Dear Friend
Included in this edition of our e-newsletter …
MAKE SURE YOUR BANK DETAILS ARE RIGHT!
OILING THE WHEELS OF THE GLOBAL ECONOMY
A Happy Christmas to you all! Yes, I realise that this is before the General Election and without wishing to be political but all of us, I am sure, hope there is no Hung Parliament with yet more frustration and uncertainty through the other side and that we can begin to progress as a Society (including repairing the schisms) and an economy and indeed, we need a settled and solid economy to keep making the money to pay for all the public services and welfare that we want to enjoy. Whatever anyone says, it really is not rocket science. We had no economic growth the last three months according to the statistics and that is as a consequence of the incessant uncertainty – which we must break. We must also be careful not to become an over-spending basket case as the cost of our national debt will increase as the risk we present will rise and that gobbles-up valuable tax resources without any benefit to us at all. All the parties seem to be promising significant increases to entice the electorate and we have to imagine which one is most likely to keep the confidence of those upon whom we rely to buy all our debt! There are plenty of examples of basket cases which have to pay very high rates – if they can raise money at all – whether failed socialist experiments like Venezuela (once lauded regularly by the Left as a wonderful example of what is possible) or secondary ones like Italy and Greece which can still hide under the Eurozone’s protection (though Greece has just introduced a demand that residents pay at least a third of all bills online to stamp-down on corruption!) or those trying to recover like Argentina where its government bonds are now changing hands at under half of what they were floated not so long ago. There are plenty of countries in-between, of which we could become one if we are too profligate – and where the rate of interest we’d have to pay would rise. A swingeing 3% increase in the cost of the present National Debt would equal all of Labour’s initial promised additional annual expenditure as one simple example so there wouldn’t be anything left for the NHS, education, welfare and so it goes on… without using a political colour too but none of the parties has considered what impact a global slow-down could have too – even if post Brexit I predict a mini-boom for the UK as some of the pent-up economic frustration becomes released and it boosts our economy dramatically – some suggest as much as £0.5trillion of capital investment is just waiting and that is before we consider what our residents’ plans are which have been delayed because of ‘Brexit’. Like it or not but an outcome means we can plan and take action.
So, the message is clear regardless, whatever your politics, please make sure you vote – it could be one of the most crucial votes in our lifetimes. And just think, maybe some will have to hold their noses and vote for an alternative to what they usually do to achieve the outcome (or not) for Brexit in which they believe but keep civil and remember you can always protest and influence the government regime in charge through the other side with diplomatic interaction.
Do you still have unitised investments you bought/were sold from an adviser some years ago? If I explain that not a single investment in our discretionary portfolios falls into this trap but if you hold investments elsewhere you may be paying unnecessary fees every year. Things changed in 2013 so seven years ago now.
Believe it or not but close-to £184billion of unitised funds still pay regular commission to the original selling adviser. In a nutshell you are paying a higher management charge than otherwise you should be – especially if you aren’t receiving any or much service from that adviser! That is 23% of all retail funds apparently and they cost on average just under 0.6% more than if you had the same fund without the kick-back.
These assets are called ‘legacy’ assets and to be frank, maybe it is time you looked to a new adviser/manager if you are included and we’d be delighted to help. The amount in these things – which can be sitting in ISAs, Pensions, Insurance Bonds or ordinary portfolios has been dropping but clearly it is still significant and even if you have cancelled the payment to the adviser, the higher fee still applies to you unless you shift asset classes. If you have an adviser and he hasn’t told you then perhaps you now know the decision you ought to be taking!
Apparently last year only 6% of adults sought financial advice – that is quite sad as at the end of the day, the principle is that the availability of specialist advice improves the outcome of the enquirer, small or large. Indeed, as this survey was published, another report suggested that the average benefit an advised client enjoys is a ‘wealth boost of £47,000’ as a consequence of that engagement, so what are you waiting for! This report was commissioned by Royal London and The International Longevity Centre. https://www.adviserpointsofview.com/2019/12/receiving-financial-advice-gives-a-wealth-boost-of-47000/?utm_medium=email&utm_content=&utm_campaign=AR.Weekly.EU.A.U&utm_source=Architas%20POV&utm_term=PHILIP%20J%20MILTON%20%26%20CO If you have a good adviser, hold on to them too – post 2013 and the commission ban (but watch-out where some firms charge a ‘transaction fee’ of up to 6%!) there were more than 40,000 whereas now there are only 26,000!
What is sad is that Damian Fantato in the Financial Times wrote only recently:- “if you are seeking financial advice today, you will probably be dealing with a better qualified, more professional person than you would before 2013. Many advisers now aspire to become chartered to demonstrate their professionalism. And for consumers, things are likely to get better.”
We have been warning people about these and it seems that one investor didn’t realise what would happen if he signed-one-up. Goodwin Barrett, which advertises prolifically, charged this poor investor £17,000 to reclaim via the Financial Ombudsman Service (a free service) and then we assume the FSCS (another free service) things he could have done himself or with a little guidance. Yes, that was 40% of the compensation he was entitled to receive whatever happened (£42,000). We have been warning investors who came to us through the Organic debacle to not go to a Claims Management Company as it is not necessary. This whole sector needs far more attention from the Regulator to resolve some of the problems within it – even if many have already been tackled. https://www.ftadviser.com/pensions/2019/12/02/fos-sides-with-cmc-over-40-fee/?page=1
We have now secured over £100,000 compensation from the FSCS for one new client who was encouraged to invest in some rather dodgy assets which went caput. It isn’t one of our mainstream activities as we try to encourage investors to pursue their own claims to avoid having to pay fees but sometimes, like this, our interaction was imperative. You will notice too that the FSCS claim limit is £50,000 so how did we secure a greater payment? This just shows how we can guide and assist even in such unfortunate situations. And no, we didn’t charge a percentage of the claim funds received but simply a time-costed charge for the actual time expended – somewhat different to the above case and indeed, even then much guidance and initial representations was all with our compliments so we were only charging for what the client was unable to do. Well done Director Scott on all your hard work there.
MAKE SURE YOUR BANK DETAILS ARE RIGHT!
Here is a chilling story and an unhelpful bank. Despite the customer making the mistake, the Bank failed miserably in its clear duty to act with common sense – and I believe legally too. If you keep or spend money which is not yours, it is theft – plain and simple. In this instance, the Bank should have ring-fenced the funds till it could prove what the man said to him and ideally secure the ‘wrong customer’s’ consent to the removal and if not forthcoming, obtaining a legal order to do so. Why do they all still appear to be so slow in reacting to such cases and indeed, the same appears to apply with frauds when acting immediately has to be the right thing to do to protect those who have been defrauded? https://www.theguardian.com/money/2019/dec/07/i-lost-my-193000-inheritance-with-one-wrong-digit-on-my-sort-code?CMP=fb_gu&utm_medium=Social&utm_source=Facebook&fbclid=IwAR0NUahf-roSnHRkMfIUPE_rf-B-t7p5HGd16L9A6nK5GLdquPWY7ZHiAXo#Echobox=1575715332
M&G and Prudential have both suspended withdrawals from their property funds to protect investors. Effectively, withdrawals have exceeded the levels of cash available to repay those wishing to leave and of course property is not easily saleable. It seems none of them listened to my advice last time round – we are unaffected as we are buying quoted ‘REITS’ – these are shares which hold such property assets and are superior to unitised funds in which most investors ‘out there’ have exposure. There are negatives but effectively if you want your money from one of those, you sell the shares to the market/another investor – simple. Indeed, as wobbles have been spreading from the two suspensions and fears of the funds having to dump cheap commercial property to raise some money, some other such REITs have come onto our radar. There are good income yields and our £1 can buy an underlying mixed portfolio worth considerably more than that, so a very attractive ‘discount’ to the underlying asset value. Maybe M&G and Prudential should look to convert their funds to REITs to avoid repetition of the problem in the future. They won’t have to keep big reserves of uninvested cash returning ‘nothing’ just to meet prospective withdrawals either, as all of these have to do these days.
OILING THE WHEELS OF THE GLOBAL ECONOMY
So, the worst performing sector in 2019 has been oil and gas. Let’s put that into context. In 2011, the sector counted for 13% of the S&P 500 in 2008 and now only stands at 4%. Companies generally were valued similarly to others then but now there is a vast gap on a ‘multiple of book value’. Yes, there are factors including a weaker oil price than the $140 a barrel then and a present glut (which OPEC is looking to address by cutting production) but for now, yes, all of us will be continuing to use oil in myriad ways and whilst sustainable alternatives are rapidly gaining ground, oil has a good few decades ahead of it for now. Oil companies trade at 1.5 times’ multiples of book value whereas the wider US market is on an astonishing 3.5 times. Several contrarian billionaire investors are interested, including Warren Buffett. The energy sector in 2020 could be one of the big ones to bounce and analysts are expecting earnings to jump by as much as 23% – primarily because it has been either over-sold or too unloved compared to alternatives and remember, these companies still generate vast cashflows for their weighty dividends and that is after providing growing and colossal environmental and research spends on renewable alternatives and conservation. Yes, there are some investors who have decided to exit the sector totally but it is an interesting one to consider and could be a little like tobacco was at the height of the law suits and since then significant gains were made by many institutions – whether you agree with smoking or not. I’m not making either case but simply saying financially there could be some good gains and maybe, just maybe, time for some of the other US giants to slow-down and possibly slip back to more realistic long-term values too.
You will know I am against excessive short-selling of companies’ shares. However, I was intrigued to note that one of the largest institutions in the world, the Japanese Public Pension Fund which holds $1.6trillion of assets, believes that it is effectively immoral and will no longer lend shares of overseas’ companies to short-sellers. In these growing times of socially responsible behaviour, it believes it conflicts with that status. In the last three years, the Fund made $300million from this behaviour so it is a high moral stance it is adopting. Of course, the purist could say that had its holdings not been borrowed then sold against it then the values would not have fallen so…
If you are one of these, please be careful if you are taking advice elsewhere about your pension. We have found so many rogues who have moved from one firm to another and are giving spurious advice to investors in the face of the past problems they have experienced. Most clients are wise to this but we have received several instructions to transfer investments to a new firm and what is odd is that they always demand encashment of all the investments so they can place the cash in new holdings. Not only does this incur unnecessary costs on disposal but also new costs on acquisition and all I have to ask is… is it really the case that not even one, say, of fifty investments is good enough to be continued in the hands of the new recipient company – I mean, who is kidding who please?
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
Dear Friend
Included in this edition of our e-newsletter …
MAKE SURE YOUR BANK DETAILS ARE RIGHT!
OILING THE WHEELS OF THE GLOBAL ECONOMY
A Happy Christmas to you all! Yes, I realise that this is before the General Election and without wishing to be political but all of us, I am sure, hope there is no Hung Parliament with yet more frustration and uncertainty through the other side and that we can begin to progress as a Society (including repairing the schisms) and an economy and indeed, we need a settled and solid economy to keep making the money to pay for all the public services and welfare that we want to enjoy. Whatever anyone says, it really is not rocket science. We had no economic growth the last three months according to the statistics and that is as a consequence of the incessant uncertainty – which we must break. We must also be careful not to become an over-spending basket case as the cost of our national debt will increase as the risk we present will rise and that gobbles-up valuable tax resources without any benefit to us at all. All the parties seem to be promising significant increases to entice the electorate and we have to imagine which one is most likely to keep the confidence of those upon whom we rely to buy all our debt! There are plenty of examples of basket cases which have to pay very high rates – if they can raise money at all – whether failed socialist experiments like Venezuela (once lauded regularly by the Left as a wonderful example of what is possible) or secondary ones like Italy and Greece which can still hide under the Eurozone’s protection (though Greece has just introduced a demand that residents pay at least a third of all bills online to stamp-down on corruption!) or those trying to recover like Argentina where its government bonds are now changing hands at under half of what they were floated not so long ago. There are plenty of countries in-between, of which we could become one if we are too profligate – and where the rate of interest we’d have to pay would rise. A swingeing 3% increase in the cost of the present National Debt would equal all of Labour’s initial promised additional annual expenditure as one simple example so there wouldn’t be anything left for the NHS, education, welfare and so it goes on… without using a political colour too but none of the parties has considered what impact a global slow-down could have too – even if post Brexit I predict a mini-boom for the UK as some of the pent-up economic frustration becomes released and it boosts our economy dramatically – some suggest as much as £0.5trillion of capital investment is just waiting and that is before we consider what our residents’ plans are which have been delayed because of ‘Brexit’. Like it or not but an outcome means we can plan and take action.
So, the message is clear regardless, whatever your politics, please make sure you vote – it could be one of the most crucial votes in our lifetimes. And just think, maybe some will have to hold their noses and vote for an alternative to what they usually do to achieve the outcome (or not) for Brexit in which they believe but keep civil and remember you can always protest and influence the government regime in charge through the other side with diplomatic interaction.
Do you still have unitised investments you bought/were sold from an adviser some years ago? If I explain that not a single investment in our discretionary portfolios falls into this trap but if you hold investments elsewhere you may be paying unnecessary fees every year. Things changed in 2013 so seven years ago now.
Believe it or not but close-to £184billion of unitised funds still pay regular commission to the original selling adviser. In a nutshell you are paying a higher management charge than otherwise you should be – especially if you aren’t receiving any or much service from that adviser! That is 23% of all retail funds apparently and they cost on average just under 0.6% more than if you had the same fund without the kick-back.
These assets are called ‘legacy’ assets and to be frank, maybe it is time you looked to a new adviser/manager if you are included and we’d be delighted to help. The amount in these things – which can be sitting in ISAs, Pensions, Insurance Bonds or ordinary portfolios has been dropping but clearly it is still significant and even if you have cancelled the payment to the adviser, the higher fee still applies to you unless you shift asset classes. If you have an adviser and he hasn’t told you then perhaps you now know the decision you ought to be taking!
Apparently last year only 6% of adults sought financial advice – that is quite sad as at the end of the day, the principle is that the availability of specialist advice improves the outcome of the enquirer, small or large. Indeed, as this survey was published, another report suggested that the average benefit an advised client enjoys is a ‘wealth boost of £47,000’ as a consequence of that engagement, so what are you waiting for! This report was commissioned by Royal London and The International Longevity Centre. https://www.adviserpointsofview.com/2019/12/receiving-financial-advice-gives-a-wealth-boost-of-47000/?utm_medium=email&utm_content=&utm_campaign=AR.Weekly.EU.A.U&utm_source=Architas%20POV&utm_term=PHILIP%20J%20MILTON%20%26%20CO If you have a good adviser, hold on to them too – post 2013 and the commission ban (but watch-out where some firms charge a ‘transaction fee’ of up to 6%!) there were more than 40,000 whereas now there are only 26,000!
What is sad is that Damian Fantato in the Financial Times wrote only recently:- “if you are seeking financial advice today, you will probably be dealing with a better qualified, more professional person than you would before 2013. Many advisers now aspire to become chartered to demonstrate their professionalism. And for consumers, things are likely to get better.”
We have been warning people about these and it seems that one investor didn’t realise what would happen if he signed-one-up. Goodwin Barrett, which advertises prolifically, charged this poor investor £17,000 to reclaim via the Financial Ombudsman Service (a free service) and then we assume the FSCS (another free service) things he could have done himself or with a little guidance. Yes, that was 40% of the compensation he was entitled to receive whatever happened (£42,000). We have been warning investors who came to us through the Organic debacle to not go to a Claims Management Company as it is not necessary. This whole sector needs far more attention from the Regulator to resolve some of the problems within it – even if many have already been tackled. https://www.ftadviser.com/pensions/2019/12/02/fos-sides-with-cmc-over-40-fee/?page=1
We have now secured over £100,000 compensation from the FSCS for one new client who was encouraged to invest in some rather dodgy assets which went caput. It isn’t one of our mainstream activities as we try to encourage investors to pursue their own claims to avoid having to pay fees but sometimes, like this, our interaction was imperative. You will notice too that the FSCS claim limit is £50,000 so how did we secure a greater payment? This just shows how we can guide and assist even in such unfortunate situations. And no, we didn’t charge a percentage of the claim funds received but simply a time-costed charge for the actual time expended – somewhat different to the above case and indeed, even then much guidance and initial representations was all with our compliments so we were only charging for what the client was unable to do. Well done Director Scott on all your hard work there.
MAKE SURE YOUR BANK DETAILS ARE RIGHT!
Here is a chilling story and an unhelpful bank. Despite the customer making the mistake, the Bank failed miserably in its clear duty to act with common sense – and I believe legally too. If you keep or spend money which is not yours, it is theft – plain and simple. In this instance, the Bank should have ring-fenced the funds till it could prove what the man said to him and ideally secure the ‘wrong customer’s’ consent to the removal and if not forthcoming, obtaining a legal order to do so. Why do they all still appear to be so slow in reacting to such cases and indeed, the same appears to apply with frauds when acting immediately has to be the right thing to do to protect those who have been defrauded? https://www.theguardian.com/money/2019/dec/07/i-lost-my-193000-inheritance-with-one-wrong-digit-on-my-sort-code?CMP=fb_gu&utm_medium=Social&utm_source=Facebook&fbclid=IwAR0NUahf-roSnHRkMfIUPE_rf-B-t7p5HGd16L9A6nK5GLdquPWY7ZHiAXo#Echobox=1575715332
M&G and Prudential have both suspended withdrawals from their property funds to protect investors. Effectively, withdrawals have exceeded the levels of cash available to repay those wishing to leave and of course property is not easily saleable. It seems none of them listened to my advice last time round – we are unaffected as we are buying quoted ‘REITS’ – these are shares which hold such property assets and are superior to unitised funds in which most investors ‘out there’ have exposure. There are negatives but effectively if you want your money from one of those, you sell the shares to the market/another investor – simple. Indeed, as wobbles have been spreading from the two suspensions and fears of the funds having to dump cheap commercial property to raise some money, some other such REITs have come onto our radar. There are good income yields and our £1 can buy an underlying mixed portfolio worth considerably more than that, so a very attractive ‘discount’ to the underlying asset value. Maybe M&G and Prudential should look to convert their funds to REITs to avoid repetition of the problem in the future. They won’t have to keep big reserves of uninvested cash returning ‘nothing’ just to meet prospective withdrawals either, as all of these have to do these days.
OILING THE WHEELS OF THE GLOBAL ECONOMY
So, the worst performing sector in 2019 has been oil and gas. Let’s put that into context. In 2011, the sector counted for 13% of the S&P 500 in 2008 and now only stands at 4%. Companies generally were valued similarly to others then but now there is a vast gap on a ‘multiple of book value’. Yes, there are factors including a weaker oil price than the $140 a barrel then and a present glut (which OPEC is looking to address by cutting production) but for now, yes, all of us will be continuing to use oil in myriad ways and whilst sustainable alternatives are rapidly gaining ground, oil has a good few decades ahead of it for now. Oil companies trade at 1.5 times’ multiples of book value whereas the wider US market is on an astonishing 3.5 times. Several contrarian billionaire investors are interested, including Warren Buffett. The energy sector in 2020 could be one of the big ones to bounce and analysts are expecting earnings to jump by as much as 23% – primarily because it has been either over-sold or too unloved compared to alternatives and remember, these companies still generate vast cashflows for their weighty dividends and that is after providing growing and colossal environmental and research spends on renewable alternatives and conservation. Yes, there are some investors who have decided to exit the sector totally but it is an interesting one to consider and could be a little like tobacco was at the height of the law suits and since then significant gains were made by many institutions – whether you agree with smoking or not. I’m not making either case but simply saying financially there could be some good gains and maybe, just maybe, time for some of the other US giants to slow-down and possibly slip back to more realistic long-term values too.
You will know I am against excessive short-selling of companies’ shares. However, I was intrigued to note that one of the largest institutions in the world, the Japanese Public Pension Fund which holds $1.6trillion of assets, believes that it is effectively immoral and will no longer lend shares of overseas’ companies to short-sellers. In these growing times of socially responsible behaviour, it believes it conflicts with that status. In the last three years, the Fund made $300million from this behaviour so it is a high moral stance it is adopting. Of course, the purist could say that had its holdings not been borrowed then sold against it then the values would not have fallen so…
If you are one of these, please be careful if you are taking advice elsewhere about your pension. We have found so many rogues who have moved from one firm to another and are giving spurious advice to investors in the face of the past problems they have experienced. Most clients are wise to this but we have received several instructions to transfer investments to a new firm and what is odd is that they always demand encashment of all the investments so they can place the cash in new holdings. Not only does this incur unnecessary costs on disposal but also new costs on acquisition and all I have to ask is… is it really the case that not even one, say, of fifty investments is good enough to be continued in the hands of the new recipient company – I mean, who is kidding who please?
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
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers
