UK Value

Dear Friend

Well, so much can happen so quickly.  Contagion can spread fast too and that appears again to be the case – not just with the UK market but international markets and whether or not some are more expensive than others.  The latest US sanctions against Chinese goods has fuelled a wobble and that, added to our own ‘Brexit uncertainty’ and worries from Iran and the Gulf have not been especially helpful as there is a sense of panic in the air.  For the UK, the Woodford debacle has not helped as that has impacted a number of stocks and made investors question their exposure to other similar companies too.  Short-selling has definitely not helped either.  Some reaction is ridiculous but a sense of ‘cause and effect’ takes a hold but those prepared to invest at the moment are likely to secure fantastic long-term value but that does not help when instead, present investors feel they are suffering ‘death by a thousand cuts’.

The usual warning and invitation is made to all at the moment.  If you don’t need to touch your market assets, then don’t.  If you need some money from them and can defer, then that is likely to be a very wise decision even if we cannot guarantee short-term better things though the balance of probabilities does point to this and if anything, here at home the ongoing concerns could force the respective negotiators for Brexit to actually ‘do something’ constructive if they perceive current uncertainty could be a foretaste of worse things to come.  I know too that one of the ‘benefits’ of being a full member of the EU club (as we are) is mutuality of help and support but I have to say I have not seen the ECB buying Sterling to help support a more orderly process since the vote three years ago – help all seems rather selective… perhaps we should ask Mr Trump if he’d like to do so with his presently over-valued Dollar – it will be a great long-term investment after all.  We all know the saying, in times of need you find-out who your real friends are.

Please don’t join the panic.  Please consider if you have spare funds as the value with some stocks and sectors is very compelling to invest and whilst not wishing to seem mercenary but another’s panic is your opportunity.  We always spread money very widely indeed and whilst each client will be different from another (as well as following different risk and needs’ strategy), as much as we hate seeing individual losses on any holdings, each is a small proportion of any client’s account and there are others which have gone the opposite way.  Indeed, whilst not every client will have everything, of the Company’s biggest twenty holdings at the moment, seventeen are roughly the same or higher in value than they were at our last reporting date on 5 April.  Our biggest single Trust (worth over £4million), a utilities’ trust we have held for a very long time now, is up 44% since 5 April and indeed pays good income on top.  That is the other thing I should remind you – a balanced portfolio of such assets generates income too – regardless of the short-term capital movements.  That is continuing and is there for you to pay the bills and of course if you are really desperate for some cash and have no other options, within our arrangements there is always something available and unaffected by short-term hysteria.


Having the odd special result has been a scarce commodity these last few years but the occasional company has been subjected to a takeover bid and that always adds spice to overall returns.  I have said that with Sterling so low and prospects for the UK being so unsettled because of the Brexit situation that the opportunities for corporate takeover are very high as long-term investors decide to buy-out depressed stocks.  We have enjoyed a bid for Cobham Plc and an activist investor has taken a stake in Saga Plc with the objective of stirring-up some improvement in prospects.  There are likely to be many more such actions whilst the opportunities abound and the interesting thing is that they are there for ‘free’ at the moment – a bonus for which really, you don’t have to pay any premium for the chance it could happen.

Another area where value has been showing again too is in discounts within Investment Trusts.  Some have been tightening but some have been widening-out as well and frankly, if you can buy good quality assets at a discount then for the medium to long-term investor that is a great way to boost your long-term results.  It’s not universal but certainly some Trusts we liked already are very attractively priced at the moment.


You will know how we are not enthusiastic about hidden charges and fees which are effectively ‘commission’ which has been banned since 2013?  The Times has reviewed this popular Company’s charges yet again and has found it wanting.  I don’t think people appreciate what they are paying for their service and advice with this giant, recently embroiled too with the Woodford debacle.  Really the FCA should take action to level the playing field but the representatives of SJP and the Company itself would certainly not like that.  Remember too, if you are a client of that firm, you are paying these charges and penalties if you leave.  The Company’s shares have fallen on results not as good as anticipated and also as the CEO has said that the ban on contingent charging (see below) could have a negative impact.  That might suggest that if it continues to do affected pension transfer business either its charges so far have been too high or that not so many clients should have been encouraged to transfer I suppose… oh!


It is a strange time at the moment.  The British government has no trouble in raising new borrowing from the markets, even if most is sold to the UK.  However, the last batch of ten-year gilts (£2.75billion) was sold at the second lowest ever level in terms of the interest rate needed (0.789%), with strong demand too.

At present, there are $13trillion of government bonds internationally trading on negative yields – meaning it costs you to invest your money in them – you will receive back less than you invest and that ignores any inflation too.  What is the world coming to!  Indeed some banks are even charging their depositors to leave money with them – not charges but negative interest rates!  Will it come here – perhaps not but certainly expecting a cut in Bank Base rates and the general levels of interest rates on savings and loans is quite likely it seems (as in the US last week)  – not because of ‘the UK’ but because of worries that the global scene is hardening for business.  I suppose, in the UK with the uncertainty through ‘Brexit’ and ‘what type’ – but it could easily be the case that we enjoy a ‘relief rally’ which helps us to do much better through the other side simply because there has been so much pent-up inertia over the last three years – and regardless of ‘good or bad’ from the actual decision in itself – let us hope so!


The market has been savaging commercial property companies in a contagion which then becomes infectious.  It is not a sector in which to have been invested and we may have started participating too soon.  However, the sentiment has turned very bearish but the evidence on the street is not anything like as negative.  The Woodford debacle restarted the issues with heavy sales of New River Trust but it has erupted in several other places too from Hammerson (£12 in 2007 and now just over £2) to Intu (damage inflicted too because of its heavy concentration on retail and having had to renegotiate rents with some leading brands in trouble).  They usually have borrowing to boost their results – not an unhealthy thing but if say 25% of your ‘value’ is borrowing when your shares are £12, it seems then to be 150% of the value of your equity when the shares fall to £2 and lenders can become twitchy and directors feel forced to sell assets at give-away prices to reduce the debt and despite the rental flows being unaffected.  The market has changed too –  long-term institutions which used to own big chunks of commercial properties aren’t ‘there’ like they used to be, from with-profit funds to pension schemes and so holders have tended to be replaced by shorter-term investors who have less patience and maturity.  Short-selling has also exaggerated and indeed created many of the problems too and something seriously needs to be done about this.  For longer-term investors, with excellent yields (the rents from tenants) then this could be a wonderful buying opportunity for great income and capital gains but do so in phases and spread your risk widely.


It has been welcome to see that claims’ managers have to note more prominently that there are free services available via the Ombudsman and FSCS so you can pursue your claim there.  Of course, they don’t want to say that because they want you to sign-up so you lose up to 40% of your rightful compensation.  However, do still be wary that certain solicitors acting in this field are still promoting their help with financial services’ claims – without prominent reference to the free services available instead and this too must be stopped.  Unfortunately the extent of regulation of legal services is some distance away from the regulated protection surrounding the financial services’ arena though it is catching-up – and the relevant ombudsmen there are somewhat toothless as well, compared to the extensive powers of investigation and full case rectification powers which the Financial Services Ombudsman has.  Have you ever heard of a lawyer having compensation awarded against it by the Ombudsman for crass negligence in a case or the legal advice and guidance given?  No – because the Legal Services Ombudsman hasn’t the power to do that – you have to find another lawyer to sue the first one and of course, the costs could be colossal and without assurance of having them back even if you win.


Phew – the cost of regulation and the cost of protecting clients continues to escalate…  It’s only right these protections are in place but we all end-up paying.  Our renewal bill to the FCA and the FSCS mutual compensation scheme is £52,074 this year, up from £26,001 last year.  Most of this is to the FSCS which compensates liabilities for defunct financial advisory companies and schemes – many of which should never have existed in the first place – and as usual where the honest and law-abiding have to pay for the dishonest, fraudulent and negligent…  it still riles somewhat however!  And yes, other things such as indemnity insurance are all on top and a figure even bigger than that…


Recently I touched upon the issue regarding paying in cash and the fact that in certain westernised countries it can still be hard to use cards – like Germany – whereas in places like Sweden, you can find it hard the other way!  Oddly enough, illegality, tax evasion and fraud, however defined, continue to enjoy the use of cash, unsurprisingly enough. It has been attacked from some quarters (like in India with the reduction in the value of the biggest bank notes) but in the EU and in the US, they still have weighty denominations – the EU especially at €500 even if they are not producing any more.  I suspect each entity should really demonetarise these big notes.  Some of the facts are astonishing – like 75% of all $100 bills estimated to be held outside of the US (60% of all its notes) and there are 13 billion $100 bills in circulation now, up from 3 billion in 1998. That’s the numbers of notes too not the face value!  For the first time ever, there are more $100 bills in circulation than $1 bills and all this despite a third of Americans not using cash on a daily basis any more.

I remember a previous article which suggested that so many of these big notes would not even be deposited if there was a demonetarisation, as too many would struggle to explain them… and the potential economic benefit could be equivalent to writing-off colossal State debts because the funds would never be needed to redeem them any more – well, in theory.  Maybe the Bank of England should start issuing £500 notes so that we too could have a significant sum which could be held and in the future written-off… just a thought…!

The other way of diminishing the value, of course, is by hyperinflation – but that can never happen again can it – shall we ask Zimbabwe or Socialist enclave Venezuela I wonder?


Probably a ‘right’ decision. We have had prospective cases where people have had significant final salary deferred pensions needing top-quality professional advice and we have always noted a guide to time-costed fee for the work.  The guidance may be to stay put and we have advised many to do just that.  However, too many financial advisers were giving advice for ‘free’ and then taking a big percentage charge on the transaction progressing and quite rightly, the Regulator noted that there was then a growing incidence of recommendations to transfer as that was the only way the adviser would receive a payment – rather odd eh!  Even then, if we had quoted say £1,500 for the quite extensive research and analysis necessary on a big case and then the guidance and advice work for a very high liability business sector (where the fee could indeed be taken from the pot if a transfer arose as the ‘right’ thing),  we found some people were going elsewhere even if the charge these ‘free’ guys levied was a transaction charge of up to 6% (average of say 3/4%) which could have been ten times our own charge!   Who is being foolish…. And isn’t that just ‘commission’… which was banned in 2013?

I’d like to see it extended to other types of financial advice – still too many feel they are receiving a ‘free service’ but of course, chunky fees are being taken from products sold to the client – and then the ongoing review arrangements.  Take companies like Openwork and St James’s Place mentioned above which are ‘restricted’ – I have yet to find a prospective client of theirs advised by them to seek an alternative advisory contact because the limited option they have available was not the best one for the client to buy…


Well done Felix for continuing to chase a Pension Administrator on behalf of a client.  It is rather disturbing that the biggest administrator in the Country cannot tell a scam scheme from a legitimate one with a professional financial adviser regulated at amongst the highest levels by the FCA  behind it however – especially as millions in the past have gone to all the wrong types of arrangement.


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