The US election looks to many (including me) like a choice between the Devil and the deep blue sea.
My extensive research concludes that either Trump or Clinton will win: beyond that, everything is uncertain. Whichever way the election goes, world stock markets could well have kittens, to use a technical phrase.
Such times can be deeply unsettling - nobody enjoys seeing the value of their investments fall, however temporarily. But most of my clients' portfolios span decades. For many families, their financial plans are powered by investments that will likely extend over 30 years or more.
Long Journeys Are Made Up of Lots of Little Steps
Click above to open presentation in new window
In a 30 year period, there are 10,950 individual days. Think about that for a second. In that context, how important (or not) are the next two or so days?
In time, the US election will be just another "event", just another (potential) blip. Until the next one comes along, as it invariably will.
The short presentation to the right (or click here) may help put the above ramblings into context. Time is a great healer, especially with your investments.
In terms of your financial well-being, what happens today and tomorrow is - honestly - pretty irrelevant. What happens over the decades is what matters.
If your financial plan spans decades then time is on your side. Let time work its magic.
Funding Your Retirement Solely by Downsizing the Family Home: A Dangerous Game
Written by Nick Lincoln, IFA
"According to a recent survey from Barings, around three million people are planning to fund their retirement solely from the proceeds of 'downsizing' their family home."
He held the post for five years. Before his tenure "The Blair Brown Project" truly was a horror story: between 2001 to 2010 alone, there were eight (!) Secretaries of State for Work and Pensions.
Mr Webb's article was on the subject of downsizing the family home. Downsizing involves selling your current house to purchase a smaller, less expensive one, and in so doing realising a chunk of capital. Downsizing is a common theme in discussions with our retired clients. However, it is only
Below is a cut 'n' paste from an email sent to all clients this morning.
We all get way too many emails. This is one of the reasons I don't bombard you with them. However, we live in interesting and unsettling times presently, and I hope you forgive this unsolicited entry to your "Inbox"!
Obviously, I am touching base with you on the back of last Thursday's EU Referendum result. Whichever way you voted, the outcome is what it is.
Let's quickly recap: UK markets, sterling etc went up strongly a week or so before 23rd June 2016. Although no-one really knows what individual factors drive markets,
When your mum asks you how your clients are handling the bad news around the markets and you answer "Very well: they have been silent", I guess you are asking for trouble.
But that is why I am called Nick "Trouble Is My Middle Name" Lincoln: brave to a fault, I go where others fear to tread. And if antagonising your mother is not a sure fire route to perdition then I do not know what is.
Now I do not rile her deliberately; I am fond of my mother - she has been like a parent to me. But she
It remains one of life's oddities that the very people who must invest are typically those least inclined to do so. Many such people choose to shun investment "risk", preferring instead the illusory safety of cash.
This is probably very true at the moment: markets are apparently volatile; one can almost hear the waves of relief as nervous "investors" sell their portfolios to cash until things "settle down".
Like more and more of us I no longer read the printed press. Yet I know what the newspaper money supplements will be full of at this time of year: useless - useless - financial forecasts for 2016.
How do I know this? Because it happens every year; it is as guaranteed as the sun rising in the east, as certain as that extra dose of misery unveiled in the Christmas Day East Enders episode.
But if these forecasts really are useless, how come they come around, again and again?
People that know me will have read the title of this "HatTip" and exhaled a sigh of relief: who on Earth would want to be like me?!
Thankfully of course we are all different, in our own lovely, different ways. Each of us has different wants, needs, aspirations, values (morals, even), ages, states of health. Financially, we have differing incomes, debts, inheritances, spending patterns and so on.
Stock markets around the world probably went up and down over the last few months. The fundamentals behind these movements were thought to be people buying shares and other people selling them.
If you would like to get more regular drivel like this then simply Google “financial advisers who send out pointless monthly market updates”. You will find literally hundreds of them. Take your pick.
And exhale! Miracles do happen: Gorgeous George managed to get through an Autumn Statement without completely rearranging the personal financial services landscape.
Of course, the devil is often in the detail, so don't pop those champagne corks quite yet. Especially if you are a buy-to-let landlord; the Chancellor seems to have you in his sights....
However, for the moment, let us be grateful. No doubt he will find things to dicker about with during next year's budget!
Nick Lincoln, owner of Values to Vision, has been using financial forecasting software since 2008.
ABR editor Rob Kingsbury spoke to him at a recent Voyant Mastery training session about why and how he uses it and whether it has affected the bottom line of the business
Nick Lincoln began using financial forecasting software in 2008, around the time he set up his lifestyle financial planning company, Values to Vision. He first used Prestwood Software’s Truth and switched to Voyant in 2011.
I am a basic rate taxpayer. When, on 8th July 2015, you sat down after your Budget, I was nearly £2,000 a year worse off because of changes to the tax regime. Yet the media lauded your Budget as a tax-cutting success. How did this discrepancy arise? It arose because I am the owner of a small business and I remunerate myself via salary and dividends. 8th July 2015 marked the day when the Conservative party finally ditched any pretence to being the party of small business; the era of “crony capitalism” (corporatism) is now accepted and openly touted by the establishment. Small business is so “yesterday”. So yes, I have a vested interest in whingeing. I admit it. But let me put to paper my thoughts on why this new taxation of dividends is so damaging.
First, let us dismiss the pernicious myth that somehow paying oneself via dividends means you are avoiding tax. This is nonsense; every penny of dividend income I receive has come out of business profits already taxed once via Corporation Tax. The compact between the State and the business owner was that the State would take its share via this tax and whatever was left over was yours. There would be no further tax to pay (unless you had the temerity to take dividends that put your income into the 40% tax band - hey big spender!) The State recognised that, as a small business owner, you were running incredible risks. The State understood that there was no benevolent employer looking after you; that there was no company pension scheme waiting for you to join; there was no employer sick pay or life cover or employment “rights”. It was just you, the marketplace and your offering.
The State saw that, if small businesses flourished, they would grow and employ people. These employees in turn would pay Income Tax, National Insurance etc.
The quid pro quo was that the State would not tax business owners as heavily as PAYE employees, a
A dividend certificate, as spotted yesterday
vast number of whom enjoy all of the above benefits.
That compact has now been blown away; the State will continue to tax you first on every penny of your profits (for, unlike Income Tax, there are no allowances with Corporation Tax) and now tax you again when you extract what remains, bar a truly pathetic £5,000 “dividend allowance”. Of course, this is where dividends meet the thin end of the wedge. Once a tax is introduced it never seems to go away. A 7.5% tax on dividends could just as easily be 17.5% or 27.5% whenever a future Chancellor needs more of our money. The door has been opened. This is the country of the “butcher, baker and candlestick maker.” It is built on commerce, on entrepreneurship, on the collective risk-taking of hundreds of thousands of people who have had the courage and conviction to go it alone. These same people may now be thinking “why bother?” Not every small business will become a big business, either through choice or because of business failure. But every - every - big business was once a small one: the ramifications of this ideological sea change from a purported Tory chancellor could be catastrophic. As ever, the outcomes will not be felt until you and your generation of politicians have long departed, to retire on your (taxpayer funded) final salary pensions. You know, those pension schemes that small business owners have not a hope in hell’s chance of ever enjoying! Anyway, hope you are well and that the family is OK. Speak soon. Yours sincerely Nick
The inspiration for this piece comes from US based adviser Alan Roth. In a recent blog he pretty much summed up everything that is wrong with my profession's fixation on investor "attitude to risk".
Here is the process: you plod through a questionnaire given to you by your adviser; the adviser feeds the answers into a bit of software; hey presto, you are told that your attitude to risk is 8 out of 10, or “balanced”, or “low-risk” or some other meaningless grading.
It is meaningless because a risk score simply pretends to know demonstrates how much pain someone can bear to take when markets fall.
But just because you theoretically can mentally stomach a large loss in your portfolio does not mean you have to. This is because - on its own -the risk attitude questionnaire bears no relation to the actual return that a client needs to get to achieve her life goals.
For example, if your portfolio simply needs to “earn” 3% a year to maintain your lifestyle then why on earth would you be in a portfolio that carries the potential return and commensurate risk of, say, 8% a year?
A risk questionnaire, as seen yesterday
Advisers that answer with "my client's attitude to risk score indicated that was the ideal portfolio" are just doing half a job.
Even worse, imagine a “cautious” risk profile client, advised to invest in a portfolio that will ensure he runs out of money before he runs out of life. What is the biggest risk for all of us? A temporary dip in the value of our investments (because markets go down as well as up) or a permanent drop in lifestyle when we run out of money?
Risk assessment questionnaires and their ilk are only ever the starting point of a conversation about your investments. Far more important is the return you need to get on your assets so as not to run out of money during your lifetime. When you know this figure then you can construct a portfolio that has the best chance of achieving it (in no way guaranteed etc).
If the resulting portfolio is too racy (or too cautious) for you, then adjust accordingly and accept the consequences on your lifestyle. But remember: markets generally recover from falls; time is a great healer. However if you run out of money in later life then all the time in the world will not save you: the dosh is gone and it ain't coming back. That is real pain.
A short term paper loss or a long-term drop in living standards? The choice is yours!
In case you missed it, there was an election recently. And in the 12 months leading up to it, a lot of promises were made. Will they be kept?
The Labour Party seemed to spend the dreadful Mansion Tax about 15 times over. The LibDems... well, I was not listening to their promises. Come on, hands up - neither were you.
As for the Conservatives, one has the feeling they were making promises on the assumption they
Most purported financial journalism is just advertising, held together on the page with reheated topics and lazy copy.
And an awful lot of that lazy copy (or “financial porn”) is designed to titillate, to sow seeds of doubt, or to get the reader to take action of some sort. Invariably these urges - if acted upon - do more harm than good.
Then, sometimes, you read something that is not so much financial porn as plain baffling. So it was with a recent article from Mark Dampier of Hargreaves Lansdown. For the record, I think this brand is fabulous; not so much for what they do but how they do it: the marketing, website and whole “customer experience” is second to none.
Mr Dampier’s article began by saying how investors have had an uneasy ride since the financial crisis of 2007-9.
To which I thought: “Say what?!” Watch this BAFTA nominated video to find out why: it only runs for a few minutes (though you may think it feels longer).
What should you take out from this?
In essence, when it comes to financial services. do not take things at face value: challenge; question; interrogate. If you do not wish to do this yourself then get a financial planner to do it for you.
Because the surest way to get diverted off your financial plan is to be influenced by external factors that do not have your interests at heart.
In financial services the desire to over-complicate seems endemic. Junior ISAs, for example: designed to be for the parents, guardians, parole officers etc of children under 18, Junior ISAs are staple media fodder yet pretty much redundant for the vast majority of people.
Why? Because parents have their own adult ISA allowance of £15,000 each for each and every tax year.
If parents want to save for their kids' future the adult ISA allowances will be more than enough for nearly everyone; how many couples with young children will be salting away £30,000 a year from taxed earnings, before putting even more aside for the nippers?
"Not many" is the obvious rhetorical answer.
Yet Junior ISAs continue to be a source of fascinatation for the financial media totally out of proportion to their actual utility. Nobody with a brain should go near them. This short video explains why.
As ever, do not watch this short clip thinking you will be given chapter and verse. I cannot do that in a timely fashion and - if I could - I would be straying into giving advice. Which is uber-naughty.
Enjoy. I hope to hear from you and thanks for your time.
"K.I.S.S" - Keep It Simple, Stupid. If only: the language of financial advice seems perpetually caught in a fog of obfuscation, double meanings and jargon.
Why though? It does NOT have to be this way. Solid financial planning is NOT rocket science. Rocket science is rocket science, as this clip demonstrates.
For investors, the take-out from the Cass report is to remember to “K.I.S.S.”, to keep it simple.
Unfortunately, many people and institutions in financial services seem keen to perpetuate the myth that dispensing financial advice is akin to rocket science.
This, dear reader, is complete and utter horrocks.
Proper financial planning has four simple constituents.
Everything else is just noise: lazy copy emailed in to wedge between the insurance company adverts.
1) Have A Plan
Think about what you want from your life. Then have an educated guess at what this lifestyle will cost, for the rest of your days. Finally, work out how you are going to fund this (petrifyingly enormous) amount. In other words, work out your “Number”.
2) Stick To Plain Vanilla
Boring, mainstream financial products: for most people, that is all they need to use to achieve their life goals. Think ISAs, collective funds, personal pensions. Really, that is probably all you need. If you speak to an adviser who blinds you with rocket science about some "can't fail" product or investment, remember what Mr Einstein said: "If you can't explain it simply, you don't understand it well enough."
And, for my sake, punch such an adviser on the nose: When these "can't fail" products do fail, it is Muggins here who picks up the bill.
3) Keep An Eye On Costs
As the Cass research shows, there is little to gain from trying to identify the next star manager. But there is lots to lose, in terms of cost, missing market gains, poor stock decisions and so forth. Make sure your adviser has a stated, methodological investment philosophy. And make sure your adviser invests his money where he wants you to stick yours.
4) Stick To The Plan
This is the toughie. A place where emotions enter stage left and reason scarpers stage right. Where there will always be reasons to save less, to spend more: you needed that gadget, this holiday, those Global kitchen knives (highly recommend these beauties, BTW).
As well, there will be nasty periods when your investments plummet in value - guaranteed. You will wobble, maybe lose your resolve and consider scrapping your plan, vowing never to enter “the markets” again.
In terms of your long-term financial health the biggest enemy can often be you. Or rather, your reaction to events. We help our clients to stay on course, "on plan". After all, it's not rocket science.
In our view, educated investors are happier investors.
In this post we outline our approach to investing client money. It will help you understand what we do (and why) with your investments.
To start, please watch the documentary below (not our work in any way). This is split into eight bite size segments. Grab your phone, tablet, PC or laptop and watch these as and when you can. You will learn an awful lot about the beliefs that underpin the advice we give to all of our clients.
Our "Statement of Independent Investment Principles (SIIP)" expands on the above and shows simulated performance for our range of Model Portfolios. For the record, past performance really is no guarantee of likely future returns.
Gold is doing what it generally does best: quietly disappointing people.
Yet three or four years ago articles espousing the wonders of gold as an investment were commonplace. Presently, however, such glowing testimonials are hard to find. Why?
Gold does not produce anything of value nor does it provide a stream of income. You buy it and hope another mug will eventually come along and offer you more for it. This is the "Greater Fool" investment approach (see also the "Dot.Com Boom" of the late 1990s).
So what is the appeal?
Gold is touted as a great way (often seemingly the only way) to protect your wealth against inflation. Over the last 30 years inflation has been relatively benign. The metal would not have needed to exert itself much to retain its value in real terms.
In that 30 year time span there were periods when gold did spectacularly well. Which means - to achieve an average of 1% a year - there were also periods when it did spectacularly badly. By the time the hacks and the rent-a-gobs in the financial press were talking gold up as an investment the gains were gone: yesterday's return gives nothing to today's investor.
So why the love?
In 1984 you could just have easily bought an index linked gilt and held it to maturity; that would have guaranteed you an inflation busting return. But index linked gilts are not exciting, whereas gold has an allure, a literal as well as physical lustre, for some speculators investors.
30 years may sound like a very long time: in investment terms it is just a long time. Time enough for an asset class to assert itself. What has gold done?
