IFA Magazine February 2012

F E B 2 0 12 ■ I S S U E 8

For today’s discerning financial and investment professional

APPS

AND WHY YOU NEED THEM

EUROPE

NEARING THE TIPPING POINT?

WARREN BUFFETT

THE ORACLE OF OMAHA

SYNTHETIC ETFs

THE CASE FOR THE DEFENCE

DRAGONS POWERFUL, INVENTIVE, UNPREDICTABLE

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

Experience counts - Henderson Cautious Managed Fund Experience counts - Henderson Cautious Managed Fund Experience tells the special manager when to adopt a Experience tells the special manager when to adopt a % more guarded approach. The Henderson Cautious guarded approach. The Henderson Cautious % more Historic Managed Fund aims to deliver lower volatility than a Historic yield* Managed Fund aims to deliver lower volatility than a pure equity fund, so it could be an attractive proposition yield* pure equity fund, so it could be an attractive proposition in today’s turbulent markets. Investing in bonds and cash as well as in today’s turbulent markets. Investing in bonds and cash as well as equities, its goal is to provide long-term capital growth plus income. equities, its goal is to provide long-term capital growth plus income.

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Chris has run this type of fund for 20 years - there’s no Chris has run this type of fund for 20 years - there’s no substitute for experience. substitute for experience.

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*Thehistorical historicalyield yieldreflects reflectsdistributions distributionsdeclared declared over past months a percentage of the mid-market share price, 30 December 2011.

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2607112), Henderson Investment Funds Limited no. 2678531), Henderson Investment Management Limited (reg. no.179 (reg.

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2607112), Henderson Investment Funds Limited (reg.(reg. no. 2678531), Henderson Investment Management Limited (reg. no. withregistered registeredoffice officeatat201 201Bishopsgate, Bishopsgate,London London EC2M 3AE), Gartmore Investment Limited (reg.

1508030), Gartmore Managers Limited no. 1137353), incorporated with EC2M 3AE), Gartmore Investment Limited (reg. no. no.

1508030), Gartmore FundFund Managers Limited (reg. (reg. no. 1137353), (each(each incorporated and andreg and services. services.Telephone Telephonecalls callsmay maybeberecorded recordedand and monitored.

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Hair is silver.

Hair is silver.

Experience is gold.

Experience is gold.

Discrete year performance

31/12/10 - 31/12/09 - 31/12/08 - 31/12/07 - 29/12/06 30/12/11 31/12/10 31/12/09 31/12/08 31/12/07

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0.8

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Source: Morningstar at 30 December 2011, based on discrete year performance, Source: Morningstar at 30 December basedrate on discrete mid-mid, UK sterling, net income reinvested2011, for a basic tax payer.year performance, mid-mid, UK sterling, net income reinvested for a basic rate tax payer.

Past performance is not a guide to future performance. The value Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Yield may you may not get back the amount originally invested. Yield may vary and is not guaranteed. This advertisement is for professional vary and is not guaranteed. This advertisement is for professional advisers only. advisers only.

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Henderson Alternative Investment Advisor Limited (reg.(reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and mited (reg. no.1795354), 1795354), Henderson Alternative Investment Advisor Limited no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated andregistered registeredininEngland Englandand andWales Wales ed and andregistered in England and Wales with registered officeoffice 201 201 Bishopsgate, London EC2M 3AE) are are authorised andand regulated by by thethe Financial Services Authority orporated registered in England and Wales with registered Bishopsgate, London EC2M 3AE) authorised regulated Financial Services Authoritytotoprovide provideinvestment investmentproducts products

Contents.indd 3

24/01/2012 16:31 24/01/201217:55 16:31 24/01/2012

C O N T R I B U TO R S

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

Neil Crossley writes for The Guardian, The Financial Times and The Daily Telegraph.

Nick Sudbury is a financial journalist and investor who has also worked as a fund manager.

17

Editor’s Soapbox

Forecasters - Who Needs Them? We do, says Michael Wilson. Just add a pinch of salt

Monica Woodley a senior editor at the Economist Intelligence Unit.

It’s a lousy time to delay the pensions auto-enrolment, says Steve Bee

Brian Tora a Communications Associate with investment managers JM Finn & Co. Richard Harvey a distinguished independent PR and media consultant.

02.12

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

THE FRONTLINE: Chinese Vice President Xi Jinping is expected to take over the Communist Party leadership role from President Hu Jintao at the end of this year.

Editor: Michael Wilson

editor@ifamagazine.com

Art Director: Tony Merlini

tony.merlini@ifamagazine.com

Publishing Director: Alex Sullivan

alex.sullivan@ifamagazine.com

Luxury Account Director: Nick Edgeley nick.edgeley@ifamagazine.com

Neil Crossley tells us how tablet devices are revolutionising IFAs’ work out in the field

Slamming on the Brakes

Nick Sudbury looks for shelter from the European storm

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

56

The Compliance Doctor

Lee Werrell of CEI Compliance looks at the top current issues of interest to IFAs

Thinkers: Warren Buffett The world’s richest investor is also an entertainer

66

49

Pick of the Funds

FSA Publications

59

42

Apps for IFAs

46

54

News

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

Kam Patel a former deputy editor at Hemscott. He is a qualified investment adviser.

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

8

65

The IFA Calendar

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

The Other Side

Richard Harvey takes a client’s eye look at the world

features

regulars

This month’s contributors

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 S Contents.indd 4

24/01/2012 17:55

CONTENTS

COVER STORY

China Gears for Growth

No, not by exporting, says Monica Woodley.

Beijing is renewing consumer incentives

25

Property Funds

It isn’t a good year for commercials, says Kam Patel, but there are still good prospects in some places

China will be navigating some tricky waters this year

➹

features 20

30

The Case for the Defence

Don’t believe everything you read about Synthetic ETFs, says Ben Thompson of Société Générale

33

Nearing the Tipping Point?

37

John Bennett, Director of European Equities at Henderson Global Investors, has hopes that the Eurozone is over the worst

Coming, Ready or Not Closed-ended funds aren’t on many platforms yet, says Brian Tora of investment managers JM Finn & Co. More’s the pity.

38

It’s Good to Talk

Got those pre-RDR blues? Stephen Andrews, Head of Strategic Partnerships at Aberdeen Asset Management, has a suggestion

IFA Magazine is published by The Wow Factory Publications Ltd., 45 High Street, Charing, Kent TN27 0HU. Tel: +44 (0) 1233 713852. ©2012. 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

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1141-02-IHT-1112 Ed's Welcome.inddSTEP 6 Journal ALL THREE 210x297mm.indd 1

23/01/2012 24/01/2012 15:15 13:49

WORDS OF WILSON

MY PREDICTION FOR 2012?

IT’S GOING TO BE A GREAT YEAR FOR CONTRARIANS

Just pick a trend - any trend you like - and write something caustic and intelligent about why the world has got it wrong and why the smart money is betting in the opposite direction.

It’s easy. Any fool can do it. Just watch.

Where shall we start? With the Eurozone crisis? Good, any idiot can see that it’ll all be over by Easter - or probably rather earlier than that if we can scare Messrs Merkel and Sarkozy into accepting that there was a reason for Standard & Poor’s downgrade. Well, now that the ratings shock has hit, the politicians will be simply forced to sort it out. Frankfurt’s on a p/e of 10. You don’t see opportunities like that every day. Buy, buy, buy.

With bonds? It’s the same story. Forget the crisis and lock into yields of 4% and upwards from quality borrowers like Belgium or New Zealand or Australia. Or 6% from Ireland and Italy, if you’re feeling very lucky. Then just sit back and enjoy the ride as the bid yields tumble. Better than an annuity, probably.

Emerging markets stagnating because of euro woes? Don’t believe a word of it. A resurgent America will take care of all those pesky export needs, and a general insouciance about inflation at home is already seeing Beijing, Bombay and Sao Paulo boosting their domestic consumption to levels that would give the ECB nightmares. So who cares if the renminbi falters? Buy. Gold? Yes, it’s obvious to anyone with half a brain that bullion is only catching its breath on its way to $3,000. Don’t believe the optimists who insist that western currencies aren’t going to hell in a handcart. No, hang on, that can’t be right...?

Cash? The best contrarian punt of all. The markets are going nowhere this year, and the smart money is under the pillow. Now, all you have to do is find a return that’ll cover the inflation. Which can’t be that hard, surely?

Excuse me while I disentangle my tongue from my back molars. It’s going to be a tough 2012. And you didn’t hear it here first.

M ik e

Michael Wilson, Editor

www.IFAmagazine.com

15:15

Ed's Welcome.indd 7

Write to Michael at editor@ifamagazine.com

Februar y 2012

7 24/01/2012 13:49

shorts

magazine

No country

will leave the euro zone this year, according to Aviva’s latest survey of 188 fund managers, and 17% say they believe Germany’s economic growth will top the United States - although the other 83% said they preferred the US. Nobody tipped Britain to come top of the pile. Half the respondents expect interest rate rises this year.

Hard Fromage Deteriorating relationships between the euro Club and the United States took another knock in mid-January... ...as the credit ratings agency Standard & Poor’s downgraded nine eurozone countries, on the grounds, it said, that austerity was now driving Europe even deeper into financial crisis.

The ruling meant that Sarkozy’s France was stripped of its coveted AAA credit rating for the first time, leaving only Germany with a triple A among the region’s major nations. The United Kingdom, which of course is not a euro Club member, retained its triple A. The move has rekindled market anxiety about a possible break-up of the single currency – not helped by the fact that, on the same day, Greece’s parliament faced bitter recriminations about the impact of the austerity pact on which it chances of getting staged rescue payments now depend.

S&P responded that its decision had been “primarily driven by insufficient policy measures by EU leaders to fully address systemic stresses”. It also added that fiscal austerity alone “risks becoming self-defeating”.

Just to emphasise the likelihood of that selfdefeating trend, S&P announced two days later that it had also cut its rating for the European Financial Stability Facility, the main European sovereign bailout fund, from AAA to just AA+. The group, it said, must find a way to improve its financial support for a collective rescue package or risk yet another downgrade.

By sheer bad luck, US Republican presidential hopeful Newt Gingrich had chosen the same week to ruffle French feathers by attacking his treacherous rival Mitt Romney for being able to speak French. It was a period that we will all be glad to forget.

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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 News.indd 8

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were slightly better than expected, thanks to heavy discounting in the high street. Office of National Statistics figures showed a 2.6% annual rise in December, with clothing and footwear sales up by 6.3%. But household goods sales dropped by 2.4%. On a monthly basis, December’s sales were 0.6% above November’s.

NEWS

Britain’s retail sales at Christmas

Investment trusts may be

coming to the platform environment soon, according to Cofunds and Fidelity Funds Network, both of which say they are expecting to introduce them by RDR day. The smaller Ascentric, Nucleus and Transact already offer some IT coverage.

But Skandia says ITs will be a priority for after RDR, and that IFA demand is currently only modest.

So Long, and Thanks for All the Brickbats A short and not very happy relationship came to an abrupt end in January.

On 13th January Stephen Gay, the director general of the Association of Independent Financial Advisers and the Association of Mortgage Intermediaries, handed in his notice after just 13 months in the hot seat.

Mr Gay blamed his decision on the strain of leading the industry through the preRDR reform period, and said he would be relieved to be moving to a new post as director of life, savings and protection at the Association of British Insurers.

We’d have to say that Mr Gay had made few friends while in office. Smaller IFAs had complained bitterly that he was espousing the FSA’s cause on fee charging and qualifications far too enthusiastically for comfort. Larger ones said that his inexperience in the IFA sector had left him critically incapable of understanding his membership’s situation at a time of considerable pain. And Everyone had seemed agreed that his previous post at insurer Aviva, where he’d been director of distribution development, had scarcely been an appropriate grounding for the position he’d acquired.

Just to add salt to the wound, hefty increases in AIFA’s membership fees had heightened the general sensitivity to the whole issue. Which made it especially brave of the Rt Hon John Gummer, AIFA’s chairman, to applaud the fact

that AIFA had increased its revenues during the last 13 months, while also reducing its costs. The organisation, he said, was “now in a better position to provide the single, strong and united voice that is able to exert greater influence on regulators and policy makers in the UK and Europe.”

Mr Gay said: “I am proud of the work that AIFA and AMI do for their members and what we have achieved during... what has been a difficult year for advisers. I have no doubt that AIFA will

We’d have to say that Mr Gay made few friends while in office continue to offer the profession an effective voice that is both listened to and respected by regulators and policy makers now and into the future.”

It was not immediately clear when Mr Gay would be stepping down. In the meantime, however, Chris Hannant was appointed to the post of Policy Director.

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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 News.indd 9

24/01/2012 18:12

Emerging market

Blackrock’s

fourthquarter profits dipped by 16%, to $550 million compared with $657 million final-quarter 2012, the bank announced.

Chiefe Executive Larry Fink blamed the trend on investors seeking more efficient investment alternatives, especially in fixed-income.

dividends are becoming attractive, according to Projit Chatterjee, Portfolio Manager of the UBS Emerging Markets Equity Income Fund, which concluded its first year at end-January with a 5% price gain. Payout ratios from emerging markets have averaged 30-45% over the last decade, he says, and debt levels are falling.

Sunny Side Up Things looked rather better in the United States, where forecasters produced a swell of optimistic news that seemed to suggest that the U.S. might be leaving the woes of the last two years behind it.

As Britain’s Chancellor George Osborne glumly awaited new forecasts that looked set to make even Fitch’s GDP growth forecasts for 2012 look optimistic – they were down from 1.2% to 0.7%, by the way – provisional figures released on 19th January showed that the numbers of people entering America’s unemployment queues during the previous week had fallen to 352,000, compared with a revised figure of 402,000 in the previous week.

Figures released on 19th January showed that the numbers of people entering the unemployment queues during the previous week had fallen to 352,000, compared with a revised figure of 402,000 in the previous week. That was the smallest number of new entrants since April 2008, and it was taken as evidence of an improving labour market. There was

also good news in that the numbers of people who continued to receive unemployment benefits also dropped by 215,000 to 3.4 million – the biggest decline in 30 months.

Meanwhile the Economic Advisory Committee of the American Bankers Association announced that, buy its calculations, inflation-adjusted GDP growth had risen by 2.5% in the second half of 2011, and that more of the same could be expected in 2012. Core inflation should stay under 2%, it said, although consumer confidence would remain only modest and unemployment would struggle to get below 8.6%.

Meanwhile, Bank of America reported a $2bn profit for the three months to the end of December – a marked improvement on the $1.2bn loss it had recorded in the same period of 2010. But it may be too early to celebrate: Morgan Stanley confessed to a fourth-quarter loss of $250m compared with a profit of $836m a year earlier.

And Goldman Sachs declared that its 2011 profits had been 47% down on 2010.

BUT IT MAY BE TOO EARLY TO CELEBRATE

Morgan Stanley confessed to a fourth-quarter loss of $250m compared with a profit of $836m a year earlier

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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 News.indd 10

24/01/2012 18:12

C512

TRANSPARENCY, EFFICIENCY, LIQUIDITY THE LYXOR ETF CHARTER OUR COMMITMENT TO CLIENTS The Lyxor ETF charter is a commitment to the highest quality standards for its clients.

Across Asset Management, Index Tracking, Transparency, Counterparty Risk, Primary and Secondary Market Liquidity, Lyxor aims to provide best-in-class services to its customers.

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T O TA L A U M O F € 2 9 B N – A S S E T M A R K E T S H A R E O F 1 5 % – L E A D I N G O N - E X C H A N G E R E P O R T E D T R A D I N G v O L U M E (24% MARKET SHARE) WITH A STRONG LIQUIDITY COMMITMENT BY SOCIETE GENERALE CIB.* − Asset Management quality: direct ownership of physical assets, no securities lending; application of best execution principles to derivatives transactions. − Index Tracking: direct index tracking. Tracking error published in monthly client reports and aims to be below 100 bps. − Transparency: daily web publication of key information: directly owned securities, collateral, counterparty risk, counterparties to all derivatives entered into by Lyxor ETF.

− Zero counterparty risk target: daily target reduction of counterparty risk to zero. − Liquidity: access for brokers to primary and secondary markets through more than 45 Authorised Participants and 15 market makers. Continuous pricing across 649 listings on more than 13 exchanges. And full transparency on creation and redemption costs.

ETF Risks: the index tracked by a Lyxor ETF may be volatile, investor’s capital is at risk and an investor may get back an amount less than originally invested.

More information on LYXOR <GO> or call 0800-707-6956 * Source: Bloomberg, Lyxor. Trading volume for September 2011, all other data as of end of September 2011. The products described within this document are not suitable for everyone.

Investors’ capital is at risk. Investors should not deal in these products unless they understand their nature and the extent of their exposure to risk. The index tracked by a Lyxor ETF may be volatile. Prior to any investment, investors should make their own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us.

We recommend that you consult your own independent professional advisers. Lyxor and Lyxor ETF are names used by Societe Generale to promote the products of Lyxor Asset Management.

Societe Generale is a French credit institution (bank) authorised by the Autorité de Contrôle Prudentiel (the French Prudential Control Authority). Societe Generale is subject to limited regulation by the Financial Services Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request. Lyxor ETFs are open-ended mutual investment funds established under French Law or Luxembourg Law. The funds may not be sold to US persons or in jurisdictions where such offering or sale has not been authorised. The telephone number and e-mail address are provided by the London Branch of Societe Generale for technical questions relating to Lyxor Asset Management products only. Calls to this line and other Societe Generale telephone numbers may be recorded. For further details please visit www.lyxoretf.co.uk

News.indd 11 C51298_IFA Magazine 297x210.indd 1

24/01/2012 18:12 01/12/2011 11:55

NEWS

Natural gas

IFAs leaving

prices in the US have fallen to their lowest levels in ten years, according to industry experts, because shale rock drilling is driving down futures markets. In Britain, too, EDF and British Gas cut their retail prices sharply after accusations of not responding fast enough to declining global prices. Brent oil remained stable at around $110, however.

the profession have underperformed the worst industry expectations, according to a new Ernst & Young study.

Directly authorised firms providing financial advice fell from 5584 in September 2008 to 5482 by last December, a decline of 1.8%, and appointed representatives were thinned by 8.3% from 9372 to 8590.

Annuities – Flexibility, Please The pressure on long-term annuities is not letting up, according to industry sources.

Precipitous declines in annuity rates are forcing many pensioners to postpone all thoughts of retirement at 60 or 65. The socalled Wearies – “Working, Entrepreneurial and Active Retirees” – may be obliged to carry on working well into their seventies, and perhaps even beyond that.

For new and incipient pensioners in particular, the disastrous 45% drop in annuity rates since August has been caused in no small part by the euro crisis, which has deterred thirdcountry investors from buying euro denominated bonds and has deflected their preferences across to sterling paper. The problem is that the rush of foreign money into gilts has driven up prices to the point where ten year yields are down to just 2% - a level that wouldn’t be unusual in Germany or America, but which comes as a shock in high-inflation Britain.

But this time it’s the restrictions on income drawdowns which are taking centre stage. Last April, the maximum amount that a pensioner could draw down was reduced from 120% of the equivalent annuities to 100% - thus putting the squeeze on people who didn’t plan on drawing a pension annuity at all by their 75th birthday, as they’d previously been forced to do.

But there’s good news too, at least for wealthier investors. It now seems flexible annuities will not be affected by the 100% income cap. According to Andrew Tully, pensions technical director with MGM Advantage, the government has now given formal assurances

that flexible annuities, which allow investors to keep some of their pension pots invested in equities, will continue to be able to pay up to 120% as previously. The downside, as usual, is that investors are required to demonstrate that they can meet a Minimum Income Requirement (MIR) - currently set at £20,000.

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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 News.indd 12

24/01/2012 18:12

St James’s Place grew its assets under management by 6% in 2011 to £28.5bn, it said. New investment business grew by 10% to £642.3 million, and new pensions business soared by 20% to £288.2 million.

NEWS

Australian bonds

have been a surprise beneficiary of the global ‘flight to quality’, according to Henderson Global Investors. It says that foreign investors bought a huge US$23.9bn worth of Australian government bonds in Q3 2011, taking foreign ownership of these bonds to a record 80.4%.

Beggar Off Chancellor George Osborne has had his hopes of avoiding further bailouts for the eurozone crisis dashed.

Christine Lagarde’s collection tin came out again as The International Monetary Fund (IMF) announced on 18th January that it would be seeking another $600bn (£390bn) of contributions in order to fulfil its mandate of stabilising the global economy. And that Britain’s 4.5% share might be as much as £17.5 billion.

The Fund said that it needed to grow its resources from $400 billion to at least $1 trillion if it was to successfully protect the world’s investment economy from an intensification of the euro’s problems. Only a part of that would be allocated to the euro rescue plans that we’ve already seen. (Total allocation so far about $600 billion.)

The IMF’s demand got short shrift from prime minister David Cameron, who seemed annoyed that the United States has already refused to contribute to any further bailouts.

Or was he perhaps just taking his cue?

He told the Financial Times: “We are founder members and great supporters of the IMF. It’s a key international institution…

[But] we set out our conditions at the Cannes G20 summit about expansion of the IMF. We believe the IMF must always lend to countries, not to currencies. We would only act if that was with others, not just as part of a eurozone measure... But above all, we want to see the euro zone standing behind its own currency.” Okay, we get the idea.

Meanwhile the European Central Bank seems to have had plenty of takers for the 1%

loans that it was making to the commercial banks. As many as €649 billion was reported to have been allocated during the first December week alone. But will the money be funnelled into buying sovereign bonds, as the ECB hopes, or simply retained to bolster their capital bases? A silly question, perhaps.

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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 News.indd 13

24/01/2012 18:12

NEWS

Taiwan’s fraught

election passed off without incident, as voters gave a second four-year term to President Ma Ying-jeou. China and the United States had worried that his powerful opponent, Tsai Ing-wen, might steer the country toward independence, risking political and trade conflict.

Inflation in Britain fell to 4.2% in December, on the CPI measure, and to 4.8% in RPI terms (including mortgage interest payments). Comparable figures for November were 4.8& and 5.2% respectively. The falls were largely due to price cuts in clothing, whereas food prices rose by 1.4%. January figures should be lower as last year’s 2.5 VAT hike passes out of the calculations.

A Foggy, Foggy View How many Junior ISAs have been sold since they came into being at the start of November?

That’s a tougher question than it sounds, because there’s been an echoing void from the providers where all the enthusiastic statistics ought to have been. The Tax Incentivised Savings Association issued a rather waffly one-liner in its January update, asserting that sales are going well – but otherwise the providers have been strangely reluctant to offer detailed breakdowns, which suggests that things may not have gone exactly to plan.

That’s not entirely fair, of course. After barely three months of existence, and with all the financial stress of Christmas 2011 bearing down on family budgets, we couldn’t have expected to see a steady annual pattern emerging yet. Better figures should start to emerge as we near the financial year end in April. But that in turn, analysts say, will depend on how the overall investment climate is looking.

It’s certainly not that investors think of the £3,600 annual subscription limit as a paltry sum, as some commentators have suggested.

“Half of all parents who said they intended to open a Junior ISA would now go for the safety of cash instead”

Over 18 years the ISA would achieve nearly £76,000 in real terms if it could grow by just 1% above inflation. And that’s without the indexlinking for contributions which will kick in after April 2013, and which would raise the payout at 18 to nearly £100,000 if inflation ran at 3%.

Is it all down to cash funds? Indeed not.

Early research from the Association of Investment Companies suggested that half of all parents who said they intended to open Junior ISAs would go for the safety of cash. But another 43% said they would definitely opt for exposure to stocks and shares. The main thing, says TISA, is that the new instruments offer a tax-efficient way to teach children about savings and investment.

The Nationwide Building Society is currently offering a 3% tax-free yield, but that’s including a 0.9% bonus that will be valid until 31st October 2013.

The Skipton Building Society’s rate is 3% with no such booster rocket attached. But those rates compare with an average 3.17% rate for a conventional one-year fixed rate ISA (source: Moneysupermarket, January), or 3.54% for a twoyear fixed rate. It looks like the incentives on the kiddie front are still a little lacklustre.

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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 News.indd 14

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24/01/2012 18:12

ED ’S SOAPBOX

FORECASTERS, AND WHY WE COULDN’T LIVE WITHOUT THEM IT’S A LOVE-HATE RELATIONSHIP, SAYS MICHAEL WILSON. AND IT’LL STAY THAT WAY You’ll have noticed that forecasters have been in the news over the last few weeks. Just a little bit. The credit ratings agency Standard & Poor’s reduced its assessment of France’s ability to cover its liabilities, just by a notch or two, and that was enough to pitch the euro zone into a feeding frenzy of doubt. (Well, okay, it didn’t help matters that eight other member countries including Austria got the forecasters’ jinx, and that one of them, Portugal, was demoted to junk status.)

Ask Chancellor George Osborne what he thinks about the Organisation for Economic Co-operation and Development’s forecasters and the response probably won’t be printable. Back in December, the OECD’s monthly composite leading indicators (CLIs) index for the UK dropped to just 98.6 in October 2011, down from 99.3 in September and badly down on its long-term average of 100.

It was the ninth successive fall for the UK. And it wasn’t much consolation that the OECD had it in for most of the rest of Angel the developed world. Britain Guirría, would share the bottom growth OECD slot with Germany, France, Secretary Italy, India, Brazil and the entire General Eurozone, it said. Whereas America, Canada, Japan, China and even Russia would skid away from recession relatively lightly.

Globally, it said, the composite leading indicators pointed “to a slowdown in economic activity in all major economies, but with some variation in the strength of the slowdown across countries,” it said. And that was that. The traditional Christmas stock market rally never happened. Trading

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Eds Soapbox.indd 17

“Ask George Osborne what he thinks about the OECD’s forecasters and the response probably won’t be printable”

Februar y 2012

17 24/01/2012 18:15

ED ’S SOAPBOX

magazine... for today ’s discerning financial and investment professional volumes remained subdued in all the major markets as investors kept their hands in their pockets.

The Power and the Glory All this came at a particularly bad moment for the government, which was just coming to terms with a decline in consumer confidence and some shockingly bad retail news. But the hammer blow came from another ratings agency, Fitch, which dropped its UK growth forecasts for 2012 from 1.2% to just 0.7%. Ouch. Just who do these so-called expert forecasters think they are?

It’s a good question. Nobody would seriously doubt that the OECD, the IMF, the ratings agencies and all the rest spend a lot of money on really top-flight economic analysts, and that their statistical modelling software is as sophisticated and reliable as you can possibly make it. But on the whole, the forecasters’ historical record has been only marginally better than the British meteorologists who completely failed to spot the arrival of December’s devastatingly high winds, only hours in advance.

But quiz the forecasters closely about how they arrive at these dire

“Fitch, dropped UK growth forecasts for 2012 from 1.2% to 0.7%” 18

Februar y 2012

Eds Soapbox.indd 18

Who do these experts think they are?

forecasts, and they’ll usually admit that they make a lot of phone calls, do a lot of sums, stick a damp finger in the wind and take a flying intuitive leap. Why can’t they do better?

Without much doubt, the proliferation of derivative-based investment products has altered the game for forecasters over the last decade. They say that the quantity of ‘paper gold’ in the world is twice that of the real live yellow metal that it’s all based on – a fact which can create a panicky market bottleneck in the time it takes Moody’s to say junk.

If you apply the derivatives logic to oil, the multiplier is probably closer to four. And all the time, there are short-sellers, bandwagon-hoppers and secretive manipulators also trying to gain an edge by following the trend - and, with any luck, making it more pronounced. As soon as the forecasts reach a certain tipping point, they sell and the trend goes into cathartic reverse.

The cumulative effect is to create instability and enhance any pre-existing rollercoaster tendencies in the macro-economic structure.

The Me-Too Syndrome So we can’t entirely blame the forecasters for getting it wrong, or even for exacerbating the trends. The very fact that they exist is the reason why they fail. And, although they rarely get the entire direction of an economy completely wrong, they’re quite good at creating dynamics of their own.

Ask a traffic planner how he decides whether to give that new orbital road two lanes or three, and he’ll laugh in a rather embarrassed sort of way. The reason why motorways and bypasses are always too small, he says is simply that, as soon as the word gets out that you’re planning a new industrial corridor, the world starts reshaping its development plans around the new highway. New factories get built close to its arterial perimeter, and that means more smaller roads and more demand for power and water, and then the new houses arrive, and after that it’s the service areas and the shopping malls and the buses and the new distribution centres. And before long your congestion levels are back where you started and you’ve increased the sheer geographical concentration of people. If you gave that new road even eight lanes they’d fill it with enough traffic for ten.

Forecasts, then, have a tendency to be self-fulfilling. And rarely more so than with financial instruments. As George Soros so acidly observed, the moment the forecasters flag up a projected growth in house prices, the banks start lending hideous amounts of money to anybody with a contract to buy a garden shed - and before long house prices will indeed start to soar, for the very good reason that there’s a lot of loose money chasing them. Until the market suddenly

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24/01/2012 18:15

ED ’S SOAPBOX

“When forecasts go wrong, they can go really very wrong”

catches a dose of vertigo and realises for the first time how high it’s suddenly become.

The same logic applied to the over-strong euro. Did we really believe that the 350 million population of the swelling Eurozone membership would create such a vortex of demand that the dollar would soon be only the world’s second The International Energy Agency’s forecast, back in June 2008, favourite currency? Yes we that the ICE Brent crude price would top the $200 a barrel mark did. For half a decade that old

by Christmas. What actually happened? Brent dropped to $48 self-fulfilling thing worked its before settling at $75 for 20 months. The world’s most eminent magic magnificently, as the allenergy forecaster had missed its mark by a massive 75% conquering European currency dominated first the global corporate bond market and Conclusion then - for all the wrong reasons - the headlines.

So why are we in this situation? Why does Great Bloopers of Our Time the media spend so much time focusing on When forecasts go wrong, they can go really these hopelessly inadequate, error-prone very wrong. I still have a special affection for the agencies who seem to possess all the power International Energy Agency’s forecast, back and all the lack of control of Mickey Mouse in June 2008, to the effect that the ICE Brent in his role as the Sorceror’s Apprentice? crude price would top the $200 a barrel mark by Well, this is just a personal view, but I’d say Christmas or shortly afterwards. And this was that the average investor no longer has any faith after a gruelling six-month run that had already at all in the merits of fundamentals as a basis for taken it from a year’s start of $90 to an all-time stock-picking. It isn’t the price/earnings ratio or the high of $140 a barrel. According to the IEA, the cashflow or even the dividend yield that decides convergence of supply fundamentals, including whether or not a share or a sector is worth buying. some instability in North Africa and the growth With the Footsie and the Dax trading at 10 of Chinese consumption, would be enough to times earnings, and even the mighty S&P 500 at “wholly justify” a crude price that would cripple 14, it isn’t apparent to anybody why the world isn’t the entire world’s manufacturing industry. beating a wild path toward these bargain valuations.

And what happened in practice? By But they’re patently not. Entire market sectors are December, Brent had dropped by almost moving in synchrony with what the macro market two thirds to just $48 before settling around expects. And even gold, the ultimate contrarian the $75 mark, where it stuck for 20 months. choice for currency worriers, is shadowing equities The world’s most eminent energy forecaster pretty closely. Fixed interest is getting so expensive had missed its mark by a massive 75%. that it’s remarkable anyone is able to afford it at all.

There is an automatic self-levelling At times like these, mere mortals have very mechanism in the markets that ought to be few reliable handholds on the investment rockface. common knowledge for forecasters, but which oddly They don’t understand economics, and they don’t doesn’t seem to be well known. It’s simply that entirely follow the links between (for example) when people can’t pay for something, they won’t. a weak euro and a sharp decline in the pension There are other errors, some of them annuities that they’re being offered. They are, too funny to be credible. Back in the eighties, I frankly, adrift on a stormy sea, and they have no was engaged to edit a commercial report that proper choice but to rely on the pilot ships and hope projected annual sales of 50 million microwave that they’re not secretly flying the Jolly Roger for ovens a year by 2015. Just in Britain alone. Yes, somebody else. That, I suspect, is where Europe’s every UK household would be buying two and a current mistrust of American ratings agencies half microwaves a year. The surging historical is coming from. And I suspect it’s going to stay sales growth of these new machines pointed that way for quite a long time to come. unequivocally toward this absurd conclusion. And when I challenged the report’s author about the Do you have a good reason for the Editor to jump possibility that market saturation might dent his back onto his soapbox? Not that he needs any client’s unbounded optimism just a little bit, it was encouragement, please send your requests to as if I’d stepped out of a flying saucer speaking editor@ifamagazine.com and stand well back! an alien language. They didn’t ask me back...

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Eds Soapbox.indd 19

Februar y 2012

19 24/01/2012 18:15

DRA G

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

HERE BE

Here’s a little quiz for you, as the People’s Republic ushers in the Year of the Dragon. See if you can figure out which of these stories isn’t true. ❶ Billionaire investor Warren Buffett recorded a video of himself playing guitar and singing, which was aired on China’s CCTV channel for the New Year’s celebrations. ❷ Rolls-Royce has announced that China is now its biggest market and has brought out a special edition “Year of the

THE CHINESE MARKET IS BECOMING INCREASINGLY IMPORTANT TO ROLLS-ROYCE 20 China.indd 20

Februar y 2012

Dragon Collection”, with the mythical creature embroidered on its upholstery. ❸ Chinese officials took on the might of the retailing behemoth Wal-Mart, by temporarily closing 13 stores for selling pork that had been wrongly labelled as organic.

Unbelievably, all three stories are true. Buffett did indeed perform for Chinese TV, showing his appreciation for a country on which he has increasingly focused his attention. His Berkshire

The special edition Year of the Dragon Rolls-Royce Phantom

Hathaway empire owns a chunky 10% stake in Chinese electric car-maker BYD, and Buffett recently hosted a fundraiser with Bill Gates for Chinese billionaires to promote philanthropic causes.

China has now overtaken the US as Rolls Royce’s biggest market, with 31% of cars sold in the country last year. And yes, the Chinese do take their organic food very seriously.

What do these odd stories demonstrate? Perhaps that truth is sometimes stranger than fiction. China can be a tricky economy to call, for reasons we’ll examine shortly.

And although the Dragon is a lucky sign for a year, it can also denote unpredictability.

So will the Year of the Dragon cement China’s place as an economic powerhouse - or will it just lead to a hard landing?

Awkward Times, Unexpected Solutions Well, we might as well agree that 2011 ended ominously.

Chinese officials spent the closing months of the year battling with inflationary pressures, cooling

www.IFAmagazine.com

24/01/2012 18:17

CHINA

GONS CHINA’S ECONOMIC PLANNERS ARE BOOSTING AN ALREADY RAMPANT CONSUMER DEMAND, SAYS MONICA WOODLEY

an excessive growth rate, and trying to prevent a collapse in the housing market. By the time you’ve added in a slowdown in China’s main export markets in the US and Europe, and the fact that Chinese shares (on the Hong Kong Hang Seng index) ended the year down 14%, you’d have to suppose that the outlook for 2012 isn’t very bright. But there’s still good news to be found.

Tight monetary policy has at last started to control inflation. The latest figures show that prices rose by just 4.1% in the year to December 2012 – the fifth consecutive month of slowing inflation, the lowest rate in 15 months and well below July’s high of 6.5%. It was still above of the target figure, but analysts are blaming seasonal

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China.indd 21

factors such as the spending splurge for the New Year.

Economic growth has also slowed, to “just” 9.2% in 2011, and it’s currently predicted to fall further to 8.1% in 2012.

That’s a welcome development, because the previous rates of nearly 10% were putting inflationary pressures on the country. You can have too much of a good thing. But that’s not to say that the authorities are keen to clamp down on demand.

Indeed, quite the opposite.

The property market is a case in point. Investment in property surged by a third during 2011, something that’s caused inflationary headaches in the past. But this time officials have been more cautious with using tools to slow growth, for fear of prompting a crash.

In order to create more demand to meet this growing supply, they are actually easing home purchase restrictions and lending caps. Officials are also looking at reducing banks’ reserve requirements so as to free up more capital for lending.

But there are other ways beyond mere monetary easing in which Chinese officials are now planning to shift policy. Following a start-of–the-year planning meeting, commerce minister Chen Deming announced a strategy of incentives to increase consumer demand – and they’re much more subtle than the massive and rather clumsy fiscal stimulus that were employed in 2008. They include the renewal of subsidies for vehicle and appliance purchases, as

Februar y 2012

21 24/01/2012 18:17

CHINA

magazine... for today ’s discerning financial and investment professional well as targeted government spending to boost tourism, online shopping and energy-saving products.

No Change on the Export Front This focus on boosting domestic demand is smart, considering the poor state of China’s main export markets, the US and Europe. But then, when even the country’s vice commerce minister Zhong Shan admits that the foreign trade environment could be bleak in 2012, you know it’s time to worry.

Although China’s exports still exceed its imports, the country’s trade surplus is at its lowest level in six years. For the past four years, growing domestic demand has increased imports at a faster rate than exports. But import growth is now slowing - in December it was “just” 12% higher than a year before, the lowest growth rate in two years. Phew.

Household consumption as a percentage of GDP is normally low in a country undergoing rapid development, but it is really exceptionally slow in China – just 34% of the whole economy. It has been export demand that has kept the economy powering on in recent decades - and, when that slowed in 2008, government stimulus took over.

And, because export demand is clearly not going to pick up anytime soon, the government is once again using domestic intervention to rebalance the economy, slowing spending and encouraging consumer spending so as to pick up the slack.

If Chinese consumers are going to do that, they are going to have to spend more – a lot more. But while Chinese statisticians usually display a tendency toward overly optimistic figures, here is one instance where they might be underestimating. Analysts at

Wang Qishan

Li Keqiang

Barclays Capital cite a study showing that household income and consumption figures have actually been under-reported, and that consumption actually picked up sharply after 2008.

BarCap does some further clever analysis which has two interesting conclusions: that China’s economy is larger than thought, and

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CHINA

Xi Jinping

IT’S THE YEAR OF THE ELECTION Even in communist China, the single-party leadership contest is not unaffected by public sentiment. Wang Qishan, a vice-premier is known as a financial reformer, whereas his main rival for the post of premier, Li Keqiang, is better known as an advocate of political and social reform. The man expected to take the roles of president and party secretary, Xi Jinping, is known to be less liberal towards workers than Mr Li, but he’s still considered the sort of communist you can do business with.

that income inequality is much worse than thought.

Election Issues Loom In a western-style democracy, the second conclusion would have important implications this year, which is not only the Year of the Dragon but also an election year.

But even in communist China, the single-party leadership

contest is not unaffected by public sentiment. Growing discontent among workers could still turn into a problem for those doing business there, perhaps damaging the country’s transition to an advanced economy. The new leader, whoever he is, will need to contain this trend while also enacting the reforms that Western businesses seek.

Whoever the new leaders turn out to be, they’ll need to maintain the right level of growth. There must be some sort of popular consent on this issue, and a distribution of wealth that is generally seen as fairer, if domestic demand is to play the role that’s now being required of it in the changing economy. The country’s new leaders must balance economic liberalisation with the need for social reform.

The Chinese Communist Party is not in any danger of losing power, but it must face this reality if, in the Year of the Dragon – that lucky but unpredictable sign – it is to guide the country through a treacherous global environment and cement its place as an economic superpower.

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China.indd 23

Februar y 2012

23 24/01/2012 18:17

China.indd 24

24/01/2012 18:17

PROPERTY FUNDS

LOOK TO WEATHER A TOUGH 2012 COMMERCIAL PROPERTY WOES ARE A DRAG ON PROPERTY FUNDS, SAYS KAM PATEL

THE COMMERCIAL PROPERTY MARKET HAS FALLEN TO A TWO YEAR LOW A new survey by Lloyds Banking Group shows investor confidence is beginning to fail

www.IFAmagazine.com

Property Funds.indd 25

If you ever thought commercial property might be the last copper-bottomed refuge for a poor investor who was getting tired of watching his capital getting steadly eaten away by rising inflation and terrible cash returns, prepare to look away now. This isn’t going to be easy reading.

Yes, it’s taken us until now to reach this point, but we can’t avoid it any longer.

The charmed existence that property funds have had over the last two years has finally succumbed to macroeconomic inevitability. The ongoing upheaval of the banking sector, the poor state of the retail economy, and especially the dire shortage of lending at

Februar y 2012

25 24/01/2012 18:21

PROPERT FUNDS

magazine... for today ’s discerning financial and investment professional affordable rates, are taking their inevitable toll on the all-important commercial property sector.

The latest return to the gloom of 2007 and 2008 was highlighted in January by an industry survey by Lloyds Banking Group, the biggest lender to the property sector in the UK with £60bn of commercial property loans.

The Lloyds study reveals that confidence in the key London commercial property market has hit a two-year low, with the net balance of respondents who expected the overall commercial property market to improve in the next six months falling sharply to just 2.8 - versus 32.2 at the end of August. And that’s the lowest reading since the index began in 2010.

Recovery ends Unfortunately, as so often, our sorrows come not as single spies but in whole battalions.

The Lloyds survey comes in the wake of other downbeat studies. IPD, the provider of real estate performance data to funds and investors, which publishes monthly snapshots of the sector,

revealed in December that November 2011 amounted to the first time in 28 months that UK commercial property had recorded a negative albeit slight - capital decline. All of which signalled the end of a sustained two-year recovery, it said.

The IPD report estimates the total return for the calendar year to date (11 months to November 2011) was 7.6%, with a capital return of just 1.3% over that period. It added that if returns continued at November levels for December, total return would amount to 8.1% and capital return would remain just positive for the year, at 1.2%. Capital growth on a rolling 12-month basis was 1.6%. But that’s well short of inflation, and it doesn’t even match what you could probably get from an instant-access savings account.

Commenting on the November findings, published in December, Malcolm Hunt, IPD UK and Ireland Client Services Director, said: “Poor economic growth forecasts, the ongoing Eurozone crisis, high unemployment and inflation still hovering around 5% has left consumers and businesses, occupiers and owners alike feeling out of pocket. Deep uncertainty about the potential of the UK to avoid recession next year is now finding its way into property values.”

Let’s put that into perspective. November’s worrying performance followed a solid 27 months of growth in UK commercial property values, during which prices rose by 17.8%. But that good performance had been only a partial recovery from the hefty 44% fall between June 2007 and June 2009. There’s an awful lot of ground to make up.

“Poor economic growth forecasts, the Euro-zone crisis, high unemployment and inflation still hovering around 5% has left occupiers and owners feeling out of pocket” Malcolm Hunt, IPD UK and Ireland Client Services Director, points out that the deep uncertainty about the potential of the UK to avoid recession next year is now finding its way into property values

26

Februar y 2012

Property Funds.indd 26

Hunt added: “Outside of London, office value movements remained negative across all regions while the accumulation of stock for sale, and subsequent uncertainty in investor sentiment, has led to a slowdown in the City. “

West End still delivering For the UK commercial property sector, and the many property funds that rely on its good health, the most worrying aspect of recent findings is the waning confidence in the London market, which accounts for the lion’s share of all overseas investment in the UK commercial property www.IFAmagazine.com

24/01/2012 18:21

PROPERTY FUNDS

“The one real exception from all the pessimism are West End offices, which are currently seen as a safe haven to store wealth.

“They’re continuing to go from strength to strength” Claims Malcolm Hunt, IPD UK and Ireland Client Services Director sector. Recent data from Real Capital Analytics shows that over 2011 institutions from the US, Asia, the Middle East and Europe spent £10.2bn on commercial property in London – nearly 80% of the total £13.2bn spent on the sector in the UK by overseas players.

The one real exception has been in West End offices, which are currently being seen as a safe haven to store wealth. “They’re continuing to go from strength to strength,” says Hunt.

Elsewhere it simply isn’t the same story.

This uncertain outlook was reinforced in mid-January with the collapse of a deal to let one of the biggest future office schemes in the City itself. Anglo-French developer Hammerson announced that law firm CMS Cameron McKenna had pulled out of talks to pre-let a third of the 600,000 square feet £485 million Principal Place scheme in Shoreditch.

A recent report from Reuters, meanwhile, revealed that five central London skyscrapers being developed by firms including Land Securities and British Land have only signed one office pre-let deal between them.

Rollercoaster ride for funds Clearly, property funds are a slightly different proposition from the hurly-burly of the property market itself. In principle, a well-run fund with a decent portfolio of properties ought to be insulated from the general troubles by loyal tenants who

THE UK REMAINS THE FOURTH LARGEST PROPERTY INVESTMENT MARKET IN THE WORLD www.IFAmagazine.com

Property Funds.indd 27

keep on paying their rents. But those too are under pressure. Data compiled by the Investment Management Association for IFA Magazine clearly illustrate the rollercoaster times that the funds have experienced over the last few years.

In 2005, it says, net retail sales of property funds across all wrappers totalled just £859 million. And in 2006 demand exploded to £3.6 billion. 2007 saw an overall net sales total of £2.07 billion, but that number concealed a bitter disappointment. Sales of £2.36 billion in the first half collapsed in the second half to a dramatic net outflow of £292 million as the financial crisis went into full swing. And the unmitigated dark year of 2008 saw net outflows of £390 million from the funds.

The recovery of 2009 and 2010 showed net retail sales of £1.81 billion and £1.84 billion for the two years respectively. But that recovery all but evaporated during 2011, with net sales of just £527 million for the 11 months to November – almost all of it in the first half. Performance during the five months to November was properly abysmal, with net retail sales of £24.8 million - falling to just £450,431 in October - as the economic woes and the eurozone crisis spooked investors.

Looking for the Positives To be sure, the 2012 outlook for the commercial property sector is set to be challenging - but we shouldn’t underestimate the quality and resilience of UK commercial real estate, most especially London and the southeast, which boast a large, mature, transparent and liquid market that’s attractive to overseas players. The UK remains the fourth largest property investment market in the world.

Up until toward the end of 2011, UK commercial property continued to be one of the few asset classes to have provided reasonable positive returns over the year to date Februar y 2012

27 24/01/2012 18:21

PROPERT FUNDS

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

THERE IS NO DOUBTING THAT THE UK COMMERCIAL PROPERTY MARKET AND ALLIED FUNDS HAVE PUT ON A GOOD SHOW BUT THE BEST FUNDS ARE GLOBAL

despite (or perhaps because of) the ongoing eurozone problems.

According to the recent figures from the Association of Investment Companies, property investment trust valuations have grown 23% over the past three years, compared with 18% for the average investment trust.

Results for the IPD’s UK Pooled Property Fund Index for the quarter to 30 September 2011, meanwhile, showed a three month return of 1.5% for all property funds - compared to minus 21% for property equities and minus 13.5% for the FTSE All Share Index. Not bad.

The IPD figures also show that annualised returns for all pooled property funds over one year to September 2011 came in at 8.6% and minus 2.3% over three years. Property equities delivered no return over one year and minus 10% over three years. Equities, meanwhile, provided minus 4.4% and plus 6% over the respective periods.

The commonest forms of property fund are currently unit trusts, open-ended investment company (OEICs) and Limited Partnerships. A unit trust, of course, is a collective investment scheme under which the property is held on trust for the participants.

OEICs are similar to a unit trust in many ways but are structured as a corporate entity instead of a trust. Limited Partnerships, meanwhile, provide a tax transparent unregulated vehicle for collective property investment and are aimed institutional investors.

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Given the scale of much commercial property investment and the specialist knowledge required, most private investors tap into the market via collective funds such as OEICs, unit trusts and tax-efficient real estate investment trusts (REITs).

Global funds deliver There is no doubting that the UK commercial property market and allied funds have put on a good show in recovering from the financial crisis. But it is worth noting that the best performing property funds (unit trusts) currently, according to Citywire data, are global rather than UK offerings.

The top two positions over a year to December 2011 are held by Aviva Investors Asia Pacific Property, with a return of 16.2%, and by Huet Capital’s Salamanca Global Property, which made 7.4%. They are followed by UK focused funds, with London-focused Royal London Property (5.36%) in third place, followed by M&G Property Portfolio Sterling (3.96%). In fifth place is F&C UK Property (3.84%).

For the three years to December 2011, the top performer has been First State Global Securities (61.3%), with M&G Global Real Estate (59.2%) placed second; and HC FCM Salamanca Global (53.5%) coming in at third.

Standard Life Global REIT is fourth (49.2%).

Focus on quality and diversity With 2012 looking to be a challenging year for the London commercial property, investors, especially the risk averse, looking to access the sector need to focus on diversity and quality.

As the collapse of the Hammersmith deal helps to illustrate, the City’s prospects in particular are not great at present, and what’s more the loss of jobs in the financial sector tends to have direct impact on rental growth. It might therefore be prudent for an investor to consider funds that have good exposure outside London; within the capital, the focus can be expected to shift toward secure, prime property boasting long leases.

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24/01/2012 18:21

FOR ADVISER USE ONLY â&#x20AC;&#x201C; NOT APPROVED FOR USE WITH CLIENTS.

NEW PRUFUNDS THAT CAN MATCH DIFFERENT CLIENT RISK PROFILES

g n i k l a t Smooth dential u r P m o r f Introducing Risk Managed PruFunds.

These four new funds offer not only the unique PruFund smoothing mechanism, but also a choice of equity parameters to help suit different risk appetites.

Helping you to reassure clients in these unpredictable times. www.pruadviser.co.uk/ riskmanagedprufunds

Property Funds.indd 29

24/01/2012 18:21

magazine

THE TRUTH BEHIND SYNTHETIC ETFs SYNTHETICS HAVE BEEN GETTING A BAD PRESS LATELY, BUT YOU DON’T NECESSARILY HAVE TO BELIEVE EVERYTHING YOU READ. BEN THOMPSON OF SOCIÉTÉ GÉNÉRALE PUTS THE RECORD STRAIGHT The growth of Exchange Traded Funds, or ETFs as they’re better known, continued in 2011 despite widespread market volatility, increased scrutiny from the regulators, and a roaring debate over physical versus synthetic replication. The jury may still be out on some of these issues, but the future looks bright for ETFs as investors become increasingly cost conscious. However, for the ETF market to continue to grow, there are a few questions to address. Such

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as what they are, how they really work, and ultimately, what the risks are?

This article can’t answer everything but we aim to address the main concerns and criticisms that have been aimed at swap-based ETFs, and show you how to determine the facts from the fiction.

Just What is Swap-Based Replication?

Unlike physical ETFs, which replicate the benchmark index by purchasing all or at least a sample of the underlying stocks, swap-based ETFs generate

www.IFAmagazine.com

24/01/2012 11:26

structure is the only way to access the market efficiently.

A second important factor is tracking error. Where the benchmark index has a larger number of underlying securities – for example, MSCI World – it may not be possible to buy all the assets physically. This means that fund managers are forced to operate a sampling strategy where only the most liquid securities are purchased.

This can expose the fund to tracking error as the basket of securities is not an accurate reflection of the benchmark index. In contrast, by the nature of the contractual agreement, a total return Swap will provide the precise performance of the benchmark index before fees.

A common method used by physically replicated ETFs to earn additional revenue for the fund and offset any tracking difference is to lend the fund’s assets to another financial institution. However, there are no regulations controlling this activity, and a substantial portion of a fund’s Net Asset Value can be lent out at any time. The loans are generally covered by collateral but the quality of that collateral is completely unregulated. There

SYNTHETIC ETFs

the performance of the index by purchasing a Total Return Swap from an investments bank, and by investing in a basket of physical assets as collateral.

In the case of Lyxor ETFs, Société Générale is always the ultimate issuer of the swap so investors know where any risk lies. By entering into this Total Return Swap, Société Générale commits to pay the Lyxor ETF the daily return of the ETF’s benchmark index, including any dividends which may be due on the benchmark index.

In essence, this means that before taxes and replication costs, the performance received by the ETF is the same as the benchmark index. In return, the Lyxor ETF pays the Swap counterparty the performance of its physical assets including any dividends paid by these assets.

This structure has many benefits. There are many instances where it is difficult or impossible to purchase the underlying assets which make up an index directly. In certain Emerging Markets or commodity underlyings for example, physical replication is restricted by regulation or is just impossible, and replicating the index through a Swap based

is no look-through requirement, no counterparty risk limits, no best execution requirement and no minimum quality standards.

All of this means that investors may not be able to truly assess the level of counterparty risk that they are taking on, and who they are exposed to. This is why Lyxor has a strict policy of no securities lending, and provides full transparency of what assets are held in each Lyxor ETF at all times.

What About Counterparty Risk in Swap Based ETFs? The use of a Swap contract does introduce a degree of counterparty risk. If the issuer of the Swap contract can’t make payments due, the swap can become worthless.

However, there are a few important points to consider which have not necessarily been highlighted in recent debates;

1 UCITS regulation: All Lyxor ETFs are UCITS compliant funds, and as such, the Swap can never exceed 10% of the fund’s assets. Put simply, this means that if the Swap counterparty failed, the loss to the ETF would be limited to 10% of the fund assets.

2 The swap exposure can

be negative: If the basket of assets held by the fund is worth more than the benchmark index, the swap is in credit, and if the swap issuer defaulted the fund would profit.

3 Daily target of zero

SWAP-BASED ETFs GENERATE THE PERFORMANCE OF THE INDEX BY PURCHASING A TOTAL RETURN SWAP FROM AN INVESTMENT BANK LIKE SOCIÉTÉ GÉNÉRALE

counterparty risk: 10% is a maximum level for Swap exposure, and in reality, at Lyxor, we manage the ETF’s exposure to the Swap every day in an effort to keep it as close to zero as possible. If the swap is in profit, i.e. the benchmark index is worth more than the basket of physical assets, some of the physical assets are sold and Februar y 2012

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SYNTHETIC ETFs

magazine... for today ’s discerning financial and investment professional a payment is made to the ETF to re-set the counterparty risk.

4 Segregated assets:

Lyxor ETFs hold high quality physical assets as collateral for each fund, which are owned directly by the fund. If the Swap counterparty were to default, and no other eligible Swap counterparty could be found, the fund’s assets could be sold to repay investors.

What Does the ETF Actually Invest In? A common criticism of swapbased ETFs is that the physical assets can be completely uncorrelated to the benchmark index, and that the quality of these assets can leave a lot to be desired. The first point is certainly true but bear in mind that these physical assets

have absolutely no impact on the performance of the ETF. They are just there to provide security to the fund and the swap agreement. This means that regardless of how remote the investment opportunity, Lyxor can maintain strict guidelines over what can be put in the basket. Lyxor only uses UCITS eligible securities and a minimum of 94% of this basket is made up of large-cap stocks, which are listed on the main international stock exchanges from developed markets, and represent different economic sectors. The remaining amount which can be up to 6% is invested in a diversified fund which holds equity as collateral.

Because the securities are selected from a universe of liquid international stocks, in the worst case scenario of the Swap counterparty defaulting, and it being necessary to sell the fund assets, this should be possible

0.15% AMC/TER

(Treat your clients to something inexpensive)

in one or two trading days in most cases – far from the horror stories of being stuck in untradeable junk bonds!

How Do You Know This Is All True?

To maintain absolute transparency, we publish details of the Swap counterparty, the counterparty risk level and the physical fund holdings of every Lyxor ETF on our website on a daily basis. This means that investors can easily determine what the fund is invested in, who the Swap counterparty is (Société Générale), and what the current exposure the Lyxor ETF has to the counterparty.

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Because we pay all running costs out of our Annual Management Charge (AMC), we expect our Total Expense Ratio (TER) to be the same as our AMC. And when you add to this the fact that our Annual Management Charges – ranging from 0.15% to 0.55% – are among the lowest in their class, you can see we’re committed to delivering exceptional value. You could call it being reassuringly inexpensive.

Just another way we put your clients first.

Exceptional Value. It’s the Vanguard Way.™ 0800 917 5508 vanguard.co.uk/costs

This advertisement is directed at investment professionals in the UK only and should not be distributed to, or relied upon by retail investors. It is designed only for use by, and is directed only at persons resident in the UK. Charges exclude purchase and redemption fees where applicable. Vanguard Asset Management, Limited only gives information on products and services and does not give investment advice based on individual circumstances. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. 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.

UK11/0696/0811

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24/01/2012 11:26

EUROPE

NEARING AN END GAME IN EUROPE JOHN BENNETT, DIRECTOR OF EUROPEAN EQUITIES AT HENDERSON GLOBAL INVESTORS, IS HOPEFUL THAT WE’RE OVER THE WORST. AND THERE ARE SOME OUTSTANDING OPPORTUNITIES OUT THERE

It was Benjamin Franklin, the US statesman, who once claimed that the only certainties in life are death and taxes. To that, we might add European summits. For years, Europe’s politicians have honed their skills in repeatedly building up expectations - only to disappoint. But the market shocks of the last few months appear to have finally hammered home the gravity of the situation.

There does appear to have been a welcome shift in attitudes: closer talk of fiscal union among political leaders, together with a European Central Bank (ECB) that appears to be less hung up on merely aping the Bundesbank. The new president of the ECB, Mario Draghi, has been swift to reverse the wrong-headed interest rate rises of last spring, whilst the Longer Term Refinancing Operation (LTRO) announced in December has gone some way to alleviating bank funding constraints.

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THERE DOES APPEAR TO HAVE BEEN A WELCOME SHIFT IN ATTITUDES New president of the ECB, Mario Draghi, has been swift to reverse the wrong-headed interest rate rises of last spring

Reaching the Tipping Point As 2011 progressed, it was becoming increasingly clear that the sovereign debt crisis was fast turning into a banking crisis. Indeed, the two were inextricably linked. After all, if lenders were not prepared to lend to governments, why should they risk it with banks? But new hope

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33 24/01/2012 11:29

EUROPE

magazine... for today ’s discerning financial and investment professional billion is from Italy alone, so there are plenty of potential flash points to test the mettle of investors. Yet buying into companies that have stronger balance sheets than most governments, in an equity market that is arguably at the latter stages of a long bear cycle and already discounts a recession, would seem to offer better odds than buying into a bull market in bonds that is looking very long in the tooth.

YIELDS ON EUROPEAN BONDS AND EQUITIES

Sectoral Disparities Source: Datastream

has come from the latest €489 billion LTRO, which provides banks with 3-year loans at 1%.

The hope is that this will not only relieve funding pressure, but that it will also encourage banks to invest in Eurozone sovereign debt. Although it’s not explicitly engaging in quantitative easing, the European Central Bank has now gone a significant way in reducing the tail risk from a near-term funding crisis in the banking sector.

That’s fine, of course, but there are certainly plenty of commentators who argue that events have still not come to a head.

It will take one or more panics yet, they say, to shake the market into capitulation before we can embark on a new bull market. But the odds are shortening.

We continue to focus on the opportunities now being presented by what is universally accepted as bad macroeconomic news. In our view, bad macro is often the harbinger of great opportunity. Amidst the noise created by the political and macroeconomic headlines, we find it critical to maintain our focus on where we can make a difference. Rarely has it been more important to take a step back and look at the worth of businesses, comparing that worth with the valuation as decided by the stock market.

What is clear is that there is considerable disparity between sectors and stocks.

The chart below highlights the valuation dispersion among European sectors. Only back in the Technology Media and Telecom (TMT) bubble were valuations as dispersed as they are today. For investors like ourselves who believe in the old-fashioned concept of mean reversion, this wide dispersion opens up a plethora of investment opportunities.

That is not to say that equities cannot cheapen still further. Stress in the bond markets has been a key trigger of volatility in equity markets over the past year. In 2012, according to figures from Société Générale, Eurozone governments need to undertake gross issuance of around €800 billion of bonds, of which €220

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STANDARD DEVIATION

If we look at price/earnings multiples on Born-Again Bargain Sectors the equity market, we find that the last twelve Our biggest sector theme for much of 2011 was years have essentially been one long bear market pharmaceuticals, and it looks set to remain so in equities, punctuated by the occasional rally. this year as well. This is a sector where news In contrast, however, government bonds – at flow has seemed relentlessly poor for many least, core government bonds such as German years. It is a sector that has seen its price/ bunds – are in the late stages of a bull market.

This is illustrated by the gap between dividend yields on European (ex UK) equities and the bond yield on 10VALUATION DISPERSION: year German bunds. The dividend Sector composite valuation standard deviation across sectors yield on equities has trended upwards while the yield on bonds has steadily fallen. Essentially, equities have been getting cheaper whilst bonds have become more and more expensive.

Source: BofA Merrill Lynch European Equity Strategy, December 2011

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EUROPE

significant discoveries are made.

In the meantime, the European pharmaceutical sector trades on undemanding earnings multiples while sporting dividend yields north of 4%*. In our view, the sector is being priced as a value sector, whereas it has the potential to be a growth sector.

WE THINK THERE MAY BE PARALLELS WITH THE TECHNOLOGY COMPANIES OVER A DECADE AGO

Given the difficult economic background in Europe, our focus is not only on identifying inexpensive growth sectors but also on discovering secular stock opportunities that will be less reliant on the general macroeconomic background. Reed Elsevier, the media group, is a company that appears to fit the bill. Once a growth darling, it has spent the last few years undergoing a cleansing and restructuring under new management.

Reed’s stock is currently out of favour with investors, but even a modicum of growth offers the potential for positive earnings surprise - to say nothing When valuations became inflated on excited expectations for of the hidden value locked up in mobile internet. Essentially, the market had got ahead of itself its assets. Bloomberg recently and ten years on the concepts are now being monetised and acquired a legal publishing and delivering real profits for companies such as Amazon and Apple research group at a multiple that would value one of Reed’s subsidiaries – Lexis Nexis earnings ratio fall over a decade or more, so – at a price barely reflected that the earnings multiples of 20-30 a decade in Reed’s current market capitalisation. ago have dropped to 10-15 today. (Source: Investing in Europe does require some Thomson Datastream.) And it is an industry faith that we will avoid Armageddon and we that has seen management changes in pursuit believe that we are nearing the end game in of business model change. Recognising that the this sovereign crisis. While we doubt that old model no longer works, the industry is now all current members of the Eurozone will be focusing on improving return on capital from members in five years’ time, we believe that the research and development, containing costs promise of fiscal union and support from the and diversifying by product and geography.

European Central Bank will be forthcoming, Whilst the sector outperformed in 2011, although electorates weary of austerity and we believe this is only the start of a multi-year hapless politicians still have the potential re-rating. The concern about drug pipelines to take matters into their own hands. is now a decade old. We think there may be In the current uncertain environment, parallels with the technology companies over low quality cyclical stocks in Europe may a decade ago when valuations became inflated enjoy short rallies on shifting sentiment, but on excited expectations for mobile internet. we continue to favour companies where there Essentially, the market had got ahead of is clear structural improvement in earnings. itself and ten years on the concepts are now Longer term, while investors chase the ‘certainty’ being monetised and delivering real profits of fixed income, we see outstanding value in for companies such as Amazon and Apple. the uncertainty of European equities.

The same is true of pharmaceuticals which enjoyed high ratings in the 1990s on prospects for biotechnology and drug pipelines.

After a decade in the wilderness, we could now be entering a decade in which some www.IFAmagazine.com

Henderson - Europe.indd 35

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35 24/01/2012 11:29

The evolving role of the DFM and the Intermediary Business Park Plaza Hotel, Cardiff

Friday, 23 May 2012

IFA Magazine and JM Finn & Co are delighted to announce a series of seminars for the IFA community in 2012 This is the first in a series of lunchtime seminars that will bring together some of the UK’s leading industry experts and financial intermediaries to discuss the current financial environment and the evolving role of the discretionary fund manager and the IFA in the run-up to and post RDR world.

Speakers and topics include:

BRIAN TORA : THE INVESTMENT ENVIRONMENT Topical insight from one of the industry’s leading commentators.

MIKE MOUNT : RDR IS EVOLVING THE ROLE OF THE DFM What options can the modern DFM bring to your investment proposition?

JM FINN & CO FUND MANAGER : Speaks about opportunities, insight and approach to investing.

ALEC STEWART : Renowned international cricketer and speaker. Over lunch Alec will regale with stories and thoughts on key values of a strong team culture, independence of thought and building long term relationships.

This seminar is CPD Accredited

Space is limited. If you would like to attend, please e-mail events@ifamagazine.com Sponsorships are available – please contact IFA Magazine for details alex.sullivan@ifamagazine.com

magazine

The award winning Park Plaza Hotel is located in the heart of the city centre, within walking distance of Cardiff Castle, the Millennium Stadium and the National Museum of Wales.

The events will be filmed and edited to appear on web sites and will also be distributed via BrightTALK thought leadership channel.

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24/01/2012 11:31

RDR

A CURIOUS STATE OF AFFAIRS THE RDR CLOCK IS TICKING, SAYS BRIAN TORA, OF INVESTMENT MANAGERS JM FINN, BUT WHY ARE SO MANY IFAS STILL IN THE DARK ABOUT CLOSED-ENDED FUNDS? Recently I have been moderating a series of webcasts on behalf of a number of investment trust management groups. The purpose has been to alert the Independent Financial Adviser community to the merits of closed-ended investment vehicles ahead of the introduction of the new regime that will be ushered in by RDR. Younger IFAs may not realise that unit trusts, as open-ended investment products were generally known, were still arguably junior to investment trusts until probably just a generation ago.

Sales of unit trusts remained relatively flat from the early 1960s until the beginning of the 1980s – two decades of zero growth.

Helped by the focus on equity investment that privatisations and demutualisations stimulated - and in no small measure by the deregulation of fund charges - unit trusts swiftly came to dwarf the much longer established investment trust sector.

Of course, other factors played their part. The savage bear market of the early 1970s, as well as discouraging unit trust sales, drove discounts to hitherto unseen levels. And investment trusts were slow to promote their own particular advantages, whereas unit trusts managers found they could enjoy star status if their funds performed and the money rolled in.

Moreover, unit trusts groups had the added perk of being able to dish out commission to those who introduced business. No contest really….

The Platform Limitation

RDR, of course, is all about levelling the playing field and making advisers examine all options before reaching the appropriate conclusion for their clients. Would that life were that simple in the investment business!

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Once upon a time individual investors would receive certificates to denote their ownership of a share or a unit trust. Today, dematerialisation means that most investments are held on some form of administrative platform. Failure to adopt the current practice will almost certainly result in some form of a cost – in higher dealing charges, for example, or in longer settlement periods,.

Yet few of the platforms that serve the IFA market are able to cope with the inclusion of assets other than open-ended funds. This doesn’t just limit the range of choice for an adviser seeking to construct or change a portfolio – it also complicates the taking on of a new client with existing investments, perhaps in shares rather than funds. Add to this the perceived risks in taking investment decisions for those who might be less forgiving if errors occur, and is it any wonder that many IFAs are now turning to Discretionary Fund Managers for help?

No Turning Back

The problem with being an investment manager is that all your successes and your failures are spelt out in black and white at every valuation anniversary. It happens that, for more than a decade now, equity investors have had a tough time. I am hopeful that the tide may turn soon, although nobody can predict the future direction of markets. What I do know is that the range of options for investors – both in terms of investments and how they are handled – is vastly greater than when I started out. The future will be challenging – but exciting, too.

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37 24/01/2012 11:31

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

IT’S GOOD TO TALK FORUMS AND SEMINARS ARE HELPING SMALLER IFAs TO REFINE THEIR PREPARATION FOR THE BIG DAY. STEPHEN ANDREWS, HEAD OF STRATEGIC PARTNERSHIPS AT ABERDEEN ASSET MANAGEMENT, EXPLAINS

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24/01/2012 11:33

With under a year to go before RDR comes into force, figures from the FSA show that 61% of firms are currently working towards implementing a compliant charging structure, and that 26% are already operating a compatible model. While this is certainly encouraging, it does mean that one in ten firms hasn’t even begun yet to address the necessary changes. So if you haven’t started implementing changes, then you’re not alone.

Fortunately there are education and networking programmes which can help.

Aberdeen Asset Management and the Institute of Financial Planning (IFP) joined forces in late 2011 to launch a series of Adviser Intelligence seminars, which allowed an advisory panel to get together to address the main issues.

Uncertain Future There are a number of uncertainties which face firms over the coming year. According to Philip Ryley of Michelmores Solicitors, IFAs now need to focus on a huge number of decisions, no matter how large or small their firm is. These decisions will include the choice of categorisation between independent and restricted, or even opting for being categorised as non-advisory. Naturally, this is key to the FSA’s guidelines over suitability and requirements for client communication and therefore IFAs need to be clear about their categorisation. To enable this decision to be made, Ryley suggests focussing clearly on the proposed service offering which will of course depend on the client base with which you are working.

RDR SEMINARS

There’s a sizeable minority of the population who believe that this year will herald the violent destruction of mankind. [That’s what the Mayan calendar says, after all – it stops at 2012.] But, assuming that we do make it safely past Armageddon to reach 31 December, the world of IFAs is set to be radically overhauled as the Retail Distribution Review (RDR) comes into effect. Preparation now is the key to success - but there is a minefield of challenges to be navigated over the coming months.

Not only will the categorisation of IFAs be affected by RDR, but also the charging structure and payment methods for the services they offer.

Ryley underlines the importance of deciding on whether you will charge upfront fees, or an hourly rate, and stresses the need to communicate this clearly to clients. On top of this, he says, smaller firms may feel the impact of VAT to a greater degree than some of the larger IFA companies.

The Journey Starts With A Single Step Considering the huge impact that the overhaul of financial advisers’ retail offerings will have on IFAs, perhaps it isn’t so surprising that a small number of firms have yet to begin addressing the necessary changes. But size seems to be an issue. Nick Cann, the IFP’s CEO, says that many of the firms he has spoken to have been early adopters. That might be because many of the IFP’s members are smaller and are therefore more able to adopt some of the recommendations quickly.

As for the rest, Cann stands firmly by the maxim that “a journey of a thousand miles must begin with a single step”. That means that even the larger firms will need to use the remaining time wisely and kick start the changeover process by getting informed. The ubiquity of the changes means that it is now more important than ever for professionals to have a forum in which they have the opportunity to discuss the guidelines, how they are to be implemented, and also issues like new qualifications.

Talking to various IFA firms of different sizes has given us confidence in firms’ adaptability, but it has also highlighted the challenges.

AS THE LEGAL LANDSCAPE CHANGES IN FRONT OF OUR EYES, EDUCATIONAL AND NETWORKING OPPORTUNITIES WILL PROVE TO BE INVALUABLE RESOURCES FOR KEEPING ABREAST OF CHANGES www.IFAmagazine.com

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RDR SEMINARS

magazine... for today ’s discerning financial and investment professional Arthur Davies of Baigrie Davies has been working on overhauling his firm for the past four years, and last September he came to give a talk at one of our seminars.

In Davies’s eyes, ‘RDR Day’ will result in a massive overhaul for IFAs, of which categorisation and remuneration are only small aspects. According to research conducted by IFP, over 71% of advisers reckon that they will be independent after RDR. But how does the categorisation issue play out in practice?

When Lee Robertson of boutique independent wealth manager Investment Quorum presented to our seminars about the changes that his firm has been making, he concentrated on the categorisation

Nick Cann’s overwhelming message is,

“Next year will see huge changes, and IFAs must go out and make them happen” process. As he puts it, “clients don’t care how we are categorised – they simply like it that we provide the service that we do.” In a firm such as Investment Quorum, with relatively few clients, the service can be very personalised, with clients being seen at least once every year. So the size of firm and the type of client will influence the ways in which decision makers navigate the changes.

Paraplanners On the Rise Although we still have some months to go, the RDR package has already created noticeable changes in the system. For instance, the growth in prominence of paraplanners has been attributed to the imminent introduction of RDR. In his talks with IFP members, Cann has concluded that adding this extra consideration to the investment advice process has proved invaluable to both small and large businesses.

The introduction of a paraplanner means that advisers are free to spend more time with

clients. Sandwiched between the adviser and the administrator, the paraplanner is responsible for preparation and maintenance of client files, as well as preparation of recommendations and reviewing of client activity. Cann’s overwhelming message is that the next year will see huge changes, and that IFAs must go out and make these changes happen to benefit their own firms in order to maximise market competitiveness.

Keep Talking, Keep Learning So, as the legal landscape changes in front of our eyes, educational programmes and networking opportunities will prove to be invaluable resources for keeping abreast of changes.

By involving an advisory panel with experts from a wide range of fields, the Adviser Intelligence seminars are also able to offer insight into how relationships between different areas of the profession may change.

The advisory panel is guided by twelve senior industry professionals from diverse backgrounds including Marketing, Law and Intellectual Property. Taking his experience from his work as a solicitor, Philip Ryley knows well the perils of choosing an hourly rate as the means to charge clients. In his sensationallyentitled presentation “Fail to Prepare, Prepare to Fail” at our September seminar, Ryley discussed some of the requirements such as ensuring that clients get fair warning if you will need to go over the predicted number of hours.

With a little over ten months to go, there is time to swot up on what the changes will mean for your firm. If you’re still unsure of what to do, worry not; you are in good company but the time to act is now. The next events in the Adviser Intelligence series will be taking place in London, Birmingham, Manchester and Bristol at the end of March.

For more comment and related articles visit...

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24/01/2012 11:33

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

APPLICATION APPLICATION APPLICATION

Versatile new apps for financial advisers on the move are changing the marketplace.

Neil Crossley reports.

Like many technological buzzwords, it’s difficult to pinpoint the exact moment when ‘apps’ first entered our language.

As is often the case, the term just crept into common parlance, and before long it was being used by everyone from shopkeepers to schoolchildren. Why, even our Editor had heard of them…

Apps – short for applications – are small, downloadable pieces of software for mobile devices, such as smart phones and tablet devices.

They’re easy to acquire, easy to use, and extremely cheap – or, frequently, free. There are tens of thousands of people developing new ones right now on their kitchen tables.

Until recently, apps tended to be a lifestyle sort of thing, focusing primarily on entertainment, communications and personal productivity. In the last two years, however, the business sector has woken up to the potential of apps. And one area being particularly targeted these days is independent financial advice.

“It’s almost impossible to overstate the potential apps have

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IT Review.indd 42

got,” says Ian McKenna, director of the Finance and Technology Centre. “We’re seeing a real demand among advisers, particularly in the work we do through protection forums, where we bring together protection distributors and look at their business requirements, going forward.”

The Benefit Of Apps The obvious benefit of apps for an IFA is to increase his reach when he’s away from the office. As long as you can get a 3G mobile or wireless signal, apps can enable you to get full, client-specific real-time quotes – and full-blown comparative quotes too - for a range of financial products.

“Apps allow advisers to do more work on the go,” says Mark Wilson, director of sales and marketing for Assureweb, a technology partner for financial intermediaries. “And they’re more flexible in terms of mobile working.”

“They also connect very nicely to the B2B business processes that you’re already working with. Plus, I think, as an additional spin-off, it

says to their clients, guys, we’re up-todate with technology’.

You’ve got clients who are already using these things day in, day out in the majority of cases. So to see their financial adviser using the same technology has got to be a plus.”

‘Look

Which Platform?

When it comes to selecting apps, there are currently four families to choose from – Apple, Android, Blackberry or Windows Phone. But the one that dominates in the IFA sector is Apple. And that’s not so very surprising. According to figures released in 2011 by analyst firm IDC, nine out of ten tablet devices being used today are Apple iPads.

44.6 million of them were shipped in 2011, with an estimated 70.8 million due to be shipped in 2012.

Apple products are by far the most prevalent devices among IFAs, says McKenna. “If you look around the meetings at the top end of the financial advice market

www.IFAmagazine.com

24/01/2012 11:34

IT REVIEW

there’s no doubt you see an awful lot more iPhones and iPads than Android devices.”

Mark Wilson of Assureweb agrees. “We just looked at the headline numbers and we knew that iPhone was the dominant device in the marketplace,” he explains. “Our stats showed that, even with the challenge from Blackberry and Android, Apple was still 60% of the marketplace according to recent sales. So it was the obvious one for us.”

Apple Ergonomics Naturally, the traditional tool for financial advisers on the move has been the laptop. But according to Ian McKenna, many IFAs are uncomfortable using laptops, believing that a laptop is a “barrier” when dealing with a client. An iPad, by contrast he says, enhances the relationship with the client.

“It gives you the opportunity to really get the customer engaged with the process.

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IT REVIEW

magazine It’s easy to pass around so you can both be involved in filling out information.

You can literally call up the apps and say to the customer, ‘Look, you put the information in’. And there’s quite a lot of analysis that shows when customers put the numbers in themselves, they tend to trust those numbers.”

performance. Advisers have secure access to any data that they have stored online in the office, including emails, fund choices and documents such as passports. Although it’s most widely used on iPhones and iPads, this app can also be used on Android and Blackberry devices.

Best Of The Bunch?

Apple apps first started entering the IFA market in 2010. In September of that year, Aviva launched a pension app for the iPhone, iPad and iPod Touch, called Time To Act. It’s a free download, aimed at advisers and consumers, which enables users to input brief details and contribution levels, in order to assess individual pension funds and the prospective value of income on retirement.

“True Potential have what is widely regarded as the best app on the market right now,” says Ian McKenna. “They’ve actually been very creative in the way they use mobile devices. For example, if you’re meeting with a client and that client needs to show you evidence of his age, you can use the app to capture a photo, which is then transmitted securely back to the main True Potential system. So when the IFA goes back to the office, they have that image on their system.”

Time To Act features an interactive ‘extra money’ calculator, which highlights the importance of employer contributions to the employee’s eventual pension pot.

According to Daniel Harrison, senior partner with True Potential, the app enables advisers to view their business and client base across a range of different

App Launches

Growing Channel

“L&G have created a userfriendly quote tool that uses the unique features of an app.”

There’s no doubt that financial adviser apps are among the fastest-growing sectors of the entire market. Another recent launch, issued in September 2011, has been Legal & General’s dedicated protection app for the iPhone, which doesn’t just provide real-time protection quotes.

It also includes a tools section that enables the pre-selection of options to make the quote process tailored, simple and quick.

Another feature of the Legal & General app is the pre-population of emails with the quote results, so that advisers can email the details to themselves, their clients or their administration teams.

Alison Manning, head of product development for individual protection at Legal & General

And its ‘beam of light’ function can illustrate the level of income in retirement in a way that people readily understand.

2010 also saw the launch of the True Potential iPhone app, available to advisers who use the company’s back office system.

(Approximately one in five IFAs in the country are now members of True Potential.) The app provides access to real-time valuations of client portfolios and historic data

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devices. The response has been extremely positive, he says.

“The difference between other apps and the True Potential apps is that ours actually show what a client currently has, in terms of valuations/ performance, fact-finding, attitude to risk and so on. When interacted with, our apps actually do something with that information. For example, completing an ATR on the iPad then lets the adviser use this information to complete investment business.”

“ Legal & General have created an engaging and userfriendly quote tool using the unique features of an app rather than just adapting existing quote functionality”, according to Alison Manning, head of product development for individual protection at Legal & General. It’s important for the industry to use modern technology that can help make protection more accessible for advisers and their clients.”

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24/01/2012 11:34

The Way Ahead

Winter 2011 saw the launch of yet another major app for iPhone, when Assureweb unveiled what it describes as “the first comparison app for advisers”. In the first two days of the launch, the company reported, around 450 apps were downloaded through the iTunes store, with another 30 to 40 apps being downloaded every week since then. As Mark Wilson, the company’s head of marketing and sales, says, the app is all about empowering the adviser on the move.

All the signs are that tablet devices such as the iPad will become ever more popular, perhaps eventually eclipsing traditional desktop and laptop PCs. “Smartphones and tablet devices have become central to peoples’ lives,” says McKenna.

“They are lifestyle devices, and this is all about lifestyle management”.

“Let’s say you’ve got your IFA out on the road, and all of a sudden the question of protection comes up. All he has to do is get out the handheld device, and away he goes. All that information is passed back into his B2B account, and he can then do more formal analysis back at the office having given a real-time initial quotation to the customer upfront. The app includes term insurance and we have the ability to link in annuities and even investment bonds as well.”

True Potential

Distribution Technology

iPhone, iPad, Android and Blackberry

iPhone

iPhone, iPad and iPod Touch

The Dynamic Planner app has been dubbed the UK’s first investment risk profiling app for iPhone. It offers customers an intuitive way of educating their clients about investment risk and risk profiling.

The app also allows access to a psychometric questionnaire, which they say helps advisers to have more productive conversations with customers.

Aviva have done some good work in terms of the mobile enabling of transactions. This app allows users to input current contribution levels to assess how much extra money clients will receive from the taxman and their employer.

Clients may also assess the growth of their fund in relation to their appetite for risk and the value of their income upon retirement.

Roughly 1-in-5 IFAs are True Potential members, and this app enables them to have access to the company’s back office system.

Widely regarded as the most advanced app on the market, it provides advisers with access to any data they have stored in the office, such as emails, fund choices and documents such as passports.

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IT Review.indd 45

IT REVIEW

IFA Empowerment

Aviva

“Financial planning apps provide IFAs with ways to continue to engage consumers who might not otherwise have been able to afford their advice and services in the post RDR market,” says McKenna.

“Apps are ideal for supporting a high-tech, low-touch delivery, and we would absolutely expect many firms going forward to embrace exactly these sorts of solutions. In that way, they’ll be able to continue to deal with the people who simply can’t afford the cost of their services in a face-to-face environment.”

For more comment and related articles visit...

IFAmagazine.com

Legal & General iPhone

Key features of the app include real-time protection quotes and a tools section that enables pre-selection of options to make the quote process tailored, simple and quick. Another feature is the pre-population of emails with the quote results, so that advisers can email the details to themselves, their client or their administration team.

Assureweb iPhone

Launched in November 2011, this app allows advisers to compare real-time rates for term assurance products from all the key providers.

The app free of charge and is fully integrated with Assureweb’s free portal www. assureweb.co.uk.

Advisers or their administrators can login to the portal and access client data keyed onto their mobile devices, allowing them to work on the move.

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THE BEE LINE

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

THIS IS NO TIME TO SLOW DOWN THE GOVERNMENT IS STALLING ON AUTOENROLMENT DATES, SAYS STEVE BEE. AND IT’S AN ATROCIOUS PIECE OF TIMING 2012 is an important year for UK pensions.

Indeed, it’s likely to be a year to be ranked right up there with 1911, 1925 and 1942 when the history of UK pensions is finally written in future times by an as-yet unborn genius and social commentator - whoever he or she may eventually turn out to be.

Even without the benefit of hindsight, though - and without having spent a lifetime in the scholarly pursuit of a deep understanding of pension policy - it’s easy enough for Joe and Josephine Average today to spot that the pension reforms coming in from this year on are a big-ticket affair. We are about to witness the most fundamental change to our pension system for a generation and certainly since most of the Baby-Boomers have been on the planet.

Reforms that will sweep millions of Britons into accruing pension savings for the first time.

About time too, most would say, particularly given the news coming out of the Department of Work and Pensions that sent us off on our Christmas break with something other than wine to mull over.

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Steve Bee.indd 46

What something, you ask? Well, the fact that only 38% of working-age people in our country are saving into a pension, for starters. Not only that, but that figure is the lowest level for the last ten years too. I mean, is that depressing or what?

Looking at the numbers in detail makes even worse reading, if you can imagine such a thing. What they show is that pension coverage is in a steady decline and has been for some time. And, worse still, that the decline is most marked in the under-40s. If that hasn’t got OMG written all over it I don’t know what has.

It’s not just me getting worried about this though. Oh no!

Here’s what Steve Webb, the current

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24/01/2012 11:38

THE BEE LINE

grand fromage of UK pensions, had to say about it all in the aforementioned DWP press release: “These are alarming figures, and they underscore exactly why our pension reforms will be so vital. With fewer people saving into a pension, lower annuity rates and an average of 23 years in retirement, many people could face a poorer future in their later lives.

“We simply must put a stop to this trend and get people saving. Automatic enrolment, beginning for the largest employers later this year, will get millions of people saving - many for the first time.”

Well, I agree with every word of that. But I am worried, if I’m being honest, that the central message

that seems to be going out about pensions in the real world is that the Government has got its foot firmly on the brake of pension reform. Companies with fewer than 3,000 employees are being given extra time in which to auto-enrol their staff, and those with fewer than 50 are being shunted right back until an unspecified date after the next election.

I really cannot see why such fundamental and important reforms have had to be delayed and over a million employers have had to be given the baffling message that their staging dates are to be delayed. In my view we should be bringing the dates forward, not putting them back.

“Companies with fewer than 50 employees are being given an extra 12 months in which to auto-enrol their staff”

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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IT’S GOING TO BE MERDA

IN A TOUGH YEAR, NICK SUDBURY GOES IN SEARCH OF CONTINENTAL EUROPEAN VALUE. HOLD TIGHT, IT’S GOING TO BE BUMPY Big and Beautiful iShares EURO STOXX 50 ETF One of the most popular European equity benchmarks is the EURO STOXX 50, which consists of 50 of the biggest companies in the Euro zone. As you’d expect, there are many ETFs tracking this index.

As you’d also expect, the two main country weightings are France and Germany: the iShares ETF that we’re featuring here allocates them 35.4% and 30.8% of the portfolio respectively. And the attractive 4.72% distribution yield, paid quarterly, is impressiuve.

But despite these defensive characteristics EUE has not been immune to the Euro zone crisis.

The fund fell by 16% in local currency terms during 2011, which means it’s now down almost 40% since its launch in April 2000. One of the key risks going forwards is the 22.5% combined exposure to Spain and Italy,

which will continue to be a source of concern until their sovereign funding issues are finally resolved.

Another point we can’t overlook is that the largest sector exposure at 22.9% of the fund is in financials. Banco Santander, Allianz and Banco Bilbao all figure prominently in this index. And, depending on your viewpoint this is either a source of value or a risk too far! iShares EURO STOXX 50 is one of the FUND FACTS largest ETFs listed in London linked to this Name: iShares popular benchmark EURO STOXX 50 (EUE) and is highly liquid, Type: which makes it cheap ETF listed in London to trade. If you believe Sector: that the region’s blue European Equity chips and the euro are fully pricing in the Fund Size: €3.3bn potential downside Launch: 3 April 2000 risk, it offers one of the easiest ways of Distribution Yield: benefitting from the 4.72% eventual recovery TER: 0.35% in the region.

Manager: BlackRock Website: uk.ishares.com

The fund’s exposure to Spain and Italy, will continue to be a source of concern until sovereign funding issues are resolved www.IFAmagazine.com

Product Reviews.indd 49

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49 24/01/2012 18:32

PRODUCT REVIEWS

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

FUND FACTS Name: Global X FTSE Nordic 30 (GXF) Type and Exchange: ETF listed in the US Sector: European equity Fund Size: US $22.2m Launch Date: 17 August 2009 Distribution Yeild: 0% Manager: Global X Management Fee: 0.50% Website: globalxfunds.com

Nordic Grit Global X FTSE Nordic 30 ETF If your clients would rather steer clear of the Euro zone, one alternative would be to opt for the more financially secure Nordic region to the North. The share prices in these countries have certainly suffered, because of the importance of the EU as an export market, but the current selloff may well provide a good entry point to benefit from the recovery when it eventually kicks in.

Oddly, there are very few investments that provide this type of exposure - with one of the few examples being the Global X FTSE Nordic 30 ETF. This dollar denominated US-listed fund was launched in August 2009 and tracks the 30 largest and most liquid companies in Sweden, Denmark, Finland and Norway. All these countries have triple A credit ratings – for now, anyway! And this is a physical ETF, not a structured one. GXF buys a portfolio of the underlying securities.

Sweden is the main country in the fund with 47.8% of the weighting, followed by Denmark at 18.7%, Norway at 18.3% and Finland at 14.9%.

The largest sector is Financials at 27.5%, but

these companies are considerably safer than many of their continental European peers. The other key exposures are Industrials and Technology.

During the second half of 2011 the ETF lost just over 24% of its value in dollar terms so it would be wrong to view it as some sort of safe haven. The decline reflects the region’s dependency on exports to the EU and the fall in the value of its oil and gas deposits. If the situation in the Euro zone improves GXF should recover quite nicely and if it implodes it should at least avoid the worst of the crisis.

ODDLY, THERE ARE VERY FEW INVESTMENTS THAT PROVIDE THIS TYPE OF EXPOSURE

If your clients would rather steer clear of the Euro zone, one alternative would be tthe more financially secure Nordic region 50

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Product Reviews.indd 50

www.IFAmagazine.com

24/01/2012 18:32

Amundi ETF MSCI Eastern Europe ex Russia Specialist ETFs linked to lesser-known indices provide an opportunity for sophisticated clients to be surgically precise with their asset allocation. These products are inevitably more risky than their mainstream peers, but if you get your timing right they can produce some exceptional returns.

The Amundi MSCI Eastern Europe ex Russia ETF is a case in point. It provides exposure to a concentrated portfolio of around 30 stocks in the Central European countries of Poland, Hungary and the Czech Republic.

All three countries joined the EU in May 2004, with the aim of becoming part of the Euro zone at some point in the future.

Well, it was a good idea at the time.

When the ETF first launched in February 2009 it proved an immediate success, with a

gain of over 100% in the calendar year. But last year the Euro zone crisis cast a huge shadow over the portfolio, with the fund losing 22.2% of its value in local currency terms.

Almost 70% of the portfolio is invested in Poland, with 16% in the Czech Republic and 14% in Hungary, which is in dire financial straits at the moment. The largest sector exposure is Financials at 38%, followed by Utilities at 19% and Energy at 14%.

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These products are inevitably more risky, but if you get your timing right they can produce some exceptional returns

Product Reviews.indd 51

24/01/2012 18:32

PRODUCT REVIEWS

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

Pick and Mix Henderson European Special Situations When sentiment is as bad as it is at the moment, the markets tend to overreact, with the result that some companies can end up trading way below their fair value. These sorts of openings are often highly lucrative.

The trouble is, in order to benefit you need an actively managed fund and a manager with the ability and the freedom to respond accordingly.

One such fund is Henderson European Special Situations, started in October 2009, which is run by the well respected Richard Pease. The manager has the scope to invest in the European stocks he thinks offers the best potential - regardless of size. Pease’s portfolio currently comprises 58 companies, with the main country weightings being the Netherlands at 19.6%, Switzerland at 19.2% and Germany at 15.1%. That’s good, because none of these were marked down by

S&P in January. But the key sectors are Chemicals, Industrial Engineering and Support Services, which require a higher level of stock-picking ability.

Pease has comfortably demonstrated his ability to add value over the longer term by comfortably outperforming the average return from the sector right from the start. He believes economic growth in Europe will be sluggish, so he is currently focusing on companies with pricing power and global end markets. This could deliver significant upside if and when the politicians manage to create a more stable business environment.

FUND FACTS Name: Henderson European Special Situations Type: UK OEIC Sector: Europe ex UK Fund Size: £309m Launch Date: 1 October 2009 Portfolio yield: n/a Charges: IInitial: 5%, Annual: 1.5% Manager: Henderson Global Investors For more comment and related articles visit...

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Website: www.henderson.com

The key areas are Industrial Engineering, Support Services and Chemicals, which need a higher level of stock-picking ability 52

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24/01/2012 18:32

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.

Auctioning of Greenhouse Gas Emission Allowances

Proposed Regulatory Prudent Valuation Return

Policy Statement

Consultation Paper

Ref: PS 12/01

13th January 2012 52 pages This Policy Statement reports on the main issues arising from Consultation Paper CP 11/14 (Auctioning of greenhouse gas emission allowances) and publishes final rules.

Mortgage Market Review: Proposed Package of Reforms Consultation Paper

Consultation period ends on 14th February 2012.

Ref: CP 11/31

16th December 2011 585 pages A comprehensive set of plans to prevent a return of the risky mortgage lending seen in boom times.

At the core of the proposals are the following principles: • Mortgages and loans should only be advanced where there is a reasonable expectation of the customer’s ability to repay. Lenders should assess affordability; • This assessment should allow for the possibility of rising interest rates; • Except in special circumstances, interestonly mortgages should generally be assessed on a repayment basis.

• Income must be verified in every mortgage application; • Lenders do not have to consider in detail what borrowers spend but cannot ignore unavoidable bills, such as heating and council tax; • The FSA is also calling for feedback on developing a specific approach for entrepreneurs who borrow against their home to fund their business.

Consultation period ends on 30th March 2012.

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FSA Publications.indd 54

Ref: CP 11/30

14th December 2011 13 pages Of interest to UK banks and BIPRU 730k firms..

The consultation calls for greater harmonisation of firms’ accounting approaches to the fair valuation of assets, which vary substantially at present.

At present companies are required to present quarterly reports on differences in approach; the proposed new regime, however, will require a consistent format allowing greater comparability.

Distribution of Retail Investments - RDR Adviser Deposit Protection: Raising Consumer Awareness Consultation Paper 14th December 2011

Ref: CP 11/29

4 pages

At the beginning of 2011 two key changes were made to strengthen compensation arrangements for deposits protected by the FSCS. First, the compensation limit for deposits increased to £85,000, and secondly faster payout mechanisms were introduced.

The proposal envisages requiring deposit takers to prominently display stickers and posters in branches and on websites (in electronic form), explaining their compensation arrangements.

The aim of these proposals is to raise consumer awareness of deposit protection and its limits. In this Consultation Paper (CP) we are asking for feedback on these proposals..

Consultation period ends on 9th March 2012.

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24/01/2012 11:43

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

UK implementation of Amending Directive 2010/73/EU - Simplifying the EU Prospectus and Transparency Directives

Feedback: Review of the UK Regulated Covered Bonds Regulatory Framework and Final Sourcebook Instrument

Consultation Paper

9th December 2012 96 pages This Policy Statement reports on the main issues arising from the Consultation Paper on proposals for the Review of the UK’s regulatory framework for covered bonds and publishes final Sourcebook Instrument.

Ref: CP 11/28

13th December 2011 84page s Of interest to interest to issuers and their professional advisers and to investors. Also to clients.

On 31 December 2010, the Amending Directive 2010/73/EU came into force amending the Prospectus Directive (2003/71/ EC) and Transparency Directive (2004/109/ EC). The proposal envisages changes to the FSA’s Prospectus Rules, Listing Rules and Disclosure and Transparency Rules.

Consultation period ends on 13th March 2012.

Policy Statement

Thematic Overview: Regulated Covered Bond Regime Guidance Consultation

FSA Regulation of Credit Unions in Northern Ireland Policy Statement

Ref: PS 11/18

9th December 2011 162page s This Policy Statement reports on the main issues arising from Consultation Paper 11/17 (FSA Regulation of credit unions in Northern Ireland) and publishes near-final rules.

Authorised Professional Firms and Legal Services Reform: Feedback to CP11/13 and Final Rules Policy Statement

Ref: PS 11/17

9th December 2012 7 pages This Policy Statement reports on the main issues arising from Consultation Paper 11/13 (Authorised professional firms and legal services reform) and publishes final rules.

Financial Crime: A Guide for firms Policy Statement

Ref: PS 11/15

9th December 2012 168 pages This Policy Statement reports on the main issues arising from Consultation Paper 11/12 (Financial crime: a guide for firms) and publishes the final guide.

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FSA Publications.indd 55

Ref: PS 11/16

Ref: GC 11/31

16th December 2011 4 pages The key areas the guidance will cover are the scope and depth of engagement that the signatory of the annual confirmation of compliance (RCB 3 Annex 1D) has with the programme, the content of Management Information and the appropriateness of systems and controls.

Consultation period ended 27th January 2012

Non Executive Directors conference; Delivering Fair Treatment for Consumers of Financial Services Guidance Consultation

Ref: GC 11/30

9th December 2011 11 pages The guidance is to help NEDs understand better how to deliver against their regulatory responsibilities under the FSA Rules and Principles, from a retail conduct risk perspective, and what this looks like in practice.

It recommends NEDs should challenge whether: • Business proposals are aligned with the firm’s conduct risk strategy; • The firm’s culture is such that it delivers good behaviours and outcomes for customers; • They have the right information to enable them to make robust decisions; • Risks to customers have been identified and ppropriate actions are in place to mitigate and monitor such risks; • The Board supports the identification and escalation of issues when they go wrong and ensures appropriate resolution; • The business learns from identified issues and draws out the wider implications.

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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.

Swiss Account-holders can keep anonymity, but must pay tax The Tax Agreement between the UK and Switzerland in August 2011 is similar to the recent accord between Switzerland and Germany earlier that month and is likely to come into force in January 2013.

The Swiss Department of Finance said in a statement that the new agreement not only respects the protection of bank client’s privacy, but also ensures the implementation of legitimate tax claims. Under the pact, residents of the UK can retrospectively tax their existing banking relationships in Switzerland either by making a one-off tax payment or by disclosing their accounts.

George Osborne, Chancellor of the Exchequer, said: “Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-

“The days when it was easy to stash the profits of tax evasion in Switzerland are over.”

George gets tough

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Compliance Doctor.indd 56

abiding taxpayers are forced to pay even more.

The days when it was easy to stash the profits of tax evasion in Switzerland are over.”

The one-off levy will raise around £5bn for the Treasury in 2013. Future investment income and capital gains of UK bank clients in Switzerland will be subject to a final withholding tax, and the proceeds of this will be transferred to UK authorities by Switzerland.

Future investment income and capital gains should be directly covered by a final withholding tax that has been set at between 27% and 48%.

In order to prevent new, undeclared funds from being deposited in Switzerland, it has been agreed that UK authorities can submit requests for information.

Meanwhile, to retrospectively tax existing banking relationships in Switzerland, UK residents should be given one chance to make an anonymous lump-sum tax payment varying between 19% and 34% of the assets.

The Finance Department said Switzerland and the UK have decided to facilitate mutual market access for financial institutions. The Swiss Bankers Association, which continually stressed the need for privacy to be retained, welcomed the deal.

Impact: For advisers of clients that fall into the category for offshore deposits, Switzerland may not now be the best option until it is decided what action to take. Whilst potential loopholes exist, and critics complain about criminal exploitation, the HMRC, and other UK officials can request account details if it has just cause.

Existing depositors will have the option of account disclosure or a one off payment in retrospective tax to clear the past.

www.IFAmagazine.com

24/01/2012 11:43

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

MiFID II – Legislative Proposal On 20 October 2011, the European Commission published its longawaited legislative proposal to revise the Markets in Financial Instruments Directive (MiFID).

See: http://tinyurl.com/3jzc43k The proposal is divided into two parts, a Directive and a Regulation, both of which are expected to enter into force in 2013. Financial institutions and users of financial services will now need to prepare to negotiate a wider regulatory perimeter, which captures previously unregulated and more weakly regulated business areas. Greater transparency will apply to a broader scope of instruments. Firms should also be aware of the wider potential interventionist powers for EU and national regulators under contemplation.

Inducements Under MiFID, firms are currently prohibited from making or receiving payments or other non-monetary benefits in connection with any investment or ancillary services provided to professional clients or retail clients, unless those payments or benefits fall into a specified exception.

There is also a high-level duty for firms to act honestly, fairly and professionally in accordance with the best interests of their clients.

An exemption for third-party inducements is available where: n

Clear, prior disclosure of the inducement has been made to the client;

n

The inducement has been designed to enhance the quality of the service to the underlying client of the firm, and

n

The payment or benefit does not impair compliance with the firm’s duty to act in the client’s best interests.

It is proposed that, under MiFID II, accepting third- party inducements will be completely prohibited for portfolio managers and independent investment advisers. This reflects a concern that inducements are incompatible with the provision of the independent exercise of discretion and independent advice.

Investment advice There is a little confusion regarding the definitions of independent or restricted advice. In light of recent debates on the quality of investment advice, the draft Directive provides that a firm, when giving investment advice to clients, is to report personally to the client as to how the advice meets the personal objectives and characteristics of the client. The firm should clearly state whether the advice is given on an independent basis and whether it is based on a broad or on a more restricted analysis of the market.

Impact: Inducements will be prohibited from third parties (on the basis that third party inducements are incompatible with the independent nature of the advice provided). See COBS 2.3.

MiFID exemption is an option for IFAs, and it must be carefully considered whether this route would be appropriate for the business model and for future developments. You should check whether you meet the conditions of the article 3 MiFID exemption (including having a requirement on your permission which prevents you from holding client money for the purposes of MiFID business).

You may wish to check this by reviewing your firm’s details on the FSA Register.

If you are out of scope but wish to fall within scope in order to benefit from the right to passport investment business on a branch basis, you need to notify the FSA by submitting both a VOP and a passport application.

Investment Advice Procedures need to be reviewed and revised to ensure that the suitability letters include the correct terminology.

Part 2 will continue next month 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.

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

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24/01/2012 18:38

THINKERS

OMAHA’S FINEST YES, YOU KNOW A LOT ABOUT THIS INVESTMENT GIANT. YOU WANNA BET?

“I don’t look to jump over 7-foot bars. I look around for 1-foot bars that I can step over.”

Warren Buffett Born 1930 in Omaha, Nebraska, and hasn’t left yet.

An entrepreneur from the word go The son of a Nebraska congressman, Buffett spent his school years building businesses that extended from selling Coca-Cola to running a small pinball machine empire. And he didn’t miss many opportunities. His first tax assessment, at the age of 14, included a $35 deduction for the use of his bicycle and wrist watch on his paper round. He bought his first shares at the age of ten, and a farm property in his teens, and by 19 he had made a modest fortune.

Ben Graham’s prodigy After a first degree at Wharton, Buffett headed for Columbia Business School, where the father of value investing, Benjamin Graham, was teaching, and by 24 he had finally persuaded Graham to give him a job. He still claims to be 85% Ben Graham today – but he has become noticeably wealthier than his mentor. He was a millionaire at 32, although not a billionaire until 60 when his Berkshire Hathaway empire went public.

Graham’s value theory, briefly, is that fundamental analysis won’t make you rich.

Instead, you accept that markets are illogical and you watch out for the occasional bargains that turn up for no good reason. The talent lies in spotting those bargains in the first place.

Some you win, some you lose Buffett felt that Graham’s price-related criteria were too strict, and that qualitative issues should merit consideration too. But, like Graham, Buffett has always preferred large blue-chip company stocks to smaller ones. And the better the dividend yields, the better. His biggest coup was a 1988 investment in a struggling Coca-Cola, for an adjusted equivalent of $3. It’s currently around $67. And Buffett made a cool $2 billion in 2002 for Berkshire Hathaway by trading $11 billion worth of forward contracts to supply dollars. It takes

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Thinkers.indd 59

nerve and judgement to make that sort of call.

Not all of Buffett’s ventures became moneyspinners. His early ventures into mining got him into trouble, and he completely missed out on the 1990s technology boom because he always refused to buy companies that ‘do things he doesn’t understand’. He now seems to have changed tack with last November’s $11 billion (5%) stake in IBM. Keep it simple, stupid Buffett’s great appeal has always been his aforementioned preference for simple, large companies that don’t pose difficult questions. But his affable public persona is undoubtedly one of his key assets – his vast annual shareholders’ meetings in Omaha have been entertained just as much by his jokes and by his colourful dismissal of investment fashions. (EBITDA is for people who believe in the tooth fairy, apparently.) And he and his associate Charlie Munger have a colourful line in forthright public speaking which has annoyed the corporate bullshit merchants no end.

Philanthropy Buffett is no longer the world’s richest man – Microsoft’s Bill Gates and Mexico’s Carlos Helu have overtaken him recently. But he has committed to giving away 99% of his vast $50 billion fortune to charitable causes. His 2006 transfer of 10 million Berkshire Hathaway shares (then worth $31 billion) to the Bill and Melinda Gates Foundation was by far the biggest donation in history.

Wannabes start here Like his contemporary George Soros (with whom he shares very few sentiments, incidentally), Buffett’s every move is scrutinised in detail by an army of analysts keen to ride on the great man’s coat tails. The fact that few of them have ever succeeded does not mean that he’s wrong – simply that his timing is better.

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

WEALTH MANAGEMENT ADVISERS

PREMIER INDEPENDENT FINANCIAL ADVISER

Our client needs a number of experienced Wealth Advisers to offer a comprehensive service to a portfolio of HNW clients in the South East of England.

The job role forms part of the wider Wealth Management Sales Team therefore working in close partnership with the introducers and peers in this team will be part of any successful applicants’ day-to-day activity.

Our Client a leading Bancassurer need a number of Premier Independent Financial Advisor’s to provide professional independent financial planning services to both new and existing high value customers. This means identifying and meeting customer needs with particular emphasis on protection, pension, investment and insurance products available through the bank’s UK branch network, whilst consistently treating customers fairly. The role requires the candidates to be qualified to a minimum of Diploma level.

London, Essex, Home Counties & South East £45,000 plus excellent bonus and benefits O.T.E c£75,000

You will be responsible for achieving targets in meeting the demands of the business by converting introductions into new business, conduct interviews with new and existing clients to review and meet their immediate and on-going financial needs; actively selling and/or introducing appropriate products and services and referring to other product specialists where required.

Optimising appointments with customers to identify needs and opportunities and provide solutions in order to achieve personal and team sales targets. Ref: 2076

FEE BASED FINANCIAL PLANNING DIRECTOR

TRAINEE EMPLOYEE BENEFITS ADVISER

Our Client a well respected firm of Chartered Accountants and Business advisers based in the South East. They now require an experienced Chartered Financial Planning Director for its specialist Wealth Management division.

Our Client is an independent firm of actuaries and consultants who offer a full range of services to trustees, employers, insurance companies and individuals. They are now looking to recruit a trainee adviser for their Liverpool office. The ideal candidate will be responsible for supporting employee benefit consultants advising clients and will require excellent written and oral communication skills to be effective in this role.

Successful applicants will be required to give advice on all aspects of financial planning from pensions, Investments and annuities to inheritance tax planning and trusts to a portfolio of clients Qualified to Chartered status you will be given your own portfolio of clients ranging from private individuals to Charities and trusts and professional connections

Merseyside c£30,000 plus benefits

Some previous pensions experience is essential and attention to detail, coupled with the ability to work well in a team environment.

The successful applicant will have experience of working within a Fee based environment on a time/cost basis with HNW Clients. In return you will receive a competitive remuneration package and a defined career path. Ref: 1999

In return on offer a competitive remuneration and study package. Study towards professional qualifications (Diploma in Financial Planning) is an essential requirement and is necessary to progress to the role of an experienced Adviser. Ref: 2079

EMPLOYEE BENEFITS CONSULTANT

WEALTH MANAGER

Our client is a successful and respected firm of Chartered Accountants and Business Advisors, with over 25 offices across the UK and worldwide. They are looking to expand their UK Employee Benefits Consultancy service with the appointment of an experienced Employee Benefits / Corporate Pensions Consultant to their offices in the London office. Primarily based in London, working alongside the existing teams you will be responsible for developing the business throughout other regions, you will be servicing clients of the organisation as well as developing new business with large corporate clients.

Our Client a well respected firm of Asset Managers with a National network of Offices who manage in excess of £10 billion of funds on behalf of Clients

London & South £70,000 basic plus benefits

You must be Diploma Level 4 qualified, with specialist pension’s qualifications, and be experienced of developing and managing group pension schemes with c200 – 2000+ employees. Typically you should be generating a minimum of £250,000 in Fee revenue per annum. Ref: 1396

WEALTH MANAGERS

London, South Coast, Norwich, Leeds £75,000 plus benefits Our Client a National firm of Wealth Managers and Investment Advisers who give Fee based Independent financial advice to private clients need a number of exceptional individuals to service and further develop their Client proposition, based out of one of their UK offices.

Ideally, you will be an experienced diploma qualified IFA already with a minimum of five years financial planning experience, covering all areas of Pensions & Investments and be familiar with operating a Wrap service. The successful applicant will be given on-going support and development to ensure they are giving their Clients the best advice.

Birmingham £40,000 plus bonus and benefits They now require an experienced Financial Planner for its specialist Wealth Management division.

Successful applicants will be required to service a Wealthy portfolio of clients ranging from private individuals to Charities and trusts and professional connections You will be responsible for working with a sophisticated customer base, providing specialist advice on relevant financial products and services including full financial planning reviews and portfolio management.

The successful applicant will have first hand knowledge of working within a Fee based environment on a time/cost basis with HNW Clients. In return you will receive a competitive remuneration package and a defined career path. Ref: 2077

FINANCIAL PLANNING MANAGER Reading £50,000 basic plus benefits

Our client is a successful and respected firm of Chartered Accountants and Business Advisors, with over 25 offices across the UK and worldwide. They are looking to expand their UK Wealth Management service with the appointment of an experienced Financial Planning Manager to their offices in Reading. You will be office based; working alongside the existing teams responsible for developing the business throughout each specialist area and you will be servicing clients of the organisation as well as developing new business with clients.

In return the successful applicants will be given an excellent opportunity to develop their career within this organization Ref: 1885

You must be a minimum Diploma Level 4 qualified, with specialist pension’s qualifications, and be experienced of developing Time Cost; Fee based business with High Net Worth Clients. Typically you should be generating a minimum of £250,000 in Fee revenue per annum. Ref: 2078

EMPLOYEE BENEFITS CONSULTANT

COMPLIANCE OFFICER

Our client is a successful and respected firm of Chartered Accountants and Business Advisors, with over 25 offices across the UK and worldwide. They are looking to expand their UK Employee Benefits Consultancy service with the appointment of an experienced Employee Benefits / Corporate Pensions Consultant to their offices in their Manchester/Leeds office. Primarily based in the North West, working alongside the existing teams you will be responsible for developing the business throughout the North East regions, you will be servicing clients of the organisation as well as developing new business with large corporate clients.

Our client who provide a truly independent range of financial services from investment and portfolio management, through to trust and estate planning are urgently seeking a compliance officer, to carry out compliance reviews in accordance with the risk based business quality monitoring programme.

North West/North East £50,000 basic plus benefits

Manchester c£30,000

Assess the quality of advice and adherence to business standards and regulatory FSA requirements and identify material risks to clients and the company Occasional file review required to determine whether the suitability of advice against business standards and regulatory requirements and identify material risks.

You must be Diploma Level 4 qualified, with specialist pension’s qualifications, and be experienced of developing and managing group pension schemes with c200 – 2000+ employees. Typically you should be generating a minimum of £250,000 in Fee revenue per annum. Ref: 2020

To provide effective feedback and direction of the remedial action required to manage or mitigate the material risks identified.

CASE OFFICERS

EMPLOYEE BENEFITS ADMINISTRATOR

Our Client a well respected Financial Services group, require experienced individuals to research and resolve customer complaints within agreed compensation limits and negotiate solutions to the satisfaction of all parties concerned ensuring requirements of external regulators and internal standards are met.

A London based IFA is looking for a corporate administrator to work within the Employee Benefits administration Support Team, responding to customer enquiries and carrying out administration tasks in support of the sales process.

Investigate customer records produced by the sales forces to ensure that the advice given is in line with standards laid down by the Group and Regulator.

Identification of possible new business leads from the existing client bank and liaison with the client and/or Employee Benefit adviser to maximise the opportunity.

Bristol & Huddersfield c£32,000 plus benefits

Examine standards of remedial action undertaken as a result of reviews, when appropriate, to ensure that customers have not been disadvantaged or the Group put at risk.

To effectively identity, control and escalate any perceived risks which may impact customers or the group Produce effective communications to internal and external customers in a clear and concise format, ensuring that any corrective action undertaken is appropriate.

Ref: 2023

For further vacancies please visit: www.shortlistme.co.uk

Februar y 2012

Thinkers.indd 60

You will be responsible for working with a sophisticated customer base, providing specialist advice on relevant financial products and services including full financial planning reviews and portfolio management.

Successful applicants will be fully diploma qualified. Ref: 2016

South Coast £70,000 plus bonus and benefits

60

Manchester, Bristol & London c£45-£50,000 plus bonus and benefits

Minimum 2 years experience of working in a regulated financial services environment CF1-4 or equivalent Ref: 2053

London c£32,000 plus benefits

Processing of group life & group pensions schemes, including checks to ensure that documentation is correct.

Obtaining new business illustrations and policy valuations for advisers where required.

Typing of letters and reports, where required.

Ensure all administration is completed in an effective manner to meet the firm’s record keeping and file quality requirements. CF1-4 or equivalent Knowledge of 1st Software Exchange is preferred Ref: 1397

and

ASPECT COURT, 47 PARK SQUARE EAST, LEEDS, LS1 2NL T: 0844 248 5292 E: info@shortlistme.co.uk

www.IFAmagazine.com

24/01/2012 18:38

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

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61 24/01/2012 18:38

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

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 UK’s leading IFA networks.

With UK wide coverage and a brand name that’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 don’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

0800 689 9689 NATIONWIDE

BUSINESS DEVELOPMENT ASSOCIATES Nationwide - £Negotiable CEI Compliance have been expanding recently and now need an entrepreneurial Business Development Associate to sell consultancy services to financial institutions.

May suit a part time position, return to work or other business type but must be able to generate own leads, understand the compliance offering and have a broad regulatory knowledge across many disciplines from investment banking to IFA and retail banking to M&A. Please contact Lee Werrell on lw@ceicompliance.co.uk

Ref: vac-36272

COMPLIANCE ASSOCIATES Nationwide - £Negotiable CEI Compliance are a nationwide consultancy that uses the associate model to deliver a fast, flexible, professional and efficient service to all manner of financial services firms from one man bands to multi-national institutions.

We use specialist for specialist work such as G60 or T&C needs, but a lot of our work is involved around compliance aspects such as S166 Skilled Person's reports, operational risk and systems and controls work.

You have the people skills, you have the regulatory knowledge, to leverage both of these on a change of career, why not consider working as a freelance consultant in the financial services industry focusing on all sectors such as banking, investment etc..

These are exciting times and everything is changing on the regulatory front....CEI is on the leading edge of the changes; why not join us?

Contact Lee Werrell at lw@ceicompliance.co.uk with your CV in the first instance.

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Ref: ceiass001

www.IFAmagazine.com

Private Client IFA £60-80,000 + Bonus + Benefits

Professional Practice IFA Ref: 09393

International insurance brokerage with a large UK presence has recently set up a wealth management offering to advise personal and corporate clients.

They now require a senior individual to work in the City office and develop referrals internally and advise wealthy individuals of SMEs/FTSE firms that they have relationships with. You must have experience of business development and a proven record of producing both high quality and high levels of fee business.

Ref: 2000

An exceptional opportunity now exists within this medium sized Accountancy practice for a senior individual to work closely with the partners of the practice. You will ensure that a level of trust is maintained in order to refer business to you and provide high quality advice to the wealthy clients that are referred. You must have a strong sales record and ideally have experience of working with professional introducers. London based.

Wealth IFA

Wealth Manager To £60-80,000 + Bonus + Benefits

£80-100,000 + Bonus + Benefits

c.£60-85,000 + Bonus + Benefits Ref: 3244

Ref: 210104

Our client is one of the UK’s leading Investment Management firms with c£10bn under management combined with a fantastic offering in the wealth management arena . As part of a continued expansion plan they now require a senior wealth manager in London to work with the IMs and advise wealthy individuals on all areas on a fee basis. You must have experience of working with professional introducers and a record of success in a similar arena.

This small National IFA has an excellent opportunity for 3 IFA’s to join their existing team of specialist consultants in London, Herts and Surrey. The firm offers holistic and niche financial planning advice to HNWIs and you will advise a captive client base currently being dealt with by specialist divisions but seeking wider generalist financial planning advice.

You should be of graduate calibre and above average technical ability. This is an exceptional springboard opportunity with no need to bring any client bank.

Associate Director, Private Clients

Executive Consultant

£70-90,000 + Bonus + Benefits

To £75,000 + Bonus + Benefits

Ref: 1303

An excellent opportunity now exists for an accomplished Private Client IFA to work within this wealth management boutique and inherit a substantial client base comprising HNW/UHNW Private Clients. You should be a Chartered Financial Planner (or progression towards) and be able to offer a background of providing fee advice to a wealthy client audience. Since you are servicing an existing portfolio you are not required to transfer any clients or funds to this role.

Ref: 5323

Private Bank with a hugely successful fee based financial services operation now requires an experienced consultant to work with retained clients and advise on all areas of employee counselling.

Ideally, you should be currently carrying out a similar role at present and be familiar with pre/post retirement/redundancy counselling, mid-career financial planning and director/senior management advice. Experience of fee based work would be a distinct advantage. London based.

For further information please contact Simon Charlton, Matthew Tatnell or Gareth Blades 60 Lombard Street, London EC3V 9EA 0207 464 8429 fs@rolanddowell.com

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www.rolanddowell.com

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63 24/01/2012 18:38

Institute of Financial Planning THE PROFESSIONAL BODY FOR FINANCIAL PLANNERS AND PARAPLANNERS Post RDR, it will become even more important for advisers in the UK to align themselves with a relevant professional body or accredited body. Membership of the IFP offers you support and guidance whether you are a Financial Planner or Paraplanner. With a huge range of benefits, why not have a look at some of the ways in which we can help you?

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

To find out more or join visit www.financialplanning.org.uk or contact us on 0117 9452470

IFA Calendar.indd 64

24/01/2012 18:43

I FA C A L E N D A R

e n zi

Dates for your diary a m a g

FEB - JUN 2012

FEBRUARY 3

6

14

15

Consultation period ends for Guidance Consultation 11/30 (Non Executive Directors Conference; Delivering Fair Treatment for Consumers of Financial Services) Consultation period ends for Chapter 2 of Consultation Paper 11/21 (Regulatory fees and levies: Policy Proposals for 2012/13) Consultation period ends for Consultation Paper 11/30 (Proposed Regulatory Prudent Valuation Return) Consultation period ends for Consultation Paper 11/23 (Solvency II and Linked LongTerm Insurance Business) and CP 11/22 (Transposition of Solvency II - Part 1)

MARCH -

RDR Final Rules due for publication

7

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

7

Berlin International Economics Conference

9

Consultation period ends for Consultation Paper 11/29 (Distribution of Retail Investments - RDR Adviser Deposit Protection: Raising Consumer Awareness) European Winter Finance Summit

1114 (EWFS) 2012, Davos, Switzerland 13

Consultation period ends for Consultation Paper 11/28 (UK Implementation of Amending Directive 2010/73/EU - Simplifying the EU Prospectus and Transparency Directives)

www.IFAmagazine.com

IFA Calendar.indd 65

APRIL

Tax year 2012/2013 begins

6

Summit of the Americas,

1415 Cartagena 22

International Congress on Energy and Politics, Antalya, Turkey

26

European Business Summit, Brussels

MAY -

Final Report on Regulatory Fees and Levies (2012/13) to be published.

European Pensions & Investments

1416 Summit 2012, Noordwijk aan Zee, Netherlands

JUNE

Emerging Markets Investment

1920 Summit, Prague

20-22 Earth Summit 2012

2022 (UN Conference on Sustainable

Development), Rio de Janeiro, Brazil London 2012 Festival opens, London

21 9 21 June - 9th September

Royal Henley Regatta

27 1 27 June - 1st July

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.

Februar y 2012

65 24/01/2012 18:43

T H E OT H E R S I D E. . .

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

AN OLD FASHIONED COVER DRIVE RICHARD HARVEY TAKES A SPIRITED SIDEWAYS LOOK AT AN IFA CLIENT’S POSITION Can I Have Your Autograph?

The first pension policy I ever bought was from a guy whose qualifications for selling financial products were about as robust as Graham Norton’s expertise in heavy engineering. But he did play for the England cricket team.

In the financially freebooting days of the ‘60s, the ability to score a ton off the Aussies or bang in a few goals for a top soccer side were the most desirable attributes for a broker. Glamour sold more policies than suburban sobriety, any day.

Well, it sold to me. Enthusiastically encouraged by my dad, who ran a pub frequented by professional sportsmen, many of whom became sales reps for pension providers, booze companies and, for all I know, snake oil manufacturers, I bought a policy.

Like most 18-year-olds I was rather more exercised about my chances of carnal engagement and lager consumption (things don’t change, do they?) than documents postulating what my income might be when I finally got to retirement age.

And, boy, did those documents postulate! As I recall, there was a dazzling array of projections, showing how my fiver a month would grow at a rate of 15%, 20%, even 25% a year, leading me to a promised land of riches when I finally pulled on my slippers and cardie. But I never did discover

66

Februar y 2012

The Other Side.indd 66

what that policy would finally yield, because I cashed it in two years later in pursuit of far more worthwhile goals. (Ladies and lager).

These days, alas, gloom and regulatory rigour combine against such reckless optimism.

“You’ll be lucky to get more than 5% on your investments this year” is the refrain.

Wonder if I can buy a savings plan off Freddie Flintoff?

A Glass Half Full

For a card-carrying optimist like me, it’s been challenging in recent months to smile bravely in the face of the financial gloom constantly peddled by the media.

We’ve endured an unremitting news agenda of a faltering economy, rotten savings returns and the apparently terminal decline of the euro. It’s all enough to make you reach for the gun and the whisky bottle.

And yet the stock market has defied all those ‘meltdown’ headlines. UK car production is up 8.6%; retail sales proved surprisingly buoyant despite gloomy pre-Christmas forecasts; and while the public sector has shed 276,000 jobs in the past year, the private sector has created 262,000.

So while it’s not yet time yet to crack open the champagne, maybe we can at least permit ourselves a small glass of something appropriately refreshing?

www.IFAmagazine.com

24/01/2012 18:48

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 Sarticles nice to see it in “magazine” style forma A N D SINN TS usual rather ANthan newspaper. A comprehensive ERS 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 THE ERS V I C KKabou to the office - not something I could say ING BAN PORT E magazine manyThe financial publications! Great - look Rforward to subsequent editions. Brilliant! Very impressive the top IFAs CAL T and all interesting publication.

Looked and felt like E T H IE S T M E N INV a proper magazine rather than other cheape are talking about... 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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