IT’S AN INEQUITABLE LIFE, HENRY


Dear Friend

Included in this edition of our e-newsletter …

IT’S AN INEQUITABLE LIFE, HENRY

REITS – MISSED CHANCE?

LASTING POWERS OF ATTORNEY

ST JAMES’S PLACE

ORGANIC UPDATE – PENSION CALCULATOR LTD

DEBT

RISKY AIM MARKET

RISK WARNING

Well, that was an interesting week.  Sterling rallied from the troughs (no, no real reason except too cheap… ignore what the pundits say!) and clocked-up a 4%+ gain to end on a seven-week high.  An interesting portent is the excessive number of ‘short’ contracts from institutions expecting Sterling to fall even more – it hurts them when it goes the other way and so they end up having to buy Sterling to close-out their positions and more demand strengthens the underlying commodity, the Pound.  (And remember too, one reason it was so weak was because of all those short positions and when the number is at its peak, in theory there ‘can’t’ be any more).  We had a very good week for several direct stocks too – has the bottom for those most afflicted now passed?  Shall we look back and wish we had bought more of those depressed stocks whilst we could?

According to the IMF, did you know that 62% of the World’s central banks’ foreign currency reserves are held in US Dollars?  21% is in Euros, 6% in Japanese Yen and 4.4% in Sterling.  Only 2% is in Chinese Renminbi.  One-third of currencies peg their rates to the US Dollar too, the biggest being the Hong Kong Dollar.

IT’S AN INEQUITABLE LIFE, HENRY

Who remembers the adverts?  ‘We don’t pay commission to middlemen’ they added (whilst paying the biggest bonuses to its ‘field staff’ (er, salesmen) in the industry… and taking these ‘marketing costs’ out of the With-Profit pot before then using what was left to declare bonuses and pretending then to show such low cost ratios on that ‘net’ position compared to most of the rest of the industry and of course, the biggest sin  of all, promising big guaranteed annuities but not making any reserves to fund them.

They duped accountants and solicitors who, in exchange for the odd free dinner with the local rep (who was taking home an average of at least £100,000pa whereas the field staff from the Pru selling on commission might have been taking home £20,000) but I am unaware of any of these professionals being pursued by their clients for the faulty encouragement they gave without first checking the Society’s Balance Sheet and understanding more about its nefarious practices… (and of course, many of them bought the hype too and bought policies!).  I am sure there are many investors who felt really cheated – they believed they were buying into some ‘superior’ model of financial practice free from commission and were duped soundly and the ‘smugness’ deteriorated into the destruction of an institution that had been around since the 1600s.  We did try to warn people publicly way before it erupted but that fell on deaf ears – though the head of the Society’s legal department did threaten me once but climbed down when the bluster was challenged…

Well, it’s all finally about to come to an end.  Compensation has been paid to most investors though whether you should still be there at all now is a moot point… but the remaining with-profit holders are being switched to another Company and unitised funds – and a bonus representing the winding-up of the rump fund being distributed.

However, if you have a policy, you’ll have had a complicated series of letters and you have to take some action in terms of choosing what happens to your money.  If you would like some complimentary guidance, then please feel free to contact us.  I see EL will allow up to £355 to be paid to a financial adviser for that advice so that is very generous!  Give us a call – and we may advise that it is time to say ‘thank you for the bonus’ but to move elsewhere rather than the default route.  I think you’ll know we’ll be candid!  And I do have to make an admission… I bought the smallest regular savings policy I could, years ago and when I believed that ultimately demutualisation would occur.  That is happening and we’ll do fine but it’s been a very long-time coming!  Indeed, the residual pot is swollen because so many cut and run at the first opportunity so really, there aren’t many of us still left to share it out and we are enjoying theirs too!

REITS – MISSED CHANCE?

Yes, I know – I spoke about the fantastic value represented by so many commercial property Investment Trusts savaged by a number of reasons including the Woodford saga in regard to ‘New River’ specifically.  Yes, we had some but I didn’t increase our exposure dramatically and wonder now if I missed that chance.  That one is up 31% on top of the 13% annualised income from the dividends.  I repeat too what I said – buying a portfolio of the stocks which Mr Woodford has been obliged to dump unceremoniously regardless of the value is likely to prove to be a fantastic investment when you look back in a few years.  And remember, Open Work and St James’s Place (when they took back management of their own funds from him) also have been dumping the same things at the silliest of prices…

LASTING POWERS OF ATTORNEY

We have just been attending to a very sad case.  A client, a single lady, had a massive stroke which has rendered her helpless and unable to communicate.  We have been her adviser and have discretionary control of her investment capital but when suggested by us she declined to complete an attorneyship in favour of anyone in case she ever faced a situation where she was unable to make decisions.

Her close friend is assisting her but in a nutshell, no-one has formal capacity to arrange and to pay the Nursing Home fees.  Formally the Court of Protection will have to become involved but that is never swift.  Meantime, whilst health assessments are being completed (as the NHS should pay the care fees regardless) there is no-one officially there to assist with the managing of her day-to-day finances from her bank to Attendance Allowance and other bills.

We are appointed as her executor upon her death and as we know the client very well, we are releasing funds temporarily from her portfolio with us (despite not having that formal authority to do so) so that her care costs are assured.    On top of that, because she engaged us years ago and trusts us through the relationship, we handle all her non-cash reserve assets so it is not as if she has a bundle of different holdings ‘all over the place’!  Not wishing to be morbid too but imagine what a solicitor would have charged for dealing with an estate and twenty or thirty different individually registered investments whereas with us, there is only the one entity to advise.

So what are the thoughts?  It is not right to frighten anyone into having to have Lasting Powers of Attorney but they are useful and just as important perhaps is to have a discretionary investment adviser in tow who is prepared to act practically when the time comes – as otherwise if all the other financial institutions clammed-up saying ‘can’t talk to you, can’t release any money’ then what would have happened (or what does happen) in those scenarios?  And yes, it DOES happen.  Are you covered?  More than anything – do you have a relationship with a trusted adviser who can access any capital that firm is managing should the need arise like that.  I have said before that this is also wise to protect against scams from strangers, friends or even family too when you may be vulnerable.  They do happen too and we are an extra barrier layer to protect your funds for you and your family against those who have other motives.  We had two suspicious instances last week – a ‘carer’ telling an estate agent to ring us to prove her client had capital which could be used for a house in which she was interested and a very controlling child who has attorneyship but acting without her parent’s authorisation to seek to control the capital.

ST JAMES’S PLACE

I know I have talked about this firm before.  It has been fantastically successful but it is not ‘cheap’ for its clients.  However, some of the problems are down to the opacity of its terms and charges.  You could say that its charges are not so relevant if the quality of the service and outcomes are commensurate but a recent Sunday Times exposé has left the Company reeling.  When one of your salesmen writes anonymously and notes the pressures for sales and the benefits to firm and salesman alike becoming ridiculously high, something needs review.  It is not the only such tied agency doing similar things with grand offers of holiday conferences in glorious locations either and a similar sales’ approach.  Openwork used to do the same and remember, at the end of the day you, the customer, are paying.  Shuffling the word ‘commission’ over to ‘fees’ of up to 5-6% is not really a transformation is it?  This is a little of what was said:-

“The beauty of all this is that customers never really understand how much they are paying. Of course, we presented everything to them — but I never really believed they knew the full impact.”  The partner claimed that if a client wanted advice about withdrawing their funds he would make it ‘as difficult as possible to arrange a meeting’.    https://citywire.co.uk/wealth-manager/news/an-ex-sjp-partners-opulent-tale-as-firm-reviews-perks/a1266357?re=67573&ea=517077&utm_source=BulkEmail_WM_Daily_Single_EAM&utm_medium=BulkEmail_WM_Daily_Single_EAM&utm_campaign=BulkEmail_WM_Daily_Single_EAM

Remember, for ‘Execution Only’ subscriptions to our staunchly independent strategies we charge not a penny of subscription fees.  For advice, we charge time-costed fees based upon the complexity of what is involved.  Our staff are not paid for business introduced and meeting sales’ targets and in fact they never have – that’s thirty-four years’ worth of pedigree now.  Now I can appreciate that if you are invested with these other firms you may not have realised all of this and the sales’ representative may be a very nice person.  However, you may now be feeling rather angry at the revelations and yes, we can understand that.  For us, at the end of the day, I should just say that they cannot be as dynamic as a small investment management firm like our own in terms of what we can buy and hold and that they can’t or don’t.  There again, not having such high charges means that you start in a superior position from day one anyway.

ORGANIC UPDATE – PENSION CALCULATOR LTD

At least one entity with somewhat inappropriate practices has been barred from dealing with ex-Organic clients.  This does not bar any of the clients from raising their complaints yet and they are still encouraged to do so in relation the losses they have suffered at the hands of Organic Investment Management Ltd’s demise.  Contact us if you need guidance as to what to do.  We are pleased to have been involved with the Regulator over this. https://www.ftadviser.com/investments/2019/09/12/fca-intervenes-over-cmc-boss-conflict-of-interest/?utm_campaign=FTAdviser+news&utm_source=emailCampaign&utm_medium=email&utm_content=

DEBT

Well done Felix for your comment on this article.  Debt can be a problem and especially if it is connected with profligacy – over-spending against what you can afford (I mean, let’s not beat about the bush…).  What do you think? https://citywire.co.uk/new-model-adviser/news/advisers-needs-to-recognise-uks-growing-debt-issue-says-ifa-milton/a1265353?re=67379&ea=517077&utm_source=BulkEmail_NMA_Daily_Single_EAM&utm_medium=BulkEmail_NMA_Daily_Single_EAM&utm_campaign=BulkEmail_NMA_Daily_Single_EAM

However, the worst case I have seen so far is a young person noting that they have not joined the NHS Pension scheme because they believe all the Extinction Rebellion ‘stuff’ that the world will have ended in ten years or so, so what is the point of providing for their retirement and indeed, well, you may as well borrow now and spend as you won’t have to repay anything as you won’t be here.  Now that is careless talk and whilst I thought the person was joking – he was being deadly serious!  The biggest risk is not Climate Change – it is failing to be sensible about your own future when you have all the tools to be so.  It is reckless of any entity, however well intended to frighten people so much that they actually start to make irrational and ludicrous financial decisions like that.

RISKY AIM MARKET

Well, actually, AIM companies increased their dividend payments by 24% to £633million in the first six months!  I only mention this in that the received wisdom is that only high-risk growth companies with dubious controls populate this minor market!  It isn’t true! The average yield is now 2.5% and yes, there are some spivvier companies there and investment funds skewing the statistics too but what it does prove is that there are some attractive opportunities as well – and many have special Inheritance Tax benefits for investors holding them at their deaths.  (We have portfolios and ISAs we manage to this end too).  https://citywire.co.uk/wealth-manager/news/aim-dividends-rocket-24-as-market-tumbles/a1266278?re=67573&ea=517077&utm_source=BulkEmail_WM_Daily_Single_EAM&utm_medium=BulkEmail_WM_Daily_Single_EAM&utm_campaign=BulkEmail_WM_Daily_Single_EAM

RISK WARNING

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