IFA Matters UK

Sorry for the hiatus!!

2010-07-23T06:22:00.000-07:00

Dear Reader, sorry for the hiatus since February. I have been worried about the complete mess in pensions. It is a shame that the state retirement age is being raised in the United Kingdom. There should be coordination throughout the European Union. It does not make much sense us Brits toiling up to 70 when the French want to retire at 60 and to get an economic contribution from us via the Common Agricultural Policy (CAP). We might have to join the euro so as to make our influence felt!!

Sorry for the long hiatus in the blog!!

2010-02-08T07:38:00.000-08:00

I have noticed that I have not discussed Indepdent Financial Adviser (IFA) matters in the United Kingdom (UK) since December 14th. The main highlight for 2009 for me was the retail distribution review and the continuing argument about commission versus fees. It looks like independent financial advice will be restricted to higher income people in Britain, if the customer has to pay fees.
The pensions industry is in a right mess and we still have to resolve the problem of zombie endowment funds.
www.searchifa.co.uk

UK pension rules get even more complicated!!

2009-12-14T05:56:00.000-08:00

Thanks to UK chancellor Alistair Darling, pension rules are getting even more complicated. The government wants to hit "fat cats" but reducing higher rate pension relief to earners of £130,000 a year compared with the previous level of £150,000
will bring in extra revenue of £100m but hit wealth creators.
The Labour government is discriminating in favour of unfunded public sector pensions,
which the country can't afford. These liabilities are going up and up.
For instance, local authorities are already devoting a large size of their fire service budgets to service pensions.
With the uncertainties generated by the fact that the government can change the rules anytime it likes, I am surprised people still contribute to personal pensions.

I am going to repeat stuff from sister blog!!

2009-11-25T06:31:00.000-08:00

I am going to repeat stuff from the sister blog "Accountancy Distilled", which today looked at the gold price. This has rallied 12 per cent since India bought 200 metric tonnes from the IMF in early November and is now $1,180.50 an ounce. This blog is not an investment newsletter with recommendations as such but the gold price probably shows us that there are quite a few nervous investors out there. You can buy
physical gold, gold certificates, gold futures, gold coins, gold jewellery and the shares of gold miners. I don't have any of these gold-linked assets but I wish I had a few Victorian
sovereigns for sentimental value.
The "Accountancy Distilled" blog started off with a bit of a rant against Gordon Brown in who,in his former incarnation of British Chancellor, ordered the independent Bank of England to sell gold at $252 an ounce against its advice. I suppose if the British central bank was not so spineless there could have been a few resignations about it but why walk the plank early when the pensions are so juicy?
I suppose now is not the time for IFAs to recommend gold purchases to their clients following the sharp rise. However, maybe it is not the time to be in fixed income gilts. This is not a recommendation but perhaps an observation!! Inflation is already rising quite sharply (petrol prices, New Year VAT increase) and if the Bank of England does not support the pound with an interest rate rise or two, then things
could get quite interesting.

Would it have been cheaper to nationalise RBS?

2009-11-04T06:34:00.000-08:00

With state control of Royal Bank of Scotland (RBS) creeping up to 84 pct, I wonder if it would have been cheaper to nationalise the bank? This might have created a hornet's nest between London and Edinburgh but it might have been cheaper, since it looks like the bank is going to be broken up anyway. Selling insurance assets like Direct Line won't making it any easier to repay taxpayer support and kow-towing to the European Commission shows how weak the government is.
Probably the UK government's balance sheet would not have been big enough to formally take on the RBS assets but state control might have avoided the furore about banker bonuses. The UK Treasury is probably regretting its disinterest in RBS taking over ABN Amro, where it looks like Spanish bank Banco Santander waltzed off with the best assets of the Dutch group while the British bank just took on board a lot of toxic debt.
The UK government did at least save the banking system a year ago since the economy could not have coped with the collapse of RBS or of the Halifax. It is a shame that taxpayers and bank employees are going to pay dearly for the mistakes of the past.

We are in a right pickle over pensions in the UK.

2009-10-29T08:06:00.000-07:00

The poor state of UK public finances apparently dictates a rise in the state pension age from 65 to perhaps 70. Yet at the same time companies can forcibly retire someone
at 65. So what are we going to do with the five year gap?
Contributing to pensions seems unnecessarily expensive and uncertain. Private pensions get hit by charges, which offsets the tax relief, while state pensions get hit by the government moving the goal posts.
We also won't be able to pay the goldplated pensions of council employees, members of parliament etc. The recent volatility of equities has shown that we can't rely on
share performance to pay on all types of pension promises.

Personal accounts delayed four years to 2016.

2009-10-19T08:10:00.000-07:00

The latest big idea in the British pension mess, personal accounts, are to be delayed
four years to 2016. A total of 8 pct of pay will be contributed by employees (4 percentage points), employers (3 percentage points) and the government with 1 percentage point. However, Moira O'Neill of the Investors Chronicle quotes pensions expert Dr. Ros Altmann, who wonders what pension income will be achieved. Current forecasts are too optimistic given worsening annuity rates.
I think one concern is that pension income could be heavily taxed in the future to pay for the demographic bulge of old people. The state pension age could be lifted quite quickly to 70 in order to save money. It would be interesting to see what people would live on. I suppose the complexity over pensions could be reduced.

Tories should not axe FSA - Xavier Rolet.

2009-10-19T06:34:00.000-07:00

Money Marketing cites a speech by the chief executive of the London Stock Exchange,
Xavier Rolet, that the Conservatives should not axe the UK regulator Financial Services Authority (FSA). Speaking at a fringe meeting of the Tory conference in Manchester, Rolet said the regulatory system in Britain had to be similar to that in Europe and in the United States otherwise it would make joint action on financial crises harder. The power of the FSA should not be fragmented over many different entities.
The Tories have said that they will scrap the FSA if they win next year's general election. The regulatory body has been given a bad press over its efforts to regulate the financial industry ranging from one person IFAs to major banks. The FSA's role in a tripartite system involving the Bank of England and the Treasury has been questioned. The Tories want a bigger regulatory role for the central bank.
Personally, I would try and reform the banks first and make them easier to regulate.

With RDR advisers will be looking at passive funds - Tora.

2009-09-16T06:10:00.000-07:00

Investment guru Brian Tora, writing in a July edition of Money Marketing, notes that the independent finance advice (IFA) community will be looking at passive investment funds following the retail distribution review (RDR). IFAs have preferred commission from active funds but there will be RDR changes on adviser remuneration.
Tora reveals that at a recent presentation of investment trusts Aberdeen extolled the merits of its Edinburgh US Investment Trust. This passive fund has a tracking error of just 0.1 per cent. To declare an interest my son has a few shares in this trust.

Some 75 pct of funds fail to beat the index.

FSA chief Lord Adair Turner likes a nice hotel.

2009-09-11T00:35:00.000-07:00

Money Marketing made a freedom of information request to ascertain that Lord Adair Turner, chairman of British financial regulator FSA, claimed £812 for two nights in a hotel during last February. Nice work if you can get it while FSA CEO Hector Sants
has a full time driver.
There is the perception amongst some independent financial advisers is that they get a hard time from the FSA while the regulator leaves the big banks well-alone. One IFA has recently called the banks giant selling machines.

A July issue of Investors Chronicle looks at RDR.

2009-09-07T00:42:00.000-07:00

I should have commented on this article earlier but I did'nt. Sorry about that!!
A July issue of the Investors Chronicle got Martin Bamford and Jonathan Fry, well-known independent financial advisers (IFAs), to comment on the proposals of the Financial Services Authority (FSA)
with its retail distribution review (RDR).
Bamford is a chartered financial planner from Informed Choice while Fry runs his own
firm Jonathan Fry & Co. Fry was against the review proposals while Bamford was for.
As a consumer of financial advice I kind of side with Fry that paying directly for financial advice would not help low-income groups. The fee payments would come from taxed income and might be considerable. However, I have sympathy with Bamford's assertion that the commission bias of independent financial advice has led to the slew of recent investment scandals (with-profits anyone?). There is also a tendency for investment bonds to be recommended by IFAs, which is not very impartial.
Fry also notes that the British financial regulator FSA lives in an utopian world
He considers that more disclosure of costs would help
consumers.
Anyway with the Conservatives proposing to scrap the FSA, if it wins the next general election, then it will be interesting what will happen to the RDR.
I had to do some pension transfers recently and it was saddening to realise that I was paying three sets of costs with the money. First, the independent financial adviser (IFA),
second the Royal London unit Scottish Life and third the various investment fund managers. However, in
the IFA's defence there has had to be quite a bit chasing up in terms of the pension funds making the transfers. One source of delay is anti money-laundering legislation
and I wonder if the checks could be speeded up. Nobody would want to send their passport to a pension fund manager by post and then hope to get it back by the same postal system. An email could have sufficed with my passport number.
However, the chunks taken out by the various parties (the IFA, the pension fund platform and the investment fund managers) will mean that investment returns will have to be spot-on to get anywhere.

Friends in need are friends indeed!!

2009-09-03T00:12:00.000-07:00

Sorry for the corny title but I thought it was a good idea to get into the troubled affair of Friends Provident, which has recently unloaded investment manager Foreign and Colonial at a loss. The bid by Resolution for the British insurance company originally founded by Quakers seems just to be a bonanza for city firms. It seems an expensive way of getting Clive Cowdery et al on the Friends Provident board. I ploughed my way through the initial Friends Provident documentation as my wife has a few shares and an endowment policy with the company. Selling out for around 79 pence does not make much sense since the shareholding is a minimum from the original flotation so I suppose we will hang on and see what the Resolution deal brings. This could mean reduced service levels to endowment holders and poor prospects (to say the least) for
workers.
Money Marketing quotes a spokesman from the stockbrokers Charles Stanley, who said that "What we suspect has happened is that two groups of investors have put pressure on the Friends' board to do a deal, the first group being investors who wanted an exit from the stock and the other group being investors who have a stake in Resolution and realise that if Resolution is going to be successful in its consolidation project, then Friends had to be the first step." This quote is in the edition of August 20th.
Quite a few commentators say that it will be tricky for Resolution in terms of execution risk but I think there are a lot of insurance companies in the UK market place, which could be snapped up and make for easy cost-cutting.

With all the regulation in the world it looks bad for Keydata investors!!

2009-09-02T02:11:00.000-07:00

On the front page of the Money Marketing edition for August 20th, one story highlights the plight of Keydata investors. I thought these kinds of disasters would not happen considering how much money the British quango (is it a quango?) the Financial Services Authority (FSA) absorbs every
year.
Dan Schwarzmann, a partner of PricewaterhouseCoopers (PWC) and joint administrator of Keydata, predicts that it is unlikely that creditors will receive much money back.
PWC has not yet found missing SLS Capital policies, where about 5,500 investors have investments.
Keydata was a structured investment provider put into administration by the FSA initially for the non-compliance of ISA retail investment plans.
This case is additional to the Lehman Brothers mess and at least the FSA cannot expect ordinary UK retail investors to evaluate counter-party
risk.
The following week's edition of Money Marketing has Paul Farrow quoting one angered Keydata investor, who said "The question of how £103m of investors' money could disappear from an FSA-regulated company is an utter scandal as is how non-compliant ISAs could be marketed for five years.
Paul Farrow wonders what was the role of HMRC in the checking of the ISAs?

The FSA is in the wars!!

2009-08-10T06:34:00.000-07:00

The British regulatory body Financial Services Authority (FSA) seems to be in the wars. I would not have taken the road of the opposition party Conservative Party which announced that the FSA would be abolished, if the Tories won the forthcoming general election. I think it does'nt help morale and there might be actually a case for the tripartite process of regulation. The regulatory bodies of other countries do not seem to have performed well.
However, the FSA is the bane of the humble independent financial adviser (IFA) in the United Kingdom with masses of red tape and fees. Although I don't think the Bank of England would want to track the activities of the financial advice arena.

I am wondering about UK gilts again!!

2009-07-17T05:21:00.000-07:00

There are warnings about a run over the British pound and I suppose UK gilt prices will wilt if this happens. However, if things get really bad economically and if we have deflation, then the relatively guaranteed income streams of UK government bonds
would become really attractive.
A mate of mine thinks Canadian dollars are a good bet because they are not printing extra. What do I know about currencies? SO, JUST TO REITERATE THIS IS NOT AN INVESTMENT ADVICE COLUMN although I love waffling about investments.
www.searchifa.co.uk
I suppose I would have to hide the Canadian dollars under the bed since foreign currency bank accounts are not a mainstream product in the United Kingdom.

PIBS look a bit of a risky investment.

2009-07-13T05:58:00.000-07:00

The PIBS issued by UK building societies look a bit of a risky investment with the possibility that coupons will not be paid. The rescue of West Bromwich Building Society has shown their true position in the pecking order for creditors and it is not good. The securities were bought for their yields but unfortunately the yields have gone up.
The PIBS of demutualised building societies converted into perpetual subordinated bonds. While the Nationwide, the flagbearer for the industry, is offering a running yield of 11 pct on its issue of 7.25 pct according to the Investors Chronicle, which highlights the risks and rewards of this area. The original investors in the Nationwide issue have taken a battering on the capital performance of
the PIBS.
This is an esoteric part of the market and perhaps not one for many financial advisers.
www.searchifa.co.uk

Financial advisers are going to have to get used to charging fees.

2009-07-06T03:48:00.000-07:00

British financial advisers (IFAs)are going to have to get used to charging fees
from the end of 2012 rather than charging commission. The UK regulator the Financial Services Authority (FSA) estimates compliance costs of £430m and an additional £40m of annual ongoing costs for the £12bn investment advice industry. This is according to the Sunday Telegraph.
The FSA wants all investment advisers, whether independent or connected to a bank, to obtain a qualification equivalent to a first year at university.
However, the Association of British Insurers (ABI) wonders about the complexity of
options such as independent advice, restricted advice and basic advice.
www.searchifa.co.uk
I think the complex area of pensions will prove a rewarding area for IFAs. I have had to transfer sums from a company pension and I had to have a personal financial adviser to handle the transaction. The British tax legislation is so complex you really need your hand holding.

Public sector expenditure cuts are on the horizon.

2009-07-02T03:49:00.000-07:00

In the United Kingdom public sector expenditure cuts are on the horizon. David Cameron, the Tory leader, has finally got a grudging admission from British premier Gordon Brown. There was a thoughtful article in today's Daily Telegraph, which argued that the main problem is collapsing tax revenues. Currently, benefits outstrip
income tax revenues but I don't know if Labour will get away with their trick in
2005 of winning the election then sharply increasing stealth taxes.
I think UK Chancellor Alistair Darling is praying for a quick end to the recession but he is not helping his reputation for honesty by not having a comprehensive spending review.
www.searchifa.co.uk
To be fair to the UK, other countries are in similar situations such as Spain, Greece
and Italy. In Ireland, there have been tough spending cuts. However, we are in electoral limbo and this is exacerbated by Gordon Brown's seeming determination to struggle on until 2010. This is too long given the cabinet's propensity to implode.
I don't think we can have another ministerial reshuffle. An October general election might be better for Labour.
Also, Shadow Chancellor George Osborne might find it difficult to promote austerity measures when it is perceived he comes from quite a privileged background. Labour will be relentless about Old Etonians, investment versus spending cuts and the fact that some Tory policies don't stack up. Apparently, its educational policy is quietly
collapsing.

Another return to the tricky problem of emerging markets.

2009-06-23T08:20:00.000-07:00

Forgive me if I return to the tricky problem of emerging markets, which are seen by some as a key area for future investment. Developed economies will not be able to match their growth rates and investors putting something away for their retirements should for collective investment schemes in emerging markets. However, I can't see these emerging markets paying out dividends to their former colonial masters. Also, the West is still the final buyer of quite a few goods from the emerging markets.
www.searchifa.co.uk
The United States has exported quite a bit of its industry to the Far East but Obama might persuade American corporates to bring it back. We have outsourced call centres
to India but these could easily be brought back, especially if unemployment rockets.
This is probably not very free trade but the U.S Congress has already introduced "Made in America" legislation, which has upset Canada.

Paul Krugman says UK economy is well-positioned.

2009-06-15T08:31:00.000-07:00

The distinguished U.S economist Paul Krugman says the UK economy is well-positioned compared with its European counterparts due to policies such as low interest rates.
He gives a lot of credit to British Prime Minister Gordon Brown.
However, the UK economic landscape has changed radically.
It is good to be positive but the City of London will not be a major producer of tax revenues while the car industry in Britain is getting a real battering. Exports will not be helped by a recovery of sterling against the euro and the dollar.
If the "green shoots" of recovery consolidate, then we will have to work out how to pay the bill for the UK government's borrowings. Some commentators are predicting ten years of higher taxes and lower public spending.
Some observers say the banking sector is now stable. However, Royal Bank of Scotland
(RBS) and Lloyds will be quite interested in getting down the state holdings and possibly less interested in refinancing British industry.
However, building societies seem vulnerable and the Nationwide cannot rescue them all. The recent downgrades in their credit ratings will possibly persuade the building societies to reduce their lending so as to improve their financial strength.

I am trying to consolidate two small pensions.

2009-06-01T06:53:00.000-07:00

I am trying to consolidate two small pensions into one small one after expenses, charges etc. The charges are quite expensive but I have not got much choice. One of the two will disappear, if I don't take action by August. My financial adviser recoomended a lifestyle one, which moves into cash at the end of the term to provide some protection.
Let's hope it will perform. The financial adviser said the annuity rates were very poor at the moment so it did not make sense to get an annuity and especially at my age. I wish the charges were lower, since they hit investment returns. I suppose that
in many cases gross investment in pensions produces little after charges.

I must have been insane!!

2009-04-28T07:18:00.000-07:00

In a very weak moment or was I insane but I was contemplating a minor purchase of War Loan. This was after my previous post on how likely it was for foreign investors to boycott gilts (British government bonds) for inflation and currency
reasons.

Obviously, this is not a recommendation one way or the other since this is not a professional blog and I have not got any professional qualifications. Most of my ideas probably come from the Daily Telegraph. I think it was in the 1930s that the UK government cut the coupon on War Loan, which was a tinsy bit naughty. It is an undated stock and some hold the bonds through inheritance. I still fancy buying them though, since they are a bit of history.
www.searchifa.co.uk

However, conventional government bonds can really be hit by inflation. A lot of financial pundits are saying that UK index-linked gilts are a better buy. In reverse,
if there is real deflation in Britain, then gilts and corporate bonds could be a wonderful investment if coupons are maintained. That is a big if, especially if yields reach the default levels of the 1930s.

Also bond prices are being distorted by quantative easing measures being carried out by the Bank of England, so I better lie down and wait for the War Loan urge to go away.

UK Chancellor Alistair Darling stretches credibility.

2009-04-24T06:38:00.000-07:00

It is probably correct to say that UK Chancellor Alistair Darling is stretching everyone's credibility with his growth forecasts for the British economy, which is basically England. To get Johnny Foreigner to invest in £200bn plus worth of gilts, I would have personally introduced measures such as higher VAT, lower international aid and European Union payments and lower expenditure on PFI projects. As I am not chancellor....

Introducing a top rate of 50 pct might play well to the left wing of the Labour Party but will lead to a lot of talent going abroad. However, it will be nice to see top-level bureaucrats and town council fat cats having to pay more. I think it is the case that quite a few footballers and football managers get paid through the Channel Islands, so at least this will stop (I think?).

The mountain load of UK government bonds (gilts) will have to compete with US Treasuries, German Bunds and even Spanish Bonos. There is unlikely to be a currency gain since we need a very weak sterling to get the British economy going and to mask the effects of deflation. If there is a gilt buyers strike and we have to lift the yields on these British government bonds, then Gawd help us poor
Britishers.

British Premier Gordon Brown says the economic crisis started abroad. If you say so Gordon. Obviously, Northern Rock and Dunfirmline Building Society are major international institutions. That is why they hit the rocks. (sorry about the pun).

I suppose we live in dangerous times!!

2009-04-06T07:16:00.000-07:00

G-20 already seems far away. And it was only last week. I doubt if the world's leaders were worried about British government bonds (gilts). I suppose we live in dangerous times. Gilts could be a poor investment if inflation takes off unless they are the index-linked variety. These last type of gilts are a favourite investment of the pension fund of the Bank of England itself itself according to economist Liam Halligan writing in the Sunday Telegraph..
The investment expert Brian Tora writes in moneymarketing.co.uk
that corporate bonds could be hit by either inflation or by a downturn longer than forecast.
I wonder if we need a return to the Goldilocks economy, not too hot or too cold. I know there are some big bets being made over corporate bonds on the basis they are underpriced and that they could provide much-needed income. There is a ghastly alternative scenario and this is that corporate bond defaults will match the 1930s Depression.

Could we get deflation and prolonged recession?

2009-03-26T07:42:00.000-07:00

In the moneymarketing.co.uk edition for 19th March 2009 Brian Tora again does an excellent summary of the current financial situation. He muses about the 1970s and the problems suffered by the UK economy then. Tora concludes that "the risk of being out of the market is rising". Before that, he considers that gilts look vulnerable to a correction.
Since then we have had a gilts auction uncovered, which apparently the bond market taking a dim view of HM Government's borrowing plans. We could get a tough budget from Chancellor Alistair Darling, if he ignores his boss Premier Gordon Brown.
The government wants some voter friendly measures in the budget, which is happening late this year. Chancellor Darling will have to come up with a plan to get the public finances on track.

In the UK defined contribution pensions are being crunched.

2009-03-06T07:14:00.000-08:00

Research by the firm Aon Consulting has shown that the value of defined contribution pensions has fallen from a total of £550bn in September 2007 to £410bn at the end of January 2008 according to a report by moneymarketing.co.uk.
I think Gordon Brown, UK premier, will have to increase the tax advantages of personal pensions since people will otherwise decide that these investment vehicles are not worth the candle. I am thinking about putting a modest monthly amount in a pension for 15 years and probably the sum and the time period are not sufficient. I will probably invest in a tracker but it could be quite diminished by the charges, which mount up in time.

Protected rights!! What are they?

2009-03-02T07:36:00.001-08:00

On the British pension scene we have the thorny issue of protected rights. These can now be transferred into a SIPP.
www.searchifa.co.uk The area of protected rights should be a good one for IFAs to give independent advice. Companies seemed to have washed their hands over trying to help out their employees in this area. In fact, it is pretty hard to get pension advice anywhere.
The collapse of corporate pension schemes, such as defined benefit ones, have made state pensions more valuable. The state scheme should be the cornerstone of pension planning. I suppose the tax raid on defined benefit schemes sanctioned by the then Chancellor of Exchequer Gordon Brown was based on an understanding that the sponsor companies would make up the difference. In fairness, increasing longevity would badly hit the pension schemes of firms. Perhaps, the demise of Equitable Life made people question the security and certainty of pensions. Despite being told by the Parliamentary ombudsman, the Labour government has not helped the victims of Equitable Life.
I invested in an Equitable Life with-profits fund and it was not funny aking the hit when I transferred. The authorities regulated the firm, which was originally founded in the 1760s, but provided no compensation. British personal depositors in Icelandic banks got their money back, where there was no UK regulation. However, this was not the case for Dutch and German depositors (I think), who really took a hit.

UK quantative easing is coming our way!!

2009-02-23T07:17:00.000-08:00

The United Kingdom government is going to carry out quantative easing to get out of the economic predicament we are in. Gold reached $820 an ounce in August and now it
stands at $1,000. British premier Gordon Brown insisted that we sold at $250 an ounce. I wonder if the two issues are linked? Sterling is not supported by masses of currency reserves unlike the China or Taiwan. Although these countries must be wondering how long will they buy U.S Treasury bonds.
www.searchifa.co.uk
So we are probably in a bit of sticky situation. British savers have been abandoned (hopefully this will change) and they should keep to mainstream institutions. There was a rush to the Post Office agent Bank of Ireland and now there is a rush back. I suppose everyone needs some certainty.
The shenanigans at Anglo Irish Bank don't look good. I think the Irish would like to have some quantative easing but the good bankers at the Frankfurt-based ECB have proved several steps behind in this current economic crisis. Perhaps, the Bank of England held interest rates too high but have certainly gone for it in a big way. Say the UK central bank buys a few corporate bonds and some gilts, it probably would provide limited help to the housing market, which needs private individuals buying residential properties from other private individuals. To help these transactions Sir James Crosby proposed a reasonable plan involving mortgage securities. This plan has been studiously ignored by the Gordon Brown administration.

Should IFAs recommend buying baked beans and other provisions?

2009-02-16T08:14:00.000-08:00

I wonder whether independent financial advisers (IFAs) should be recommending to their clients the purchase of baked beans and other provisions? In his article in the Sunday Times, William Kay makes some solid financial recommendations such as beware of gilts because historically the British government has managed to get out of its obligations. Kay says we should store extra food because of possible shortages. If these took place, they would happen very quickly. We should also have some gold stored in a safe place.
www.searchifa.co.uk
I have been trying to persuade members of my family of the need to stockpile certain items. This is maybe not to cope with a crisis but with perhaps more mundane issues. Recently my parents were hit by a wave of power strikes.
Last autumn we were close to financial disaster with the possible closure of Royal Bank of Scotland (RBS) and Halifax (HBOS). If ATMs temporarily closed, would people have enough cash to survive for a couple of weeks? What potential problems are we looking at? I think the favourites are the Middle East and North Korea.

I might have to see an independent financial adviser.

2009-02-13T06:07:00.000-08:00

I try (and probably fail) to write a blog aimed at independent financial advisers (IFAs) and obviously I am not one. I like reading the publication MoneyMarketing, which I think is excellent. So quite a few blogs relate to articles from the publication. I really like Brian Tora and Mark Dampier. Then, today I suddenly realised that I am going to have to see an IFA to get some investment ideas. For instance, what do you invest in at the moment? UK equities, even with dividends reinvested, have posted a loss over the past decade. This coincides with Gordon Brown's stewardship of the economy.
Do I invest in yet another pension? Would a modest investment bar me from means-tested benefits when I retire in 15 years time? Will pensioners get any benefits then?
If a company like Rio Tinto can see its share price fall from £70 to just under £20 and get imbroiled in a mighty row over Chinese investment (worrying the Australian government), then it looks like individual equities are out.
Investment funds are supposed to be safer with their diversification but suffer from their poor investment choices and high costs. For instance, UK investment funds were
unable to avoid the disintegration of the British banking sector.
What about buy-to-let, which seemed to answer pension needs at the time? If the UK residential property market is going to tank further in 2009, why buy a loss? Distressed buy-to-let investors would see me as a gullible buyer and would probably not lower the price. However, a real asset might be a long-term winner especially with the pound collapsing.
If I see an IFA, I will let you know how I got on.
www.searchifa.co.uk

Standard Life coughs up £100m over pension sterling fund.

2009-02-11T08:54:00.000-08:00

The venerable Scottish insurer Standard Life is going to cough up £100m following the tanking of its pension sterling fund. This was not the performance desired by independent financial advisers (IFAs), who pointed to the mention of "cash" in some brochures. Hargreaves Lansdown said simply that it wanted the money back for its clients.

It reminds me when a Fidelity Income fund was found to have invested in nil yielding tech stocks. There was a bit of a furore. The current investment conditions have really hit investment trusts and unit trusts. UK funds have been especially hit by the implosion of the British banking sector. Star fund managers have seen their reputations tarnished. The industry is trying to push corporate bond funds for investors looking for income. They represent quite a bet on future default levels to get the attractive yield.
www.searchifa.co.uk

Good corporate bonds paying 7 pct to 9 pct might be retired by companies, if they can refinance for less. Bond managers will be having another look at the issue documentation for the paper.

FSA boss Turner fails to read from government script.

2009-02-10T07:53:00.000-08:00

The Daily Telegraph has cited comments by Lord Turner, chairman of the Financial Services Authority (FSA), which warn of possible stagflation. This could happen if the decline of sterling continued. I thought the drop in the pound was to help a renaissance in the economy. However, this happens rarely and food import prices should be shooting up soon. Discussing possible stagflation is definitely not in the government script. It would be a way of inflating away our debts but I think the pensioners in Spain would come back to Blighty to exact some terrible revenge on Gordon Brown et al.
Liam Halligan, former Channel Four economist correspondent, has been warning in the Sunday Telegraph, that we are not going to suffer deflation but increased inflation. He is pretty critical of the British government's policies to put it
mildly.
Back to the FSA, it does not seem to be resolving the spat between Standard Life and independent financial advisers (IFAs) over whether its pension sterling fund is a cash fund or not. Hargreaves Lansdown has asked the Scottish institution on behalf of its clients for the money to be returned. The pension sterling fund has taken a hit investing in mortgage-backed securities rather than cash as illustrated in some brochures.
www.searchifa.co.uk

I hope I have not been giving investment advice!!

2009-02-04T07:01:00.000-08:00

I have been reading that the Financial Services Authority (FSA) has been maintaining a dignified silence that it was warned by Singer and Friedlander that its Icelandic buyers were not fit and proper. The FSA seems content to go after the small
fry.
Talking about small fry, I hope I have not been giving investment advice, since the FSA would come down hard on a poor blogger but lets the big fish go free. With the banking meltdown, something has gone very badly wrong at the FSA.
Talking about Iceland, bankruptcy does not look a pretty sight. I know they parked the foreign debts out of sight and out of mind but inflation and unemployment have been shooting up. I suppose the Borough of Barnet still wants its money back. Maybe Barnet could convert its debts into future
cod catches.
Although HM Government deigned not to rescue the local authorities with Icelandic deposits it probably had no choice but to repay depositors of Icebank to protect the integrity of the British banking system. The Labour administration could have done more to minimise the collapse of the Icelandic invaders by clipping their heels. I suppose hindsight is a great thing and probably it is the "mania of crowds" thing. If we allow Royal Bank of Scotland (RBS) to hit the rocks, then we were not going to be clued up in terms of preventing councils depositing council tax revenues in Iceland. Under the FSA rules I suppose the councils were considered professional investors, big and nasty enough to look after themselves. I suppose nobody is going to walk the plank about this mess.
www.searchifa.co.uk

In the UK is financial advice useful?

2009-01-28T07:40:00.000-08:00

I read a recent article by Chris Dillow in Investors Chronicle, which looked at the merits of financial advice. It could be counter-productive according to some studies. However, when financial advice comes into its own is when it assesses the risk profile of clients. Dillow also says, perhaps tongue-in-cheek, that rather worry about financial planning, people should really look at if they want a bigger house or car.
In the Money Marketing publication Adviser Business the managing director of Worldwide Financial Planning, Peter McGahan, says that in terms of investment business the firm is attracting business from clients, who are basically unhappy with banks.
www.searchifa.co.uk

Clients will be bruised by the disappearance of bank stocks.

2009-01-27T08:44:00.000-08:00

British independent financial advisers (IFAs) will meet plenty of clients, who will have been bruised by the virtual disappearance of UK bank stocks. For instance, the roll call covers Northern Rock, Bradford & Bingley, Alliance and Leicester and Halifax while the share prices of Royal Bank of Scotland, Lloyds and Barclays have taken a right battering. In retrospect, Alliance and Leicester did well to be taken out by Spanish bank Banco Santander, which is treated virtually as a UK bank by the British government.
So what can IFAs recommend to clients to make up the income gap because the UK banks were briliant dividend players? There are articles in the financial press extolling corporate bond funds while IFA David Kauders has always recommended to clients that first they should be debt-free and then they can invest in UK and US government bonds. So in the overwhelming amount of cases clients should be advised to get started on reducing their mortgages.
www.searchifa.co.uk
I remember years ago reading conservative advice from Foreign and Colonial Investment Trust that investors should have a financial cushion of a year's money before investing in their company. It sounds like genteel advice from a bygone era but one we are probably returning to.

Mark Dampier abandons political neutrality.

2009-01-22T07:34:00.000-08:00

The research chief of Hargreaves Lansdown, Mark Dampier, has abandoned political
neutrality in an article for moneymarketing.co.uk. He says that it was always better to stick to political neutrality but has to own up to the belief that the government has "systematically wrecked our economy over the last ten years". The charge sheet includes the introduction of taxes on pensions and the weakened regulation of the banks. Dampier says the public sector has to be cut back.
www.searchifa.co.uk
I suppose the Gordon Brown economic miracle has been put to bed. We don't get any
slogans about "boom and bust".

UK bank stocks do not look too good.

2009-01-15T08:10:00.000-08:00

You don't get the sense that the British government is not working too hard to avoid the complete nationalisation of some UK banks. There has been talk of a "bad bank" to take on the toxic assets housed by these institutions but at around forty pence the private shareholders of Royal Bank of Scotland (RBS) look like they are flying the white flag. The share price would be healthier if it could unload a few assets into the bad bank and if it could do it now.
www.searchifa.co.uk
So if the British government took full control of RBS the next day there would be calls for the sale of the U.S banking interests due to local fears of unfair competition. It would be impossible to get a good price for these American assets, which cost an absolute fortune to build up, because it would be a forced sale.
The current management of RBS might feel it is a good idea to sell off the international interests but retreating to a tough UK banking market dominated by the behemoth Lloyds does not sound a good idea. RBS has just sold a small stake in a Chinese bank but the original purchase must have been based on some kind of game plan, which was not completely wrong.
I suppose a UK taxpayer rescue and foreign assets do not compute.

Where are the British banks going?

2009-01-14T06:21:00.000-08:00

There has been chatter in the UK about the creation of a "toxic bank" to house the ghastly assets not wanted by the British banks. One potential result would be to see the Royal Bank of Scotland (RBS) halve in size. It would be in the strange position of having no assets left from its ABN Amro acquisition but would still be paying for it.
www.searchifa.co.uk
I suppose British premier Gordon Brown looks at the electoral calendar and has decided he has not got enough time for the banks to gouge out the profits from UK consumers and corporates while it slowly writes off the problematic items on its balance sheet. The prime minister wants the British banks to lend again but they have instituted very conservative lending standards in the residential property sector and they don't seem to have any desire to lower them.
The UK economy is very dependent on the housing sector. House prices have fallen badly but there has not been any sign of real capitulation selling. For instance, the buy-to-let sector has held up well given the implosion of the main lender
Bradford and Bingley. If vendors start accepting the offers being actually made then
it will at least get the transaction numbers moving.
Hopefully, the toxic bank will not have to take lots of mortgage loans but unfortunately it will be full of acronym rubbish such as SIVs, CDOs as well as a load of corporate loans.

I am thinking about investing in premium bonds.

2009-01-09T06:16:00.000-08:00

One of the main problems about investing in UK premium bonds is that punters don't often win. This makes them a poor hedge against inflation. Now, the odds over winning a prize have sharply got worse over the year. However, if there is deflation then premium bonds won't suffer as much from inflation as in the past. Over the last few years I have spent money on them and overall premium bonds have been disappointing performers. However, they could be a short-term punt over
2009 and with the government guarantee of getting your money back, that is a pretty powerful incentive in these times of troubled banks. Don't expect to win.
www.searchifa.co.uk
In actual fact I don't expect real deflation in terms of actual falling prices. Inflation indices are artificial constructs and the ones we have don't measure city or regional differences. For instance, if petrol prices go down, they are still expensive (mainly comprising taxes in Great Britain). Fares are going up above inflation and council taxes will also increase over inflation.
If the retail price index did go down, would the modest state pension be modified downwards as well? Of course not but there could be pay cuts in the private sector as
exemplified by JCB.

British IFAs could face a bleak year in 2009.

2008-12-31T04:13:00.000-08:00

UK independent financial advisers are pretty much unloved by the regulatory body FSA.
Comments on the retail distribution review focus on the appearance that the banks have had a pretty easy ride. However, IFAs have got to consider the here and now. 2009 could be a bleak year but there has been so much change in the financial landscape that clients would need more advice rather than less.
For instance, the popular investment house New Star has seen the creditor banks take control while some of its high flying funds have closed for redemptions. You do recommend now? M and G or Fidelity.
Can you recommend structured products? The collapse of Lehman Brothers as a counter-party has made supposedly low-risk products into very high risk ones to put it mildly. Supporters of structured products point to their defined return and
low cost.
The collapse of the Icelandic banks have put the spotlight on the deposit guarantee schemes in offshore territories and have made a lot of British councils look stupid.
There is an area of advice in offering recommendations on where to
put deposits.
www.searchifa.co.uk
Another area is pensions. The forthcoming introduction of a higher tax rate of 45 pct
will probably lead to an increase of pension contributions. SIPPs will continue to grow.
Finally, quite a few potential clients will be planning to leave the United Kingdom. They will need help in navigating the tax codes of countries such as Australia and the United States. The collapse of sterling against the euro might make moving to eurozone countries less attractive.

Merry Xmas to all my readers!!

2008-12-24T04:41:00.000-08:00

I suppose it is a bit late to send a Christmas message to all my readers on Christmas Eve, when it is very quiet. I will go back to the theme of corporate bond funds but my experience is mixed all the same. I have been a long term modest investor in City Merchants and in capital terms the performance has been terrible. The best idea is to have a range of investments/deposits/properties!! I know that diversification in equity terms has not really worked but let's hope it should help in the future. Everybody seems to be down 30 pct and I suppose people will be averaging down their losses. The re-investment of dividends is crucial.
www.searchifa.co.uk
One massive change in the UK investment landscape is the virtual disappearance of British banks from future portfolios. One of the staggering events of 2008 was
the death spiral of Royal Bank of Scotland (RBS) and Halifax. I could not understand why they did not hit the short sellers by buying their own shares. I suppose they wasted too much capital by buying back stock at previous sky-high prices. Is
RBS a buy at 44 pence?

ZIRP does not sound very good!!

2008-12-17T08:28:00.000-08:00

I wonder what British independent financial advisers (IFAs) can recomend in terms of investments when we have got ZIRP or zero interest rates coming to us soon. The U.S
Federal Reserve Bank (FED) under Ben Bernanke seems to have pressed the panic button
by lowering its rate to a range of 0% and 0.25%. Here, the Bank of England might have a bit to go from its current base rate level of 2%. However, IFAs are having to survey the wreckage of the British financial scene and what do they recommend? Ten year gilts yield around just 3.4 pct. It is probably too late to get into them while long term they must be affected by the collapse of sterling and future inflation.
www.searchifa.co.uk
Quite a few people are recommending corporate bond funds, which are offering significant yields and could sit quite nicely in SIPPs.

New Star has faded and John Duffield is leaving.

2008-12-09T08:56:00.000-08:00

British investment manager New Star has fallen under the control of some major banks and its founder John Duffield is leaving. It operated a culture of star investment fund managers, some of whome found it difficult to outperform. Investment conditions have been tough for active stock pickers.
A columnist in MoneyMarketing jokes that he always wrote articles about New Star under the fear of receiving writs from the company's lawyers.
Another columnist says New Star's troubles have affected the fund management industry as a whole.
Meanwhile, the Bath-based firm Fidelius offers advice from simple mortgages to investment planning. It approaches the requirements of the client with a completely open mind.
Meanwhile, Nic Cicutti of Money Marketing, has written a perceptive article about the New Star implosion. For instance, he notes that New Star markets over 40 funds
compared with around twelve in 2002. Fashion funds reflected latest fads for investors. There was also no rigorous, disciplined approach when the stock market started to collapse. Also, good managers will have periods, when they are unable to outperform due to being in the wrong sector or having the wrong investment style.

Major banks could take control of New Star.

2008-12-02T08:27:00.000-08:00

The major banks could take control of UK investment manager New Star. You would have thought that fund management was a straightforward and simple business with not much to go wrong. It seems that New Star was weighed down with debt, which was very negative when funds under management suddenly went south. When these funds go up, it can be a very profitable business if costs stay the same. It is sad that it has not worked out for New Star founder John Duffield, who is a real character amongst the grey denizens of the City.
www.searchifa.co.uk
One worrying factor is that quoted businesses are going into administration nearly every week. It seems like it anyway (Woolies, MFI, London Scottish).
It will be interesting if the Bank of England lowers interest rates to 2 pct from 3pct. If the banks are not passing on the decrease to borrowers but are applying it to savers, then the Bank might consider a pause. It does not seem to be too worried about the exchange rate but sterling does need some support to prevent a major fall.

Is the UK mortgage market going to recover in 2009?

2008-11-27T07:08:00.000-08:00

The British government wants the mortgage lending market to recover in 2009 but is this going to happen? In an article for Money Marketing the Charcol technical manager Ray Boulger proposes that Northern Rock, the mortgage bank nationalised by the government, could suspend or reduce the repayments made on the loan made by the Bank of England. This loan stood at £26.9bn at the end of 2007. The move would reduce
the pressure, which is contracting the mortgage market in Britain.
www.searchifa.co.uk
It is funny that the British government wants to have lending levels set at 2007 levels but it seems that it does not want to influence Northern Rock and Bradford & Bingley, which are under its control. I suppose the comment by B & B boss Richard Pym
that the buy-to-let market is dead can be viewed as not helpful.

New Star shining bright?

2008-11-26T06:46:00.000-08:00

It does not seem that long ago when the legendary British fund management entrepreneur John Duffield founded New Star with the aim of having the brightest and the best as his fund managers. Duffield had previously stuck it to some Germans and the new company was going places. Now according to a Money Marketing article it is thought that New Star will lose 50 to 60 of its 380 strong workforce.
However, Mr Duffield is positive for the future and sees long-term prospects are still intact with the benefits of increased savings and investment flows. He says property is the best option in terms of UK investment while the influence of India and China will continue to grow.
www.searchifa.co.uk
Darius McDermott, of Chelsea Financial Services, told Money Marketing that he is confident that the infrastructure to support fund performance will be
there.
New Star International Property has just suspended dealings in the fund due to some institutional withdrawals. On his company web site, Mr McDermott notes that the fund has outperformed the MSCI index with a 9.2 pct decline since its launch.

British IFA firms will be reviewing independence in 2009.

2008-11-20T06:57:00.000-08:00

MoneyMarketing has cited a study by the consultancy firm Plimsoll, which considers that some British independent financial advisers (IFAs) will be reviewing their independence in 2009. Some 161 IFAs are heavily in debt while there will be pressure from the retirement of directors. Around 470 of 2,900 IFA directors will be over retirement age during 2009.
Some 834 companies are operating without debt and many have cash surpluses. One strategy will be for the strong IFAs to take over the weak ones.
www.searchifa.co.uk

Bolton-based Professionally Connected Financial Planning offers comprehensive service.

2008-11-19T06:52:00.000-08:00

Professionally Connected Financial Planning (PCFP) was set up in February 1999 by Michael Norris and David Makinson. The firm is based in Bolton and offers the opportunity to pay with fees rather than with commission. PCFP offers advice in areas such as phased
retirement and funding for university fees.
www.searchifa.co.uk
I think I have been to Bolton once at night and I have seen the team a couple of times. The last time was when Bolton visited Tottenham and got shredded by Keane and Berbatov. However, Anelka looked pretty good and it was a shame that he went to Chelsea. Somehow Keane got himself sent off but it was still a convincing victory for the Spurs.

Bank stocks seem to be continuing their decline.

2008-11-11T08:08:00.000-08:00

British bank stocks are again on the rack. Royal Bank of Scotland (RBS) is trading at 58 pence despite the fact that it is going to get quite a wodge from the British taxpayer. Halifax Bank of Scotland (HBOS) reached 90 pence, which is also receiving largesse from the taxpayer. These judgements by the stock market do not show any confidence for the future. This future seems to be one of hard grind sorting out the mess of toxic debt, derivatives and funding issues.
When Abbey National hit the buffers, it was helped by a benign environment to resolve its treasury book and it took several years and a sale to a stronger bank Banco Santander. The HBOS takeover could sink Lloyds TSB. If the combined bank does well I think at a later date the Competition authorities could order a reduction in its UK share of mortgages and savings.
www.searchifa.co.uk

Are the UK banks going to need more state help?

2008-11-05T07:04:00.000-08:00

Barclays is one of the banks, which has turned down the offer of help from the UK government. The British bank has raised money from Gulf investors for example. Independence means that it can exploit international ambitions. This compares with the Royal Bank of Scotland, which looks likely to dispose of quite a few foreign assets.
Barclays has attracted brickbats for ignoring pre-emption rights but has argued that conventional rights issues did not work well with HBOS and Bradford and Bingley. These latter banks were hit by the long delay between announcing the capital raising operation and actually getting the money. The new shares were also issued at a discount, which hit the existing stock price.
Let's hope Barclays is not hit by toxic debt or by increasing loan losses.
www.searchifa.co.uk

I am reviewing my investments and it is not pretty!!

2008-11-03T08:05:00.000-08:00

Sometimes I wish I went to an IFA. I am reviewing my investments and it is not pretty. My portfolio is extremely limited and is becoming more so.
New-build flats are coming down in price but will they recover? One government minister says they don't want a 70m population for the UK. However,if the working population declines, then more workers would have to be imported to cover the increasing number of dependents. It is probable that the population will rise and residential property would again be an interesting investment area.
In Bristol, the firm Edison Ford has significant expertise in the buy-to-let market.

Bank of England governor can still move markets.

2008-10-22T05:40:00.000-07:00

A speech in Leeds last night proved that Mervyn King can still move markets. Today,
sterling was down 4 per cent against the dollar. This was in response to the Bank of England governor saying that the UK economy was entering recession. If I was the governor I would try and talk things up since it might make things better. There is no point in trying to wish for a deep recession.
www.searchifa.co.uk
Most IFAs be wondering if they have the client base to survive. Mortgage brokers have been badly hit as property transactions have come down. They have been in recession for quite a long time. Apparently, the recovery will come in 2010.
In Newmarket, Suffolk, Frank C Barker offers advice in areas such as lump sum investments and income protection. I wish I had a lump sum to invest, although the traditional arena of the stock market looks very risky. However, the world does not stop completely and people have sums on deposit where they are looking for a better return.

I expect IFAs are shell-shocked over recent events.

2008-10-16T08:13:00.000-07:00

I read in moneymarketing.co.uk that levies on British IFAs could increase due to the nationalisation of Bradford and Bingley. The Spanish bank Banco Santander bought the savings and branch network while the UK government ended up with the mortgages.
Bradford and Bingley had a major business with the buy-to-let sector.
www.searchifa.co.uk

Panic selling hits UK stock market.

2008-10-10T06:11:00.000-07:00

The view was that equities were the good long-term bet in comparison with bonds and cash. However, this week's falls in the London stock market has shown how risky shares are. One view is that the stock market is pricing in a depression. I don't know how the Royal Bank of Scotland got marked down to 79 pence at one point today. This is a massive bank and one which would benefit from the UK government bailout if it wants to. It does not bear thinking about if RBS has to be rescued by the government, although some sections of the population in Scotland would be delighted to have a Scottish state bank.
I think pro-Independence supporters had counted on a vibrant financial services scene in Edinburgh, which has been badly affected by the recent market turbulence.
www.searchifa.co.uk

Another bad day for the UK bank stocks.

2008-10-07T08:06:00.000-07:00

Today (October 7th, 2008) has been another bad day for the UK bank stocks with some of the major banks denying that they asked the British Treasury for money. It looks like there is going to be some recapitalisation although opponents of nationalisation or partial nationalisation say the banks should look for merger/sale deals with stronger partners. Anyone for Abu Dhabi? I wonder what the government would think if the Qataris swallowed up Barclays.
Looking back at an old copy of moneymarketing.co.uk for July, there is an interesting article by Mark Dampier, head of research at Hargreaves Lansdown. He notes then that bank stocks were already down 44.9 pct for the year. Dampier also emphasises the importance of the housing market, since it employs directly and indirectly millions of people. However, the housing market will continue to fall.
Dampier says "In the future, people will look back on 2008/10 as the Great Deleverage."

I like Brian Tora article on financial crisis.

2008-10-06T07:39:00.000-07:00

I like the moneymarketing.co.uk article by Brian Tora on the current financial crisis by looking at the past. For instance, in the early 1970s there was a three day week in the UK and hyperinflation. Tora says this crisis is all about overborrowing with too much money being lent to the wrong people. However, he is confident that we will get through the crisis, which may be once in a lifetime event but is not unique.
Meanwhile, in Brighton the financial firm Antrams has been offering advice for over twenty years. It can handle complex financial planning issues.
In his regular investment article for moneymarketing.co.uk Tora says he is convinced "central banks and governments will find a way out of the situation created out of easy money and greed". However, I think he might have to exclude the bankers Trichet and King, who seem intent on fighting imaginary inflationary battles. It may be that inflation is used to attack the debt mountain in various countries. However, Trichet and King must be more pragmatic and cut interest rates now. Oil and food prices have come down, although the Bank of England governor must be worried about the level of sterling.

It is interesting BOE widening range of collateral.

2008-10-03T05:49:00.000-07:00

The UK central bank Bank of England is widening the range of collateral it takes from banks in the provision of their funding needs. The central bank is to take paper, which is not AAA rated such as U.S student loans. The Bank of England governor Mervyn King is probably pondering how to get the banks off this funding tap.
www.searchifa.co.uk
Apparently, the Governor is being more pragmatic and is less concerned at making the banks pay for their mess.

I suppose everybody is waiting for U.S bailout.

2008-09-26T06:33:00.000-07:00

Apparently, it is the Republican caucus, which is holding up the $700bn rescue package in the United States for the banks. I wonder what British independent financial advisers (IFAs) could recommend in these troubled times.
www.searchifa.co.uk
Frances Kemp of Knowlden Titlow Financial Services Ltd gives an excellent review of the collapse of U.S investment bank Lehman Brothers.
It is sad that HSBC is cutting jobs, especially back-office ones. They were'nt the ones responsible for investment decisions in areas such as mortgage-backed securities.

Alistair Blair reviews the Lehman affair in the Investors Chronicle.

2008-09-22T05:55:00.000-07:00

The excellent financial commentator Alistair Blair takes a look at the collapse of U.S investment bank Lehman Brothers in the Investors Chronicle. He notes that the $22bn balance sheet was overwhelmed by "so much toxic rubbish being generated in the mortgage financing".
The shareholder funds of $22bn had to support assets of $670bn.
www.searchifa.co.uk
Blair also noted that the Lehman average pay per employee was $330,000 and totalled $9bn a year.

Ages ago I read a couple of books on American investor Warren Buffett, who emphasised the importance of investing in things you understand. I suppose the financial situation of U.S investment banks is not that clear. Buffett has for the past few years described derivatives as "financial weapons of mass destruction". The investor from Omaha (Nebraska) has made money by investing in stocks such as Coca-Cola and reinvesting the dividends over long periods and really benefitted from compound interest.

Is Bank of England governor holding up recovery of mortgage market?

2008-09-17T07:28:00.000-07:00

I wonder if central banker Mervyn King is holding up the recovery of the mortgage market in Britain. In August moneymarketing.co.uk reported that King's
"heavy-handed rejection of proposals to help the mortgage market floated by Sir James Crosby shows there is little consensus on what needs to be done in the homeloan sector".

The Bank of England governor does not want any type of guarantee as far as lending is concerned and thinks the UK mortgage market will recover on its own accord. However, this approach has been criticsed by Wave Lending chief executive Colin Snowdon, who describes the governor as an economist first, a banker second.

Linda Will, of West Country building society Stroud and Swindon, says the problem is the financial authorities are undecided on what to do and there are major divisions between themselves.

Sir James Crosby is the former boss of HBOS (Halifax Bank of Scotland), which could be swallowed up by Lloyds TSB. HBOS has 20 pct of the UK mortgage market but in terms of new lending institutions such as Banco Santander unit Abbey National have been growing fast.

The UK mortgage market will probably recover naturally and the lenders will start lending if the spectre of negative equity falls away. I think the government might have to give a helping hand to the housebuilders, whose share prices have been shot to pieces.

Bank of England governor - No pain, no gain.

2008-09-16T07:35:00.000-07:00

The Bank of England governor, Mervyn King, has not said the phrase "no pain, no gain" but he is pretty adamant in his opposition to any plans by the UK government to prop up the mortgage market. I read in moneymarketing.co.uk one description of Mr King, which said the Aston Villa fan
was a purist and was not a pragmatic economist.
Some parts of the mortgage market continues to operate. If you are creditworthy, then you will still receive credit. However, it looks like there are real problems at the first-time buyer level, which obviously hits chains.
In recent memory building societies ran a cartel while rationing housing loans. Such things were dismantled in the Thatcherite revolution but remarkably banks and building socities can still move together in the United Kingdom. They all seemed to raise their required deposits at the same time and at the same level. Or was that my mistaken impression?
If the Bank of England governor has his way, there will probably be a slow recovery.
UK Chancellor Alistair Darling wants any recovery to be quicker and it will be interesting to see how far he ignores Mr King.
www.searchifa.co.uk

moneymarketing.co.uk profiles IFP ceo Nick Cann

2008-09-15T07:36:00.000-07:00

moneymarketing.co.uk has profiled the chief executive of the Institute of Financial Planning (IFP), Mr Nick Cann. The executive is hoping to achieve a target of 2,500 certified financial planners within three years. Mr Cann was surprised to be approached by the IFP since he came from a sales/marketing/business development background. The Oxford Polytechnic graduate worked at Barclays Bank and Robert Fleming/Save and Prosper.
moneymarketing.co.uk notes that "Cann has introduced a number of initiatives to raise the profile and reach of financial planning". While the IFP ceo notes that more firms are looking at advanced qualifications.
The first Financial Planning Week was started and this ran from September 8th to
14th.

Will Alistair Darling rescue the mortgage market?

2008-09-11T06:58:00.000-07:00

Will British Chancellor Alistair Darling rescue the mortgage market? The Bank of England governor Mervyn King wants the market to recover naturally and does not want any form of state guarantee or help for borrowers. Mr King is insisting that the lenders should still retain the risk of their mortgage loans.
Some observers consider that the Bank of England governor is being too much of a purist and should be more pragmatic.
www.searchifa.co.uk

Postscript: with me writing in September 2009 Darling is still Chancellor, which seems a minor miracle, since he is more or less ignoring the instructions of Prime Minister Gordon Brown. Darling wants to be a bit more upfront on forthcoming spending cuts from 2010. However, he could help the mortgage market, which has shown signs of recovery, if he reduce stamp duty rates.

Mervyn King is still Governor of the Bank of England, which is another source of wonderment. He must be surprised that the UK banks seem to be making efforts not to
repossess at the first possible moment. I think the banks should be congratulated for these efforts to keep down residential repossessions.

It is always a drag to come back from hols!!

2008-08-27T04:46:00.000-07:00

It is always a bit of a drag to come back from hols. Buying English newspapers abroad like the Daily Telegraph makes you realise how pessimistic the papers are. Or are things really bad? I was in Spain and apparently the country is sliding into recession but it seemed the place was open for business as usual.
One drawback has been the collapse of sterling against the euro. I don't think Spain really needs a hard currency but we found our euros flying out the window when we went to a few meals.
It has taken ages to get back into things but I am wondering if I apply for Gordon Brown's new energy package. Depending on which part of Spain you are in, you don't have to worry too much about being cold.
www.searchifa.co.uk

Santander's Abbey chases HBOS in UK mortgage share.

2008-08-06T07:24:00.000-07:00

The specialist publication moneymarketing.co.uk has published the list of top institutions according to UK mortgage loans. In top spot is HBOS, (which operates Halifax and Bank of Scotland) with £73.1bn or an estimated 20.1 per cent of the UK mortgage lending market. Chasing hard is Abbey, which is part of the Spanish banking group Santander with £35.6bn or 9.8 per cent. The list comes from the Council of Mortgage Lenders (CML) and covers 2007.
The Abbey's market share has improved in comparison with the 9.4 per cent level in 2006. The Spanish-owned affiliate admits that the exit of other companies from the UK market has helped.
www.searchifa.co.uk
It would be interesting to get up-to-date figures since Northern Rock would probably have a very different position to last year. In 2007 the Newcastle-based bank had fallen from third to fourth with £29.1bn or estimated market share of 8.1 per cent.
Its new management wants to shrink the loan bank but it might just end up with a load of duff loans. The 2008 first-half results showing losses of half a billion plus were terrible.
The CML figures showed UK building society Nationwide had grown from 5th to 3rd in the ranking with £33.9bn or an estimated mortgage share of 9.3 per cent. My mortgage is with the Nationwide.

I am a bit worried about the missus' B and B shares!

2008-08-05T08:51:00.000-07:00

I am a bit worried about what to do with the shares held in British mortgage bank Bradford and Bingley by my spouse.
I suppose we could give the rights issue (capital raising) a miss. I could take financial advice from an independent financial adviser . We could spend the £184 (I think it was the sum last time I looked) on the hols instead.
I suppose the UK stock market will be spooked by the gory figures from the nationalised Northern Rock. Alot of customers are probably throwing in the towel with the change in economic circumstances. Those 125 pct mortgages are coming to haunt the Geordie bank in a big way. Gawd knows why I invested (and then sold) a modest sum in Northern Rock. Not that I am a big expert on UK bank shares. In the weekend FT the Scottish investment expert Colin McLean noted that Northern Rock had posted upward earnings per share for five years. Sounds like some dodgy regulation by the British regulators and this is probably a problem at Bradford and Bingley. Would there be a mercy killing? The banks will probably have their own problems and would want to wait until conditions improved. Perhaps there could be a joint bid.

Is buying individual U.K equities too risky?

2008-07-29T08:01:00.000-07:00

Is buying individual U.K equities too risky at the moment? There has been bid action at Detica and Acambis, which has been very helpful. However, for large sectors of the British stock market such as banks and housebuilders where volatility has been very high and the movement has been down. It would have been very difficult to time when to buy Alliance and Leicester and then not to hang around for the Banco Santander paper.
www.searchifa.co.uk
I wish my few stocks would go up a bit. I look at their prices in the paper and wish that I bought a tracker fund and then could stop worrying about equity investment.

IFAs are going back to school

2008-07-22T05:44:00.000-07:00

MoneyMarketing has reported that the UK companies Scottish Widows, part of the Lloyds TSB banking group and Norwich Union, part of the insurance group Aviva,
are heavily attracting independent financial advisers (IFAs) for their training
academies. For instance, Norwich Union has attracted over 1,300 registrations to
its Financial Adviser Academy since March.
www.searchifa.co.uk
MoneyMarekting cites George Andrew, market relations head at Scottish Widows, who noted the appetite for more professionalism in the industry.
I think IFAs have enviously looked on at the legal and accountancy professions, who
manage to charge substantial fees for their work.

UK direct property unit trusts prove a poor buy.

2008-07-21T04:54:00.000-07:00

In the United Kingdom retail investors of direct property unit trusts have been hit by the double whammy of poor performance and of being unable to sell. Major players such as Norwich Union and Friends Provident have locked investors in with long notice periods.
www.searchifa.co.uk
The idea of investing in direct property via unit trusts was that it represented a non-correlation with shares. However, these unit trusts have proved illiquid with a limited market for selling their assets when investors cash in their units.

Are we going to get any Spanish lolly?

2008-07-14T07:44:00.000-07:00

Are we going to get any Spanish lolly from the Banco Santander paper bid for UK mortgage bank Alliance and Leicester? Santander might end up bigger in the UK than in its home market of Spain. OK, that might be unlikely but the car manufacturer Volkswagen
has a presence in Brazil similar to the size of its operations in Germany.

www.searchifa.co.uk

With the share bids for Abbey National and Alliance and Leicester, Briitsh shareholders are accepting a major player in the UK banking market. Does it matter
if a foreigner holds a certain percentage of this market? Would the authorities be
so welcoming if some foreign group took over HBOS (Halifax Bank of Scotland)? Or perhaps the British authorities will give
Sr Emilio Botin, Santander chief, a knighthood for rescuing two mortgage banks?

Clive Briault trousers £528,000 from the FSA.

2008-07-08T07:45:00.000-07:00

One of the few scapegoats of the Northern Rock affair, Mr Clive Briault, has trousered £528,000 from the UK's financial regulator Financial Services Authority (FSA). Mr Briault left the organisation in April 2008 by mutual consent. The mortgage bank had to be rescued by the UK government after being unable to borrow from the wholesale lending market.

MoneyMarketing also reports that the FSA boss, Callum McCarthy, who saw his pay go up by 10 per cent to £480,553 but did refuse a bonus. Amazing, the British government under the Reverend Gordon Brown, has called for pay restraint to help keep inflation at around 2 pct-3 pct, when quangocrats are getting a lot more.

www.searchifa.co.uk

The Daily Telegraph reports that Northern Rock has appointed Rick Hunkin to reinforce risk control at the Newcastle-based bank. Mr Hunkin had a similar role at the U.S owned institution GE Money UK Home Lending. I suppose better late than never.
I suppose everybody is wondering if Bradford and Bingley is going the same way as its
northern rival.

HBOS affiliate Clerical Medical stops trail commission.

2008-07-08T06:58:00.000-07:00

MoneyMarketing reports that Clerical Medical has stopped trail commission to quite a few independent financial advisers (IFAs). The British financial company, which is part of banking group Halifax Bank of Scotland (HBOS), justifies its move by saying that many customers no longer deal with their IFA.

www.searchifa.co.uk

MoneyMarketing cites a Clerical Medical spokesperson, who says customers have been telling them they no longer have an IFA and the move is to keep in line with the requirements of the Financial Services Authority (FSA).

I think Clerical Medical has shot itself in the foot over trying to grab a small amount of money. This might mean it is under financial presure. Who knows? The
Halifax share price looks pretty miserable at the moment.

Mortgage broker John Charcol is restructuring.

2008-06-18T03:34:00.000-07:00

Moneymarketing.co.uk reports John Charcol is restructuring. The UK broker is to reveal redundancies later and for instance, the Birmingham branch was closed recently. Redundancies are to be confirmed later and technical manager Katie Tucker
has already left.

I suppose this shows the painful adjustment being experienced by companies in the UK housing sector.

The British housing market still operates.

2008-06-17T04:12:00.000-07:00

The British housing market still operates. Houses still have for-sale signs. There are also cash purchases, which do not need mortgage finance. It is unfortunate that two main lenders Northern Rock and Bradford & Bingley are limping along. However, the Nationwide points out that house prices are still 10 pct higher than they were three years ago.
Yet, Liberal Democrat Shadow Chancellor Vince Cable notes that the housing market has been seriously overvalued for some time thanks to massive consumer debt in a quote to
moneymarketing.co.uk.

The housing market is crucial to the UK economy and I am surprised that stamp duty has not been cut to help sentiment. British Chancellor Alistair Darling should have carried out a cut at the March budget since it would have been quite a powerful signal. He perhaps does not have the money at his disposal but a cut then would have been more helpful. The quoted UK housebuilders are going through a torrid time.
www.searchifa.co.uk

British housing market bust?

2008-06-10T08:47:00.000-07:00

Are we going to see a British housing market bust? The housing market has certainly frozen up with the lenders tightening their criteria. For instance, there are no more
100 pct plus loans and we have not really felt the knock-on effect of Northern Rock and Bradford & Bingley hitting trouble. The missus' share stake in B & B has such a forlorn value that I have to wonder when the shares will ever recover.
www.searchifa.co.ukFirst-time buyers should be helped by a reduction in stamp duty but a thoughtful article (sorry harrowing article) in the New Statesman says that nobody should be considering a property purchase at the moment. I suppose we just have to sit out the next two years but the Labour Government has always wanted a buoyant housing market for the feel-good factor during general elections, so 2010 anybody?
Northern Rock could hit a real financial mess if the housing market goes down and the Government now probably wished that it was not so picky about Lloyds TSB. Northern Rock is also undermining the stability of the housing market through its shrinking programme. It might make perfect sense to force customers to go elsewhere but not if there is not much of an elsewhere to go to.

John Wriglesworth predicts possible fall in housing market.

2008-05-27T06:46:00.000-07:00

Money Marketing cites economist John Wrigglesworth, who predicts that the UK housing market could fall by 50 per cent. He says that if lenders return to lending at
a multiple of three times income, then housing prices could drop by 50 per cent,
returning to their level of early 2000. This was when lending criteria began to
be loosened.
Wrigglesworth, who is managing director of Wrigglesworth Consultancy, says the British government has to inject £350bn into the mortgage market through the Bank of England special liquidity scheme. He considers the initial £50bn pretty paltry.
I suppose this is the time to batten down the hatches. The number of transactions has dropped sharply and I wonder what the government will do since it will want to go into the 2010 general election with a strong housing market to get that
"feelgood" factor.

When will the credit crunch be over?

2008-05-21T07:22:00.000-07:00

In the United Kingdom there have been a range of forecasts on
when the credit crunch will be over. We seem to be a bit behind
of the United States, which apparently is in recession according
to some pundits.

However, Money Marketing has cited Ray Boulger, technical manager
at John Charcol, who says the housing market figures are not that bad
in reality. For March, Boulger noted that the real fall in house
prices was 0.1 per cent according to the Nationwide. However, this
fall was seasonally adjusted to 0.6 per cent.

Perhaps the UK economy will escape a recession but the performance of the
housing market will be key. The government has not helped by increasing
taxes. Housing minister Caroline Flint was photographed with a briefing
document forecasting a 2008 decline of 5 per cent to 10 per cent
at best.

The Bank of England governor Mervyn King has more or less stated
that he will not reduce interest rates in the short term.

Will banking problems hit wider UK economy?

2008-05-19T08:04:00.000-07:00

Will banking problems hit the wider UK economy? The mortgage market has shrunk following the travails of Northern Rock. With the number of loan products being reduced and with hefty deposits required, the British housing market is going
to be travelling at a reduced speed. Some homeowners will be trapped and will be
unable to move despite the job offer, downsizing, divorce, death of a partner
etc.
www.searchifa.co.uk
The Bank of England has cut interest rates but these have been used by the banks to reinforce their profitability. It has been heartening that some banks such as
Royal Bank of Scotland, HBOS and the Bradford & Bingley are reinforcing their balance sheets with rights issues. (The missus has 250 shares in Bradford & Bingley).
HSBC looks big enough and ugly enough to get by so we just have to wait for
Barclays' decision on whether to go ahead with a capital increase.

Profitable and strong banks are vital for an economy even though they can come across as robbing institutions. The British banks have been guilty of pushing cheap credit and it is becoming a shock to the UK consumer for the reverse to happen.
Maybe we are looking at just a further six months of pain.

Are you bearish or bullish?

2008-05-13T08:33:00.000-07:00

Are you bearish or bullish? I was thinking about increasing my pension provision again and just felt a wave of defeated boredom. I have not got enough spare money.
Are UK equities going to be top-class performers or should I just try and pay off
as much of the mortgage as possible?

I was amazed that there have not been more British banks following the path of
Royal Bank of Scotland and Halifax (HBOS) in launching rights issues to raise more money from their shareholders. I could buy them and hope then
the shares of the two banks go up enough over the next 15 years so that I could retire. (I have been rereading this last sentence and I think it is a load of rubbish!!)

Mortgage fraud case opens in Glasgow.

2008-04-23T06:32:00.000-07:00

A mortgage fraud case has opened in Glasgow and the amount could reach as much as £3.2m. Institutions believed to be affected inlcude HBOS, which operates the Halifax and Bank of Scotland brands, and Lloyds TSB. A total of nine people have been arrested.
www.searchifa.co.uk
A recent BBC report put UK mortgage fraud at around £700m and the attraction was that it was a low risk activity. One surprising issue is how some solicitors and accountants are prepared to risk their professional status by indulging in mortgage fraud.

Later note: the problems of Bradford & Bingley apparently have included fraud amounting to £15m.

Is Bank of England governor defending UK financial markets?

2008-04-16T07:13:00.000-07:00

Is the Bank of England governor Mervyn King defending UK financial markets? Obviously, he would not like to be lectured by overpaid bankers over the need to hose
the markets with cheap cash. However, this might be necessary to get things going
again. I assume the governor is very aware of the dangers of importing inflation
with the depreciation of sterling. This should help exporters but this has never
been the priority of the Bank of England.
www.searchifa.co.uk
Mr King must be as mystified as the rest of us that the banks have not cut dividends
and raised capital. This would be allied with management changes. How many
Barclays SIVs can go bust before the management does the decent thing.
www.searchifa.co.uk

The credit crunch in the United Kingdom - how long?

2008-04-14T06:37:00.000-07:00

I don't want to be negative but previous credit crunches in the United Kingdom have coincided with recessions. They seem to go together like ham and eggs and I can't
see British Prime Minister Gordon Brown and UK Chancellor Alistair Darling managing to persuade the banks to resume lending. I would assume the credit crunch to last
for the whole of 2008 while the housing market is already suffering from a lack of buyers. Some areas such as London are going up but others such as the West Midlands
are going down.
I think Brown and Darling should cut stamp duty rates to help pep up the housing market, a market, which is being dampened by the slimming down of Northern Rock.
www.searchifa.co.uk. In some respects the
housing market could just freeze up if vendors do not decide to lower prices. There would be just a Mexican stand-off.

Non-doms are hit by confusion in the UK.

2008-04-02T08:24:00.000-07:00

In the United Kingdom, non-domiciled residents may be feeling a bit aggrieved with the sudden change in their tax position. The HMRC has finally got its way on an issue, which was always batted away by former premier Tony Blair.
It looks like a one-off opportunity for tax advisers to deal with their non-dom clients before they leave the country.

Briault walks the plank at Financial Services Authority.

2008-03-27T07:57:00.000-07:00

Managing director Clive Briault has walked the plank at the UK regulatory body
Financial Services Authority (FSA) following the Northern Rock debacle according
to Money Marketing. However, Mr Briault was the prime mover of the retail distribution review, which has yet to be finished. He leaves with a contractual
£380,000.

Elsewhere, I read that the actual FSA staff supervising the UK mortgage bank were insurance rather than banking experts. The organisation's internal report has pointed to failings in the supervision of Northern Rock but I think the main structural flaw was the tripartite responsibility of the FSA, the Bank of England and the Treasury.

Bank of England governor Mervyn King still seems to want to punish banks for their mistakes but he lost the opportunity to do that some time ago. In a perfect world
the banks' shareholders would lose their shirts for their poor lending decisions
but this would be too damaging for all concerned.

It is official FSA can't regulate banks.

2008-03-26T09:30:00.000-07:00

The Financial Services Authority (FSA) has admitted regulatory failings over the UK
mortgage bank Northern Rock. Apparently, the FSA thought that the Bank of England would do more to support banks, when interbank lending froze up during the summer of
2007.

The small fry have been toasted with five of the seven member team directly supervising Northern Rock leaving. However, other main factors were the dithering of the UK Treasury and the Bank of England governor worrying about moral hazard.

Life companies will struggle with platforms - Skandia.

2008-03-17T08:30:00.000-07:00

Money Marketing cites Skandia UK chief executive Brett Williams, who says that life companies will struggle with platforms. For instance, Williams believes that companies such as Standard Life will find it hard to achieve the right scale.
The Skandia UK chief executive comments there is fierce competition in the
market as shown by Friend's Provident backing down from its launch and by problems faced by Norwich Union's Lifetime.

Towry Law acquires employee benefits firm

2008-02-19T06:43:00.000-08:00

Money Marketing reports that Towry Law has paid an undisclosed sum for Hazlems Financial. The employee benefits firm is based in London. Hazlems managing director Nick Jones said it was the right time and in the best interests of their clients.

Friends Provident is keeping Sesame after review.

2008-02-12T05:10:00.000-08:00

Money Marketing reports that British insurance group Friends Provident, originally founded by Quakers, has decided to keep financial adviser network Sesame after a wide-ranging review. In May 2007 Friends acquired the firm for £75m. However, the group has decided to sell fellow financial adviser Pantheon, which concentrates on the high net worth market. Pantheon was bought for £33m.

Deutche Bank seems to be winding down UK mortgage operation.

2008-02-07T07:19:00.000-08:00

Moneymarketing reports that the future DB Mortgages, a British unit of the German banking group Deutsche Bank, seems to have an unclear future. The bank has made redundant the managing director of DB Mortgages, Bill Dudgeon and would not confirm how many people were still employed at the affiliate.

Telegraph highlights "new model" financial advisers.

2008-01-29T06:04:00.000-08:00

There was an interesting article in last Saturday's Daily Telegraph, which ighlights "new model" financial advisers. These are financial advisers, who
no longer charge commission but levy fees on the client directly. For instance,
Citywire publishes "The New Model Adviser" magazine. The Telegraph notes that
an increasing number of IFAs have moved away from commission-driven selling.

The firm SewellBrydenGunn has amassed clients nationwide from its Bagshot, Surrey base. The firm emphasises the high qualifications of its staff.

IFAS predict consolidation in their sector.

2008-01-24T06:18:00.000-08:00

In articles published by UK magazine Money Marketing both Bruce Wilson, of Helm Godfrey, and Garry Heath of Life change, predict consolidation in the IFA industry. Wilson says he has received more calls from IFAs to sell their businesses in the last few months.
Garry Heath says developements in backoffice IT are allowing consolidators to benefit from cost cutting. Increase size allows advisers to market more to their
clients.

People who are interested could look on www.searchifa.co.uk for a financial adviser near them.

Money Marketing publishes Sesame survey

2008-01-15T06:55:00.000-08:00

Money Marketing publishes an interesting survey of Sesame advisers. Some 64% are concerned about the possible effect that falls in the housing market could have on their companies.

However sales and marketing director Stephen Young notes that 20% of Sesame advisers are actively looking to recruit. He says that advisers are also willing to change to market conditions.

Merry Xmas and Happy Year to all my readers!!

2007-12-24T08:12:00.000-08:00

A Merry Christmas and a Happy New Year to all my readers. Looking back on the blogs for the year one popular subject has been Northern Rock, the British mortgage lender, which needed rescuing by Her Majesty's Government. There has been some recent comment that a "market solution" should have been applied, ie let the Newcastle-based bank go bust in September. Northern Rock was quite close to me because I lost a few bob on the shares, when I actually sold them.

I think Alistair Darling did the right thing of safeguarding the deposits and perhaps a temporary nationalisation will help right Northern Rock although some deluded shareholders want £4.10 a share. However the cookie crumbles, it does not look good for the reputation of the City. Darling's reputation as Chancellor has not been helped by the Northern Rock debacle. It is thought that he is just a cipher for UK prime minister Gordon Brown. The same Brown who says he just taking Xmas day off for his Christmas holidays and then spends a couple of weeks in Scotland.

I am trying to get my head around the inheritance tax changes!!

2007-12-21T05:50:00.000-08:00

I am trying to get my head around the forthcoming changes in British inheritance tax. These were announced by UK chancellor Alistair Darling in his recent pre-budget speech. The inheritance tax threshold is to doubled to £600,000 and then slowly lifted to £700,000 by the year 2010.

In the edition of Internationalmarketing.co.uk dated November 8th, 2007 it was stated that "The rules are complex and the terms of everyone's will and their trusts, if they have them, are different. The important thing is to recognise that the tax regime has changed significantly and for the better but that people may need to act now to ensure their families derive the maximum benefit when they die.
The changes affect anyone with an estate more than £300,000 and increasingly when the figure get towards and over £600,000."

Inheritance tax is so complex in the United Kingdom but it would be quite simple to scrap it like in Australia.

End of UK stock market growth, part two!!

2007-12-19T09:17:00.000-08:00

In the previous blog I commended Chris Dillow's article in the December 14th-27th issue of Investors Chronicle, which examines the possibility of the British stock market going ex-growth. Performance has only held up due to the contribution of the tobacco, banking and mining sectors. Dillow notes that UK shares are cheap and the factor behind this is that investors have recognised the ex-growth nature of UK quoted PLC.

Factors include foreign competition and more money taken by the workforce.
Chris Dillow writes "John Terry, Brad Pitt and Jonathan Ross earn big money because their employers need them more than they need their employers." I dispute this. For instance, Arsene Wenger has kept the pay levels relatively down by transferring anybody who wants silly money such as Ashley Cole.

Another possible factor in the lack of growth in the British stock market is that pension funds are choosing UK gilts (government bonds) instead of equities.

Has the UK stock market gone ex-growth?

2007-12-19T06:46:00.000-08:00

Has the British stock market gone ex-growth? I read an interesting article by Chris Dillow in the Investors Chronicle, who noted that the only true performers in the
last twenty years were banks, tobacco and mining companies. Dillow noted that companies well-known for their innovation such as media and software had been poor performers.

I personally would not invest in the banks at the moment since they are suffering a few problems but maybe BAT and Imperial Tobacco look reasonable. Or rather than taking my amateurish advice, you could contact an
independent financial adviser.

Out of the banks you got to look at the ones, where the share prices have not fallen so much such as HSBC, Standard Chartered and Lloyds TSB. Again, caveat emptor, I am not giving investment advice I am just blogging on a sunny afternoon.

Dr Marc Faber says U.S already in recession.

2007-11-28T04:07:00.000-08:00

Money Marketing cites economist Dr Marc Faber, who says the U.S economy is already
in recession. Faber notes the sub-prime crisis and falling residential prices.
He says that a synchronised global bust could be rather unpleasant. The Swiss-born
economist is the author of the "Gloom,Boom and Doom" report. Dr Faber is famous for his calls on markets.

Choosing an independent financial adviser

2007-11-22T06:15:00.000-08:00

It is interesting the difference between having the choice of a range of
products from an independent financial adviser and going to a bank, which
is committed to its tied products. I am considering a long-term product,
a pension. There is a bit of hoping and seeing. There are no guarantees,
just a realm of possibilities. The Nat West brochure offered me the
princely sum of £60 a month in return for quite a bit of saving. Perhaps,
the 1.5 per cent charge is quite high. I would be more comfortable with
a charge of 1 per cent.
National Westminster is part of the Royal Bank of Scotland (RBS) group.

Tax amnesty for UK offshore accounts!!

2007-11-19T07:59:00.000-08:00

The Sunday Times reports that some 64,000 taxpayers have come forward under
the tax amnesty launched by the HMRC to pay unpaid tax and a 10 per cent
fine unlike the usual 100 per cent fine. The British tax body has raised
£140m so far and expects to reach a figure of around £500m by the late
November deadline.

UK bank stocks can go up and they can go down!!

2007-11-13T08:38:00.000-08:00

UK stocks can go up and they can go down as shareholders of Barclays can testify
with their recent bumpy ride. A mate of mine bought them at six
something and now the bank stock is five something after reaching four
something and he is not a happy bunny.

British bank stocks have been one of the pillars of UK income funds, both unit
trusts and investment trusts. The banks were used to provide the income but this
strategy has truly unstuck with the collapse of Northern Rock. I am no expert in shares but I think the advice of being able to lose your investment, if it came to it, is a sound one.

I suppose shareholders in Royal Bank of Scotland were hoping for a more
robust performance than they got recently. What as Fred the Shred Goodwin got to
to say to his institutional investors?

(Now that we are in January 2009 we know how it has panned out for Fred the Shred.
In addition, investors can only dream of £5 for Barclays.)