Archive | August, 2012

Retirement Planning Needs To Be Taught In Schools

30 Aug
Retirement planning needs to be taught in secondary schools and given the same priority as careers advice, according to de Vere Group’s chief executive Nigel Green, who says this is the only sustainable way to solve the pensions crisis. 
His comments follow a study by Barings Asset Management that found 44% of those close to retirement age were unable to say when they would be able to retire. 
Get the Most from Retirement Planning
It’s terrifying to think a large proportion of the population who are nearing retirement age do not know when they will be able to afford to retire. As a nation, it seems we’re ill-informed. In order to ensure people are, in the future, more likely to be able to retire when they choose (and not have to work on past their selected retirement age because they can’t afford to give up work), it’s of vital importance we teach from a young age – how to plan finances.
 
The earlier people start to make informed decisions, the easier it is to enjoy the lifestyle you deserve when you retire. Many are disillusioned with retirement planning and especially pensions but the truth is more likely – people are dissatisfied with the investment returns generated – this is where professional financial advice is paramount (but make sure the person giving the advice has the ability and enthusiasm to provide suitable advice both now and in the future).
M341
In a poll back in April, more than 80% of users said their pension pot had failed to grow in-line with promises and projections made when they first began contributing (information provided by Barings Asset Management). Unless students are informed about the massive risks of ignoring retirement planning, many could find themselves worse off in later life.
Annuity Rates are at historic lows, age-related benefits is being scrapped, soaring living costs and taxes, and people living longer – meaning money has to go further – it’s clear that the world has changed irrevocably in the last few years; things are not the same today as they were a generation ago. Should we fail to plan for retirement, an increasing number could find themselves unable to enjoy the retirement that previous generations have taken for granted.
In secondary schools, students are taught about finding a suitable career, which is right and proper, but it is madness that we stop without equipping them with the life skills of how they are more likely to be financially independent once they are ready to leave the world of work. 
Personally, I am a great believer in both pensions and alternative investment vehicles, such as ISAs, certain structured products/deposits, simple fixed term deposits and collective investments. I have been and will carry on saving through these investments and as an IFA (Independent Financial Adviser) specialising in investments and tax planning – I know that if I do not provide for my future – no one else will. I plan that we will have the retirement we deserve and yes, I expect and have planned to financially assist our daughters through their path to adulthood.

US Economy Expands

30 Aug
The US economy grew more than first estimated in the second quarter, according to official figures.
US economic growth revised up to 1.7pc
In a world of negative sentiment, there are signs of improving prosperity – admittedly slow but positive. We await for Ben Bernanke’s statement on Friday but I, and many investment strategists and analysts before me have said, we are expecting the news to be no earth shattering news….this seems to be one of the recent driving force seeing marginal losses in global stock markets but there are also many other factors.

Mr Bernanke has used the event, a conference of the world’s central bankers, to indicate the Fed’s intentions. So far, the Fed has kept base interest rates near zero for almost the last four years and injected $2.3 trillion into the US economy.

The US Congress’s budget office last week warned that spending cuts and tax rises could trigger a sharp economic slowdown in 2013. In its report, it expected the US recovery “to continue at a modest pace” for the rest of 2012 but warned that “substantial changes to tax and spending policies” would cause the US to tip back into recession next year.

The 1.7% annualised pace in ahead of previous estimates of 1.5%, unemployment is still above 8% and the economy is shaping up to be one of the biggest issues of this year’s US presidential election, which sees President Barack Obama take on Republican rival Mitt Romney.

 

Market Outlook On 29 August 2012

29 Aug

I think it is clear that volatility will be part of the investment landscape and despite a strong bounce on Friday, it wasn’t enough to pull the market back into the black for the week. This is the first losing week for stocks in the last seven weeks.  

2012 Gold Q2 Market Trends and Outlook4

 

Economic Calendar

Last week saw only a few economic numbers released, but the ones we got painted a big piece of the real estate picture in the US – but the information was conflicting. 

The Good News – existing home sales increased, new home sales increased and homebuilders’ earnings expected to increase for that two-year timeframe. Also, Aircraft sales rose and auto sales were higher.

The Bad News  – MBA Mortgage Index fell and the FHFA Housing Price Index was only up 0.7% for June. (It is up but it remains a very slow improvement trend.) Also, durable orders fell marginally.

As for the coming week, it’s a pretty big one with :-

  • Consumer Confidence figures for July
  • Michigan Sentiment Index score for July
  • Personal income and personal spending figures for July

Stock Market

First and foremost, the longer-term trend is still bullish.  Even if the market does indeed end up going through a near-term correction, we’ve yet to hit a major top.  Specifically, the upper 52-week Bollinger band has yet to be tested.  Since 2009, and really for the last several years, the one-year upper band line has marked the point where the bigger trend usually starts to stall and even then it doesn’t always kick-start a major market pullback.

That said, whether or not the longer-term trend is still in place won’t change some of the red flags we’re seeing.  For instance, the CBOE Volatlity Index (VIX) (VXX) remains uncomfortably low – at levels frequently seen at near-term tops.  And once again, volume remains at eerily low levels, and was even weaker on the way up over the past seven weeks. 

So what’s next?  That’s the problem – what’s next?  It remains unclear whether or not the new-market level is going to become a floor or a ceiling for the foreseeable future.

My opinion has not changed – a little bearish in the short run, but still bullish in the long run.  I still expect the markets to be volatile, with a market pullback followed by a market rally.  My clients are positioned ready for this downward correction and upward rally. The question is, when will it happen?  

Next week is apt to be quite unremarkable, with late-summer, back-to-school, last-minute-vacations, and other distractions in the lineup.  That will lead us into the first full week of September, which kick-starts what’s usually a tough first half for the month for stocks.  The weakness in early and mid September leads into potentially the best period of the year (Quarter 4), but it’s still not going to be an easy ride.

I expect t would be something of a miracle if stocks didn’t take at least a small hit soon. Although, that dip doesn’t have to be fatal. The dip just has to be big enough to humble the markets a bit.  Moreover, the dip could and I expect would be a huge buying opportunity for a bullish finish to the year.

Is QE3 Imminent?

28 Aug
So this year has seen the typical post Recession 2008 cycle – a climb, dip and then a climb so far – with last week seeing the first decline since the rally started beginning of June.
With all the issues coming to a head (maybe) in September – what is next for the markets?
If the Fed decides next week not to implement another round of QE it could turn the tables on investors, with emerging markets in the doldrums and UK, European and US equities once again leading the charge.
While some believe the minutes from the latest Federal Reserve policy meeting imply that a large-scale asset-purchasing programme could be on the horizon, the markets are still in the dark about the likelihood of such an event. I personally doubt a QE3 asset purchasing programme is on the cusp of the horizon – but then who ever said governments, treasury functions, etc. had to act rationally?
If the Federal Reserve rejects the ‘printing money’ option and the dollar stabilises, it will create an environment that is not conducive to things like emerging markets and commodities, but it could be hugely bullish for everything else that hasn’t worked well in the last few years. It is plausible that, if these assumptions are correct, European and Japanese equities could stand to benefit. 

Looking at relative valuations, they are trading at extremely low prices relative to US equities in historical terms. You could argue the same thing about European equities which are trading back to where they were in March 2009 and US equities are expensive in relative terms. 

Government bonds are also out because they are so expensive (some with actual negative yields), and emerging markets – controversially given their heavily tipped status in recent years – could be out in the cold with them. 

In the UK, I believe some of the cyclical companies such as house builders and unloved sectors such as media stand to benefit the most from this new environment, as they are priced at huge discounts to the market. Whereas, defensive investments, which last year did their job, and are now at a record premium.

So I am in the process of planning to reposition my clients portfolios for a change. I believe there is a risk currently of reversion here, with some of the areas people really love reverting and de-rating to the downside.
The major issue seen – is QE3 and if Ben Bernanke sanctions an asset buying/money expansion programme – I personally do not think this is necessary, desirable or suitable timing and could well be counterproductive. 
Does this mean it won’t happen? Who knows!!!

Lord Howard Flight criticises Westminster’s acceptance of RDR Commission Ban

22 Aug

So a little background information – from January 2013, a new regime comes into being where commissions are being banned on retail investment contracts. We will live in a fee charging world. The benefit of this is the charge for the service is clear and transparent – the concern Lord Flight raises is around advice and affordability.

He voices the opinion questioning – are commissions actually bad? Clearly whatever source of remuneration, full disclosure is needed and as such is this ban appropriate. It seems that the concept of a commission ban has been declined in most countries – rather maybe the issue is in the explanation and presentation?

Personally, I understand the worries raised on both sides – the point being I have seen equally severe misappropriation of remuneration through both fees and commissions. The problem does not lie with the remuneration but rather the person taking payment. This is the world in which I give advice but I am a great believer of agreeing a remuneration structure, agree the service to be provided and duration for the remuneration and provide it as agreed – not rocket science.

I think the failure is more around people not being aware of the remuneration and the service provided is not proportionate to the remuneration received.

Lord Flight

A Conservative Peer, Lord Flight, has criticised fellow politicians for failing to question the Retail Distribution Review (RDR) commission ban and warned of the unintended consequences.

Howard Flight Conservatives

Lord Flight wrote to the Financial Times predicting the RDR reforms will lead to only the rich being able to afford advice. – a former chairman of Investec Asset Management, explained his strong feelings on the issue and why his colleagues in Westminster were not questioning the ban.

He said: “Generally, I think people in both the Commons and Lords don’t really understand the issues and are quite willing to accept a moral judgment that commission is a bad thing.

“What I think is particularly mistaken is that quite a lot of the well-intentioned consumer lobby are too elitist to understand the unintended side of things.”

Lord Flight also reiterated the points made in his letter about the direction legislators are heading from in Europe, with the EU now likely to rule out a commission ban. The European Parliament’s Committee on Economic and Monetary Affairs (Econ) has removed all references to such a ban in amendments to the draft of the revised markets in financial instruments directive (Mifid). A proposed Europe-wide ban on commission payments to independent financial advisers is expected to be rejected by the European parliament in a vote next week.

“What is wrong with full commission disclosure commission arrangements being required and having individual signed agreements?

“It’s interesting to note that this is what the normally crackpot EU has opted for.”

Meanwhile, the peer, who is also an adviser to the Tax Incentivised Savings Association board, raised another problem with the RDR commission ban.

“It would be a disgrace if non-advice intermediaries weren’t bound by the commission rules,” he said.

“It’s almost better for people to have no advice rather than end up going to non-advice intermediaries, most of whom would be the main banks, who have had the worst track records in terms of stuffing them with bad products.”

HMRC Crack Down on Tax Avoidance Schemes

22 Aug

HMRC has won, subject to appeal three court decisions against tax avoidance schemes. These cases are expected to provide the Exchequer with £200 Million.

The message is clear – when planning to minimise tax, ensure you use the rules that exist, take advantage of government backed schemes (eg personal pensions, ISAs, VCTs, EISs, AGR & BPR related schemes) and use accepted approaches within the flavour of the law – take professional advice. The cases in question are high value high – profile and are out of the remit of the general investor but the ethos of HMRC is clear.

HMRC Letter 480

HMRC have stated that this sends “a very clear message” that it will tackle efforts to avoid paying tax.

The first case, against ‘Schofield’ and heard in the Court of Appeal on 11 July, involved a business owner using a tax avoidance scheme to create an artificial loss on his sold business, even though it had actually made him a £10m profit. HMRC said he paid £200,000 to be involved in the scheme.

Another case against Sloane Robinson Investment Services, heard in the First Tier Tribunal on 16 July, saw the company’s directors attempt to avoid a combined £13m worth of tax on their bonuses. The First Tier Tribunal ruled the scheme, even once it had been modified to counter recently introduced anti-tax avoidance legislation, did not work.

In the final case, against ‘Barnes’ in the Upper Tribunal on 30 July, a scheme aimed at exploiting a mismatch between two tax regimes on behalf of more than 100 individuals failed to work. HMRC said some £100m was at stake as a result of this scheme.

HMRC director general of business tax, Jim Harra, said: “These wins in the courts are a victory for the vast majority of taxpayers who do not try to dodge their taxes. They send a clear message to tax avoiders – HMRC will challenge tax avoidance relentlessly and we will beat you.

“We have now had three major court successes in avoidance cases in the last month alone and I hope this sends a very clear message: These schemes don’t come cheap, you carry a serious risk that you’ll end up paying the tax and interest on top of a set-up charge which can run into the hundreds of thousands of pounds.

“These were complex cases which show HMRC’s experts doing what they do best, delivering great results for the UK.”

We Are All Human

4 Aug

So many of us lose sight of what is truly important.

Two lovely people I know have recently passed away. They were very dear and special to me for so many reasons. Where they reside in my heart, they will always be with me. I will and already miss them greatly but I will always honour their memory.

We will call him S (not sure if I should put people’s names and so chosen to use just their initial) – a character so large, he would argue with you and make you debate your opinions – I loved our afternoons together, his coin and stamp collections, stories, rants about the banks, the markets, driving through the hills in Italy, his working life, bags of rocket from the garden (amongst other delights) and everything – I just know he was one of a kind. We are all richer for knowing him and anyone he met he would touch their life – he did with me.

As for M, she was such a kind and sincere person – how many times did we sit and talk ? – so many subjects – such a clear thinker – her kindness will never be forgotten. She was always such a great host always tea served a certain way – I was always able to make her laugh and she me – I will miss her.

 

So back to my original statement – think about where your life is leading, tomorrow will be upon us sooner than you think. You have two choices – inspire and enrich others or NOT. We all have this choice. Looking inwardly – I know I am an obsessive, I constantly aspire to be better than I am – there is no perfection just the effort to be better – sometime sI lose sight of what is important. 

I believe there is much I must improve and plan to learn from those around me who inspire and at times humble me. 

I hope if you take anything from my ramblings is – we all need to think about who we are , what we are doing and should we be doing this – can we do better. I for one know the answer – yes I can do better and I will.