What If .... It all goes wrong?

1996: Portrait of a Lady - Campion

This afternoon I met with a long-term client that really gets what we are doing for her. She is a very fit 80 year old lady with a sharp mind and a lovely sense of humour. Inevitably we turned to the awkward topic of life expectancy and discussed her family history and her opinions about potentially needing assistance and long-term residential care. We clarified her thoughts about leaving and selling her home should she require care. We also talked about her desire to help her wider family and the possibility of needing to spend money on her own healthcare. Naturally she also has concerns about the state of the world and global stockmarkets, how much should she hold in cash as an emergency fund and so on.

I do some sums, adjust her financial plan and reveal that allowing for her current rate of spending and estimated giving and medical bills, she can afford her portfolio to achieve a return of -0.51% a year. In other words, she can afford to achieve no (negative) growth and still have sufficient funds. If there is a dire stockmarket crash of 35% that doesn't bounce back, but is simply marked as a "correction" her returns need to achieve 2.86% a year. Now nobody wants a crash and I have yet to meet someone that wants to enter residential care rather than living in their own home, but this sort of analysis and information is vital to providing peace of mind. Certainly we can adjust some of the assumptions, even the most apocalyptic assumption of a 65% crash that doesn't recover, would mean that her investments need to generate 7.89% a year. The important ingredient going forward will be to review her plan carefully, balancing risk and reward with needs and making sure that she is within her own budget (not ours). This is the power of good financial planning.

Double or Nothing? Reality Check?

1993: The Assassin - John Badham 

Continuing on the theme of financial planning assumptions, today the FSA have launched a consultation process on reducing investment assumptions. Taking guidance from PWC, the FSA are reflecting on advice to cut investment assumptions about future returns. Unless there is a form of proper explanation, I fear that many will be more confused and deterred from investing - precisely the opposite objective of the FSA.

Assumptions about investment returns boil down to some fairly basic maths. For example, let's take the "endowment mis-selling scandal". Suppose you need to build a fund of £100,000 over 25 years to repay a mortgage. Whilst there is an element of life assurance (which has a price) and investment charges, tax and commission (all of which gave rise to the mis-selling). How much you are asked (or quoted) to contribute depends upon your initial assumption. Setting aside the costs etc as mentioned, just considering the maths to build a fund of £100,000 over 25 years the following would apply.

A 5% growth rate results in £170.03 a month (total outlay £51,010)

A 7% growth rate results in £126.99 a month (total outlay £38,097)

A 9% growth rate results in £93.87 a month (total outlay £28,161) 

As you can see, for many people attempting to keep costs to a minimal amount, you will appreciate why they were lulled into using assumptions about higher rates of return, particularly when at the time, the longer-term average returns were fairly similar. Sadly returns have not held up to the assumptions in the majority of cases and one might argue that the long-term economic picture has altered to the extent that lower rates of growth should be assumed. Hence the PWC advice to the FSA.

The problem is that the proposed rates of return being suggested for a pension or ISA (which have tax advantages) are being reduced from 5%, 7% and 9% to 2%, 5% and 8%. In other words slashing the projected rates 60%, 28% and 11% respectively. This is primarily because of low interest rates and low inflation, anticipated (assumed) for the long-term. Let's take another example... building a pension fund over 30 years to a size of £1m.

Old Rate 9% = £583.31 a month (outlay £209,991)

New Proposed Rate 8% = £705.40 a month (outlay £253,945 = 20% more)

Old Rate 7% = £850.30 a month (outlay £306,109)

New Proposed Rate 5% = £1,221.46 a month (outlay £439,725 = 43% more)

Old Rate 5% = £1,221.46 a month (outlay £439,725)

New Proposed Rate 2% = £2,032.23 a month (outlay £731,604 = 66% more)

Just reflect on these numbers for a moment. You are a bright person and know that actually we have no way of knowing what the future returns will be in practice. We need to make sensible assumptions, which need to be based on experience of reality. Setting aside the problem that some investments are overpriced and some managers are rather poor, do you believe that the "average" person will interpret these figures as guidance and will simply assume that its better to give up before starting, becoming ever more reliant upon the State. It is an irony that the regulator asks us on the one hand to treat past performance as an unreliable guide to future performance, but then stipulates the rules about projections. In truth it would be more grown up to have a proper conversation about individual and personal expectations, attitude to risk and capacity for loss, but this takes time, something which also needs to be paid for. Something that will be a bridge too far for most UK investors from 2013, when their financial adviser is finally forced to ask for a fee - something that we have always done with our clients, so that they are shown the truth about money.

Oh and by the way, if inflation is 2.5% a year, a £1m fund over 30 years is equivalent to roughly £480,000 today. It is the link to inflation that needs exploring very carefully indeed. The problem with the proposed rates, is primarily not that context is everything, assuming a return of 2% when most savings accounts can provide more, will lead people to draw the conclusion that there is no purpose to investing. We will have reached the point of no return - particularly with inflation higher than 2%. Whilst having a realistic assumption is clearly sensible, without explanation, the FSA risks putting off millions of people from making  provision for their future - which will inevitably be linked with ours.

Financial Planning - Life and Death?

1937: Dead End - William Wyler

Predicting the future is a pretty difficult task. There is a degree to which we probably all hope that someone knows what is going to happen, though of course we actually know rather better in practice. The media seem to love speculating about tomorrow, indeed the more I watch the output from media outlets, including the BBC, I'm struck by how much of the "reporting" is no more than speculation, obsessing over what might happen, rather than seeking to clarify the choices and consequences.

Financial planning has a degree of future prediction about it, which for some can feel all too like crystal ball gazing. Cards on the table, I don't believe that crystal balls have anything to tell us about the future. Indeed one might suggest that more can be revealed by someone's body language, tone and general demeanour about how the future is likely to look for them, something that an accomplished "reader" can interpret to their own advantage.

However, financial planning is about attempting to address estimates about the future. Starting with the end in mind, some very awkward thoughts about when you die (not a terribly British conversation)  is going to frame your financial plan. None of us know when this will be (unless we are determined to end our own life). This is perhaps the most significant assumption of all when it comes to financial planning. Assuming you live to 100 but then only living to 85 has implications. For example, your savings were assumed to be required for a further 15 years, which may have meant that you couldn't spend, give or have quite as much as you would have liked to have done. As your income was assumed to be needed for a further 15 years, perhaps your investments were assumed to need "to work" harder than they actually had to - by which I mean taking more investment risk for a higher return. Perhaps out of concern for a long life, you deferred some spending that was actually rather important to you. As you can see - lots of questions and resulting choices from a single assumption about when you die.

This is why a great financial planner will not only raise the issue (most don't seem to) but also explore the implications with you and revisit the agreed assumptions each year as part of the review/refocus process. Starting with the end in mind is vital when designing your financial plan. I wouldn't want to be a guest at your 95th birthday party if we had only planned for your money to last until 95. So think carefully about your assumptions, as many have said, to ass-u-me, can make an ass of you and me. Of course, living each day as though it were your last may have other implications too.

Lessons from Greeks - Stay the Course

1954: Ulysses - Camerini

One of the great things about being a financial planner and member of the IFP is that I get to hear a lot of really good talks from very well informed people. Last night's local London IFP branch was no exception. The topic was behavioural finance from a leading author and speaker on the topic, Greg B Davies. I won't be able to any justice to the content of his talk in a few words, but he played some "behavioural theory" mind games with us - helping us to see the different ways in which people perceive risk and the behaviours that they adopt. Importantly, he suggested that how questions are "framed" can manipulate behaviour, which is something that every impartial financial planner needs to be aware of.

Whilst there are many exceptions, Greg was very clear that solid psychometric testing for risk is the logical and most preferred way to asses your attitude to risk - in essence a ringing endorsement of our approach and use of FinaMetrica risk profiling with clients. However, this is part of the story and as an adviser, I need to be mindful of the reluctance of clients (investors) to realise a loss - even though it may be sensible, logical and beneficial, realising a loss is something that as humans, we struggle to do. As many others before him have suggested, to be good investors we need to remove emotion from our decision making. However, he recognised that this is not an easy discipline, we can have very good and rational reasons for "selling at the bottom", although such a decision will not serve us well in the long-term.

Greg warned of the problems of short-term thinking and investment strategies focused on the short-term. We need to be mindful of the fact that in general, we as humans tend to dislike losing money twice as much as we like making money. He also argued that whilst there are flaws in Modern Portfolio Theory, it is currently the best model that we have to help investors achieve an appropriate balance between risk and returns. Greg reminded me that perhaps the most important role a financial planner plays is helping clients reduce the number of mistakes that they would otherwise make. He reminded us of the image of Odysseus, (Greek version of Ulysses) who knowing that he was going to be lured by Sirens, bound himself to the mast of this ship, and stopped the ears of his crew with wax so that they would not hear. A familiar story, but what I hadn't reflected on before was the practical limitations that running a ship whilst being tied to the mast, providing direction to people that cannot hear. This (discomfort) was the "price that needed to be paid" to avoid the limitations human nature (to succumb). So as markets remain "nervous" remember the long-term perspective, stick to your goals, and take heed of Odysseus who was thoughtful enough to defend himself from himself.

The Value of Memory Lane

2006: The History Boys - Hytner

Financial Planning comes with baggage (a lot). We have all probably had some bad experiences with money, perhaps a tale or two about being ripped off. Childhood experiences of money - right from our family approach to reward and affirmation to the holidays we took and our pocket money budgeting skills (or lack of). In essence our experience of money in our formative years invariably provides the backdrop for our adult experience. Our relationship with money is complex and I am always intrigued by it.

This weekend was a family celebration for my family. We decided to meet up in the west country, where I grew up. I had booked a B&B for the weekend, and rather surprised to find my old History teacher welcome us inside (thankfully History lessons and exams hold good memories for me). We met up with several long-term family friends, many of whom I had not seen for over thirty years, yet the memories came flooding back. Its funny what we can remember. I was aware of how much I had changed, but also how my own childhood seemed so relatively simple. It also seemed that life was also much more straight-forward. Most people probably had little if any financial planning back then, financial products were certainly fewer and appeared to be quite simple (from today's perspective). Now there is a huge amount of complexity and potential for disaster from an enormous array of financial products. Yet, the reality is that little has really changed. Today people want what they wanted then - a life that involves enjoyment, fulfilment, meaning, and as little anxiety as possible. Yet we seem to have complicated this to the point of paralysis with information overload. Things change - most obviously in the purchasing power of a pound (which was a paper note in my childhood). It was amusing to listen to my brother attempt to explain inflation to his son - which of course is often explained in terms of the price of sweets.

However, the past is the past. It is the backdrop, it is not our future. Certainly the predictability of domestic family life has an element of repetition. It has lessons to teach us and warnings to heed as well as reminding us of our roots and providing a "grounding". However, the role of a good financial planner is to help make the complex rather more simplified. To keep the focus on what is important to you (not the market and certainly not the media). Predicting the future is folly, we all know that life can deliver an unhelpful curve ball or two, however, being prepared, being able to know what you value not "what your valued" can have a very liberating and anxiety reducing effect. To your future!

The Hunt for Decency

2007: The Hunting Party - Shepard

The financial services industry has a poor reputation I admit. In the 1990's it was quite common for me to come across people that had been mis-sold policies and this left me and those that I worked with at the time somewhat vitriolic in our distaste for others in the "industry", we saw ourselves as the good guys in a fight to help people get decent financial products. My view was that most advisers were liars, cheats and thieves. Since then a few things have changed. Most importantly, I have altered, I have matured and have also been able to see my own short-comings. This, I am told is how it is.. the more you know, the more you know you don't know. Back in the 1990's I was still selling products like almost all other "advisers" at the time. I still don't believe anyone was disadvantaged, but with the benefit of experience, I can say that things could have been better. Hence in 1999 when I started my own firm, things would be very different. They were. I was better at my job and charged less for doing it (eh?) I was vastly more efficient (funny how running your own small business does that), clients were better off, the products were better. Turning up to training seminars, I was still seething at the way many "advisers" operated on a commission basis still (the car park told its own story) and whilst I came across fewer examples of mis-selling, was of the opinion that it was still a product driven industry full of crooks.

It wasn't until I joined the IFP and began what I would now call proper financial planning, that I found my own attitudes changing towards other advisers. Finally it seemed that we could work collaboratively, seek out each others help and experience. I was also aware that some of them are actually really rather clever and very good advisers, not to mention holding high standards of practice and ethics. Over the last 5 years or so, I have had renewed faith in my own industry, with a real sense that advisers and their advice (and how they charge for it) has been improving dramatically. I had been wrong about many of them. The new RDR rules have helped this process too, catching far more advisers up in the transition to decency than would otherwise have happened, left to their own devices. Ok, I still meet some that simply don't get it and fail to or lack the ability to think, but this is rarer than it was. Most are engaged with the change.

So it particularly grates on me when clients are hassled by people from claims companies attempting to get them to complain about PPI. I have had two clients in the last 2 weeks double check with me (having been hassled to the point that they thought it wise to do so) that they have not got PPI (they hadn't). The claims "adviser" was adamant that they had a valid claim and had exerted considerable pressure to get them to appoint him to make a claim on their behalf. Let me be clear. These claims consultants are ruining what remains of any faith in financial services. They are scoundrels. They have broken the data protection laws in obtaining information about people, they have then lied about what they know, and lied about what they charge for their "service". They are exactly the sort of people that mis-sold PPI, which for the record does not include me. They are wasting vast amounts of time and money, chasing claims that do not exist, making false promises and in it only for themselves. Much like the deer that sought out and attacked my dog (without provocation) as we walked in Richmond Park this morning, these claims consultants will meet with the same short sharp response from me...."go away!".

Half Year Valuation Statements

2003: The Statement - Jewison

Most investors will have received a half-yearly valuation statement at some point over the last couple of weeks based on values at 5th April 2012. These half-yearly statements are dull but important and are required by the Regulator. A problem that sometimes occurs is understanding what they say. In short they provide an overview and the detail of alterations in your holdings since the previous half year statement (October 5th).

You will observe that new lump sums or regular payments are shown, including the purchase date and price of assets/funds that were bought. Income payments of two forms - either income from dividends generated by your investments and/or income paid directly to your bank as you take it from the portfolio. There will also be a note of fund changes due to switching and/or rebalancing funds, so that your portfolio remains appropriate to your attitude to risk and your requirements from the fund.

Finally, you should also see our charges and fees clearly highlighted. Remember that these vary depending on the service level that you have from us and your total funds under management. If you have any questions about this please get in touch. You may also see a fee for the platform where appropriate, this is the charge for having your assets on the selected administrative platform, enabling improved information and management of your holdings.

In most cases there is an overview and then a breakdown of all the costs - it is not both, merely an attempt to show the layers of charges and activities conducted on your behalf. An important point to note is that the valuation is now wrong - it was the value at the 5th April 2012, not the value now. So if you have made changes since that date they will not be picked up in the statement until next time.

Solomons: Truth Required - Dispelling Myths

2010: Clash of the Titans - Leterrier

When the Bank of England and politicians talk about the possible problems as a result of Greece leaving the Euro, one is only left to wonder if they have looked at their own finances. Here in the real world, the "possible problems" are a reality, with falling stock/share prices, which everyone has some exposure to - be it directly in their own portfolios or as people that live on planet earth and make use of products and services provided by business. Unless you live in a handmade tent and self sufficient, you are being impacted by the Eurozone nonsense that has been rumbling on. The markets are in reaction to indecisiveness. Here are a few facts which may help provide some perspective for a longer term view.

Financial planning is partly about dispelling myths about money. As we know Greece and China are two ancient nations with a great history for mythology, whether its Dragons or Gorgons, Minotaurs or Xiezhi, but their present day financial stories seem to be taking centre stage. However, these two ancient nations would provide a very uneven match for each other, this is no clash of the Titans. Today, Greece has an estimated population of 11.3m (about 20% of the size of the UK population) and GDP of $301,083m (about 14% of the UK's GDP) which has been shrinking each year since 2008. At the same time its public debt has been rising rapidly since 2008 from 99% of GDP to over 150% of GDP. However, whilst the debt is certainly "bad" the percentage figure can be rather misleading when you consider the size of the economy against others.

Compare this to China, where GDP has been growing year on year. The population is a staggering 1,338.3m (over 100 times bigger than Greece) with GDP of $5,926,612m (20 times bigger than Greece) and growing by about 9% a year (almost twice the size of the Greek economy a year). The US has GDP of $14,586,736m about 3 times the size of China (as the world's most developed economy) and has a population of 309.3m (about a quarter of the Chinese population). Here within the British Isles, collectively known as the UK, we have a population of 62.2m and GDP of $2,261,713 equivalent to about 15% of the US and now less than half of the Chinese GDP.

These "facts" are from the World Bank's own data, which anyone can look up online.

Solomons: Morning Brew Extends Life

1931: Cafe Noir - Leslie Hiscott

As clients of ours will know, when creating your financial plan we need to assess how you currently spend your money, often there is a gap between what is stated and what happens. This is what I (and many others) call spending creep and I usually suggest that this is what all those trips to coffee houses actually cost. Unless some fairly tough decisions need to be taken, I rarely suggest that we alter "spending creep" we assume that it is indeed spent money, rather than treat it as identifiable and therefore able to be saved and put into your financial bucket or plan (as some are prone to do). Spending creep is part of life and a budget should be something that allocates money, not counts every bean. Well it turns out that perhaps not terribly helpful to your wealth, all those coffees are perhaps helpful to your health. The LA Times report that drinking coffee might improve your life expectancy. Now I'm not an expert so I couldn't tell you if this is actually true. I have to admit to holding a great many suspicions about the links between research, business and media particularly in the US. However, if it is an accurate assessment, then perhaps coffee drinking is a new form of investment in your future... but of course living longer may bring other issues - for instance being able to afford to live or have additional need for care, which has a significant price tag.

For those of you that work and grab a coffee on the way, I wonder if you have thought about how much your spending on coffee typically is each week? I have failed to notice any good hot drink sell for less than £2 and I invariably find myself parting with something closer to £5.... I'm a sucker for the blueberry muffins. Any visitor to Paris, Venice, Florence or Rome will also be aware of the high price of a the black nectar. Well say that's 5 days a week and something like 46 weeks a year.. around £1,150 a year... which is why I bought a decent coffee machine for the office (which clients like too). Whilst I cannot grab the coffee on a platform (or near one) my pod coffee machine is not even a tenth of the expense. "Look after the pennies and the pounds will look after themselves". So apart from being a nice pick-me-up, if coffee is also a wake up call to longevity, make sure your financial planning ensures you have enough beans until the end!

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Financial Planning to a Different Rhythm - Yours!

1992: Strictly Ballroom - Baz Luhrmann

To many people financial planning is about building up savings in a variety of financial products, coupled with trying to achieve market beating returns. This is a complete misunderstanding of what it really is. A meeting that I had this morning is an example of what financial planning is (or should be in my opinion). Financial planning is about you setting the tempo, the rhythm and pace to your own lifestory, not outside forces such as "the markets". You don't have to do things the way everyone else does, but if you want things to work, you need a plan and one that includes a few safety nets.

Over the last six years I have been working with a charming couple, who I always enjoy seeing, as they planned their retirement. This has now happened, though they are busier than ever before. We have put in the groundwork over the years and today was an opportunity to review progress. Over the years we have been discussing their plans about their future. Today, most of our focus was on how they plan to spend their money, provide for their children and also support charities close to their heart. We discussed how we might make sensible provision for care or assistance in their later years to ensure that their funds don't run out, but with a significant emphasis on living generously today.

After discussion I am able to make a few minor adjustments to their plan, to demonstrate what investment returns are really needed each year, which when factoring in their lifestyle spending and giving plans is a meagre 1.44% a year after all investment costs, which clearly has implications for how a portfolio is structured and has made allowance for inflation. Our thoughts turned to the current problems in the Eurozone and the impact that this might have on selecting a few worst case scenarios (such as the stockmarkets crashing), should their portfolio suffer a 35% decline and not recover, (by which I mean no "bounce back") investment returns would need to increase, but only to a very modest 3.15% a year. In short, we identified that they were highly unlikely to ever run out of money - the only real pressure was from their own spending behaviour (which we review, not to be controlling, but to ensure that our assumptions are broadly correct). 

I would suggest that (from over 20 years experience) anyone seeking financial planning advice is not terribly interested in ISAs, pensions or investments - but whether or not their money will run out, whether they will have enough and in the event of calamity, what the consequences might be. This delivers genuine peace of mind and appreciation of the long-term "game" as well as what is really important. This is the antedote to a media filled with stories of woe and fear..which reminds me of a quote from the Baz Luhrmann film Strictly Ballroom: "a life lived in fear is a life half lived". If this is what you would like from your financial planning, what are you waiting for? pick up the phone or send me an email.

Being Wary of Men in Black Suits

2002: Men In Black 2 - Sonnenfeld

On your behalf (and mine) I have been seeking out the wisdom of "experts" again today, with the second and final day of the Morningstar 2012 conference.  That said, one of the most memorable talks was from Dave Fishwick, Head of Macro and Equities Investments at M&G who pointed to the flaws in human nature to consistently seek out the opinions of supposed experts. "Men in suits", who purport to have a valid, credible opinion. He suggested that many of those claiming to have spotted significant moments of change, invariably have only done so once, and perhaps this has something to do with luck. This was acknowledged later by contrarian investor Alistair Mundy of Investec, who talked with great honesty about the need for Fund Managers, advisers and investors to be honest about our mistakes and to learn from them, something that is often difficult for Fund Managers in particular, to do. He pointed to the abilty of humans to forget all too readily and this is something that investors need to be mindful of in the coming months as yet more market turbulence is likely as European markets eventually figure out how they will address their problems.

The world has changed though, particularly in the credit markets, what was once low risk, is now arguably high risk, for which there is a considerable premium. The Bond market has seen huge inflows of money as investors seek safety, yet many corporate bonds are actually paying lower levels of yield (income) than equities from the very same companies. Risk has been moved from the private sector to the public sector, with sovereign nations more at risk than many investment banks. This is a fundamental change in the way Bonds have worked throughout my time on earth (or indeed anyone else's for that matter). Luke Spajic of PIMCO, argued that the new upside down credit world poses questions for portfolio construction and something that I am currently reviewing, though thankfully believe clients are well positioned.

The key points from my perspective frankly have little to do with investment selection, but everything to do with having robust, repeatable processes that are tried, tested and work. This is something that I have constantly worked on for our clients over the last decade or so. Financial planning has a fair bit to do with artistry - applying experience and professional opinion to the reality of data. Ultimately though, achieving goals is the purpose of financial planning, not calling the market (right or wrong).. but helping our clients to get where they need to go, as cost effectively as possible and ensuring that purchasing power and lifestyle are protected.

Seeking Values

1957: Something of Value - Brooks

Today has been a "classroom day", spent in the company of some of the leading financial planners and several top drawer Fund Managers. Today's key themes were probably to be expected - what on earth is going on in Europe? and what will the impact be on our clients? Well, as with all investment seminars, there are as many opinions as there are people (and a few more besides). The question of Europe hangs heavily in the air, reactions are mixed. For starters, "Europe is not terribly significant" (6-9%) of the global market and shrinking each year in terms of its global impact, though the way the media cover the story one would liken its significance to a catalyst for an End Times scenario. There are better places to invest (yes I would hope so too) but what irks me is the way that the financial services industry makes blanket statements about parts of the world. We are talking about people, indeed we are talking about our peers, friends and family, not simply "them" or "the consumer"...it may be politically expedient to forget that nations are nothing more than a collection of people, but to discuss the world in such terms does rather miss the point, that business exists to serve people and investors exist to help business flourish. So whilst I might agree that, yes Europe is a mess and is only a small part of global markets, it is our neighbour and whilst its size may be increasingly diminished, failing to reflect on the societal impact of an unstable Europe would perhaps be like missing the bad apple, which will eventually pass its dis-ease to others. Only time will tell.

As for regional investment, there was mixed and arguably divided opinion on this. The only speaker to make helpful use of data in his slides suggested that investors need to focus on companies not countries. A valid point, but the cultural differences of countries, combined with their political and legislative take on life is not something that even a multi-national company can easily bypass. The truth is of course that investors need to seek out value and diversify, being mindful of where most growth is likely to reside, though historically this would also carry the highest risk, due to the size of the relevant market or exchange (and possible Government interference). Investment Management Firms need to search for the next big thing... the next Brazil, Russia, India and China (BRIC)... it was suggested that the "next eleven" or N11 would include South Korea, Turkey, Mexico, Indonesia, Nigeria, Bangladesh, Egypt, Philippines, Vietnam, Pakistan and Iran.... somewhat controversial and of course would probably require a significant change in political leadership on all sides.

Thankfully, there were signs of hope that growth is returning and indeed happening (largely in non-OECD nations) and that investors must think globally. Something that we at Solomon's do with our clients - we aren't UK centric in our investment approach (thankfully). Perhaps one of the most refreshing talks was an interview with Hendrik du Toit, the CEO of Investec Asset Management, who spoke of values, serving our clients and being a faithful fiduciary, something that resonated with me and I hope is clearly expressed and imbedded in our client service.

The World According To...

1950: Key to the City - G Sidney

It has been a very busy few weeks. I haven't had much time to update the blog, but then perhaps little has changed... the markets remain nervous about European Governments keeping their promises (I'm sure I suggested some months ago that they wouldn't and that the effort to retain the Euro was and is a colossal waste of money).... the football season is nearly at an end... which simply proved that whilst money clearly provides an advantage in sport it doesn't guarantee results. Manchester City just inched through as Premier League winners.. by a whisker and I'm sure that other large clubs that spent millions may be finding that counting their trophies is not a difficult task this year. As ever, money does not guarantee anything, but you would probably be wise to assume that it adds considerable advantage, such as securing the top players. So it will be with interest that over the next couple of days I attend the annual Morningstar conference in the City of London. Designed to keep me informed with the latest thoughts from some of the world's leading "expert" investors. I will keep you posted, but remain mindful that talk is cheap, results are what counts.

Credit Where Credit Is Due

1980: Airplane - Abrams & Zucker

I'm no less immune to becoming a victim of financial fraud than anyone else. Sadly over the Bank Holiday weekend someone managed to use my credit card to make a rather expensive purchase from a well-known high-end airline - for a sum approaching £4,000. Care with your personal banking is something I have often written and talked about, so it shouldn't be a surprise that I noticed this pretty quickly and immediately informed my Bank (NatWest) that this wasn't my purchase and was in fact a case of financial fraud - or theft as I prefer to call it. Thankfully the team at NatWest could quickly identify that this was a case of fraud (the name of the purchaser was evident to them in this instance - which was odd I thought). Anyway my account was corrected on the same day. Full marks to NatWest who have now improved my sentiment towards them for doing what in theory they promise to do anyway. My own cynicism and the experience that others have reported to me has generally left me suspicious that action in such circumstances could be as swift or helpful. I am delighted that my experience of NatWest was rather different and very helpful indeed. Sure I have had to cancel my card, which will probably create a few practical hiccoughs over the next month or so, but this is the price that I pay for proper protection. Thanks NatWest, a job well done.

How did it happen? well only really three possible options - either my card had been cloned via some terminal (which I doubt as I check these things carefully) or it had been seen by a criminal (also highly unlikely) or a website that I used it for was severely compromised. This seems to most likely explanation to me, as I had a poor experience with one site in particular - which whilst a "decent" organisation, have a really rubbish payment system. A lesson learned to back off as soon as I become suspicious of such a site again.

A Spoonful of Sugar

1964: Mary Poppins - Stevenson

Financial planning is not something that nations do terribly well, as we have all observed over the last couple of years. Last weeks local council elections did little to highlight much, although depending on your political leaning, perhaps your interpretation will differ. The London mayor vote boiled down to the predictable two-horse race, with Boris Johnson and Ken Livingstone collecting 84.3% of the total vote. The LibDem candidate Brian Paddick came in fourth behind the Green candidate Jenny Jones, sharing between them only 8.6% of the total first choice vote - of course this is the result of those that decided to vote (about 2.2m), the majority (3.6m) didn't actually vote at all. The average "turnout" being 38%. So whilst Boris pulled in 1,054,811 first choice votes and Ken 992,273 (according the the BBC site) even Boris' votes only really amount to 18% of eligible voting Londoners, fewer than one in five. For those worried about the rise of the BNP, they achieved 28,751 votes or about 0.5%... one in two hundred Londoners. The wider local council elections reflected much the same. France of course has now decided to oust Mr Sarkozy preferring Mr Hollande, to sort out their economy, much to the chagrin of Germany who had hoped France to be a major partner in seeing through austerity measures.

It would seem that the public at large are not happy with austerity measures (frankly who is surprised by this insight? and who couldn't have predicted it?). The problem for us all is that politicians will seek to implement policies that please people and defer the the inevitable changes that need to be made, principally that spending more than you earn is not a sustainable way to run either personal or national finances. Ideologically, there are of course alternatives to a simple "cut public services" approach. It would seem to me that politicians have failed to communicate the severity or significance of the national and international crisis unless changes are made. They have failed to grasp the nettle, so-to-speak and have offered little vision for our increasingly inter-twined futures. The medicine may taste nasty and may be very unpopular, but to date, few have offered any credible alternatives. Politicians have failed to provide us with the much needed spoonful of sugar to sweeten the bitter taste... we are in need of a Mary Poppins, in which you will recall the delightful Mr Van Dyke failed to convince with his attempted cockney accent - our politicians and those in Europe need to walk the talk.

Counting the Votes

1972: The Candidate - Ritchie

As a financial planner it is difficult to assess the true impact of local elections with respect to the impact on our economy, yet clearly yesterday saw a significant vote against the Coalition Government. The markets don't like this sort of vote. The turnout was woefully low, perhaps due to a fairly grim day, but probably has more to do with the fact that it would seem that the majority feel increasingly disconnected from post-modern politics, if this isn't the case, then the low voter turnout is even more shocking. As we know, France is also having presidential elections. It would be reasonable to suggest that markets are a little apprehensive about the prospect of France electing someone that may not see through their own austerity measures. The knock on effect of this could be significant for Europe as France is effectively number 2 in the region, The "big one" of course is the US election in November. This is likely to mean that bad economic news is played down and played up by opposing sides and we may not have a clear indication of how well the US is doing until January 2013. As the rain continues to fall and the hosepipe ban persists, my only prediction is that this may be a summer of continued turmoil in Europe.

Sadly there are no easy answers to the economic situation. The debts of the western world are so significant that to carry on as before is really not an option. However for some, life seems to be just as good as it was prior to any austerity measures. Take the Sunday Times Rich list as an example or indeed the auction of the Edvard Munch's "The Scream" which sold at auction in New York for an enormous $120m. The highest price paid at auction for any piece of artwork. There is a very real sense that wealth begets wealth and the converse is also true, poverty begets poverty. Whilst few in Britain are poor when compared on a global scale (perhaps you saw Ewan McGregor's Unicef cold chain mission to Napal) the poor need to be encouraged and incentivised to find work and to create wealth. It would seem that many in Britain don't believe that the Coalition are achieving this aim quickly or clearly enough, hence today's market fall. In my view it is vital to have a financial plan, one that has been stress-tested and has a long-term, values based focus. This will enable you to avoid the anxiety of markets and meltdowns and the overinflated value of most "news". Have a great Bank Holiday weekend.