between £50.93 a month to £71.88 a month. A difference in cost of £5,028 over 20 years for exactly the same cover. This is for a policy without any commission (which is how we arrange protection policies). Alternatively another IFA - even an RDR compliant one, can still receive commission on these products. This would increase the cost on standard commission terms to a range in quoted premiums from £67.23 to £95.22 a month (32% more). In hard cash costs, that's an extra £3,912 - £5,601 for exactly the same thing. I take the view that clients would prefer to pay a fee, reduce the premiums and pay as little as possible for protection and use the savings more productively.

DT

Christmas Turkey - Measure and Weigh

1948: Sorry Wrong Number - Litvak

First Direct have published some research into Christmas present plans. The danger of any survey is what is read into the data, which in this instance was a survey of 1,000 people. The survey revealed that 280 people (28%) were expecting to receive money this Christmas - with an average sum of £83 each. This is a higher sum and greater proportion than the same survey last year.

The financial services industry, being keen to find a headline, interpret this as £1.2bn in cash gifts this year. However, by my maths I make 28% of a 62.3m population 17.4m people, each in receipt of an average £83 makes a sum of £1,447,852,000. A British £bn is meant to be a million, million or 1,000,000,000,000 (12 zeros). An American billion is a thousand million (1,000,000,000). So I guess the survey is either £247m  (American) off the mark or if you use the British £bn, then £1,198,552,148,000 off the mark... but hey what's a few million in the detail!

Payyourway.org produce a similar survey but with rather different results - claiming that Christmas cash will be worth £2.4bn. Their survey found that 57% of the population plans to give an average gift of £88. Again, using 57% of a 62.3m population is 35.5m people with an average gift of £88 is £3,124,968,000. Ok, so not all of the 62.3m population is old enough to give money, but assuming an American £bn and an average of £88 given then that's 27.272m people (43% of the population).

So as I hope I have demonstrated, I don't pay much attention to surveys and believe that small surveys can be very misleading when attempting to apply the data nationally or globally. This is one of my main gripes about how the economy is valued, measured and planned. I know this may seem like splitting hairs when it comes to surveys about cash gifts at Christmas, but sadly when it comes to the information about the Eurozone and global economy we cannot afford to make such a hash with the numbers, the consequences are rather serious. After all, cooking a 4lb Christmas turkey will have a different impact on your family than a 40lb turkey and no one wants to look like one on the day!

Whilst I'm on the subject here are some recipes for Christmas turkey

Jamie Oliver

Delia Smith

Nigella Lawson

Martha Stewart

Surrey Turkeys

Real Meat Company

DT

How to Improve Your Investing Skill (and how to avoid crashing a Ferrari)

1954: Race for Life - Terence Fisher

I'm sometimes asked why someone that is successful in their field (by which is meant, financially successful) would need a financial adviser. The question really being asked, is why would you be able to help me, I've done well enough on my own. 

I suggest that one considers some of the top sports players - in any field. The best invariably have a coach, which on the face of it may seem rather odd - surely if the coach was any good, they would be a competitor not a partner. Being a coach or an adviser is about being trusted to challenge and to take the subject further. Possessing something does not make one a master of it. A great coach will help ensure that perfect practice is achieved, that fine-tuning is conducted and that the overall objectives are clarified. A great financial planner will help you to identify what is truly important and help demonstrate what is needed to get there. Of course the partnership needs to work and be of benefit, delivering better results - but results may be a broad term - perhaps simply being better.

I was reminded of this as I across a story of some luxury sports car owners, who managed to crash their convoy of top end Ferrari's at the relatively modest speed of 80mph (if you believe that was the speed they were travelling at). Having the Ferrari did not make them good drivers, just the owners. That's not to say that perhaps they were not good drivers anyway - but I would suggest that without someone that is interested in the long-term welfare of these drivers, this probably would not have happened.

Having a set of golf clubs and a knowledge of golf sadly does not turn you into a Pro. Having a Ferrari does not make you a good driver. Having money does not make you good at managing it. Great coaches are like great financial planners - they help protect you from... you.

DT

European Union - Playing without Instructions?

1939: Rules of the Game - Jean Renoir

At the risk of being political, I am going to express my views about mooted changes to the European Union. We might all have a wish or desire for peace and goodwill to all and are perhaps reminded of this as we write and open the Christmas post. We wish for these things, because we would like them to become true (well most of us anyway). However, we are not fool enough to think that peace and goodwill to all is something that occurs with the turn of a calendar date, it is something that it desired, worked towards, but in reality is illusive. We may genuinely want these noble things, but we know that deep down that our own peace is a pre-requisite.

So whilst we might wish for the Europeans to work well together, get along and all be prosperous anyone with an ounce of wisdom knows that wishing is not the same as achieving. Greater European integration of economic and social policy would solve the Eurozone crisis, but only if everyone accepts and adopts the same rules, which they won't. The self-interests and differences in culture are too significant to overcome with rules. It will fail. Politicians are optimists and often delusional to believe that significant change can be made quickly and an electoral system keeps them needing to believe the optimism rather than dealing with the reality. A single European state cannot police its own rules, having more will not make it easier.

Until politicians recognise that the Euro should be a currency to price international trade, but no more, we will continue to pour more money into a system that will not work. The Euro is only 10 years old, yet to the way the media report on it one would think that national currencies did not exist. We cannot even get our own small scale local Governments to agree so why would this be achieved on a bigger scale? Arguments about pension inflation and accrual rates are inconsequential when considered in light of a homogeneous welfare state, social, taxation and economic policy across Europe.

The way out of the Eurozone problem is painful. It means acknowledging failure and rebuilding. In my opinion it means returning to national currencies. If the Eurozone were a house, a surveyor would be warning that the foundations are faulty. They will not be improved by knocking down a couple of walls and doing some re-wiring.

Sorry, but I do not believe that more rules and greater integration will work and whilst there may be short-term relief (because something is being done) the long term problems will remain. So I remain considerably concerned for Europe.

DT

Safe as Houses?

1971: The Burglars - Henri Verneuil

I'm sometimes asked if I know anyone that can help with general insurance queries or renewals. I'm not an expert in general insurance and it is not something that I'm qualified to advise on, however I know enough to know that the comparison websites are, to put it bluntly, not the entire market. General insurance, like many other things in life is one of those costs that we would all like to keep to a minimum, but as is so often the case, price is merely one factor. When it comes to insurance claims and the inevitable stress that is almost certainly experienced, having a good insurer that handles and pays a claim quickly is worth additional cost when compared to the additional stress that more "competitive" companies may generate. I cannot tell one from the other until I experience a claim, but this is where a general insurance broker is ideally placed.

If you have a home that would cost over £500,000 to rebuild or have contents worth more than £75,000 then you would automatically be considered for "high net worth home insurance".This type of policy provides much higher levels of cover than a standard household policy, including worldwide all-risks cover for all your contents (including pet damage, which is excluded by most other policies), high single item limits for jewellery, fine art and collectables, plus useful extras like identity theft cover, family legal expenses cover and emergency assistance.

Additionally, the security conditions are not onerous and the premiums are lower than you might expect. Underwriters can be very flexible in terms of what they can agree to cover and in most cases it is actually cheaper to arrange a high net worth policy than to cover the same sums insured on a standard household policy. You can also include cover for up to 6 properties – ideal if you have a second home or holiday homes you also need to insure.

So if this is something that would be relevant to you, I would suggest giving Phil Heard of 1Stop Insurance a quick call or email. Let me know if you would like his contact details.

Property crime has generally fallen fairly dramatically since 1993 according to the UK National Statistics from roughly 1.75m reported incidents to about 0.75m reported incidents. This is information for trends in domestic burglary to 2008/09. The more recent report for 2009/10 reveals that of the various types of reported crime, burglary accounts for about 12.5% of all incidents which is approximately a total of 542,375 reported burglaries. This is the fourth ranking form of criminal offences behind, (1) theft and handling stolen goods, (2) violence against the person, (3) criminal damage.

DT

Squeezing The Middle - Tax is the Clue

1941: Ladies in Retirement - Vidor

We have heard discussion about the squeeze on middle-Britain, with politicians being typically vague at defining what they mean by middle-Britain. My guess is that it is anyone that has an income between £30,000 and £250,000 - yes quite a range I know, but in the big scheme of things, probably representative of who is actually paying the most taxes to HMRC. Anyone with declared earnings under £30,000 is paying 20% unless they are over 65 and caught out by the age allowance trap (which is where the additional, age-related personal allowance is gradually reduced back down at a rate of 50% for every £1 of income over £24,000 in 2011/12).

So by way of a "heads up" from April, the scheduled changes to the tax system that will most likely effect you are as follows:

1. The standard personal allowance rises from £7,475 to £8,105

2. The age related allowance 65-74 rises from £9,940 to £10,500

3. The age related allowance 75+ rises from £10,090 to £10,660

4. The age related reduction trigger rises from £24,000 to £25,400

So if you are retired and you can adjust your income to £25,400 you will be better off. You can only "adjust" your income if you have assets that produce income that you can turn on and off, which probably means that you have had some very good financial planning advice. This would involve use of ISAs and using capital gains as income and so on.

Sadly, whilst the standard personal allowance rises, the band on which basic rate tax is levied is reduced from £35,000 to £34,370. Also don't forget that if your declared income is £100,000 or more you begin to lose your personal allowance anyway. The good news? well the 50% tax rate will remain unchanged on any income over £150,000 - if indeed this is good news.

If you would like to have a look at a little more detail, here is the link to the HMRC tables for 2012/13.

DT