There have been many significant developments since our last newsletter:-

• The sovereign debt crisis - Threatens to replace the banking crisis with southern Europe as the focus, although the US and the UK have comparable debt levels.
• Dividend income - Those relying upon dividend income, having been severely hit by their holdings in banks, have now been hit by BP.
• Retirement - Pension costs have been forced up the agenda, so many (all?) will soon face later retirement and less generous provision.
• New Government - In the UK a new Government and new budget give food for thought.
• Risk - The world economy, recently surrounded by doomsday warnings, continues to avoid the worst of the predictions, yet there is still concern about risk, but there always should be as risk is always present – the difference now is that the risks seem more identifiable.

We always advise: “establish the level of risk you are comfortable with and stick with it” - but that does not mean do nothing.

• The sovereign debt crisis - growth will be limited by actions to reduce spending, but for the adventurous, depressed European asset prices and a weakened Euro may be an opportunity to increase exposure to Europe. Suitable funds are the easy way for most and there are several available.
• Dividend income - chasing “safe haven” dividend yielding stocks is always more risky than it seems for the individual investor and if you are “in” when the crisis hits (e.g. Banks, BP), you are trapped. If you need income, funds tailored to produce dividends are a safer way to minimise your risk.
• Retirement - Always the most important consideration and yet so often ignored. Cost pressures, lower returns, reduced tax allowance, delayed retirement, longevity, reduced annuity rates, etc. conspire to form a gloomy picture, but do not strengthen the case for doing nothing. Doing something is better than nothing, always. Keep retirement high on your list for your planning or for discussion with your adviser.
• New Government – Actions to reduce the deficit probably mean that interest rates will remain low for longer and growth/income elsewhere risky to chase. Cash is an essential element in any plan, and the closer you are to retirement, generally the more proportionally you should hold. Therefore, make the best of it. Move savings (and importantly ISAs) around to maximise interest. Make the most of tax free savings if you are a taxpayer (NS&I, ISA’s) to minimise the effect of tax upon already low interest rates.
• Risk - Low returns are tempting many clients to consider significantly increasing their risk exposure. We are never comfortable with this, particularly now. Always we return to our two key guides:

“establish the level of risk you are comfortable with and stick with it” – move within your level by all means, but not outside it without the most careful consideration.

“timing for a single sum is always difficult, so a gradual move over several months/years is always recommended”  This gradual approach has served many clients very well.

These thoughts will be part of the background to our next round of reviews with clients. If you wish to discuss them or anything else before our next meeting, please call.

Please note, the information provided does not constitute advice. You should contact us to arrange a financial review should you require any further information. 02/07/2010

Investwise Group’s Further Reflections and Thoughts on the Global Financial Crisis. 

What will happen, where will the financial markets go now? Many professional investors have struggled with the convolutions of the past couple of years, so what chance is there for the average person planning for the future, their family, their retirement?

In March, our last article on this subject, we felt that the bottom of the market was close:

“…significant participation now is only for the adventurous, or those with very long horizons. For the adventurous, many asset prices may be considered a "bargain". For those with a more moderate approach to risk and with cash returns falling, then some increased participation may be considered.”

Also we suggested, as we consistently do:

 “…timing for a single sum is always difficult,… so a gradual move over several months (or years) is always recommended”

Since then, most markets have recovered by 20%-30%, so many who held their nerve a year ago (when it was too late to react anyway) have seen their investments recover to some extent and those who increased their participation should be showing pleasing gains (certainly far better than cash with interest rates at record lows).

This “recovery” has been against a background chorus of, “bear rally” “it won’t last”, “double dip recession”, etc. etc…. Valid arguments, but many analysts who “predicted” the 2008 collapse were calling it for years and had to be right eventually. Certainly true is the fact that the recent rally means some of the immediate “sizable” market gains have occurred and the chance of value reductions is possibly greater than it was in March.

Recently many clients, attracted by the recent rally, have been considering greater participation. This is a common reaction, but not a course we are comfortable with. An investor not comfortable with the potential market fluctuations in March, should be no more so (arguably less) now.

Our view remains: establish the level of investment risk you are comfortable with and stick with it. Individual levels of risk can be discussed and agreed with the help of your adviser and there are many factors – your circumstances (e.g. those close to retirement usually need to avoid uncertainty), the time horizon over which you want to invest, your investment objectives be they income, capital growth or a combination of the two, whether you want to invest in funds that take account of ethical or environmental issues or not, your personal attitude to investment risk.

Having established a risk level then some variation may be appropriate e.g. a little more participation in March when values were good, perhaps reducing now that a rally has been enjoyed. Timing however remains the issue and one that is difficult to call hence our ongoing advice is worth repeating:

“…timing for a single sum is always difficult,… so a gradual move over several months (or years) is always recommended”   

This remains our view. 

Please note, the information provided does not constitute advice. You should contact us to arrange a financial review should you require any further information. 05/01/2009.

A financial adviser should be viewed like any specialist; they provide a service that you could probably do for yourself (e.g. an accountant or a plumber), but your affairs will normally proceed more easily and effectively if you use them.

A good financial adviser will have knowledge of the market, legislation, taxation and administration that would take considerable time to research for yourself before you make informed decisions. Additionally, there are some areas of financial planning that can only be conducted through a qualified financial adviser (or example, there are product providers who do not sell directly to the public).

If you use a professional financial adviser then you are entitled to expect that the adviser:

• Is someone you feel you can trust, who inspires confidence and is a discrete “sounding board” for discussion of any concerns or issues
• Holds a QCA Level 4 qualification or equivalent (mandatory by 2012) 
• Is able to recommend products from across the whole market (some will only be able to recommend products from a limited range of providers)
• Is fully authorised and regulated by the appropriate authority – The Financial Services Authority (FSA)
• Keeps fully informed and  up to date with all relevant markets/products/providers
• Keeps fully informed and  up to date with all appropriate legislation, taxation and administration
• Demonstrates a clear understanding of your needs and objectives
• Provides you with a clear plan to meet your needs or achieve your objectives
• Offers a clear open charging structure, with options to pay for advice either on a fee basis or a commission basis (where the fee is deducted from any subsequent investments).

Importantly, you should believe that your financial objectives are more likely to be achieved as a result of the services of your chosen adviser.

• Individual payments qualify for income tax relief at the marginal rate.

• The pension payments do not attract any liability to National Insurance Contributions on the Company, Director or Employee.

• Company or Employer payments into registered pension schemes attract corporation tax relief. Company or Employer pension payments qualify in exactly the same way as you claim any costs associated with running your business - for example travelling expenses.

• Making Company payments into registered pension schemes can be a valuable tool in reducing your Company’s exposure to corporation tax. Effectively, you use company money to fund an account that belongs to the Director or Employee. The payments made reduce your corporation tax bill and the resultant account, although funded by the company, belongs to the individual.

• For a company, a pension benefit may be the key to attracting the best employees.

• The pension is the property of the individual and as such is protected from creditors should the company go under.

• The money or assets held in a pension grow in a tax advantaged environment.

• When you retire, you can take 25% of your pension fund as a tax-free lump sum, the remaining 75% is used to secure a retirement income.

• Liquidity is an issue, for businesses and individuals, which not be ignored as in the contributions to a pension are not accessible in the same way as other investments.

Questions there may be, but the advantages of a pension are hard to ignore.

Please note, the information provided does not constitute advice. You should contact us to arrange a financial review should you require any further information. 17/08/2009.
 

There are certain things we choose to do ourselves because we enjoy them, for everything else we tend to like the hard work done for us. Whilst a day with the family picking strawberries makes a welcome change, having to harvest all of your own food is less appealing. The same could be said about your home. Most of us have done the odd bit of decorating but, few of us have decided to build our own extensions.  

Dealing with your finances is no different from either of the above examples. Whilst we may think nothing of finding our own car or travel insurance on the internet, we still rely on the professionals when we are dealing with the more complex financial issues.

It can seem easy to find mortgage deals on the internet with each bank or comparison site saying their mortgage is better or cheaper than their competitors. Sadly though, how many times have you seen great deals on the internet, only to find that in the small print there are additional fee’s and charges applicable, they do not cover the things you need or having spent ages filling out the forms, you find that for some obscure reason you are not eligible at all! This maybe an acceptable risk when you’re spending a few hundred pounds on car insurance, but not when you’re buying your dream home and borrowing often over a £100,000. 

A mortgage broker is there to find you the best mortgage based on your personal needs, ensure it’s with a lender who is likely to issue you with a mortgage offer and where you apply through them to ensure everything should run smoothly. They see hundreds of clients with similar needs to yours and deal with virtually every lender. It is this experience, knowledge, service and their time you are benefiting from when you use a mortgage broker. 

In the post credit crunch market, some lenders in a drive to increase their profitability, have decided to cut out mortgage brokers and save their best mortgage rates for clients who go directly to the lender. The problem is which ones do this changes all the time, so finding the best deals can prove tricky. In addition if the best product for you is a deal only available by going direct to the bank, you need your mortgage broker to make you aware this.

A traditional commission based mortgage broker receives nothing for telling you about a better direct deal. So if the best deal is one direct from a bank, an obvious conflict of interest exists. Surprisingly the Financial Services Authority is completely fine with a mortgage broker calling themselves independent, but not telling you about any cheaper direct deals you may be eligible for.

Price comparison websites commonly have the same limitations as a traditional commission based mortgage broker. Website aside, price comparison sites are built on the same business model as their High Street mortgage broker counterparts. Although they often carry an air of impartiality, comparison sites are normally funded by the same commission system as mortgage brokers and as such the same conflict of interest often exists.

We however think differently, independent should mean the whole of the market, not just those products where commissions are payable. Our clients come to us for our knowledge and access to detailed information on all mortgages. Our clients want to be able to make an informed choice based on all the facts, not a limited selection of products on which a mortgage broker will make money. 

Our service offering is True Whole of Market Mortgage Advice and includes: 

• Telephone or face to face interview (dependent on your location)

• Research of the whole market to locate the best deal - including lenders direct deal's and exclusives only available through mortgage brokers.

• Written Recommendation report

• Copy of independent market research included with your report

• Copy of the lenders criteria included with your report (where available)

• Illustration of recommended mortgage (Key Facts Document)

• Telephone contact with us for general application enquiries through the process

• Where the lenders expect you to apply directly to them and not through a mortgage broker, you simply make an application directly to them. We will locate the nearest branch or bank contact details.

• Where the lenders are able to pay a processing fee to us, we will make the application on your behalf and track the case through to completion. Any additional fee we will receive for this service is disclosed on the illustration provided.

• Mortgage Guarantee: If your application is declined we will repeat the above process free of charge and make a second recommendation. This is not available where the mortgage was declined due to your failing to disclose material facts to us at outset which where relevant to the transaction. Only available once per property.