An Arch-Enemy?

2012: Avengers Assemble - Whedon

Financial Planners are furious today after the FSA announced that it has conducted a review of the sale of Arch Cru products. It would appear that many of the advisers selling these products were inept with an overwhelming number from the sample failing the file test from the FSA. The FSA suggest that many of the firms involved (795 in all) will collapse, conservatively putting this at 30% of the firms concerned. Planners are not upset that the firms found "wanting" will be punished, but that we (the rest) have to pay for their incompetence to the tune of around £100m. The FSA suggest we should all increase our fees so that we can meet the rather larger FSCS "30 days to pay invoices" that will be on the way. This of course makes perfect sense doesn't it? higher fees for clients of good firms, paying for the "advice" that others gave and took on a commission basis. One of the regulators main initiatives TCF (Treating Customers Fairly) seems to have rather caught a cold on this one, failing on several counts - its not fair, and its not our "customers" and if ever one client cross subsidised another this is perhaps the most telling example.

I am happy to report that we have not arranged any of these products. I believe that a fee system rather than a commission system where the adviser is only paid to sell products, is the main reason for this sorry state of affairs. Advisers are meant to ensure that clients have been given proper information and of course that it is appropriate to the client (not the adviser's bank account). I dare say that this would probably have been a non-issue had firms been made to charge fees years ago - which is something that we have always done, yet are being penalised by being forward thinking, by having to pay compensation for those that seriously messed up. Unlike comic characters, I don't have an arch-enemy, though one has to wonder how long good financial planners and their clients will put up with this sort of stuff before they get together to form a group seeking to clean up the place, rather like the current Avengers film on release at the moment.

Sundance London 2012

1969: Butch Cassidy & The Sundance Kid

If you are a regular reader of my blog you will have gathered that I greatly enjoy film and the arts. I think because I enjoy good and well told stories, which is also what I enjoy about my financial planning role with clients - listening to their stories and getting a sense of their passions in life as they talk about the future. To me it is energising and provides a real "buzz". I'm also someone that likes to listen to people that have walked the talk and succeeded in following their life goals and passions. So the opportunity to spend an evening with Robert Redford, T-Bone Burnett and Nick Hornby at the very first Sundance film and music festival in London, accompanied by The Guillemots was an opportunity that I didn't want to pass up. Glen Hansard was an added bonus - a great singer that first came to my attention having watched the film "Once" some years ago.

It was a memorable evening at the O2 Indigo suite and I understand that today Simon Mayo and Mark Kermode will be interviewing them again today on BBC radio 5Live, if you are interested (so it will probably be available on their podcast). Anyhow, it was fascinating to hear the two of them discuss their careers in film and the growing importance of music to help tell the story and develop characters. Robert Redford originally trained as an artist and had come to the conclusion that this had somehow been lost once he became a well-known actor, however as his career moved into directing, he found the artistry coming together between the different media. He was also very open about his "mistaken views" which were generally about things that turned out far better than he had ever expected. There was also an acknowledgement that often film making is very difficult, often doesn't go as planned, involved some luck and is hard to keep control of - much like life itself. However for all its trials and difficulties, keeping true to the vision and the integrity of the chosen path was very much their message. One not just for film makers but surely a vital life skill and highly pertinent when discussing and designing your financial plan, the route map to the life you want.

Smaller Pond

1991: Favour, the Watch and Fish

Financial planning is changing quite a lot at present. This is due to something that as an industry all financial firms are undergoing. The regulator is in the final stages of implementing its Retail Distribution Review (RDR) which comes into effect on 1st January 2013. As stated before this has little impact on our firm or the advice we provide, however for many it is a radical overhaul. The most salient point is that financial advice needs to be properly paid for and the price of the advice agreed between client and adviser. It must not be determined by a product or product provider.

There is no getting away from the fact that financial planning is not cheap. It involves time, time to get a full picture of a clients assets, liabilities, existing arrangements, plans and hopes for the future, attitude towards risk, capacity for loss and so on... as a result most of us expect Banks to cease providing advice, except to their high net worth clients (which is a service that financial planners like me can easily exceed). The rest, are sadly left to "do it themselves" by making a "direct" purchase of a financial product without advice, just information. For many this will be fine, as their savings are probably small and the complexities therefore limited. However this won't be true for all.

Today HSBC have announced that they are ceasing their "Tied Advice" and will offer a whole of market advisory service, which I suspect will actually be "restricted advice" when it is finalised. This means 650 advisers from HSBC will be losing their jobs. It hasn't been said that this is because of RDR, but it almost certainly is. This is on the back of Barclays decision some months ago to cease providing advice to all but their high net worth customers. I expect further Banks to follow suit, but they tend to have a way of finding a solution.... but the pond is certainly getting smaller.

Listen Up?

1938: Listen Darling - Edwin Marin

Financial planning involves a lot of listening (and hearing), certainly there is a dialogue - asking questions that perhaps others don't get to. It is good to be heard. I'm conscious that information, however well intended from a financial planner can be perceived as unrequested, intrusive and perhaps unwelcome, there is a degree of interuption. If this has been your experience I apologise. My purpose for this blog is to provide a sense of relevant and hopefully helpful commentary about matters arising in the world in which we live. Sometimes this involves reporting "bad news" which one might argue is not always helpful. I guess I'm trying to prompt, inform "shine a light" on issues that have an impact on most, if not all of us.

This week (and its only Wednesday morning) I have felt a degree of being heard in two significant ways. Firstly a difficult case that I have been working on finally got my goat so much that I fired off a polite but blunt email to the Boardroom of a multinational firm, resulting in a surprisingly rapid response with a phone call from the CEO (within about 4 minutes). This then resulted in resolution of the main problem within the next 24 hours. A result. The second was the ability to spend some time with the owner of our main software supplier, the backbone of our business. This was a really useful time (hopefully for him too) being able to express my thoughts and suggestions about requirements for the future so that I can provide better services to clients and deliver even better business effectiveness and reduce commercial risk. Again a sense of being heard, though of course the outcome is rather more long-term.

To me, being heard and understood is pretty important and perhaps I am a little over-invested in providing information that I believe should be heard and understood - which of course is open to interpretation and really little more than my opinion. By flagging up problems or drawing attention to the need to face some stark truths can seem very dreary and doomsday-like. This is something that I will probably wrestle with for the foreseeable future and so I'm simply going to come clean, that my take on life is that information is important to help plan for the future, however bleak the situation I always have hope, though inevitably some difficult decisions need to be taken and some of these may be uncomfortable. This applies to my own life as well as anyone elses.

Waking From The American Dream?

2005: Brothers Grimm - Terry Gilliam

Financial planning if handled incorrectly can appear to be mainly about dreaming and wanting the impossible. Financial advisers or financial planners are not wizards, there is not a magical ability to remove problems or avoid reality. Over the last 100 years or so, many have headed to the land of opportunity, the land of the "free" in order to seek and make their fortune. Don't get me wrong, I am not anti-American (not at all) like everywhere else, it has its good bits and bad bits - just like us here in Britain. There is much to be proud of and quite a lot that would cause a degree of  embarrassment.

Bloomberg today shared grim news that the US Social Security Fund is going to run out three years earlier than they expected. It helps fund 44 million people in the US and will run dry (by current predictions) by 2035 - just 23 years time. Sooner than this even is the Disability Fund which supports 11 million people in 2016 - that's 4 years time! This is financial planning done on a national scale - something that most Governments try to do but invariably get horribly wrong.

So what? well - problems in America are usually a warning to us here in Britain and a problem aired is a problem shared. There are solutions of course, but this is the power of good information, helping decision makers to hopefully make the right choices for the future. However, before berating the US for underfunding its welfare system, think about this in your own context. Are you banking on a fairytale ending for your retirement, a fairytale that has no basis in fact or reality? Are you planning wisely and making informed, good decisions today about how you live today and how you appropriately plan for tomorrow? Need some expert help? clear information? or will you too find the harsh reality of the future, simply too much? 

Financial Planning - Empowering Decisions

1997: A Life Less Ordinary - Boyle

Financial Planning when done properly can be incredibly powerful. A recent piece of work was for a couple who wanted to consider their options. They have always had fairly clear ideas about when they wanted to retire. They were not certain about whether they wanted to educate their children privately as the local schools are very good. However, this might change at secondary school level and they also wanted to provide for the higher costs of a Degree at University. They also expressed the view that they would like to move to a larger property, which would mean a considerable increase in their mortgage. They would like to know whether choosing one, meant not doing the other, they are also concerned about the level of pressure that larger commitments would bring and wanted to be as certain as possible that they would not get into the position of working all hours to fund a larger home, that they might not see in the daylight. In addition, they wanted to ensure that the burden of school fees was also deemed worthwhile for both the parents and the children. The crunch question being could they afford to both, one or neither? what income would they really need to be generating and would this be practical and fit their values as a family. My role is to help them prioritise which is more important (the why) and then do the financial planning to figure out the how and what need to be done.  The result is a compelling document which reveals what is possible and realistic, enabling them to move forward with clear evidence to support their decisions over the next 20 years. My report provides all the answers to their questions and more.

This is really what financial planning is about - providing information to make better decisions, based upon a well thought through plan. It is not about the value of your pension fund, ISA or which one to use. Frankly that stuff is very boring to most clients (and to me), what clients really want my help to figure out, is whether they are doing the right things to achieve the goals that they have set for themselves and their families. These may be big expensive goals or seemingly small goals that don't cost a lot - again that isn't really the point, the point is that you clarify and quantify what you want, what is more important and how much effort you really want to invest in achieving the life you want. It has very little to do with the stock market, though the way most financial advisers act, you would think that our lives are determined by the markets, but then that's the difference between ordinary advice and great financial planning.

NHS Pension Scheme Costs Increase

1963: Doctor in Distress - Thomas

As the end of the month approaches, many NHS employees will be reflecting on a fairly significant financial planning matter - in that your net pay will reduce due to the increases in pension payments towards the NHS Pension (which is excellent) which took effect from 1st April 2012. Contribution rates are based upon full-time salary levels and the larger increases impact those with higher NHS pensionable pay. Your pensionable pay does not include all of your income and it is best to review your March payslip (the end of the NHS financial year) where you will see a total pensionable pay figure for the year. This is the amount that your NHS Trust employer report to the NHS Pensions Agency at Hesketh House.

Anyway, for those earning £26,558 - £48,982 of pensionable pay, your payments will increase by 1.5% to a total of 8.0% of your pensionable pay each month. All those earning more that £48,983 have had their payments increase by 2.4% of salary. This means a total of 8.9% a month for those earning £43,983 to £69,931; 9.9% for those with pensionable incomes between £69,932 and £110,273 which will cover most senior staff. Those earning over £110,273 will now pay 10.9% this is generally Consultants and those with Merit Awards etc. The number crunchers estimate that 52% of NHS staff will pay more towards their pension, estimated to be approximately 682,500 people. You can see a table form of this by clicking this link.

It is important that you keep your payslips and P60's safely, clients should send me a copy of their March 2012 payslip and ideally this should be sent as a pdf scan. This is vital information to enable us to calculate pension contributions for the annual allowance and lifetime allowance, which obviously helps us to do a thorough job in relation to your financial planning, and in particular your pension.

Kony 2012 - Day of Action 20 April 2012

A day like any other? a day when a youth initiative to bring a warload in Uganda to the world's attention so that he might be found and put on trial for the crimes he has committed, in particular for leading and organising the abuduction of children and turning them into child soldiers. It will be interesting to see what happens next, will the global community take any action? Well thousands have been - and they continue to do so.

I'm happy to lend a little airtime to an organisation that is attempting to stop abusive actions by warloads that ruin the lives of others. If only it was as easy to start peace as it is to start war. I hope you have a great day.

That's The Wrong Answer

1966: Carry on Screaming - Thomas

There are days when I'm very much "in the zone" and then there are days like today, when I am thwarted by incompetence. Financial planners rely on good information, the tired phrase "garbage in, garbage out" very much applies within financial planning. It is important that information is accurate. I have been working for a client that is due to reach a milestone birthday next week. We have made repeated requests to his pension company (a well-known Multi-national) for accurate information about what his funds are worth and what their options are for him. I need this in order to do a thorough job, frankly a proper one, assessing all his available options. So it is "disappointing" (one word for it) when we are told conflicting information and sent inaccurate details. This is not for a theoretical analysis, but is vital for something that will happen next week (we have been requesting information for months).

Sadly, its not possible to simply "move on" and dismiss their incompetence, the pension concerned is fairly old (ok very old) and has all sorts of very good "bells and whistles" involving guaranteed annuity rates, which when compared against the market are considerably better (double). So it's no good me losing my patience and moving on to another option, we need the information. The client of course is simply looking forward to the funds - his pension, which is entirely reasonable, but will be disappointed when they don't materialise on his birthday because of the delays outside of our control. I would like to think that in this technology based world, that this sort of mess could be easily avoided, but sadly the company concerned cannot even send a fax out on the same day.... hey presto an email to my inbox from a research company asking about annuities.... will I spare my wrath? As a financial planner that attempts to make sure money arrives in the right form, right amount, right place, right time it is deeply disappointing to be at the mercy of product provider incompetence. Sadly, real life experience of service is not regarded as a terribly good way of assessing the most suitable product, so we persist... again.... whilst I carry on screaming.

PPI Bogus Claims Companies

2000: The Claim - Winterbottom

As a financial planner determined to cut through the nonsense and provide a high quality service to clients, it saddens me to continually read about further scandals. The financial services industry is certainly well short of perfect and the most recent mis-selling scandal was for Payment Protection Insurance (PPI). You probably will not be surprised to learn that I have never been a fan of PPI - preferring (by a country mile) proper Income Protection cover - if necessary. The vast majority of the sale of PPI was conducted by Banks and Lenders to those applying for credit. In principle the theory was (and still is) perfectly sound - insure against your inability to meet your liability, however, with the case of PPI, often the cover was poor (at best) and in many cases would not have paid a claim. In addition some people did not even know they were paying extra for this benefit. Finally this sorry tale was corrected by agreement of fault and large compensation claims now headed towards the guilty parties.

So what? well perhaps if you have access to more than 5 television channels and the occasional newspaper or surf the web, you will almost certainly have come across "claims companies" the equivalent to the proverbial ambulance chaser, invariably suggesting that they work for free to help you get money back, which of course to anyone with a modicum of intelligence is complete nonsense. Adverts often state that a firm is regulated by the Ministry of Justice, which all sounds rather grand and reassuring, but isn't. In fact the Ministry of Justice has closed around 20% of claim firms in the last year and had to double its staff to deal with the increased investigation of claim firms, many of which are completely bogus. The investigation is ongoing following the floodgate moment of approval for legitimate claims. Perhaps you have been emailed or even phoned - I have (several times). To my mind, it seems that claims companies appear to be breaching the data protection act by contacting you in any event, let alone making false promises. Typically 40% to 50% of claims being received for PPI are invalid. This is a huge waste of time and resources that ultimately will cost us all much more.

Legitimate claims for compensation should be properly settled, it is not difficult to complete any required paperwork by yourself (only 20% of people do) and you don't need a specialist claims company (which 80% currently "employ"). The very existence of such organisations makes my spirit sink as we become an increasingly more litigious society that grows to be more like the US with a culture of blame and failing to take responsibility. The Ministry of Justice have a very good fact sheet on this topic.

Financial Planning - Against the Flow

2011: Salmon Fishing in the Yemen

Financial planning is something that I have a real passion for. It is my belief and assertion that when done well, proper financial planning is akin to a light bulb moment or a bit of an epiphany. In essence as a financial planner I address the fundamental question that clients ask (even when it isn't verbalised)... will I run out of money? Proper cash flow modelling admittedly involves lots of assumptions about the future, but these are reasoned, reasonable and reviewed. A financial plan is essentially your lifetime goals, perhaps aspirations, but clear, well defined and thought-through goals. This process can take some time to get right - not because the process is difficult, but because most people simply don't know what they want out of life. American life coaches probably call this "living deliberately" rather than "living by accident". In other words - if you don't have a lifeplan, how can you make good decisions.

The questions can be fairly straight-forward - "Can I afford to buy this house and pay off a mortgage, run it and still afford to live in it when I retire?" or perhaps "I'd like to retire from my job at 60 not 65, but can I afford to do so with all of my commitments?" or "I have worked hard to build my business, what I need to know is what is the sale price I must achieve to do all the things I am working for?". Sometimes the questions are less clear - "Can I afford to start giving money away to my children or will I need it later?" "Can I really afford to spend all this money in my retirement? will it run out?"... "What investment return must my savings and investments achieve as a minimum?"

A great financial plan, will provide answers to the questions that you have thought of and hopefully quite a number that you didn't. Seeing this graphically represented is a very powerful and profound experience, something that enables you to make better decisions and understand why a financial planner is no more interested in financial products than you are - we are interested in solutions.

I attended the preview of "Salmon Fishing In the Yemen" at the weekend, this is a really great "little" British film which seems to capture an aspect of current times. I won't give the plot away, (its well worth seeing with a fantastic cast and director) but in essence stereotyped cultural barriers need to be crossed in order to achieve an ambition. To some, what on the surface seems daft, ludicrous or mad really poses the question - do you understand the vision? not just the "head-stuff" but the "heart-stuff" too? Great financial planning must connect with what's in your heart, not just in your head, after all, we're talking about your life, not a hypothetical one.

Here's a link to the trailer for the movie, which is on general release in the UK from 20th April 2012.

A New Start

Love Wins - Rob Bell

Whilst today is the start of the new 2012/13 tax year, it is also Good Friday. Today the staff of Solomon's will be observing this day by closing the office. We shall open again once the Easter weekend is over on Tuesday 10th April 2012. To Christians Easter is a time of reflection and celebration at the opportunity of a new start, a new day, another chance (again). There is clearly much division of opinion about the significance and of accuracy of reporting and subsequent representation of the life of Christ, or Jesus. It is not easy to come to the Easter story without considerable "baggage" collected over the years from a variety of unhelpful experiences and sources. One thing is certainly undeniable - that this is a story that has lasted over 2,000 years and if the claims made are accurate, surely they are worth investigation. One book that I have found to be rather more accessible and not loaded with dogma is simply called "Love Wins". As with most controversial books it has had its critics. For the record, I wouldn't presume to tell you what to believe, however at some point, we may all have to wrestle with the big question - what's it all about? and financial planning by virtue of taking a look at your life ahead in the time remaining, poses this question, amongst others too. Perhaps this book will help those wishing to explore the question. Happy Easter.

It Figures...

April 2012 - Market Report

The latest numbers for global markets are now available within the news section of the website. These reveal that to the end of March 2012 (Q1) the investment world was looking pretty positive. The FTSE All-Share returning 15%, even the Nikkei 225 put on 15.9%. Gold being one of the more obvious single digit commodities at 5.7%. The Dow Jones up 8.8% only a bit better than the MSCI European index at 8.0%. You can read all the numbers here. But please don't read too much into them... doing so is like attempting to read tea leaves. Markets have weakened in the last few days, for a number of reasons - but the mention of Spanish Bonds and the price of iron ore would only add to the volume of speculation. The housing markets here and in the US are improving, but I remain very concerned about America when I watch supposed experts talk on Bloomberg about how difficult it is to get a mortgage because people have to complete some paperwork. Given the recent history of US lenders giving away money to people that didn't have any (Ninja's) - No Income No Jobs and a culture where you can return the keys without recourse, I remain deeply concerned that the bluff and thunder of the American property market is entirely misplaced. Let us hope that they think carefully and learn some lessons about wise borrowing...and that we do too.

As Clear As Fog? The New Jargon

1936: A Face in the Fog - Robert Hill

Finally, today that FSA have begun the process of telling the public what is happening to financial advisers from January 1st 2013. To clients this will not be news, to regular readers it will be not terribly new information, but for those of you that have recently found my blog, this may come as a surprise.

As a forward-thinking financial planner, I have operated on a proper fee system since setting the company up in 1999. What this has meant is that clients have clear fees for the advice they receive and clear implementation costs. This was quite radical at the time. Since 1999 we have improved our services and frankly, become an awful lot better at delivering them. So you would think that I'm pleased that the regulator is making everyone operate on the same basis. Well, not entirely. In the "good old days" (they weren't) advisers were either Tied or Independent - which meant that they either sold you products from just one company or could search for the best from the entire market. This should have been better and probably was in 90% of cases, but as providers paid different levels of commission for the same product or vastly different amounts for the same investment but into different types of product, frankly the whole thing was open to abuse. So then came Multi-Tie to muddy the waters - a third approach, with you guessed it, the ability to sell products from a limited number of companies (typically 3 or 4). The next step was to say that to call yourself independent, the adviser must offer products from the whole of the market and offer the option of paying a fee instead of commission.

The new rules go a bit further - the adviser has to agree the cost or fee with the client (you) in advance. This can be paid from the product or directly, but importantly is not determined by the company that provide or "manufacture" the product. The implication being that Product Providers cannot sway what products they want to promote or "entice" new business. This fee agreement rule applies to all advisers. They also all have to have the same minimum (enhanced) level of qualifications. However, to be termed independent, they must offer advice from a broader range of investment products - which include unregulated ones, (called Unregulated Collective Investment Schemes) which can result in huge losses to clients. UCIS cannot be promoted to the general public. It is these products that are suitable for very few "normal clients" (by the FSA's own admission) that are causing me and many fellow forward thinking advisers some concern. Basically a lot of them (but not all) are rubbish and not relevant to 99.9% of people. Yet in theory we are supposed to consider them for all clients, by researching, assessing and then ruling them out (or not) in order to remain able to use the term independent. In the majority of cases this will be a huge waste of time and client money. Simply saying we won't or don't do it, means we can only use the term "restricted adviser" - which applies to an adviser that does everything but UCIS or one that simply sells one type of product. To assume that the general public will appreciate the differences once the marketing teams have "had a go" is in my opinion somewhat naive. I welcome your thoughts.

House Prices Begin A Nervous Recovery

1945: House of Fear - Roy William Neill

Perhaps your major asset - your home is on the increase in value (finally). The average house price last month was £163,803 (yes I know - where is this house? there certainly isn't an average house in London worth this amount!) in July, last summer the average price was £163,765. You will notice that there is little real difference, but this comes after data that had previously revealed month on month price falls, this trend was bucked in March (according to Halifax) by a 2.20% rise in prices. No doubt the mathematicians amongst you will appreciate that in real terms property prices are therefore falling behind inflation. One also has to question... so what? if you live in the house, its short-term market price is hardly an issue - its only when you want to sell that it becomes a problem - unless you are a landlord. Property price rises may give rise to questions about possible capital gains tax bubbles and when/if to sell or let the property. The truth is that property is not very liquid, the buying and selling process is fairly protracted. Another property truism - is that its all about location, location, location.

Good financial planning will involve considering your options with respect to your home. Some people will find that their home provides a useful form of capital - either by downsizing and releasing equity or by taking out a loan against the value of the property. Invariably this is done to provide income to meet expenses. I would counsel a great deal of caution if you are considering taking a loan against your home. This can end badly and needs expert counsel to avoid considerable distress that many have suffered when they understand that their debt compounds with interest and can result in nothing being left - which might be suitable to some people, but on the proviso that they have understood the mechanics of the loan - which few seem to do. Great financial planning will help identify stress points in your future cash flow and provide advance warning as well as possible solutions. The art in financial planning is knowing what questions to ask.