Philippa Gee Wealth Management Ltd

A new marathon has been announced this year. We will see the inaugural Shrewsbury Marathon take place in June and given the publicity it has already received, I imagine it will be a popular event.

So how does one go about training for such a day and what implications does this have for your investments? Well bear with me, as thing there are some similarities.  The important point for me is having a plan and sticking with it, whether you are talking marathon or investments.

The runner establishes how many weeks they have left until the marathon and formulates a set plan to get them from their current condition to marathon-ready and then has to follow it diligently. If the weather is particularly warm one week, success does not allow for the runner to suddenly double up their number of runs to enjoy the sun as that could cause an injury and mean that their training is ruined for the whole season. So the intention is to have a set agenda and to stick to it.

In many ways an investment strategy is the same, as you cannot let the volatility of a stockmarket put you off your plan.  Many people, when the market looks positive and roars ahead, think that this is a time to divert from their plan and invest even more, only to regret it when the market then falls back again. One of the keys to successful investment is to listen to the noise of what happens in markets day by day, but not to be taken in by it.

A plan is something to follow in order to give yourself the chance of achieving success, whether you are training for a 26 mile run or building up a successful investment strategy. So we all have an interesting year ahead!

I am thinking of writing a book called Investor Income Anxiety.

I see more and more cases of people desperate to take an income from their assets but face a reduced amount as they have historically used cash. These people are being forced to consider moving up the risk scale purely because interest rates are so low.

Now this may not seem like hot news to you, but do bear in mind that the sort of interest rate you are able to obtain at this point is even lower than you could have got less than a month ago, as fixed rates have reduced further. It is having a significant impact for some.

Indeed it is getting to the point that investors feel they either have to tie up their money in very long term rates to get a marginally higher income, which may not fit their requirements and may mean that they miss out on interest rate rises, when these eventually occur. Alternatively, investors feel they have to start considering assets that involve an element of risk, which they would prefer not to. Now it may well be that it is worth taking on board some risk, if you have a long enough investment horizon and a decent spread of assets, but that is not always the case.

So if you are chasing more income, think carefully about the options. Basically there are no risk-free investments that pay a high income. So either you accept the increased risk or stay in safer assets with a lower income. Above all and whatever option you pursue, know the downsides as well as the upsides.

It helps to go in with your eyes open.

There was a hill relay competition in the Church Stretton yesterday, with some serious challenges involved for all participants. You can find more details here http://merciarelays.org.uk/ on the four different races and the inclines involved.  It looks like no mean feat.

These athletes didn’t just decide to take part without any training, they have spent months working out to build up the stamina and fitness needed to help them get a good result.

In many ways this is the same with investments. You simply can’t wake up one day and think that you can start immediately start investing and make a success of it. You need considerable time, concentration and experience to get it right. So many people contact me, who have come into money and started managing it themselves, have then found it to be an impossible task and recognise they need professional help. Whilst they might initially enjoy the venture (as you would at the start of the race) they then realise that the sheer time and effort is far greater than they imagined. Typically they have sold and bought at the wrong times and have ended up with a lower sum of money than they first started with.

I would like to run in the hill relay, but if I do I will need to do some serious training. If you want to manage your own investments, do the research first and be honest with yourself as to whether you really can spare the time. If not, get professional advice, a personal trainer for your investments could be a really good idea

I came across this brilliant phase today; “If you are going to jump into the swimming pool, you need to make sure there is water in it first” and I thought it was perfect when considering investing in the stockmarket.

So markets are still volatile and as one economic worry lessens, another one takes it place, but is this the time to jump in?

Well for me it is not a straightforward question, as it depends on time-frames. If you are looking to invest for a fairly short period of time and are looking for that ‘golden moment’ then you need to be careful as I do not think that we have reached the end of the uncertainty. As long as countries in Europe continue to need economic restructuring and the UK has yet to get to grips with delivering strong growth, then I believe markets will still deliver some volatile moments.

If you are looking for a long-term investment, as most should, then you need to check that the water is there in the pool and also be prepared to accept the swings and roundabouts of markets and structure your investments accordingly.

Of course no one can predict exactly where markets will move to and when the swings will subside, but with the properly structured portfolio, it shouldn’t be about whether you should be in or out of markets, but shaping your holdings appropriately. And of course, these are just my views and should be treated accordingly.

It strikes me that the two questions are both equally essential, but should be treated quite separately to each other: do you have water in your swimming pool and do you want to jump?

Arm-bands anyone?

More often than not, a good proportion of the news that fills my inbox tends to relate to new fund launches. This situation becomes much worse around this time of year, when there is a stronger demand for ISAs. But does it make the world a better place? I am not convinced. In the twenty years that I have been dealing with investments, I have to admit that I have never sat down and thought “oh no, what a shame there aren’t more funds to choose from”.

I understand that as a fund management group grows, it tends to focus on extending the range of funds, so that there are offerings which will suit different market conditions, will appeal to most investors and will gain the valuable commodity known as “funds under management”. But is it right to continually keep launching products?

I believe many fund management groups ignore the risk of constant reinvention and the following are five points I wish to make to them:

1. You will be better regarded, by advisers and investors alike, if you all your offerings are best of breed. For example four great funds out of a total offering of four is far better than six great funds out of a total of fifteen funds.

2. One of the worst traits is when you launch ‘me too’ products. It smells of desperation.

3. Remember that one bad fund has the capacity to damage the whole fund range for years to come.

4. Consistency is so important, whether it be investment objective, fund manager and team, or the process. If it works, protect and preserve it.

5. ‘Brand stretch’ is not a phrase I use frequently, but if an investment house has a strength, a unique point that makes them specialists in their field, why on earth move into another area where the talent is not there. It would seem destined for failure.

There are rare occasions when a new fund launch is necessary, for example there is currently a major focus on the cost of a product and therefore I understand that the odd new fund launch might be necessary, but not as an everyday occurrence.

Fund management groups need to understand that they are dealing with money that people have worked extremely hard to save and invest. It is a responsibility that should not be treated lightly.

Focus on what you do best. Please.

It’s that time of year when snow is more likely and yesterday, given the weather warnings for our county, we all prepared for the worst. Some clients mentioned that they were buying extra food and made sure they had enough oil for their heating, whereas others mentioned that local schools might need to close.

That is what we do. When the prognosis is for bad weather, we prepare ourselves and take sensible action. No one wants to be the person featured on the news, stuck in snow drifts hours from home, without any warm clothes or supplies.

The weather forecasts, despite what we might sometimes think, are not based on guesswork, they relate to detailed analysis, carried out rigorously and monitored closely. I am not saying that they get it right all the time, but when extreme conditions are forecasted, I would suggest we would be short-sighted to ignore the warnings.

For me, there are many similarities with the stockmarket and the weather at this point.

The economic indicators are concerning. These are recessionary times; the global economy is so heavily in debt it is facing an uncertain future and the European position is a constantly evolving saga of woe. Yet despite all of this, stockmarkets are so chipper that they are shrugging off all the uncertainty and pushing forward. Does this mean we should also shrug off the concerns and blindly assume it is sunshine from now on?

For me, the threat of economic ‘snow’ is still so strong and will remain until perhaps March or April at the earliest, so I am still inclined to wait for more bad news. The detailed forecasts and analysis I run show a challenging time ahead and, rather than using guesswork, I will act on these and assume that more challenges await. If this happens you can wave good bye to the recent gains and more.

I am not prepared to have client’s assets slip or drift in this bad weather.

Most products have different advantages; some might offer greater potential, others might attempt to limit the downside, others may be low in charges and others may claim to add tremendous value which more than covers their extra costs.

Recently I came across a product claiming to be a “cash alternative” which led certain people to assume that this was a low risk product. Let’s be perfectly clear about this, a product allegedly offering an income of 9% with opaque charges and various conditions of contracts is not low risk, particularly if it is unregulated. If something looks too good to be true, it invariably is.

For some clients it is just as important to steer them away from the dangerous products as it is to construct the correct new investments, damage limitation is a valuable commodity.  Protecting that which has been built up over time, even generations, can take prime importance and there is absolutely nothing wrong with that. Are you about to invest in a howler? Stop and get advice quickly, it would be far better to double check matters now, than to leave it too late.

Recently I was asked to write a blog for a website used by investment advisers. I decided to do a rather “punchy” piece, to really get the message across. Apologies in advance for the strong opinions viewed, but I felt it was necessary!

BLOG: Are some financial advisers that gullible?

Picture the scene; it’s the strategy day for an investment provider and they are busily coming up with new products to flog. They propose an investment offering high levels of income (and a risk to match) but camouflaged with some pretty fantastic marketing material. Their concern is how to attract investors? How on earth can they convince the end investor that this high voltage product is actually “safe as houses”?

Ah, but that’s the point, they don’t need to convince the investor, they simply need someone else to spin the lies for them, so they can hold their hands up as the innocent party when it all goes wrong. How do they convince someone to do that for them? Is it to come up with a product that actually delivers, that won’t become illiquid and that will provide the level of risk stated by the marketing material? No, don’t be ridiculous, They just offer advisers a commission of 10% and their work is done.

Well, that is how it appears to me. I see a good proportion of new clients coming to me to help them unravel various investments their previous advisers have set up. This is often a challenging task as not only do you have the financial effects to consider, you also have the emotional impact on the client. For many they have trusted someone with their financial livelihood and had that trust completely destroyed, along with their means of retiring, as the products have lost considerable value and in various cases are now completely illiquid.

I find this sickening. That an adviser can hold the trust given them by the client in such contempt (that they feel no responsibility for their actions) is despicable and how can the investment provider, coming up with this sort of nonsense, sleep at night? It’s just wrong.

Shame on you.

Here we are after another set of significant falls in global markets and while the picture is very slightly better this morning, there is still time for it to unravel further. But what does it actually means for investors and are further falls really likely? Well I remember being on maternity leave in 2008 and watching the TV reports of the market falls at that time. I can clearly recollect the images shown of the Great Depression and the reporter stated that it was likely that by 2009, a lot more people would be living on the streets and unable to even feed their family. It was alarming but clearly didn’t happen in the way it had been portrayed and clearly markets started to recover.

So what are we facing? It’s fair to say that markets have dropped considerably in the last 24 hours, however we are still at a level very similar to that of last month and therefore the moves in between have simply been the results of some very limited trading and people over reacting or under reacting to announcements. Frankly I’ve been surprised by previous days rises and the ignorance of the fundamental bad news, so in many ways it is a relief to see that now priced in and an acceptance of the more serious situation we are in. But is this going to end in Armageddon? Even if we were to face a very significant fall in the value of the stock market (far more than we’ve seen in the last day or so) just remember that the economy still keeps going, people still go out to work, people still need to shop, save, invest and borrow. The model is not under threat but the assumption that ‘good times’ last forever has had to be addressed.

I am not trying to ignore the fundamental economic problems many countries around the world now face. It will take time to unravel and to factor in the many ripple effects that this contagious view will cause. But I would rather we deal with this problem now and get as much of the bad news factored in, rather than the slow and constant drip feeding. We are not children, give us the bad news and we can deal with it and move on, otherwise this negativity will last a lot longer than it needs to.

So what should you do? Well of course these are just my general views and not in any way specific advice, but overall you should probably be sitting tight (of course it depends on your circumstances and your need to access capital) make sure that you are in the right investments, that you have a financial plan in place which remains right for you and then you wait. Yes these falls are worrying and very difficult at the time you experience them, but prices will rise, prices will fall and in a number of year’s time I believe we will simply look back on this as another (large) blip on the graph. Give it time.

Friday 23/9/2011 9.30am.

We have seen exceptionally volatile markets and it is unlikely that this will suddenly change to a more positive outlook. The financial worries are contagious, so instead of it applying to one region only, it instead is spreading all around the globe. Whether the problems will be short-lived, or (as the pessimist in me worries) it will take longer to restore. But you can’t spend forever waiting for the market to turn, so what should you do in the meantime? What are the do’s and don’ts of investing?

DO

1.  Make sure that the investments pass the ‘sleep at night test’. There is no point staying awake and worrying. When markets fall, instead you should make sure that when you look at the level of risk that you spend more time considering the potential impact of a fall in value rather than concentrating on the potential return.

2.  Do make sure that you have enough money that is accessible. This may mean earning some pretty poor interest rates on that proportion of money, but it helps to pull the overall level of risk down and means that you won’t need to access cash that needs a longer time frame.

 3.  Do make sure you review  your investments. Circumstances change and markets certainly do, so it is unlikely that investments that you have set up will always be right in the future. You service your car, you service your boiler, so please do service your portfolio.

 4.  You would expect me to say this, but do get professional advice. You may have enough time to research what investments to make, but do you have enough time to continue that and decide when is best to sell out of a holding? We are all busy with enough commitments and outsourcing is the way to keep on top of many key responsibilities, so using a professional advisor not only helps to reduce your workload, but means that your investments should be looked after and monitored by someone with specific expertise.

 5.  Do understand that times when the markets are falling significantly are not unusual and are perfectly normal. Prices will rise, prices will fall, prices tend to rise again.

 DON’T

 1.  Sell your investments which are falling in value. This is absolutely the worst time and you will allow people to make money out of you.

 2.  Be scared of investments so much that you only invest in cash – opportunities remain and the return of cash can be low compared to inflation. Cash does not tend to be a long term solution.

 3.  Be too focused in your investment approach. Even the most aggressive of investor needs to have a spread and balance of different holdings.

 4.  Listen to your next door neighbour. Many people complain of hearing a story by someone at a dinner party or over the garden fence, where ‘so and so made 300% and you should do it too’. This is utter nonsense and any investment that might be of interest to someone else is not guaranteed to suit you. Indeed your circumstances, outlook and requirements could be completely different.

 5.  Ignore your ‘worry monster’. If you are presented with an investment and cannot shrug off a concern or worry, follow it up and don’t just accept that you are wrong. You know your circumstances best and therefore you should be concerned about something that rings a ‘worry bell’.

 Investment portfolios require careful monitoring and management. This is what we do. Call us.