JUST HOW GOOD IS YOUR FINANCIAL PROVIDER?
ALL CHANGE IN THE ADVISORY WORLD
BAD NEWS FOR EX-ORGANIC CLIENTS
Dear Friend
This missive will arrive as the Dow Jones is heading for its biggest one-day points’ fall since August and all over the concerns for coronavirus. Of course, so far the stocks which appear least affected are the overpriced tech ones which have pushed the index higher and basic things like commodities’ prices are falling as the demand is dropping short-term. As ever, don’t panic but be wary about any encashments or withdrawals from your market investments – it’s not the best time to take money off the table when the conditions are wobbly and the prices you may secure not the most stable. I don’t say that to frighten anyone but the sentiment could have changed dramatically in just a week so why take the risk of securing poor prices for something you can defer temporarily? More on this below.
JUST HOW GOOD IS YOUR FINANCIAL PROVIDER?
Recently we had a new client come to us. He had been using a large ‘platform’ provider for his pension. He might have chosen it for the low cost. However, upon our review we found that instead of the money being invested over the last six years as he had assumed was happening, it had been sitting there in cash. (Curiously this provider made £73million from its customers’ cash reserves last year!).
This was £134,000 so no small sum and what returns lost in that time! He had received 0.29% in total – or 0.05%pa.
I think the precautionary tale is to remember ‘cost over value’. Yes of course he should have noticed but maybe he was too busy but had he appointed a professional independent adviser then the likelihood of something going wrong like this would have been removed and indeed had the adviser been negligent he would have some grounds for redress too! Of course, it could have been worse I guess… he could blindly have put it all into a ‘top performing fund’ like Woodford… or maybe one of the others hitting the headlines at the moment only to find a few years down the road something similar has happened there too…
It is also an interesting thing – a new client could come to us and we find they have £500,000 in just one fund with one company. They have been sitting upon it but would they put all that money in there if they were writing a cheque today? No – but they desperately need to diversify! The same often goes with a property investment – it is not what it cost you but what it could be converted into today. If you would not repeat the exercise as a new investment with that much cash now, it is probably telling you it is time to exit and spread your eggs around better.
Then there is the other – do you have a load of fragmented assets – bits of investments here and there, odd pots, old defunct pensions and so on – can you imagine how much easier it would be to see them altogether, in a cohesive and actually far more diversified strategy that is actually working together and with your best interests in mind and not the product provider’s and with a manager overseeing it?
STAFF CHANGES
It is always sad when staff leave and for whatever personal reasons but we wish them the very best in whatever new opportunities (or retirement!) that present themselves to them! Some go quite quickly after they join a new employer as they realise that the post is not for them or indeed as the employer has been the stepping stone to ‘something else’ and for some, they may have become part of the furniture and just feel it is time for a change, or family circumstances demand a review of responsibility and even geographical location. We have been blessed with a pretty stable team for some time but as the opportunities out there in the work place have evolved over the last few years, it seems that the greater ability to change creates new openings and chances too and more capacity to review and revise and certainly some of our present team have taken those chances to join us from elsewhere as well.
However, it is always nice to be able to part on good terms and these are some of the comments which staff have left for us over the last few years:-
I was a little overwhelmed by the lovely presents from you all and the moment and so I just wanted to email to say a proper thank you, you really have been a fantastic team to work with and I shall miss you all very much. It is the fact that you care about the clients that makes PJM what it is and that comes through in the lovely comments I received from so many over the last few weeks. It’s never about one person and you all deserve to share in that praise so well done and thank you again for your support over the last 12 years.
and
As you know it is my last day here today, so just want to say a massive thank you to everyone in the office. You are the best bunch of people that I have ever worked with and I have made some really great friends. I have enjoyed working here for the past four years and that is mainly due to all of you. I will miss you all and I hope to stay in touch.
Thank you also for my birthday card, leaving card and present. I have put some cakes in the upstairs kitchen for you all to enjoy. Unfortunately Sarah has already told you she made the cookies so I can’t now pretend that I made them! I wish you all the best for the future and thank you all for being the best staff ever!
and
Firstly can I please say thank you for allowing me to work in your company alongside some amazing people. I have really enjoyed my time here (even though it was a short time) but the tug of spending real quality time with my grandchildren (and helping to support them with Jack) became more and more difficult not to do.
We are grateful for the work they have completed with us and for clients and staff and wish them all the best. It has been a privilege to be involved in their lives and as we progress as a business too! Our full complement is presently thirty-four staff but we are always open to considering new possibilities to join us and across the range of services and skill sets and including experienced advisers. Have a look at our ‘careers’ page on the website for more information! https://www.miltonpj.net/career-opportunities/
We have been very humbled of late following the decision of one of our staff members to leave the Firm for personal reasons which we understand. Some of the client testimonials in gratitude have been so generous and kind and we are very grateful for all of them – thank you so much.
To us, it is just how we try to perform as a Business – the care we try our utmost to provide to our clients at all levels and with the service staff surrounding the advisory team to help us do just that. No, it doesn’t make us perfect but we believe that by directing our efforts in the right way, then the impression ‘from the top’ is the one which percolates down through all the levels and hopefully, if you are a client, that is your experience.
Indeed, one client whose Family has been connected with us for over two decades commented this and it was very humbling. Thank you very much! Here are some excerpts:-
Of the decades we’ve now happily spent with you, correspondence and papers go back to when you first extricated us from Zurich, previously Allied Dunbar – ‘for the life you don’t yet know’; I mean, please – and how we’d managed, first, to maintain in financial terms such a tangle of schemes and strategies and plans I really don’t know, and second how you’d managed to shuffle them into a useful order, and recognise the potential we’d mysteriously accumulated, is also a thing of wonder. I’ll not go through the entire history, but within a few years of our joining you, M of course took over our affairs and took the raw, processed material to another stage. It’s only been within the last five or so years that we’ve developed a relationship with S, but he too took the baton, and with great perception of who we are, and how we choose to live, and developed the current template with which we are so very comfortable.
Rest assured we’re not going anywhere, but our attitudes are changing, much I’m sure like most of your clients, in this low-growth, zero-percent interest economy. We might decide to depart the template over the next few years, not without discussion with yourselves, and our leaning these days is more toward a strategy of self-interest and indulgence, and what we actually want at this stage of our lives since what we actually need, with thanks to yourselves, is taken care of. Either way, we really both hope our paths do cross again before not too long.
As always, with very kind regards and continued gratitude for your and your team’s efforts on our behalf.
NATIONAL SAVINGS
So the chance of winning ANY prize in the Premium Bond draw has now reduced to 1 in 26,000… the number of £100 prizes every month is also halving. 22million of us have bonds and an aggregate £85billion is held earning such a pittance! You’d be shocked too to learn how many have the maximum allowed and have had that for quite some time. So often too, superstition can stop people withdrawing the money and putting it into more sensible investments. And for the rest in general National Savings – the rates of interest there are dropping even harder too.
So, for who are they wise? There are really very few categories of folk. The first is the multi-millionaires who use all their other tax and investment opportunities and for whom the thought of an odd tax-free prize is good, with instant access. The second is the saver who has looked at his emergency cash reserves and keeps some of them in Premium Bonds (but recognising he must encash them when an emergency arises so not keeping more than he should in total in such poor assets regardless). Thirdly, the person who may have a capital project coming-up in the next year or two and who cannot afford to take a great deal of ‘risk’ of the amount of return he is securing. They are unlikely to win any prizes (sorry to disappoint you!) but they wouldn’t be losing much deposit interest either and the money is instantly accessible. That is then it! So for too many people, you have to stop thinking that you stand a chance of a ‘win’ as you don’t and won’t but you have to realise how much you are losing by not being more sensibly invested. Let your head rule your heart on this one!
DEATH
Just how do you consider this thorny subject? Felix was asked recently and here are his brief comments:- https://www.ftadviser.com/your-industry/2020/02/11/how-advisers-approach-the-death-conversation/ You don’t have to be morbid about it and if you have ‘liabilities’ that need protecting should something untoward happen to you then insurance may be wise (I say ‘may be’ because you don’t need to buy insurance for cover that is automatic – for example death value of your pension or the sale of an asset against which a debt is secured).
Then there is the other side – how long will my capital last when I stop work – and how long should I make it last… if you don’t have a big enough pot to manage on the income it generates alone!
OUR BUILDING
It is lovely to have been able to rejuvenate our Grade 2 listed building here at Choweree House. Indeed, it is always a pleasure too to have clients arrive and who remember it in a previous incarnation – Mr and Mrs T remember it as a doctors’ surgery and the retort was: “Mrs T had been in nursing all her life and gave a lovely recollection of Choweree being the Doctors’ – and babies’ prams all lined-up in the reception area; they both really appreciated how it has been thoughtfully decorated and the original features kept. They were both thrilled at being given a quick tour of the meeting rooms and board room to see how it has been thoughtfully remodelled.” I should add it was an accountancy practice for years after that as well as General Accident’s office so a surgery really goes back some decades!
PASSIVES – INDEX TRACKING
An interesting thing has happened as more and more investment has concentrated upon index-tracking funds which buy everything ‘simply because it is there’. Now, Black Rock, Vanguard and State Street hold over $12trillion of stock in this way. What this means is that there is no mandate as such but they own that much control over votes at company meetings for these passive funds they maintain. Is that healthy…? I suggest it is not. Just imagine if activists of all the wrong kinds started to wield some form of control over these mega shareholdings… and remember – the whole of the UK market is not much off $2trillion…
ALL CHANGE IN THE ADVISORY WORLD
Last year we heard that Deutsche Bank is laying-off 18,000 jobs and now HSBC announces a global retrenchment cutting 35,000 roles and especially in City positions but inevitably filtering-down to local ones. It is interesting to reflect too – Lloyds Banking is going back into the advisory world after an absence of many years in the face of the miss-selling fiasco from ‘banc-assurers’ which saw them all close down and to be frank, we have to just hope they have learnt their lessons but… Big salaries with bonuses to attract advisers are reliant upon big sales of selected products generating high-reward-producing remuneration for the Bank and the salesperson too and not the care and attention of looking-after existing clients (which are not so remunerative) either. And of course, each salesperson will be expected to produce, as I have said earlier – one noting ‘£12million of new business every year’ and if not selling that much, they will be ejected.
Then we hear that just as local advisory firms sell-up, one of the leading consolidators has found that the self-employed advisers have fled the nest taking their clients with them (we don’t employ advisers on self-employed terms). However, the firm’s owners are struggling to secure the final payments as business has been hit hard! Trouble is, do clients want to be serviced from a national head office or with roving advisers and with centralised, shoe-horned processes which can be very different to what the clients have been accustomed…? It’s an interesting one and I guess there will be another shake-out at some point down the road and green grass may not be so green afterall, especially if new sales are rather harder to come-by!
PEEVED
I am peeved. I cannot buy an investment because the only one which exists is not available in this country. What is it? Well, as a consequence of the coronavirus, shipping rates have plummeted. The ‘Baltic Exchange Capesize Index’ which was 5,000 in 2019, is now under zero… yes, there is an EPT (a collective fund) which reflects the index but… my view is that short-term rates are well and truly overdone and they will recover. For example, a super tanker which cost $140,000 a day last month is now only $23,000. There are other issues like frozen goods not being able to dock and perishing on the seas as the containers cannot be recharged. For us, a little dabble at an appropriate time would not have harmed as it poorly correlated to equity markets (as well as simply being ‘cheap’). Instead we’ll just have to rely upon the very few investments we have that have some shipping exposure.
INVESTMENT OPTION
This is as usual not a play on an investment but it shows how bizarre the markets can be sometimes. So for our clients, at the end of last year we bought a chunk of Zero Dividend Preference Shares in GLI Finance Ltd, a small quoted finance company in which we also have ordinary shares, the second biggest holders in fact. The Zero rolled-forward a year so that it is repayable in December 2020 at a fixed price with an early redemption offer at £1.333 for 25% of the issue in just a few weeks. However, on the market, the price for the Zero is only £1.21. So that is over 10% return for a few weeks for those shares anyway. However, if we keep the rest till 5 December, we shall receive just over £1.41, which is 16.5% higher than now. Yes of course, you wouldn’t buy them at all if you think the Company can’t finance the impending repurchase or indeed meet the last payment but it is solvent and has been trading well in its main activities, even if that is not a guarantee of course. Yes, it does have to restructure its overall debt for the future but there are enough assets at the moment to more than cover all the liabilities though clearly if any company flounders, the value of those assets can disappear or be much less in a distressed situation. We don’t think that is going to happen incidentally!
BAD NEWS FOR EX-ORGANIC CLIENTS
Unfortunately one of the last investments which Organic bought for most of its investors has had a winding-up order imposed upon it. This is Via Developments Plc. In our view, it was negligent for any individual client to have been sold this directly anyway and it was also in the Dublin based funds which remain suspended. Whilst this debt is protected as a debenture (which is effectively a mortgage over all the assets of the Company) it is hard at this stage to know what realisable assets there will be. It is a speculative residential property development company with many ‘special purpose vehicles’ and as I say, not something anyone of these clients should have acquired – it was something for big funds to consider, not small investors. The extra loss will mean more compensation from the system however – have you lodged your complaint and claim yet?
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 celebrate our 35th anniversary in 2020 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
