A Re-telling of Raiders and a Lost Arck

1981: Raiders of the Lost Ark - Spielberg

I have been reflecting on the difference between fairness and justice and realise that the two are completely different. Hot on the tracks of my share of a £60m bill for the failings of others, there is further news about yet another firm collapsing and as a result likely that further bills will keep arriving for me and many other financial advisers. This time is involves a SIPP provider (HD SIPP) an investment property firm called Arck LLP, an investment called Sustainable Agroenergy Plc and a couple of firms called Sustainable Wealth Investments (UK) Ltd and Sustainable Growth Group (UK) Ltd - ironically named.

The Serious Fraud Office has appointed administrators for the above, which have clearly been found wanting by the SFO. This relates to a so-called green investment fund based on tree plantations in South-East Asia (surely not the setting of the opening sequence to the Indiana Jones film?) and linked to foreign property investments held within a SIPP. I imagine the worst - perhaps that there is a foreign bank involved somewhere and a number of investors promised guaranteed returns. Perhaps this may even involve scams about pension cash liberation, it certainly has all the grubby hallmarks of one. I don't know the detail and of course innocent until proven guilty, but I can tell you that I get emails every day offering high commissions (very high) for getting investors into these sorts of arrangements. However, quite apart from the fact that I work on a fee basis anyway, these are almost always "too good to be true" and are based on the most flimsy of information. Sadly there are still many "advisers" that will recommend this sort of rubbish, even the most basic of research should have revealed some problems. Here is the most basic financial planning principle of them all. If it seems to good to be true, it almost certainly, almost always is (i.e.not true). Here is also a helpful link to the SFO's current known scams.

If you know anyone that may have got involved with any of these companies, here is a link that will be helpful. Sadly this is likely to mean yet another large compensation levy for yours truly, despite never even entertaining the notion of arranging these sorts of investments.

It Seems That The Buck Stops Here...(when nobody else takes responsibility)

2006: Notes on a Scandal - Richard Eyre

You may recall that on Thursday 15th March 2012 I posted a that I was groaning about my share of a £60m bill from the FSCS.Well today it arrived (gulp!). This is all due to an American derivatives stockbroker firm, MF Global going bust and their clients requiring compensation. This is simply yet another collapse of a firm that yet again has little if anything to do with real or proper financial advisers, yet it is the IFA and Financial Planning community that are picking up the collective bill from the FSCS.

Rommel Pereira, the FSCS Director of Central Services writes "In the past year the volume and value of investment claims coming to the FSCS has exceeded our previous assumptions. The increase has partly been driven by on-going costs for Keydata Investment Services Ltd and Wills & Co. FSCS has made more decisions on Keydata claims than previously predicted with a higher average compensation payment than earlier claims. There have also been two new failures in CF Arch Cru and MF Global.....We appreciate that the interim levy will not be welcome news for firms in the Investment Intermediaries sub-class, but we have a duty to compensate consumers with eligible claims. We sympathise with firms about the unpredictability of compensation costs but funding is required to cover the costs of compensation until the next levy is raises and becomes available in July."

This comes with an invoice and 30 days to pay from the date of the invoice or face a set of late payment charges and interest blah,blah,blah...(standard notice) and another (the full proper, big bill, arrives in less than 4 months time).

Look, I know we need a decent compensation system so that when firms mess up deliberately, investors are not left simply being ripped off. However, isn't there a degree of mutual responsibility that is meant to happen? such as the investor reading the material and deciding that based on the information, relationship and so on, that the investment is worth taking a risk with. Similarly the adviser should be doing relevant due diligence on products before recommending them. Auditors (PWC in the case of MF Global) should be checking the truthfulness and accuracy of any product literature and finally the regulator should be checking that the product is well run and managed properly and those that are arranging it/selling it do so with all the proper caveats?

Yet how on earth do I get billed for the messes that the above clearly failed on? where I have done my part of the job and avoided this rubbish like the plague!  This on the day when many of us will also be pondering how the cost of a second class stamp can really be 50p (a 38.8% increase! and 30% increase for a first class stamp at 60p) oh well at least the FSCS enclosed a freepost envelope! I wonder what your thoughts are and if you would care to let me know. I know I am sounding rather like a bleating sheep, but does it seem fair to you?

Banks Make Taking a Punt Harder

2012: Safe House - Espinosa

One of your largest financial outlays is probably going to be your mortgage. Good financial planning will ensure that this is repaid efficiently and as sensibly as possible. For all the jargon (and there is a lot) there are really only two types of mortgage. A repayment mortgage (you repay the mortgage over the life of the mortgage - typically 25 years). An interest only mortgage (you simply pay the interest charged on a mortgage and at the end of the mortgage must come up with the money to clear the original mortgage (which won't have decreased unless you have paid part of it off already). Not rocket science, though the way that the mortgage world works with 101 variables of these two versions, you could be forgiven for thinking it wasn't really as simple as all that - but it is.

As a financial planner, an interest only mortgage can be a good way for clients to run their mortgage. It is not for everyone. It involves risk - that you might not have enough to pay back the loan. Historically this is an area of financial advice that has come with all sorts of problems - remember endowments? this was really just a long-term savings plan to build up money to pay off an interest-only mortgage, nothing more. Sadly most were, technical word, "rubbish" and didn't or won't clear the original target. However this doesn't mean that interest only mortgages are bad. They certainly are more risky and when its your home, frankly few would want to risk a home.

Lenders have been gradually altering the terms under which they will now offer an interest-only mortgage, as directed by the FSA they have come to the conclusion that a repayment mortgage is better. I agree with this, but there are still reasons for some to use an interest-only mortgage. It is a little bit silly to assume one size fits all. Anyhow, Skipton has followed a number of other lenders by increasing the equity/deposit element of a mortgage for interest-only mortgages. Skipton now want a minimum of  a 40% equity/deposit, Nationwide want 50% as does Coventry. Santander and NatWest are fairly keen to have larger deposit/equity stakes too. So what? well not much of an impact really unless you are using an interest-only mortgage and want to move to another lender. At Solomon's we don't arrange mortgages, so we refer clients to expert mortgage brokers. The most important element of a mortgage is that it is properly planned, that it is affordable and appropriate provision is made should life not work out as planned - you don't want to be left holding a larger IOU to a lender without any resources to pay. As ever caveat emptor!

So You Want to Understand Your Personal Allowances?

1949: Any Number Can Play - LeRoy

Sadly I have not mastered a way to put a graphic into this blog - which would help enormously to portray what really happens to personal allowances and rates of income tax. This is for everyone under 65 - sorry I know many of my clients are over 65, but the Government are intending to scrap the age allowance anyway and this is really a post about the mechanics of tax.

Now (2011/12)

Personal Allowance £7,475 = 0% tax

The next £35,000 (total income up to £42,475) = 20%

The next £57,525 (total income up to £100,000) = 40%

The next £14,950 (total income up to £114,950) = 60%

The next £35,050 (total income up to £150,000) = 40%

Everything above £150,000 = 50% 

New Tax Year (2012/13)

Personal Allowance £8,105 = 0% tax

The next £34,370 (total income up to £42,475) = 20%

The next £57,525 (total income up to £100,000) = 40%

The next £16,210 (total income up to £116,250) = 60%

The next £33,750 (total income up to £150,000) = 40%

Everything above £150,000 = 50%

Budget Announcement (2013/14)

Personal Allowance £9,205 = 0% tax

The next  £32,245 (total income up to £41,450) = 20%

The next  £58,550 (total income up to £100,000) = 40%

The next £18,410 (total income up to £118,410) = 60%

The next £31,590 (total income up to £150,000) = 40%

Everything above £150,000 = 45%

So if you follow this (well done!) the amount of income you need to earn before paying 40% tax is falling (from £42,475 to £41,450). Let's do a worked example. Suppose you earn £160,000 a year and your income remains fixed.

2011/12 the actual tax (excluding any National Insurance) would be £58,000, in 2012/13 £58,126 and in 2013/14 £58,051. This is what I mean by moving the goalposts - the reality is that you end up about the same (in this example), even though at first reading it looks as though you may be a bit better off as the personal allowance has risen.

Suppose you earn £65,000 well this tax year you would pay tax of £14,010, in 2012/13 you would pay £13,884 and in 2013/14 you would pay £13,869. Not exactly massive sums, which is the point, because the Chancellor/Government/Country cannot really afford to reduce tax in the current climate, at least not for those who are generally 40% taxpayers.

This is not a political statement, its simple fact (all Chancellors play this game because they are head of the Treasury, which is a Civil Service department). Its also true that we do have a 60% rate of tax (effectively) as well as the 50%, but this only applies to those caught earning a bit above £100,000.

Of course a good financial planner will know how to help you reduce your tax liability legitimately, but tax is only an aspect of financial planning, not the main purpose.

The Day After The Budget

1940: Blondie on a Budget - Strayer

It has been a manic few days. There was the endless speculation in the media about what the Budget would contain, then the Budget itself and today further speculation tempered by some analysis. The reality is that you and I can do nothing about what is in the Budget, all we can do is reflect, understand and where necessary make adjustments to your financial planning.

So what is the big news? well probably the gradual phasing out of the Age Allowance. This is probably welcome by most that understand it, though it would seem that a number of politicians and media journalists do not. The age allowance is currently complex in application - extra personal allowances for those over the age of 65, but these are gradually reduced once income is above £24,000 by 50p for every £1 over £24,000. Good financial planning uses allowances for those caught within this income range so that they don't lose allowances (another good reason for ISAs) but those with larger incomes frankly tend to have their personal allowances reduced to the standard levels for all. As you will have gathered we are all having the standard personal allowance increased. I say all, but what I really mean is those earning under £100,000.

The tax tier system continues to be smoke and mirrors - pretty much standard diet to all Chancellors that I have known in my lifetime. Yes it is the case that the personal allowance (income you can earn before paying tax) is rising towards £10,000 - but then the amount of income that you pay 40% is increasing. This is a classic moving the goalpost technique. I will put a separate post about this.

The scrapping of Child Benefit has been altered, thankfully some common sense has prevailed and a few more sums have been done. Its a shame that the Chancellor couldn't simply say that he got it wrong and amended his plan, but there you go.

Corporation tax rates are being reduced - so very good for those running Limited or Plc businesses, such as Ken Livingstone. However for most people this is probably of little interest, for those attempting to do some tax planning, the option of becoming a Ltd company may now be more appealing than self-employed as a partnership or sole trader.

The 50p rate of income tax is being reduced to 45p - but this is hardly news due to all the leaks that pre-empted much of the Budget itself. This is one of those "depend which side you sit on" issues. You will either see this as help to indicate that UKplc is no longer the highest taxed country in Europe and so "open for business" or you will see it as a backhander to the rich. It is of course both.

Pensions were not attacked, but reliefs (excluding those to pensions, VCT and EIS) so mainly capital gains losses and large charitable donations are to be restricted to £50,000 or 25% of income, whichever is the greater. This prevents very large losses deliberately realised in order to pay little or no income tax.

I'm sure you are already bored to death by the annual silly schoolboy behaviour of MPs that we witness each year and the attempt to make a donkey look like a horse. Sadly, little radical reform, much of the Budget is welcome, but the proof of the pudding...

Transparent Tax System? Fact or Fiction?

1960: The Amazing Transparent Man

As a financial planner, one of the most significant issues that I have to deal with is taxation. I'm no Accountant (I believe in allowing people to specialise in what they are good at) but I have to deal with various aspects of the tax system that can be a frustrating exercise. At the moment we are counting down the days until the end of the tax year, which is always the same. We are helping clients ensure that proper allowances are used, capital gains are triggered  and so forth. Tax is essentially an emotive and highly political issue. In many ways it is voluntary, in that it is possible to arrange your affairs so that you pay hardly any tax (if any). This inevitably carries some problems - such as residing outside of the UK for a set number of days each year and a huge array of legitimate tax avoidance measures. However, there is a sense of civic duty in paying tax - to pay for our roads, hospitals, welfare system and so on. Most of us would probably think that we pay too much tax.

The Government is planning to provide taxpayers with an annual statement of how their tax was spent. The idea being that this will show how much tax you paid and how this was used. Whilst I support a clear, no-nonsense approach to public finances, I have to say that I have concerns about this initiative. For starters, it only considers direct tax (income tax) it does not include indirect taxes like VAT, excise duty, TV licenses, Road Fund tax, Council Tax. Neither does it include other taxes that are paid by businesses - employers National Insurance, corporation tax etc, not even capital gains tax or tax on investments (tax on dividends). So the data is considerably flawed. It also has a potential to mislead, your tax may well pay for schools and so forth, but the way this is funded is not directly down to you and neither is it your choice. Some might look at their tax and believe that they don't pay enough to this or too much to that - though tax is not selective. Importantly it does not make allowance for the spending that is done on "our behalf" that is not met by taxes, but by the Government borrowing money (which is why we are in a mess and having cuts). So if the statement was for UK plc I would be happy to support it, but it won't be. There are too many vested interests in keeping the tax system murky and frankly overly complex. I regret that this will merely become a tool for any politician, whatever their view, to support arguments based on flimsy information. As ever, the truth can be hidden in the numbers. As suggested before in this blog, I am an advocate of a full in-depth reformation of the tax system, aligning taxes, so that there aren't differentials between the actual amounts and rates of tax paid depending on whether you pay tax as a business, investor, entrepreneur, retired person, on welfare, employee, employer or self-employed, where it does not pay to "hide" wealth and everyone contributes equally (which does not mean the same). Now that would be fair and radical, but highly unlikely.

Women of the World... Take Cover!

1944: Cover Girl - Charles Vidor

Today it seems that some men have taken a backward step in time to an age when women had few freedoms and many suffered at the hands of abusive husbands. Sadly there is still some distance to travel for many men who are unable to move beyond thuggery. I'm not going to waste further time commenting about some rather idiotic and sadly revealing statements by a well known British actor, but instead focus on the fact that European legislation about gender equalisation (yes there really is such a thing) is due to impact British shores in a variety of ways. Ultimately this will mean that for various types of insurance women will be asked to pay rather more for cover. Rather than reflecting a lower statistical likelihood (which is how the actuarial system works) we are moving to a set of criteria that must not consider gender in relation to risk. This is a double edged sword and one that most people will not really appreciate until its too late. In short, time is now running out before the new legislation comes into effect, conveniently just before Christmas. This is certainly one gift that neither men or women will welcome.

Great financial planning will gradually reduce the need for insurance (as you build wealth and reduce debt) so it makes a lot of sense to review your progress. Some types of cover increase each year to keep the cover broadly in-line with inflation (which has now fallen to 3.4% here in the UK), some policies are re-priced every 10 years and then perhaps every 5 years - depending on the contract. So it is worth checking if you even need cover and if so whether you have the right type at the best price. This will all come from a proper financial plan, identifying what you need to achieve your goals and what risks you are happy to neglect and which you wish to insure.

Sorry, I'm Going to Groan..about a £60m bill

1966: Carry on Cowboy - Gerald Thomas

Financial Planning carries with it some really rather daft issues. As a firm of regulated financial planners, we are subject to the rules of the FSA and the laws of the land. Unfortunately some "advisers" decide to  break these, but then these people would probably rip off anyone. Others might simply be careless or reckless with investments. You may recall that some months ago I blogged about MF Global - well yesterday the sting was delivered to yours truly. Investment advisers have been handed an extra bill of £60m from the FSCS as yet another "interim levy" to cover the  collapse of this company. The FSCS have been inundated with claims, so far £27m this year as a result of MF Global.

Why am I moaning? well frankly MF Global are not financial planners. They are or rather were, stockbrokers. This is yet another case of an organisation classified by the powers that be as an IFA firm, when the practical day to day reality is completely different. My slice of the £60m bill will be heading over to my office at some point over the next couple of weeks - I can scarcely contain my excitement! I don't want to bother you with the mechanics of the financial services industry, but changes (RDR) are coming from January which mainly means that advisers have to be qualified and charge fees rather than commission (finally catching up with us... since 1999) as a result it is estimated that 25% of the current advisers will retire. This results in fewer firms and therefore larger bills for this sort of thing - which ultimately will end up... well where do you imagine? Sadly I do not believe for a moment that the new rules will prevent cowboys from being cowboys and the system seems to be very broken from my perspective. The punishment for bad advice ultimately ends up with good advisers paying for it, which is a bill inevitably shared by clients.

Critical Illness Claims Beating The Odds

2011: 50/50 - Jonathan Levine

Financial planning involves planning the life you want, but also making sensible provision should life not deliver all that you hoped. Insurance is not something that many of us think of in warm terms, but the truth is that for those without adequate capital the right insurance is as welcome as England winning the world cup (assuming that you are English). Insurance can be a life saver and the UK provides world leading insurance.

Many of you may have taken out critical illness cover at some point in the past, the need for the cover needs to be reviewed regularly - it does become increasingly more expensive. However, every time I have a client that is unfortunate to be diagnosed with a serious illness like cancer, I'm grateful that I advised them to take the cover out. Sadly some people don't have cover and of course only discover its merit once they are diagnosed with a serious condition and then of course wish that they had some. Unfortunately this happened to someone I know last week. My thoughts are with them as they come to terms with the medical treatment and uncertainty about the future, not to mention the impact on finances and lifestyle.

One company that has been a major player in the Critical Illness market is Scottish Provident. They took over SMA Pegasus many years ago, a company that was one of the pioneers in the market. Anyway, Scottish Provident recently announced that of the claims that they received in 2011, they paid out 91% of them. The average payout was £81,883 with the largest single payment being £945,709. In total they paid out over £89m in claims in 2011 for critical illness. 65% of claims were for cancer (average age 47) - with 33 different types of cancer claims, of which a third were for breast cancer. The next largest set of claims was for heart attack (12% - average age 50) and stroke (6% - average age 47).  Importantly of the claims submitted 2% were not paid because Scottish Provident discovered material non-disclosure on the original application form. The remainder (7%) simply did not qualify because the illness suffered did not meet the definition of a critical illness. A quarter of all claims were paid to people between the ages of 45-49 (the largest group of claimants).

The moral of the story is to make sure that if you need critical illness cover it is with a really good company like Scottish Provident and that you provide full disclosure of your medical history within an application form. My role as a financial planner is to help assess if you even need cover, if so how much and then I put on my IFA hat to do the leg work to find the best combination of cover, terms and price - which will be a price that is not inflated with commission, because we charge fees for our work and do not have to sell policies to get paid.

Talking Money - Out Now

2012: Talking Money March Edition

Our clients receive a hard copy of our regular magazine "Talking Money". This time the focus returns to the end of the tax year and making sure that you have made full use of sensible allowances. A digital version of the publication is available via our website, which you can either download simply as a pdf or into i-books or a similar application. You can access the magazine here and we have also added a couple of brief updated guides about Pension Consolidation, Estate Planning and Wealth Management. These can be found within the resources section of our website. Please remember that these are generic and do not contain specific advice, if you are a client please seek our advice before acting on documents like these. If you are not yet a client, please exercise great caution as good financial planning requires a context, which should always be yours, not that of the latest rules and regulations.

The hard copy of Talking Money was sent to clients yesterday, please be aware that time is rapidly running out for the tax year, which for most people means consideration of available pension contributions, ISAs and capital gains allowance that could be used. Feel free to pass on the hard copy to friends or the digital version.

Deja Vu Investing and the Sequel of Ker-ching

2003: The Curse of The Black Pearl

As you will have gathered, I'm a financial planner that likes films, probably partly because I enjoy a good story - something that I get to hear from clients (the story of their life to date...in part! but perhaps more interesting is where they plan to take the story in the years to come). Anyway, I was bombarded by more emails about "new investment funds" which frankly all seem to be very much alike, which prompted me to reflect on the sense of "deja vu" that I sometimes also experience with film.

There are probably a wide range of reasons why there are so many sequels in the film world. The worlds highest grossing 50 films contain 40 films that are part of a series - Pirates of the Caribbean, Lord of the Rings, Harry Potter, Indiana Jones, Star Wars, Shrek, Spider-Man, Jurasic Park and believe it or not Transformers to name a few. A cursory glance at a theme park list of rides and you will see this theme further "monetised". There is very much as sense of finding a "cash cow" and milking it for all you can - or the goose that continues to lay golden eggs. This might be said of the investment world too, where new fund launches become a "me too" bandwagon form of investing. The film world is much like momentum investing - a popular film begins to gather momentum, becoming a global success. Investment Companies also spend considerable sums on marketing to tell us all how fantastic they are in the hope of gaining further momentum. Unlike film though, the ticket price will not be pretty much the same for everyone, those in at the beginning will benefit far more than those towards the end - which has no direct comparison to film, which is essentially a fixed but unique (because of the viewer) experience. Investing once the news is out, is a bit like arriving late at the party, it has happened (largely) the greatest profits have been made and the original investors have probably sold out for a higher profit to an investor that wanted to catch some of the action, all too late. This is the often forgotten key principle for professional investors, like those appearing on Dragons Den.

When it comes to investing, the greatest returns are invariably achieved by the first few investors, this is a high risk strategy that most of us are unlikely and unwilling to risk - after all it could go horribly wrong for a new investment (there is a higher chance). So most tend to wait until the good news is confirmed, by which point the opportunity will have largely passed. This constant chasing of returns and becoming disillusioned tends to cost investors considerable sums, often eroding their asset values. This is one of the reasons why I discourage clients from playing the game - which is unwinnable for most people. There is an alternative though, one that will reduce costs and provide better results. Unlike the films that entertain millions (and make millions - for example, the Pirates of the Caribbean series has taken over $3.7bn in worldwide box office tickets) investing should not be about being taken along for the ride.

Good Bank... Bad Bank?

1945: The Lost Weekend - Billy Wilder

The most expensive financial costs are probably your pension, closely followed by a mortgage. So today's news of further lenders increasing their standard variable rate, despite the Bank of England retaining their base rate at 0.50% will cause many to question the ethics of Banks again. Today, Clydesdale and Yorkshire (readers of this blog will know that they are part of the same organisation) have decided to increase their standard variable rate from 4.59% to 4.95% from 1st May. This will mean increased borrowing costs for about 30,000 of their customers. However there is a slight twist, they also seem to suggest that if you wish to move to a different lender and do so before the end of July any exit fees (early redemption penalties) will be waived.  One might question why lenders would be helpful, I would suggest that this is all part of a timed strategy to tidy up a mortgage book and continue to work on improving their own balance sheet.

It often surprises me when I read industry statistics about how few people review their mortgage, yet will seem to get very worked up over the price of petrol - which is an insignificant cost when compared against a mortgage. This is something that as a financial planner I would encourage you to do. Solomon's do not arrange mortgages, but we can put you in touch with an excellent mortgage broker that can help you. However the first thing you should do is to contact your existing lender to determine what deals they would offer you as an existing customer, once you have this information a full assessment of the market will have some context.

Banks and Building Societies are set up to make money from you and whilst it may appear to be a significant effort to move from one to another, these days things have improved. The market is a competitive one, but most rely on your inertia to make the bulk of their profits, which in turn makes them lazy and makes for a less competitive market. So as you head off for the weekend, get out your mortgage statement and have a look at your rate, compare this against a Bank of England base rate of 0.50% and consider how much over the odds you are really prepared to pay, then consider how you might better use some of this to achieve other goals, even if its just being able to feel a little better at the petrol pumps.

Google it... thinking differently about bricks and mortar

1999: Office Space - Mike Judge

Today I had the opportunity to go beyond the online and see the bricks and mortar of Google. Here in London, right next to Paddington station is an office that attempts to capture the essence of west coast technology and lifestyle. Google it seems, does live up to its online answers for everything when it comes to looking after their staff, the result being that an army of motivated and committed people take the strain, crunch the numbers, run the algorithms, and test the features of all things Google.

The offices are a little like an indoor beach - including deckchairs underneath palm trees, open spaces, help yourself coffee stations (and some) just about a frisbee throw from the last one. Pool tables, games rooms and even a music studio for staff to jam. There is a huge canteen area with a vast array of choices and its actually a free lunch. The environment encourages more of the collaborative work that you might expect from an organisation like Google and of course uses all of the latest technology to communicate internally and around the planet.

My visit prompted me to reflect on how the working environment is also testimony to corporate culture and speaks volumes of the relationship between management and staff. In most British businesses this would be "extreme business" and perhaps for many smaller businesses, simply beyond their reach. However, there are lessons that could be learned - perhaps a thoughtful, creative environment leads to higher productivity and/or increased loyalty, perhaps it leads to better ideas and better business. Our environments have an impact. That made me think that financial advisers can forget that a property is not simply an asset, but a home. The decision to downsize or relocate to somewhere cheaper in order to release funds for income later on, may be far from ideal, yet for many it is a likely scenario. A financial plan will identify options and provide a reality check well in advance of reaching such a stage. A good financial plan will also consider and reflect that your main residence is not simply a bricks and mortar, but a home - one that reflects your values.

Life - Time to Save Some by Getting Involved.



2012: Kony

Financial Planning works when the world that we live in also works. Teenagers and "youth" often get very bad press - yet they are our future. I was sent a link by my teenage daughter to have a look at. This is a powerful video designed to change the dreadful things that are happening at the hand of Joseph Kony a rebel soldier leader in Uganda. This is well worth the 30 minute investment of your time. Have a look, make a difference. The campaign to make Joseph Kony famous is now gathering momentum. He is responsible for the abduction, rape, brutalisation, maiming and murder of over 30,000 children in Uganda, forcing children to become soldiers in his make-shift "army".

Most of us tend to feel powerless about the state of the world as we read about what is going on, (well I do) whether it is Syria or anywhere else. Here is a compelling short film that will hopefully make you more aware of what's going on, renew your optimism in a younger generation and American foreign policy. What have we got to lose by getting involved? Perhaps this is too political for a financial planner - but frankly I'm not too bothered. I really only want to work with people that I like and my clients are all people that I believe care about the state of the world. So if I upset anyone for suggesting involvement, that's a shame, but I'd rather be part of changing the world for the better, however naive that might be, than watch others deliberately ruin life for others. I can live with the consequences.

KONY 2012 from INVISIBLE CHILDREN on Vimeo.

More Good News for Mining Stocks

1949: Sons of New Mexico - English

Investment in the right mining companies has been fruitful over last few years. Fresnillo, one of the larger mining companies releases its preliminary figures this morning. Profits before tax up 50%, with revenue increasing from $1,409m to $2,192m. Fresnillo is now the world's largest primary silver producer and Mexico's second largest gold producer. The production of silver actually fell (marginally by 0.6%) whereas production of gold increased by 21.6%.

Fresnillo is a FTSE listed company and as a result anyone with a UK index tracking fund will hold some stock in the company. If you would like to see the preliminary results click here.

Whilst many of us will remember the Wild West movies which often seemed to revolve around gold from Mexico, today in 2012 the West is still getting gold from Mexico, albeit not at the point of a gun or stolen. Mind you, some might consider the current price of gold to be something akin to daylight robbery.

Tax Year Ending



1995: Nick of Time - John Badham

Financial Planning has a long-range perspective, financial advice is often highly focused on specific tax years. As a financial planner that implements financial plans using financial products, it is important to remind everyone that we now have only a month until the 2011/12 tax year ends. This means that anyone that has not used ISA allowances and wants to do so does not have much time left. The personal Capital Gains Tax Allowance is a "use it or lose it" allowance, so it may be worth considering realising some gains from investments so that the gain is tax free (up tot the CGT allowance). Pension contributions - a "little" more complex, but in essence the annual allowance of £50,000 runs out and to make matters a little more problematic, the Lifetime Allowance is reducing from £1.8m to £1.5m - it is possible for some people to protect the higher amount by applying for HMRC Fixed Protection.

These are just a few of the main allowances, others might include Junior ISAs, personal charitable giving, Potentially Exempt Transfers, Enterprise Investment Schemes and Venture Capital Trusts. The UK has the most complex and most detailed set of tax rules on earth. These are often viewed as a hindrance, but rules are helpful to anyone planning.

IFA v Financial Planner

2010: The Big Picture - Eric Lartigau

I was recently asked what the difference is between an IFA (Independent Financial Adviser) and a Financial Planner (who is also independent). The truth is that those now operating as financial planners used to regard themselves as IFAs, however as our profession has moved on and technology has greatly improved, a financial planner is someone that first of all creates a long-term cash-flow plan. This is something that a number of us have been doing for some time, but only in the last few years has there been any half-decent software that enables this process to be presented.

As a result, a financial planner is finding out what your goals and aspirations are, what lifestyle you want. It is not about the money, but about the lifestyle. The financial products are very much a secondary part of the relationship - but still important and most financial planners will continue to implement and manage the financial products, but this is a result of the plan, not an objective at the outset.

I'm conscious that I have not described this as clearly as I might, that's probably due to the fact that as a financial planner, I continue to wear my IFA hat to arrange products to take advantage of the tax system and so on, but primarily creating the financial plan is where my focus is initially. All elements of the piece come together and need reviewing, but it is the financial plan upon which everything else hangs. Those of us that now regard ourselves as financial planners, work to a six step plan, a financial planning world standard ISO22222.

1. Establish your short, medium and long term goals in life

2. Gather your financial data

3. Analyse and evaluate your financial status

4. Develop your plan

5. Implement your plan

6. Monitor your plan and make adjustments where necessary to keep on track

This is something that we have been doing at Solomons, but we are constantly developing and improving the "what" and "how", but our "why" has never altered. I believe that having control of your finances enables you to enjoy a genuine sense of freedom and peace of mind. The additional benefits are numerous, from having more time to do what matters most to simply enjoying the time you have with those you care about.   

The Money Machine

1997: Breakdown - Jonathan Mostow

Financial planners are sometimes confused with magicians - in truth there is nothing magical about financial planning, though some people certainly approach money as though it was. The principles of sound financial management boil down to generating income and keeping costs below income levels. Long-term planning is essentially ensuring that there is sufficient income to meet costs without having to "work". Most of us have resources that enable us to find work and earn a living, however when times are more challenging, as they are now, thoughts are often directed to the money machine.

If you were hoping that I was going to point you in the direction of the nearest money machine, I'm afraid that there is no such thing. You are "it". Your own personal skill set and capacity to think will require your creative endeavours to "go forth and earn". Some people are not able to do this, because they lack the ability to see their resources, understand them and in some instances may have no resources at all. Those wishing to see their resources need to reflect on how to best employ them. This is not a straight-forward problem, but one that starts with the end in mind. How much is needed and over what time (which is a diminishing resource for us all). Many financial advisers seem unable to do this for themselves and so I would question their ability to do so for their clients. I believe that this is because the thinking required goes beyond the simple needs of today and must be based upon a larger picture, one that is built upon personal values. This is where expert financial planning reaps benefits.

Of course if you are the money machine (you physically go out to earn a living) then it would make a lot of sense, unless you have ample resources, to insure yourself against breakdown - you would do so for your car and house and probably a pet, yet a significant number of people do not properly insure themselves - their ability to earn. This is one of the very first steps of any good financial plan. Sadly once the machine breaks down, there is no chance of taking out insurance. So make sure that you have the proper level of cover. Hopefully your cash machine won't ever break down, but if it does, you will have ensured that your finances and lifestyle do not become casualties. Its bad enough when the mundane things break, as my boiler did the other week - but when the thing that breaks is you, the size of the problem is significantly more problematic than a lack of hot water.