Retirement Planning | IFA 66 | March 2018

For today’s discerning financial and investment professional

Trumped Up, Trumped Down?

Februar2018 March y 2018

NEWS

REVIEWS

ISSUE 66 65

COMMENT

ANALYSIS

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CONTE NTS March 2018

CONTRIBUTORS

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Ed's Welcome

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News

Brian Tora an Associate with investment managers JM Finn & Co.

Richard Harvey

10 Stepping up NS&I CEO Ian Ackerley looks at what changes have already been made to help advisory firms with an outlook for the future

a distinguished independent PR and media consultant.

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Ed's Rant Trumped Up, Trumped Down? Michael Wilson assesses the state of the US economy and stockmarket

Neil Martin has been covering the global financial markets for over 20 years.

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That was then, this is now - retirement planning Damian Davies of the Timebank takes a reflective look at how planning for retirement has changed over the years

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Brett Davidson FP Advance

A new era for retirement planning strategies Using VCTs to help clients achieve long term goals

26 Michael Wilson Editor-in-Chief editor ifamagazine.com

Sue Whitbread Editor sue.whitbread ifamagazine.com

How certain are my clients’ state benefits?

Henry Tapper takes a good hard look at the State Pension and questions how sustainable it will be in future

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Better Business Accentuate the positive; Brett Davidson with practical business tips for financial planners

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Insurance implications of the SMCR Matt Hughes summarises the details

Alex Sullivan Publishing Director alex.sullivan ifamagazine.com

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China in your hands Brian Tora analyses whether we should be worried about investing in China

36 IFA Magazine is published by IFA Magazine Publications Ltd, Arcade Chambers, 8 Kings Road, Bristol BS8 4AB Tel: +44 (0) 1179 089686

Going through changes Annabel Brodie-Smith of the AIC still sees very strong value for advisers as long as they are prepared for risk

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Dazed and Confused Richard Harvey tries to fathom out the cryptocurrency craze

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E D'S WE LCOM E March 2018

Getting to Know You Never let it be said that we don’t have our fingers on the market’s throbbing pulse Last month’s IFA Magazine feature on the cryptocurrency boom arrived just in time to see the valuations of bitcoin (and some 1,500 other cryptos) descending from the sublime to the ridiculous (if you happened to be a holder), or vice versa if you’d fancied buying some but had feared you might have been too late.

But the third is that the international community is genuinely serious about getting to grips with cryptos, and about integrating them successfully into the global financial system. The International Monetary Fund has just called upon the political community to agree a standard for regulating the blockchain process, which is really rather ingenious.

The bitcoin price, of course, rollercoastered from $20,000 down to $6,000 and back up to $9,000 by mid-February.

Scary stuff. So have we learned anything? On the whole, I’d say we have.

Taxing matters

Three awkward truths The first is that cryptocurrencies are here to stay, and never mind what the central banks might prefer.

Disenchanted millennials have rather taken to the dashing, piratical nature of the new stateless coinages - and the fact that they have no stabilising fundamentals whatsoever, apart from a fluctuating rush of people interested in buying them, isn’t going to trouble those who retort that quantitative easing wasn’t exactly a textbook exercise in wealth creation either.

The second, as we said last month, is that the investor risks are as formidable as the opportunities. Leaving the administration of a new global currency to a thousand microscopic clearing houses in cyberspace opens up innumerable opportunities for things to go wrong.

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That will presumably mean leaning on the crypto exchanges to release the secret info they hold on the wallet holders who trust them with their privacy. And it won’t be music to everyone’s ears.

Least of all, the tax evaders, who claim to be developing a new peer-to-peer cloud-based trading system that doesn’t use exchanges at all. (Does that sound like a safe idea to you? No, me neither.)

But anyway. You’ll have figured out that tax revenues will be one of the main drivers behind this governmental effort. And that, on the whole, governments are really quite keen on finding ways to levy income tax and capital gains taxes on the proceeds.

There’s only one problem.

Well, two. Given that cryptocurrency valuations are effectively a game of chance, shouldn’t they be taxed as bets rather than investments? (Which in many/most countries would mean not at all.) And if HMRC won’t buy that argument, how will it react when I ask it to allow me capital gains tax relief because I’ve had a bad year on the crypto markets?

I’m not holding my breath.

And so to tax year end This month, with the end of the tax year bearing down hard on us, IFA Magazine is taking a look at the modern day scenario for retirement planning. The autumn Budget (which is the only Budget now, remember?), managed to resist the temptation to tinker yet again with pensions legislation, but there’s still an important message for advisers as investors face the tighter lifetime allowances (boo) but broader opportunities in alternative investments such as EIS (hooray.) We’ll spare you the technical details as you’ll be well aware of those by now.

Instead, Damian Davies takes a retrospective look at how retirement planning advice has changed so dramatically over the past few decades. His conclusion that the role of professional advice has never been so important given all the complications, technicalities and constant changes that have such an impact, will no doubt meet with nodding heads, but seizing the opportunity to extend advice to a wider section of the population remains a big challenge.

Henry Tapper gets to grips with the core questions about the state pension – is it fair to women, is it biased toward the boomer generation, is the triple lock safe, and how is the government going to make ends meet as the financial belt tightens?

With bated breath Michael Wilson Editor-in-Chief

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N EWS March 2018

ETP investments top $5 trillion Forget about all that equity market uncertainty, the exchange traded funds market seems to be saying. The global value of exchange traded products (consisting of ETFs, exchange traded commodities and exchange traded notes) has leapfrogged the previous expectations of a $5 trillion valuation by 2020 to reach a new alltime high of $5.15 trillion in January 2018.

That’s according to new data from data provider ETFGI, which reported on 9th February that global holdings had soared in January by a record 6.47%, or $313 billion, from a previous record of $4.84 trillion in December 2017. Net inflows of $106 billion (also an all-time record) were 68.6% higher than a year previously, ETFGI reported.

And, as expected, the bulk of the new money was happening in equities. Assets in Equity

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ETFs/ETPs increased by 7.49% in January, ETFGI said, which significantly outpaced the 1.73% increase recorded in Fixed Income ETFs/ETPs during the same period.

More than half of the equity inflows went to the world’s top 20 ETFs by net new assets, which collectively gathered $62.6 billion in January 2018. The SPDR S&P 500 ETF Trust (SPY US), which was celebrating the 25th anniversary of its original 1993 launch, scooped $19.8 billion of new money to take its global capitalisation to $307 billion.

That, of course, was before the equity market correction of February 2018 set in. Not to mention a sharp rise in bond yields. So what’s the situation been since then? We await the February news with eager anticipation.

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N EWS March 2018

Gushing The United States is on course to overtake Saudi Arabia during 2019 as the world’s biggest oil producer, the Paris-based International Energy Agency reported in mid-February. US crude production, mainly from shale oil deposits, rose by an extraordinary 1.3 million barrels per day during January against its year-earlier levels, prompted by a revival of oil prices which has made many previously unprofitable wells viable again.

That contrasted with the experience in many producer countries, which had seen their production and investment throttled back by poor oil prices during most of 2017.

The difference, the IEA said,

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was that US producers had responded to the crisis period by improving their efficiency.

Global oil consumption, says the IEA, will grow by 1.4 million b/d in 2018 to reach 99.2 million b/d. But here’s the rub – fully 59.9 million b/d, or 60.4% - will be met by non-OPEC sources.

That may be partly due to the uncertainties around production in OPEC member Venezuela, whose economy is sliding into chaos. But there have also been market reports that Russia was renegotiating a 2017 agreement signed with the Gulf States to limit production in an effort to tighten the supply market.

Could that imply a relaxation

of the supply scenario in the second half of 2018?

Certainly, other criteria seemed to point toward strong oil prices, at least for the time being. The OECD had reported in January that commercial inventories had fallen by 55.6 million barrels during December - the steepest drop since February 2011 - to just under 2.9 billion barrels. Which would be equivalent to one month’s global consumption, although rather more for the OECD countries alone.

The IEA’s annual oil market outlook is due for publication on 5th March. It should make for interesting reading.

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N EWS March 2018

Housing strong, except in London UK house prices saw a surprisingly strong 3.2% annual rise during January 2018, says a report from the Nationwide building society – overturning expectations that growth would slow from the 2.6% annual increment recorded in December 2017.

The average UK house price in January was £211,756, the Nationwide said – the highest on its records. That came as a surprise to Robert Gardner, Nationwide’s chief economist, who said that it came in the face of “signs of softening in the household sector in recent months”.

The reason, he said, was simply that market supply had slowed to a trickle. But he also suggested that the subdued pace of new building activity was also putting a squeeze on the property scene which was supporting prices.

Other sources were more inclined to pin the blame on economic uncertainty, often connected with the Brexit negotiations. Howard Archer, chief economic adviser at the EY Item Club, declared that the squeeze on consumers’ purchasing power remained “appreciable going into 2018, and [was] likely to only gradually ease as the year progresses”. On the whole, he added, “Despite January’s stronger-thanexpected data, we maintain the view that house prices will rise a modest 2 per cent in 2018.”

Standard & Poor’s, on the other hand, estimated that 2018 house prices would grow by no more than 0.5% in 2018 and 1.5% in 2019.

Ironically, the Nationwide’s survey coincided with The Royal Institution of Chartered Surveyors’ report for December, which said that central London prices were under more pressure than at almost any time since 2009. And that £1 million plus properties across the UK were selling at discounts of 5% to 10%, and were failing to reach asking prices in two thirds of all cases.

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N EWS March 2018

Retirement? Not for me, thank you, I’m far too busy!

Financial Planner Marlene Outrim (pictured), who is Founder and Managing Director of UNIQ Family Wealth, has written her first financial planning book aimed at consumers. The book is entitled “Boomers: redefining retirement”.

Marlene has been advising people for many years on how they can achieve their life and financial goals by planning effectively for their future. In her view, we are no longer a generation who are looking forward to a more traditional retirement

- the pipe and slippers idea, or who are relieved to be reaching the end of our working life. As a result, she has put pen to paper to highlight how retirement can be the start of an exciting new phase of life.

Her book gives examples of inspiring 60, 70, 80, even 90 something year olds who are starting to really live their lives when they should, in theory, be slowing down.

Nick Cann, former CEO of the Institute of Financial Planning says: “This is a very interesting read, positive, full of practical tips and ideas, as well as useful information. It will act as an inspiration for retirement. For those moving on to this next stage of their life or already in it, this is a book I would strongly recommend.”

Outrim is holding an official book launch at the Off the Wall art gallery, Cardiff, on International Women's Day(#pressforprogress) - 8th March 2018 from 4-6pm with afternoon refreshments.

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IAN ACKE RLEY March 2018

Stepping up Ian Ackerley is a man with a mission. A year ago he became the new Chief Executive at NS&I and has been working with his team to build stronger relationships with professional advisers. He’s been talking to Sue Whitbread about what changes have already been made to help advisory firms and how future plans are shaping up

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IAN ACKE RLEY March 2018

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How has your first year as Chief Executive at NS&I been? What was your experience up to that point, which led you to the role?

Have you had experience of dealing with the adviser market in the past?

It has been a busy and enjoyable first year. We’ve launched two new products: Investment Guaranteed Growth Bonds and Junior ISA; and brought two products back on sale: Guaranteed Growth Bonds and Guaranteed Income Bonds. We have also made good progress on improving our infrastructure.

NS&I has a great culture – very welcoming, focused on doing the right thing for the customer and with a real drive to improve our proposition and service.

I have had substantial experience of the adviser market over more than 20 years. I started my career in UK financial services at AXA Sun Life where I went on to be Managing Director of Sun Life International – a business which was entirely focused on the adviser market in the UK and selected overseas countries.

Since then, I’ve worked at a number of life offices with a strong adviser channel focus.

Financial services is complex and it is clear that advisers have a key role to play in helping people make the right decisions.

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How important is the adviser market to NS&I? How are you planning to develop stronger relationships with advisers, planners and paraplanners for the future?

We currently have around 700,000 customers with over £50,000 invested with us and more than 8,000 of these customers have over £1 million invested. Clearly, many of these customers will have sought financial advice.

If you add up the value that these 700,000 customers hold with us,

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this equates to around 40% of the money invested with NS&I. Therefore, it’s fair to say that advisers could have influence over a significant amount of NS&I funds, so it’s easy to see why they are important to us.

In the past, NS&I used to have a more distant relationship with financial advice firms.

However, NS&I’s unique 100% security guarantee and products like Premium Bonds are important features that generate interest from advisers and their clients. For all these reasons, it’s vital that we continue to strengthen and deepen our relationship with professional advisers and their teams.

In recent years we’ve launched a new dedicated website for advice firms (nsandi-adviser.com) and have had our Adviser Helpline (0800 092 1228) available for a number of years now.

We have also stepped-up our engagement on social media and increased the number of events we exhibit or speak at, including being the headline sponsor of the PFS awards for the last two years. All of this has resulted in an advocacy score of about 8/10 (‘how likely are you to recommend NS&I?’). This is the highest it’s ever been.

However, the future is where it gets more interesting. The engagement activity is all very well, but it won’t mean much without a good service offering to advice firms. Some advisers have told us that they find our service poor in comparison to other providers, with processes that cause frustration for them and their clients.

to find out information like valuations, maturity dates, confirmation of transactions processed, etc. To enable this new service, at the same time we will be launching an indefinite Client Letter of Authority template as well as a new Terms of Business agreement between NS&I and each advice firm.

• In September 2018 we plan to launch online access to information on clients’ NS&I holdings via a secure log-in on the Adviser Centre website.

Looking longer term, we will give serious thought to transactional access and connectivity with platforms and advisers’ back office systems.

In addition to the servicing enhancements, we are looking to grow our Intermediary Relationships team and get out into the regions a bit more, meeting with advice firms face-to-face.

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Which resources do advisers and paraplanners tend to find most useful?

Generally speaking, our dedicated website for advice firms, the Adviser Centre (nsandi-adviser.com).

The good news is that we now have specific plans in place to significantly enhance our service to advice firms:

However, we have about 8,000 advisers, planners and paraplanners who have registered to receive our news updates via email.

We tend to send out about one a month, reserved for the most important announcements, and advisers and their colleagues can register for these on the Adviser Centre.

• By March 2018 we will be launching access to information on clients’ NS&I holdings via the Adviser Helpline. This will enable all staff in an advice firm

Advice firms also like using the ‘NS&I Quick Guide’ – a handy one page overview of our product range.

This can also be found on the Adviser Centre.

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IAN ACKE RLEY March 2018

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When it comes to NS&I products, which are the most popular with advisers?

In terms of the products currently on sale, Premium Bonds are the most popular (74% of advisers say they recommend them), followed by Income Bonds and Direct Saver – the latter two mostly because of their high maximum investment limits.

Other products that are very popular when on sale are Guaranteed Growth Bonds and Guaranteed Income Bonds, Index-linked Savings Certificates, and of course 65+ Guaranteed Growth Bonds were hugely popular (82% of advisers said they recommended them).

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Can you talk us through your new phone service for advice professionals?

How do you see it helping advisers and paraplanners?

At the moment, when advisers and their colleagues wish to find out any information on their clients’ NS&I holdings, they have to do everything by post and it could take 2-3 weeks for a response. In addition to this they have to supply a new Letter of Authority, signed by the client, every time they contact us for information.

The new phone and online services becoming available this year, and the new indefinite Letter of Authority and Terms of Business agreements, will ultimately result in almost instant access to the information, and result in an improved service to the advice firm and the end customer.

Also, all staff in a firm will have access to these services, not just the advisers.

All of this is designed to make NS&I much easier to do business with but there is still more to do.

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As use of platforms continues to grow amongst the adviser community, is there any possibility that NS&I product range might one day become available via online platforms?

After we have launched the servicing enhancements this year, and registered the vast majority of advice firms for these services, we will then turn our attention to access via third party platforms and back office systems.

We know that the vast majority of new business that advisers conduct is done through platforms and currently NS&I is not included in this channel, so we know it’s something we need to give serious thought to.

For NS&I, this means we have to continuously improve our service to customers and advisers to make it easy and convenient to do business with us. In terms of our core proposition, we have to innovate to make sure it remains relevant and attractive so that we can retain our existing customers and attract new ones. That’s lots of change but we must also maintain the trust of our customers and make the most of our strengths including Premium Bonds and our 100% HM Treasury backed guarantee.

Some further research needs to be carried out on this subject first though, as it is a fast changing world and Open Banking could potentially make some of it easier – certainly in terms of making information available. However, we will also consider transactional access as part of this too.

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What does the future hold for NS&I? What is your vision for the group going forward?

This is an exciting time for those of us working in the savings and investments industry. Open Banking brings the potential for substantial change with new propositions that will make the sector more competitive. The prospect of further base rate rises should create an environment in which the reward for saving will increase and this is important given the impact of changes to pensions rules which is resulting in people converting their pension pots into cash. Expectations of customer service (for both customers and advisers) are rising all the time, often driven by their experiences in other sectors (e.g. online retailers).

Ian became Chief Executive of NS&I in March 2017.

Immediately before that, Ian worked at Barclays which he joined in 2011 as Director of Investments and where he was responsible for Barclays’ UK retail investment business.

Ian has over 20 years’ experience in the UK retail financial services industry.

His previous roles include Managing Director of Investments and Pensions at Virgin Money, Managing Director of Sun Life International and working as a consultant with McKinsey & Company.

Ian has an honours degree in Psychology (BSc) from St Andrews University and holds an MBA from London Business School. He began his career with Royal Dutch Shell.

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ED'S RANT March 2018

Trumped Up, Trumped Down?

Michael Wilson hears a wailing and a gnashing of teeth.

Is it all just in his own head?

Can you hear that funny noise?

That high-pitched whining sound, like a gearbox that’s been pushed a bit too hard and needs to cool down for a bit? That faint, disturbing chatter of invisible teeth? That ominous grumbling from deep in the works that says that this really shouldn’t be happening, but somehow it is?

Yes, I thought so. It’s the unmistakeable sound of sourfaced newspaper pundits trying their very hardest to process the fact that President Donald Trump’s America has somehow failed to descend into chaos under the new management. And that, despite the worst efforts of an administration that’s

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still at war with itself, the US economy is genuinely growing at an annual rate of more than 3%. And that unemployment is down around its historical low, at just 4.1%. And that US businesses are in good heart.

And that, barring major political accidents, Donald Trump is heading into next November’s mid-term elections with an economic record that certainly looks impressive. Even though his 33% satisfaction ratios among the population at large are the lowest for any first-term president since records began.

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ED'S RANT March 2018

Drat and double drat, as Dick Dastardly from the Wacky Races would undoubtedly have said (am I showing my age here?). Time to think again, Muttley. But which of us will be over the mountain and across the finish line first? Aaah, that’s still to be decided…..

Party mood Let’s start by being generous.

Donald J Trump inherited an economy in which nobody had been doing much for the little man (or indeed the hardworking middle class) for more than twenty years. Real incomes for most had stagnated or fallen, while the share of the profits going to the top 1 per cent continued to increase. And his peculiarly distant Democrat predecessor, the heavily intellectual Barack Obama, had failed to communicate any real level of engagement with the growing concern.

Looking back, it was an open goal. Trump didn’t need to produce proof of his plans to reinvigorate the slower parts of the US economy when he

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approached the US electorate in November 2016; all he needed to do was promise to improve the lot of the working man, and the blue-collar states would fall into line to vote for him.

For a while, we cynics were able to sniff that the Trump plan would come to nothing as soon as the average American understood that there was no plan, apart from handing out tax breaks to the employers and borrowing private sector money with which to rebuild the country’s tattered, outdated transport infrastructure. At the same time, we said, the cost of imported consumer goods would soon rise, thanks to Trump’s import tariffs and the much weaker dollar which would be bound to ensue.

But then something awful happened. The dollar weakened by up to 15%, the import tariffs started to bite, and Trump’s tax reform was passed by Congress. And even though its benefits went straight to the 1 per cent rather than to the workers, nobody noticed.

The party started, retail sales soared on a tide of cheap new credit, and American households’ savings ratio dropped from a ten year average of around 6% to just 2.4% in December 2017.

That wasn’t as bad as Britain’s pathetic 1.7%, but we at least had the excuse that our economy was under pressure.

Smoke, mirrors and the dollar And all the while, the stock market boomed, of course.

President Trump hasn’t hesitated to claim personal credit for the 18% growth in the S&P 500 index in the 13 months since his inauguration, but he tends to forget that President Obama presided over a somewhat more impressive 176% growth during his 96 months in the White House, while Bill Clinton had made 211%. (An unlucky George W Bush had seen the index fall by 39.5% during his blighted reign.) Keep hold of those figures, folks, and we’ll see how they compare as the future unfolds.

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ED'S RANT March 2018

One of the points that Americans forget is that their enthusiasm for Wall Street doesn’t always translate to foreign investors.

The dollar slid by 14% against the pound during the 13 months to end-January, and by 15% against the euro. Which would have meant that few equity investors would have seen anything to match what they could have got by staying in their home markets. Hmmmmm.

Does Trump see the weak dollar as an unwelcome aberration? It seems not, if Treasury Secretary Steve Mnuchin’s boast to the January Davos conference is anything to go by. He is absolutely right to claim that a weak greenback is helping the trade balance by making American exports cheaper while imports get more expensive – but to portray it as a policy tool, as he did, is bound to sound a little unfortunate when it comes from a government that has railed so hard against both Germany and China for being “currency manipulators”.

Mind the gap That accusation probably won’t trouble the White House too much. Apart from cars, where most foreign-owned US market models are built in America, the country has little enough to fear from foreign imports of consumer goods and services.

It’s a great big country, and it’s hugely self-sufficient, especially

now that it’s pumping its own oil. But what’s this?

Is the Prez doing anything wrong?

As we were finalising this article, the news broke that the US trade deficit (including services) grew by 12.1% during 2017, reaching $566 billion – the biggest since 2008. And $375 billion of that was with China! So was that because of wicked Chinese currency manipulation? It seems unlikely, given that the renminbi had strengthened by 5.5% during 2017.

I’ll come back to this theme in a minute, but bear with me while I look at the question of import tariffs and so forth. As we’ve said, there are almost none in force at the moment – give or take a recent tax on Chinese solar panels and washing machines.

My guess is that Trump has no wish to deliver on his threats to impose 35% trade tariffs on China, Mexico or elsewhere, because that would force up consumer prices in a way that would hurt his prospects in the November elections. And it’s the poorest who buy the most cheap goods, obviously.

Is there a better explanation, then? US commentators are saying that America’s import surge ($2.9 trillion, against $2.3 trillion of exports) was the result of stronger consumer purchasing. And that’s where it gets interesting.

On the minus side, analysts are pointing out that the imbalance didn’t reflect the impact of Trump’s amended tax plan, because it hadn’t properly taken effect yet. And nor did it reflect any major changes in trade policy, because apart from a lot of huffing and puffing, the President had largely confined himself to threats which hadn’t been translated into policy. The inference that’s being made on all sides is that the retail party atmosphere is likely to grow bigger this year, and that the trade balance will worsen precipitately.

It wouldn’t be surprising if it all changed after November though.

After all, protectionist trade practices are not entirely without president. (Sorry, precedent.)

Ronald Reagan ran a very severe set of “voluntary” (ho ho) quotas against invading Japanese car and motorcycle manufacturers in the 1980s – indeed, new Hondas became so scarce in California that people were paying well over the odds for them.

But Reagan was trying to achieve something very specific – namely, to give the antiquated and lazy US auto industry a four-year designated break in which to get its act together and start producing competitive models. And when the protection period was over, he

Proper consumer-led inflation is something that the developed world has hardly seen in the last quar ter of a centur y. Since the mid-1990s, all the talk has been about how to aver t the threat from deflation

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ED'S RANT March 2018

phased out the quotas.

Does Trump have the selfdiscipline to do that?

Reagan was also a president who sought to enliven his country’s economy with a truly massive set of tax cuts and subsidies. After all, the Keynesian principle had worked well enough for America during the 1930s depression, so why not? But where the Gipper differed from Trump (and from George W Bush, for that matter) was that his largesse was intended only for a limited period – after which Reagan raised taxes again during his final term. If there are any clear signs that Mr Trump intends to pull back the $1.5 trillion on subsidies which he’s just handed out, then we’d be glad to hear of them. Until then, US businesses are surely running on an intravenous sugar drip?

Inflation: the bogeyman returns And so we (or rather I) return to my point. The latest figures suggest that ordinary Americans are spending their substantial pay rises (up by an average 2.9% in January) on having a good time.

This isn’t the place to debate whether the White House would have done better to spent its cash on health services instead – it’s simply where we are. But the big problem now is how the country will cope with the growing inflationary pressures. It’s all going to be a tough challenge for the new Federal Reserve chairman, Jerome Powell.

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Mr Powell, who turned 65 the day before his inauguration on 5th February, has got a lot to do. On the one hand, he needs to rein in the Trump spending boom with a tighter bank rate policy, but without hurting the self-same Trump spending boom on which the November election may hinge.

If Mr Powell raises rates by a lot, he will put a huge dampener on US businesses’ plans to develop and create new jobs. More importantly, though, he will boost the value of the dollar, which the boss doesn’t want because it’ll make the trade deficit worse in a year when it’s already looking threatening. One way and another, it would be quite surprising if Powell’s career path runs any more smoothly than his predecessor Janet Yellen’s.

But here’s an interesting thought.

Proper consumerled inflation is something that the developed world has hardly seen in the last quarter of a century.

Since the mid-

1990s, all the talk has been about how to avert the threat from deflation. (Briefly, the worry is that if consumers think their new sofa will be cheaper next year, then they’ll defer the purchase and the sofa market will go through the floor, so to speak.) So are we ready for a new era? And do we even have the outdated skills in the financial cadres to know how an old-fashioned inflationary spiral works?

For enlightenment, I checked out the original prophet of the low-inflation world. Roger Bootle, who is now the executive chairman of Capital Economics, first shook up the world with his 1996 tome “The Death of Inflation – Surviving and Thriving in the Zero Era”, which was pretty much the set text on the subject until about three years ago, when he more or less declared the idea dead.

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ED'S RANT March 2018

In a rather fine article he wrote for the Telegraph back in 2015 entitled “Dead and buried – but how soon will inflation return again?”, the scholarly and careful Mr Bootle explains why he felt it was time to bury his idea. The rise of China, he says, has upset the traditional balance between the great economic powers by adding a new, powerful and “disruptive” force. (That’s my choice of word, not his.)

As the severely rocking boat has grappled with its new occupant, it transpires that the new entrant is becoming rather rich, and suddenly it’s looking for places to invest its money, for a decent return please.

“That would be enough to raise the growth rate of aggregate demand quite decisively.

Central banks would then shift away from nervously trying to boost demand to again seeing their job as restraining it.

Once that shift has occurred, interest rates and bond yields will again be a few percentage points above inflation, thus giving a significant positive real interest rate.”

I doubt that Donald Trump would disagree. Although his views on “rapist” China buying up US Treasury bonds would presumably be unprintable.

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Quantitative wheezing Yet this is not the whole story either. All around the world – in America, in the UK, in the Eurozone - central banks are now preparing to wind back the quantitative easing programmes of the last decade. And the chances are that we’ve all long since forgotten just how big a contribution they’ve made to lowering interest rates and suppressing inflation. We are all going to have to reset the metrics of our expectations as

this important new trend gets under way. And yes, it would be surprising if a few fringe operators didn’t come a cropper along the way. Will they be allowed to fail? You bet they will.

Calling the CAPE Crusader…

But let’s go back to the stock market, if we may. Donald Trump has declared, over and over and over, that the surge in US stock prices is the surest sign of his economic success. If he was ruffled by the deep setbacks that the Dow suffered in early February, then he managed not to show it. (Or maybe his minders just confiscated his Twitter account?)

But the fact that the sun is shining again doesn’t mean that all is necessarily well on Wall Street, or that Trump’s hubris is well-judged. The cyclicallyadjusted Shiller CAPE index, the “affordability ratio” which tracks the inflation-adjusted price/earnings ratio of (usually American) stocks over a (usually) ten year period, is still squawking a red alert which nobody seems to be hearing at present.

At the time of writing in midFebruary, the ten year Shiller figure for the S&P 500 was nudging 33, which was almost double its long-term mean of

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ED'S RANT March 2018

16.8. It was also the index’s second highest level of all time – second only to 1999, when it had topped 44 before the 2000 panic had trashed the dotcom boom and put an end to the party.

It was as recently as January 2018 that the S&P CAPE figure overtook the 1929 pre-crash level. And it certainly looks doesn’t look good against London’s more modest figure of around 18, or rip-roaring Hong Kong’s 21. (Figures for end-2017 from Barclays’ international comparison site at www.shiller.barclays.com There’s plenty of room there for caution, it might seem. But hang on, say the bulls, that’s not entirely fair. The Shiller CAPE, like any other p/e ratio, can be distorted by periods of poor corporate earnings, which can make it a lagging indicator.

And right now, the mid-2008 financial crisis is still in the ten year calculation. That ratio won’t look so stupid in the autumn when the panic has passed out of the calculations and vanished downstream.

Is there anything in this claim?

One way to test it might be to calculate a nine year CAPE instead of a ten year one, and it’s already been tried. And it showed a figure of 28, which was still

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somewhat too high for comfort.

So what’s a poor analyst to do?

Well, we could always try asking Professor Shiller himself.

(Smacks forehead. Why didn’t I think of that earlier?) You can read Shiller’s January 2018 thoughts for yourself at www.project-syndicate.org And what does he say?

Essentially, that the United States is an international anomaly, in that the historical pattern of past earnings growth, as reflected in his own CAPE calculations, doesn’t give any guide as to future profits. In fact, it’s the inverse – a poor earnings record implies that things will improve.

“That’s the opposite of momentum,” Shiller says. “It means that good news about earnings growth in the past decade is (slightly) bad news about earnings growth in the future” And vice versa!

Oh, my aching head.

The way ahead?

But I started out by trying to be generous, and I’ll try to end in the same constructive way. Let’s assume that the US economy, which is operating at very nearly full capacity, doesn’t suffer the overheating problems which bedevilled the 1970s and 1980s, and that

somehow it all works out for the best. There are two things which the world is waiting for.

The first is a commitment to better returns for employees, who have had a raw deal for many decades. That means, among other things, that company boards need to stop funnelling all their gains into their major shareholders’ pockets and start distributing the proceeds more fairly. It’s hard to see how that can be achieved without upsetting the pension funds and the institutional investors, but it’s got to happen eventually.

The second is that President Trump needs to come good on his much-hyped plan to rebuild the tatty infrastructure, and its antique industrial plants as well. From its broken-up highways to its steel mills and its heavily-lobbying oil refineries, the system is crying out for regeneration.

Trump’s intravenous sugardrip therapy may give the patient enough strength to achieve this without too much fuss. But it needs to be backed up by concerted, consistent and systematic leadership.

Which is something we haven’t seen much of lately.

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RETI RE M E NT PLAN N I NG March 2018

That was then, this is now Damian Davies of The Timebank takes a reflective look at how planning for retirement has changed over the years, and how the role of professional advice has evolved As I started to write this article about retirement planning, it got me thinking. Strangely, I started thinking about food. I’d found some food rationing coupons which my grandparents had saved from the 1940s, and it made me realise what little choice there seemed to be back then, with just the basic foodstuffs to keep body and soul together.

The quality of our standard of living has improved, and the amount of food and choice we have available now has been transformed - 24 hours a day in just about everything.

The times they are a changin’ as Mr Dylan said.

Then I started to think about the changes in “retirement planning” and whether they have been beneficial to the people needing the planning and advice? How has the advice process changed? What are we doing differently now? Is it really better than it was?

Don’t look back in anger It struck me that only in recent times, and only as far back as the 1980s, did any choice start to emerge. But did people need, or get, any advice then?

In 1980, I would argue that the scope of available advice was very limited. For most, it may only have amounted to either staying in a company pension scheme or starting a private pension. Life seemed to be a lot more ordered, set out and predetermined. People had a decent chance of working for the same company for 40 years, and the vast majority retired at age 60 for women and 65 for men.

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That was it. You finished work and you either took your company pension plus your State Pension, or else you converted your private pension into an annuity to add to your State Pension.

There was no real choice for the majority, and no real scope for advice. If someone had to convert their private pension to an annuity, then they had to choose from a menu of pension choices with or without time or dependants’ guarantees, from the same provider.

Once chosen, this was irrevocable - and it was a critical decision which a lot of annuitants were unprepared for.

Retirement was a cliff edge for most, a guillotine date that arrived, on a set day when you reached 60 or 65.

Back then, for most of the population, the general level of investment and pensions knowledge was very low, as it was for overall financial sophistication in general.

Fortunately, annuity rates were substantial,at 12% plus, so with the benefit of hindsight it seems that converting to an annuity was quite lucrative - given where interest rates and inflation are now, and given the arguable demise of annuities.

It looks and sounds disgraceful now, but that’s how it played out for the majority. Cash flow planning, for a large part of the working population, amounted to surviving from one pay packet to the next.

(Weekly of course). Of course, this still holds true for many, but the standard of general living has moved on significantly.

A new order It’s difficult to see where advice came into the equation for the masses. Those with large sums to save or invest may have used a “broker” who practised the dark arts of investing in the stock market on their behalf. At the other end of the scale, direct sales people from insurance companies at least got people thinking about putting money away for their future – although many were led into expensive plans which they didn’t really understand.

This also hints at the vast social and cultural changes which have swept through the country and the financial services sector over this period. These days, no financial adviser would dream of advising their clients without first taking them through a comprehensive engagement process and procedure to ascertain, needs and goals, attitudes to risk and capacity for loss, cash flow planning and any number of other things. Only when the adviser believes they know all about that client and their situation would they present a comprehensively researched report including recommendations to help the client to meet their allimportant goals in life. w So we can probably all agree that, with a few probable exceptions, it definitely wasn’t like that in the “good” old days. No choice, restricted markets and providers, expensive products, and very few if any retirement options meant that the majority were more or

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RETI RE M E NT PLAN N I NG March 2018

less forced to retire at a set date.

There was a dearth of advice for retirement, other than basic stuff like “you need a pension, so how much can you afford to put into a private pension plan?”

There wasn’t an advice process or procedures which would bear any type of scrutiny now. Unbelievably, the absence of qualifications needed to become an “adviser”, of of CPD, or of effective compliance checks, meant that a sales culture prevailed, rather than a service based on meeting clients’ needs.

Cue the music from Ashes to Ashes, because it does now sound like life on Mars and totally alien from the retirement planning opportunities which are now in place – and which people expect.

Not least of these are all the client safeguards and lifeboats ready to catch the ones who fall overboard.

Where are we now?

So, what has changed in regard to advice for retirement planning? And what particular areas might people need professional advice on?

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Very few people joining the workforce now will gain entry to a Final Salary (DB) scheme – the shift away to money purchase (DC) schemes has continued to accelerate. This has dumped the onus on most individuals to plan for their own retirement and how they will provide for it. Many are quite likely to slip up here, with very serious consequences.

Meanwhile mortality rates have fallen, with people living well into their 80s, and this change has had major consequences for retirement planning. Clients who expect to live longer will need to have potentially accumulated more capital if they are not to run out of money, or if they are to deal with the impact of inflation.

It’s difficult to see anyone now working for the same company for 40 years. There have been massive changes to industry, and the demise of so many old-fashioned manufacturing industries, including coal mining, steel manufacturing and shipbuilding, to name just a few.

Some, however, have had a rebirth and a resurgence – such as car manufacturing.

The State Pension age has risen dramatically for women. Those now under the age of 55 are looking at receiving their State Pension at age 68 - and who says this won’t be postponed further?

Meanwhile the numbers of people who ‘phase’ their retirement through part-time work and partial access to pension funds are likely to increase in future, due in no small part to the increase in the State Pension age.

People are more mobile these days when it comes to the world of work. This brings added complications when it comes to financial planning, because taking control of matters like income protection as well as retirement planning comes down to individual choices.

Pensions simplification has been and gone. Perhaps this was the most ill-named initiative ever?

‘Pension Freedom’ has now arrived, just so long as you meet all the rules, but it needs to be handled with care if people are to avoid running out of money too soon.

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RETI RE M E NT PLAN N I NG March 2018

Language barrier We all know that there are many different types of pensions now in existence, and lots of different ways in which people can access them.

And the jargon around pensions is a separate lexicon that very few nonfinancial services professionals will ever understand.

There is still a confused belief for many people, that pensions are an investment in themselves, rather than just a tax wrapper in which to hold investments. Often we hear people arguing that they don’t “like” pensions, and that their houses or businesses are their pensions. Many operators have been openly touting buy to let as a better way than pensions to plan for old age.

Annuities are dead! Long live flexi access drawdown! But what really is drawdown, people wonder, and how does it work? “Phased retirement and the efficient frontier”? To many, this might sound like something out of Star Trek.

These are just for starters. Let’s add in a few more complications.

How about the position regarding private pension death benefits and the taxman? Beware the bogey man, especially if you transfer from a final salary scheme and have the temerity to die within two years. Then there’s sequencing the investment of funds. Assessing risk, volatility and expected investment returns pre- and post-retirement is no easy task. Thank goodness that cash flow planning processes are available to us, but individuals who do not take advice do not usually have the advantage of using these effective tools.

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Meanwhile, back at the IFA’s offce…

Fortunately, knowledge of effective legacy planning can ensure that the transfer of wealth to the next generation happens in the most appropriate way. It can be a minefield even for professionals like us, let alone for DIY investors.

Complications from autoenrolment, work place pensions, salary sacrifice, LTAs, MPAA and maybe even the pension protection fund can all muddy the waters still further.

The list just goes on and on and on.

You know what I’m talking about, but ask yourself, what chance do the general public have here. Do they have the faintest idea of what all this means and more importantly what they need to do to plan effectively for their retirement and into retirement?

Whether they like it or not, it’s up to them to figure it out or ask someone to help them. When people say “I need a pension” what they really mean is I need someone to help me plan for my future, for retirement.

As advice professionals, we know that to navigate our way around all the different legislation we need to understand complicated technical points and a huge range of options.

It means having a considerable amount of technical knowledge and communication skill. We need to be able to articulate these complicated scenarios to a client in a way that they can understand, so that they can see quite clearly how it all applies to them. The ensuing discussion needs considered advice.

Everything I’ve listed will require advice at some point.

Stand by your families Even for those who may have a final salary scheme, social changes such as multiple marriages or partnerships with multiple children or same sex partnerships have made transferring out of defined benefit schemes something that more and more will contemplate and do.

For example, why, if you are divorced with children and grandchildren of whatever age, would you not want to try and leave them something after your death? In so many DB schemes, if you die early into retirement, your benefits go with you.

This is not something the public will (or should) stand for. Low interest rates have compounded this effect, along with greater expectations from the public. It’s my money, it doesn’t belong to the Scheme Trustees, so who are they to decide what happens to my hard earned pension? And why should it just be swallowed up because I’m single?

Think of the complexities of all the permutations around just transferring from a DB scheme depending on the personal circumstances of the person or couple involved. Mind blowing.

What chance does the average person have of trying to make an objective financial decision on what to do, taking into account all the pros and cons of the options available? I would contend, very little without your help and advice.

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Pensions are not the only fruit In the modern age of planning for retirement, advisers would be remiss not to also remind their clients of all the alternative, tax-efficient ways to save and invest that will get them to where they want to be for their retirement. It’s not just about pensions any more. In fact, with more and more limitations being heaped upon pensions, the pragmatic planner will find an ever greater range of tools at his or her disposal.

Yet again, this type of complementary retirement strategy creates another lexicon of products and choices. Most of these weren’t around at all not so many years ago. How many clients will know how all these products work and how they might assist them? Who do they turn to for advice on ISAs, LISAs, EIS or VCT? Combining the benefits of these different investments can be highly effective and is an essential part of modern day retirement planning advice.

A golden age for professional advice If ever there was going to be a golden age for financial advisers and planners providing advice to clients on retirement planning, this is it.

It has officially arrived, heralded to a large extent by the complexities and greater choice that successive governments have built into what is available out there. The choice for the

public is just breath-taking and bewildering in equal measure.

Unlike 1980, this is now an age where there is no single, one-off solution that fits the majority.

Everyone now deserves a tailormade solution to meet their financial needs and aspirations.

Are we ready for this golden age? Definitely. There are more and better qualified advisers practising than ever before, with effective processes and procedures to guide clients that can convert a basic need of “I want to be able to afford to retire and live the life I want to live” into a reality.

Advice is now paramount for everyone, yet sadly, the reality is that more and more people are being disenfranchised from the advice process through fear, ignorance or the perceived and actual cost of getting it.

Explaining the menu Let’s try an analogy. You, the adviser, walk into a French restaurant, and you find that the menu is in French. There is a reasonable chance that you (and the clients) will recognise most of what’s on there. Education and TV cookery shows have permeated our society - and by the same analogy, most of your clients will understand at least the principle of a pension.

Now, suppose that we put you in a Chinese restaurant, but it’s all in Mandarin. I doubt whether one in 500 financial advisers would know what they would be

ordering. You need help, and lots of it, and advice and guidance.

The waiter takes you over to the buffet and talks you through all the dishes on show, and you think, “that’s looks and sounds nice. I would never have thought of trying that or those two dishes would work together.”

Just think how much clients benefit from you doing this for them? And what’s more, they will willingly pay you for the privilege, once they can understand and see and feel the benefit for themselves. Planning for retirement is a key long term goal and a need which the majority will have to address.

How satisfying then, to hold their hands and navigate them through what is the modern retirement maze, to set them on the right path to achieve a comfortable retirement and gain the peace of mind along the way that having such a plan in place will mean.

As an industry - no, as a highly qualified modern profession - let’s make sure that advice is never rationed like food in the past. Knowledge and advice are probably your most valuable commodities in this golden age as everyone will need them at some point. It’s our duty to ensure that as many people as possible can benefit from the planning process as we seek to help people avoid financial problems in later life and make their money work well for them so they can achieve their goals and live the lives they want to lead.

About Damian Davies Damian established The Timebank in 2003 after being an adviser and discovering the need for outsourced paraplanning first hand. Since then Damian has directed The Timebank to be the largest paraplanning provider in the UK and is starting to grow the business internationally.

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ADVE RTORIAL March 2018

A new era for retirement planning strategies Changes to pension legislation have meant that advisers and paraplanners are looking at different ways to help clients make the most of tax-efficient investments as the tax yearend approaches. Downing LLP highlights some case study examples of how using VCTs can be used as part of the retirement planning process to help clients build up capital for retirement

From 6 April 2016, the government introduced changes to the pension tax relief system, including a new annual allowance taper for higher earners which reduces the maximum annual contributions eligible for tax relief. We consider two scenarios where advisers and paraplanners may consider the use of Venture Capital Trusts (VCTs) as part of the client’s financial plan.

Case study 1 – retirement income planning 42 year old Carlos is an employee earning £250,000 per year, making him an additional rate tax payer. He has historically contributed £2,000 a month to his pension pot, but with the annual allowance taper his annual contribution is reduced to £10,000 (at a net cost of £8,000 including 20% pension tax relief at source). Carlos would like to continue contributing £2,000 each month and decides

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to speak to his financial adviser about other ways of planning for retirement income.

Having discussed Carlos’s goals and assessed his risk tolerance, Carlos’s adviser suggests that he could complement his retirement pot by investing in a Venture Capital Trust (VCT).

She highlights the fact that VCTs invest in smaller companies that aren’t listed on a major stock exchange, so they are higher risk than typical pension funds. Carlos is comfortable with that and can take a long term view on investment returns. He is not expecting to retire until he reaches the age of 60 at least.

On hearing from his adviser that VCTs offer 30% income tax relief (up to a maximum subscription of £200,000 per tax year) and the potential for tax-free growth and income, he feels that using VCTs would help him to plan ahead for his retirement alongside his pension assets.

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ADVE RTORIAL March 2018

Case study 2 – the annual allowance taper From 6 April 2016, clients with an income above £150,000 per year will see their annual pension allowance reduced by £1 for every £2 of excess income. Those clients with incomes of £210,000 and more will have an annual allowance of just £10,000.

The maximum reduction is £30,000; as illustrated in the graph below, this will be reached by clients with income of at least £210,000, resulting in an allowance of just £10,000 in the 2017/18 tax year.

A potential solution Anthony’s adviser suggests that he could enhance his retirement pot by investing in a Venture Capital Trust (VCT). They discuss the fact that VCTs invest in smaller companies which aren’t listed on a major stock exchange.

As a a result they are higher risk than typical pension funds, however this is something that Anthony is comfortable with - it is in line with his risk tolerance. The fact that VCTs offer 30% income tax relief (up to a maximum subscription of £200,000 per tax year) and the potential for tax-free growth and income makes them an appropriate consideration in this situation. VCTs may also provide an alternative for clients aged over 40 years and who will not have access to the Lifetime ISA.

Example: Anthony is 50 years old and earns £250,000 per year, making him an additional rate tax payer. He has fully funded his pension each year in order to maintain his current lifestyle in retirement from age 60. Consequently he has no availability to carry forward pension contributions that he has not utilised in previous tax years. Historically, Anthony made a gross pension contribution of £40,000 a year as part of his retirement planning strategy and has that amount available to invest again for the tax year 2017/18. Anthony’s annual allowance will be restricted to £10,000 for the 2017/18 tax year following the changes in pensions legislation. This means he will pay more income tax and would accrue less retirement income than in previous tax years.

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Of course, these examples are for illustrative purposes only. Investors’ capital is at risk and returns are not guaranteed, tax reliefs are subject to personal circumstances and that the VCT maintaining its qualifying status and may change. VCTs are long-term investments and shares should be held for a minimum of five years to qualify for the available tax reliefs.

Any subscription should be made on the basis of the relevant product literature. Downing LLP is authorised and regulated by the Financial Conduct Authority, firm ref 545025. For more information please contact our adviser helpline on 020 7630 3319 or at www.downing.co.uk

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STATE PE NSION March 2018

How certain are my clients’ state benefits?

The State Pension is a key building block for financial planners undertaking retirement planning strategies with clients. Henry Tapper, strategy director at First Actuarial, takes a look at the details and asks how sustainable the State Pension is likely to be in future As I begin this analysis of the State Pension, the old quote attributed to Benjamin Franklin springs to my mind “in this world nothing can be said to be certain, except death and taxes”. Sadly, this did not include pensions, not even the State Pension. Behavioural science suggests that the further we look into the future, the more we crave the security of certainty. But life (and death) aren’t like that, and anyone who has ever conducted a cash flow forecast knows they are putting their finger in the air.

While we can philosophize about the “ineluctable modality of later life”, that won’t get us very far. Your clients, like all of us in fact, crave certainty and relative to other sources of retirement income, the State Pension comes up with it.

The State Pension – under the microscope If you go to https://www.gov.uk/ check-state-pension and input your Unique Tax Payer Reference, you will see something like this.

You can get your State Pension on 11 November 2028, Your forecast is

£159.55 a week Your forecast is not a guarantee and is based on the current law does not include any increase due to inflation

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STATE PE NSION March 2018

This example is the amount which I can expect as a pension from my 67th birthday, but this is not guaranteed. As the As the Women against State Pension Inequality (WASPI) have found out, the date at which state pensions are payable is a moveable feast and it moves with the Government’s estimate of life expectancy for all of us ("us"=UK population).

The WASPI women expected to retire earlier than men and they’re finding out that that advantage has been taken away from them. This is because of UK and European law which requires state pensions to be equalised. During the last 30 years, the law has changed.

Generally, the law has changed for the betterment of women, but in this case it has worked for the worse. Our retirement finances are subject to the vagaries of the law and this is one reason we must keep our fingers crossed.

Can I be sure that the Government won’t push back my retirement age (as it already has)? Well no, but the closer I get to my State Retirement Age, the less likely is it that I’ll have to wait longer. There is still a corridor of uncertainty but that corridor is getting narrower. The WASPI women claim that they found out too late about their having to wait longer and that the Government hid this information from them.

They have some grounds to be aggrieved, part of the contract Government has with all its citizens is to keep them informed.

Nowadays we have to keep ourselves informed about pensions -or as a professional adviser – you have to help your clients inform themselves. Things are liable to change and it’s not just the “when”, it’s the “how much”. At the moment, that £159.55 is good only for this year.

Annual increases The rate of basic State Pension is increased from April each year by at least the level of growth in average earnings. The current Government’s policy is that the basic State Pension will increase each year by the highest of:

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• growth in average earnings • price increases

Summary

• 2.5 per cent

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For instance, in tax year 2016/2017 the basic State Pension rose by 2.5%. But in April 2018 it is likely that price increases will be in excess of 2.5% and earnings growth even higher. As readers will know, this is known as the triple-lock; you are guaranteed (for as long as the triple lock survives) an increase in your state pension entitlement of the best of the three numbers bulleted!

Of course, it would be good if we knew what inflation was going to be, and it would also be good if we were to know if the triple lock would last forever. The truth is, we don’t know either of these things. We can only guess.

Planning ahead So far I’ve been talking about what I know about myself, because the forecast in this article is my forecast. If I scroll down on my forecast I find out more interesting information about me. I discover that the amount I can expect is dependent on my contributing more national insurance. (See diagram below) To get my final £14.20 per week, I need to work for another four years. That’s because I spent some of my life not contributing enough national insurance. I don’t owe money, I was contracted out of the state pension and so currently only have 31 out of the 35 complete years I need to get my full entitlement.

Years of full contributions

11 Years to contribute before 5 april 2028

11 Years when you did not contribute enough

It looks like the 11 years when I didn’t contribute enough gave me two full years of credits, so I have the equivalent of 31 years national insurance contributions.

This is really helpful to my retirement planning. It tells me that I have every chance of getting to my full state pension, despite being contracted out of the second state pension (what used to be called SERPS) for a number of years. This certainty I have in numbers.

Talking people through their entitlement to the State Pension is an incredibly important and rewarding part of our job. The people who I do it for, are really grateful, especially when I explain the small print and put their expectation in the context of others. One suggestion for advisers is to make sure your clients have their HMRC User ID and password to hand (and an internet connection handy) when you do!

You need to continue to contribute National Insurance to reach your forecast Estimate based on your National insurance record up to 5 April 2017

£145.35 a week

Forecast if you contribute another 4 years before 5 April 2028

£159.55 a week

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STATE PE NSION March 2018

You’ve never had it so good – the politics of the State Pension The idea of the triple-lock would have been unthinkable for much of the past fifty years.

Wage and price inflation have been far too high for far too many of these years for such a promise to be affordable.

The triple lock was introduced in 2010 by the coalition Government. It is proving very popular, especially by those in retirement (who are good at voting).

In its quinquennial review of the national insurance finances in 2014, the Government Actuary (GAD) made it clear that the triple lock was not affordable for ever. The triple lock was - to GAD - a way of getting the State Pension back up to a level where it provided everyone with a minimum safety net in retirement. We may feel that £8,325 pa is too little to live on, but it is a lot more than could have been expected – even in 2010.

The Government Actuary points out in his review that “private sector provision” and in particular its increase due to “the impact of autoenrolment” and the pension freedoms “could open up consideration of phasing options starting in 2020 for securing greater sustainability of State Pensions and the National Insurance Fund”.

This is a coded way of saying that provided we are saving more, the Government could turn off the triple lock by the end of the decade.

We may look back at this decade as the “good old days”, at least for the State Pension. The clear message for your clients is that none of us expect the State Pension to increase into the next decade as fast as it is at the moment and that the nice surprises we get when we revisit the State Pension portal, are unlikely to last. There is some certainty in that.

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What else can you expect from the state?

Most people who cannot afford to pay for financial advice will be dependent on the system of further state benefits in retirement, known as Universal Credit. However, the level of those benefits and how and to whom they become payable, is important, especially when – like me – you talk with people in the workforce who are on low incomes.

The certainty of these benefits being available is unfortunately low. The universal credit system is not properly understood because it is complex and often unfair. The acknowledged expert on these matters is Gareth Morgan (the Ferret). If you would like to bone-up, as I do, you can visit the Ferret website – http://www.ferret.co.uk.

To be fair to Government, Universal Credit is new and has yet to bed down, and we can be reasonably certain that the current unfairness will reduce over time. Nevertheless, the reality for most people on very low wages is that – unless they are very careful – they could reduce their entitlements to benefits under Universal Credit, by being seen to draw income from private pensions.

It is worth reminding wealthier clients who are concerned about the uncertainties of their retirement planning that the uncertainties for those who do not have their wealth are much greater. The increased dependency that poorer people have on state pensions and benefits in retirement are much higher than those of us with money.

There is one final point which is important, but often ignored, with regards to the payment of income in retirement.

Money arising from pensions, whether state or private, is not subject to national insurance and is therefore more valuable in the hand than “earned income”. This, combined with the increased age-allowance and certain non-means tested universal benefits (bus passes, TV licence reductions etc.) mean that life in older age is financially less taxing.

Are there risks from perceived intergenerational inequalities?

But, as with the benefits themselves, the taxation of benefits is not written in stone. Economists such as Paul Johnson are keen to point out the increasing inter-generational transfer from the young to the old which is sociologically and politically unsustainable.

While there are good reasons for Governments to reward the old, these do not include bribing them for their votes. The baby booming generation, who form the majority of financial advisers’ clients, should be aware that they cannot have it their own way – forever!

The certainty of the current benign conditions pertaining to State Pensions and benefits needs to be viewed in the light of these large “macro” considerations. In the final analysis, the nation has to ask of itself – “can we afford all of this?”. Unless we see a substantial increase in productivity (GNP), I think we can be certain that the answer to that question is “no”.

Henry is a commentator on pensions. He runs Pension PlayPen which provides advisers with outsourced pension reviews for auto-enrolment; he is strategy director for First Actuarial, which focuses on small and medium sized occupational schemes. For the first 15 years of his career he was an IFA, before becoming head of sales at Eagle Star/Zurich corporate pensions. If you haven’t come across him on social media, you don’t use social media.

Twitter - @Henryhtapper

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How do I stay ahead?

Specialist back up for my clients’ tax year end needs

We know how precious your time is as you get closer to tax year end. Our technical team is here to help you with all your last minute queries, so you can keep on track through April and beyond.

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BETTE R BUSI N ESS March 2018

Better Business Accentuate the positive Can celebrating your successes provide a boost for financial planning businesses? It certainly can, argues Brett Davidson of FP Advance, as he gives practical tips on how you can harness the power of this effective strategy You win some, you lose some.

If I ask you to tell me off the top of your head what’s not working in your business, I bet you could rattle off a dozen things fairly quickly.

However, if I asked you to tell me a dozen things you’ve achieved in the last 12 months, for many people the task is much harder.

Why is that the case?

Israeli-American psychologists Amos Tversky and Daniel Kahneman first discovered the concept of loss aversion. This shows people tend to prefer avoiding losses than making gains, e.g. it’s better not to lose £5 than to find £5. Some studies also suggest that, psychologically, losses are twice as powerful as gains.

Perhaps that’s why we remember the things that might cause us loss, our business challenges, rather than those that have brought us gains, our business wins.

My experience, working closely with hundreds of owners of financial planning firms, is that they really struggle to recall all the things that have moved their business ahead. Yet they can always see the challenges that, in their minds, remain ‘still to be done’.

As a result, if you’re not careful you can start to get weighed

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down by the constant feelings of needing to be better than you currently are. This is a recipe for depression, and it’s not helpful in achieving your business goals.

There are even some people who take pride in how hard they are on themselves; “harder on themselves than they are on others” is a phrase often touted by the successful. It sounds macho and hugely accountable.

Yet, as someone who has tried this approach, it’s eventually a little self destructive. We learn best in an environment that is nurturing and encouraging, not one in which we have a constant fear of being good enough.

What to do?

There are a couple of concepts that are vitally important, not only to achieving your goals, but to enjoying your journey while you do so.

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Take time to notice and acknowledge the good work you’ve done

At FP Advance we do this formally once every quarter at our Quarterly Review days. We review the goals we set for the last 90-day period and see how we did in achieving them.

We also check in with our business plan to see how we’re tracking against our twelve -month goals, three-year picture and ten-year target. When we can, we try to celebrate any success. We also do it as part of our weekly leadership team meeting. When we open the meeting we take five minutes to share something positive. Whilst this can also be something personal rather than business related, often the stuff that is fresh in our minds are the things we’ve achieved or walked forward on the business front. It’s a great opportunity to celebrate the small wins every single week.

We also like the break between Christmas and New Year. It’s like a natural full stop at the end of the year and it’s a great time to slow down, appreciate what you’ve got, and to allow yourself some reflection time on what you’ve achieved in the last 12 months.

2

Focus on incremental improvement

This sounds so obvious, but I’ve found it to be a very powerful tool.

I read a book on fitness called Burn The Fat, Feed The Muscle by Tom Venuto. As I read through each chapter I was struck by how Tom’s mental approach to getting fitter and stronger could be applied to any

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endeavour, including your business.

He made the point that if all we did was one more lift, jump, metre (insert your training exercise here) each day, in two years time we’d be amazing. Yet most of us quit when it gets tough and miss out on the spectacular progress we can make from small incremental improvements.

Now, as I go and lift a few weights in the gym, if I can do just one more repetition than my last workout I record it as a personal best. It’s amazing how that mindset of incremental improvement helps me stay positive and wanting to return again. This change of mindset has proved very powerful in many areas of my life, not just in the gym.

“There is no such thing as failure. Only feedback, only results.” - Tom Venuto Do the calculation for yourself. If your business currently turns over £500,000 p.a. and you grow by just 10% p.a. year on year, in five years time you’ll be turning over £805,000 p.a. and in ten years time £1.3M p.a. If your incremental growth rate is 12% or 15% it looks even more interesting.

You can do those sorts of growth numbers.

Too much, too soon

Her mother, knowing that the key to success and enjoyment is doing the practise, provided her with an incentive programme.

Every day that she practised she received a sticker. After achieving seven stickers she was allowed to rummage through a box of treasures and toys that she loved, and pick one as her reward.

This motivated her to practise, which she did. A good example of celebrating success.

Why? Because she had forgotten to celebrate the success along the way.

It had all become too much like hard slog. It was why she ended up creating the Savor the Success programme, to help other aspiring entrepreneurs. She wants to make sure they enjoy the journey along the way, rather than focusing on the end results all of the time.

Blow your own trumpet

By her mid-to late teens she had discovered her own passion for the piano and no longer needed the rewards, so they were stopped.

She had discovered that she wanted to be a concert pianist.

This was now her motivation.

The lesson here is simple enough to understand. You’ve got to ensure that you are celebrating your successes and milestones along the way; big or small. If you can get this right, you’ll find a real joy infuses all of the work that you do.

However, after several years of playing professionally, she became burnt out and quit.

See if you can celebrate a few more successes in your business, and let me know how you go.

Brett is the Founder of FP Advance, the boutique consulting firm that helps financial planning professionals advise better and live better.

He is recognised as one of the leading consultants to financial advisers in the UK. Professional Adviser magazine has rated him one of the Top 50 Most Influential people in UK financial services on three occasions.

You can follow Brett online and via social media: Twitter: @brettdavidson Facebook: www.facebook.com/FPAdvanceLtd LinkedIn: www.linkedin.com/in/davidsonbrett Website: www.fpadvance.com

The danger is in trying to do too much too quickly, and failing to celebrate your success on the way.

If the day-to-day journey itself is not fun, you can lose interest or get burnt out, and that’s not good.

If you’re already in a bit of a hole and feeling burnt out, then these concepts can be used to get yourself back on track quick smart and feeling good again about your business.

Let me give you a good example of those two concepts in practice.

Angela Jia Kim who created The Manifest Method and the Savor the Success course describes her own journey as a concert pianist: As a young child she was encouraged to learn the piano.

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SMCR I M PLICATIONS March 2018

Insurance implications of the Senior Managers and Certification Regime extension As the FCA looks to extend the SMCR, Matt Hughes, partner at JLT Specialty, examines what it might mean for firms and some of the considerations that businesses should be undertaking in advance

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Since the financial crisis, a raft of legislation has been introduced with the stated aim of rebuilding trust and stability in the financial services sector.

One particular area of focus was how risk oversight was discharged, and what standards were to be expected. The Senior Managers and Certification Regime (SMCR) was introduced to banks, building societies, credit unions, insurers and dual regulated (FCA and PRA regulated) investment firms in March 2016, replacing the Approved Persons Regime (APR).

Higher standards and accountability

The overall framework aimed to focus accountability at all levels within a firm, with senior individuals having personal accountability for areas where they have a clear and defined responsibility. The SMCR also extends to those individuals who aren’t ‘senior managers’ but perform activities which mean they could cause significant harm to the firm or its customers (‘certification functions’). As such, any person falling under the scope of the SMCR faces potential liabilities that could lead to a successful claim being made against them.

The practical implication of all of this has been that firms now have to produce a statement of responsibility outlining every senior leader’s area of responsibility within a firm; establish a firm responsibility map, which aims to show how the people and responsibilities are aligned to each other; and seek pre-approval by the regulator for any person holding a senior role to ensure their suitability.

In respect to ‘certification functions’, while the individuals performing these are not approved directly by the FCA, the firm has to certify that they are ‘fit and proper’ persons with the requisite skill and experience to perform such a function.

The reason for this according to a recent media interview with Jonathan Davidson, executive director of supervision for retail and authorisations at the FCA, was to “ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals they deal with,” while also ensuring that “senior managers are accountable both for their own actions, and for the actions of staff in the business areas that they lead.”

SMCR extension The next phase of SMCR implementation is now getting underway, with the final consultation into how the SMCR will be extended to all authorised firms nearing completion.

This extension is expected to be implemented during 2018; with the deadline rapidly approaching, firms across the sector should now be considering the likely impact of the extension of SMCR on their business and appoint a project team to prepare a plan to ensure the firm is ready for implementation. Firms must clearly understand whether they are in the core, enhanced, or limited scope regime, as well as whether an individual is ‘fit and proper’ to perform a senior management or certification function.

Insurance considerations In the event of a claim, there can sometimes be uncertainty as to whether it is a Professional Indemnity (‘PI’) or a Directors and Officers

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(‘D&O’) matter. For example, a claim against the firm for failure to act in the best interests of a client (or group of clients) would likely fall to a professional indemnity policy. However, if the allegation is made against an individual with responsibility for the implementation and discharge of this duty, the D&O policy could be called in to action.

D&O policies have historically afforded cover to Directors and Officers of the firm, which included those individuals deemed to be an ‘Approved Person’ as defined by the Financial Services Market Act 2000.

Market leading D&O policies have since been updated to reflect the new regulatory environment by making specific reference to the SMCR under the relevant definitions. This change increases the number of people who would have access to cover under a D&O policy as cover now includes employees performing these ‘certification functions’.

Taking this into account, firms may wish to review the level of their existing D&O policy limits, given the increased number of people attracting cover under the policy. The majority of D&O policies are underwritten on an ‘aggregate’ basis, meaning the limit you buy is the total amount available during the life of the policy (this includes defence and investigation costs as well as any settlement eventually agreed). Theoretically, the more people covered under a policy increases the chance of a claim and therefore the erosion or exhaustion of the limit purchased, and as D&O policies protect the personal assets of the individuals covered under the policy, a firm would rather have too much than not enough.

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Protection against cyber criminals Firms also need to make sure they are protected against ever-growing cyber threats, as they are particularly lucrative targets for cyber criminals taking into account the data they hold. Cyber insurance policies provide a number of ways to protect against the damage caused by a cyber attack, in particular the first party costs associated with repairing the damage caused by a cyber attack.

With the dual issues of SMCR expansion and rising cyber-dependency, it is vital that firms consider the risk implications and the insurance solutions available to mitigate these exposures.

With the enhanced regulatory focus it is conceivable that there is an increased chance of regulatory claims and/or investigations, while a cyber incident can be extremely damaging to a firm, with wide ranging consequences that go beyond merely the immediate aftermath. It will be vital for firms to ensure they are prepared for these growing issues in the future.

Matt Hughes is a partner in the Financial Lines Group at JLT Specialty, a leading global insurance broker and risk consultant. His experience has spanned advising market leading clients in the asset management, wealth management, insurance company and banking sectors.

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BRIAN TORA March 2018

China in your hands With concerns over recent volatility in global stockmarkets, should we be worried about China? That’s the question on Brian Tora’s mind The start of 2018 felt comfortable, with the global bull market appearing intact. The beginning of February was a different matter altogether. Spooked by a sell-off on Wall Street as news of rising wage inflation emerged, investors around the world took to their heels and volatility returned in spades. It was all rather short lived, but it did rattle a few cages.

The burning question in the aftermath of what we all hoped was a mere correction in a sustained bull market in February was, does this represent the commencement of a more sinister turn of events? The risk, of course, is that a higher cost of labour in the world’s largest economy will push inflation up and encourage the Fed, under its new boss, to accelerate the interest

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rate rises that are expected. Dearer money will not only impact upon consumer spending and business investment, it will also make equity valuations look even more extended.

Strength in numbers At the core of the bull argument for shares lies the strength of the global economy. Comments from such august organisations as the International Monetary Fund have become increasingly optimistic. Analysts clearly believe that President Trump’s tax reforms will aid growth in the US, while recently published data from China suggests that the economy there grew by nearly 7% in 2017 – the first time a year-on-year increase has been achieved since 2010.

Of course, this is still rather less than the heydays of the early years of this millennium when double digit growth was the norm (in 2007 the Chinese recorded GDP growth of over 14%), but it is impressive nonetheless. The only problem is, can these numbers really be trusted?

There are already indications that some areas of the country may have overstated numbers for the year just ended, but in a command economy like that of China, you get what the leadership is prepared to let you have.

And so to China Recent action from the government there suggests they are resigned to a slower growth rate, though not everything they have done adds to a feeling of confidence.

Earlier interference with the

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workings of the stock market was worrying, while China’s property and banking sectors still provide cause for concern. The policymakers there seem to be willing to address financial issues created by the rapid expansion in economic activity of recent years, while the environment is taking greater prominence now.

This could, of course, impact on some areas of the economy there, such as infrastructure spending.

However, on the plus side, the move to a more consumer led economy appears to be working well and there is still considerable scope for increases to the standard of living for many in this, the world’s most populous nation.

As with all forecasting, it is not possible to be sure that one of the vulnerable areas in China’s economic structures might not suddenly turn into a greater problem than feared, but so far they have proved adept at averting disasters. Recently, the Chinese renmimbi has been allowed to drift up against the US dollar in particular, perhaps a sign of greater confidence there. But geopolitical concerns could re-emerge, with North Korea a continuing source of worry.

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That China is destined to become the most important economy on the planet seems inevitable. But they are not the only kid on the block in Asia. In a recent report, Goldman Sachs was particularly optimistic for India, following a series of reforms that should add impetus to the economy in the future. Indeed, they generally considered Asia capable of maintaining a high level of growth in the coming year, with the main risks being higher inflation and a consequent increase in interest rates.

What can we expect?

Which brings us straight back to the source of the hiccup in markets in early February. You only have to read fund managers’ recent reports to realise that many are concerned that this bull market, now arguably the second

longest on record, cannot continue indefinitely. One thing is for certain in the investment business. Markets always travel too far, whichever direction they are moving. The trick is to sell before the top and buy before the nadir of a market’s fortunes, but that is much easier to say than to actually implement.

At the moment the global economic environment appears benign, with growth likely to build as the year progresses. However, investors need to be mindful of underlying trends for inflation in particular. We have become far too used to a cheap money world, with central banks dishing out cash like there is no tomorrow.

While it has arguably worked, in that the financial storm of a decade ago did not result in an economic rout, it will come to an end. The new normal could well be different to conditions pre 2008, with central banks and governments anxious not to undo the good work achieved, but it would be naive not to expect some consequences for markets. When this might happen is far from certain. Only time will tell.

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VCTs March 2018

Going through changes Were the Budget changes actually bad news for VCT investors? Annabel Brodie-Smith of the AIC still sees very strong value for advisers’ clients investing in this attractive asset class – as long as they are prepared for risk

A collective sigh of relief could be heard after the Autumn Budget when it became clear that rumours doing the rounds that the Chancellor would change the tax reliefs on venture capital trusts (VCTs) were speculation rather than reality.

All told, 2017 proved to be a good year for the VCT sector.

There was strong fundraising, performance and confirmation that the VCT tax reliefs were to remain in place for investors.

Now, at the start of 2018, the outlook remains positive for VCTs and for those who consider investment in this asset class.

They come close on the heels of the last rule changes in 2015. Like those 2015 changes, they affect EIS and VCTs alike. The rules are designed to prevent VCTs investing in ‘capital preservation’ type businesses and focus on the amount of time VCTs have to invest their money.

These are important so let’s take a closer look at what’s being proposed.

The pre-Budget rumours, however, had their effect on fundraising. From the beginning of the current tax year to the end of December 2017, VCTs have raised £462.5m. That is more than they raised in either of the whole tax years ending April 2014, April 2015 and April 2016. It’s not far away from the fundraising figures for the entire 2016/17 tax year, which raised £542m, the second highest amount ever. Clearly some advisers have made sure that their clients subscribed for their VCT shares early to avoid any potential changes to tax reliefs but the figures evidence the strong demand for VCT shares.

Ch-ch-ch- ch-changes The Budget did herald another set of significant rule changes for VCTs. These changes will mainly be introduced in 2018, with a few held back to 2019.

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VCTs March 2018

Through the looking glass First, there is a new principlesbased test for VCT qualifying investments, designed to boost investment in companies where there is long-term growth and development which means significant risk. This will be introduced before the end of the tax year when the legislation

receives Royal Assent. Whether the test is met will depend on taking a ‘reasonable’ view as to whether an investment has been structured to provide a low risk return for investors.

The condition will have two parts: whether the company has objectives to grow and develop over the long term and whether there is a significant risk that there could be a loss of capital to the investor greater than the net return.

The headline grabbing change was a boost to the annual investment limit for knowledge-intensive firms which will be doubled from £5 million to £10 million for investments made by VCTs. This is clearly designed to boost investment in innovative

and higher-risk companies.

Knowledge-intensive companies, just as a reminder, have to invest significantly in R&D and either create intellectual property or have a high percentage of the workforce with higher education degrees. VCTs can invest in knowledge-intensive companies up to ten years old rather than the usual seven years for other companies. From 6th April, there will also be greater flexibility over how the age limit of ten years is applied.

Times - they are a changin’ There was another significant rule change which will increase VCTs’ exposure to investee companies (qualifying investments). For accounting periods beginning on or after 6th April 2019, the percentage of funds VCTs must hold in investee companies will increase to 80% from 70%. In addition, from 6th April 2018, VCTs will be required to invest at least 30% of new money raised in investee companies within 12 months, after the end of the accounting period in which the funds are raised.

Back to basics These changes are clearly designed to ensure VCTs invest in the ambitious, ‘innovative companies that are the backbone of the economy’. VCTs will have more exposure to these companies, which start small but have the potential to grow into household names in the future, helping to create jobs and growth. The important news is that the generous tax benefits remain to compensate investors for the risks they take. It’s interesting to know that the majority of VCT investors tend to invest smaller amounts into VCT funds. In the 2015-16 tax year, 43% of investors made a claim for an investment of £10,000 or less.

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VCTs March 2018

So what’s the impact on investors?

The first point to bear in mind is that, as with the 2015 rule changes, the impact will be gradual rather than a cliff-edge scenario. This is because most VCT money is raised by existing VCTs. Existing VCTs already have investments they made before these rule changes, which continue to sit within portfolios and account for much of the return investors will receive in the future. But any new investments by these VCTs will be made entirely under the amended rules and this applies to any new share classes launched by existing VCTs. Risk v return Taken together, the 2015 and 2018 rule changes move VCTs (and EIS) up the risk scale, because they eliminate the possibility of certain safer kinds of investment.

Of course, some VCTs have never sought to conduct this sort of investment, and their strategies will be little changed. Octopus Titan VCT is a case in point: it has always focused on earlystage companies. The impact is perhaps greater on EIS: the government’s Patient Capital Review consultation found that a majority of EIS ‘funds’ had capital preservation type objectives, versus about a quarter of VCTs. VCT managers are very adaptable. Since the 2015 rule changes we have seen some, such as NVM, hiring new staff to refocus their businesses on the kind of areas demanded by the new rules. We’ve also seen some managers (especially those who were focused on lowerrisk investments) reduce their fundraising targets, or choose to raise nothing at all, if they don’t think they can put the money to work effectively.

It’s likely that the new requirement to invest money faster will add to this caution: raising too much, too quickly could make your performance suffer, and hence your reputation: no VCT

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manager wants that. It’s more important than ever for advisers to be alert to when fundraisings are being launched – smaller ones from popular managers will fill up in days, not weeks.

At the AIC, we’ll continue to liaise with the government and industry to ensure that this latest set of changes is implemented in a way which reflects commercial reality.

However, it’s reassuring to know that, at nearly 22 years old, the VCT industry has the benefit of highly experienced managers who have adapted to change in the past and continue to deliver good returns for shareholders. Over the past ten years, the average VCT has returned 89.5%, without accounting for the upfront tax relief. Performance in 2017 has also been encouraging.

From the beginning of the year to the end of November, the average VCT returned 7.1%.

Much of this return is in the form of tax-free dividends.

Advisers are clearly aware that when considering VCTs for inclusion in clients’ portfolios, they have always been higher-risk. The generous tax reliefs on offer shouldn’t blind anyone to the nature of the underlying investments, which are small, ambitious UK businesses that won’t all succeed.

But the VCT structure makes it easy to access a professionally managed, diversified portfolio of these businesses, with the transparency of a Londonlisted investment company and the reassurance of an independent board.

Think big Advisers can also reassure clients that they are putting their money to work where it is really needed, helping UK businesses to grow and create jobs.

An HMRC investigation in 2016 concluded that VCTs and EIS were operating as originally intended ‘in terms of how investments are used, bridging finance gaps and wider effects on investees’. An AIC report released last year showed that VCT-backed businesses had created 27,000 jobs since the first investment by a VCT, a figure likely to be much understated because data was not available for all businesses.

Let’s hope 2018 continues to be a strong year for VCTs and their investors, ultimately benefitting the UK’s smaller companies.

Annabel Brodie-Smith Annabel Brodie-Smith is Communications Director at the Association of Investment Companies (AIC). Her role is varied but chiefly focuses on communicating the uses and features of investment companies to the media, opinion formers, advisers and private investors. Annabel heads up the AIC’s training and information programme for advisers and wealth managers. This aims to increase awareness and understanding of investment companies through seminars, conferences and online training tools.

Prior to joining the AIC in November 1997, Annabel worked at Hill & Knowlton, the PR Agency. She obtained a B.A in Geography from LSE/King’s College, and an M.A from Syracuse University in New York.

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ACQUISITION AND SALES

O F I FA BUSINESSES Retirement?

Time for a change?

There are countless reasons to dispose of an IFA business, just as there are countless reasons to get hold of one.

W E A R E A S P ECI ALIST FINANC IAL S A LES, CO N SU LTAN CY AN D BR O KER AG E B USINESS. Gunner & Co.’s mission is to work directly with you, whether you are looking to realise the capital in your business, or you are looking for growth through a merger or acquisition.

We consider every business to be unique, and therefore finding the right solution for you starts with a thorough understanding of your business operations and your wish list.

Only from here can we make valuable introductions which align to both party’s needs.

If you would like to discuss options to sell, exit or retire, or acquire IFA businesses, please get in touch for a confidential discussion.

louise.jeffreys@gunnerandco.com

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RICHARD HARVEY March 2018

Dazed and Confused Life is always full of surprises but Richard Harvey confesses to finding it hard to fathom out what is going on amongst the cryptocurrency mayhem There are some people for whom inciting, and then participating in, conflict is one of life's great hobbies. Not me, squire.

As a card-carrying coward, I've always had a tactic for avoiding confrontation, which is to identify the nearest door, and exit toute suite. If I'd had to serve in the trenches during World War One, I would have been taken out at dawn and terminated with extreme prejudice.

It's not just ducking the punch-up in the pub, or crossing the road to avoid the lairy geezer with his pit bull.

It's also skirting potential nasties. And for me, and many of my generation, the league of impending malevolence is topped by the prospect of dementia and Alzheimer's disease. Hardly surprising, when one person in the UK develops dementia every three minutes.

Forget-me-not So far this month, I've come within a gnat's kneecap of forgetting my wedding anniversary (which would have generated immediate domestic nuclear winter); got togged up to join my regular weekly walking group only to discover I was a day too early; and forgot the names of people I've known for years.

Lady H has assured me that this forgetfulness is down to a lifelong propensity to multitask, cram my diary with 'To Do' items, and never just chill out and watch something inconsequential on the telly.

Anyway, hedging my bets, I thought I'd finally take my IFA's advice, visit my solicitor and draw up a Lasting Power of Attorney. Not exactly the most joyous occasion, but at least I am now assured that should I begin that long journey into mental confusion, then at least I know someone sensible is going to administer my affairs.

Confused – am I the only one?

Hopefully, that document will never have to be implemented. Because apart from mental infirmity, there's another reason why those of us born just after the war (World War Two, not the Crimean) are increasingly confused by life in 2018.

We grew up in an era when it was perfectly acceptable to biff a recalcitrant child, eat three cholesterol-packed meals a day, and smoke like a coal-fired power station. Since then, our entire existence has been turned upside down.

Social media. Online banking.

Celebrity Love Island. President Trump and Kim Jong-un.

I mean, give us a break what previous generation has had to cope with such a perplexing, fast-changing and morally-confusing world?

And now comes the daddy of them all. Bitcoin.

Even if I still haven't a scooby-doo what bitcoin is, I’m getting a strong feeling that it must be the 21st century version of the South Sea Bubble

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I FAmagazine.com

RICHARD HARVEY March 2018

Dazed - crypto what?

What on earth is that all about? Because whatever these cryptocurrencies are, lots of geeky people are apparently trading them.

By the looks of things they are already realising that what goes up must come

down. The value of these new-fangled currencies has proven to be extremely volatile of late, with some huge falls happening (can I even call them currency I wonder?). I took a look at a 90-second video on a website called bitcoin.org. A cheesily cheery American explained that bitcoin is a "digital decentralised currency", which I could keep in my "digital wallet", supported by "software which is open source".

Oh, right. Now all I need is someone to explain that explanation.

Even if I still haven't a scooby-doo what bitcoin is, I’m getting a strong feeling that it must be the 21st century version of the South Sea Bubble.

Probably because my IFA has always told me: "If it looks too good to be true, it almost certainly is".

So I think I'll just take Lady H's advice, settle down in front of the TV, and take in a Randolph Scott western this afternoon.

Always providing I can remember where I put the remote.

I FAmagazine.com

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CAREER OPPORTUNITIES Position: Employed Financial Planner Location: Sheffield Salary: £40,000 - £62,000 Per annum The business: This is an award winning, highly regarded IFA practice that seeks to build a long term, trusting relationship with their clients by providing a vast range of products and services in order to find a tailored solution for each client. They have multiple offices and are a very well-established business which is expanding quickly.

The opportunity: An experienced financial adviser is required to join a growing firm that can offer genuine career development as well as offering exam and study support.

The successful adviser will have the chance to have an existing client bank topped up by a number of the firm’s existing clients, alongside a steady lead source. A qualified and experienced paraplanning team provides support. A competitive salary and strong benefits are also provided.

What’s needed for me to be considered?

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You will be diploma qualified with established adviser/ CAS status.

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Hold an established client bank (covenants are not an issue).

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Excellent telephone manner and client facing skills.

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Driven and motivated to achieve targets.

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Track record of producing good levels of business within an IFA environment.

Position: Chartered Financial Planner Location: Market Harborough Salary: £50,000 - £65,000 Per annum The business: This is an award winning, well-respected IFA practice that seeks to build a long term, trusting relationship with their clients.

They have multiple offices and are a very well-established business which is expanding quickly and they pride themselves on their professionalism and the quality of the service that they provide.

The opportunity: The firm offers genuine career development by exam and study support, a strong client bank to service and build on, that is generating more than £100k in recurring income. A qualified and experienced paraplanning team will assist. A competitive salary and strong benefits are also provided.

What’s needed to be considered: •

You will be diploma qualified and currently hold CAS status.

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Excellent sales and presentation skills, telephone manner and client facing skills.

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Driven and motivated to achieve targets.

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Track record or producing good levels of business within an IFA environment.

Position: Technical Paraplanner Location: Sheffield Salary: £35,000 - £40,000 Per annum The business: This is one of the biggest most respected IFAs in the area. They pride themselves on their consultative approach to advice, seeking to build a long term, trusting relationship with their clients. They pride themselves on their level of technical knowledge, expertise and the ability to find the best solutions for their client.

The opportunity: Exam and study support is available for the role which will be actively involved in the back office process as a key member of the technical team.

What’s needed for me to be considered: •

Qualified or working towards level 4 diploma is an advantage.

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Previous experience within an IFA practice and paraplanning is essential.

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FCA understanding of regulations and products, and their practical application.

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Effective communication skills, professional, proactive and positive attitude.

Position: Compliance File Checker (12 Month FTC) Location: Farnborough Salary: £35,000 - £40,000 Per annum The business: This multi-award winning financial services network, is currently seeking a compliance professional to join on a 12 month fixed term contract due to an increase in pensions liability projects. The role involves remotely reviewing the suitability and quality of advice given to clients and to ensure that any identified areas of concern or development are appropriately addressed.

Duties: •

To accurately assess the suitability of advice given by consultants against the standards set by the business.

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To assess the clarity, accuracy and adequacy of consultant documentation and record keeping against the standards set by the business.

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To issue clear and accurate feedback confirming any required remedial actions necessary to avoid negative consumer outcomes.

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To ensure that any required remedial actions are completed by Consultants within acceptable timescales.

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To maintain knowledge of the compliance procedures and relevant regulatory rules.

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To maintain the technical knowledge necessary to assess the suitability of advice provided by consultants across the range of products and services offered by the business.

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Ability to identify and report potential cases of financial crime.

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To maintain records to the standards necessary to demonstrate consultant and departmental performance.

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To effectively communicate with and deal with queries raised by supervisors.

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To meet the departmental standards with regard to service standards and productivity.

What’s needed to be considered: •

To hold QCA level 4 qualification or able to demonstrate relevant experience.

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Experience working within financial services.

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Experience working within a compliance role, with experience of dealing with the FCA.

Position: Senior Paraplanner Location: High Wycombe Salary: £35,000 - £45,000 Per annum The business: This forward-thinking firm deals with all aspects of financial planning. They have strong connections with one of the largest accountancy firms in the region, are well-established and pride themselves on providing a high quality ongoing service to clients.

The opportunity: The company offers exam support and put an emphasis on personal development and progression. The role will involve working with the other paraplanners within the firm to provide bespoke support to the firm’s financial planners and clients.

Responsibilities: •

Analyse client details in order to prepare appropriate recommendations.

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Undertaking whole of market research, as required.

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Liaising with research team involved in risk and compliance to ensure that advice is compliant.

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Provide high quality technical, administrative and research support to the advisers.

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Provide input to the research manager on the suitability of new systems or procedures.

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Assist in the development of less experienced members of staff.

What’s needed to be considered?

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Previous experience within an IFA firm would be preferable.

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Level 4 diploma qualified and working towards Chartered status.

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Excellent communication skills and attention to detail.

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Ambition and drive to progress your career.

Position: Senior Wealth Management Consultant Location: London Salary: £50,000 - £60,000 Per annum The business: This is a national independent firm of financial planners, with offices across the UK. They have an excellent reputation and focus on providing a complete financial planning service for clients.

The opportunity: The opportunity here is for a senior adviser, with a professional and level-headed approach to come in and help take on a number of the company’s clients and help grow the companies AUM. They are interested in CVs from advisers with existing portfolios whether these be transferable or not. A fantastic salary and benefits package is available.

What’s needed to be considered: •

Hold previous experience within an IFA / financial planning practice.

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Must be qualified to a minimum industry standard of Level 4 Diploma qualified.

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Previous experience dealing with High Net Worth Clients desirable but not essential.

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A strong understanding of pensions and investment products advantageous.

Position: Employed Financial Planner Location: Horsham Salary: £35,000 - £40,000 Per annum The business: This is a well-established, growing practice with a great industry name. It focuses on providing a highly personalised financial planning and investment management service with the client at the heart of it.

The opportunity: They seek a financial planner with a proven track record, to service existing clients and provide high quality financial advice. As a Chartered practice, this particular business prides itself on providing unrivalled levels of service and advice to their clients, and supports its staff well.

What’s needed for me to be considered: •

Level 4 Diploma qualified and keen to progress towards Chartered Status.

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Previous experience within a fast-paced IFA practice.

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High level of analytical capability and good communication skills.

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Excellent client facing skills.

Position: Financial Planner Location: Fareham Salary: £35,000 - £45,000 Per annum The business: This is an award-winning boutique firm of independent financial advisers that offer financial planning and portfolio management service to a diverse range of HNW clientele across the UK. The firm prides itself on giving its clients the "full financial planning experience", running a cash flow and full holistic plan for all clients.

The opportunity: Due to business growth this firm has an opportunity for a financial planner to join the team to support business growth. Full back office support is provided, as well as leads, referrals and a generous bonus structure and exam support towards Chartered status/ gaining additional industry qualifications.

What’s needed to be considered: •

Hold Level 4 Diploma - progressing toward Chartered status ( advantageous).

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Previous experience providing financial advice within a regulated IFA environment.

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Comprehensive financial planning process/market knowledge.

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Experience servicing a HNW client bank and generating new business.

Position: Technical Analyst Location: London Salary: £35,000 - £38,000 Per annum The business: This is a well-established financial planning firm with 5 offices based nationally. They are looking for a Technical Analyst with experience who can hit the ground running and get into the role in an efficient manner. It offers scope for career development through to Chartered status.

The opportunity: This is a unique opportunity in which the chosen candidate will report directly to the regional administration manager to ensure a smooth client experience from start to finish. The successful candidate will conduct much of the research and analysis in assisting the consultant however will not be expected to complete entire suitability reports.

Responsibilities: •

Preparing necessary research for client reports.

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Handling both client and adviser queries and undertaking any necessary research.

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Reviewing products available to meet client needs and making appropriate recommendations.

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Undertaking review of new funds available to meet the requirements of the asset allocations and make recommendations to the directors.

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Ensuring all paperwork is compliant with FCA guidelines.

What’s needed to be considered?

It would suit an individual with paraplanning experience who can quickly take to the role.

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You will have attained the Diploma in Financial Planning as a minimum.

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Excellent IT and communication skills and the ability to deal with individuals at all levels within and outside the business.

Position: IFA Practice Manager Location: Oakham Salary: £30,000 - £45,000 Per annum The business: The firm prides itself on being able to provide a financial planning service built on honesty, professionalism and integrity. They are a bespoke firm of Chartered Financial Planners.

The opportunity: The successful candidate will oversee the smooth running of the paraplanning team and the day-to-day workings of the business.

There will be a strong focus on the management of compliance.

Responsibilities: •

Looking after the compliance for the back-office team and the financial advisers.

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Suitability report writing and fund research and direct client relationship management.

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Overseeing the work of the paraplanning/administration team and delegating tasks.

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The provision of technical support and training to junior team members.

What’s needed for me to be considered?

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Minimum of the level 4 diploma qualification.

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Ideally you will have or be working towards the advanced Diploma/Chartered qualification.

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Experience of working with a financial advisory or planning practice.

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Experience of completing compliance-related tasks.

Position: Employed IFA Location: Liverpool Salary: £30,000 - £50,000 Per annum The business: Due to an extremely fruitful period of business, this firm of independent financial planners is now looking to expand by adding a new member to the financial planning team.

The opportunity: The adviser will take on some of the company’s clients, alongside building and growing this bank further. It suits any level 4 diploma qualified professionals, whether an existing IFA with a strong book of business, or a newly qualified adviser. Leads are provided via referrals and professional introducers, with a highly rewarding salary and benefits package.

What’s needed for me to be considered: •

Hold previous experience within an IFA / financial planning practice.

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Must be qualified to a minimum industry standard of level 4 diploma.

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Previous experience dealing with high net worth clients desirable but not essential.

Position: Office Manager Location: Amersham Salary: £27,000 - £32,000 Per annum The business: The firm has over 28 years’ experience of providing regulated face to face financial advice to individual clients. They provide an honest, client-focused approach and are whole of market.

The opportunity: Due to company expansion the client is looking for an office manager who can help manage clients through the process.

What’s needed for me to be considered: •

Experience working in an IFA Firm.

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Good knowledge of financial services sector with a good Administration background.

And also…

If these specific vacancies are not exactly what you are looking for, please contact us to discuss other opportunities we may be recruiting for that aren’t necessarily advertised. Additionally, refer a friend or colleague to us and receive £200 in vouchers if we assist them in securing a new career.

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