Good afternoon. I have just returned from a relaxing and much-needed break which took us to bustling Hungary, Slovakia and Austria. Yes, I took the computer though the inbox defied my occasional review so apologies if you are still awaiting my reply!
I returned to an unexpected speech from our Chancellor. I should like to share the opening parts of that.
‘I am sorry to say that economically, the Country is in a rather worse state than when we came to power almost 16 months ago. I realise I did try to address some of the issues we perceived we inherited, like buying-off many public sector employees with generous and way above-inflation salary increases and without any agreement to improve staff productivity (which is now apparently the poorest it has ever been).
‘I also tweaked government borrowing rules, enabling me to borrow a significant extra sum which we could then spend recklessly as well but I realise this was all rather ill-advised as support for us has since plumbed record lows. The public sector unions are back for even bigger pay rises, our disloyal backbenchers won’t let us cut benefits as we must (and indeed are demanding even more which will disincentivise yet more people from looking for work) and the cost of our inflated public borrowing is gobbling-up even more of our tax receipts.
‘Yes, we made mistakes. I told you that removal of the Winter Fuel Allowance was to raise money but afterwards, admitting doing that was a big mistake, it has cost us more to reinstate it for 90% of the people who had it before, causing grief and worry to all pensioners and now changing the qualification basis to a ‘household income’ even though we have no way of knowing how much that is of course, as we tax people individually. It was well-intentioned and maybe we should have listened to wise counsel and simply made the Allowance taxable instead – a simple and equitable solution as opposed to what was effectively a poor choice. I am truly sorry for that.
‘Still, loads of new claims for Pension Credit arose and whilst that’s costing the Country new benefit claims where we had no provision for that either, it’s good that they are having their entitlement. After all, too, it’s now a long time after the last administration so I can’t keep blaming them anymore, can I? We increased the tax burden on the wealthiest and many of those very capable people have fled the Country so instead of taking more tax from them, now we take nothing at all. These policies have also dissuaded many new wealthy and highly skilled international people from wanting to come here and they used to bring their inward investment too.
‘I also thought it was great to increase National Insurance on working people’s jobs. I just cannot understand how vacancies have fallen, firms are cutting-back on recruitment and unemployment has risen. Of course, more people not working means less coming-in for the Exchequer and more benefits doled-out.
‘I have also presided over higher inflation, colossal energy costs (despite very cheap global gas and oil prices) as businesses have had to increase prices to cover these and the extra taxes levied and National Insurance upon them (and way above inflation increases in the Minimum Wage). This has also meant that the cost of government borrowing rose to higher levels than even during the abortive Truss/Kwarteng Budget and so we need more tax to pay the extra interest. Upon reflection, whilst ‘that’ Budget was very clumsy, I accept now it would have been a great way to stimulate growth and cut inflation after all. Of course I have also now realised that as the largest employer in the Country, increasing the cost of employing public servants directly and indirectly, as well as all their oncosts like pensions, sickness and holidays, then we have to raise yet more taxes from the rest of the economy to pay for them too and there is never any going backwards, is there?
‘So, I am sorry. We have made quite a few economic mistakes but I am afraid on 26 November in my Budget I am going to have to make you pay for that with increased taxes, reduced public spending and a sorrier economic outlook than if we’d have not done several of those things in the first place. I realise now that trying to run the Country’s finances is a lot harder than I thought and not only are there ramifications for policies but as we have seen, sometimes changes designed to increase our coffers end-up putting us in a far worse position than if I had left things alone in the first place.
‘It’s also hard for any upstanding citizen and business to keep on top of all the paperwork, bureaucracy and regulations as well and that includes me, even when I employ competent professionals to guide me. Still, if you have any grievances, please do send them along as I do have years of experience in the Complaints Team in one of my last jobs.’
Ok, so tongue in cheek but in the real speech, where is the admission of a single mistake? Wouldn’t that have been honest and genuine and perhaps the Country would be more behind her? Yes, some international factors have had a bearing on global economics but things are worse because of what ‘they’ have done. Still, within all of this I must remain optimistic – albeit realistic and to make value-led decisions in helping our clients navigate their finances and investments.
Congratulations Felix!
Anyway, good news – well done Felix Milton on being considered amongst the top under 35 next generation advisers again! Here is Felix being interviewed and saying what you might need to do to qualify!
Felix Milton on making it as a Top 35 Next Generation Adviser
Confidence claim – your financial adviser
So, arrogance is of no help to anyone but how many years’ experience and endeavour are necessary before a business can begin to claim some rightful confidence that maybe it is doing things significantly right for its clients? I am going to say that 40 years must stand for something, whereby the odd creases, the foibles, the service qualities, the reliability, the integrity (sadly what seems like a rare word too often in business, politics et al these days) can have become known to the clients looked-after by that business.
However, that doesn’t then mean that either the client or the firm can rest-back in complacency but as long as there is a permanent endeavour to improve – services, practices, staff capabilities and care, skills and systems, even to become as cost-effective as possible by enhanced technology, etc then yes, when you find that, maybe rather than naively being negatively critical, ‘we’ need to embrace and appreciate it and value that as a truly precious commodity in today’s world. None of us is perfect but we strive towards that, learning from our ‘mistakes’ as we go.
We are blessed to have many clients who appear to do just that and where we are humbled by their kind comments, such as these simple ones received this week (thank you J&JA from Scarborough!):-
We always find your updates and data helpful – as well as always prompt and efficient. Thank you. We’re confident you will all keep ‘doing the business’ for us. Confidence is probably the most important thing, day to day, for customers like us. The regular contact and commentary from Philip are a big confidence booster, when added to very good results.
Fees for the future
Interestingly, Evelyn Partners is introducing a minimum fee for certain of its clients – typically smaller ones. That is £3,500pa. We are not planning to follow suit but perhaps it does help ‘value’ the service which a quality financial advisory firm should be providing and the regulatory protections afforded, etc as well.
Several firms have high entry levels for new clients too – something we have not introduced but naturally we must consider what sort of expectations can be imposed upon us by that new client too! We are very happy investing in our new client at our cost as well; invariably we take a very long-term perspective!
Good news/bad news
European Assets has morphed into the new Trust and we elected for as much cash at the net asset value as possible. The good news is that we benefited from some other investors who didn’t do that so our cash allocation was higher! We can recycle that cash to buy more shares at a discount to that net asset value – all an extra bonus for our involved clients.
Middlefield Canadian has also morphed into an ETF at net asset value and again, sadly (as we liked the Trust and the sector involved) we have encashed and are rolling the money over – another bonus for our investors as the discount at which we purchased for them disappears. What is that worth? It may be 5% or 15% on their investment but all an ‘extra’ which you don’t have if you hold simple unitised or cheap index-tracker investments – as most non-clients do.
Aberdeen Diversified Income is repaying a further 19p at the net asset value. UIL, one of our larger holdings, has agreed to sell its large Somers’ holding at the net asset value too – all good news. It also announces further buy backs and the shares rise 18% on the day – yet still trading at a wide discount.
As ever, remember these ‘changes’ are bonuses for free – returns not from the underlying markets and assets held in the funds but technical trading outcomes which can materialise from discounted Investment Trusts held as opposed to those who only hold other unitised investment forms – as are sold to most ‘out there’. These extra bonuses, where net asset value is achieved and paying above the price we can pay to buy more shares or have paid for the shares in the past are good news beyond the underlying market outcomes.
WPP slipped recently and then promptly falls further on more downgrading – the old adage of ‘catching a falling knife’ catching us sadly as we have just added a few shares – fortunately not too many but we’ll chase at these lower levels. Meantime, TT Electronics, one where we have a rather more meaningful holding, has succumbed to a bid so a 60% rise there and hopes of a fight – excellent news but sorry to see the Company go.
Maxims – being a better investor – from the ‘Basil of Barnstaple’
10. Very often, the ‘most boring’ of investments when they are sorely under-priced can be the very best investments when they return to their appropriate and fairly-valued ‘boring’ categorisation.
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
