Investment Thoughts

Dear Friend


Did you realise that despite all the negativity, in the US at the end of 2018, the numbers of jobs available exceeded the numbers of those seeking work?  That’s quite a turnaround!  In the UK, the balance between employment and the unemployed have matched too (when considering the unemployable or those who are unable to do the jobs which seek employees).  It bodes well for the economy generally even if there are political and conflict situations which could disrupt short-term confidence.  However, at the end of 2018, as you will remember, the markets took a dive and for the calendar year, it was the first time since 1961 that no major asset class produced more than 5% for the year.

How about a new expression for some of you too – investing being like mountaineering, where progressing upwards always seems fine, encouraging, well-prepared and optimistic but when you hit the top and you start to go down the other side it is not so good.  Indeed, most of the casualties in that sport occur on the way back down when your supplies have been exhausted, your enthusiasm for the peak is behind you and you are weakened by the experience.  Does this define the Woodford experience perhaps – everyone happy to be flooding-in on the optimism and then on the other side, the problems have been compounding and making things worse.  What holdings do you have where the mountain-top experience might not be too far away (or could be behind you) – are you basking in previous past success when you should be selling-out to start to protect some of your gains (or all of them)?  Think about it psychologically, which ‘one’ are you more likely to be complacent about?  We have now made a start in buying into the Woodford Patient Capital Trust incidentally.

So what does a good active investment manager create?  There are arguments for buying passives (index-trackers) and the costs but a good active manager would be giving you an unrivalled blend of different things in your strategy and reweighting it as he looks at it constantly (not changes it constantly however).  These people won’t be chasing trends as so often exhibit themselves within passive indices too – perhaps especially now in the US Tech sector (again) which has propelled the S&P500 to a record high.  The passive supporters also conveniently do not comment on the Japanese stock market index which is still just over half its 1989 level or the FTSE100 which is just above its 1999 level – wonder why that is…  and remember what Warren Buffett said – ‘what we learn from history is that people don’t learn from history’…

And what about inflation?  It remains benign and it is a struggle for many nations to make it hit 2% in fact, a figure considered as a prudent economic growth level.  However, whilst our short-term averages have been at this figure, did you know that the 100 year average is nearer 4%?  What would a bigger inflation figure do to your deposits at the Building Society which fall in real terms by 4%pa?  (It is curious that if you throw your money at say ‘the British Stockmarket’ the collective annual income from all the components well exceeds 4%pa at the moment and that level should keep rising as companies make more profit and distribute more of it to shareholders).  Indeed, extending this to those with pensions and wondering how much income they can take till the pot is exhausted (most people under-estimate how long they are going to live..), you could almost just throw it there and forget about it as the income is higher than long-term research has suggested is a sustainable capital withdrawal figure with a projection of ‘nil’ at your expected death point!  In this way whilst the capital will gyrate, it will still be there and in normal times with years on your side, should be worth a considerable sum more than the starting level to book – not being worth nothing at the ‘end’.  Then what are we to make of the fact that the gold price has hit its highest level since September 2013?  It is one of our defensive assets for clients in fact though if it becomes too expensive we shall have to move-it along.  Other commodities have also been firmer partly on the Feb’s ‘dovish’ stance with interest rates.  This might compound to prove inflationary, especially as wage levels do that too in view of the current pressures.


Hargreaves Lansdown has been taking a caning on the Woodford fund debacle and for supporting the Funds on its ‘best buys list’ from which it enjoyed good revenue but few have noted that SJP had 40% of the total assets under Woodford’s management till they cancelled the mandate recently.  Apparently some years ago there were concerns expressed by SJP but they didn’t do ‘anything’ much about them and the use of the Woodford name to sell the funds to their clients was more important and the funds were too lucrative for SJP.  They have now appointed Colombia in his stead but that’s after the horse has bolted – or when really they should be pumping more in the damaged stable not selling it at fire-sale levels.  There is the big conflict of interest in that of the total management fee SJP was levying clients for the fund, Mr Woodford saw only a paltry amount of that, with most staying to profit SJP and its salesmen oddly enough – despite the fact they were not doing the management.  Opacity like this is not acceptable in my mind, alongside the hidden ‘exit fees’ that this firm charges – a 6% fee effectively levied against capital investment across the board – we levy a 0% one.  Openwork also had £300million with Woodford on its similar platform – now replacing that with Jupiter but similar charging arrangements apply and the same questions could be asked of them – I hope neither are your adviser…


In 2006 we were shocked when the Regulator brought out new rules so that those operating in the world of finance had to demonstrate ‘TCF’ – Treating Customers Fairly.  In our innocence we could not understand how any such business was already not demonstrating that – even to survive and thrive successfully but there we are – it is now firmly embedded in the rule books.  Well, believe it or not but solicitors are finally catching-up with some relevant legislation.  I am sure good ones have always been doing this but on implementation of its regulator’s new rules on 25 November 2019, there is a new principle 7 which says ‘solicitors/firms must always act in the clients’ best interests’.  Now you have to ask – what have they been doing all these years…!  It might explain some very dubious cases which have been through the courts over the years…  let us hope fewer of those now start.


Investors put much trust in the large investment management firms’ technical and administrative capabilities.  However, they are not always everything that ’you’ assume!  Last week, M&G (a subsidiary of Prudential) closed its Fund of Investment Trusts.  That was a shame even if it was not large but what was daft is the principle of holding a fire sale and simply ‘dumping stuff’ is not what a corporation managing hundreds of billions should do! 

However, one of the Trusts is one in which we have a reported stake.  Now what should have happened is brokers approached, possibly the stock transferred across to the recipient new fund anyway and then a gradual selling-off at sensible prices.  Instead, the price sank by almost 5% instantly.  We were able to buy some of these cheap shares before they have since bounced back-up again.

Now what is 5% you might say – just a small sum but actually, is that five or four-years’ worth of management fees or five or four years’ worth of interest on deposit accounts.  To us, it is the sort of opportunity we look to achieve whenever we can but clearly if you are with Prudential or M&G….  I’m sorry we did not have space for more!  These types of opportunity are all the sorts of ways we try to generate a better return for clients and to help pay the fees – things that just don’t seem to happen elsewhere oddly enough – as the wind-down on Mr Woodford’s funds also demonstrates and we are just ‘small fry’ not with the multi-billions they waste for their clients!


Have you been scammed?  Apparently one-in-ten of us has been at some point in our lives.  It could be even more. This is not where we have entered into a legitimate deal which didn’t go as well as we should have hoped, this is a simple, case of being defrauded.  All I suppose we can say is that the apparent cost of a professional, independent fully regulated financial adviser could save you a considerable sum if in the future otherwise you succumb to such fraudulent endeavours (and a chat can be free anyway and without obligation).  And don’t think you are too clever – fraudsters can speak with silver tongues and have duped even rocket scientists and brain surgeons in their time and will do so again.  In fact the ‘cleverer’ you think you are, the more they will play-up to your self-flattery and suck you in that way!    Will you be suckered for £500, £5,000, £50,000 or even £500,000?  Let’s say it is £5,000 – how many years’ worth of professional management fees would that constitute – let alone all the extra help and guidance you’d have been receiving anyway for that.  Sadly we are dealing with the losses from the fraud and negligence at Organic Investment Management and there, the average losses seem to be as much as 30-40% of investors’ money and whilst it is hoped we can secure this as compensation, could you afford to see that go to some fraudster – or even seeing that disappear from your parents or ageing grandparents, maiden aunt, eccentric bachelor or other members of your friends and family set?  Don’t underestimate the psychological cost of that happening too – the fraudsters don’t care if they send the victim to an early grave so don’t cut-off nose to spite face – go and seek advice and guidance either for yourself or that relative or friend about whom you are concerned.  We have saved many people from frauds in our time I can tell you, simply because we are in the loop with clients’ money and assets.


One third (34%) of people who accessed their pension savings via drawdown for the first time during a six-month period in 2018 did so without taking any advice.   Analysis from the Association of British Insurers (ABI) found that more than 62,000 people had withdrawn from their pension during this period, but only 21,000 had taken any form of financial advice.

A different study by insurance giant Zurich found that over half of drawdown investors are unaware that they can vary their income withdrawals. It also found that 56% do not know that they can stop withdrawals, despite this flexibility being one of the main advantages of drawdown. If investment conditions become more challenging in the future, drawdown investors need to know what options they have to either stop or reduce income withdrawals to avoid eating into their pensions, potentially causing serious financial problems.  It found significant differences between those who have sought advice and those who haven’t. Just 35% of non-advised consumers understood they could reduce their drawdown income, compared to 77 per cent of people getting ongoing advice. And some 33 per cent of non-advised consumers were aware they could stop their drawdown income, versus 73 per cent of those speaking to an adviser.

As we have said many times, the new pension flexibility on withdrawals is an excellent introduction and makes pensions even more appealing but just because you can withdraw lump-sums at your discretion, doesn’t mean you should. Indeed, there are many reasons why pensions should be left invested for as long as possible.  Regardless, taking money from the pension that you have accumulated during your lifetime (to help support you in retirement) is a hugely important decision that could have all sorts of ramifications, good or bad. For the average investor, a mistake could have dreadful consequences and lead to financial hardship and with that in mind, we recommend you have a relationship with a quality professional financial adviser you can trust before acting.


A bit of fun but the Daily Mail, in liaison with Fidelity, is running a share competition – it is not a good representation of what investment is all about but it is free to enter and you may be interested?  There are cash prizes though perhaps you’d have to just pick the most speculative stocks you can and where the short-term news could be good to win!  Of course, there is zero risk…


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 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