Please excuse this missive so soon after the last but we are trialling what we hope is a better system so this is the first under that!
We Have An Abundance Of Opportunities And A Vast Wealth Of Choice
I am sorry if my last eshot may have confused some readers and alarmed them about our financial strength. I am pleased to reassure that we’re certainly not running-out of money. We have always endeavoured to be sensible with our own resources even if we believe firmly in ‘putting our money where our mouth is’. This is because it is wise anyway, is reassurance for ourselves and our staff but crucially is also good for all our clients.
Whilst of course all our clients’ assets and cash are held at totally unconnected custodians for absolute protection, all too many financial advisory firms have very little money in their own businesses and the proprietors seem to draw as much out as they can, so it seems (you can check accounts on Companies House!). Purposefully, we keep considerable reserves to carry us through hard times and far in excess of the Regulator’s requirements. If you are not with us, have you checked your financial adviser’s net worth at Companies House if it is a limited company?
My last eshot flagged that there is an abundance of excellent opportunities out there to buy at the moment so that all we need are more funds to manage for our clients, so we can take advantage of them even more! Thank you for those who responded and who wanted some more information as to how they and thus we might be able to do this together!
In regard to values generally, whilst markets have been slower these last several weeks, there have been some telling signs that the undercurrent of valuations is beginning to move in investors’ favour too. This is good and a number of our core holdings have been nudging upwards quietly and gently but the odd few percentage points here and there, make a considerable difference. We expect to see more corporate action too and frankly I am surprised that there hasn’t been much already – AA Group Plc for example is being fêted now and whilst the share price is still ridiculously low at around 38p, it was 12p at its worst. That’s a more than four-fold increase on what an investor would have secured a few months ago.
There are consultations ongoing in the industry, with both the FCA and The Treasury Select Committee undertaking them. One is on ‘vulnerable people’ and the other on investment scams especially centring upon pension transfers. I have taken the time to file responses to both, after defining what a ‘vulnerable person’ is. Sadly, we have and do see all types which have been financially abused – from those who are health impaired or infirm through age (minors as well of course) but also the millions of others who have been and are being scammed either through naivety, a lack of financial sophistication or a misplaced trust in some slick salesman and fancy promises.
It can also be a very sophisticated person, any of us in fact, who has a chink in our armour at that specific point in time when a fraudster is prowling – and they will look to find that. I am reminded of the fox which prowls around the same poultry run every night for years as it travels its average nine miles hunting, whatever the weather – it is that once in many years that the electric fence battery has failed or the little hole has appeared that he will strike and these fraudsters are just the same.
Sadly, one clear conclusion is that the Regulatory process takes too long to act when it is made aware of problems, closing stable doors after the horses have bolted. Then, actions introduced are so often blunt-edged and simply act to burden the law-abiding and honest players with whole rafts of new rules. I should love to work at the FCA and should operate on the basis of investigation which basically says, “We have seen your promotion. If you are innocent, please prove you satisfy the rules or else remove it and desist immediately. If you don’t, then you will be fined, possibly jailed and potentially struck-off and the file passed to the authorities potentially to close-down your limited company”. So the next time a juicy offer of a ‘guaranteed 8%pa from a secure property transaction’ arises, that would be the question asked – prove this is a non-regulated collective investment for which you do not need regulatory approval.
Over the years I have sent so many cases of dubious merit to the FCA to investigate, from stamp investment scams to ‘guaranteed rental income on holiday lodges’ only to be rebutted as ‘aah, they don’t fall under our remit’. I am sorry but yes they do – you are there to help protect the public and to ask the questions of these promoters to prove they are not in breach of the rules and to come down upon them like a ton of bricks if they fail to oblige.
Why Take Advice
We have just had a very sad case of a very foolish person. Since he came on board years ago through a mutual adviser, this client, aged younger than me, has never engaged with us in any sense or form.
However, he had a pension plan worth £86,000 and the original ‘retirement date’ arose. We wrote to him a few months ago offering to guide him at the relevant time and that would have been without charge, just a friendly ‘hello and do you understand your options’. No reply. Instead, we now receive a copy letter from the pension company saying he’s cashed the lot! Of course he can do that but by doing that he has incurred the wrath of the Taxman and is paying a whack of tax including at higher rates as all the payment (aside from the Tax free lump sum) is added to his other income and taxable! How can we help people avoid doing the worst possible things? Even had he staggered the withdrawals over several years he would have reduced his tax bill considerably – thousands of pounds saved. If he was worried about fund values he could have transferred the pot into a cash fund with the pension company so it would never change in value. We really try our hardest but it is impossible sometimes to save people from their worst enemy – themselves.
Clients’ Cash Balance
We have received an interesting letter from the FCA today though it doesn’t apply to us. It applies to advisers who do not provide discretionary management and it states that cash balances of these advisory clients have been ballooning.
The FCA heads the letter ‘we expect you to act to prevent harm to your clients’. What it is signifying is that whilst these advisers’ clients may have increased their cash balances as things became most volatile, most did not take advantage of the cheap prices at the bottom to subscribe those funds again and they sit there, festering, earning nothing and underperforming, costing their clients significantly.
What have we done? Readers of this August missive will know that whilst it was very uncomfortable, we encouraged investors to subscribe cash to buy from distressed sellers and so we held very little in cash at the bottom of the markets. Perhaps what this signals is that a ‘good’ discretionary manager will use cash as a tool in such instances whereas an advisory one cannot possibly contact everyone to suggest they may want to buy the bargains abounding at those times? What is that worth over a long period I wonder – even if none of us is perfect in our market choices nor timings. Effectively the FCA expects such advisers to encourage surplus funds not being reinvested soon to be returned to clients! The FCA will ‘follow-up’ individually ‘with firms that report significantly increased cash balances’!
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