What Are Our Client Relationships Like?

Dear Friend

In the absence of any progress as we await ‘news’, I am reverting to type on subsequent eshots.  The latest news centres upon Mr Trump’s renewed attacks on Chinese goods to rebalance tariffs and this has wobbled markets – alongside the arrival of USS Abraham Lincoln to make sure Iran toes the line as the increased sanctions against that regime bite.  Generally, the markets are pretty sanguine however, with a relatively limited fall-back on this news.  For the UK, a breakthrough on Brexit is likely to be more encouraging however and as I have said for some time, UK-centric stocks are too cheap whatever the outcome.


We do try our hardest to be responsive and prove that our clients’ needs are our best interests.  We are not perfect but we give our best and believe we have instilled this within our staff too as long-term ethics and professionalism, albeit with a mantra that ‘however good we do something we can always try to do it better’.  Fortunately (if that is not the wrong word!) we have very few client defections and are always disappointed when, for whatever reason, a client decides to leave us.  Very occasionally we are happy when someone does go – usually we can ‘all’ remember those types of interactions and very, very rarely we have had to inform a client that they are going because we are insisting upon that!  However, I can only think of less than a handful ever since we began.

Imagine our surprise however when Ernst Young’s Global Wealth Management report hit our desks recently, suggesting that as many as a third of investment clients have shifted wealth manager in the last three years and the same sort of numbers is thinking of doing so over the next few years!  What sort of relationships are the advisers creating with their clients?  What sort of work are they doing to build trust and understanding? What sort of expectations do the clients have in their advisers in the first place?  https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/wealth-and-asset-management/wealth-asset-management-pdfs/ey-global-wealth-management-research-report-2019.pdf  I suspect the report is one of those to take with a ‘pinch of salt’ but thank goodness that is neither our experience nor how we operate.

Indeed, what about the cost of movement?  If it is right to go , then that is the right decision but not based on short-term semantics as that doesn’t do anyone any good but if a wholesale revision is involved and significant disposals of one set of assets to acquire another, that has implications and costs and frequently those are neither explained properly but also, to gain something you first of all have to cover those, before making progress.  Who is being unethical to encourage people to chop-and-change like this all the time?  There are some regulatory rules which advisers are meant to follow but even with the Organic clients we have ‘inherited’, we have found many cases where a transfer has been ‘advised’ without any consideration to the cost implications or appreciating that ‘staying put’ was really the best thing to do for that client.  Of course, ‘no action’ invariably doesn’t generate any or very much money for the new adviser does it – or am I just being cynical.  You have to watch the big restricted advisers too like St James’s Place and Openwork as they theoretically ‘do not charge’ many or any fees for advice so it is really ‘conditional selling’ where the salesman is paid only on the business going ahead and then he is paid a big sum taken from your investment amount and you have to pay that by suffering ‘hidden’ higher annual fees from the investment products and an early withdrawal charge of up to a swingeing 6%.  They aren’t alone.  We don’t take any subscription fees on new investments into our discretionary ranges whatsoever – a straight 6% saving from day one but if the best advice to you is just to ‘stay put’ we don’t entice you to change just so we receive a payment…  we don’t have punitive withdrawal penalties or excessive management fees to compensate either.  Are we doing something wrong?  No, I don’t think so.


We can buy pretty much ‘anything’ for our clients.  We are neither restricted nor tied to a limited range.  We can buy ‘open-ended’ funds, ‘closed-ended’ funds, ETFs, direct shares, bonds, loans, commodities and hold bank deposits and… we don’t just buy things because they exist but because we believe they could fulfil a part in clients’ strategies.  We never put an excessive amount of anything into any account.  Our biggest holding, a smaller company Investment Trust, counts for only about 2% of the total assets we manage.  We should have had more as it has been a great performer for us and remains good value but that would be greedy!  It is only our biggest holding because it has performed well and we haven’t really trimmed-it back to size yet.  We also hope that when we buy something we are going to be holding it for a long time as we don’t want to trade just for the sake of it, as that incurs costs but likewise we must not be reluctant to trade if we believe something has fulfilled its potential or something else may be ‘better’.  We also spread our eggs very widely indeed so that we can pursue many opportunities from the dull to the more exciting but all in proportion of course (and different degrees for some clients over others naturally, depending on their risk perspective) and also mitigating risk for an individual client but also all clients.  Sometimes there are investments (typically Investment Trusts – ‘closed-end’ funds) which we like so much that we almost want them ‘everywhere’ because their value is so good but even then, no-one will be over-exposed to any one or sector.

Often too, technical trading opportunities arise and we are always looking for these.  One such is the chance to buy quoted Investment Trusts at prices well below their asset value.  What this means is buying a £100 bag of Pound coins for less than £100 and in the hope that at some point it will revert to that real value.  If you buy an ‘open-ended’ fund, this chance never arises and that is the type of asset most investors buy and most advisers sell (I can give you reasons for that but there you are – it is a  reason why we have and keep clients very often – it makes no difference to us but if one is better than the other, then we buy what is best for the client, not us!).

So, let us take a certain smaller company Investment Trust at the moment.  It doesn’t really matter what it is, nor the sector it covers, it is simply a quoted fund.  We first held it years ago and were buying £1’s worth of assets for say 80p for a very long time.  That meant we were enjoying the market returns and income from £1’s worth of underlying assets but it only cost us 80p to buy.  It stayed around that level for years so we did not see any ‘extra’ but still it was attractive and with good management and fair charges.  It also borrowed a little money and invested that too so if it made more on those investments than the cost of borrowing, we pocketed the profit.

However, over an extended period of time and on the back of excellent results, the price of the Fund’s shares rose more quickly than the underlying asset value and so for new clients we were buying less value – 90p for £1’s worth and so on and till finally the price went above the underlying asset value to a premium (so paying £1.05 for £1’s worth of assets!) and quite a considerable premium too!  Why did this happen?  It is simple.  New investors saw the track record, wanted it and there were more buyers than sellers and the price went up.  The market generally was more optimistic too I suppose.  This behaviour allowed the Manager to go to the market and sell more shares at this level so increasing the size of the Trust!  What did we do?  We were ‘sad’ in one sense as we had been reportable shareholders for years (owning over 3% of the Trust and enjoying annual visits by the Management Company to sunny North Devon) but over the months we sold the lot.  Instead, we put it into similar funds where the shares were still trading on relatively significant discounts. 

Our story may have ended there but it didn’t.  The shake-out last autumn encouraged a few investors to sell and had they paid over the asset price, they were taking a big loss.  There was little buying appetite so my interest was drawn again and I watched… and the price fell some more, whilst the underlying assets did better and the price kept falling further – so it has been added back onto our buying lists again, now trading at a discount of approaching 20%.  The cheaper it becomes, the more of it we shall buy and we receive a good dividend income which we always welcome too.  So far, we have only bought £600,000 of it as we buy gradually and regularly as otherwise, we should not be able to buy what we want.  We gradually increase the stock’s prioritisation of purchases for clients to acquire what we’d like (constantly rebalancing of course).  We may have lost money on the first ones we have bought but I don’t mind – it’s part of a process and I want them to remain cheap till we have a more meaningful number!

To us, this is all part of our job as a multi-manager, wealth manager, ‘hedge fund manager’ or simple financial adviser – whatever name suits really – it is doing the best we can for our clients from the whole world of opportunity and having the knowledge and experience to know enough about what we are doing to be able to do it.  We are learning constantly and we need the courage and confidence to believe in what we are doing and yes indeed, making mistakes sometimes too.  If you have some money with us, we’ll be doing this for you automatically.  If you’re with almost any and every other financial adviser and investment manager, they won’t because they can’t or don’t know about these nuances.  ‘Can’t’ is often simply because they manage so much that they cannot trade in the small Trusts in which we can dabble and often secure the best value!  If you don’t have any money with us – why not give us a try – you can invest ‘Execution Only’ with no advisory fees and no subscription charges whatsoever – simple – you select what and the underlying model for pension, ISA or portfolio…  send us a cheque!


If you subscribe to Social Media or certain political propaganda you would not believe that the headline above holds true but it does!  Not only is a small proportion of the highest earners paying a colossal part of the total Income Tax take but Capital Gains Tax and Inheritance Tax have been rocketing. Capital Gains Tax is payable on profits from asset disposals, like shares or property.  There are various exemptions and indeed a generous £12,000 annual allowance which not enough people use (especially the wealthy and Higher Rate Taxpayers, and which they definitely should be using) but despite these, last year the amount of CGT collected was £9billion compared to less than £2billion in 2003.  Inheritance Tax has also been growing and last year £5.4billion was collected.  The amounts HMRC has been collecting from these taxes have been rising steadily and well in front of inflation.  Of course, sky-high property values have added to that but despite liabilities being prevalent, we are helping people better plan their affairs to minimise such taxes too so these figures are after tax planning by the astute.


You will recall me commenting upon these before and calls for regulation because there are so many scams and misrepresentations sadly.  ‘Dream Lodge Group’ (Walsham Chalet Park Ltd) which went into liquidation in January is going to cost the individual owners dearly.  In just five years 1,150 people paid £25.6million (I cannot say ‘invested’ as they are NEVER an investment except for the site operators) and what a disgraceful state of affairs.  167 people paid £14.3million for lodges that were never even built!  The subscribers responded to juicy adverts guaranteeing rental incomes of perhaps 8-10%pa and lovely holiday dreams but those payments soon ceased.

The assets have now been bought by Exclusive Luxury Lodges which has offered new rental agreements to the old owners but subscribers will lose at least £3000 a year if they sign, securing just half of the previous ‘promised’ rental levels.  On top of that, they will have to pay around £140 every time the lodges are rented-out.  And what about the security of tenure legally that these people have (or don’t have)?  All very unsatisfactory.

And what about ‘values’?  They are effectively unsaleable after the initial purchase, as I have shared before, or where the site owners take them back at ludicrously cheap prices as I shared recently about one unfortunate lady selling her Park Dean unit in Barnstaple back to the owners at a colossal loss and not long after she bought it initially.  The site operators are not very interested in selling second-hand lodges or caravans owned by other people when they make so much money on new ones.

I have raised these issues with the Regulator for many years now but to no avail.  ‘Guarantees’ when promoted as investments in property or any other form of asset should have protection – or not be offered in the first place.  What value is a guarantee when you need it and there is no substance backing them?   I have also taken matters-up with our MP but so far there has not been any action to change things to at least protect more people from making the same mistakes.  Instead there are still loads of very expensive full-page advertisements and roadside signs enticing the naïve to buy one.  I am hoping too, to see a feature in the Telegraph with some prominent backing to warn people of the pitfalls and to make sure that if they have to buy anything that they buy a holiday home and not an ‘investment’ and they do so with their eyes wide open and appreciating the ongoing costs and inevitable significant loss of capital.


Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.

To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!

If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website www.miltonpj.net. We celebrated our thirtieth anniversary in 2015 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.

Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.

My best wishes

Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB

Chartered Wealth Manager

Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers