IFA 36 by Alex Sullivan

For today ’s discerning financial and investment professional

Japan and The Fourth Arrow Cheap Oil What ’s Your Conspiracy Stor y? Chartered Versus Certified

EUROPE FINALLY CRACKS

QE, Here We Come

JANUARY 2015

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ISSUE 36

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CONTENTS C O N T R I B U TO R S

Brian Tora an Associate with investment managers JM Finn & Co. Steve Bee founder of Jargon FreePensions, and of Jargon FreeBenefits. Lee Werrell a senior compliance consultant and industry adviser. Richard Harvey a distinguished independent PR and media consultant. Nick Sudbury known for his columns in many leading financial magazines. Abbie Tanner a leading marketing consultant for financial services companies. Neil Martin has been covering the global financial markets for over 20 years. Editorial advisory board: Richard Butler, Michael Holder, Ian McIver and Mark Pullinger

01/15

THE FRONTLINE: The euro falls, the Germans turn grumpy, the Mediterranean sniffs fresh air.

6 News All the big stories that affect what we say, do and think

Oil - Collateral Damage Where’s the downward pressure coming from, asks Michael Wilson? And how long is it going to last?

21 Good Intentions New Year’s resolutions. Management guru Abbie Tanner would like to have a quiet word with you

27 From the Ground Up Heartwood’s Mark Rockliffe says we sometimes need to rethink our model to get ahead

30 Chartered or Certified? lanners are upgrading their qualifications, says Neil Martin. But which route to choose?

35 Local Hero We talk to IFA Colin Lambert about the importance of looking after clients on your home turf

38 Luxury Funds at Poundsaver Prices Our funds feature returns with Nick Sudbury looking at a sector that’s been moving into bargain territory

42 Europe: A Bumpy Year Ahead QE isn’t going to be the answer to everything, says Brian Tora. There’s a lot still to be thrashed out

Editor: Michael Wilson

Art Director: Tony Merlini

Dumping the Pensions Albatross

Publishing Director: Alex Sullivan

Whoopee, says pensions expert Steve Bee, we’re heading back toward sanity

editor@ifamagazine.com

tony.merlini@thewowfactory.co.uk alex.sullivan@ifamagazine.com

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PART

CONTENTS

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46 Pssst! Anyone for Risk? Sanlam’s Head of Marketing Giles Cross says it’s no good letting pensioners play it for 100% safety

Wanted – A Fourth Arrow? Our panel of senior analysts tells IFA Magazine that it isn’t looking clear enough yet for Japan

55 Complaints Handling Procedures Don’t look now, says Lee Werrell, but the FCA is about to get heavy with you. Yes, you

58 FCA Publications and IFA Calendar In the news, in print and in court. Our monthly listing of what’s new in FCA-land

IFA Magazine is for professional advisers only. Full subscription details and eligibility criteria are available at: www.ifamagazine.com

65 Thinkers: Gunnar Myrdal A Keynesian before Keynes? That’s what he reckoned. Decide for yourself

‘IFA Magazine’ is a trademark of IFA Magazine Publications Limited. No part of this

publication may be reproduced

The Other Side

electronic retrieval system

They don’t make childhoods like they used to, says Richard Harvey. Thank goodness

or stored in any printed or without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies. Wherever appropriate, independent research and where necessary legal advice should be sought before acting on any information contained in this publication.

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WORDS OF WILSON

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Europe Cracks It had to come eventually, of course. QE, I mean. Anyone could see that happening. Well, anyone except the Germans, that is

But then, the Germans have a historical reason for remembering what happens when you ood an undeserving situation with large amounts of liquidity. As a student in Berlin, my

If the Swiss hadn’t done what they did, it might have been the global economy that got shaken apart

elderly neighbour still bore the forty-year-old scars of watching her entire family fortune wiped out by a loose credit situation that had turned into uncontrollable hyperin ation. And the poor, demented old dear still had paranoid fantasies about the ghostly figures who walked straight through the walls of her apartment and helped themselves silently to her money. Trauma runs deep. But surely not so deep as to last 80 years? Alas, it seems so. The German protesters who are still trying to get Germany’s participation in Europe’s forthcoming €60 billion per month QE programme declared unconstitutional have sincere worries. They fret that feckless Greeks will grab the ECB’s money and then default on their bond obligations anyway. And even though the ECB has told them that it’s the recipient governments that will bear the weight of any default, and not the Eurozone’s national taxpayers, the resentment is still bubbling Maybe it always will. There’s no doubting that QE will hurt. It’s already devaluing the euro, just as it’s done for the yen during the last year. On the other hand, the financial markets love it because it will drive up export volumes and encourage

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consumer spending at home. Just look at America’s experience over the last six years if you doubt the logic of that. The odd thing, in fact, was that it took the non-EU Swiss to force the ECB’s hand. After months of shilly-shallying from the ECB, Zurich had simply decided to make QE a selffulfilling prophecy by abruptly abandoning its 40-monthold currency peg against the euro. It had no choice, it said. The two great tectonic plates, the Swiss franc and the euro, had been under such underground tension recently that something had to give. And suddenly, in the space of an hour or two, it did. With an almighty crack that resounded round the world. The fact that the Swiss euro soared by 30% in an hour before settling back to a mere 15% one-day gain told us everything we needed to know about how unsustainable the euro’s situation had become. If the Swiss hadn’t done what they did, it might have been the global economy that got shaken apart, not just Germany’s pride. Mike Wilson, Editor

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NEWS

No Stopping Us Now had delivered a swift kick in the underbelly by cancelling the Swiss franc’s threeyear fix against the euro – thus boosting the SWF by 0 in the space of an hour while knocking the European central currency into the relegation zone. And Internationally?

In theory, the Santa Claus rally should have ended a couple of weeks ago as the December rush of position-squaring tailed off and the world faced up to the grim realities of 2015 A failing Eurozone economy, a Chinese slowdown, and a global slump in oil prices that ought to have kaiboshed the oil-heavy FTSE 100 index. And the very real prospect of a hung parliament after the May elections. There wasn’t a lot of good news to be found there, was there? But what actually happened just goes to show how much you can depend on theory.

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The perilous third week of January saw the Footsie finding its way back into positive territory for the year; and the stricken FTSE urofirst 00 put on a da ling 10 in the space of a fortnight. All thanks, it seems, to the growing realisation that the European Central Bank had finally strong-armed Germany into letting it launch a round of quantitative easing. Yes, the same QE that had

given America such a tremendous boost during the last six years. But not before the Swiss central bank

The European Central Bank has finally strongarmed Germany into letting it launch a round of quantitative easing

There wasn’t much doubt that the euro and QE questions were the driving force behind the equity market’s change of heart in Europe. Not least, because both Wall Street and Tokyo both staggered and struggled in more or less time-honoured January fashion. The S 500 entered the third week of January at a sluggish 2,020, having at one point retraced all of the improvement since last October – an odd thing, you might think, since America had just announced a stunning fourth-quarter GDP growth and was otherwise full of bright shiny optimism. But then, without a bustedbut-rescued economy like the euro to give it a lift, where were the optimistic voices to come from? The dollar continues to do just fine, thank you.

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NEWS

Swiss Cheese Yes, the boot up the ECB’s fiscal backside, which we mentioned in the previous article, had been delivered in a not very timely fashion on 15 January by the Swiss Central Bank, which had cancelled its forty-month peg against the euro at no notice at all. The continental shelf between the two currencies had simply become too stressed,

Mario Draghi

it reasoned, and the tectonic

finally lived up to the billing to

fault line had been bound

do “whatever

to give way sooner or later

it takes” to save the euro

Indeed, that was probably what drove the ECB, seven days later, to announce an entirely expected 18-month experiment in quantitative easing – starting in March 2015 with monthly bond purchases of €60bn per month, and ending in September 2016. Or, as ECB president Mario Draghi put it, “until

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we see a sustained adjustment in the path of in ation . The ECB, of course, has pledged to maintain consumer inflation at around to 2 - a step which it believes is essential because there’s a very real chance of deflation taking hold in the euro zone. Technically, indeed, there had been deflation in December

201 , when year-onyear prices fell by 0.2 - worse than the 0.1 forecast decline, but almost certainly accountable to the freefall in the price of oil rather than any actual decline in consumption. Quantitative Squealing Nevertheless, the road to QE had been fraught with difficulty and a

fair bit of name-calling. Germany in particular had lambasted the idea of ‘flooding the market’ with freshly printed money – not a particularly hard thing to understand, considering the German folk-memory of 1 0s inflation, but something that was still felt by the Mediterranean states

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NEWS IN BRIEF

to be a deliberate denial of their own need for economic support. Angela Merkel, the German chancellor, had already declared to a receptive German public that she thought the QE programme would not in fact work, and had argued that it could burden taxpayers in many countries with heavy potential losses. In the event, however, Mr Draghi obtained a grudging acceptance by agreeing that the ultimate responsibility for bond-buying would be divided among the 19 eurozone national central banks, not by the governments themselves. Not that everyone was won over by Draghi’s sweetener. As we went to press,

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Angela Merkel had already declared to a receptive German public that she thought the QE programme would not in fact work

several German groups had appealed to Germany’s Constitutional Court to stop the country’s participation in the

ECB’s folly. Given that the same courts had already cleared it some weeks earlier, the chances of success seemed slim. What it will mean for the euro is a decline in its value against the dollar, the pound and – oh yes, the Swiss franc. But it ought to improve the export prospects for Eurozone manufacturers.

King Size Problem King Abdullah of Saudi Arabia died, and was succeeded by his younger brother Salman bin Abdulaziz Al Saud (79) [below]. The new ruler, regarded as a social conservative, faces a tough period of challenge as oil prices languish below $50 a barrel.

There have, inevitably, been some casualties. A couple of FX brokers went promptly to the wall, having been caught with their overextended trousers down: shares in the US forex trading group FXCM had been suspended in New ork after a 0 price fall in pre-market dealing. Ouch.

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NEWS NEWS IN BRIEF

Sweet as a Nut The first issue of pensioner bonds got off to a flying start on 16 January, with the NS&I phone lines and website both swamped by enquiries. The NS&I 65+ Guaranteed Growth Bonds, which are available only to the over-65s, pay 2.8% for one year or 4% for three years.

Global Warming Global stock markets perked up in the last weeks of January, as perceptions grew that the introduction of quantitative easing, coinciding with a healthy US economy, would usher in a period of greater calm and reduced volatility. The euro weakened by 6% against the pound during the three weeks to 22 January, and by 10% against the dollar.

Getting Sentimental UK house price sentiment cooled again in January, according to a Markit Economics survey which found that although consumers perceived a small rise in that month, their expectations for future price growth had fallen back and were well below last May’s record high. All regions had seen a sharp moderation of sentiment since then, Markit said, with London and the South West experiencing the greatest slowdown.

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Awareness: A Long Way Still to Go With April now galloping over the horizon, only one in five of the 55-70 age group say that they understand the term ‘marginal tax rate’

Only half of DC pot holders say they understand what an annuity is. And one in ten believes that the best way to minimise their tax liabilities after April will be to withdraw everything from their pension pots in a single lump sum.

new research paper, “Making the System Fit for Purpose” finds that consumers approaching retirement are ill-equipped for new pension freedoms. And that contingency plans are needed to prevent consumer harm arising from the new pension freedoms.

These are just three of the frankly shocking findings to emerge from a survey conducted by the International Longevity Centre think tank and published on 1 anuary. The

The research, supported by a consortium of industry partners and guided by pensions and retirement expert Ros Altmann, was conducted among 5,000 people aged

55- 0 who had yet to retire or to draw on their private pension wealth. The survey found the following: 5 of people with DC pots aged over 55 said that they would prefer a pension that will deliver a guaranteed income for life, rather than a plan whose value depended on the fluctuations of the financial markets. Half said that they wanted their guaranteed income to be protected against inflation. But

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disappointingly, only two in every five in this group have yet to make any retirement plan. Those closer to retirement were more likely to have made a plan, ILC says, but even among those who were less than one year from retirement, more than in 10 had still not made one. Reassuringly, perhaps, only of those interviewed said that that paying for big ticket items such as holidays or a car was the most important thing on their agendas, but another 5 said that paying off debt was the biggest priority. There was more confirmation of the risk-averse trend when the interviewees were asked what proportion

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of their pension fund they could afford to lose. The most commonly given response among DC pot holders was none at all 5 . Only thought that they could afford to lose 20 or more of their fund. The misunderstandings continued. Only 20 of those with DC pots understood what an enhanced annuity was, and only 5 said that they understood what income drawdown was. Women were consistently found to be less financially aware than men and therefore most at risk of confusion from the new pension freedoms Government’s Business Champion for older workers, Dr Ros Altmann said:

“It is clear from the research that there is an urgent need to help people understand more about how pensions work, and what their options are when deciding how to make best use of their pension funds. Even after decades of pension saving, many people have no understanding of the most important aspects of the pension system, which leaves them at risk of making poor decisions.

A Little Off the Mark Britain’s consumer inflation level dropped to just 0.5% in December, a very long way below the Bank of England’s 2% target. Governor Mark Carney was obliged to explain to the Treasury for the shortfall, which is thought to be at least partly due to low fuel prices. Everyone was feeling twitchy about deflation, which had already been indicated in the eurozone.

The opportunity of more freedom and choice in future has the potential to deliver better value from retirement savings, but much work still needs to be done to help savers understand their options.”

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The Wholesale and Nothing But The Sale British energy companies competed to slice an average of 4.75% off their consumer prices for natural gas, reflecting what they said was a fall in market prices. Consumer groups, however, pointed out that wholesale gas prices had actually halved by 50% in the last nine months.

Advice? Guidance At Last At last, some Finalised Guidance from the FCA on what we mean by advice. Or is it advice as to what we mean by guidance? Or guidance as to when we’re giving guidance? Or not, as the case may be?

Slow Boat to China China’s economy grew by just 7.4% in 2014, the slowest pace since 1990, new figures showed. New government policies have been aimed at reducing the country’s dependence on consumer credit, but the news still came as a shock to the financial markets.

The Shanghai Composite dropped by almost 9% on 19 January as the announcement appeared, although that still left it handsomely ahead on the last six months.

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The FCA Just in case you were ever in any doubt as to what you were doing and when you were doing it, FG 15/1 “Retail Investment Advice: Clarifying the Boundaries and Exploring the Barriers to Market Development” kicks the new year off in fine style. In a snappy pages, it confirms pretty much what it was saying last year about the occasions where terms such as simplified’ advice’ are used. Sounds simple. But the clarification is welcome anyway. Having spent the last six months in pursuit of responses to Guidance Consultation GC1 / between uly and October 201 , the FCA says it now has a

has restated its definitions of ‘personal recommendation’, ‘regulated advice’ and ‘generic advice’

clearer picture of where confusion has been lying when it comes to the boundaries of what constitutes advice. And with FG 15/1 it confirms how firms should interpret the boundaries of advice, and gives a summary of the feedback the regulator received. We are, of course, being unnecessarily

flippant here, because the underlying issue is serious enough. The many firms who complained to the FCA that they were uncertain as to which sorts of activities constituted advice (model portfolios? using decision trees have a valid point. And the growing development of semi-guided investment routes, which can often blur the line between executiononly and advised services, is an area which we can expect to grow significantly in the coming years. Playing By the European Rules There’s also the fact that the MiFID rules define ‘advice’ in ways that may not necessarily be

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congruent with UK practice. Accordingly, the FCA says, it has taken the opportunity to restate its definitions of ‘personal recommendation’, ‘regulated advice’ and ‘generic advice’. Broadly, it says, MiFID requires regulated advice to be of a personal nature, relating to one or more specific investments, whereas the Regulated Activities Order does not. Otherwise it is classified as generic advice. Social Media Another reason why there’s been uncertainty is that the channels of information being used by advisers are changing. How does a comment on Facebook or Twitter or LinkedIn

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stand when it comes to deciding whether or not it’s advice? And if so, is it specific or generic? Broadly, the FCA finds in this Finalised Guidance that information that doesn’t relate to any specific investments, and which is sent out to existing customers or indeed the world in general though newsletters, blogs and so forth, will generally not be considered as regulated advice. ither way, FG 15/1 provides more clarity than you’ll probably expect. In particular, one of the annexes sets out a simplified fivestage flow-chart which ought to leave no real doubt as to what the FCA means. You can find it at http://tinyurl. com/kxfvy2y

3 for O2 and EE to BT O2, the mobile communications provider formerly owned by BT, came under offer from Hutcheson Wahmpoa’s Li Ka-Shing, who bid $15.4 billion for Telefonica’s control of the company. Meanwhile, BT was in talks to buy EE. But the O2 bid was expected to come under close scrutiny from the European competition commissioners

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Bitcoins at $175 No, that’s not a misprint - we did Household Chore

say $175 . The wild fluctuations

UK households are an average of £489 a year worse off because of government changes to taxes and benefits, according to the Institute for Fiscal Studies. Changes such as VAT rate increases, rises in National Insurance Contributions and significant cuts to benefits had meant that the poorest households had lost around 4% of their incomes, compared with around 3.5% for the next poorest decile and 2.5% for the richest sectors, it said. But the middle-income sector had lost much less, and pensioners had been “relatively unaffected” because of indexation.

of the world’s first crypto-currency

Copper Bottomed ‘Doctor Copper’ suffered an unpleasant relapse as the price of copper, which is commonly regarded as a bellwether for economic health, slumped by 12%. Poor markets in China were blamed.

culminated in a catastrophic low on 14 January, having dropped 58% from the $418 being paid in midNovember - and from just $300 only a week earlier

But the real tears were coming from the ‘long-term’ holders who had bought at $1,147 in early December 2013. The Financial Times ran an interview on 9 January with Gavin Andresen, the chief scientist of the Bitcoin Foundation and the ‘CEO’ of the bitcoin culture, warning that bitcoins were dangerous “like the early internet and that people should avoid them unless they were “technically proficient enough to keep [their] computers secure’. If that sounds a little unexpected, Mr Andresen went on to say that the internet

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had eventually settled down and become respectable, and so would the bitcoin culture. What he didn’t bother to say was that confidence had just been whacked once again by the revelation that Bitstamp, Europe’s busiest USD bitcoin exchange, had just suspended its services because, as it said, it had “reason to believe” that one of its Bitstamp’s operational wallets had been compromised a week earlier. And that deposits to those addresses “cannot be honoured”

stamp of confidence that its anonymous users were hoping for. But then, that’s anonymity for you.

Gavin Andresen [below], of the Bitcoin Foundation, warned that bitcoins were dangerous “like the early internet”

The trouble seemed to be that Bitstamp didn’t know which accounts were unsafe. Not exactly the

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SOAPBOX

Colla

The death of King Abdullah [right] has caught Saudi Arabia at a bad moment, as it grapples with damagingly low oil prices. How will the new King Salman respond? And how will it impact on the international oil industry?

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teral Damage Prepare to rethink your assumptions about the global oil scenario, says Michael Wilson Please excuse me if I seem a bit more disgruntled than usual this month. It’s been a tough few weeks, and an expensive learning curve for me. You see, I thought I’d got shot of my ailing oil shares portfolio in the nick of time – well, by last December anyway – and I was really quite looking forward to the prospect of watching the energy markets drift lower for another six months, before leaping in with one of my usual spectacularly well-timed contrarian buys. But I got more than I bargained for. In the last month I’ve watched my BHP Billiton mining shares getting pummelled by the self-same bear rush that’s been trashing the oil majors. I mean, for goodness sake, what vulnerability does an Australian coal-and-gold-anduranium-and-base-metals specialist have to the hydrocarbons industry? Yes, I know that the world fell off the commodities supercycle a couple of years ago, but how could crude oil at $49 be doing this much damage to a company that makes its money by flogging non-oil raw materials to the Chinese? Memo to Self: Keep Up At The Back That was where I had my come-uppance waiting for me. This very morning, I read that BHP Billiton has chopped its drilling rigs in the North American onshore shale

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gas market by 40%, from 26 rigs to just 16. And that most of its rivals are doing the same. And that BHP was axing 20% of its international oil exploration budget during 2015, and that it was due to make ‘impairments’ of $200m-$250m to its underlying profits because it had sold some of its assets in Louisiana and the Permian basin. And that its shares had now lost in the first two weeks of January, bringing the damage since last July to 30%? Slap forehead and say a very bad word. This old fool has been in this company too long, and I’ve let the grass grow under my feet. How else could I have missed the fact that a conventional, old-fashioned mining company might have decided to chance so much of its arm on smashing up the tectonic plates of the New World? An activity which it was eminently well suited to doing, considering its expertise in every other earth-smashing endeavour? But there it was, and there it is. Anyone who hasn’t been keeping up with the energy markets over the last three years has been risking getting hung out to dry, because the global situation has been shifting in ways that would hardly have been believable five years ago. For Instance? First, the halving of the oil price in the last six months has got the economists in a twist. The last time it happened, in 2008, it turned out to be a portent of stock market and financial disasters that were to shake the world. Whereas this time all the papers have noticed is

that it’s taken 30p off a litre of petrol and chopped Britain’s inflation rate to the point where the Bank of England Governor had to apologise to the Chancellor for not letting prices rise fast enough. That’s weird. But not as weird as what it’s doing in America, where every company you meet is currently cock-ahoop about its falling energy bills, apart from the oil industry itself, obviously. And even then it’s not so bad for the oil majors, who are still sitting on enough crude oil and gas to let them wait it out until sanity eventually returns and the oil price heads back upwards again. But it’s a different story for all the tiny exploration and development companies that have been staking their claims in this 21st century gold rush. All those yee-haw oil tech companies, leveraged to the hilt and committed to a lot more than just a few picks and shovels. All those tax-incentivised ‘Master Limited Partnerships’ that were flogged to the oilunwary just six months ago, some of them with market capitalisations of below $100 million. All of them desperately hoping that West Texas Intermediate will be heading back up toward the $70-80 per barrel that they need to get their operations back up to break-even. Choose Your Conspiracy Theory And what are the chances of that? Well, it depends which conspiracy theory you believe in. For some, Saudi Arabia opened up a massive gulf last autumn

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(if you’ll pardon the expression), when it announced that it had no intention of reining back its own massive oil exports even though the world market prices for crude had crashed. For the more primitive shotgun-toting cynics in Texas, this was tantamount to open betrayal by an ungrateful Saudi royal family which America had pledged to defend militarily, but which had now set out to destroy America’s shale gas producers by pricing them into submission. A mighty act of domination by the global giant which had all the best cards in its hand. Up to a point, that’s true. Saudi Arabia has the world’s biggest oil reserves, and what’s more, they’re very high in quality and reputedly cheap to extract. So how does it look to Riyadh that America is widely touted to steal its crown within perhaps 20 years, thanks to its considerable stocks of much more expensive oil? Now consider that Saudi Arabia normally acts as ‘swing producer’ to the OPEC group – generously cutting back its production when prices are low (to create a supply squeeze) and raising it when oil gets expensive enough to permit a little profittaking. Riyadh is effectively working like a central banker to the OPEC community. Except that now, it isn’t. Saudi Arabia’s refusal to cut production in the face of falling prices is looking very damaging indeed – not least to some of its OPEC partners. The Real Cost of Production A recent study in the Wall Street Journal (http://graphics.wsj. com/oil-producers-breakeven-prices/) reckoned that OPEC members Iran and Algeria require $130 per barrel for their economies to break even; that Nigeria needs $123, Venezuela needs $117, Iraq $101, the UAE $77, Qatar $60 - and non-OPEC Norway just $40 a barrel. Poor old Russia struggles below $98, it said. But the big surprise comes from Saudi Arabia itself, which

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SOAPBOX

the researchers said needs $106 per barrel to make ends meet. Not because getting it out of the ground is expensive (it isn’t), but because the Saudi government spends its oil revenues so freely that everything would quickly crash without that sort of a world market price. If that’s correct – and we have no reason to suppose that it isn’t – then the real reason why Saudi Arabia has opted not to cut production is not what we think it is. Rather than simply trying to face down the Texans in a poker game where Riyadh has a bigger pile of chips, Riyadh is looking real disaster in the face and has no real choice but to go for whatever money it can get. If it were a farmer, according to this argument, it might eventually be in danger of having to eat next year’s seed corn. Its alternatives would be few and far between.

passes from the eldest of the original King Abdulaziz’s sons to the next eldest. And, since Abdulaziz died in 1953, you can figure the rest out for yourself. Most of the current contenders are in their seventies. Yes, we know that it was the eldest son, Salman (79), who got the top job this time, pretty much as family protocol dictated. But next time round it’ll get messy. In a break with tradition, the late King Abdullah had

That, of course, is a ludicrous extrapolation. Saudi Arabia could leverage its future oil production any time it felt like it. And anyway, a former government adviser called Mohammad al-Sabban told the BBC in mid-January that the country could easily withstand eight years or more of low oil prices, thanks to a fairly substantial set of government spending cuts and a cash pile of 3tn Saudi riyals (£527bn). That’s around £28,000 of cushion for every Saudi national in the country, by the way. Not bad. The Saudi Succession Still other conspiracy theorists point to a period of possible instability within the Saudi administration itself. King Abdullah’s death from pneumonia has now set the Saudi succession onto a new course – and sooner or later there’s going to be trouble in the ruling family. Trouble, not least, because all the remaining heirs to the throne are elderly, and factionalism and rivalry between them is rife.

As for America, I find it hard to see how the present price problem will do much more than take out some of the biggest and most over-leveraged gamblers

Unlike most monarchies, where the crown passes to the eldest son, the Saudi kingdom

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Russia’s President Vladimir Putin hasn’t dared to try and extort political concessions from the West because he can’t risk losing the only thing that’s keeping his people’s larders stocked with food

That matters, because Salman is considered to be a particularly conservative character, which does not bode well for the country’s budding democracy movement. Saudi Arabia has other tensions with America – partly over the Arab Spring (which it took care to suppress on its own soil) and partly over Syria, where its heavily Sunni, anti-Assad and anti-Iran positions took it into supporting the armed resistance against Assad - part of which has unfortunately morphed into Islamic State. Very embarrassing. Unsurprisingly, that particular alignment is effectively lapsing these days, and not before time probably – but now that IS has started talking about attacking its former sympathiser, the relationship between Riyadh, Washington and Assad has moved into John Le Carré territory. Some tinhats, indeed, are claiming that Barack Obama is secretly in league with the Saudis, and that everything else is just a cover story. For all the good that would do for both of them. Rolling Out the Risk Scenario And so the conspiracy theories roll on. It seems almost pointless to dwell on them when the thing that really stands out is how the collateral damage to the world’s oil markets is stacking up.

personally appointed his very youngest brother, Prince Muqrin, aged only 69, as deputy heir (after Salman) - thus leap-frogging a whole clutch of older brothers, all of whom who can expected to feel a bit upset. Rows are already rumoured over which concubine’s sons should take precedence over which others - and although we can expect the royal family to stay outwardly solid, you can bet that it will be boiling within.

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We’ve already seen that the worst damage is happening in single-industry states like Venezuela, Nigeria and Russia – all of which rely horrendously on oil and gas revenues. Nigeria alone gets 98% of its export earnings and more than 80% of its government revenues from oil and gas - which might explain a lot about the government’s present mess. Russia’s President Vladimir Putin hasn’t dared to try and extort political concessions from the West because he can’t risk losing the only thing that’s keeping his people’s larders stocked with food.

And here in Britain, with North Sea oil contributing so much to the economy of a certain northern country, this year’s 50% cutback in exploration, drilling and support activity is going to make life exceptionally difficult for Nicola Sturgeon – with oil towns like Aberdeen feeling the initial pinch, but with the central government coffers taking the strain as the year progresses. As for America, I find it hard to see how the present price problem will do much more than take out some of the biggest and most over-leveraged gamblers. Unlike virtually every other country we’ve mentioned so far, the United States has a truly diversified economy with a mobile, solvent financial system that can lay off most of the future risk in one way or another. But what if the low crude price sticks for another three years, as BP’s boss Bob Dudley forecast only the other week? That’s a prospect that will overturn many of our assumptions about the robust nature of the oil industry’s finances. And beyond that? Can the alternative energy suppliers survive unscathed, with oil at $50 a barrel chopping away at their already weak state of price-competitiveness? What if a slowing world economy (down to 3.5% growth in 2015/16, says the IMF) should decide that it simply has other priorities right now than spending trillions on new energy sources? We are in a new situation, and it would be a reckless commentator who pretended that we can expect a rapid return to business as normal. The convergence of economic, geopolitical and scientific factors is set to test everyone’s mettle, and the old assumption that the laws of energy supply and demand will resume their normal functioning deserves to be at least examined closely, and very probably challenged.

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27/01/2015 12:36

G U E S T F E AT U R E

Januar y 2015

Good Intentions Here comes February. Whatever happened to those New Year’s resolutions, asks Abbie Tanner?

I recently read a staggering statistic. Despite being created just one month ago, around 92% of all New Year’s resolutions have already failed. I find this shocking. So it got me thinking - where do people go wrong? And what makes a successful New Year’s resolution? Apparently, around half of the UK population set resolutions for the coming year> But, as shown by the stats, very few are successful. So how about you and your business? Now that the festive glow has worn off, you’re back at work and the cold weather has set in, are you struggling to commit to your New Year’s resolutions? What can you do to buck the trend and make 2015 your best year yet? How to Set Yourself Up to Fail Firstly, let’s look at why resolutions fail in the first

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place. According to my research, you are setting yourself up for failure if you: n

Set unrealistic or unattainable goals. Often people set lofty, unreasonable or downright impossible resolutions. Then, when they don’t achieve the results they are after they berate themselves or - and possibly worse - they continue down the path they’ve always travelled and their life remains unchanged.

Have vague aspirations rather than focused goals. A resolution like ‘I want to get fit and healthy’ is too vague. For each goal you need a specific target, which is to be achieved within a certain timeframe and ideally linked to a new habit. For example ‘To get fit, I will run 4 days per week for a minimum of 20 minutes’.

Try to achieve too many goals. Focus is incredibly difficult when you attempt to achieve too many goals at once. A friend of mine rattled off ten resolutions when we caught up last January. Come December she had achieved just one. Rather than a reflection of her personality or lack of commitment (she is both incredibly motivated and successful), I fear she simply tried to achieve too much over the course of the year on top of her usual commitments.

Don’t commit 100%. Achieving any goal takes time, energy and willpower. Often we pay lip-service to resolutions by jumping on the bandwagon with everyone else without truly committing to the end goal.

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G U E S T F E AT U R E

Januar y 2015

Are too rigid. Not allowing any flexibility and creating a ‘win or lose’ sum game will set you up for failure. Life can - and will - get in the way at times. A rigid mind set makes it easier to give up rather than focus on getting back on track.

Procrastinate. ‘Tomorrow I will start...’ or ‘when I have more time I’ll…’ or ‘when the weather gets warmer I will...’ <insert goal here>. Sound familiar? These are all excuses that rob you of the time you could be committing to achieving your goals. Start today, even if it means just taking the first initial step.

Doing it for someone else. Self-motivation is key. You need to ‘own’ your resolutions and want to achieve them for you, nobody else. No matter how much the person you are doing it for means to you.

Have no accountability. If you haven’t written your goals down or told anyone - friends, family or colleagues - you are

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not accountable for the outcome and therefore more likely to fail. Keep your resolutions visible throughout the year. Having them hidden away in your bottom draw will only surprise and remind you the next time you spring clean.

Be realistic. Make sure your resolutions are SMART Specific, Measurable, Achievable, Realistic and Timely) and remember that change doesn’t happen overnight. You need focus. Set small, realistic and achievable goals then rinse and repeat. If you’re an app junky check out Goal tracker: SmartGoals Pro, an app designed to keep you on track irrespective of the goal(s) you’re seeking to achieve.

Create habits. I think this quote from Aristotle says it all: “We are what we repeatedly do. Excellence, then, is not an act, but a habit”. Once you have defined your goals, set about creating real change by establishing habits. For example, rather than ‘I will get healthy’, create a habit of substituting your daily morning pastry with a piece of fruit. If your goals are linked to new habits, you are 50% more likely to succeed. James Clear is a great resource for techniques to transform your habits.

How to Set Yourself Up for Success in 2015 What can you do differently to give yourself the best chance of achieving your goals this year? Here are my seven steps to success (along with a few resources you can use): 1.

Adopt an innovative mind set. Rather than taking your present situation as a given look for one (or more) ways to take a step back and see what you could do differently. The book Agile Innovation: The Revolutionary Approach to Accelerate Success, Inspire Engagement and Ignite Creativity encourages readers to create change by challenging conventional ways of thinking and looking for imaginative solutions.

IFAmagazine.com

27/01/2015 13:02

Welcome to London Capital Club

Your space in the heart of the City for meeting, dining and networking

A Space for Meeting

Events & Networking

London Capital Club is the perfect location for meeting with clients over an informal coffee, a spot of lunch, or in one of our sumptuous private meeting spaces.

We host a range of networking events, as well as keynote speaker events. We have spaces for members’ events and can accommodate up to 150 delegates in a variety of room set-ups.

London and Beyond

Restaurant Fine Dining

Club members receive the same exceptional service in over 250 clubs worldwide, which make up the IAC network, as well as access to further benefits, such as discounts at some of the country’s best golf courses and hotels.

Enjoy the brasserie-style ambience in our public bar and restaurant, @15, formal dining in our members’ restaurant The Walbrook Grill, or hold a private function in one of our historic rooms for an outstanding fine dining experience.

We look forward to welcoming you to London Capital Club T: 0207 717 0088 E: enquiries@londoncapitalclub.com A: 15 Abchurch Lane, London EC4N 7BW W: www.londoncapitalclub.com Find Us:

Bank

Cannon Street

Monument

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27/01/2015 13:02

G U E S T F E AT U R E

Januar y 2015

Hone your focus. Professors at Stanford University have shown that setting too many goals can lead to ‘cognitive overload’. Pick just one or two goals that are most important to you, and psychologically you will be more likely to succeed. For inspiration check out the ITV social media campaign #ChangeOneThing – and then do just that. Show commitment. People who write down their goals are 42% more likely to achieve them. Grab a pen (or electronic device) and write your goal(s) down. Share this information with those to whom you will be held accountable. A great app for creating lists and sharing them is Wunderlist. Reward success. Set monthly, quarterly, semi-annual and annual targets. But don’t beat yourself up if you miss a target. Instead focus on rewarding success. Research shows that positive feedback and rewards increase your chance of success.

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Show resilience. Don’t quit before you reach the finish line like the 2 who have already abandoned their resolutions before the start of February. If things get in your way, remember it shouldn’t be about the time it takes to reach your goal but about achieving the goal itself.

What I’ll Be Doing This Year This year my resolution (note it’s a resolution and not resolutions - I’m taking my own advice and focusing on just one) is to foster happiness in my life - or, more specifically, to take measurable steps to improve my overall happiness and foster it in those around me. I’ve come to the realisation that happiness is something that you have to work at, so that’s what I’ll be doing. Often in the daily grind, we forget to stop and smell the roses. Rather than big gestures, it’s the little things that can bring joy and colour to our day – which, when played out over a year and compounded, will lead to a happier life. My very own happiness project has started with the

support of a very good friend who will be on the journey with me, so we can hold each other accountable. Every two months we are creating a list of 11 Small Things we will both achieve independently, and then share on social media and via Wunderlist (this app has allowed us to share the list and timeframes allocated). The 11 Small Things are not designed to be too challenging, but to push us outside of our comfort zone. For example our first list includes: #2 Visit an art gallery or museum alone, #6 Smile and say good morning to a barista, and #8 Read a novel recommended by the other person. You can follow our happiness project on social media using #11SmallThings. Changing your life requires that you first change your mind set. I hope the above points have encouraged you to think about things a little differently and to get back on track with your resolutions - setting 2015 up to be an awesome year. Best of luck!

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27/01/2015 13:02

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 SP EC IALIST F I N A N CI A L S A L E S A N D BR O KE R AGE BU S I NES S . We help company owners looking to sell, exit or retire from the industry to optimise their company asset value with an appropriate solution for them, their clients and other stakeholders within their business. We do this by matching them up with appropriate acquirers, whose requirements and solutions are aligned to the needs and wishes of the seller. We work with leading companies looking to grow and develop their businesses by acquiring or partnering with financial advisory firms. If you would like to discuss options to sell, exit or retire, or acquire IFA businesses, please get in touch for a confidential discussion. +44 (0)117 908 9686 sam.oakes@gunnerandco.com

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27/01/2015 13:02

GUEST INSIGHT

Januar y 2015

From The Boots Up Mark Rockliffe, Head of Intermediary Sales at Heartwood, tells Neil Martin that rethinking strategy from scratch is the key to a successful team

You might say that football’s loss has been Heartwood’s gain. Mark Rockliffe, Head of Intermediary Sales at Heartwood, freely admits that being a footballer was his first career choice - closely followed by bank manager. The football dream died quite early, though, when compared to a certain celebrity chef who had the same ambitions. “I like to think I’m

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slightly better than he is,” says Rockliffe, “And I can kick with both feet too - I don’t have to turn around in a circle!” It’s a typical Rockliffe tongue-in-cheek comment, to which he quickly adds: “I realised very quickly that either I wasn’t actually dedicated enough to it, or not good enough, or probably a combination of both. And I basically thought ‘you know what I’m going to do? I’m going to join a bank.’”

As it turned out, he didn’t join a bank. But, even though Rockliffe might have been frustrated in his two first career choices, he appears to be comfortable scoring goals for Heartwood. Full Circle The company has a track record that now stretches back over 25 years, and it currently has over £2bn funds under management. It has grown,

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Januar y 2015

it says, largely on the back of word-of-mouth referrals and personal attention to its clients’ needs. Heartwood is particularly proud of the fact that many of its clients are City professionals themselves - including bosses of investment banks and multinational companies, and partners of private-equity firms and hedge funds. In 2013, it became a wholly-owned subsidiary of Handelsbanken. Rockliffe, who joined Heartwood in 2011, now spends his day working with IFAs and advisers across the sector. His main brief, he says, is to develop a tailored investment management proposition for independent financial planning firms. His focus is on building and managing intermediary distribution channels. Having worked with IFAs since the age of 19, he says it’s good to see that, in many ways, the IFA industry has come full circle. “Many of the core skills talked about today around the role of advice and the importance of advice were in evidence among the really good advisors I was talking to when I was in my early 20s.” A Different Perspective Rockliffe agrees that his career path was perhaps a little untypical. Unlike most people who cross the divide from insurance into the asset management business, Rockliffe came straight into asset management as a sales director, following x years as an IFA. That gave him a unique perspective on the business. Describing the asset management industry as “quite insular”, Rockliffe believes too much value is placed on the product. Controversially, perhaps, Rockliffe considers that the value of asset managers can be overstated, although he recognises their strong intellectual capital. Rather than product pushing to IFAs, Rockliffe believes there is a different approach, one that he has been developing at Heartwood.

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GUEST INSIGHT

Focus on the Business Model Heartwood’s approach is very simple: IFAs need to focus on advice in their business model. According to Rockliffe, “That’s how IFAs will win and succeed. If you look at all the consumer research, it says that in terms of engagement with this industry as a total, it needs and values advice and planning support.”

he could take a very credible investment proposition that had been built for a discerning investor, and could now deliver that proposition for any investor. Taking Care of the Client He believes that Heartwood can offer smaller clients the same service as enjoyed by their larger clients:

Underpinning this approach is the need for robust institutional management. “And that’s why I joined Heartwood,” says Rockliffe.

“Okay, the fee structure needs to differ. But if IFAs are going to outsource, they have got a number of fiduciary responsibilities they have to retain.”

On joining three years ago, Rockliffe faced a number of challenges. A major hurdle was that the Heartwood brand was unknown in the IFA market. Its client-base was made up of highly sophisticated, knowledgeable and discerning private clients. Looking in from the outside, Rockliffe found that

“Just because the adviser outsources to an investment manager, a Discretionary Fund Manager (DFM) for example, it doesn’t mean the adviser is relieved from their

One of those responsibilities is to make sure that the customer gets the journey that they have signed up for. Rockliffe says,

“Just because the adviser outsources to an investment manager, a Discretionary Fund Manager (DFM) for example, it doesn’t mean the adviser is relieved from their responsibilities, either from a regulatory perspective or a business model perspective.”

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Januar y 2015

Pre-RDR, there was pressure on IFAs to outsource quickly to investment managers. Rockliffe’s approach was different: “We went to a number of firms, and said, look, we think your business model needs a certain core component for the future, and we don’t think that IFAs are big enough, or well-resourced enough, to deliver their own investment management.”

everything, crossing over into the area of providing advice.” The Opportunity From Rockcliffe’s perspective, Heartwood was fortuitously placed in building a business “in a post-RDR world.” “That’s what I’m really passionate about. Can you genuinely find firms that win and compete on the quality of their advice? If you can find those firms, and if they are well organised and well capitalized, then they are the likely winners.” Rockcliffe believes these are the “acquiring firms of the future.” Heartwood acts as their silent partner in managing money, which Rockcliffe estimates is about 30 to 40% of their total assets. Heartwood’s strategy has been to target quality IFA firms and ones with which they can build relationships. Rockliffe hates the word ‘strategic partnership’ and likes to describe it as having ‘skin in each other’s game’, a form of co-dependence that works between Heartwood and the IFA.

responsibilities, either from a regulatory perspective or a business model perspective.” DFMs Encroaching The big advantage for Heartwood, says Rockliffe, is that it arrived late to the Retail Distribution Review (RDR) party. “We had a huge advantage in the IFA arena,” he says, ”we could start with a blank piece of paper.”

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Rockcliffe agrees that a lot of the discretionary market has been very successful and describes some of them as “brilliant businesses”. However, he believes many of them have effectively undermined the IFA business model: “Not by design, I’m absolutely sure of that. However, they have said ‘we’ll take your client on board for you’, and then they have ended up doing

Finally, Rockliffe admits that it’s been a long journey for him personally, from what he himself describes as a “…not particularly nice suburb of Brighton…”, to sales positions within a number of leading companies and now helping to formulate Heartwood’s approach to the IFA community. Perhaps he would have been wasted on the football pitch, or sitting behind that bank manager’s desk?

27/01/2015 13:04

INSIDE TRACK

Januar y 2015

Trading Up The choice between Chartered and Certified status is down to an adviser’s specific needs, says Neil Martin. But either will bring significant benefits

Education, education, education. Tony Blair’s old mantra might have gathered a bit of dust over the years, along with his slightly battered reputation, but it’s one legacy of his premiership that’s still being heard loud and clear throughout the financial sector.

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One of the key pillars of RDR, of course, was to improve professional standards within the industry – meaning, among other things, that advisors are encouraged to not only reach a certain level of expertise that is recognised by a professional body, but

also to continue their own personal career development. For many advisors, that means beefing up their planning credentials. Essentially, advisers wanting to offer a better service have a choice between achieving Chartered or Certified status. Chartered Financial Planner

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Januar y 2015

Status is conferred solely by the Chartered Institute of Insurance CII , whereas Certified status is governed by the Institute of Financial Planning. Steve Jenkins, Director (Financial Services and Insurance Markets) of the CII, is clear about the need. “I think the role of financial advisors will become more and more important in the future as people take greater responsibility for their own financial affairs,” he told us. “And in that context, people need to be confident that they are dealing with someone who knows what they are talking about, and who acts at all times in the customer’s interests” Outperform Your Benchmark “What we found subsequent to the RDR, and what we’re encouraging as many people as possible, is to really to go above and beyond the regulatory requirements, in terms of their own professional development and developing their own expertise. And it’s in that context that we’ve seen a big upswing in the momentum in financial advisers, both IFAs and non IFAs, moving onto chartered status.” Chartered Status There are around 4,400 Chartered financial planners in the UK, although not all are financial advisors. It’s currently reckoned that 15% have now reached Chartered standard, and that this proportion is set

to increase over the years. The Chartered status includes three key components: The qualification itself - an advanced diploma in financial planning, equivalent to degree standard; •

A strict code of ethics, which is underpinned by disciplinary processes;

•

A formal programme of continuing professional development, which will be tailored to the individual advisor’s needs.

As Jenkins says, these crucial components reflect the standards set by the more mature professions, such as law, accountancy and medicine. The point, he stresses, is that individual advisors want to be seen by customers and by their own staff as working in a peer group that’s equivalent to these professions. But then again, advisers will find that Chartered status can help to further their own personal career development, and it can also attract referrals from the established professions. Firms and the big institutions appear to value the Chartered status, he says, because it helps develop career paths for their staff and helps them hold onto talent. Jenkins agrees that clients and potential clients increasingly expect their IFAs to have reached a certain professional standard. “If

“I think the role of financial advisors will become more and more important in the future Steve Jenkins

as people take greater responsibility for their own financial affairs”

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you look at the Saturday and Sunday papers, especially the finance sections, you’ll notice that where the quoted experts are describing themselves, it will now be Joe Bloggs, xyz, Chartered financial planner.” Certified Status Sue Whitbread, Communications Director at the Institute of Financial Planning (IFP), agrees with Jenkins’ comments - adding that, by investing the time to gain advanced professional qualifications, advisers and planners can not only to maintain and build their own competence, but also demonstrate to clients and potential clients their commitment to the highest professional standards. She also believes that it can have sound business benefits. “Certified Financial lanner certification is different to many professional qualifications,” she explains, “in that it primarily tests candidates’ application their Financial Planning skills – and not just their knowledge.” “To succeed, advisers and planners need to have very strong technical knowledge. But, most importantly, they have to be able to demonstrate that they can apply it appropriately within a complex financial planning situation - the kind of situation that they can typically come across in practice.” Whitbread says that she regularly gets CPF CM professionals coming back to the IFP with the discovery that learning the six step financial planning process to become a CFP CM professional has turned out to be a “light bulb” moment that has changed the way they’ve worked ever since. Much of this, she says, is down to the process that candidates have to go through – a process which helps them to discover a practical approach to enhancing their client proposition which will put their clients’ goals right at the heart of the process. It means, she says, that

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Januar y 2015

The IFP believes that in the post RDR environment, this clarity and purpose makes a lot of business sense because of the way it helps the planner to build long term client relationships based on trust.

“Certified Financial Planner certification is different to many professional qualifications, in that it primarily tests candidates’

Sue Whitbread

clients see value in the process right from the outset. The IFP believes that they buy into the reassurance, and that they are prepared to pay ongoing adviser fees to ensure that they keep on track to achieve what they want in life – their goals.

INSIDE TRACK

application and not just their knowledge”

And the Future? Both our guests agreed that the future for advanced education within the advisor environment is excellent, and that the current trend toward a recognised status will continue to increase. “Not only that, but there are more and more firms who are introducing programmes,” says enkins. “Indeed, some of the larger firms are implementing their own professional development

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programmes specifically to encourage momentum towards chartered status: firms like St James’s Place, Towry and Ashcourt Rowan, as well as some of the banks. It’s in their interest to kind of create a space which people are attracted to, because what that will do is create an environment where people can study with their peers, and they can do that in a supportive way.”

Up to a point, an advisor’s decision to go for Chartered or Certified status depends on a number of factors - some professional and some personal. But overally, it can only be to the industry’s advantage and betterment that such training and career development opportunities now exist within the industry.

IFAmagazine.com

27/01/2015 13:05

ADVERTORIAL

Peter Georgi of Halo Films talks about why IFAs need an “About Us” Video The About Us page is the second most important page on your website – only behind the home page. This is your one chance to talk about yourself, and not about your customers. This is the opportunity they give you to impress them. Your “About Us” is your audition - Seems self-evident to make it quality, right? 1 – Make your Branding Message Who are you? What do you do? Clients want to have a deeper understanding of the people who they will be dealing with if they select your company. And remember, it’s also a chance for you to talk about areas of speciality and identify who your ideal client is – this can be a good way of weeding out the unsuitable clients at an early stage. 2 – For Potential Employees When people hear about your company’s job openings, they will almost assuredly visit your website and check out your About Us page. Having a video that prospective applicants can watch is a great idea. They can get a feel for who you are and who you serve. They should also gain a greater understanding of your values and your mission. It’s also a great idea to include your staff in the video so that the job seekers get a feel for your company’s diversity and the attitude and demographics of the people working there. Prospective clients and job seekers should also learn the history of the company. Through all of this subtle information, the applicant finds out whether they might be a good fit for your company and whether your company is a good fit for them. Today’s employers realize the value of recruiting someone who feels at home and will stay. The About Us video is another tool for engaging prospects and helping to reduce the wasted time of interviewing someone who really wouldn’t be a good fit and doesn’t realize it until they show up at your office.

3 – For Current Employees Having an About Us page isn’t just about new employees. It’s to help focus and align your current ones as well. A good About Us page gives your employees identity and a sense of proudness to be working for this company. It’ll also help your employees explain who they work for and what they do.

With thanks to Kirstie of WarroomInc.com

For more information on how we can help with a home page video, or any other aspect of video marketing, please get in touch: phone: 01453 810914 email: info@halofilms.co.uk You can also view examples of our work at: www.halofilms.co.uk

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27/01/2015 13:05

A D V E R TO R I A L

Exciting Times Are Ahead Exciting times are ahead for The Wealth Care Partnership (TWCP) as they plan significant growth of their business, building on their already impressive credentials

TWCP is a successful practice specialising in holistic financial advice to mainly the pre and post retirement market, including people in later life, covering Long Term Care, investment, tax planning and Equity Release. With a focus on providing high quality financial and tax planning to people with property and savings and who value their personal service, their marketing activities attract high levels of new enquiries to the firm. Investing in the development of their brand, TWCP are working in conjunction with their branding and marketing company

on a number of initiatives including the launch of a new website and the publication of new client literature which draws on their deep understanding and experience in the later life market. Building on the success and expertise of their existing advisers, they want to expand their adviser and client base whilst preserving the very things that set TWCP apart from other financial advisers. Two recent hires are helping to put the building blocks in place for the growth of the business. Richard Knowles has joined as Client Relationship Manager, and will be the first point of contact for all enquiries to the firm. With Richardâ&#x20AC;&#x2122;s experience as a Bank Manager for many years, he is well positioned to support both the advisers and the clients to ensure the process from enquiry to business is a smooth and positive experience for all parties. Lucy Fenwick has joined from JP Morgan, as Strategic Growth Manager and she will be working closely with the whole team to implement the

ambitious expansion plans as well as developing other strategic opportunities on offer to support the planned growth of the business. The company was established in 2007 to provide specialist advice to older people and their families, and the advisers are recognised as leaders in the field of later life advice. The Founding Directors, Karen Rayner and Tim Anstee, are both members of Society of Later Life Advisers (SOLLA) and Tim is SOLLA Regional Co-ordinator for Hampshire and SOLLA Joint Regional Co-ordinator for Dorset. SOLLA is committed to raising the standards of practice of those engaged in advising older people by promoting the highest levels of professionalism in financial advice. TWCP has recently won the â&#x20AC;&#x153;The Best Long-Term Care Intermediaryâ&#x20AC;? award at the Health Insurance Awards for the third time in four years and has been shortlisted every year for the last seven years.

S E E PA G E 6 4 FOR OPPORTUNITIES

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27/01/2015 13:19

I FA V I E W

Januar y 2015

Local Hero Neil Martin talks to Colin Lambert, of CTL Wealth Management, about the joys of focusing on your home turf

It took Colin Lambert a fair few seconds to think of a good answer to my first question of the interview. As an IFA, what was his main resolution for the new year? His answer, which I’ll reveal at the end of this piece, said much about the fundamentally down-toearth approach that Mr Lambert brings to so much of his business. No matter what you’re doing, it’s essential to be enjoying it. CTL Wealth Management, which launched in late 2005, has spent the last ten years developing a practice which includes the Greater Manchester areas of Bury, Rochdale and Oldham. And that’s the way Mr Lambert likes it. Rather than pitching aggressively for highfliers in the big city, his firm sees itself as a local business which has grown mainly through word-of-mouth-recommendation, and through a network of accountants and solicitors who recommend his services. That’s not to say that Lambert’s ambitions aren’t high, of course – but he’s clear that he has no problem with the local tag, and that his client list has grown to include a select number of business owners and professionals who are keeping him more than busy. “In fact,” he told us, “I’m one of the few who seem recently to have gone from the office in my house to a separate office.

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27/01/2015 13:19

I FA V I E W

Januar y 2015

Many IFAs of my size have been going the other way, from the office back to home.” For some indefinable reason or other, CTL’s ‘office’ does have a certain welcoming air. A former pub in the pleasant Manchester suburb of Heywood, Lambert says it became available at just the right moment for the firm – and now, renamed as Heritage House, it dispenses sound advice about money instead of merely accounting for its inevitable destination on a Saturday night. As we’ve said, Lambert stresses that his growth model is not to aggressively seek new clients, but to make sure that the expansion of his client list keeps pace with his ability to provide that all-important personal service. Right now, he says, his primary objective is to achieve a good return for

his small team, and for the network of advisers who between them can offer all the skill sets required for advising clients. Asked how his ‘territory’ has fared during the economic crisis, and how it’s doing now, Lambert is upbeat. “For anyone who has had a regular job, or a mortgage, the past few years haven’t been exactly bad,” he says. “Money has been very cheap – in fact, it’s been a good time for many out there.” Network, Network Being local means that networking is crucial for Lambert. That means, among other things, chatting with business owners and other potential clients every second Wednesday of the month at a local curry restaurant. (Hmmm, we’re beginning to really take to this chap - Ed.) It’s this level of involvement in the local business community, Lambert says, that allows him to keep in touch with what’s going on around him. It also gives him a head start when clients ask for the lifestyle planning that is the

“I reckon politicians feel they have to say something over Christmas, without thinking through all the implications”

IFA View - CTL Wealth Management.indd 36

focus for most of his clients. He helps his clients recognise the value in their businesses and how they can plan for the future. That’s a holistic matter that takes in all aspects of family life as well as business activity. “It’s no point working those extra years just to qualify for the heart attack, you know.” Auto-Enrolment But in case you think CTL’s priorities are all about the local networking scene, the firm can show some of its contemporaries a thing or two about using the web. Lambert is currently working hard to develop a new side of the business that focuses on the growing potential within the auto-enrolment sector: its dedicated auto-enrolment site at http://www.auto-enrolmentrochdale.co.uk is a natural extension of the firm’s close links with local communities, but it just might bring in business from further afield. The idea, Lambert says, is to provide a sound interpretation of the auto-enrolment legislation for companies, including consultancy and advice; existing pensions review; pensions design; initial data analysis and cost modelling; and, member communications and advice. Regulation and the FCA And so to the familiar territory of regulation and the emerging environment post-RDR. Lambert isn’t the only UK adviser who feels that IFAs are overregulated, and that the boxticking exercises which currently

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Januar y 2015

to enhance his business skills. But oh yes, we were going to give you his answer as to his new year’s resolution?

Indeed, Lambert says he always saw RDR as a kind of vindication of the principles he’d been sticking to through most of his professional career. For him, he says, it’s always been about building long term relationships with clients and advising them with considered solutions. This model, he says, has always been supported by fees and retainers, so the banning of commissions hasn’t changed anything.

Golf, he says. Well, maybe not exactly. “Keeping my finances sufficiently in the black to spend more time on the green!” He sponsors the occasional match and has found that being on the fairway is still “one the best ways to meet new contacts and chat with existing clients.”

Forward Into 2015 What’s going to be the big issue for 2015? Pensions, of course, he says. How could it be anything different? The April rule changes will radically change the way people plan their retirement. But the Government’s latest pronouncements about allowing people to sell their annuities has all the hallmarks of election policy-making on the hoof, he says. “I’m still not sure what they are trying to achieve with it. I reckon politicians feel they have to say something over Christmas, without thinking through all the implications.”

It was a good answer. Get the balance between business and personal life to the right point, and you’ve cracked the secret of satisfaction. Not a bad resolution for all of us to adopt for 2015.

Colin Lambert

take up so much time work neither for the adviser nor for the client. But on the whole, he says, things are looking good.

“For anyone who has had a regular job, or a mortgage, the past few years haven’t been exactly bad”

On a personal level, Lambert is working hard towards Chartered Status and has taken part in a mentoring programme

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PRODUCTS

Januar y 2015

Bling Funds At Poundsaver Prices 2014 was a year to forget for the luxury goods sector, says Nick Sudbury. But could the sell-off represent a buying opportunity?

Uphill Struggle After a strong 2012 and 2013 the Julius Baer Luxury Brands fund from Swiss & Global has found it a lot tougher going, with a 2% shrinkage in the last calendar year. The fund aims to achieve long-term capital growth by investing in leading luxury companies with excellent brands, high quality products and continuous innovation. The sterling accumulation units have risen by around 20% since they were launched in July 2011, but the fund has struggled to make much headway since August 2013 as the sector has slowed. The managers use bottom-up stock selection based on the underlying fundamentals, and they have constructed a highly concentrated portfolio with the top 5 holdings accounting for almost 29% of the assets. Scilla Huang Sun, who co manages the fund with Andrea Gerst, believes that there are two main trends influencing the sector. The first of these, she says, is the increasing importance of e-commerce with companies like

Burberry leading the way by allowing clients to personalise their items so that they can be handcrafted to order. The other is the growth in top-end menswear, with brands like Gucci and Prada opening more men-only stores. Julius Baer Luxury Brands is heavily weighted towards jewellery and watch makers, which is one of the fastest growing areas of the sector. In fact its top holdings include both Tiffany and the Swatch Group with fashion,

Julius Baer Luxury Brands Fund Type:

SICAV under Luxembourg law

Sector:

Equity – Other Specialist

Fund Size: £262m Launch:

July 2011

Yield:

n/a

TER:

2.06%

Manager: Swiss & Global Asset Management

accessories and jewels making up over 50% of the portfolio. Swatch and Nike, another of the largest weightings, also fall into the category of affordable luxury goods that appeal to the Chinese market that is experiencing its own version of austerity. BMW is the only car maker in the portfolio, but it makes it into the top 5 holdings with a weighting of 5.6% of the fund. It has been chosen on the back of its sound balance sheet and attractive valuation and also benefits from the fact that these sorts of premium cars are still selling particularly well. Company results have been mixed, which is perhaps not that surprising given the patchy economic backdrop. The fund’s largest holding, Tiffany, recently reported strong double digit growth in the US, while the Italian leather goods specialist Ferragamo was upbeat in its outlook. There was less positive news from the American fashion designer Michael Kors, where the figures were negatively affected by the competitive promotional environment in the US.

jbfundnet.com

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It’s hard to think of an industry more exposed to the world’s socio-economic hotspots than the luxury goods makers. In 2014 many of their main markets suffered a succession of problems - with the first and potentially most serious being the slowdown in China. Since then the terrible con ict in yria and collapse of the oil price have hit the big ticket spenders in the Middle East, while the most recent casualties have been the high rollers in Russia. Not that it’s all been bad news – it’s just that the rate of

growth has stalled. Industry specialists Bain & Company believe that the final 201 sales figure for the global personal luxury goods sector will be around €223bn - a modest 5% annual increase on the peak €212bn of sales recorded in 2012, and certainly a big improvement on the €153bn recorded back in 2009. But for now it looks as though the first golden years after the 2008 financial crisis are now in the past. These days the main drivers of growth are in the Americas and Japan, with China experiencing a small reduction.

There are also structural challenges from within the sector. The latest evidence suggests that there is a shift in emphasis away from the more conspicuous, globally recognised symbols of wealth, in favour of originality and niche top-end brands. And at the same time, consumers are buying online. If these trends remain, they could yet change the whole dynamic of the industry - which is another reason why we’d say that it pays for investors to use experienced fund managers who are familiar with the whims and desires of the rich and famous rather than doing their own stock-picking.

Pictet Premium Brands-P dy GBP

Tough at the Top One fund with a bit more wriggle room is the Geneva-based Pictet Premium Brands, which is only required to invest a minimum of two-thirds of its portfolio in companies operating in the luxury sector. Normally these sorts of businesses enjoy higher operating margins than their middle of the road counterparts, but this hasn’t stopped the fund massively underperforming its (dollar-based) MSCI World benchmark in 2014 – even though in absolute terms it was up a creditable 6.5%. Caroline Reyl, the manager, invests in companies with strong brands that provide aspirational products and services. She concentrates on the fundamentals and looks for businesses with pricing power, solid balance sheets and good cash flow that can perform even in a challenging environment. There is also a willingness

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Type:

SICAV

Sector:

IMA Specialist

Fund Size: £675m Launch:

November 2007

Yield:

n/a

TER:

1.99%

Manager: Pictet Funds

pictetfunds.com

to invest in smaller brands with high growth potential. The result is a highly concentrated portfolio of 37 holdings, with the top 10 accounting for 47% of the fund. These include the likes of Nike, Macy’s, L’Oreal, Burberry and Christian Dior. The biggest sector weighting is Apparel/ Luxury at 43.7%, followed by Travel and Tourism at 13.2% and Vehicles at 10.8%. Reyl has recently increased her holding in fashion retailer Burberry, because she says its impressive digital offering should allow it to gain market share. She has also upped her stake in Hugo Boss, where she thinks the shift to women’s wear and retail distribution

will have a beneficial impact on the bottom line. It is interesting to note that the fund has a remarkably high beta of 1.21 - which implies that investors are exposed to a greater than normal element of market risk. Unfortunately, when the active returns are measured against the MSCI World index, they produce a negative Information Ratio. This suggests that the manager has not been able to add value - although it may be largely due to the fact that about 40% of the fund is driven by sales in emerging markets, an area that has been struggling. Despite the disappointing performance, Reyl remains optimistic and believes that premium brand companies have strong fundamentals and are well placed to grow their profits. In all probability, a lot will depend on the strength of the global economy and whether it can shrug off the socioeconomic problems that we have seen in 2014.

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PRODUCTS

Januar y 2015

Going Up in the World The cheapest way to enjoy a bit of bling is to invest using one of the themed ETFs that track the sector. An interesting example is the Amundi ETF S&P Global Luxury UCITS ETF, which is domiciled in France but is available in the UK. This ETF currently provides exposure to around 80 of the world’s main luxuryrelated securities. But it has a much more humble origin. Amazingly, the Amundi ETF started life by tracking the MSCI Europe Insurance Index, which was a far cry from its glitzy future. From the time that it was created in November 2008 to 17th February 2014 it followed this rather mundane objective before it was decided to upgrade it to a life of luxury. That, of course, makes the early past performance rather irrelevant for comparison purposes, although it has no impact going forwards. The ETF provides a more diversified exposure

to the luxury sector than its actively managed peer group. Its largest weightings are in Nike, Diageo, Daimler, Louis Vuitton, and Richemont, with the top 10 accounting for about 50% of the portfolio. Performance since the change of mandate in midFebruary 2014 has been broadly similar to the fund’s actively managed competitors, although with a fair amount of volatility along the way. But then, let’s remember that it was a tough year all round.

Amundi ETF S&P Global Luxury UCITS ETF Type:

UCITS ETF

Sector:

Equity – Other Specialist

Fund Size: €57.8m Launch:

December 2008

Yield:

n/a

TER:

0.25%

So what of the future? As long as there are no more seismic shifts in the benchmark, the ETF should continue to offer a cheap and diversified exposure to the luxury goods sector. This would allow clients to play the broader theme, although one would hope that experienced active managers would be able to add enough value in such a constrained sector to more than compensate for their higher fees.

This ETF currently provides exposure to 80 of the world’s main luxury-related securities

Manager: Amundi ETF

amundietf.com

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Dominion Global Trends Luxury Consumer Fund

Back to America

Type:

SICAV

Sector:

IMA Global

One fund that may be better placed to weather the geopolitical storm than most is Dominion Global Trends Luxury Consumer. Throughout the year, the manager, Dan Gianera, has been steadily increasing his exposure to North America.

Fund Size: £55.6m

By the start of December the US weighting had reached a hefty 57%, up from 39% at the end of June. This prescient move should help to protect investors from the worst of the turmoil affecting the other regions. Actually, the thinking behind this shift was nothing to do with geopolitical risk, but was rather due to the fact that US-based companies like Macys, Nike, Tiffany & Co, and Michael Kors are all leading the way when it comes to digital sales and marketing. This is an area that Gianera considers an absolute necessity. His view is backed up by a recent report by Exane BNP Paribas which estimates that 40% of

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Launch:

June 2007

Yield:

n/a

TER:

1.5%

Manager: Dominion Fund Management Limited

dominion-funds.com

luxury growth from 2013 to 2020 will originate online. Dominion Global Trends Luxury Consumer – formerly known as Dominion CHIC – aims to achieve long-term capital growth by investing in global companies in the luxury or discretionary spending sector. Like the other funds, it has a highly concentrated portfolio of 37 positions with the top 10 accounting for 46.4% of the portfolio. These include: Macy’s, the American clothing company VF Corporation, Estee Lauder, Burberry and Polaris Industries, which makes off-road vehicles for the leisure market.

A highly focused portfolio can be the best way to add value, but in the short-term it can be highly volatile. In November, for example, the fund rose by more than 6% on the back of strong double digit gains from holdings such as Jimmy Choo, Salvatore Ferragamo, Brunello Cucinelli, Tiffany and Macy’s. Unfortunately, most of these gains were then given back in the first half of December when world markets experienced a sharp sell-off. Over the last five years the sterling accumulation units are up 74.6%, although in fact most of these gains came prior to 2014. There are many unknowns facing the luxury sector, but most of the top brands have stood the test of time and are likely to continue to do so. Whether the shares will outperform is more debatable and seems unlikely if markets continue to struggle and the geopolitical tensions persist. It is much easier for these sorts of companies to make headway when the global economy expands.

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Januar y 2015

B R I A N TO R A

The Ground

Moves

That rumbling noise you’re hearing may be the rupturing of the tectonic plates under Europe’s currency system, says Brian Tora

If the start of 2015 is anything to go by, we could be in for a bumpy ride as the year unfolds. Volatility has returned to equity markets in spades - driven by more uncertainty over the future of the European single currency zone, growing doubts over global economic growth, and continuing geopolitical concerns in a variety of areas. Investor sentiment has been damaged by markets that are being pulled hither and thither as often con icting news emerges. Switzerland Decouples Investors’ lives have not been made any easier by the mid-January decision of the Switzerland’s central bank to abandon its efforts to peg the Swiss franc to the euro. In

Brian Tora.indd 42

part, this reflects the difficulties of coping with the inflows into their currency - a problem that will become even more difficult now that the uropean Central Bank has been prodded into its own monetary easing. (Not least by Switzerland’s own action.) Now the task is to head off the slide into deflationary conditions that appear to be developing. Such a move will surely weaken the euro further, making any attempt to hold down the Swiss franc well-nigh impossible, despite negative interest rates.

Deflation Here As Well? If deflation is the uro one’s main concern - Greece aside, of course - the inflation figures published here in Britain for the end of 2014 showed that we might have the same sort of worries. They prompted Mark Carney, the current Governor of the Bank of ngland, to write his first letter to the Chancellor of the xchequer explaining why the Consumer rice Index had come in outside the permitted range. As it happens, the Chancellor trumpeted these figures as a positive for the UK economy - but then, we are close to a General lection. At just 0.5% the December rise in the cost of living was the lowest for 15 years - and the joint lowest since records

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began. You might well agree with the Chancellor that this is a good outcome. After all, it means that average wages are now rising faster than inflation. But such a low figure is not without its concerns. It is worth looking behind the numbers at the real reasons why inflation is continuing to fall. Blame It On Oil Aside from a cooling in the housing market and a slowing economic performance, that most important of commodities, oil, has been steadily falling in price. In part, this reflects the decision of the Saudi Arabians both to punish Iran and to head off competition from new high cost producers such as the US shale oil developers; but collateral damage is inevitable. BP has announced job cuts in its North Sea operations, while the pain Russia must be feeling will be intensifying

- making utin’s next move even harder to predict. Cheaper oil does, of course, mean lower petrol prices and fuel bills – delivering, in effect, a tax cut to K consumers. But if inflation does turn negative and falling prices – or deflation – become the order of the day, those self same consumers that have more money in their pockets to spend are likely to defer buying goods. Why purchase something today when you are fairly certain it will be cheaper tomorrow? It was that attitude that brought an end to Japan’s economic miracle a generation or so ago. Believe it, falling prices are dangerous. Could Inflation Return? So inflation is an indicator that needs to be watched closely. Like many who were suspicious of that great financial experiment, quantitative easing, I initially believed that we would see

inflation taking off, bond prices falling and interest rates rising once the economic picture had improved. Yet a resurgence of inflation is nowhere in sight, due mainly to subdued wage demands as workforces around the world remain cautious over continued economic prosperity. With a clear difference of opinion between the Germans and the CB boss Mario Draghi, over whether quantitative easing is appropriate - or even legal - within the single currency zone, we have yet to see if urope can head off deflation. Germany, of course, is paranoid over inflation – memories of the Weimar Republic still linger after all these years. In the meantime, my money is on inflation picking up here in Britain at some stage - but it wouldn’t surprise me if that stage is still some time off.

An individual approach At JM Finn & Co, we understand the importance of treating you and your client as an individual. This is why our Tailored Platform Solution is a discretionary service that can integrate seamlessly into your proposition. Mike Mount T 02920 558800 E mike.mount@jmfinn.com

www.jmfinn.com LONDON BRISTOL

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JM Finn & Co is a trading name of J. M. Finn & Co. Ltd which is registered in England with number 05772581. Registered Office: 4 Coleman Street, London EC2R 5TA. Authorised and regulated by the Financial Conduct Authority.

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27/01/2015 13:2412:44 27/02/2014

Januar y 2015

STEVE BEE

Dumping the Albatross Surprise, Surprise, says Steve Bee. Common sense rules at last

I’ve been surprised by how surprised people have been by the surprise new pension reforms that were announced in last year’s Budget and will soon come into being in April this year; surprised because the surprising thing about the surprise reforms are that they’re not really all that surprising at all. Quite unsurprising really.

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We used to have to spend all our lifetime pension saving in one hit, and at an arbitrary age somewhere between age 60 and age 70. Everybody had to spend their lifetime pension pot on a regular income to last them the rest of their time on the planet between the point when they stopped working and the point where they stopped functioning altogether. That process was called ‘buying an annuity’ and it was deemed by legislation to be the only suitable use of the result of a lifetime of saving for the future. Everyone’s post-work future was assumed to be the same as everybody else’s. But that’s now been changed in a surprise move. (Look back on pre-2014 press commentary and the predictions of the great and the good, and you won’t find any reference to it. To me though, that’s what is surprising, but I’m getting ahead of myself.) The bottom line is that we won’t all have to buy annuities in future. Instead we will be able to spend our lifetime pension savings in any way we feel suits us and our own individual circumstances. Who’s Against It? Nobody These changes though are not so much political – rather, they were inevitable once the 2007

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Steve Bee.indd 45

Pensions Act was put in place. And that groundbreaking piece of legislation, of course, was enacted by the last Labour government, under Gordon Brown. But its ramifications have essentially been overseen by the current coalition government, and it has a broad base of political support. And so it should. For the last 50 years, the elephant in the UK pensions room has been the most unfortunate fact that private pensions, including all workplace pensions and the state second pension itself, have given poor value for money for many people, because of the withdrawal of state meanstested support that applied to millions of pension savers once they retired (and got ever older).

I’ve been expecting just this outcome since 2008. It’s just that I thought everybody else was too...

That was a disastrous position to have found ourselves in during the late post-Beveridge years, and it was something that was likely to get ever worse over time as more and more of the over-60s fell into the meanstesting trap as the basic state pension degraded. That inequity was put right (for future retirees) by the 2007 Pensions Act which has led to the ending of our 50year experiment with the state providing an earnings-linked second pension for millions of employees, and to a subsistencelevel single-tier pension for future retirees post-2016. No Mystery We now have a complete break between state pensions and private pensions (including all workplace pensions) and can say goodbye (and good riddance) to the days when they were hopelessly intertwined to the detriment of so many pension savers. Once that happened, it was inevitable that pension savings would be freed up in the way that is happening right now; once it is no longer possible for anyone to fall back on the rest of us for support in old age why should anyone care what people do with their own money? Indeed, what has it got to do with anyone else at all? After 2007 this was bound to happen sooner or later. What surprises me is that so many people in our pensions industry didn’t see it coming. The timing is irrelevant - I’ve been expecting just this outcome since 2008. It’s just that I thought everybody else was too...

27/01/2015 13:26

Januar y 2015

INSIDE TRACK

I spend my life speaking with financial planners about regulation, trends in the market, their service proposition and, most importantly, how they can best demonstrate and deliver value how they can create the kind of social currency that attracts and retains the right kind of customers, those that refer and refer again.

I’m taking in their concerns and what they want to hear.

Similarly, I’m spending an increased amount of time speaking to the end consumer, trying to ascertain precisely the triggers which motivate them to seek advice, to cut through the bluster and noise and to find someone to guide through the morass of often conflicting information that exists on the web, in the press and in everyday conversation; and in doing so

I’ve learned about the existence of a “communications gap”, a real disconnection between what we think our customers are interested in and what they really want to know.

We Need To Talk... Risk is the elephant in the room for the retiring baby boomers, says Sanlam’s Giles Cross. Why won’t people acknowledge that we’re going to need it? 46

Inside Track - Sanlam.indd 46

I could write chapters on what I’ve learned; chapters on what clients truly require from their advisers, the need for us to revisit the process of “fact finding” and re-arm ourselves with some of those “soft skills” so often ignored - and maybe even re-think how we discuss “goal planning” and its importance. Discussions for another day.

Rose Tinted Scenario But, most importantly, I’ve realised that if we fail to change the way we talk about two specific issues we run the run the risk of not only failing to capitalise on the greatest business opportunity of our time, but also failing a whole generation of investors. We need to change the way we talk about retirement; and we need to change the way we talk about risk. If demographic projections are to be believed, we are an ageing population. I read recently that by 2050, one in four people in the UK will be over the age of 65. That sounds OK until you realise that, of the other three, a large proportion will be in education or unable or unwilling to work; and that those who do will carry the burden not only of supporting themselves but also doing their part in delivering the tax receipts necessary to fund education, healthcare, welfare, defence et al. If that is indeed in the future, how will the state also provide a universal old age pension? My belief is that it cannot. As a society we have a rose tinted view of retirement - a fact that was brilliantly exposed by Martin Bamford in his recent film Boom (a piece I would urge

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Januar y 2015

all to watch – you can get it from https://vimeo.com/ondemand/ boom . The film presents a view built on the retirement experience of our parents and grandparents; those generations lucky enough to have lived and worked during the era of defined benefits, an era now in its final death throes, a victim of merciless reality. Without care, our experience of retirement will be frighteningly different. Making “It” Last Since George Osborne announced his pensions shake up in 2014, there has been talk of the birth of a

But these “models” make huge assumptions. Who says we’ll all be able to work longer? Won’t our children and grandchildren, those, post education, who have a right to have dreams and ambitions of their own, have something to say about that? And to think that’ll we’ll all be able to get a part time job in our dotage is a little optimistic. Current experience should already put pay to that notion. So, straight away, we have to start telling the truth about retirement; and it’s not pretty. I’m not suggesting for a moment that the adviser community starts spouting doom and gloom, scaring our audience into submission, but we do need to start telling it like it is; that auto-enrolment is a starting point and nothing more, that we’re not all going to be able to become “amateur landlords” going forward (and imagine the problems it

People are now directed by how they feel about things; by how their values are reflected and by how they are treated

“new style” of retirement; not only of people retiring later but, more importantly, phasing their retirement through a movement to part time employment or taking another job in retirement to supplement income. Why? Because we simply haven’t saved enough. Pure and simple. In the euphoria of pre-crash consumerism, in the belief that the money would never dry up, we didn’t plan for the future.

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would create if we tried!) and that if we are to stand a chance of making “it” last, we’re going to have to start treating our retirement saving as our number one priority. Making “it” last. That’s going to be the challenge, and when we talk about “it” we shouldn’t think about money, we should think about lifestyle; the continuance of the ability to keep ones’ home, to run a car, enjoy a holiday and maybe go out a couple of times a month.

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Januar y 2015

Retirement was never supposed to last 30 years or more - it was all supposed to be over quite quickly. And, if our reality is now that during our working lives we have to build a fund that can sustain a lifestyle for the long term, our challenge and opportunity is not only to advise, encourage and create effective long term investment programmes “preretirement” and “at retirement” but also “through retirement”. In short, we need to create “whole life” investment strategies. If we assume that drawdown will become the fashion and that annuities remain unfashionable, we will need our retirement funds to not only deliver sustainable income for the long term but also real growth. It is the only way to stop us running out of money. Is De-Risking Defunct? To that end, the traditional model of “de-risking” at retirement may be defunct. Rather than relying on a

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INSIDE TRACK

more defensive strategy in retirement to provide stability, the answer may be to remain invested in the equity markets, taking advantage of the opportunities offered there. Providers now face the challenge of creating products which not only offer income and growth, but also give consumers the confidence to remain invested throughout their retirement. Indeed, at my organisation the focus is just that – we see it as the future. Telling It Like It Is Our role as advisers therefore must be to talk more honestly and positively about risk. Risk seems to be something that many consumers simply don’t understand, and many advisers struggle to explain. Maybe it’s fear of regulation, maybe we are still too close to the financial crash, and maybe we don’t understand it ourselves. We must warn, quite rightly, about risk, but we must also talk equally about its benefits. We must learn to communicate the

need for patience, explain market cycles and why the sustenance of a long term growth strategy, throughout life, is so important. If people are now to remain invested for 60 to 80 years, we must take a market view of the same period. Whilst past performance can never be used as a guide to future trends, if you had invested a £1 in 1945 it would now be worth... you know the story. Over the longer term equity markets have always performed better than the mainstream alternatives – and, with that being the case, if we are now to remain invested for the longer term, it is those markets which may provide the solution. People shouldn’t fear investment risk, they should understand it; and alongside the need for clear, no nonsense communication about the importance of retirement planning, we must ensure that they do. That’s where we can deliver real value. And as for the providers, watch this space…

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Januar y 2015

BURNING ISSUES

Waiting for the Fourth Arrow Japan’s economic reform has stalled. But can Prime Minister Shinzo Abe restore confidence? It’s been a tough few months for those who expected Japan’s economy to pull away strongly under the radical leadership of Shinzo Abe. A bold quantitative easing programme combined with ambitious structural changes seemed to promise so much last summer. But the sharp stock market uctuations since December have disappointed the Tokyo bulls. The 1.9% third quarter recession was worse than expected, and the battle against deflation has fallen short. The sales tax reform has had to be postponed, which means no relief for the Treasury. So where do our panel of experts think things are going now?

Meet the Panel Tom Elliott

Question 1: Will we see a resumption of confidence in 2015, and where will it come from?

International Investment Strategist at deVere Group

John Redwood

Chairman of the Investment Committee at Charles Stanley Pan Asset

Michael Wood-Martin Japanese portfolio manager for The Bankers Investment Trust

Burning Issues.indd 50

Michael Wood-Martin The economy has performed poorly since the introduction of the increase in AT last April and is one of the reasons why the proposed second hike in the AT charge has been postponed for a couple of years. Inflation too has been trending

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Januar y 2015

lower than what the authorities might have expected but this is a global trend with inflation rates slipping elsewhere. The fall in the oil price will only serve to flatten inflation further. But this is not to say that the authorities in Japan have failed – far from it. Both Kuroda-san of the Bank of apan and rime Minister Abe-san remain committed to rejuvenate the apanese economy. Whilst 201 was hampered by an increase in AT the outlook for 2015 should see a recovery in consumption as the benefits of improved profitability feeds through to higher wages and increased corporate spending.

Tom Elliott A weaker yen is likely to boost exporters’ earnings and those of their suppliers, but there is a large part of domestic economy that is not benefiting from the falling yen as inflation eats into near-stagnant wages. Certainly valuations are attractive, perhaps oversold in recent years relative to history and to those of other industrialised nations. But markets can remain miss-priced for a long time. If a sustained rally is to take root, I think it will be as a result of clear political victories in the Diet by rime Minister Abe, in the area of structural economic reforms.

John Redwood apan so far has defied all the rules about public finance and economic progress. Mr Abe’s three arrows meant carrying on with the policies of large budget deficits and money printing that had characterised the previous two decades. His decision to allow the consumption tax hike from 5 to as part of a gradual policy of curbing the large public deficit is credited with setting the economy back,

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and has narrowed his options further. He now seems keener on growth than cutting the deficit. apan borrows more than 0 of the state budget each year. Its total state debts are now more than 2 0 of GD , way above the levels of other advanced countries who are trying to get their deficits down. So far apan has got away with this, as all the money borrowed is borrowed at home, safe from negative effects from a falling yen. The state now owns such a large share of this debt that interest rates have been driven lower despite all the extra borrowing. 2015 is likely to see more of the same. The government forecasts a resumption of growth in 2015-1 . They are seeking to persuade larger exporting companies to put up wages, as they are benefitting from a weaker yen and doing well in world markets. They are reluctant to do this, and the government has only limited influence. Meanwhile the large state social welfare budget is directing spending money to consumers.

Question 2: Shinzo Abe’s “Three Arrows” policy was intended to stimulate business on the tacit understanding that employers would release some of the windfall through dividends and higher wages. But businesses have been slow to fulfil their part of the deal. Why is this, and can Abe do anything about it?

Michael WoodMartin While the First monetary and Second fiscal arrows of rime Minister Abe’s “Three Arrows” were easy to dispatch, the Third arrow (structural change was always going to be the most difficult to implement

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and measure. Despite some scepticism a number of changes are taking place including a proposed cut in corporation tax, the introduction of a corporate governance code and the promotion of women in the workplace – all changes for the good which should improve corporate profitability. Wages are increasing but were trumped by the increase in AT in 201 - whereas 2015 should witness an increase in real wages. Businesses are fulfilling their role although the Abe administration will ensure that the corporate sector does not slacken off.

John Redwood Mr Abe’s third arrow of supply side reform has been slow to travel from his bow. Labour market changes and reducing the number of obstacles to competition in sectors like health and agriculture will help. Meanwhile as we wait more progress the markets are likely to respond favourably to yet more official buying of shares as well as bonds, as Japan enters another year when it defies the logic of deficit control and sound finance. The overall tax burden in apan remains low, with tax cuts for corporations as part of the Abe policy mix.

Tom Elliott olitical pressure has resulted in the larger companies sharing strong profit growth with workers, through higher wages. This has helped mitigate the effect of inflation and a rise last spring in consumption tax. However, the many more private sector workers that are employed by smaller companies, that can escape government pressure, have seen little or no wage growth and rising inflation and consumption taxes have led to a decrease in living standards. The link between wage growth and unemployment, which is a strong feature in western macroeconomics, does not appear to apply to apan where unemployment is at a 15 year low of .5 .

Burning Issues.indd 52

BURNING ISSUES

Question 3: ‘So what?’ an optimist might say. “Japan’s involvement in developing markets, especially China, will carry the day even if the country’s own domestic economy doesn’t improve as hoped.” Is there anything in this argument?

been kept in Japan. Japanese exporters are leveraged plays on global demand.

Michael Wood-Martin With the yen so weak, the outlook for exports has greatly improved and exports remain an important driver of the apanese economy. However with the change in political landscape in recent years the focus has shifted from one of overseas reliance to the regeneration of domestic demand to power the economy. So, while a cheaper yen should feed through to higher exports and an improved level of profitability for the corporate sector, the main emphasis is on breaking the mind-set of deflation within apan and creating an environment where the domestic economy enters a period of secular expansion.

Tom Elliott Yes, and it is this that has enabled Japanese manufacturing companies to remain world class. They have kept manufacturing costs down by outsourcing the production to neighbouring Asian countries, enabling continued investment in R D and in future projects. Meanwhile, high value-added jobs with good salaries have

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Question 4: The Bank of Japan stepped up its fiscal stimulus last October, but the BoJ governor faced heavy opposition from his own board about the negative impact on the yen. Sure, a cheaper yen helps exporters, but it also makes life harder for consumers who want imports. How can Abe square the circle?

Michael Wood-Martin The last quarter of 201 witnessed a number of surprises from the unexpected move by the Bank of apan to loosen policy to the snap election and subsequent victory by the ruling coalition. Whilst it is true that the weaker yen can be something of a drag for consumers, the prospect of higher wages as a result of a higher level of corporate profitability more than offsets such disadvantage. The drop in the oil price will help consumers too while the postponement in the AT hike will also improve the prospects for consumption over the coming year.

Tom Elliott It was not only other board members at the Bo who complained about the weak yen. Taro Aso, Abeâ&#x20AC;&#x2122;s finance minister, has also complained that a weak yen was counter-productive as it reduced householdsâ&#x20AC;&#x2122; spending power. This reflects a broader

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global discussion, which is whether quantitative easing is ultimately divisive in a society. It helps to raise asset prices, benefiting those with apanese stocks and property in recent years ie the rich and those who have built up some savings . But, insofar as it suppresses the value of the yen and causes import prices to rise, it hurts the spending power of the young and the poor who consume a greater proportion of their income than the old and rich. Abe is trying to square the circle through moral suasion, asking employees to raise wages ahead of inflation, but with only limited success.

John Redwood The fall in oil price makes generating inflation as the government wants that much more difficult. Were inflation to take off, of course, the government might find that was worse for apan and her irregular finances than this long period of price stability and very low interest rates.

27/01/2015 13:33

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10/10/2014 13:43 09:10 27/01/2015

COMPLIANCE DOCTOR

Januar y 2015

Damned If You Do, Damned If You Don’t Compliance Consultant Lee Werrell reports on a change to complaints handling procedures that will affect every IFA in the country

CP14/30: Complaints handling rules changes www.fca.org.uk / your-fca /documents / consultation-papers / cp14-30 Forming and influencing the rules made by the regulators is the responsibility of every authorised firm, feedback on proposals forms part of the responsibility of a mature industry. The FCA would like to know what you think of proposals to change the Complaints Handling Rules by sending your comments by 13 March 2015.

Across the period of 2013/14, fifteen major retail firms carried out self-assessments to help the FCA understand how complaints received from consumers are handled in practice, as well as providing evidence of policies, processes and management information

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(MI). The FCA also invited five trade bodies to take part in the Complaints Thematic Review. The FCA established a working group of representatives from these participating firms and trade bodies to not only identify and discuss issues around regulated complaint handling, but also to discuss these issues with the Financial Ombudsman Service (FOS) and consumer groups. The working group made a number of recommendations to the FCA for further action and for possible changes to the rules. The Thematic Review concluded in June 2014. Additional Drivers for the Thematic Review The Parliamentary Commission on Banking Standards (PCBS) had also made several banking complaint handling recommendations that it wanted to see implemented within the regulatory framework and increasing transparency to empower consumers. Extra pressure was building from the implementation of the EU Alternative Dispute Resolution (ADR) Directive which is designed and intended to provide European consumers and traders, access to outof-court settlement schemes to assist in the contractual disputes that arise from the sale and supply of goods or services. The FOS falls within the scope of this directive which

has a little under 6 months to go before implementation on 9th July 2015. The Consultation Paper intends to address how all of these changes can be incorporated and achieved and the impacts they will have on ombudsman service procedures as well as overall complaints handling and reporting practices. Overall Recommendations Overall, three main recommendations emerged as policy proposals that were intended to improve the way complaints are identified, recorded and handled. Therefore the regulator has taken these on board and is proposing to: • Extend the informal complaint dealing time. This means that firms will have a longer period of up to 3 business days before escalating the complaint to a more formal process and not having to send a “final response” letter to those complainants following receipt. This will allow less formal complaints to be handled more quickly and efficiently without time pressure and in many cases may be easily resolved at a branch or first contact level without expanding into a full blown regulatory investigation. • Improve communication and FOS referral. When a complainant receives a

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Januar y 2015

response within or at the end of the three business day period, that if they are unsatisfied, they can refer the complaint to the FOS. This will cut down on the delay of having to wait for 8 weeks as well as serve to provide clarity and awareness of their rights of referral. The FCA will amend their rules accordingly if this is confirmed. • Achieve compliant recording on all complaints. With this additional freedom to respond in a reasonable time of three business days, to ensure increased transparency around complaints handling and, to reduce the temptation to manipulate data to any perceived advantage, the regulator will require all complaints to be reported. If a greater number of complaints are handled in this shorter proposed time then total transparency is needed to rebuild trust with consumers. Supplementary Recommendations There is an additional recommendation for all postcontractual telephone calls to financial firms to be charged to consumers at a maximum ‘basic rate’. This means that firms will not be permitted to provide ‘premium’ rate, which includes 0845 numbers - but they will be permitted to list mobile numbers.

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COMPLIANCE DOCTOR

There is also a proposed amendment for the Dispute Resolution: Complaints sourcebook (DISP) in the FCA’s Handbook to implement the Mortgage Credit Directive. Advantages To The Change The extension of the informal time allows less serious or less complex complaints to be dealt with relatively quickly and efficiently by the firm. In practice, this often means that the complaint can be handled at the first point of contact, by frontline staff in the relevant business unit, such as bank branch staff, without it being escalated to specialist complaints staff. Staff members at this level may already have an established relationship with the consumer and they may know about a consumer’s particular circumstances and needs. Where appropriate, consumers can find it easier to deal just with these staff, rather than specialist complaints teams who may be less familiar to them and to whom they may have to repeat their complaint. In many cases, consumers are not looking to have their complaint dealt with formally, including receiving a written response – they simply want an issue resolved quickly and effectively. The FCA discussed these preferences directly with consumers as part of its preparatory research. There will be other advantages:

• The complaints return will be revised with a new list of categories of complaint, set against product/service groupings • A simplified table for firms with fewer than 500 complaints will be available, and • The complaints publication will be revised to include more contextual information, helping consumers to more easily compare the services provided by competing firms Disadvantages The regulator recognises that there are a number of risks of consumer detriment from extending the timeframe. There is a risk that some staff might take advantage of a longer timeframe without becoming more efficient and more minor complaints which may have been handled by the close of the next business day may now take longer to resolve. A related risk is that more complaints will end up being dealt with by front-line staff, when they may not have the appropriate skills or knowledge to deal with those complaints. The Way Ahead Put it all together, and you’ve got something that ought to give every adviser pause for thought as we go into the new year. Those who act pre-emptively will have less to worry about than those who don’t.

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COMPLIANCE DOCTOR

Januar y 2015

ADR Change The Alternative Dispute Resolution Directive (the ADR Directive) applies more broadly than financial services, and it requires the UK government to ensure that dispute resolution, provided by a qualifying ADR body, is available for any dispute concerning contractual obligations between a consumer and a business, although the use of ADR is not mandatory for firms under the ADR Directive.

AMENDMENTS TO RULES MADE BY THE OMBUDSMAN SERVICE • Definition of a chargeable case. • Definition of consumer. • Grounds for dismissal. • Test cases. • Resolution of cases by the ombudsman service. • Consumer redress schemes. • Voluntary jurisdiction. MORTGAGE CREDIT DIRECTIVE • Complaints procedure disclosure for intermediaries within the scope of the MCD. OTHER RULE CHANGES • Successor firms.

Member States have until 9 July 2015 to implement the ADR Directive.

In Chapter 5 of the CP the FCA sets out its proposed approach to implementing the ADR Directive and provides an overview of the areas in which existing rules will change. This chapter covers: AMENDMENTS TO RULES MADE BY THE FCA • Referring complaints to the ombudsman service. • Information requirements for firms. • Definition of consumer.

“Whether a retailer is a member or not, we are still going to help that customer by looking into the complaint” Dean Dunham, Chief Ombudsman

• Ombudsman service annual reports. For details of how to manage your risks or any other regulatory issues, contact Compliance Consultant at

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info@complianceconsultant. org or your qualified compliance professional.

See also the listings of the latest FCA Publications on Page 58

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Januar y 2015

F C A P U B L I C AT I O N S

FCA Publications

OUR MONTHLY SUMMARY OF THE LATEST OFFICIAL PUBLICATIONS Early Implementation of the Transparency Directive’s Requirements for Reports on Payments to Governments

n ISDAFIX n WM/Reuters (WMR) London 4pm Closing Spot Rate

Ref: PS 15/1

n London Gold Fixing (soon to be replaced by the LBMA Gold Price)

2 January 2015

n LBMA Silver Price

Policy Statement

7 Pages This Policy Statement reports on the main issues arising from Consultation Paper CP14/17, published in August 2014, and publishes final rules. The original Consultation Paper proposed, at the request of HM Treasury, to align implementation of the country by country reporting requirements set out in Article 6 of the TD (as revised by the TDAD) with parallel rules set out in Chapter 10 of the Accounting Directive 2013/34/EU (AD). Bringing Additional Benchmarks into the Regulatory and Supervisory Regime Consultation Paper Ref: CP14/32 22 December 2014 32 Pages This consultation paper seeks views on how our generic approach to regulating benchmarks could be applied beyond LIBOR to other benchmark administrators (and benchmark submitters as appropriate). Following misconduct related to the London Inter-Bank Offered Rate (LIBOR) benchmark, the FCA was given powers to regulate other benchmarks in April 2013. The benchmarks that are being brought into the regulatory scope are: n Sterling Overnight Index Average (SONIA) n Repurchase Overnight Index Average (RONIA)

FCA Publications and IFA Calendar.indd 58

n ICE Brent Index The FCA expects to be regulating these additional benchmarks from April 2015

its earlier consultation in July, which proposed changes to the way individuals working for UK banks, building societies, credit unions and PRA-designated investment firms are assessed and held accountable for the roles they perform. Consultation period ends 27 February 2015 Retail Investment Advice: Adviser Charging and Services

FCA Confirms New Disclosure Rules and Transparency Rules

Thematic Review

Press Release

16 December 2014

22 December 2014 The FCA has confirmed that new Disclosure Rules and Transparency Rules (DTRs) to report on payments to governments have entered into force. This follows an announcement on 12 December, which set out requirements under the Transparency Directive for issuers involved in the extractive or logging of primary forest industries to produce annual reports on payments made to the governments in the countries they operate in. The new rules have taken effect for financial years beginning on or after 1 January 2015 Strengthening Accountability in Banking: Forms, Consequential and Transitional Aspects Consultation Paper Ref: CP14/31 19 December 2014 332 Pages This Consultation is relevant to all firms authorised under the Financial Services and Markets Act (FSMA). A technical CP which the FCA is publishing jointly with the PRA, the document follows

Ref: TR14/21 32 Pages Following the introduction of the Retail Distribution Review on 31 December 2012, in January 2013 the regulator began a three-cycle thematic review into how firms implemented its requirements. Cycles one and two found that firms had made progress in implementing the RDR, but identified some areas where they were failing to meet our requirements, particularly around adviser charging disclosure. The third cycle of this thematic review is now complete, and includes: n A repeated assessment of firms’ adviser charging and service disclosure. n A new piece of work looking at how firms’ business models have developed in response to the RDR. The regulator says it focused on what firms provide to clients in return for an ongoing adviser charge and how firms are delivering these ongoing services in practice. Thematic Review TR14/21 sets out the FCA’s findings, including some good and poor practice examples of firms’ design and delivery of their ongoing services.

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Januar y 2015

Guaranteed Asset Protection Insurance: A Competition Remedy Consultation Paper Ref: CP14/29 12 December 2014 44 pages Generally, of interest to any party which distributes add-on GAP insurance in connection with the sale of motor vehicles. The paper sets out proposed changes to the Guaranteed Asset Protection (GAP) insurance market. In July 2014, the FCA confirmed its findings from the general insurance add-ons market study that competition was not effective where products are sold as an add-on and that markets for these products are broadly not working for consumers. The regulator proposed four remedies, one of which relates specifically to the GAP market. The objectives for the proposals set out in the paper are to reduce the advantage enjoyed by the add-on distributor and to empower customers to make informed and active decisions on whether to buy GAP insurance and, if so, from where. Consultation period ends 13 March 2015 Improving Complaints Handling Consultation Paper Ref: CP14/30 12 December 2014 55 pages The Consultation Paper follows on from the Thematic Review on Complaints handling [TR14/18], and further develops a number of policy proposals. Consumers are entitled to complain and to seek compensation from firms when things go wrong. But the regulator is anxious to ensure that the process of complaining is straightforward, transparent and fair to consumers, while allowing firms to handle

complaints as efficiently as possible and for consumers to have effective access to the ombudsman service if they remain dissatisfied. In particular, the paper proposes a limit to the cost of calls that consumers make to firms when complaining, as well as for other postcontractual calls. Consultation period ends 13 March 2014

Dates Diary for your

JANUARY 2015

21-24 World Economic Forum Annual Meeting Davos, Switzerland 29

Consultation period ends for Consultation Paper CP14/23 (Restrictions on the Retail Distribution of Regulatory Capital Instruments)

Deadline for selfassessment tax returns 2013/2014 (online only)

Annuities Sales Practice Thematic Review Ref: TR14/20 11 December 2014 41 pages Of interest to: n Firms selling annuities. n Firms which have existing personal or stakeholder pension customers and their representatives. n Consumer representative groups and individual consumers. This paper follows on from TR 14/2, which reported that many consumers were buying an annuity from their current pension providers without adequately checking the available alternative providers, and that they may be missing out on a higher income in retirement as a result. The regulator had found that many consumers do not shop around and switch provider, even when a high proportion of these would be better off doing so. As a result, it announced a review that aimed to understand whether firmsâ&#x20AC;&#x2122; sales and customer retention practices contributed to customers not shopping around and switching. This document presents the findings of this thematic review of the non-advised sales practices of pension providers offering annuities to their existing customers.

FEBRUARY 2015 2

Consultation period ends for Guidance Consultation GC14/26 (Regulatory Fees and Levies: Policy Proposals for 2015/16)

European Council meeting Brussels, Belgium

Chinese Year of the Sheep commences

Skeleton and Bobsleigh World Championships Winterberg, Germany

Consultation period ends for CP14/31 (Strengthening Accountability in Banking: Forms, Consequential and Transitional Aspects)

Continues overleaf

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F C A P U B L I C AT I O N S

Januar y 2015

Dates Diary for your

MARCH 2015 5-8

International Economics Conference Berlin, Germany

Consultation period ends for CP14/29 (Guaranteed Asset Protection Insurance: A Competition Remedy). Also for Consultation Paper 14/30 (Improving Complaints Handling)

F1 Australian Grand Prix Melbourne, Australia

UK Spring Budget

Parliamentary elections in Israel

MIPRU Simplification Consultation Paper Ref: CP14/28 8 December 2014 76 Pages Since 26 April 2014, the first phase of the revision of chapter 4 of the Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU 4) has placed non-bank lenders (NBLs) as subject to the same capital requirements for mortgage lending as banks and building societies. The FCA is now consulting on proposed, simplified rules and guidance in this second phase of the revision of MIPRU 4, as part of the commitment made in the Policy Statement (PS12/16) on the MMR. The proposals will: n Incorporate in MIPRU 4 the relevant rules and guidance appearing in BIPRU, thereby making MIPRU 4 a standalone chapter, and stripping out any that are not relevant for NBLs. n Simplify any remaining complex and lengthy rules and guidance. Consultation period ends 19 January 2015 Credit Broking and Fees Policy Statement

21-23 Parliamentary elections in Egypt (first round)

Ref: PS14/18

APRIL 2015

9 pages

6 6

FCA due to start regulating additional benchmarks (CP 14/32) UK Tax year 2015/2016 begins UK Pensions deregulation begins

25-27 Parliamentary elections in Egypt (second round) HAVE WE FORGOTTEN ANYTHING? Email editor@ifamagazine.com

FCA Publications and IFA Calendar.indd 60

1 December 2014 The FCA has previously declared significant concerns about the practices of some credit brokers – particularly in the high-cost short-term credit (HCSTC) and other subprime credit markets – which charge upfront fees to consumers. Some 41% of all the complaints received since 1st April by the FCA’s Consumer Credit Department relate to credit broking, the FCA says, and around 80% of these are about online brokers

charging upfront fees. Accordingly, the regulator is introducing rules to address those credit broking activities which it feels are putting consumers at risk. Examples: n The rules will ban credit brokers from charging fees to customers, and from requesting customers’ payment details unless they meet FCA requirements. n Credit brokers must make sure customers are given clear information about who they are dealing with, what fee will be payable, and when and how the fee will be payable. n Fee-charging brokers will need to notify the FCA, quarterly, of the websites they operate. The new rules on credit broking came into effect on 2nd January 2015 Multilateral Trading Facilities (MTFs) - Dear CEO Letter and FCA Good Practice Observations on MTF Rulebooks Guidance Consultation Ref: GC14/9 1 December 2014 183 Pages This proposed guidance relates to the Market Conduct Rules for Multilateral Trading Facilities (MTFs) - 5 March 2014. Primary Market Bulletin No. 7 Finalised Guidance Ref: FG14/9 27 November 2014 4 Pages One amendment to the Knowledge Base, to explain the prospectus disclosure requirements for retail investors in non-equity securities. The Bulletin summarises the feedback received on UKLA/ TN/632.1 and the course of action taken.

IFAmagazine.com

27/01/2015 13:47

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Warwickshire / Birmingham

We are representing a highly qualified and experienced paraplanner in Cardiff who is looking for a new opportunity within a company that can offer him a senior paraplanner role or a trainee adviser role. This candidate has a good technical mind and able to perform a paraplanning and supportive role to a team of Advisers. He is conﬁdent to speak to clients and explain technical advice to a large range of clients. This candidate would like to work for a company that will appreciate his capabilities, help to develop his career and offer him long term progression.

This exceptional candidate is a Senior Executive with a nationwide IFA company. Level 4 Qualiﬁed, he has worked his way up from adviser to senior manager. He has been responsible for designing business strategy, implementing change and delivering increased sales performance across telephone and face to face regulated sales teams.

This candidate has been with the same company since 2006 and is chartered with CAS. He has written between £250k and £450k of fees within the last three years and has £50m aum, a substantial part of which he can move after negotiation.

LS – 10971

This candidate is looking to join a company who are reviewing their post RDR sales proposition with a view to delivering sales improvement across a national or regional framework.

Jonathan Murphy Trainee Paraplanner

A natural communicator, he can articulate vision and strategy to senior executives and team members he has proven experience in training and mentoring advisors to enable them to deliver against performance based objectives.

He wishes to join a company in the HNW IFA Practice where he achieve an equitable split, with long term incentives achieved through business growth. JA – 10836

JA - 11083

North East This candidate is a trainee paraplanner and has gained the diploma in financial planning. He would like to become an Investment Manager so is looking for an Investment house that can offer him a trainee role within their Investment Management team. Although based in the North East of the UK, this candidate will relocate for the right opportunity and will undertake any exams/ training to further his career and is already studying towards the IMC qualiﬁcation to further his investment knowledge. This candidate will start from the bottom and work hard to gain the experience and knowledge to climb the ladder and become an important member of an investment research team. LS - 10902

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Bharat Bhagani Head of Compliance London An experienced Head of Compliance who is looking for a new permanent position in the big City. This candidate has 19 years’ experience working in Compliance and has previously worked for commercial/investment banks in London as their compliance oversight and as the Money Laundering Officer. Wanting to secure a similar role, my candidate is open to conversations with companies who require his area of expertise. LS - 11069

27/01/2015 13:56

Independent Financial Adviser Fordingbridge, Hampshire The Wealth Care Partnership (TWCP) is currently seeking high calibre IFAs to join their expanding team. Based in a rural setting in the New Forest, 10 miles from Salisbury, they are currently taking the business to the next level. Seeking professional, ambitious IFAs to share in their success and who want to be part of an award-winning and dynamic team. As they enter this exciting period of growth it is important to TWCP that they attract IFAs who share their values, put their clients first and provide the best financial solutions according to their clients’ individual needs. TWCP encourage applications from IFAs with proven success in their field. They are willing to consider different employment structures including salary based and self-employed contracts with rewarding financial packages on offer.

In addition there may be the opportunity for a discretionary bonus structure and in the future, an equity stake in the business for the right candidate. For the successful candidate, a robust infrastructure with a high level of administration, paraplanning and business support, including strong marketing and lead generation will be available. TWCP was established with a vision to build a centre of excellence with a focus on a clear goal; to give personal quality advice and guidance to people serious about maintaining financial independence and protecting their assets in later life. Since being established in 2007 the business has grown substantially. The firm has been shortlisted every year since 2007 for the Health Insurance Awards and has won the Best Long-Term Care Intermediary award four times being the current winner for 2014. The team have utilised their combined experience to become pioneering leaders in the field of later life advice and their current advisers are members of the Society of Later Life Advisers (SOLLA) which is accredited by the Financial Services Skills Council. The role will specialise in holistic financial planning for affluent clients on investments and tax planning, so proven relationship management experience within an IFA role and a broad knowledge of financial services is essential.

The ideal candidate will be an established, professional IFA with an existing client base or the potential and ability to build one. You will have experience of writing high levels of business and in addition be able to demonstrate: •

A high volume of trail income;

•

The ability to sustain and nurture long-term relationships;

Experience in client advice which is compatible with TWCP’s services;

•

The ability to challenge constructively;

•

Seminar experience would be advantageous, but of more importance is the confidence to present and network with individuals and groups.

•

Capability to work with the support team in a collaborative way;

•

The inter-personal skills required to deal with complex family dynamics and older clients;

To discuss this role, in confidence, please contact Sam at Tamar HR on 01579 343700 (sam.davey@tamarhr.co.uk) or to apply please send a CV and covering letter to jobs@tamarhr.co.uk Thinkers.indd 64

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THINKERS

Januar y 2015

Expectationist Gunnar Myrdal Born 1898 in Gustafs, Sweden Died 1987 near Stockholm, Sweden The joint winner of the 1974 Nobel Prize for Economics might have seemed just a little surprised by his colaureate, the proto-monetarist Friedrich Hayek, with whom he shared what must have been an uncomfortable platform. On the one hand, the hard anti-Keynesian who really didn’t approve of governments interfering in the economic cycle; on the other, this avowedly social democrat Swede who had laid down the basis for the Swedish welfare state, who had pioneered the ‘interactive social economics’ of desegregating America, and who was as much of a sociologist as an economist. A Keynesian Before Keynes? In fact they say that Hayek thought he’d been given the Nobel laureate as a sort of strategic counterbalance to Myrdal’s unabashedly leftist views. But the odd thing about Myrdal these days is that, although some of his leftist views still have the power to surprise, the basic assumptions that they embody are taken for granted almost everywhere. It was Myrdal who had first fallen out with the pure ‘classical’ financial models that had dominated during the early decades of the 20th century, and who had been studying the role of expectations in price formation as early as 1927 – some years before Keynes had really got into his stride. Myrdal often maintained that the basic idea of adjusting national budgets to slow or speed an economy had been developed by him in his 1932 book

IFAmagazine.com

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policy development. Meanwhile his interest was gradually shifting toward issues of opportunity for poor or underprivileged populations: his 1957 work, An International Economy, Problems and Prospects, Rich Lands and Poor and Economic Theory and Underdeveloped Regions, was regarded as seminal.

“Correlations are not explanations”

Monetary Economics, which had been published some four years before Keynes’s own General Theory of Employment, Interest and Money. And indeed, his interest in the social interaction of achievement and expectation, savings and spending, was prescient at a time when the world of the Great Depression was sticking to largely classical responses – and suffering for it. Politics, Politics... Myrdal served as a Social Democrat MP in Sweden between 1933 and 1947, becoming Minister of Trade in 1945 in the leftist government of Tage Erlander. That episode, of course, culminated in the Swedish monetary crisis of 1947, for which he was perhaps unjustly blamed. But he lost no time in moving to the United Nations Economic Commission for Europe, where he served as Executive Secretary until 1957, overseeing the reconstruction of post-war Europe and creating one of the leading centres of economic research and

Desegregation in the US But America remembers Myrdal most distinctly for the authorship of a work entitled An American Dilemma: The Negro Problem and Modern Democracy, which he had published as early as in 1944, working together with R.M.E. Sterner and Arnold Rose. The book had declared that the problem of race relations in America had resulted from a cumulative interrelationship between the existing discrimination against AfricanAmericans and their failure to achieve economically – largely because of the interplay of low opportunities, low incentives, and low motivation. This, he said, represented a failure by America to translate its sincere human rights ideals into practice for the African-American population. And the U.S. Supreme Court agreed with him in its0 1954 decision (Brown v. Board of Education) to outlaw racial segregation in public schools. Myrdal spent his final decades fighting for the equal treatment of other groups – Asians, Africans and, not least, women. But he remained to the very end an avowed economic interventionist – something for which not everyone has forgiven him.

27/01/2015 13:56

T H E OT H E R S I D E

Januar y 2015

But Tell That To Kids These Days... They don’t make childhoods like they used to, says Richard Harvey. Thank goodness

It’s a big year in the Harvey household. ignificant birthdays for me and Lady H (both ending with a zero), eye-wateringly expensive celebration holiday booked and paid for, and an expansively alcoholic bash organised for chums. And, despite contemplating the devastation thus wrought to the joint bank account, we even considered punting a few bob on one of George’s ‘pensioner bonds’, particularly if ISA rates turned out to be as laughably low as forecast. So, feeling chipper, if a little less well-breeched, we continue to pay scant attention to the irritating prophets of gloom who opine – rather like a Russell Brand video stuck on replay – that it’s all very well for my generation, because our good luck is on the backs of future pensioners. Squeeze? What Squeeze? Having participated in festive fun and frolics with 30and 40-something colleagues, it didn’t appear to me that they were overly concerned about their putative future of penury and food banks. Indeed, there seems to be a significant disconnect between their financial status now, their future prospects, and (the elephant in the room) their willingness

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to save. One wonders, to misquote a ‘70s pop song, how they can be ‘Young, Minted – and Broke’? Rationing, Armageddon and Tommy Steele It also seems only fair to compare the relative lifestyles of us babv boomers (born just after the war) with more recent generations. At the risk of being dubbed ‘King Whinger’, I occasionally remind the whipper-snappers of the sort of privations we had to endure growing up in the 1950s and ‘60s, compared to today. For instance... n

The nation’s idea of sophistication-on-astick was a dinner at a Berni Inn (favoured menu choices – prawn cocktail, steak and chips, Black Forest gateau).

Miserly TV offerings, book-ended by the allday test card and the National Anthem after the last programme, around 10.30pm.

Seaside holidays to places like wind-blasted Great Yarmouth, whence I was despatched every year, and packed off to see end-of-thepier shows, with bill-toppers such as Ronnie Ronalde, a chap whose pièce-deresistance was whistling ‘In A Monastery Garden’.

Being somewhat concerned that we were all going to be blasted to kingdom come by the constant face-off between America and the Soviet Union, particularly when Comrade Khrushchev commanded his navy to deliver a bonus boatload of nuclear missiles to Cuba. n

And, perhaps most agonising of all, trying to evade the rigid moral restrictions of the day. (Oh, come on, you know what I mean). So, at least for this year, excuse me if I dismiss all protestations about how my generation has hit the jackpot at the expense of our sons, daughters and grandchildren.

As Marie Antoinette allegedly said: “Let them eat cake”. At least it won’t be rock buns and Victoria sponge.

IFAmagazine.com

27/01/2015 13:59

For authorised financial advisers only – not for retail clients

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For more details call 0845 108 0443 or visit partnership.co.uk

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27/01/2015 14:01 14/10/2014 16:05

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