Included in this edition of our e-newsletter …
Thank you New Model Adviser for awarding us with a certificate for being in the top 100 firms in the Country – recognising ‘prominent leaders and outstanding achievements in the UK financial advice community’.
Well, the Market and indeed Currency are both taking the election shenanigans in their stride with good gains (especially in smaller companies and UK-centric stocks) and also in Sterling. Is the vote all about ‘Leave or Remain’? I guess fundamentally it is, whatever some pundits or political activists would like you to think so that will drive where you mark your cross. In the context of this missive, I shall not dare to venture too far further into politics here though I have been somewhat concerned at some of the spending pledges being bandied-about by all the parties – they do have to be funded at the end of the day and with the highest ever levels of public sector spending and welfare, the highest ever levels of personal and corporate taxation as well as Inheritance Tax on the wealthier estates and having overspent to the tune of nigh £1trillion since the economic collapse of 2008/9 as represented by the increase in the National debt, it is crucial we do not become too carried away. All that said and whilst clearly there have been cuts in many places, it is hard to reconcile ‘cuts’ overall with these figures of extra colossal spending too, simply representing a lower level of increases on the Nation’s Credit card – but no actual cuts at all!
I don’t think people realise how destructive gambling can become. Did you know that one in every hundred has a serious gambling problem? I do not know if you saw the Panorama programme on the subject but it is sobering and how rational adults without vulnerabilities can be swept-up into the problem is horrendous. One lady gambled all of her home proceeds away and also her share of the inheritance from her father’s house. Another gambled so much and borrowed and begged from friends and family as well as engaged in fraud to feed his habit.
To be frank, the whole industry is inadequately regulated. The advertisements should be curtailed and the opportunity of massive personal losses should become the onus of the gambling companies to prove that they are monitoring their customers. They follow ‘bonus’ processes to reignite the habit and with the man above, at one point they credited his account with £10,000 to entice him back. In the worst examples and especially with young men, they have committed suicide. Just 4% of gamblers deliver 78% of betting companies’ revenues according to the latest statistics. That is over £14.5billion every year of money that these firms extract from gamblers who have not won.
It is far too easy to gamble on the internet, your smart phone or whatever and someone somewhere has to take the bull by the horns. In the worst cases, the addiction destroys lives, families, homes, jobs, businesses and at the end of the day, the gambling companies win – you don’t.
We have had a request from a financial journalist – would you be interested in giving a case story to the media? They might be looking to consider what was the original advice trail, what were you told you were buying and what was the encouragement for you to go into the fated Organic Pension range. We have seen some awful cases I am sorry to say but at least following our last letter to all of the investors, there is some opportunity for progress in regard to their claims for compensation due to them. We are still seeing cases where zealous claims management companies were engaged and where they will take a considerable proportion of any compensation rightly due to investors and that is very wrong in our view, as all the claim can be managed by the investor with the help of the FSCS.
We are told that a recession may be imminent but perhaps only a minor one. Germany seems to have slowed-down and could be heralding the problem but the trade disputes between China and the US don’t help. The curious thing is that in the UK, when the Brexit impasse is through, we are likely to see a short-term economic surge as bottled-up activity and limp confidence burst forth for some time as people consider they can begin to see where the future is taking them and the cloud of that uncertainty has been lifted, even if there will remain many minor clouds of course.
Did you know that in the last fifty years or so there has only been one global recession? That happened in 2008/9 and prior to that, the world kept growing and even through the darkest of issues (such as the oil shock in the early 1970s) otherwise surrounding our world. Of course, we are finding that the emerging world is over-taking the advanced markets when it comes to growth but let’s see if we can at least keep-up!
Well, an interesting phenomenon has just occurred and that is that the overlap in US companies between hedge funds and traditional mutual funds has climbed to a new high in a convergence that is crowding the interest in the top stocks. Around 12% of the top fifty US stocks held as ‘overweight’ are owned by both sets of managers according to Merrill Lynch and what happens when one or the other starts to off-load? Did any of that happen last week when Amazon undershot the market so its stock fell out of bed somewhat? When you are talking about a nigh $1trillion company that makes a big difference and that is where a lot of investors’ money is sitting. And remember, with index funds (passive investing) most of your money will go into the biggest stocks, the ones which have already risen to become the biggest already. However, when you look at the opposite to this ‘Growth’ and that is ‘value’ then the companies are typically so much smaller and less popular but at a record divergence from ‘growth’ perhaps it is just time to start – and long overdue. We are ready!
I remember the 1987 crash very well – on a froth of momentum and it is interesting (or is that worrying?) that only one-third of today’s financial advisers was over twenty-one at that time so what experience can they add to the mix when the repeat may arise!
It has been noted that the National Minimum Wage is to increase to £10.50 an hour. I welcome any increase in wages but there are consequences which don’t seem to be being properly considered. For example, as the State is the biggest employer (and those related to it), its costs will escalate and either taxes will need to rise or jobs cut to meet budgets. Then there are other employers – they will be obliged to demand greater productivity from their staff at the bottom end because the cost is gradually becoming higher and higher and indeed that cost will need to be passed-on to the customer, something likely to lead to an increase in inflation and hurting the very people the higher wages are designed to help. Indeed, if you are a charity or social enterprise it becomes even harder to engage people as this is a core cost, meaning more must be raised.
Certain sectors will be hardest hit too. For example, retail, hospitality and the care sectors employ many at the lowest end. Trainees will become more expensive as well and I suspect fewer will be engaged as they will struggle to justify their cost. Already, almost half of all employees are on the National Minimum Wage as the increases have caught-up with those who may have had more senior roles and that will have interesting consequences in themselves though differentials are a thing of the past over the assurance of a secure job perhaps. For an employer, as staff costs rise, then greater personal justification of that contribution has to exist from the employee as otherwise, what too is the point of employing that person? This will mean that employers are obliged to take decisions to ensure their teams are more honed and far more streamlined and that the surplus which has been undertaking less productive work is trimmed. When the Living Wage level increases to £10.50 an hour that will be a minimum cost to the employer of nigh £25,000 so £500 every week when everything is added-in from holiday leave to pension contributions and National Insurance. Employees too are not there just to cover their own liability but to generate a contribution to the operation of the enterprise. Employers are being forced to be more ruthless already as a consequence of that significant cost increase which has nothing to do with the level of income someone needs to live. That little corner café will struggle to warrant having any staff at those sorts of levels as its customers are not willing to pay £10 for a cup of coffee – that becomes the new reality and instead the owners would be financially better served simply turning occasional surplus custom away as they save money that way – a strange position in which to be.
Self-employment is also likely to continue rising as customers don’t care about whether the business owner works all the hours of the day and shows only a pound or two of profit for his efforts… it doesn’t make it right but where employment is no longer financially justified, then it creates opportunities for the self-employed to step into that space, if they can do so efficiently I suppose and to worry about only earning a small contribution in exchange for the flexibility and freedoms which come alongside that work status.
Do you hold any share certificates in paper form? Well, it can prove very expensive for you. If you lose one, the replacement costs can be far bigger than the value of the holding! The minimum charge can be as much as £75! Sometimes too you may not be responsible for the loss in that say a capital issue may have happened and a new certificate sent to you and it doesn’t arrive. And what about lost dividends or other distributions? Do you know if you have not had one? The Registrar won’t try again to find you if the cheque is not presented for payment. Think about the certificates if you have been taking dividends as more shares too – a right pickle.
Thinking morbidly too but it can be a big mess when it comes to your affairs on death. Just think how much an executor solicitor may charge for sorting out a problem in such matter and it cannot be left undone either. (And that reminds me of Community Companies too – really it is unwise to invest in these as the cost of sorting things-out on your demise are likely to exceed the value invested… and then there is no certainty you or your family’ll see any money back anyway – maybe a gift is best… we are dealing with an estate now with a community railway share certificate which is unsaleable – so what do we do and how much charged time can be afforded in dealing with the matter, wholly disproportionate to the original ‘investment’).
Well we have a solution – why not tidy everything up and make your life easy. If you trot into our Office we’ll take all those shares off your hands and you can put them into one of our Balanced Portfolios. Yes, we decide what goes in there but we’ll not charge you a penny to take the certificates off your hands, all the paperwork needed and to subscribe to the Portfolio either. And in most instances (but not all), even if we decide not to keep certain holdings and we sell them for you first, we’ll absorb the brokerage as a special incentive. Now isn’t that a reason for tidying things-up for yourself?
According to Compeer, the British wealth management industry has just seen its collective assets exceed £1trillion for the first time ever. This reflects a growing economic confidence generally and despite the concerns from Brexit uncertainties. https://citywire.co.uk/wealth-manager/news/uk-wealth-industry-assets-break-through-1-trillion/a1286923?re=69066&ea=517077&utm_source=BulkEmail_WM_Daily_Single_EAM&utm_medium=BulkEmail_WM_Daily_Single_EAM&utm_campaign=BulkEmail_WM_Daily_Single_EAM. Indeed, the UK continues to do well in the international stakes too – fourth wealthiest nation according to Credit Suisse’s latest wealth management report but all encouraging reading for investors. https://www.credit-suisse.com/about-us-news/en/articles/media-releases/global-wealth-report-2019–global-wealth-rises-by-2-6–driven-by-201910.html
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