IFA Magazine - October 2011

O C T 2 0 11 ■ I S S U E 5

For today’s discerning financial and investment professional

F I NANC IAL P L A NNING WEEK ARE YOU READY?

CREDIT RATING AGENCIES

THOSE HALOS ARE FINALLY SLIPPING

JOKE T HE

IS ON ALL OF US

EUROPE BURNS WHILE POLITICIANS FIDDLE

ET H ICAL INV ES TM E N T

CHANGING TIMES, CHANGING OBJECTIVES

TH E V I C KER S B A N KING R E P OR T

BUT IT COULD HAVE BEEN SO MUCH WORSE

N E W S R E V I E W C O M M E N T A N A LY S I S

This communication is for financial advisers only. Investec Structured Products is a trading name of Investec Bank plc, registered address 2 Gresham Street, London EC2V 7QP. Investec Bank plc is authorised and regulated by the Financial Services Authority.

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Neil Crossley writes for The Guardian,The Independent, The Financial Times and The Daily Telegraph, mainly on technology, business, media affairs and TV. Emma-Lou Montgomery, the former editor of Moneywise, has an impressive record of print and broadcast journalism including editor-in-chief at Interactive Investor.

She is a qualified investment adviser.

Nick Sudbury is an experienced financial journalist and investor who has worked both as a fund manager and as a consultant. He is also a chartered accountant.

Kam Patel, formerly deputy editor at Hemscott, also brings long experience from Bloomberg and from online editorship at CityAM. He is a qualified investment adviser.

Monica Woodley, senior editor at the Economist Intelligence Unit. She has previously worked on Money Management, Investment Adviser and Investment Week.

Lee Werrell is the Managing Director of CEI Compliance Ltd, a leading UK consultancy.

Editorial Advisory board: Richard Butler, Michael Holder, Ian McIver and Mark Pullinger.

10.11

Editor: Michael Wilson

editor@ifamagazine.com

Art Director: Tony Merlini

tony.merlini@ifamagazine.com

Publishing Director: Alex Sullivan alex.sullivan@ifamagazine.com

23

8

News

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

Editor’s Soapbox

The Credit Rating Agencies are on the ropes.

It’s payback time, says Michael Wilson.

46

Level 4 - Are You on Course?

49

The clock’s ticking, says Diane LeadbetterConway from BPP Learning Media.

Pick of the Funds

Nick Sudbury’s pick of a solidly performing crop.

54

The Generation Game

Longer lives aren‘t the only factor behind a change in our pension needs, says Steve Bee.

FSA Publications

Our monthly listing of FSA publications, consultations, deadlines and updates.

59

56

The Compliance Doctor

Lee Werrell of CEI Compliance discusses some of today’s most pressing issues.

Thinkers

John D Rockefeller - the richest self-made man in recent history did it his own way.

66

53

65

The IFA Calendar

Conferences, economic summits, race meetings... All the dates you daren’t miss.

And Finally...

Frederick Smythe-Allinson reckons we’d all be better off with monkeys

features

This month’s contributors

regulars

C O N T R I B U TO R S

magazine... for today ’s discerning financial and investment professional

IFA Magazine is for professional advisers only.

Full subscription details and eligibility criteria are available at: www.ifamagazine.com

N E W S R E V I E W C O M M E N T A N A LY S I SN S

COVER STORY

Why have the politicians made such heavy weather of fixing the debt problem? And is it over yet?

Monica Woodley is losing patience.

➹

Europe’s Ridiculous Crisis

CONTENTS

features 16

The headache worsens for Europe’s leaders

20

Financial Planning Week

28

There’s no time like the present. Sue Whitbread from the Institute for Financial Planning talks to IFA Magazine.

Banking – The Vickers Report

25 years on from Big Bang, have we turned the clock back on integrated banking? Kam Patel says it isn’t all bad.

34

Ethical Funds

Don’t think they’re just for treehuggers, says Emma-Lou Montgomery. There are some seriously profitable contenders out there.

42

New Directions for Platforms

Neil Crossley asks what the FSA’s Platform Policy document really means for transactions.

IFA Magazine is published by The Wow Factory Publications Ltd., 45 High Street, Charing, Kent TN27 0HU. Tel: +44 (0) 1233 713852. ©2011. All rights reserved.

‘IFA Magazine’ is a trademark of The Wow Factory Publications Ltd. No part of this publication may be reproduced or stored in any printed or electronic retrieval system 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.

N E W S R E V I E W C O M M E N T A N A LY S I S

The sunÕ s shining on EIS Shout it from the (solar-panelled) rooftops: Octopus is one of the UKÕ s largest investors in solar and weÕ ve raised more money into Enterprise Investment Schemes than anyone else. Thanks to Feed-In Tariffs, Octopus EIS is giving investors access to predictable, RPI-linked returns, available within a highly tax-efficient wrapper (with recently enhanced income tax relief). But there are clouds on the horizon, as Feed-In Tariff adjustments and EIS rule changes are due at the end of this tax year. Octopus EIS is open now and has capacity until 31 December 2011, but after this date investment opportunities will be limited. This means investors only have a brief window in which to invest into Octopus EIS, before the sun sets on a golden opportunity.

making humans happy

0800 316 2298 octopusinvestments.com

For professional advisers only.

Issued by Octopus Investments Ltd, 20 Old Bailey, London, EC4M 7AN. Octopus Investments Ltd is authorised and regulated by the Financial Services Authority.

1285-01-EIS-0911

WORDS OF WILSON

IT JUST DOESN’T STOP, DOES IT? WE WERE JUST STARTING TO HOPE THAT WE WERE GETTING THROUGH THE WORST OF THE PANIC ABOUT THE EURO AND THE DOLLAR AND THE STUMBLING GLOBAL ECONOMY – AND SUDDENLY IT’S ALL COME BACK WITH A THUMP. It’s not so much that Greece’s restructuring refuses to go through quietly – because, frankly, the markets have probably priced in a Greek default already. Instead, the worries are now centred on the counterparty risks to banks in other European countries, and to the looming fear that Italy itself might be the next culprit into court.

Italy, to coin that old phrase, is too big to fail. Except that this time the description actually fits. Having spent most of the 1980s issuing government bonds like there was no tomorrow, and having then gone back to bingeing in the last decade under a deeply untrustworthy Prime Minister, Silvio Berlusconi, Italy’s debts are now rattling the markets deeply.

Last month, our biggest concern was that the world’s politicians had lost the public’s faith in dealing with the prospect of global recession. This month it seems that faith alone won’t do the trick even if the politicians deliver on cue.

This time it’s the raw numbers that don’t add up. Italy’s government debt ratio is reckoned at 120% of GDP – which massively busts the convergence criteria that Frankfurt set out before the euro was formed - and its ten year government bonds are fetching bid yields of 5.9%.

Admittedly, that’s kid’s stuff compared with Greece (22%) or Portugal (17%) or even Ireland (9%) – but it’s still a full 400 basis points more than Germany, which gives you some idea of how wide the credibility gap has become. Berlusconi’s premiership has been an opera buffa which now looks like turning into a corpse-strewn tragedy.

And then there’s Mifid II. The final draft of Europe’s latest master plan for a pan-European system of investor protection is due for publication on 21st October, five months late. We honestly don’t know whether this colossal exercise in dumbing-down will mean the end of executiononly and the severe limitation of structured ETFs, but they’ve certainly been on the discussion table. For the moment, all we can do is watch and wait. Happy days.

M ik e

Michael Wilson, Editor IFA magazine

www.IFAmagazine.com

Write to Michael at editor@ifamagazine.com

October 2011

7

shorts

magazine

Retirement annuities

fell back by as much as 5% during August, according to independent analysts William Burrows, because of deteriorating prospects for the bond and equity markets. This fall would be equivalent to ÂŁ300 of lost income for a typical pension portfolio if the saver had opted to buy an annuity at the end of the month rather than at the start of it.

Greek Tragedy: Act Three Jitters about the global economy worsened in midSeptember, as worries about a possible debt default

by Greece continued to contort market sentiment.

By the end of the month, however, a volatile rally had set in - based more on hope than confidence, because political opinion was still hopelessly divided. The bulls were taking cold comfort from reports that the EU, the IMF and the European Central Bank were approaching agreement on a plan that might allow Greece to write down half its debts.

It was not immediately clear exactly how this would differ from a default - since much of the money was owed to banks who would be sure to miss their money when it was gone. But it was significant that market sentiment was ready to read good news into the political tea leaves for a change, because up till that point the opposite had been true.

The FTSE Eurofirst 300 had spent August and September zigzagging crazily between 880 and 970, as panic had seized the markets about the

apparent directionlessness of political leadership with regard to Greece and its commitments to the euro stability pact. Only a month earlier the index had been 20% higher. Worries centred on rumours that Germany had made secret preparations for a full-on Greek bankruptcy which would effectively force Greece out of the Euro club. And which would also create widespread counterparty contagion.

An angry Tim Geithner, US Treasury Secretary, had declared a plague on all Europe’s houses for failing to show more mettle in an issue that was depressing the whole global economy. Did his barking lecture work? We shall find out soon enough.

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N E W S R E V I E W C O M M E N T A N A LY S I S

index-linked (inflation linked) savings certificates, in issue since May, which offered savers 0.5% above the retail price index. It was estimated that more than half a million people had applied to open accounts since the 2011 scheme had been launched.

No further issues are expected during this financial year.

Gold bugs remained confident

as September passed, reassured not just by renewed talk of quantitative easing in the US but also by an announcement that China was opening its own trading floor, to be known as the Pan Asian Metals Exchange. And that Kazakhstan, the world’s 20th largest producer with annual output of 27 tonnes last year, had pledged to buy all of its own production until at least 2015.

NEWS

The Post Office withdrew its

Atomkraft? Nein Danke Fish out the stripey leggings and the duffle coats, it’s back to the 1970s.

Germany’s decision to phase out all its nuclear power stations by 2022 has brought belated joy to the Greens. But, the government’s move has been less than popular with the energy companies - not to mention manufacturers like Siemens which make a goodly proportion of their profits from exporting nuclear technology.

Chancellor Angela Merkel’s decision to close the nukes was of course taken back in May, as the implications of Japan’s Fukushima crisis in March first became apparent.

But the full severity of the financial impact is still only just emerging.

RWE, the country’s biggest energy company and its sole nuclear operator , shocked the markets in August by announcing that its net profits for the first half of 2011 had plummeted by 39% to just €1.67 billion, because of a €900 million provision to meet the future costs

Atomkraft? Nein Danke The anti-nuclear movement in Germany has a long history dating back to the early 1970s. The New York Times recently reported that “most Germans have a deep-seated aversion to nuclear power, and the damage at the Fukushima Daiichi plant in Japan has galvanized opposition”.

of decommissioning nuclear facilities, writing off fuel rods, and meeting new fuel taxes.

Compare that with the €1.71 billion profit that the markets had been expecting - and consider that €900 million is a mere fleabite out of the actual decommissioning costs – and you can see where the trouble is coming from. Meanwhile Siemens has seen its own share price tumbling by around 30% in the six months since April.

Mrs Merkel’s decision had come as a double shock to everybody because it had been only nine months since she’d announced a plan to extend their working lives by an average of 12 years. So where does it leave Germany’s future energy needs?

In a hole, it would appear.

Publicly, Germany hopes to chop its electricity usage by 10% between now and 2020, while doubling the renewable sector’s contribution to 35%. But it will be surprising if the German locomotive can keep rolling without increasing its industrial dependence on coal. Not the best way to cut greenhouse gas emissions by 40%, one would think.

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SN E W S R E V I E W C O M M E N T A N A LY S I S

Venezuela’s stock market

may have been the world’s strongest during the first eight months of 2011, as President Hugo Chavez struggled to retain hold of a failing power base. The good news was that the Caracas exchange had put on 53% by mid-Deptember. The bad news is that, with even official rates of inflation running at 30% (and unofficial estimates much higher), it was still very much a gambler’s market.

Britain’s industrial output fell by 0.2% between June and July, according to revised figures released by the ONS. The fourth straight monthly decline left overall output about 0.7% lower than in July 2010.

Experts blamed a fall-off in oil and gas production.

Coming, Ready or Not The much-debated final text of the European Commission’s Markets in Financial Instruments Directive II (MIFID II) is now due to be published on October 21... ...having missed its original May deadline by five months. That may not be an entirely bad thing, though, if it means that some careful thought has gone into some of its more contentious provisions.

As we reported in the May issue of IFA Magazine, the Commission has been shaking up the UK’s adviser networks with a recommendation that consumers all across Europe should enjoy much more protection from the cruel rigours of the marketplace. Which doesn’t sound so bad until we learn that its original proposals had included the abolition of execution-only broking – under some circumstances, at least – and that that the list had also been expanded last December to include fixed income products, derivatives and commodities.

A consultation period for the Mifid document ended in March, and since then it’s all gone very quiet. The one thing we can say for certain is that MIFID II’s purpose is to help establish a uniform set of rules and standards for all countries, regardless of their state of sophistication. And, on one level at least, British fears about a dumbed-

down market have not exactly been assuaged

by FSA statements about restricting structured products and derivative-based exchange traded funds - all of which are strange and frightening creations for many Europeans, though they enjoy a widespread acceptance among UK investors.

That’s not to say that IFAs themselves are always comfortable with ETFs, of course. Paul Stanfield, the chief executive of the Federation of European Independent Financial Advisers (FEIFA), declared recently that UK advisers still don’t properly understand how ETFs work. It wasn’t just that the major differences between asset-backed instruments and derivative-based funds weren’t popularly understood, he said. It was also that, because they don’t pay commission, IFAs have had little incentive to get to know them.

For all we know at present, Mifid II, might place such obstacles in the path of these instruments that they become very hard to sell. One thing we can say is that the publication of the Mifid II document will coincide with another important piece of European regulation, known as the Markets Abuse Directive. Popularly known as MAD. No further comment seems necessary.

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N E W S R E V I E W C O M M E N T A N A LY S I S

to open an execution-only platform – a version of the Elevate system – by the middle of 2012. But relax, it won’t be directly available to consumers.

Instead, the company plans to run it as a white-label service for IFAs whose clients need only minimal guidance.

The platform is expected to sell only ISAs and mutual funds to start with.

The Swiss central bank

gave some comfort to the euro by announcing that the Swissie was to be pegged at Sfr1.2 to the euro. Although welcomed in Brussels, Zurich’s implied retreat from refuge-currency status after a damagingly strong run gave rise to analysts’ fears that Switzerland might find itself forced to buy up failing European bonds in order to support its parity.

NEWS

AXA Wealth announced plans

Is China Growing Again?

Yet another tried and trusted assumption went out of the window in September... ...as new government figures showed that China’s imports reached a record monthly high of $155.6bn (£98bn) in August, 30.2% up on a year earlier.

And the country’s exports grew by a slightly smaller 24.5% year-onyear, meaning that the resulting trade surplus was just $17.8bn, compared with $31.5bn in July.

It’s all rather hard to square with the idea that China’s 10% expansion rate is slowing down. But perhaps that’s not such a bad thing, since the Beijing government has made a formal policy of boosting domestic demand in contrast to the export-led practices of the last two decades.

Up to a point, the growth of China’s imports is also down to the fact that the yuan itself has risen by about 5% against the dollar in the last year or so. This has increased the purchasing power of Chinese households.

Which is exactly what America has been demanding for the last six or seven years.

In theory, then, everyone should be happy with this situation. But will the rise in demand cause an inflationary spiral? The early signs are that worries on this count are misguided.

Preliminary figures show that the consumer inflation rate dropped slightly to 6.2% in August, from 6.5% in July.

One explanation may be that the country has raised its interest rates five times in the last twelve months, while also stepping up the reserve ratio requirements for banks, in an effort to calm the borrowing frenzy of recent years. If this in turn can reduce the fears about the stability of Chinese banks, whose balance sheet can be opaque to put it mildly, then that’ll be another success for Prime Minister Wen Jiabao.

“Imports are down because the yuan has risen by 5% against the dollar in the last year or so.”

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N E W S R E V I E W C O M M E N T A N A LY S I S

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Service released statistics on the complaints it had handled during the year to April. 65.5% were against banks, with Lloyds, Barclays, HSBC, RBS, Citi and Bank of Ireland accounting for around 57%. About 47% of all complaints had been upheld by the FOS, rising to 65% among advisory businesses. That said, the actual number of complaints against advisers was very low, accounting for only 1.5% of all cases.

The FOS also said that it intends to heed the government’s call to publish the names of companies when it delivers its verdicts on complaints by the public. The organisation had been under intense industry pressure to resist the risk of ‘reputational damage’. But names will be named only after complaints reach the third stage of deliberation - a legally binding order by the ombudsman to the company in question.

It’s a Thankless Job

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President Barack Obama’s big Labor Day speech on job creation once again failed to galvanise the US financial markets...

...which promptly began sliding back into the depths of August’s levels. The markets had quickly decided that the President had nothing to say, and by mid-September the S&P 500 (adjusted for sterling) was exactly where it had been in January 2011...in July 2008...in December 2005...

And even the late-September rally still left the index looking decidedly range-bound.

This is no great surprise. Today’s unemployment rate of 9.1% is a little better than the 10% that Mr Obama inherited three years ago, but you’d have to go back to the Ronald Reagan years of the early 1980s to find another time when it was this bad. Indeed, there are 2.4 million fewer people in work than when the present incumbent arrived in the White House – or 2% of the workforce. And the total number of non-farm jobs was bumping around the 130 million mark – broadly the same as in the Clinton era of the late 1990s but significantly below the 140 million recorded toward the end of George W Bush’s presidency.

So far, so bad. But a word of warning. America’s statistical releases are always a rather hit-and-miss affair in their early days, and they only gain accuracy as the months progress and the initial guesstimates are replaced by solid data. It would not be surprising if the final figures turned out to be quite different from the early ones.

That said, the August figures were grim. 17,000 jobs had been created by the private sector, but they were exactly matched by 17,000 jobs that the various state and federal governments had cut. At the time of writing, Obama was about to send the American Jobs Act, his $447 billion plan to jump-start the economy, to Congress. And in principle his chances of getting approval for the jobs bill, which aims to create new jobs through a mix of tax cuts, infrastructure spending and direct aid to state and local governments, would be excellent if only it weren’t for the fact that the Republicans have him politically on the ropes. As it stands, this one is likely to run and run.

NEWS

The Financial Ombudsman

NEWS

India’s economic

growth rate slowed to just 7.7% in the second quarter of 2011, the government has revealed.

That’s the lowest level in nearly two years. It’s also five times as fast as America’s expected outturn for 2011.

Worldwide venture capital

fund-raising reached $21 billion in the first eight months of 2011, according to researchers Preqin. That was as much as in the whole of 2010. But still barely half the levels of before the global financial crisis. Around half of the new money raised is going into either IT or health care. But green energy technologies have seen their share slump from 14% of all new VC investment to just 6% in 2011.

The Mortgage Famine Bites New mortgages are still incredibly hard to obtain, according to new figures from the Council of Mortgage Lenders.

The CML’s statistics show that the number of new mortgages issued during July was just 48,400 – marginally better than June but nearly 7,000 fewer than in July 2010.

Perhaps more importantly, the number of loans to first-time buyers was 1,300 smaller than in July 2010, at at 18,200.

Advisers pin the blame mainly on last year’s Mortgage Market Review (MMR), which placed much tighter restrictions on the lenders by stopping them in most cases from accepting self-certifying mortgage applications. The average first-time buyer is now having to put up 20% of equity, and those who can’t manage 10% are facing sharply higher interest rates.

Yet it’s not clear that all of the blame can be laid at the lenders’ doors. CML director general Paul Smee blamed the shortfall at least partly on August’s seesawing financial mood, which he says augurs badly for the rest of the year. He added: “It is likely that this reflects weak consumer appetite for borrowing,

“The average first-time buyer is now having to put up 20% of equity.”

more than any additional constraints on the availability of mortgages,” he said.

The CML says that the average new mortgage is now £120,000, slightly higher than at the start of the year. This means that, although the numbers of new loans was down, the total sum advanced in July actually grew slightly from £6.9 billion in June to £7.3 billion in July.

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PRONTO! HELLO...? IS THERE GREEK TRAGEDY? ITALIAN OPERA BUFFA? FRENCH FARCE? MONICA WOODLEY STARTS TO DESPAIR ABOUT EUROPE’S WILL TO FIX THE EURO

PARAKALW! ALLO?

Notice to bankers, central bankers, finance ministers, foreign ministers and all the rest of you. The world is waiting for you to act. Yes, you. Yes, the whole world. Sorting out this mess should have been possible a long time ago. Why are we still waiting?

Well, okay, it’s possible that we won’t actually be waiting by the time you read this. As we went to press, the politicians were debating the possibility of giving Greece a write-down on half its government debts (“Write-down” sounds so much nicer than “controlled default”, don’t you think?) But is that going to be the end of the matter? Not likely. There are bigger issues still to be broached, such as whether Greece can stay in the Euro club at all.

16

October 2011

For the past 18 months, the eurozone debt crisis has been a case of one step forward, two steps back with acts of bold decisiveness followed by hesitant delays. And it would be good to say that it’s over now. But by the closing weeks of September, with Italy suffering a credit rating downgrade from Standard & Poor’s, it seemed that the only consolation we could glean was that the markets had already anticipated the bombshell before it actually arrived. A poor consolation, but these days we have to get it wherever we can find it.

Mid-September saw only the most recent example. The European Central Bank had acted in concert with the central banks of the UK, Switzerland and Japan to offer liquidity to

EURO DEBT

ANYBODY THERE? European banks, allowing them to borrow in US dollars for three-month periods until August 2012.

And that was good. Not only did it show that the ECB was committed to providing liquidity, which was reassuring for investors; the implied cooperation with other central banks also gave us confidence that at least some government bodies are capable of working together.

And yet, just days later, at a meeting of eurozone finance ministers, we got another backstep into indecisiveness with a delay to the release of an €8bn aid payment to Greece and to an overhaul of the European Financial Stability Fund. A rising tide of popular sentiment in Germany had kaiboshed Chancellor Angela Merkel’s hopes of getting her country to support the ‘undisciplined’ southern cousins.

But wait, we’re getting ahead of ourselves again...

Certainly, Greece is getting mixed signals from the different parties it must satisfy. On the one hand, European Commission economist chief Olli Rehn said before the finance ministers’ meeting that the Greek concessions went “a long way to meeting the fiscal target for this year”. But some government officials, notably from Germany, are demanding more evidence that Greece is cutting costs, raising taxes, privatising assets and reforming structures.

It’s estimated that the Greek government needs €172bn for day-to-day operations for the next three years. That figure could grow larger if the country’s economy continues to contract, lowering tax takes. And the government recently said that this year its GDP would contract by 5.3%, rather than the 4% earlier estimated. Ouch.

Previous bail-outs of Ireland and Portugal were mainly low-interest loans allowing the countries to continue to pay their bills as they

What’s a Grecian Earn?

Back in July, as IFA Magazine reported, the ministers had met to approve a deal that would release an €8bn tranche of the €109bn bail-out package granted to Greece last year – the second such bail-out agreed in the past 15 months. But instead they said they were dissatisfied with the Greek government’s progress on reforms and budget cuts, and that they’d reassess the situation in October.

That was only the half of it. Ahead of the meeting, Christine Lagarde, the new head of the International Monetary Fund and the former French Finance Minister, had threatened to withhold the IMF’s portion of the €8bn aid payment, saying that Greece had only implemented reforms in parts.

So here we are with October on the calendar, and the heads of a joint European Union, IMF and ECB mission – known as “the troika” – have been back to Athens to resume negotiations on the aid payment with the Greek government.

Yes, there seems to be some progress. But are the Greeks really dragging their feet? Or is the troika pushing for too much, too soon?

www.IFAmagazine.com

“If the Greeks do not want our advice, we can’t do anything for them,” the International Monetary Fund chief Christine Lagarde, was quoted as saying ahead of a meeting with Greek Finance Minister Evangelos Venizelos, who kept insisting Greece will be okay.

implemented austerity measures. But in addition to loans, the Greek bail-out is also composed of a €50bn privatisation programme and a series of bond swaps and rollovers – a much more complicated combination. And of the €109bn bail-out, just €34bn will actually go to Greece for its funding needs, with the rest providing backing to the bond buy-backs, swaps and rollovers. In other words, less than a third will go to pumping energy back into the economy.

October 2011

17

EURO DEBT

magazine... for today ’s discerning financial and investment professional

Launch the Lifeboats – No, Hold On...

Michael Wilson says:

The ministers also decided to delay their timetable to approve changes to the European Financial Stability Fund, the special purpose vehicle that was created by the 27 EU member states in May 2010 for exactly this sort of purpose. The €440bn rescue fund had been agreed by eurozone heads of state in July, and it was to have been ratified by national parliaments by the end of September - but you guessed it, by the third week of that month only five of the 17 governments had completed the process.

The changes to the EFSF would have increased the fund’s lending capacity, allowed it to make loans to governments to recapitalise their banks, and given it the power to intervene in secondary bwwond markets. The overhaul had been widely seen, and welcomed, as an aggressive move that would give additional powers to combat the crisis. So the fact that eurozone countries have been slower to approve the revamp than had been anticipated takes more than a little bit off the shine.

The reluctant Europeans are still largely ignoring a plea from US Treasury secretary Tim Geithner to decisively tackle the debt crisis that’s engulfing the eurozone. In a rare appearance at the eurozone finance ministers’ meeting in September, Geithner warned them that eurozone governments and the European Central Bank must put aside differences and “take out the catastrophic risk from markets, remove the threat of cascading defaults and avoid loose talk about dismantling the institutions of the euro.”

A good point. But S&P’s Italian downgrade had come hot on the heels of a Moody’s announcement that it had also put Italy on review, after yields on Italian five-year bonds had hit a record high of 5.6%. Yields had fallen briefly after the central banks’ liquidity efforts to support banks - but the indecisiveness of the eurozone ministers to grant Greece’s next aid payment and overhaul the EFSF had deflated investors’ confidence, sending yields back up again. At the time of writing they still showed no signs of coming down.

And so to Berlusconi...

There are few words in any language that can properly explain the Silvio Berlusconi phenomenon, but probably the most useful is astonishment.

Astonishment that his unashamedly open philanderering could have remained politically acceptable to his own people. Astonishment that the owner of Italy’s biggest private broadcasting networks could also be allowed to control the state media that were supposedly competing with it. And astonishment that a head of state could be accused of quite so many criminal activities and yet have most of the charges mysteriously annulled. This looks a lot like gangsterism. And yes, there are some very charming gangsters around.

But the most astonishing thing, surely, has been Berlusconi’s success in cranking up the public debt as if the euro convergence rules had never existed. At present, Italy’s government owes 120% of GDP and its ability to pay its bond obligations is by no means clear. Ten year paper is paying a yield of 5.7%, and even two year bonds are on 4.75%. Compare that with Britain (2.5% and 0.8% respectively) or America (2.15% and 0.15% respectively), or even with troubled France (2.5% and 0.9%, despite recent talk of a credit downgrade), and you start to realize that we are talking about a problem we haven’t often seen in a country this big or this important. Standard & Poor’s September decision to downgrade Italy’s sovereign credit rating has set the cat properly among the pigeons.

Last month, IFA Magazine said that there was nothing so obviously wrong with the world

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Ignore Geithner at Your Peril

October 2011

economy as to merit the August stock market crisis, unless it was the vague fear that we hadn’t been told the worst. It is now apparent that we have indeed been protected from some unpalatable truths about Europe’s fourth biggest nation. And until we’ve examined the likely knock-on effects to institutions like French banks, we won’t have the full picture.

Italy is large, relatively affluent and resilient. But its economic growth is on the floor; its corruption and its lack of tax gathering efficiency is a national joke; its statistical reliability has been repeatedly questioned; and Mr Berlusconi is already trying to publicly backtrack on the $90 billion worth of austerity measures that his government has introduced this year. These aren’t good omens.

“Standard & Poor’s ratings seem based on the daily papers rather than on reality and they are flawed by political considerations,” Berlusconi rejected criticisms by S&P and defended the stability of his parliamentary majority.

US Treasury secretary Tim Geithner Efforts over the summer by the ECB to support Italian and Spanish government debt in the secondary markets have had a generally positive effect. But, as with the liquidity support, the effect has been mostly short-lived. By the final week of September it was clear that investors had caught onto the eurozone’s “one step forwards, two steps back” routine, and that they were holding out for decisive action to finally tame the crisis.

Geithner has bluntly told Europe that it needs to get on top of its problems before it finds itself beholden to the IMF - or to foreign rescuers. (Widely assumed to be a reference to an earlier statement by Chinese premier Wen

Jiabao that his country was ready to extend a helping hand and increase investment in Europe.)

But, from where we’re standing, the threat of being heavily indebted to China is unlikely to provoke action among Europe’s financial top brass, given that the danger of a Greek default or the failure of the euro have not.

But, even if it still fails to follow through on the main drift of Geithner’s threats, Europe should still listen to his encouragement: “Your financial challenges in Europe are eminently within your capacity to manage, you just have to choose to do it,” he told us. Or, to put it more frankly, Europe needs to pull its finger out and get on with it – follow decisive action with more decisive action, not delays.

Hallelujah to that. If Europe’s leaders are serious about maintaining the monetary union, a decision needs to be made as to whether Greece can be kept within it. If the answer is yes, European leaders must show that the full force of the European Union is behind rescuing Greece, saving the euro and maintaining the eurozone.

Because the same old dance of one step forwards, two steps back is still getting us nowhere.

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This advertisement is directed at investment professionals in the UK only and should not be distributed to retail investors. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2011 Vanguard Asset Management, Limited. All rights reserved. UK11/0882/0911

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“Your financial challenges are eminently within your capacity to manage, you just have to choose to do it,”

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GETTING THE WORD OUT THERE IF EVER THERE WAS A MOMENT TO GET PERSONAL FINANCE BACK ONTO THE PUBLIC AGENDA, THIS IS SURELY IT. SUE WHITBREAD TALKS TO IFA MAGAZINE. With consumer debt levels now topping 100% of gross domestic product, and with investment returns for many savers down around the minus numbers, even in nominal terms, it takes a lot of drive and imagination to get the public’s enthusiasm pumping.

Which is exactly what the Bristol-based Institute for Financial Planning aims to do with this year’s Financial Planning Week (21st to 27th November). For eight glorious days, the IFP says, the press, the internet and the airwaves will be jumping with free information designed to get the personal finance agenda back on the kitchen table where it belongs.

The fact that this will undoubtedly bring in new business for IFAs and financial planners can be taken pretty much for granted, of course.

But, according to communications director Sue Whitbread, that’s only half the point. Much more important, she says, is simply to get the word out to the public about the ways in which people can sharpen up their financial planning, learn budgeting skills, take a long look at their life situations – oh, and choose some investments too.

Plenty To Do Let’s get the ball rolling with a few statistics.

The average UK citizen has about £110,000 of wealth, including his home, according to government figures, but he owes around £33,000 if you include his mortgage. He has around £4,350 worth of credit card debts, overdrafts and so forth (January 2011) – a figure which broadly doubles among those households which have unsecured loans. In a good year, of course, the average Brit saves 7% of his disposable income, but unfortunately this isn’t a very good year, for reasons we don’t need to explain. It’s always been hugely sensitive to the economic climate. In 2008 the ratio dropped to just 2%.

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October 2011

Only one in three adults currently has an ISA, but only 26% of these are worth more than £15,000 and 31% are below £3,000 in value.

(Source: Cimetric, 2011.) The average 56 year old man has a pension pot of only £52,800, according to the Office for National Statistics – enough to provide an annuity of maybe £50 a week. And his female counterpart has only £9,100 in the pot. With only 5 million people now contributing to an employer pension scheme, things are probably going to get worse before NEST brings an improvement. It can’t come soon enough.

The Programme So that’s the size of the mountain that Financial Planning Week has to climb. For those eight days, Ms Whitbread says, the IFP’s 2,000 members will be out there organising seminars, writing press articles, mailing their clients and generally making as much noise as possible. Booklets, videos and other material will be distributed. Helplines will be ringing, and free advice dispensed.

Underpinning everything will be the Financial Planning Week website (www.financialplanningweek.org.uk), which is being heavily revamped for this year’s event, and which will be going live in its new format in a few weeks. Like last year’s site, it’ll feature tutorials, links, downloads and reference tools intended to help the public find its way through the financial jungle.

Life Planning We’re not just talking about investments here, obviously - although those are of course central to the theme. Nor are we even focusing on the importance of using tax allowances and making the optimum use of tax-efficient schemes like pensions, ISAs, trusts and long-term savings plans.

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FINANCIAL PLANNING WEEK

“Next big ambition?

To get Financial Planning Week onto the national TV channels.”

IFP Communications Director, Sue Whitbread

A Force to Be Reckoned With The Bristol-based IFP, which celebrates its 25th anniversary this year, has around 2,000 members – not just customer-facing IFAs but, perhaps more importantly, financial planners and paraplanners. These are the people faced with the critical task of making sure that their customers’ financial arrangements meet their personal needs. And that they actually realise what those needs are. It’s no good being all gung-ho about a high-risk strategy, she says, if you’re thinking about retirement and you’re likely to need that cash in the next few years. Often you have to sit down with a client and explain that he hasn’t properly thought his requirements through.

All this means, inevitably, that the IFP’s members are accustomed to getting up close and personal with their clients’ individual financial arrangements. And, she says, they could teach some IFAs a thing or two about qualifications. “Our members are practically desperate to learn more,” says Ms Whitbread, “and they’re always retraining.”

Level 6 is nothing very exceptional for a financial planner these days, she says.

(That’s broadly equivalent to a bachelor’s degree from a university.) Indeed, the fuss from IFAs about being told to make Level 4 seems really quite strange by comparison.

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People need to be encouraged to make wills and to learn about powers of attorney.

They need telling about the importance of life assurance. And they need help with choosing the right sorts of bank accounts, and with determining their own safe levels of debt.

Often that means taking a hard look at their budgets – something that many will be reluctant to do. They need encouraging to step back and consider how their own lives are changing (children, school, health, age and dependency), and how their financial priorities might need to change as a result. And sometimes, of course, people need direct help with getting out of financial difficulty.

All of this falls within a financial planner’s remit to one extent or another. But, for many, the cost and complexity of getting professional advice is too much of a deterrent. Financial Planning Week aims to bridge the gap by providing these reluctant planners with enough basic information to make a start. For many, the information supplied through Financial Planning Week will be enough to see them on their way; for others, however, it will point up the places where there’s really no substitute for professional advice. Which is where the industry’s own opportunity comes into play.

Highlights of the web-based programme will include pages of top tips, listing easy ways for readers to sort out their finances and kick start their plans. Plus a downloadable DIY financial planning guide written by a specialist in the field; tips on debt planning; information on choosing a savings instrument; and budget planners and calculators of all kinds.

There’s more, but it’s all tantalisingly hush-hush at the moment.

Watch the website for more details.

Next big ambition? To get Financial Planning Week onto the national TV channels, says Ms Whitbread. “We’ve had TV news slots lined up in the past, but time and again the studios have come back to us at the last minute and told us that something else has come up so there isn’t room to fit us in.” Come on, news schedulers, you can do better than this.

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October 2011

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Support you through regulatory change Engage with a community of professionals Follow a structured career path Increase your personal and business potential Harmonise your goals with those of your clients Keep up to date with relevant issues and news

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ED ’S SOAPBOX

SHOOTING THE MESSENGER MICHAEL WILSON SAYS IT’S PAYBACK TIME FOR THE PONTIFICATORS When you were at school, didn’t you just hate the classroom swot who always seemed to have the teacher’s ear? The smarty-pants with the straight tie and the shiny shoes who could always tell you why Sir was right, and why Smith and Adams over there clearly hadn’t done their homework? And didn’t you just love it when the little creep came unstuck?

They don’t come much more unstuck than the international credit rating agencies. Standard & Poor’s, one of the world’s big three rating agencies, has been getting a blast of downright hatred from the press, the politicians and the investment world since its decision on 5th August to downgrade the mighty US government from

“When you were at school, didn’t you just hate the classroom swot?

And didn’t you just love it when the little creep came unstuck?” www.IFAmagazine.com

its coveted AAA rating to just AA+, in view of Washington’s huge current deficit and its messy threshold-raising exercise. It was the first time in 150 years that Uncle Sam had scored less than a Triple A, and it hurt the nation’s pride.

Sensibly, S&P’s two rivals, Moody’s and Fitch, decided to hold their ratings steady and didn’t get the flak. For the time being, at least...

Obviously, S&P and the others are perfectly entitled to give anybody any rating they like – they are, after all, independent companies.

Subject always to the proviso that they might lose their privileged status as “nationally recognised” assessors in America if they get it too badly wrong, too often.

But what seems doubly ironic is that the rating agencies’ own past errors are still writ large across subprime mortgage crisis which brought about the collapse of (AAA-rated) Lehman Brothers and generally got us all into the mess we’re in now.

That hurts.

October 2011

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ED ’S SOAPBOX

magazine... for today ’s discerning financial and investment professional

A Comedy of Errors Didn’t S&P and the others dish out all those ludicrous triple A ratings for the subprime bonds that the wide boys of the banking world had been parcelling up for our delectation? Yes they did. And didn’t S&P’s chief have to resign in 2007 after the scale of his team’s mistakes became apparent? Yes he did. And weren’t the big three ratings boys still giving a clean bill of health to Enron just days before it collapsed in 2001? Affirmative also.

Weren’t the agencies right at the heart of the Basel II banking accord, which required every bank in the world to present full audits of its lending risk portfolios so that the powers that be could decide how much capital it ought to be setting aside against any possible default? Yes they were. It was a development that gave the rating agencies huge and unprecedented power in the commercial banking world.

“Politicians are getting hot under the collar about the “issuer-pays” arrangement between banks and their credit assessors.”

Pause for effect.

With hindsight, we know just how good those risk assessments were, because half the world’s banks have spent the last four years in chaos. And who exactly was paying the agencies to produce those superfine assessments? We’ll give you a clue. It wasn’t the governments or the financial regulators. Sure enough, it was the client banks themselves, who would have been awfully cross about getting a sub-optimal credit report...

There are currently a lot of politicians, especially in Europe, who are getting hot under the collar about this cosy “issuer-pays” arrangement between the banks and their credit assessors. So should we be surprised that the ratings agencies are quite fantastically profitable? Moody’s is currently reckoned to be running an operating

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October 2011

margin of 35-40%. And over at McGraw Hill, the publishing outfit which owns S&P, investor pressure is growing to split off the golden goose from the rest of the flock so that its true value can be appreciated in all its own burnished glory.

And yet...

There are two sides to every story. The International Monetary Fund gave the rating agencies a pretty good assessment last year, when a special study found that every single country that had defaulted on a debt since the mid-1970s had been flagged up by the agencies at least twelve months in advance. And this year, too, all the European countries which got into hot water with their debts had been flagged up several years ago.

You might be inclined to say that these extreme examples are just the lowhanging fruit. If you couldn’t see that Ireland and Greece were on the skids at least three years ago, then you’d be better advised to get a white stick and a Labrador.

It’s the trickier middleground countries – Mexico, South Korea, Brazil – where the true expertise is needed.

And to be fair, most of those ratings have been reasonably accurate. But when it comes to the banks, nobody would really dispute that the agencies’ rating assessments have been pretty dismal.

Consider also the extreme responsibility which goes with being a ratings agency. It was that fateful downgrading of AIG’s credit status in 2007 that started such a run on the world’s biggest reinsurer that it had to be propped up by the Federal Reserve, simply in order to prevent businesses from Boston to Beijing from waking up to find they had no valid insurance policies any more.

Recall the shocking effect of Moody’s or S&P’s downgrades on manufacturing companies from Sony to General Motors – and, more specifically, the outward stampede of cash from their stocks – and you start to wonder why anybody would want to be in this line of business at all. Unless it was for the money, of course.

Europe’s Experiment But let’s look at one of the newer developments here. You might have heard that the G20 Group’s co-ordinating body, the Financial Stability Board, has demanded that its members find ways of keeping the ratings agencies’ assessments far www.IFAmagazine.com

ED ’S SOAPBOX

away from the rulings on how much capital a bank should have, or on things like margin agreements.

But Europe’s response is rather different.

It’s not, in fact, a solution so much as a sidestepping process. The European Central Bank is discussing an idea whereby the shaky economies of Portugal, Ireland, Italy, Greece and Spain (the unflatteringly-named PIIGS), and all the others too, would be eligible for support from a new kind of so-called ‘eurobonds’ that would be jointly underwritten by all the Euro Club governments, and most of all by the ECB. Yes, that’s rather a radical solution. It implies that the credit pool will be underwritten by the whole vast Euro-zone economy, without regard to country risk. And that in

turn would make the need for approval from an outside ratings agency redundant.

There are more radical mutterings in Europe, where pressure is growing for a panstate ratings agency that wouldn’t be a paid entity at all. During the last year Europeans have been outraged at the way Moody’s & Co launched blistering downgrades on Greece, Spain, Portugal and Italy - in each case, just in time to trash a major restructuring announcement.

There have even been claims that the three American agencies are driving down the euro so as to make the embattled dollar look better.

(Perish the thought.) An official ratings agency, some say, would obviate this problem nicely.

How does the scale system work?

Ratings agencies haven’t altered their methods in the 150 years since they were first invented.

A combination of intense mathematical study with ‘fingertip feel’ analysis – not to mention a lot of phoning your friends - results in a hybrid product which is, unfortunately, far too obscure for the average layman to tackle or contradict with any conviction. “Because everyone knows we’re good at it” is about the best account you’re going to get.

Each of the ‘big three’ (S&P, Moody’s, Fitch) has its own classification system, which makes it hard to compare the ratings. But in very broad terms, the top of the quality spectrum is dominated by a group of what we normally call Triple A governments (or companies) – which at the time of writing included Britain, Germany and France.

(Though France’s position was under review.)

Because these governments’ debts are regarded as 100% secure, their Triple A rated bonds can get away with paying smaller yields than those of their slightly less distinguished competitors – which now include the AA+-rated United States, of course. That in turn means that the capital value of any triple-A bonds you hold is at a maximum.

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It also means that any downgrade is going to wipe huge chunks off your bond portfolio!

There’s nothing terribly bad about being an A anything, except that the yields are higher and the prices are consequently lower. Anything from BBB upwards (Standard & Poor’s) or Baa (Moody’s) qualifies as ‘investment grade’ and might be considered suitable for your pension portfolio. But ‘sub-investment’ grades which fail to make these levels are strictly for risk-takers in their various guises.

Brazil opens the batting for government paper at BBB- from S&P, and Turkey and the Philippines score a mere BB. Ireland currently merits a Baa3, which is just above junk. There are hundreds of large companies on significantly lower ratings, and their high yields on their corporate bonds are reflected in sometimes large “spreads” over German bonds, a popular benchmark, or else against US Treasuries. Their prices are consequently lower to accommodate the risk of default, however small.

Which is a good thing for an income investor or a risk investor, but a source of worry for those who insist on sleeping tightly. You pays your money and you takes your choice.

October 2011

25

ED ’S SOAPBOX

magazine... for today ’s discerning financial and investment professional

America’s Regulatory Lash The United States has already taken up the running with rather more practical gusto. The Dodd-Frank Act, which passed into law in July 2010, gives the government just two years in which to come up with a better alternative.The Act doesn’t pull its punches - and it would have been even tougher if the Administration hadn’t backed down on a critical issue at the very last moment.

Influential protagonists such as Al Franken (Democrat) had tried to insist that the ‘issuer pays’ model

“The US has already taken up the running with rather more practical gusto.”

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October 2011

should be completely outlawed. That was enough to send the industry into frothing-mouthed mode, and the proposal was defeated. But another report by the Securities and Exchange Commission and the New York Attorney General had lambasted the industry for slovenliness and complacency - and had dragged up several very juicy internal emails that proved its point.

“No nation, agency or organization has the authority to dictate terms to the United States Government,” said Congressman Dennis Kucinich (Democrat) in July, as Moody’s discussed a possible downgrade (that, in the event, never actually happened). “Moody’s is representing people who stand to gain from the U.S. being able to issue more financing. This is an unwarranted interference in the political process and continues to raise questions about conflicts of interest among the rating agencies.” Okay, yes, we get your point.

Aye, and There’s the Rub All in all, the opprobrium being heaped upon the ratings agencies is not unexpected.

But it leaves aside the awkward question: what would we do without them?

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ED ’S SOAPBOX

Imagine a world in which a fund manager had no tools at all for assessing the credit status of a developing country, apart from his own acute mathematical ability of course.

Think of the trouble we’d have in figuring out whether Bank A was sounder than Bank B – especially if we didn’t have access to their backroom files – and the prospect of something very close to anarchy heaves into view. And double those doubts if the banks happened to be in a part of the world where financial regulations were, ahem, flexibly applied.

So what do we do?

Among the saner suggestions would be to abolish the ‘nationally approved’ tags that lend what might often be a bogus credibility to the agencies. (I’m thinking not least of the Chinese agency that savagely downgraded the United States last month because it was feeling piqued over the US deficit.)

Another, better way would be to improve

“Does ‘three strikes and you’re named and shamed’ sound like a good start to you?” the transparency of the vetting process so as to make sure that agencies couldn‘t simply reward themselves for slack work or even cover-up jobs. But hey, perhaps the best way would be to go the other way completely?

Let’s mix a metaphor. Does “three strikes and you’re named and shamed” sound like a good start to you?

Do you have a good reason for the Editor to jump back onto his soapbox? Not that he needs any encouragement, please send your requests to editor@ifamagazine.com and stand well back!

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(Transparent, low cost, straightforward)

Diversified exposure across a mix of equities and bonds Exceptional value AMC/TERs ranging from 0.29% to 0.33%* Automatic rebalancing And, all built using Vanguard's range of index funds.

Find out more: vanguard-lifestrategy.co.uk Straightforward. It’s the Vanguard Way.™ 0800 917 5508

*As we pay all running costs out of our AMC, we expect that our AMC will be the same as our TER.

This advertisement is directed at investment professionals in the UK only and should not be distributed to retail investors. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2011 Vanguard Asset Management, Limited. All rights reserved. UK11/0882/0911

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IT COULD HAVE BEEN SO MUCH WORSE IF YOU THINK THE ICB’S FINAL REPORT WAS TOUGH ON THE BANKS, JUST THINK WHAT MIGHT HAVE BEEN, SAYS KAM PATEL The Bank of England’s governor Mervyn King might look like a mildmannered sort of chap, but just watch out when he gets angry. Barely two years ago, he shook Britain’s banking system to the core by calling for a comprehensive break-up of the big banks - arguing that, if some banks are thought “too big to fail”, then they were simply too big.

So it’s a bit of a relief all round that Sir John Vickers’ recommendations for reforming the sector are less drastic than King’s prescription. And what’s more, Vickers has given the banks a decent period of time in which to implement his proposals, as well as some critical leeway in deciding how they can refashion and

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October 2011

restructure themselves to bring their operations into line with the recommendations.

The report, compiled by the Vickers-chaired Independent Commission on Banking (ICB), was originally commissioned by the government in response to the 2007 run on Northern Rock, which led firstly to the stricken bank being nationalised the following year, and later to the taxpayer bailouts of Lloyds and Royal Bank of Scotland.

Vickers and his colleagues on the ICB were asked by government to not only find ways of avoiding taxpayer bailouts of troubled banks in future, but also to consider whether the competition in high street banking was adequate – and, if not, to suggest ways of increasing it.

Ring Fence At the heart of the ICB’s proposals - which both Vickers and government want to see fully implemented by the start of 2019 - is a recommendation that banks should ring-fence domestic retail banking services from their riskier investment banking operations.

There’s no doubt that the ICB wants to see a very clear and unambiguous division between a bank’s retail and investment operations. (but without the wholesale separation urged by King.)

Indeed, it recommends that the ring-fenced business should be separated from the parent bank “legally, economically and operationally”, and have its own board and culture.

Under Vickers, this independent ring-fenced

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BANKING

Picture: Phil Sayer

“Vickers has given the banks a decent period of time in which to implement his proposals.” subsidiary will also publish its own financial information, have very limited exposure to global financial markets and not be allowed to engage in trading activities that require support from the bank’s own account.

Capital Cushion To ensure that there is adequate protection for the retail arm

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in times of trouble and strife, the Commission wants to see the ring-fenced business boast a capital cushion of up to 20%, made up of mixture of equity and bonds.

The biggest of the ringfenced banks - HSBC, Lloyds, Barclays and RBS, furthermore, October 2011

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BANKING

magazine... for today ’s discerning financial and investment professional would be required to have at least 17% of equity and bonds plus a further “loss-absorbing buffer” of up to 3% if authorities believe that under severe stress they might not be able to meet obligations to primary customers without recourse to the taxpayer.

The proposals do allow for flows of funds from ring-fenced operations to the investment arm as long as the capital ratio of the ring-fenced bank does not drop below a minimum of 10%.

So what will qualify for inclusion within the ring-fence?

especially, Barclays, have sizeable investment banking activities that mean they might well prefer to have deposits from the larger corporates sitting outside the ring-fence, so that they can be used to help support investment banking.

But it’s very possible that corporate clients might insist on having their funds located within the ring-fenced business, where they’ll regard it as safer. That in turn could push up the costs of funding investment activities outside the ring-fence, which would hit profits. Indeed, analysts

“A welcome step towards the greater clarity that banks need to be able to operate with confidence.”

Lloyds Escapes the Knife

Picture: Danial Lewis

Barclays CEO Bob Diamond surprised everybody by welcoming the ICB proposals

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Well, it certainly includes ordinary deposit and overdraft accounts of retail customers, mortgages and the like, as well as the accounts of small and medium enterprises. But Vickers is leaving it up to the banks as to what to do with larger, non-financial services, corporate clients. It could even be possible to have lending to such clients supplied partially from within the ring-fence operation and the rest from outside.

It isn’t too hard to see that there is the potential for competition between a bank’s ring-fenced operation and businesses outside that barrier. RBS and, most October 2011

not to have had ring fencing imposed, the bank has surprised everybody with its chief executive Bob Diamond warmly welcoming the Vickers proposals.

As the FT reported on 13 September, the day after the publication of the Vickers report, Diamond believes the ICBs proposals represent “a welcome step towards the greater clarity that banks need to be able to operate with confidence”.

The publication meant “a cloud has been lifted” from the regulatory landscape, he added.

Exactly where the lines will be drawn for ring-fenced assets by the banks is still unclear at present, but the leeway given to them on this

by Vickers is a very important concession as it will allow each of them to better align the new subsidiary with the shape of their respective retail and corporate banking businesses.

For the time being, Vickers estimates that between one-sixth and one third of the £6 trillion of bank assets will end up inside the ring-fence.

at Credit Suisse reckon that, because of their big investment banking activities, and the potentially higher funding costs implied for these operations under Vickers, RBS and Barclays might have to contend with (pro-forma) 2013 pretax profits being reduced by a quarter.

Diamond Geezer RBS, being one of the bailed out banks and 83% owned by the taxpayer, is not in a strong position to complain too much about ring-fencing. Barclays, which avoided the government bail-out, looks better placed to grumble - but, while it would have no doubt much preferred

But if there’s one bank that has come out of the Vickers probe a little better than expected it has to be the 41% governmentowned Lloyds Banking Group.

The ICB, most notably, surprised by backtracking on its interim suggestion in April 2011 that Lloyds should be required to sell off even more than the 632 branches it currently has on the market, so as to meet EU rules on state aid. The ICB justified its April call for an increase in the branch sell-off volume by arguing it was necessary to cut Lloyds’ bloated 25 per cent share of UK current account market.

But the final report from Vickers recommends only that government should seek agreement with Lloyds “to ensure that the divesture leads to the emergence of a strong challenger bank”. The ICB www.IFAmagazine.com

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magazine... for today ’s discerning financial and investment professional furthermore stipulates that the resulting competitor must have a market share of at least 6% - which is pretty sizeable, and not too far off the share that Nationwide Building Society currently enjoys.

The upshot of Vickers’ final recommendation for Lloyds means the lender can now simply proceed as originally planned with the divestment of 632 branches and not worry about further erosion of its branch base.

Delivering on the 6% market share requirement should not be too difficult for Lloyds, as it can offload the branches to an existing UK player, with the likes of Co-operative Bank and new entrant NBNK already in the frame as suitable buyers. If needed, Lloyds could even ‘bulk up’ the deposit book associated with the disposal to ensure the 6% market share target is met.

Lloyds also looks to have avoided the short straw on ring-fencing. Over a quarter of its balance sheet – around £190 billion – comprises corporate loans to mid-to-large companies. As Vickers is leaving it up the banks to decide how to deal with such accounts in relation to ring fencing, Lloyds can happily choose to place them within the fence.

If Vickers had insisted on having such accounts placed outside the ring-fence, Lloyds would have been exposed to higher funding costs and a resulting (pro-forma) 2013 pretax profit hit that could have amounted to as much as 26 per cent, according to analysts at Credit Suisse.

And So To The Customers...

Still, if it looks like the ICB has ended up treating Lloyds softly, there is a sting in the tail which underlines the Commission’s determination to ensure protection for depositors.

For under ICB proposals, individual depositors will, for

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October 2011

“Lloyds, like the other banks, will also have to bear the costs of the ICB’s proposals.” the first time, rank higher than unsecured debt in the event of insolvency. That is an important change as it leaves Lloyds in particular exposed to senior creditors (the largest providers of wholesale funding to banks) demanding higher risk premiums, even when lending to the “safer” ring fenced operation.

The worry, therefore, is that under the ICB’s new “depositor preference” ranking, owning bank debt could will become less attractive and push up banks’ borrowing costs.

Lloyds, like the other banks, will also have to bear the costs of implementing the ICB’s proposals, with the Commission estimating the total cost creating and running the ring-fenced operation across the sector will amount to £4-7 billion. It seems inevitable that customers will have to bear at least some of the costs of this, with free banking looking certain to be a casualty, with banks likely to phase it out completely over the next few years.

Alongside finding ways of ensuring long term financial stability of the sector and protecting the taxpayer in any future banking crises, Vickers was charged with looking at improving competition on the high street.

With the big five - Lloyds, HSBC, RBS, Barclays and Santander –between them boasting eight in ten UK current accounts, the ICB believes customers are being taken for granted and getting a rough deal.

The creation of a strong new entrant via the sale of the Lloyds branches will clearly

help address some of Vickers’ concerns on this front. In addition though he wants to see a system implemented that allows for easier and faster switching of bank accounts – within seven days - and is “free of risk and cost to customers”.

The ICB also wants banks to be clearer on charges, proposing that on current account statements they inform the customer how much interest they have lost on their cash relative to the Bank of England base rate. The proposal aims to alert (or remind) customers that their bank may, for instance, pay zero per cent or very low rates on in-credit balances.

With the base rate currently just 0.5 %, this might not be such a big issue for retail customers - but remember, in the recent past it has been higher than 5%. At higher base rates in the future customers may think twice about leaving excess funds in zero rate current accounts and might decide to move them to a savings account - or simply switch to a bank that is perhaps offering a decent in-credit rate.

To be sure, Vickers amounts to the biggest shakeup of the financial sector since the Big Bang wholesale restructuring the industry in 1986. And certainly institutions would much prefer not to have to deal with the changes proposed by the ICB. But the banks know it could have been a lot worse. Just imagine if Mervyn King had got his way.

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CLEAN, GREEN, MONEY MACHINE YOU THINK ETHICAL FUNDS ARE UNDERPERFORMING? TAKE ANOTHER LOOK, SAYS EMMA-LOU MONTGOMERY “The UK’s first ethical fund was dubbed the Brazil Fund – so called, because sceptics said you had to be nuts to invest in it.”

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Seb Beloe, head of Sustainable and Responsible Investment (SRI) at Henderson Global Investors, gives a wry laugh as he recalls how the UK’s first ethical fund, launched back in 1984, was dubbed the Brazil Fund – so called, he says, because sceptics said you had to be nuts to invest in it.

Today, with SRI having grown into a multibillion pound industry, one would imagine that those same people must be laughing on the other sides of their faces. Ethical investment is now big business, thanks in large part to changes in the way that pension funds are required to declare the extents of their ethical commitment. There are just under 100 UK-domiciled ethical funds to date, according to figures from the independent advisory service EIRIS, and the volume of cash invested in these funds has sextupled in the last ten years from just £1.5 billion to £10 billion.

www.IFAmagazine.com

ETHICAL FUNDS

“These days all sorts of investors, from pension funds to charities, from environmentalists to devout Muslims, are actively seeking investment in funds that align with their own moral, ethical or religious beliefs.”

Indeed, the Investment Management Association estimates that investors put £62.2 million into ethical funds in the fourth quarter of last year alone. And research from ICM on behalf of Cooperative Financial Services says this is set to continue, with 13% of investors surveyed planning to opt for ethical or sustainable funds within their Isa. In short, there’s clearly been a shift in investor sentiment. These days all sorts of investors, from pension funds to charities, from environmentalists to devout Muslims, are actively seeking investment in funds that align with their own moral, ethical or religious beliefs.

For Some, It’s Not What You Do...

One thing that quickly becomes evident, however, is that people have differing ideas and principles when it comes to what SRI

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and Corporate Social Responsibility (CSR) are actually intended to achieve. And, unsurprisingly, the funds themselves tend to adopt different ethical and SR objectives.

Take, for instance, Zurich’s Environmental Opportunities fund, which says it invests in ‘companies and institutions which actively enhance the global environment and community’.

Some ethical investors might not be so happy with the near-15% of the fund’s holdings in BP, Shell and Rio Tinto – all of which have got themselves into one sort of environmental hot water or another in recent years. So, how do you navigate between the various shades of ‘green’ when it comes to determining the most suitable fund for your client? Can you be sure that one fund manager’s version of a SR or ethical business is the same as another’s?

October 2011

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ETHICAL FUNDS

magazine... for today ’s discerning financial and investment professional

Trees: An Obvious Solution?

Beloe explains that the whole principle behind ethical investing has evolved in ways that might not be immediately apparent. In the early 1990s, he says, SRI policy focused on avoiding the things you positively wanted to avoid - like tobacco or armaments, for instance. But these days the position has gone into reverse, and we’re looking at a positive search for the areas you can and should invest in. Henderson takes the view, he says, that these ethically-acceptable markets are well placed to grow and to make money for investors. Renewable energy and energy efficiency are still all the rage – although some of the bigger fossil energy players have seen their greenish halos slipping quite badly in recent years. What’s new is that many investors are getting keen on companies which operate good labour practices, and those that offer support and services for an ageing population.

More confirmation of this view comes in from Barchester Green Investment, an IFA firm specialising in ethical and environmental investment, found when it revisited its “first, second and third division” ethical and environmental funds review of years gone by, fund managers’ ideas of responsible investing can vary widely. For a list of Barchester Green’s own ‘saints and sinners’, see the website at http://tinyurl.com/3gy6fza

“The sheer thrill of being able to picnic or paintball in your very own copse.”

It’s the Way That You Do It...

What is evident is that, despite a shift in what is screened in or out of an ethical or SR fund, there are still wide discrepancies.

And none more so than between European ethical funds and their US counterparts.

A recent study from the US shows that 64% of ethical funds there apply five or more criterions for their ethical screening policy, while around 18% only apply one. The avoidance of so-called ‘sin’ shares – those that invest in the tobacco, alcohol and pornography industries are popular with ethical screening in the US. And some US ethical funds have even taken a stance against stocks in companies that have anything to do with abortions - whereas in Europe that criteria is rarely applied.

Islamic funds often screen out companies producing pork or other ‘unclean’ food products, or insurance companies that insure couples who are not married. Whereas the Ethical Investment Advisory Group (EIAG), a member of UK Sustainable Investment and Finance (UKSIF), takes a

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October 2011

It seems obvious enough that timber is an idea way forward for an ethical investor – and, in many respects, it is.

Forestry projects in the UK (and sometimes elsewhere) qualify for tax breaks on timber production, inheritance tax exemptions, business asset taper relief and so forth.

And that’s before we get to the ecohalo. Combine all this with the sheer thrill of being able to picnic, party or paintball in your very own copse, or even just your own square kilometre of pine forest, and you can soon see why wealthier investors take a keen interest in woodland ownership.

(Prices tend to start at £20,000 per acre.)

But the practical complications of running a woodland mean that collective investment funds are often the better way forward.

Because timber takes decades to grow and harvest, the only way to achieve a steady income is through a pooled investment whereby you get a little bit of everybody’s felling revenues each year. Established forestry groups like FIM Services, an FSA-authorised manager, run funds that can make this a practical reality: FIM, for instance, recently announced a new £20 million subscription to its existing £43.6 million UK collective fund, with applications closing in December.

Alas, the same can’t always be said of the many hardwood-growing project funds that compete for investors’ cash. Although some tropical projects are doubtless cleaner than clean, there are many which fail to provide enough security, and sadly, some that are outright scams. The managers can generally reckon on the likelihood that investors will never go and inspect their own ten hectares of tropical forest in person, so they may never find out that it isn’t forest at all. Or that somebody else felled their trees last year, or that their land title is unsafe.

Deep diligence is always necessary in these cases, and company references should always be taken up. You can never be too sure, or too safe.

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ETHICAL FUNDS

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Solar Power: A Window Closing Shortly

more traditional approach. EIAG extends its ethical investment restrictions to companies involved in military products and services, pornography, alcoholic drinks, gambling, tobacco, human embryonic cloning and even weekly-collected home credit.

(Too many associations with loan-sharking.)

Unlike European investments, many US ethical investments are focused on how much a company gives back to the local community and how it treats employees.

Domini which runs a series of funds and is one of the largest ethical investment firms in the US, uses a ‘community impact gradient’ to assess whether a prospective investment fits the bill.

So its Social Bond Fund has large interests in the now government sponsored Fannie Mae and Freddie Mac. And Apple, Microsoft, JPMorgan Chase and National Oilwell are among its largest shareholdings. You wouldn’t be likely to see that sort of portfolio on this side of the Atlantic.

But that’s not to say that the ethical water is altogether clear over here either.

Since 2000, occupational pension funds have been legally bound to disclose whether or not they incorporate any social, environmental or ethical assessments into their funds’ investment strategies. But the funds themselves aren’t subject to the same legislation. Instead, they’re required just to state whether they do or they don’t have ethical strategies.

And pension funds are far from whiter than white when it comes to their green credentials.

Despite the existence of a number of green and ethical initiatives that pension funds can sign up to - including the UN’s PRI, the Carbon Disclosure Project and the Institutional Investors Group on Climate Change - too few UK pension funds are adopting responsible investment approaches yet, says the UK Sustainable Investment and Finance Association.

“Be quick, or you’ll miss it.”

That’s What Gets Results...

These days, other organisations beside pension providers are coming under pressure to invest ethically. The EIRIS Foundation and the Holly Hill Charitable Trust recently ran a survey that asked, simply: ‘”What is the UK public’s opinion of charitable investments?” The responses showed, perhaps unsurprisingly, that 78% of the British public would think worse of a charity if they found out that it had funds invested in activities that ran contrary to its values. And when you consider that UK registered charities hold

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October 2011

For many investors, free power from the sun ticks the right ethical boxes precisely.

Although the start-up costs are high, the prospect of potential returns running over many decades is something of a clincher.

And, with Britain’s target for renewable energy output scheduled to rise from 5.5% of production today to 15% by 2020, you’d suppose that the government would be doing all it could to stimulate investment.

But alas, one of the doors is about to close, and investors need to move fast.

A favourite way to get into solar energy has been through Enterprise Investment Schemes (EIS), which provide investors not just with income tax relief, capital gains tax deferral and inheritance tax relief, but also the potential for capital growth. Interest has heightened especially since last year’s announcement of the Feed-In Tariff (FiT) scheme, under which companies that install and run solar panels can benefit from a guaranteed production income for 25 years. That means that EIS-qualifying solar funds can lock into a long-term benefit that has the extra benefit of being linked to the retail price index.

But nothing good lasts for ever. From next April, solar companies will no longer qualify as investments into EIS or Venture Capital Trust products. Which means that investors have barely six months left in which to make a move.

Octopus Investments - one of the market leaders, with around £100 million invested into UK solar installations – says the opportunity is still well worth taking. The Government has given assurances that, once a solar site is connected, it will continue to receive the FiT at the rate that was announced at the time. Which would imply that, in a financial environment that’s constantly changing, solar-focused EIS projects look ideal for those thinking about retirement, those seeking tax-free capital gains, or simply those who are interested in an investment with a reliable income. Be quick, or you’ll miss it.

www.IFAmagazine.com

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ETHICAL FUNDS

magazine... for today ’s discerning financial and investment professional nearly £78 billion in investments, that’s a lot of potential business.

Let’s remind ourselves once again, by the way, that the whole UK universe of ethical funds is only an eighth of that size.

Clearly, sustainability issues are now higher on the agenda, with government and businesses pledging a total of £5.2 billion towards environmental projects over the next two years.

And the investment case is just as compelling.

According to Henderson’s Beloe: “I personally do not want to invest in anything to do with tobacco or gambling. That’s just my personal preference. But the fact that we have funds that outperform, and that do not invest in these areas, is a win-win situation. “

“I personally, do not want to invest in tobacco or gambling.”

Seb Beloe, head of Sustainable and Responsible Investment (SRI) at Henderson Global Investors

Indeed it is. As Henderson’s own blog (http://tinyurl.com/3gy6fza) records, a recent study by RCM, part of Allianz Global Investors, found that investors could have added 1.6% per annum to their returns over a five-year period by investing in funds that themselves invest in companies with above-average environmental, social and governance (ESG) ratings. For Beloe, the advances made by the sector in the intervening years since the launch of the ‘Brazil Fund’, mean it is no longer even the case that investors need look at the merits of SRI simply as a part of a balanced portfolio. By his reckoning, they seem to have it all going for them.

Recent studies, for example, by Macquarie Research and UBS have found that companies with strong ESG ratings tend to outperform most in times of heightened risk aversion and weak equity markets. And that’s another point that interests Beloe. These days, he says, when investors are most worried about risk, it’s the companies with unsatisfactory

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October 2011

approaches to ESG issues that underperform.

“We have also reviewed performance at a portfolio level,” says Beloe’s blog. “And here too we find that a basket of highly-rated companies from an ESG perspective will outperform its poorlyrated peers. Again, this is particularly true in times of heightened market stress. For example, from the start of 2011 to the middle of August we found that our ‘SRI preferred’ portfolio outperformed its non-preferred peers by 9%. Over five years the group of SRI preferred companies returned 34.5% but their non-preferred peers returned only 5.2%.

L&G’s Viewpoint Legal & General’s Global Environmental Enterprises fund, which launched in June, is one of a growing number of funds investing in worldwide companies with strengths in in energy efficiency, low carbon energy production, and water, waste and pollution control.

Managed by Legal & General Investment Management’s Robert Dowling, the passive fund tracks the Osmosis Climate Solutions Index of 100 companies, run by Osmosis Investment Management, which essentially requires that all its constituents must obtain at least half their revenues from low carbon activities.

June Aitken, CEO of Osmosis Investment Management, stresses that, although the global energy efficiency environment is still uncertain, with public perceptions of climate change currently in recession, issues such as the Fukushima nuclear crisis in Japan are sharpening the general focus on efficient use of power. She believes that there are still enormous opportunities to be found among Japanese efficiency specialists, many of which are market leaders.

The case for IFAs Julian Parrott, Chair of the Ethical Investment Association and a partner of advice firm Ethical Futures, certainly agrees that it all adds up to a pretty good case for ethical funds. Sure enough, he says that change is coming slowly but surely.

“At the EIA we’ve seen increased interest from ‘conventional’ IFAs, but also increasing levels of client enquiries from people who are keen to find out more about sustainable investment opportunities. This significant growth in investment opportunities means that there are sufficient investments both for those clients who just want to dip their toe in the water and for those who want to create a fully ethical portfolio.”

NATIONAL ETHICAL INVESTMENT WEEK takes place from 16th to 22nd October 2011. Details at www.neiw.org For more comment and related articles visit...

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magazine... for today ’s discerning financial and investment professional Anticipation was high on 1st August 2011 when the FSA finally published its platform policy statement, a set of rules that extend the consumer protection elements of RDR into a rapidly developing area of investment services.

As most people in the industry expected, increased transparency and improved consumer experience were the chosen key to the new changes. But for anyone taking the most cursory glance at these developments, one fact was abundantly clear – here was a case of the FSA flexing its regulatory muscles without necessarily providing clarity.

According to the FSA, the new platform rules have two key aims – firstly, to ensure that customers receive a better service and, secondly, to provide a more transparent and efficient marketplace. To achieve this “better service” for customers, platforms will be required to transfer – within a reasonable time and in an efficient manner – assets that are held on behalf of a customer to another person, when requested. The rules will also require platforms and other investors to pass on fund information to the end investor.

A Road Paved with Good Intentions It’s all pretty simple as far as the FSA is concerned.

“The rules published today are designed to enable consumers to understand the services they are being offered by investment firms, and what they are paying for,” said Sheila Nicoll, Director of Conduct Policy, when the August changes were announced. Well, we’re all on the side of the angels. But what does it mean in practice ?

To provide the second aim – “greater transparency and efficiency” – the FSA rules

will require advisor firms to “take reasonable steps to ensure” that their platform services are unbiased in the way they present retail investment products. The FSA will also require platforms to disclose to professional and retail clients “any fees or commission they arrange to accept from third parties in relation to retail investment products”. These should be disclosed in advance of the platform providing services to those clients.

Other requirements for greater transparency and efficiency include extending the application of the RDR rules on facilitating payment of adviser charges to facilitation through platforms. For example, a platform with client cash accounts could enable payments of adviser charges out of such accounts. It would also “require nominees to respond to information requests by authorised fund managers for liquidity purposes”.

U-Turns, U-Turns...

In many respects, these stipulations covering wrap platforms and online services delivered to IFAs are pretty much what we expected. But one issue has provoked much disappointment. The FSA has sidestepped the contentious issue of banning cash rebates from product providers to investors and from product providers to platforms.

The FSA acknowledges that it still wants to ban these practices, on the basis that they distort the advisory market for pensions, savings, asset management and other financial products. But it has delayed their implementation until after the Retail Distribution Review (RDR) deadline of 31st December 2012.

“The FSA has decided that it would be desirable, in principle, to ban both cash rebates

THE FSA’s PLATFORM POLICY PAPER HAS PROVIDED YET MORE FUEL FOR THE REBATE DEBATE. BUT HAVE THE LATEST RULE CHANGES SIMPLY MUDDIED THE WATERS? NEIL CROSSLEY INVESTIGATES.

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AS CLEAR October 2011

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IT REVIEW

from product providers to investors and product provider payments to platforms,” says the platform policy statement. “Given the potential impact of these changes on the business models of platform service providers, the FSA has concluded that further research is needed to ensure that the implications for consumers are fully understood before proposing new rules.”

Further research? That looks like a U-turn for the regulator. In November 2010, the FSA reversed its original decision to ban payments between providers and platforms, and now it has changed tack a second time.

Well, sort of. And at this late stage too.

On the positive side, the FSA does appear to have heeded industry concerns that a ban on fees could drive smaller players from the market, reduce competition and have a detrimental effect on transparency. But it could also be argued that, until the right to charge commissions on platforms is either abolished or protected, the entire RDR overhaul will remain hopelessly blurred.

A Headache for Platform Developers That’s certainly the view of Skandia, which has criticised the regulator over its delayed implementation of the cash rebate ban. The Swedish company claims that the delay only creates uncertainty for platform operators.

“Whilst the deadline for implementing the final platform rules remains unclear, the policy statement suggests that the platform consultation and RDR implementation date have been de-coupled,” said Skandia recently. “This is less than ideal for platform operators who are already building RDR-

AS MUD www.IFAmagazine.com

October 2011

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IT REVIEW

magazine... for today ’s discerning financial and investment professional ready platform services and [who] will have to continue these developments with uncertainty around what the final platform rules will be.’

One of the issues that are central to the platforms debate is that of “consumer detriment”.

Earlier this year, the Financial Services Consumer Panel warned that the way platforms are currently paid is potentially “detrimental” to clients – because they are not informed how much a platform is paid to promote different funds, and may therefore only be offered funds that give rebates to platforms.

Mud, Mud, Glorious Mud But one major player has already sought to rectify this situation. The proposed new rules for fund platforms will not take effect until 31st December 2012, and any rule banning payments will not come into force until after the RDR deadline of 1st January 2013. But Fidelity FundsNetwork have already begun implementing the new rule changes.

On 1 September 2011, the day after the changes were announced, Fidelity proceeded with its own disclosure rule. As a result, investors buying any of the 1,200 funds available on Fidelity’s online supermarket can now see exactly how much the company receives for selling them.

And other fund platform operators are planning to follow its example, said the company.

“This move is the first step in our commitment to greater transparency,” Fidelity FundsNetwork said, ”and one which we are pleased to say has been welcomed by a number of fund providers and other platforms looking to move in the same direction.”

Certainly, some financial advisers have welcomed this development, arguing that it can only lead to greater openness. But generally the rules have had a more difficult impact on adviser firms. Bundled markets make up the bulk of assets in the platform sector, and that’s

a model that is now under threat. It certainly did not go unnoticed that the day after the FSA published its platform policy statement, Hargreaves Lansdown’s shares fell by 12.7%.

IFA reaction to the FSA’s new rules could be best described as “underwhelming” - a point made

by Gary Shaughnessy, UK managing director of Fidelity International. “The conclusions of the RDR Platform Policy Statement, which lead to more consultation, are not good for consumers, not good for advisers and not good for the industry,” he said.

“Clearly, the rules maintain a status quo for now, which may simplify the implementation. But it draws no conclusion for some of the longer term questions that the industry has been asking.”

Stephen Gay, Director General of the Association of Independent Financial Advisors, also voiced his frustration. “The new guidance, on which FSA has not consulted, relating to the definition of independence and the use of single platforms, potentially changes the playing field yet again for firms with very little time to consider the implications.

“Giving further consideration to the impact of banning cash rebates demonstrates FSA’s willingness to listen to the industry in some areas and is a positive step.

“However, the RDR is too important as a project to risk a poor implementation, and the change in FSA’s approach to independence could impact on proposition decisions being made by firms over the coming eighteen months.

“This lack of clarity only adds weight to calls for delays to RDR in areas where the industry is not ready, and the FSA is unable to provide confidence about effective implementation.”

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“This lack of clarity only adds weight to calls for delays to RDR in areas where the industry is not ready, and the FSA is unable to provide confidence about effective implementation.”

Stephen Gay, Director General of the Association of Independent Financial Advisors, also voiced his frustration.

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October 2011

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magazine... for today ’s discerning financial and investment professional

ARE WE ALL DECEMBER

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October 2011

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THE HUMAN RESOURCE

READY FOR 2012?

DIANE LEADBETTERCONWAY CERTAINLY HOPES SO!

As some predicted, RDR has crept up with alarming speed, and as an industry there is a mere 15 months left to ensure that all IFAs who want to continue giving financial advice have achieved Level 4 status. Wellplaced sources currently indicate that only 50% of IFAs have actually achieved this which leaves an alarming 50% who are still struggling on the exam route or haven’t yet started. The time for waiting for the FSA to back down on RDR is well and truly over.

Although there have been many calls for the FSA to extend the deadline, or alternatively to allow grandfathering as they did for N2, it would appear that the FSA are holding firm and it now looks increasingly unlikely that there will be any concessions.

Having said that, there must be concern within the FSA that, in these difficult economic times when the general public need more access to financial advice/ planning rather than less, there will be a severe shortage of those qualified to provide it!

So how are the networks going to ensure that on 1 January 2013 they have a fully functioning and appropriately qualified workforce in place?

Many of the networks are beginning to realise that leaving people to make their own exam choices in their own time just isn’t working. And they have become increasingly proactive

in selecting an examination route of choice, running study work shops and organising exam technique days.

There are various RDR exam routes to choose: CII’s Diploma in Financial Planning and Diploma in Regulated Financial Planning, IFS School of Finance, and the AIFA/ CIOBS Diploma in Investment Planning, to name just a few.

If you are unsure which exam route is right for you, then you should contact the institutes who will be only too happy to explain their exam approach to you. There are also a wealth of independent training providers who can give you advice on the range of examinations available and help you select the route that most closely matches your learning style.

Whatever exam route you choose, it is important to remember that all the exams available are there to test you can apply your knowledge and provide sound financial advice - something most people have successfully done for years!

Many people will fear having to sit exams again after so long out of the classroom, but it’s important to remember that you are being examined on what you already know.

Sadly there are many IFAs who will read this and decide to think about it “later”. In 6 months from now, “later” could well have become “too late”.

Diane Leadbetter-Conway is Publishing Director, Financial Services and Markets at BPP Learning Media

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October 2011

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PRODUCT REVIEWS

TAKING STOCK NICK SUDBURY SELECTS THE PICK OF WHAT’S NEW, WHAT’S POPULAR – AND, MOST IMPORTANTLY – WHAT YOUR CLIENTS ARE READING ABOUT IN THE PAPERS.

A question of evolution TM Darwin multi-asset fund David Jane, the former head of equities at M&G, has recently launched a new multi-asset fund at his investment boutique, the Darwin Group. He spent just over 3 years running a similar mandate at his previous employer and is now looking to build on his solid if unspectacular track record.

The whole point about a multi-asset fund is that it’s an outcome driven product with the scope to invest accordingly. Of course all funds have a specific objective, but most are more constrained as to how they can go about it.

The challenge, as Jane sees it, is to successfully preserve investors’ capital in difficult times while earning decent returns when conditions are more favourable. This is easier said than done and requires clever portfolio management and a decent sense of market timing.

He believes that the developed markets currently offer better scope for stock pickers than the emerging markets, which is why he has a 24% weighting in UK equities, with a further 15% in the US and 10% in Europe.

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FUND FACTS Name: TM Darwin multi-asset fund

The next Type: UK OEIC largest exposure Sector: Cautious is a 24% Managed allocation to fixed interest. Most Fund Size: n/a of this relates to Launch: 19 May 2011 government bonds Portfolio Yield: n/a in the developed markets, and Estimated TER: 1.74% there is also a Manager: Darwin 10% investment Investment Managers in commodities.

Website: A good www.darwinim.com multi-asset fund can make an ideal core portfolio holding that achieves acceptable returns in all market conditions with a relatively low level of volatility. The test will be whether the manager is up for the challenge and can use the wide remit to his investors’ advantage.

October 2011

49

PRODUCT REVIEWS

magazine... for today ’s discerning financial and investment professional

FUND FACTS Name: M&G Income Multi Asset Fund Type: UK OEIC Sector: Cautious Managed Fund Size: £13m Launch Date: 11 November 2010 Portfolio yield: 3.8% TER: 1.73% Manager: M&G Website: www.mandg.co.uk

THE FUND IS CURRENTLY YIELDING A HEALTHY 3.8% Nice little earner M&G Income Multi Asset Fund One of the beauties of the multi-asset approach is that it gives the manager the freedom to switch to the most appropriate asset classes at each point during the economic cycle. This means they can invest where they think they will get the best returns and are not tied down to one particular area.

The M&G Income Multi Asset Fund is case in point. It is run by Steven Andrew, whose main aim is to generate a high and rising level of income over time. Subject to this he will also look to deliver long-term capital growth.

Andrew has the mandate to search out the best sustainable income opportunities across a wide universe of different assets. This allows him to invest directly in diverse areas such as fixed interest, equities, warrants and money market instruments. He can also have an indirect exposure via funds or derivatives.

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October 2011

The fund’s largest exposure is a 49.9% weighting in fixed interest, with the biggest individual holdings being UK and US government bonds. A further 45.1% is invested in equities with most of the other 5% in the M&G Property Portfolio.

The fund is currently yielding a healthy 3.8% and is one of the few in its peer group to offer a monthly income distribution.

This is a very attractive feature for those who rely on their investment income.

It is too early to judge the M&G Income Multi Asset Fund, but the manager certainly has the mandate to produce a high and increasing level of income without eroding the underlying capital value. There are very few other funds with the scope to actually do this.

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Investec Multi-Asset Protector Fund One of the strongest arguments in favour of multi-asset funds is that they provide greater diversification, which can help to limit the downside in difficult markets. Unfortunately this wouldn’t really work in the event of a sharp selloff when all the risk assets tend to move together Cautious investors who want to guard against these sorts of extreme risks might be interested in the Investec Multi-Asset Protector Fund. This aims to provide long-term capital growth, whilst also delivering protection at 80% of the fund’s highest ever share price.

The way the managers limit the downside is by moving more of their assets into cash when the markets fall. They also invest in a derivative contract to provide the solid 80% floor.

The idea behind this approach is to perform better than a money market fund, but not as well as a pure equity product in an upward trending market. In the two and a half years since it was launched it is up around 34%, which is consistent with its objective, although it is yet to be tested in a severe bear market.

FUND FACTS Name: Investec Multi-Asset Protector Fund

At time of writing Type: UK OEIC the fund had a 14.7% exposure to UK equities Sector: IMA Protected and a further 32.5% Fund Size: £382m invested in international shares, with the largest Launch Date: weighting being the 30 January 2009 12% in the US. The Portfolio Yield: 0.37% more defensive holdings were a 29.3% allocation Estimated TER: 2.01% to fixed income and Manager: an additional 15.9% Investec Asset in cash. There were Management also small exposures to property and Website: alternatives. www.investecasset The underlying management.com holdings are a mixture of passive ETFs and actively managed funds including in-house ones from Investec. So far the mandate has worked pretty well, but it remains to be seen whether the willingness to shift into cash will provide the intended protection or just act as a drag on returns when markets recover.

SOMETHING FOR CAUTIOUS INVESTORS WHO WANT TO GUARD AGAINST EXTREME RISKS

PRODUCT REVIEWS

Safety Catch

PRODUCT REVIEWS

magazine... for today ’s discerning financial and investment professional

It’s a Kind of Magic Jupiter Merlin Income Portfolio Before the advent of multi-asset the most common way for retail investors to achieve greater diversification was to invest in a fund-of-funds.

These provide two levels of active FUND FACTS management Name: Jupiter Merlin but also a Income Portfolio dual layer of fees.

Type: UK OEIC Perhaps the best known and Sector: Cautious longest established Managed fund-of-funds Fund Size: £3.2bn is the Jupiter Merlin range Launch Date: headed up by John 14 September 1992 Chatfeild-Roberts.

Portfolio yield: 2.8% In fact the Jupiter Merlin Income Estimated TER: 2.33% Portfolio was one Manager: of the most popular Jupiter Investment investments Management Group during this year’s ISA season.

Website: jupiteronline.co.uk Jupiter Merlin aims

The personal touch Personal Assets Trust The most tried and tested multi-asset mandates are to be found amongst the investment trusts. One such is the self-managed Personal Assets Trust, which aims to deliver a high total return while keeping the risk below that of the FTSE All-Share index.

Personal Assets invests in a concentrated portfolio of UK and international shares, but will also move heavily into liquid assets when the market outlook deteriorates. The most famous example of this was at the end of April 2008 when it went 100% into cash and fixed interest.

This limited the decline in its share price over the next year to less than 10%, whereas the All-Share lost 30%.

Once the managers have determined how much of the fund to invest in the markets they then identify the most attractive sectors before selecting the individual stocks. At time of writing the equity exposure was

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October 2011

to produce a high and rising income with the potential for capital growth. It does this by investing in managed funds and ETFs that provide exposure to equities, fixed interest, commodities and property. The main priority at the moment is to select managers who can protect investors’ wealth in an inflationary environment.

There are currently 15 fund holdings with the largest weighting being the 37.8% exposure to UK equities. This is made up of a couple of Jupiter’s inhouse products as well as popular third-party funds like Artemis Income and Invesco Perpetual Income.

The next biggest area is the 28% allocation to fixed interest where the holdings include the likes of M&G Strategic Bond and Thames River Global Bond. There is also a 15.8% weighting in overseas equities, with the balance comprising a 7.2% exposure to a physical gold ETF and 11.2% in cash.

Jupiter Merlin has an excellent long-term performance record with a 90% gain in the last decade and a 5-year return of 32.3%. There is also a decent 2.8% yield that it distributes on a quarterly basis. It is proof that the fund-of-funds model can work despite the double layer of fees.

FUND FACTS Name: Personal Asset Trust (PNL) just over 50%, split Type: Investment Trust almost half and Sector: Global Growth half between UK and US large caps.

Market Cap: £334m This was made up Launch Date: of just 18 individual 22 July 1983 share holdings. The Yield: 1.7% balance comprised a 13% weighting TER: 1.18% in gold and 34% Manager: in fixed interest Self managed mainly in the form of Treasury Inflation Website: patplc.co.uk Protected Securities.

Timing the market like this can be extremely difficult, but the managers have shown a conspicuous aptitude for delivering long-term returns at a substantially reduced level of volatility.

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THE BEE LINE

THE GENERATION GAME CHANGING LIFE PATTERNS MEAN THAT RETIREMENT EXPECTATIONS ARE EVOLVING, SAYS STEVE BEE I was listening to the news on the radio the other day about a new report from the NAPF on the state of our private pensions in the UK. The point it was making was that we face a potential personal disaster for millions of Britons if our private pension schemes don’t deliver.

I was listening to all this and wondering what different people hear when they get this kind of news hitting them about pensions?

The trouble, it seems to me, is that different generations of us have different shapes to our lives and will probably want different things from our one-size-fits-all pension system.

Years ago, I suppose, you could say a whole generation of Britons saw pensions as a way off the treadmill of work. I’m sure not everyone ever saw things that way, but that’s kind of the way pensions used to be portrayed once upon a time. The general perception was that people started work in their second decade of life, stopped work halfway through their seventh decade of life, and looked to leave the planet sometime early in their eighth decade. Sort of three score years and ten, that kind of thing.

Now that was never really real, obviously, but enough people bought into the idea to make it possible for our politicians to build a pension system around that basic perception of the ‘shape’ of our lives.

But things changed. The postwar generation that followed that first generation - a

group that calls itself the Baby Boomers - started the trend whereby at least some people didn’t start work until they were in their third decade on Earth. At the same time, increases in longevity – or, at least, the declining numbers of senescent deaths - meant that many Boomers could have a reasonable expectation of still being on the planet to see some of the years of their ninth decade.

That’s not the same for everyone, of course, but there’s already enough consensus around that perceived ‘shape’ to that generation’s lives to mean that today’s politicians have the political capital to change our pension system, so as to take account of it.

The Boomers’ own children, of course, are yet another different generation - just as their own children will eventually be to them.

And the Boomers’ children already accept the idea that starting work is something that happens in your third decade of life.

But unlike their parents, they also accept that ‘normal’ might now mean starting work in debt, and not with the clean financial slate that previous generations took for granted. They are being told that they can expect to see most of the years of their ninth decade. And indeed, many may well see some of their tenth decade’s years before they pop off.

And they’ll be confident that their own children in turn may well see their eleventh decades out, while still enjoying life...

All three generations probably listened to the same radio broadcast that I was tuned into.

But, like I said, I wonder what each of them heard?

Steve Bee, a well-known campaigning pensions activist, is the managing pensions partner at Paradigm and the co-founder of www.jargonfree pensions.co.uk

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October 2011

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magazine... for today ’s discerning financial and investment professional

OUR MONTHLY SUMMARY OF THE LATEST OFFICIAL PUBLICATIONS BY THE FSA. These listings exclude the FSA’s routine monthly handbook updates.

Transactions on Turquoise Derivatives and Derivative Markets Where Reference Data is Unavailable Guidance Consultation

Ref: GC 11/21

8th September 2011 2 pages Of interest to authorised firms with transaction reporting responsibilities, particularly those trading in derivatives.

The document contains proposed guidance on transaction reporting for transactions on Turquoise Derivatives and derivative transactions conducted through clearing platforms of derivative markets where the reference data for these transactions is not made available to the FSA and ARMs. Consultation period ended 22nd September.

Quarterly Consultation Paper No.30 Consultation Paper

Ref: CP 11/18

7th September 2011 102 pages Various proposed changes, including amendments to the SYSC Sourcebook, the Training and Competence Sourcebook, liquidity rules in the Prudential sourcebook for BIPRU firms, the Collective Investment Schemes sourcebook, Perimeter Guidance manual, and Disclosure and Transparency Rules.

Reporting Transactions in Derivatives Conducted Through Clearing Platforms Finalised Guidance Ref: FG 11/12

September 2011 10 pages Guidance applies only to transactions in derivatives conducted through clearing platforms of ISIN derivative markets or of Aii derivative markets.

This guidance will be effective from 31 March 2012. However, firms wishing to comply with guidance before this date may do so.

All the remaining transactions in derivatives executed on an ISIN derivative market (eg transactions in derivatives executed on the order book) continue to be reportable under SUP 17.1.4 (1) as currently.

All transactions in derivative instruments executed on the order book of an Aii derivative market are required to be reported from 13 November 2011.

Consultation period ends on 6th October for Chapters 3 and 9; 20th October for Chapter 2 and 6th November for other Chapters.

FSA Regulation of Credit Unions in Northern Ireland

Transposition of the Revised UCITS Directive

Consultation Paper

Policy Statement

Ref: PS 11/10

2nd September 2011 295 pages This Policy Statement reports on the main issues arising from the joint HM Treasury/FSA paper (Transposition of UCITS IV: consultation document) of December 2010 and publishes final rules.

The driving issues, the FSA says, are that: • Key investor information will be shorter and clearer than the documents currently given to consumers before they make an investment decision. It should enable investors to compare funds more easily and make betterinformed choices that meet their needs.

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• Changes to the scope of the Financial Ombudsman Service and the Financial Services Compensation Scheme will mean that investors in UK-authorised funds will be able to benefit from the increased competition generated by the UCITS management company passport, without any decrease in their rights of redress if something goes wrong.

October 2011

Ref: CP 11/17

31st August 2011 229 pages Primarily intended for members, advisers and volunteers associated with credit unions in Northern Ireland.

An updated version of the dedicated section of the FSA Handbook of rules and guidance CRED, to be called CREDS, is due to apply by the time the transfer of regulation of credit unions in Northern Ireland takes place on 31 March 2012.

This Consultation Paper proposes a single regulatory regime which will apply, as far as is possible, the new CREDS rules to credit unions in Northern Ireland.

However, it will not be possible to apply CREDS in its entirety and the FSA proposes tailoring the rules to reflect remaining legislative differences between Northern Ireland and Great Britain.

Consultation period ends on 31st October.

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Guidance Consultation

Ref: GC 11/20

25th August 2011 3 pages A list of FAQs that arose during the FSA’s recent RDR roadshows, relating to questions about the changes and about what firms are required to do.

proposed ‘Dear CEO’ letters set out our plans for monitoring implementation of the Code during the coming remuneration round. An annexe alsocontains proposed guidance for consultation on certain policy issues.

Platforms Policy Statement

Recovery and Resolution Plans Consultation Paper

Ref: CP 11/16

9th August 2011 78 pages Primarily intended for banks, building societies and insurers.

This Paper covers the proposed requirement for certain financial services firms to prepare and maintain Recovery and Resolution Plans (RRPs) and separately, for some of these firms, and others, to make additional preparations in relation to their investment client money and custody assets (CMA) holdings.

Recovery Plans require firms to identify options to recover financial strength and viability should a firm come under severe stress. Resolution planning requires firms to submit detailed information about their business and operational structure in the form of a Resolution Pack.

Consultation period ends on 9th November.

Remuneration Code (SYSC 19A) Finalised Guidance

Client Assets Sourcebook Consultation Paper

Proposed ‘Dear CEO’ Letters Providing Guidance on Issues Relating to Remuneration

Consultation Paper

Ref: GC 11/19

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Ref: CP 11/15

29th July 2011 42 pages The document aims to seek views on the FSA’s proposals to amend the Client Assets Sourcebook (CASS). It covers two main topics: Custody liens policy is being revised in the light of the 2008 banking crisis. Proposals have already been consulted upon in CP10/9, and rules were subsequently published in PS10/16. But one of the proposals included in CP10/9 involved prohibiting firms from granting inappropriate general liens over their clients’ assets and client money derived from those assets. A transitional period is due to expire on 1st October 2011, and interim arrangements need to be tidied up.

Title transfer collateral arrangements (TTCA) are also being amended, in line with the Consultation Paper (CP10/15) issued in July 2010.

Consultation period ends on 28th October.

5th August 2011 10 pages Of interest to FSA-authorised banks, building societies and Capital Adequacy Directive (CAD) investment firms. (This generally corresponds to firms subject to MiFID, although exempt CAD firms are not included.)

The revised Remuneration Code came into force on 1 January 2011, implementing the rules on remuneration contained in the EU Capital Requirements Directive (CRD3). These

Ref: PS 11/09

1st August 2011 73 pages This Policy Statement reports on the main issues arising from Consultation Paper 10/29 (Delivering the RDR and other issues for platforms and nomineerelated services) and publishes final rules.

August 2011 Contains self-assessment templates for Tier 2, 3 and 4 firms, and also various information sheets on frequently asked questions.

Guidance Consultation

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

Top Questions Asked at the RDR Roadshows

Auctioning of Greenhouse Gas Emission Allowances Ref: CP 11/14

25th July 2011 68 pages The document proposes changes to the Handbook which complement the Treasury’s implementation of a new regulatory regime for platforms that will conduct auctions in emission allowances. The new regime is being put in place ahead of the start of EU procurement processes to select both a common EU auction platform and one or more national auction platforms.

Consultation period ends on 25th September.

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magazine... for today ’s discerning financial and investment professional

Lee Werrell, Managing Director of CEI Compliance Ltd, gives his personal round-up of the key issues that are currently shaping the compliance agenda

See also the listings of FSA publications on Page 54 of this issue.

RDR Roadshows The FSA have conducted roadshows and produced a guidance consultation paper on the most commonly asked questions.

n

Can you explain what (g) is in the list of retail investment products?

n

What is meant by relevant market in the context of independent advice?

n

If I charge 1% for a £50,000 investment and 1% for a £250,000 investment and the work is the same, am I not going against the principle of treating customers fairly?

n

We can only receive an ongoing income for an ongoing service, post RDR. I have agreed a service level with some of my clients, which involves them being ‘on the books’ and I am available on a reactive basis to deal with any issues that arise. Is this acceptable under adviser charging?

If my firm does not employ a pension transfer specialist, does that mean my firm cannot hold itself out as independent?

n

Post RDR, can anyone carry out a fact-find or other client-related activities?

n

In preparing to meet the professionalism requirements, how should advisers expect to get help from accredited bodies?

n

What is structured continual professional development (CPD)?

n

If I consider a product, but I don’t feel comfortable recommending it due to its risky nature, can I still call myself independent?

n

If a firm has three restricted advisers, but as a team they can advise on all retail investment products, can the firm hold itself out as independent?

n

Where a limited company has ‘independent’ in its registered name, but will not offer an independent service in the future, will they need to apply for authorisation again?

For further information visit: http://tinyurl.com/6zcpkfb or http://tinyurl.com/669kgf3

n

Competence reporting The new requirement to notify the FSA that a firm no longer considers a retail adviser competent or that there has been a significant breach of the Approved Persons Principles came into force in July.

Firms should notify the FSA if a retail investment adviser: -

56

n

is no longer considered competent;

n

failed to attain an appropriate qualification within the prescribed time limit;

October 2011

n

failed to comply with a Statement of Principle (APER); or

n

performed an activity without demonstrating competence and without supervision.

Impact: Senior management and HR will need to make appropriate changes to their staff assessment, T&C policy and disciplinary procedures in line with this new requirement.

Further guidance can be found at: Chapter 8 of CP10/22 - http://tinyurl.com/6zsvv6j Chapter 4 of PS11/1 - http://tinyurl.com/6erxeug

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C O M P L I A N C E D O C TO R

Wealth Management reviews The ‘Dear CEO’ letter sent in June 2011 should have been responded to by all Wealth Management (WM) firms. There are also lessons for all investment advice firms.

n

If, in the course of reviewing your client files, you identify problems, root causes or compliance failures, the FSA would expect you to have regard to Principle 6 (Customers’ interests) and consider whether you ought to act on your own initiative with regard to the position of customers who may have suffered detriment from, or been potentially disadvantaged by such factors.

The letter was prompted following thematic reviews on WM firms and many files were found to be lacking basic information and suitable evidence.

Nearly 80% were potentially unsuitable and two thirds contained little information on firm’s house models; the client’s documented attitude to risk or the client’s investment objectives.

Several key areas of concern have arisen from the review, particularly the inability of firms to demonstrate that client portfolios and/or portfolio holdings were suitable. For example, the FSA saw: An inability to demonstrate suitability because of: n

an absence of basic know-yourcustomer (KYC) information;

n

out-of-date KYC information;

n

inadequate risk-profiling;

n

some firms not implementing MiFID client classification requirements;

n

the lack of a record of clients’ financial situation (assets, source and extent of income, financial commitments); and,

n

the failure to obtain sufficient (or any) information on client knowledge, experience and objectives.

Risk of unsuitability due to: n

Inconsistencies between portfolios and the client’s attitude to risk; and

n

Inconsistencies between portfolios and the client’s investment objective, investment horizon and/or agreed mandate.

n

...resulted in a ‘Dear CEO’ letter being sent to 260 wealth management firms by Margaret Cole (right), MD of the Conduct Business Unit at the FSA.

sampling a meaningful number of client files;

the depth, breadth and quality of client information; and

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Impact: For WM Firms, if there is any uncertainty or dissatisfaction, there would appear to be a major review required of not only past client files, but also sales process requirements. The practices of just completing a fact find section where hard facts have changed to update KYC on existing clients are long gone. New evidential requirements require thorough and in-depth assessment. Contact your Compliance provider to undertake a review of your files and processes accordingly.

The poor results of the FSA’s research into service levels...

assessing whether files have relevant, meaningful, accurate and up-to-date client information; n

This letter is obviously stating recognized concerns by the FSA regarding suitability. This could, if true to form, be the precursor of a major thematic initiative or focus on upcoming ARROW visits. Once signed to say you have completed the work to your own satisfaction, you have drawn a line in the sand and can now await the tide of the FSA. If you have not changed your suitability requirements since MIFID was introduced and there is not a clear “House model” of a file for all products, there is some major work to be done for your firm. If you reviewed a proportion of your files less than 20% you could appear not to have reviewed a “meaningful number” and will need some board level response as to the rationale you adopted.

If you reviewed less than 10% of your files, you could be wide open for a direct challenge from the FSA..

Impact: For IFAs who are not classed as WM Firms, the same lessons should be learned as the principles of client suitability are the same regarding any investment advice.

The FSA also had concerns that firms were not taking reasonable care to organise and control their affairs responsibly and effectively, using adequate risk-management systems.

The letter required firms to satisfy themself that they are currently meeting the FSA suitability requirements and to mitigate the risk of future noncompliance, we expect that you will want to consider the client information contained in your client files and if it is likely to satisfy your obligations regarding customers’ desired investment portfolios. If you have not recently assessed the suitability of your client files, you may want to consider:

whether the client portfolios, and the current holdings in client portfolios, are suitable, based on the documented client information you hold.

Remember: If you have any concerns regarding these issues, please contact your compliance department or an independent consultant who is a member of the Association of Professional Compliance Consultants (APCC), recognised as a trade body by the FSA.

October 2011

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“Good management consists in showing average people how to do the work of superior people.”

John D Rockefeller Born 1839 in New York. Died 1937 in Florida, aged 98.

A life that spanned the history books The owner and originator of the Standard Oil Company, which monopolised America’s oil industry well into the twentieth century, was always the confident type. He attended business classes for all of ten weeks before starting out in the commercial world. Within four years he had his own food distribution business, and within eight he had built his first oil refinery, supplying kerosene lamp oils as a cheap substitute for whale oil.

Information is power That was just the warm-up. The young Rockefeller spent the Civil War years buying out his oil rivals and planning an ambitious distribution network based on the new and fast-growing railway network.

Most importantly, he employed a ‘market research’ team of observers to track the quickly expanding industry in oil-rich Ohio. Sure enough, within three years Rockefeller owned the biggest refinery complex in the world, which became Standard Oil in 1870.

Research and strategy had paid off handsomely.

The dirty game begins Standard Oil was one of five competing oil majors in Ohio, but it set about squeezing out its rivals by persuading the rail companies to double all their usual freight rates while simultaneously allowing it 50% discounts for its own ‘bulk contracts’.

These rail cartels were eventually broken up by angry state legislators, bringing Rockefeller into public disrepute. But, undeterred, he still continued to buy out his competitors with cash while simultaneously pressing the railroads for further bulk transport discounts and sweetheart deals of every kind. Rockefeller’s instinct for the efficiencies of scale were unmatched: by 1874, just four years after Standard Oil’s incorporation, all 26 of its Cleveland rivals had sold out to it.

Monopolising the pipelines The end of a beautiful friendship came in 1877,

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when Rockefeller annoyed his railway friends by investing in oil pipelines instead – thus prompting them to start building their own pipelines in response. Standard Oil promptly laid siege to the rail companies by withholding its commissioning altogether - and eventually, starved of revenue, they obediently sold out to Rockefeller. This left him with a virtually complete monopoly of the distribution system. The New York World described Standard Oil in 1880 as “the most cruel, impudent, pitiless, and grasping monopoly that ever fastened upon a country.” No understatement there, then.

A forced retirement By 1885 Standard Oil owned 20,000 domestic wells, 4,000 miles of pipeline and over 90% of the world’s oil refining capacity. By 1890 it was also alarming legislators with an attempted entry into the iron ore industry, which brought it into direct conflict with Andrew Carnegie’s steel empire. And, as government outrage grew, Rockefeller sensibly took a back seat in 1897 and restyled himself as a gentle philanthropist.

Philanthropy If he had known that he would live to nearly 100 – his lifelong aspiration - the old toughie would probably have stayed in business just to spite them all. But his remaining 40 years, through the First World War, the Depression and the start of the Hitler era, proved to be the salvation of his public image.

Rockefeller had always been a devout Baptist and had funded religious and educational causes, including an Atlanta college for black women (now Spelman College). But his General Education Board (1903), his Sanitary Commission (promoting public health) and his Institute for Medical Research (later Rockefeller University) took the giving to new levels. An $80 million gift virtually founded Chicago University. But the press still remembered him for handing out nickels and dimes to everyone he met – including some very rich men. A nice irony.

October 2011

59

magazine... for today ’s discerning financial and investment professional

Senior Paraplanner – Private Bank, London

Director/Associate Director - Nottingham

Basic to £48K plus benefits and bonuses

Basic salary between £70,000 - £100,000

Our client, a leading Private Bank, is currently looking to take on a Senior Paraplanner to join its Financial Planning team in the City. The role will initially focus on support for some of the firm’s Senior Financial Planners, who advise clients with portfolios between £1-10m, however they are looking for this individual to fast-track into a client-facing role. The position offers the opportunity to join a very high quality team, rapid career progression and an excellent package.

A top tier fee based professional practice based in Nottingham is looking for a Director or Associate Director in order to manage the financial planning arm of the business. You will be tasked with managing an existing team of financial advisors, as well as developing internal relationships within the practice. You will have experience of working in a senior position within a wealth management environment, hold the Diploma in financial services as a minimum, and have a demonstrable record of performance.

Call Charlotte on 0113 274 3000 or e-mail charlotte@bwd-search.co.uk

Call Danielle on 01727 884662 or e-mail danielle@bwd-search.co.uk

Independent Financial Adviser – Private Bank, East Anglia

Platform Sales BDM (South)

Basic c£65-100K plus benefits and bonuses

To £80k + £130k OTE + Benefits

A leading Private Bank is looking to recruit a new Financial Planner for their East Anglia region, who will be responsible for advising HNW & UHNW clients across the Suffolk, Norfolk and Cambridgeshire areas, referred from both internal and external introducers. The role offers limitless access to very high quality clients and an excellent package within a highly respected and prestigious firm. Candidates must be Diploma Status (as minimum) and have experience of advising wealthy individuals on complex financial planning needs.

Call James Woods on 01727 884662 or e-mail james.woods@bwd-search.co.uk

A fantastic opportunity has arisen to join a global insurance firm that will be launching its own platform later this year. Our client is looking for a highly experienced individual that is capable of demonstrating excellent management and sales skills with a strong background in platform sales. This role will involve working closely with the Head of Distribution by attending roadshows/conferences and using Business Development skills to help bring across some of the top IFA’s in the South of England. Due to the nature of this role, candidates will only be considered if they have experience within the Wrap/Platform space.

Call Adam Scott 0113 274 3000 or e-mail adam@bwd-search.co.uk

Employee Benefit Consultant - Nottingham, London

Fund Manager, Investment Directors and BDM’s - North West

To £80k, excellent bonus, benefits

Potential to develop to Partner Level with equity in all roles

A leading, progressive and entrepreneurial professional services firm is seeking Employee Benefit Consultants to be based in Nottingham and London. The role will involve taking over a healthy client bank and developing business further through building relationships with other arms of the business and attending appointments set up by the telesales team. This role requires someone who is proactive and that can evidence a proven track record in developing new business. Diploma qualified preferred with a sound knowledge of DC/GPP. In return you will work for a large, leading organisation and a highly rewarding package is on offer.

Call Zoe on 0113 274 3000 or e-mail zoe@bwd-search.co.uk

Call James Rhodes on 0113 274 3000 or e-mail james.rhodes@bwd-search.co.uk

the financial services e-learning specialists

Numerous opportunities exist within this asset management firm with a strong and enviable reputation in providing investment management and advice to private clients, charities and trusts. The firm is totally independent with all money managed on a discretionary basis, and offers individuals a contemporary way of conducting business, without having that ‘corporate’ constrained feel. The Fund Manager will ultimately be the decision maker on how each individual’s money is managed; Investment Directors will be client facing and must have a demonstrable track record of developing a loyal book of business; BDM’s will have a long and strong track record of developing intermediaries, particularly within the pensions market.

Get your skills up to date the easy way

Wanted: Quality financial advisers ....Only those with Level 4 Qualifications need apply More and more large groups are demanding that candidates have already achieved at least Level 4 qualification. In fact, many haven’t even picked up a book yet. Without large numbers of qualified advisers the FS sector has a difficult future to say the least.

The BWD Group, an established search & selection firm, have taken action to help with the launch of a new service - BWD development.

• Advisers and others taking the Level 4 exams can now access e-learning programmes and on-line mock exams.

• This allows candidates to learn at their own pace - at a time and place to suit them • They can take on-line assessments along the way and take up to five mock exams to make sure they are on track to pass the live examination

If you like the sound of this, go to www.bwd-development.com where you can see a full demonstration of the service or call BWD development on 0845 850 9995 T 0845 850 9995 F 0113 274 3031 E info@bwd-development.com

60

October 2011

www.IFAmagazine.com

Business owner / entrepreneur THE COMPANY

A change in direction can be daunting especially when that change means a step into the self employed but taking hold of your financial future and becoming a leader of your own destiny need not be such a complicated transition when you have the support of the right network.

Keillar Resourcing is working in conjunction with one of the UKÕ s leading IFA networks.

With UK wide coverage and a brand name thatÕ s synonymous

with excellence you can be assured of the right levels of support along the way.

Commission rates are high and you can decided on the right levels of support from a variety of choices and only pay for the support you decide to utilise and that means you donÕ t pay more than you have to. This RDR ready network can support you with everything from office to admin and might even supply the odd lead or two!

ABOUT YOU

Maybe this is the right time to take hold of your own financial future? If you think it could be, then get in touch and we will tell you how this network could be just the ticket!

THE PACKAGE

With excellent commission rates up to 90% the eventual level is entirely up to you.

LOCATION

Genuinely national so wherever you want it to be.

To learn more about this exciting opportunity contact Paul Mullarkey on 0131 557 9668 or 07875 341758 for the inside scoop or email him on paul@keillar.com

www.keillar.com

keillar Resourcing operates as a recruitment agency T10268 Tenet Recruitment Ad 24/05/11_T10145 Tenet Recruitment ad 24-08-10 24/05/2011 09:28 Page 1

I want to be part of a

winning team

The Tenet Group are the largest independently owned adviser group supporting over 5,500 advisers nationwide.

We’re looking for Independent Financial Advisers to join our winning team.

IFA’s Scotland – Negotiable remuneration deals available.

Employed IFA Positions x 4. Midlands, North West, Middlesex, South Yorkshire.

IFA – Midlands. Renowned Business with excellent support/lead gen sources.

Employed IFA – Hove Brighton.

CAS or Trainee

We are an established IFA firm with offices in Edinburgh, Aberdeen and Dundee. Due to our unique lead generation model we are looking for advisers to cover all areas of Scotland to service introduced business along with self generated referrals. Along with leads we are able to offer Paraplanner support, admin support, office space if required, back office systems and mentoring support. You must be CAS and working towards diploma.

We are a well renowned IFA business based in Leicestershire and have been serving the needs of our clients since 1982. Our business benefits from working closely with 3 substantial solicitor firms along with a number of accountancy practices acting as introducers. A further lead generation source are the seminars we run regularly to new introducers, affinity groups and IHT clients. Having recently established ourselves with the UK’s leading independent network we are now looking for additional advisers to join our business on a self employed basis.

All firms are supported by a leading financial support provider, leads are provided from existing client banks, in-house accountants, retirement seminars to professional groups and estate agent introducers. All salaries are negotiable, car or car allowance, DIS and medical care benefits provided. Office or home based with full office support provided for all positions. You must be CAS and diploma (or working towards)

We are looking for a customer focused individual to join our established IFA firm. You may be newly qualified or have been working in a tied or multi tied environment and want to make take the step into the IFA arena. You will be given access to 1500 clients, receive support from in house administration, paraplanner, compliance and sales support. Diploma study program is also available.

We are also looking for advisers on a self employed basis who are looking to alleviate the business burden of trading on their own. Commission splits are fully negotiable.

Please contact Mark Ford on 0113 239 5312 to discuss any of these positions or email your cv to mark.ford@tenetgroup.co.uk

www.IFAmagazine.com

October 2011

61

magazine... for today ’s discerning financial and investment professional

You are in demand iFa: accountancy Practice: directorship Prospects n.Yorkshire £competitive basic + bonus + package

iFa: Professional Practice: managerial Prospects manchester c.£45-60,000 basic + bonus + package

Join the financial planning division of this established accountancy practice. This is an excellent long-term career move offering a future directorship. You will be responsible for continuing to service and develop an existing client base whilst driving forward the financial planning business. Experience of working as an IFA within a professional practice environment (i.e. solicitors or accountants) is beneficial. You will have excellent client relationship and business development skills together with a highly professional and ethical approach. Good quality clients are provided, therefore own client bank is not required. ref: 1368370 linda.leon@hays.com or 0161 929 7039.

This is a first-class career opportunity to work within a professional practice providing holistic and truly independent advice to a well established client bank.

Ability to identify your clients’ requirements and provide bespoke advice to achieve financial goals will be recognised and rewarded. Own client bank is not a requirement as you will have good quality clients to work with. Your clients will typically include business owners, company directors and higher net worth individuals establishing their personal financial planning requirements to ensure a quality independent advisory service is provided. Managerial opportunity available if desired. ref: 1432036 linda.leon@hays.com or 0161 929 7039.

hays.co.uk/financialservices FS-03476-1_IFA_Pg_June.indd 1

Senior Financial Planner Location: Devon

Salary: £35,000 Ð £60,000

Our client is one of the South West's most foremost Financial Planning Firms, delivering creative solutions across comprehensive and bespoke financial planning, investment portfolio management, tax and estate planning. They are seeking an experienced Diploma Qualified Senior Financial Planner with a proven record of success in the field and previous management skills. This role will require some travel to Bristol for training purposes, and will involve liaising with the current incumbent with a view to running the practice upon their retirement.

Skills Minimum 5 years experience in similar role Diploma in Financial Planning (Dip PFS) Competent Adviser Status (CF30) Experience of holistic financial planning, and dealing with HNW clients Ability to manage a small team and delegate tasks accordingly Excellent communication skills, both written and verbal Strong IT skills, knowledge of 1st Software would be an advantage Benefits Competitive salary, depending on experience and qualifications, 23 days holiday, Group Life Assurance scheme (4 times salary), Private Medical Insurance for employees, their spouses/partners and any dependent children, Permanent Health Insurance scheme, Employer's Pension Contribution (7% of basic salary), Free on-site parking

62

October 2011

02/06/2011 09:07

Heat Financial Services provides a highly tailored service to the UK Financial Services industry assisting Clients across the Banking, Life & Pensions, Mortgage, Investment and Stockbroking Markets, consistently assisting Clients to adapt and respond to the relevant regulatory and industryÊ challengesÊ inÊ partnershipÊ withÊ HeatÊ TrainingÕ sÊ FinancialÊ ServicesÊ Trainers.

Heat Financial Services Specialist Consultants are consistently updating their industry knowledge to allow them to provide high level assistance to Clients in both niche areas of the industry and the general Financial Services Market, whilst working closely with Clients on each individual requirement to ensure they fully understand the organisation and the position(s) they are looking to fill.

Heat Financial Services Specialist Consultants will only present relevant candidates, with the experience and knowledge that matches the Client requirements.

A quality approach to business makes Heat Financial Services a key partner in the recruitment process, coupled with Specialist Financial Services Training via Heat Training. The proposition for Clients and Candidates alike is a one-stop shop for all Financial Services Industry Recruitment and Training needs.

ContactÊ oneÊ ofÊ HeatÊ RecruitmentÕ sÊ SpecialistÊ ConsultantsÊ toÊ discussÊ anyÊ ofÊ theÊ above:Ê Ê fs@heatrecruitment.co.ukÊ Ê orÊ Tel:Ê 0845Ê 375Ê 1747Ê Ê Ê

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Private Client Consultant, London and Home Counties £55-85,000 + Bonus + Benefits

Wealth Manager £75,000 + Bonus + Benefits Ref: 9899

Well-established investment/wealth manager with an outstanding financial planning division are now in need of experienced IFAs for various locations. Your role will be to services and build on their existing HNW client contacts, liaise with their professional introducers and develop further business via client contacts and in-house marketing. You should provide a solid career track record and a commitment to providing fee based advice to HNWIs.

International asset management firm with a London base in W1 requires 2 additional individuals to join their existing team of successful Wealth Managers. The role requires you to follow up leads referred internally and develop further business from additional marketing support. Advice, in the main, is investment led so a sound understanding of this area is essential. This is an extremely lucrative role with genuine potential earnings in excess of £150,000 per annum.

Junior IFA, Private Bank

Senior Wealth Manager To £60-88,000 + Bonus + Benefits

Ref: 3233

Ref: 3242

c.£40-60,000 + Bonus + Benefits

Ref: 76867

Leading investment management firm with offices nationwide and a small but hugely successful wealth management offering now requires 2 additional Wealth Managers to work from its offices in the City. Essentially, the role involves working with the Investment Managers and advising these referred clients on all areas but focussing on IHT and investment planning.

London based private bank with an investment management and wealth planning offering now require an additional individual to assist in servicing client portfolios. You will advise on all areas of investments, pensions and IHT planning and where necessary promote the wealth management proposition internally to other divisions of the bank.

You must be CF30 qualified and DipFS.

Private Client Advisor

Business Developer/ Wealth Manager

£75-85,000 + Bonus + Benefits

Ref: 4354

Medium sized boutique wealth manager based in the City requires a Client Adviser to advise an existing portfolio of wealthy City Lawyers and Accountants.

This portfolio is in place and as such requires a Chartered Planner (or progression with) to service the financial requirements of a wealthy audience.

You must be degree educated and able to explain complex financial solutions in a clear, simple and concise manner. Evidence of producing in excess of £200,000 fee income per annum is essential.

To £75-95,000 + Bonus + Benefits

Ref: 42134

Top 5 Chartered Accountants require a senior individual to work with existing and new Partners and leverage off these relationships to further promote the financial planning proposition.

This would suit a financial planner who has had experience of working with introducers in some capacity and now looking to attach themselves to a brand name. London based

For further information please contact Simon Charlton, Matthew Tatnell or Gareth Blades Lombard Street, London EC3V 9EA 020 7461 8429 fs@rolanddowll.com www. rolanddowll.com

www.IFAmagazine.com

October 2011

63

I FA C A L E N D A R

a g a

e n zi

Dates for your diary m OCT ‘11 - FEB ‘12

OCTOBER 1

New provisions and guidance come into effect from FSA Policy Statement (Pension Reform Conduct of Business Changes).

1

Revised start date for FSA Policy Statement PS 11/06 (The Client Money and Asset Return).

13

6

Money Management Financial Planning Awards.

17

Consultation period ends for

2027 (Institute of Financial Planning).

6 20 2, 3 and 9 of FSA Quarterly

European Manufacturing Strategies

1719 Summit, Düsseldorf, Germany

Middle East Investments

2324 Summit, Dubai.

DECEMBER 31

FSA restructuring process (CPMA, PRA etc) scheduled for implementation.

31

Basel III Capital Framework - all major G20 financial centres scheduled to have committed to the regime.

World Economic Forum Summit on the

2123 Middle East and North Africa, Jordan.

27

25th anniversary of the ‘Big Bang’ deregulation in London.

31

Deadline for self-assessment tax returns 2010/2011 (paper only).

Asia Pacific Private Wealth

31 2 Management Summit and Alternative Investments Summit, Macao.

NOVEMBER 1 3 4 6 9 9 11

Child ISAs introduced. Maximum annual investment increased to £3,600.

G20 Summit in Cannes, France.

FT Advisor Service Awards.

Financial Planning Week

Consultation Paper No 30.

World Economic Forum Summit on the 1011 Global Agenda, Davos, Switzerland.

Start of reporting for transactions in derivatives as per Final Guidance 11/12.

JANUARY 2012 1

Denmark assumes the EU Presidency until 30th June .

World Economic Forum Annual

2529 Meeting, Davos, Switzerland.

Emerging Markets Investment

3031 Summit in Montreux, Switzerland.

31

Deadline for self-assessment tax returns 2010/2011 (online only).

FEBRUARY Consultation period ends for remaining Chapters of FSA Quarterly Consultation Paper No 30.

AIFA annual dinner, London.

CIO and CFO Japan Summit, Makuhari.

APEC (Asia-Pacific Economic

1213 Co-operation) summit, Hawaii. www.IFAmagazine.com

-

(TBA) Alternative Investments North America Summit, Braselton, Georgia.

15

(TBC) Unbiased.co.uk annual ‘Media IFA of the Year’ awards ceremony.

Have we forgotten anything? Let us know about any forthcoming events you think ought to be in our listings.

(Sorry, press and official events only.) Email us at: editor@ifamagazine.com, and we’ll do the rest.

October 2011

65

A N D F I N A L L Y. . .

magazine... for today ’s discerning financial and investment professional

SWEET FSA NO LUCK FOR FREDERICK SMYTHE-ALLINSON IN HIS SEARCH FOR A MILLION MONKEYS. THANK GOODNESS, THEN, FOR HUMANS. It hasn’t exactly been a lucky couple of months for most of us. The problem isn’t so much that the markets dropped by 14-20% in late July and early August, and then turned sharply upward, and then nose-dived yet again. It’s one thing to tell your clients that they’d do better to close their wallets and minimise their risk until things clear up a bit - and another thing to explain to them afterwards why you let them miss out on a 10% rebound. So what do we do?

Well, they say that if you sit a million monkeys at a million keyboards for long enough, one of them will eventually present you with a word-perfect version of Hamlet. The catch, of course, is that waiting for the laws of chance to do their thing will probably take longer than the scheduled end of the solar system. And by that time the monkeys will have evolved bigger brains than ours, and they’ll be solving twelvedimensional rubik’s cubes in their coffee breaks.

There surely must be a better way? Well, maybe there isn’t. One thing’s for sure, an awful lot of people who are paid handsomely to get it right have managed to foul it up in fine style over the last few years.

Oil Armageddon Example One: The International Energy Agency. 190 boffins in 28 countries with a budget of €26 million, doing their collective bit to keep the Organisation of Economic Co-operation and Development moving along – and that’s the whole free world, as near as dammit.

In June 2008, as the ICE Brent oil price spiked from a year’s start of $90 to nearly $140 a barrel, the assembled IEA sages issued a statement saying that the terrible price squeeze was “wholly justified” by the supply fundamentals, and that there was a very real prospect that it would top $200 a barrel by Christmas or shortly afterwards.

Alas, they’d all gone very quiet by December as Brent ended the year at $48 before settling around the $75 mark, where it stuck for 20 months. Not a blush from the experts, not a lost bonus. And very much less an apology. Perish the thought.

66

October 2011

Lost Property Example Two: Bob Beckman, the celebrated author of doomster titles like The Downwave and Powertiming, who very sadly died in 2007.

Beckman’s special place in history came from having made one of the most historic and sustained property blunders of the last 50 years.

In 1979, as London housing prices started to soar, Beckman had made a splendid show of selling off his Thames-front penthouse and going into rented accommodation while he encouraged his followers to do the same and wait for the Property wipeout that was certain to come soon.

As house prices crescendoed into the stratosphere during the next decade, Beckman’s normally jaunty mien became a kind of rictus grin.

Undeterred, he declared in his second blockbuster, Downwave, that we were all headed for a final and utterly disastrous stock market crash which would wipe out civilisation as we knew it. “By 1987,” he declared, “there will be no real residential housing market in Britain for the owner occupier, and some houses will be unsaleable at any price.”

Alas, wrong again. Shares soared and property continued to boom, especially in London, on the back of Big Bang (1986) and Margaret Thatcher’s privatisation boom. Share prices took a brief tumble in 1987, but housing prices certainly didn’t. Oops.

Beckman never did get his waterfront property back.

Shaggy Dog Story But Allinson is being really far too harsh on the poor man. Surely Beckman deserves a special golden monkey prize for having tweaked the market’s tail earlier in the 1970s, when he’d declared that his Old English sheepdog, known as William, had made him more than £100,000 over seven years by means of his unique stock-picking skills. According to Beckman (and who are we to doubt it?), he had developed a technique whereby he would read out company names to the dog – and “if he barks at one of them, I invest in his name”.

Alas, the Inland Revenue didn’t buy this “wags to riches” tale, but sent Beckman a capital gains tax bill that wasn’t even made out in the name of the dog. Spoilsports. www.IFAmagazine.com

Very good in its make up and content. Sets itsel aside from other publications in the marketplace Excellent. Thank you. Really refreshing. High qualit e production i nwith some good thought provoking article z and useful LOgOa information. Good useful content. Up-to dateainfoK useable, very good and easily read. Ver good m articles, relevant to my work. Very interesting extremely useful. Very impressive read and lots o useful articles SANTS nice to see it in “magazine” style forma rather than usual newspaper. A comprehensive read. Very good layout and informative. Good content, appealing to the female reader as many publicationscrisiare very male driven and focused s Thank you. AUquality magazine for IFA IFA’s. ’s. Good pape S A with good content which is plain talking. Good ayout and easy to read. Not seen anything like thi for IFA market. Really AZIL Worth reading. Interesting BRgood. content. Very professional and upmarket, exactly what is needed in the ifa community. Absolutel fantastic. Not cluttered by endless comparison tables. Punchy contemporary style.. More of the same in the monthsBRto please. A very readable AF TE R ITA INcome TS O RI E publication. It looksTHlike an interesting and enjoyable read that I would be happy to have delivered to the office - not something I could say abou magazine manyThe financial publications! Great - look forward to subsequent editions. Brilliant! Very impressive IS all the top IFAs A LY S N A T felt like and interesting publication. Looked and MEN M O IEWC a proper magazine rather than cheape E Vother R S are talking about...

NEW looking publications. Breath of fresh air and topica get your free subscriptionI’m going get it instead of the n biteTosimply size chunks. fill out the form online at: professional adviser papers and financial advise www.ifamagazine.com/ content/subscribe papers. Enjoyed the read. Keep up the good work MA

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