Tag Archives: Financial Planning

HMRC Focusing On Tackling Tax Avoidance by the Wealthy

17 Jan

HMRC Letter 480

It’s official, HM Revenue & Customs is doubling its team tackling potential tax avoidance of wealthy individuals. The number of inspectors has increased to over 200 inspectors.

The Affluent Compliance Team is to begin recruitment of 100 additional inspectors. The focus of the unit has expanded from those with annual incomes from £150,000 and accumulated wealth of £2.5 Million to £20 Million; to include those with wealth above £1 Million.

HMRC has reported that the unit had received additional tax receipts of £75 Million (by the end of December 2013). This is expected to rise to a target of £586 Million by the end of 2015.

Exchequer Secretary David Gauke says: “The team has made a great start by bringing in £75m in additional tax that would otherwise have been lost to the country…… Dodging tax is immoral, illegal and unaffordable and the minority who cheat are increasingly finding that, thanks to the work of the Affluent Team, they have made a big mistake.”

Director of the Affluent Team Roger Atkinson says: “Good quality intelligence is central to catching the cheats and so we are expanding our Affluent Intelligence Unit fourfold. This is very good news for all honest taxpayers.”

Bill Mott and Neil Woodford Issue Warnings For 2013

15 Jan

Neil Woodford has warned investors to expect further downgrades to profits forecasts for those companies more sensitive to the economic cycle.

Neil Woodford (manager of the Invesco Perpetual Income and High Income funds) paints a pessimistic story for the rest of 2013. He has grave concerns pertaining to the existing problems (eg the ongoing crisis in Europe, a possible slowdown in the US and reductions in borrowings across the western world) will limit the pace of global economic growth. Conversley, in his monthly update, he states he believes there is a “population of stocks that can grow consistently through this difficult period”.

Bill Mott (manager of the Psigma Income fund), has always raised his concerns over the effect of central bank policies,  he has warned that these have raised the chances of increasing inflation by continually introducing unprecedented policies into the market. He believes that these have increased the expectation of a growth in inflation.

“To some extent, inflation is already with us. The Bank of England has exceeded the middle of its target inflation range for 38 months in a row. What is remarkable is that despite this persistent inflation, the UK gilt market is trading at such low yields. Real interest rates on bonds have been negative for some time. Are low gilt yields telling us that the bond markets are relaxed about the inflation numbers? Or is it rather that the same target-busting Bank of England has been the most enormous buyer of gilts and has successfully subverted all price signals?”

Bill Mott has avoided investing in bank shares through the portfolio he manages, Psigma Income Fund. This has caused poor returns (short-term) against his peers. Time will tell if his decision is correct, as there has been a recent period of price rallying in this sector but is this a “true” rally or rather a “relief” rally. The latter will see the prices collapse, or could the pricing be sustainable?

Personally, I have concerns over the banking sector as there are several unknowns which carry a huge risk and could derail the recent optimism, One major issue with this sector is the lack of clarity of information and the continual fiascos constantly being unearthed. I see the comments about RBS and Libor, where the fines could be significantly worse than those suffered by Barclays (but expected not to be as large as those suffered by UBS). This is just an example and who knows what next?

Investment Bulletin – My Views For 2013

7 Jan
Fireworks explode over Times Square as the crystal ball is hoisted before New Year celebrations in New York December 31, 2012. REUTERS-Joshua Lott
What a year 2012 has been. It has not been an easy year and with the Christmas & New Year break, life has been put back into perspective and some sanity has returned. 2012 has ultimately been a good year for my clients and despite the challenges, we have made good gains. The challenges that faced the markets have been considerable:-

  • Disappointing economic growth and corporate earnings
  • US Presidential Election won comfortably by Barak Obama
  • Worrying geo-political developments, such as, in the Middle East and China
  • The ongoing debt crisis in the Eurozone (at times threatening the very existence of the Eurozone)
  • Easing political risk in Europe but still minimal Eurozone growth
  • Consumer confidence growing in the US
  • Relatively successful Chinese growth expected in 2013

Looking ahead, we’re beginning to see signs that a more positive outlook is developing. In the US, in particular, the recovery we see in the housing market could have a meaningful impact on growth prospects. Does this mean that the 30-year bull market in bonds is coming to an end? And should we be braced for an imminent increase in interest rates, reminiscent of the US Federal Reserve’s 2.5% worth of hikes that clobbered bond markets in 1994? I don’t think so. The Fed has said that it won’t raise rates until 2015 and while it could do so earlier, I think that next year would almost certainly be far too soon.

The outlook for returns in 2013 will depend on where you invest, I am confident that there are still attractive investment opportunities in several areas of the investment universe. In these conditions, a flexible approach and experienced active management can really prove their worth.

Markets will worry about the Italian elections in 2013 (likely to be brought forward thanks to PM Monti’s resignation) and in Germany (likely in September 2013) and even about the stability of the coalition government in the UK.

Currently, the most likely outcomes seem to be a strong vote for Merkel and her CDU/CSU grouping in Germany and the election in Italy of a coalition with a strong commitment to the Euro but a rather weaker commitment to structural reform of the economy. 

Worries about the possibility of a hard economic landing in China in 2012 abated with a soft landing and expected growth should be robust in 2013. Although Obama’s re-election does not solve the issue of political gridlock within the polarised system in Washington, growing consumer confidence underpins hopes that the US economy is on the mend.

Above all, markets still take heart from the extraordinary support offered by central banks across the developed world, with ultra-loose policy keeping interest rates and bond yields low, providing liquidity for the financial system and helping governments finance budget deficits cheaply. There may yet be worrying consequences from this grand monetary experiment, but for now investors should think twice about betting against the tide of central bank Dollars, Pounds, and perhaps increasingly Euros and Yen that are expected to keep flooding the world economy.

Will 2013 be the year in which the world really starts to emerge from the shadow of the global financial crisis? Perhaps that is too much to hope for, but there are good signs that the healing process in the global economy and markets can continue. Growth in the major developed economies is likely to remain quite subdued – slightly more robust in the USA, but still close to zero in the Eurozone.

 

The Economy 

Economic developments around the world now range from tangibly-improved in the United States, through apparently-improved in China and India, to less-bad in Europe. A return to financial markets driven by fundamentals is long overdue but first we need to consider the political ramifications of 2012 and prospects for 2013 :-

  • Risks from the Middle East are higher
    • displacement of US influence in Egypt by the Muslim Brotherhood
    • civil war in Syria
    • this clearly fragile balance of power leaves the region less stable than a year ago
  • Elections were a feature of 2012
    • two in Greece
    • France (with the arrival of a wave of socialism, which already appears to be on the wane)
    • Barrack Obama’s re-election in the US
    • Re-election of Shinzo Abe in Japan.
  • Risks from the Eurozone are lower and falling
    • It appears very likely that Angela Merkel will be re-elected in Germany
    • The Italian election, which must be held by April 2013, will determine whether the reform process Mario Monti was able to begin during his tenure continues or whether it reverses
  • The time for forgiveness is late 2013
    • The German election will likely coincide with Greece’s return to primary surplus. 
    • This could mean that Greece’s debt could only be forgiven if it defaults, and thereafter no more fiscal transfers would be possible. The appeal for the creditor countries is that it reduces the risk of political extremists gaining power and forcing the long-feared Grexit – an event which carries unquantifiable risk to the broader financial system.
  • Will profits matter more than politics?
    • The chances of markets being driven by fundamentals, rather than politics, are clearly higher for 2013 than they were for 2012.
    • I expect equities to trade according to their earnings growth.
  • In the UK, general share capital growth is expected to be positive, combined with attractive potential dividends
  • In the US, stronger earnings growth but a lower yield and a slight softening of the dollar will mean a more sedate return in sterling terms.
  • European companies seem well placed to capitalise on the region’s export performance. The modest valuation of European shares offers an attractive yield, and positive trade dynamics are supportive of further gains.
  • Japanese equities are currently heavily overbought and I expect profit taking might be in order. With the country back in recession, I expect modest total return from Japanese shares.
  • The rest of Asia, however, looks set to enjoy robust earnings growth which encourages me to think positively about the potential for strong equity returns.

Investors must clearly treat these opinions with caution, as equities are volatile. I am an advocate of asset combining to take advantage of the differing asset performance related correlations, helping to manage both risk and volatility. I believe, however, that the potential for markets to reflect fundamentally attractive valuations should give investors optimism about the prospects for 2013.

How RDR Impacts Investors

2 Jan

The Retail Distribution Review (RDR) comes into force from Monday 31 December 2012, but what does this mean for those who are paying for advice?

There has been an overhaul of the disclosure of what you pay, how you pay and the advice (at point of sale and ongoing). The idea being that the advice received is suitable, you are aware of any restrictions i.e. independent or restricted; and the associated costs. 
I am an independent financial adviser (IFA) under the old and new regime. The service provided has always been detailed with an ongoing service as the advice process starts with the purchase of a financial product and on-going advice is paramount (in my opinion). Make sure you receive what you are and have paid for – 
Lord Turner FSA living wills proposals
The Financial Services Authority (FSA) outlines the changes which will directly impact – and hopefully benefit – the everyday investor:
1. Know how much advice costs
“Advice has never been free. You may not have realised but if you received financial advice before our changes came in you probably paid ‘commission’ to your adviser.”
“This generally came from the company providing the product paying your adviser a percentage of the sum you invested.
“Instead of you paying commission on new investments your financial adviser now has to be clear about the cost of advice and together you will agree how you will pay for it.”
“This way you know exactly what you are paying and that the advice you receive is not influenced by how much your adviser could earn from your investment.”
“Your adviser now has to clearly explain how much advice costs and together you will agree how you will pay for it. This could be a set fee paid upfront or you may be able to agree with your adviser that they can take the fee from the sum you invest.”
2.  Know what you are paying for
Is this a transactional item, on-going advice and defined service to be provided.
While many advisers are remaining independent, some have changed their business models so that they only give “restricted” advice.
“Financial advisers that provide ‘independent’ advice can consider all types of investment products that might be suitable for you. They can also consider products from all firms across the market.”
“An adviser that has chosen to offer ‘restricted’ advice can only consider certain products, product providers or both.”
“Your adviser now has to clearly explain to you whether they offer one or the other.”
Get improved professional standards“Some investments can be hard to understand. So the minimum professional standards of qualification have been increased….”
“Financial advisers also have to sign an agreement to treat you fairly.”
3.  What should you do now?

“Next time you see your adviser you should ask how much you have been paying for their advice and how much that same advice now costs.”
“They should also be able to explain how the changes to the way you get and pay for financial advice affect you, and whether they offer independent or restricted advice.”
Happy New Year and good luck investing in 2013

Launch of Waverley Court Consulting Ltd – Website www.waverleycc.co.uk

18 Dec

I am pleased to announce the launch of my website – http://www.waverleycc.co.uk

After much work, reviews, re-writing and editing my website is now live. Let me know your thoughts on the content, design and presentation. Personally, I am most pleased with the Testimonials sections – every one who kindly provided their comments presented their views of our relationship.

Which? Research – Bank Staff Under Pressure to Sell

18 Dec

Big Change consumer banking event

It’s a damning review from the Which?’s Big Change survey. 

One of the many reasons I chose to become an Independent IFA – no sales targets and my mantra is “service, service, service”.

In the past I have worked within large institutions, although not the banks, and the importance of “sell at any cost” was a common practice. I have known many where their role was to sell and felt it was their choice (the client) to trust them and so what was purchased was solely their decision. If your very livelihood is dependent on “sell at any cost” and there is an environment of targets and not service, and this is the “norm” and acceptable, then many will and have been manipulated.

The Which? investigation suggests pressure on bank staff to sell financial products has not reduced, despite demands for change from regulators and politicians.

In Which?’s Big Chance survey of over 500 front line bank staff, conducted in September:-

  • 81% say the pressure to meet sales targets has stayed the same or risen
  • 66% say they are usually told to sell more
  • 41% say they thought there had been a decrease in the incentives available.
  • 46% say they know colleagues had missold products in order to meet sales targets
  • 40% say they were sometimes expected to sell products even when it was not appropriate for the customer

Customers feel the pressure

Which? is calling on all the banks to refocus their incentive schemes on customer service.

Further research from Which? found that customers are feeling the effects of the pervasive sales culture in Britain’s high-street banks :-

  • 40% say the last time they contacted their bank they were offered a new product or service that wasn’t suitable
  • 25% felt pressurised to take up the product

Staff were interviewed from HSBC, Royal Bank of Scotland, Lloyds Banking Group, Barclays and Santander.

Which? is handing in a dossier of evidence to the Parliamentary Commission on Banking Standards. The dossier includes the bank staff survey, consumer views and previous research on the banking industry. This is in addition to 120,000 signatures from the general public pledging their support for ‘Big Change’ in banking with Which? and 38 Degrees.

Which? chief executive Peter Vicary-Smith says: “We are calling on the banks to be much more transparent about their sales targets and incentives.

“Our survey reveals the stark realities of the sales culture that still exists at the heart of the banking industry. Senior bankers say the culture is changing but this shows it just is not filtering through to staff on the front line who remain under real pressure to put sales before service, even after incentives are taken away.”

The Current Market is a Stockpicker’s Paradise

17 Dec
The best time to be able to add value to portfolio performance is during times of troubled markets. Now the markets are clearly troubled, or in crisis, or in panic, or in confusion…
A stock-picking approach is vital during these times and a strong stockpicking discipline is possibly the best way for investors to ensure their money survives the current recessionary environment.
Many industry commentators have suggested that a combination of low-interest rates and low growth is a nightmare for managers who take a bottom-up approach. Maybe more so than ever, investors need to become students of the political scene as much as the macro-economic environment. You, as investors, more than ever need to focus on a company’s fundamentals. We are clearly in unprecedented times, The Bank of England interest rate has been at 0.5% for over two years (the lowest ever in history). This is not the time to be aggressively taking on risk, I believe we have to stay defensive, and the way we do that is by being very selective about which holdings, sectors and niche markets we pick. Although, we also need to remember when to break this rule as there are opportunities – suitable asset combining is essential to manage the potential for success with a capital preservation overtone.

Stockpicking has been a style that can prosper even in the most difficult markets.