Philippa Gee Wealth Management Ltd

I met with someone today who was housebound (mentally they were very very sharp indeed) living on their own, with no immediate family in the area and have never used a computer.

I can’t imagine this situation is uncommon, but there was a problem – she simply couldn’t access her money. The bank accounts and investments she had were with a bank that would only offer services to those who could walk in to the branch or could access the details online. The situation was made worse as the bank were based in a listed building, which while lovely to look at, meant that no wheelchair access could be created, so even with someone helping her in the wheelchair, this lady couldn’t actually get in her bank.

I went in to speak to the bank to see what help they could provide, but gone are the days when someone from the bank is allowed to visit customers at home, unless they use the Private Banking service of course. What do you do? Have power of attorney when it really isn’t needed, or trust someone living locally for to go in and access your money?

I really feel that this is a major issue, which could leave someone feeling unintentionally helpless and I can only imagine that this problem is going to get worse. How incredibly frustrating for someone to have money which they have saved up hard to accumulate during their working life, to be left without access to these funds at the time when they need it?

For younger generations, I am sure that they will remain ‘online’ well into retirement and in their quieter years, but for now, we have decades left with people who have never used a computer and they are being forced into difficult situations when trying to manage their money.   There may be growing virtual communities, of that I have no doubt, but that still leaves many without the human contact and comfort they are used to and still need.

There are many online tools now available, so it can be hard to know where to start. There is one site which I believe ticks various boxes for investors; it is simple, easy to negotiate and gives clear information.

So what is the site? Well to give a little background first of all, as we know the FSCS (Financial Services Compensation Scheme) has now increased the compensation limit for cash holdings, subject to certain conditions, which is great news for many investors.

But the landscape of our financial industry is changing and with the merger or restructure of many banking institutions, you could be under the incorrect impression that you have spread your assets between different organisations, when in fact they are part of the same group and share the same banking licence.

Well rather than try to explain this further, I suggest you simply look at this website and try it yourself  http://www.guardian.co.uk/money/interactive/2010/sep/02/savings-providers?CMP=twt_fd

So now we are told yoga is bad for us, or at least a number of recent articles in the press have suggested that this is the case. Well at least that is one thing I can remove from my worry list of ‘things I never get time to do’. But should a warning like this be an indication for us to reflect in other areas of our lives, including financial? Perhaps so.
 
There are many times when investors are told, categorically, that this fund manager has the pedigree to keep delivering what ever happens, or that a certain asset type is one that everyone should hold, regardless of risk and attitude. Well time seems to prove this generalist philosophy wrong, so what can be done? What can you do?
 
Just as with exercise, there are no miracle solutions in the one-size-fits-all-category. What is right for you is unlikely to be ideal for the guest at your dinner party, next door neighbour or relative, so you need to stop following the advice of others who do not know your own circumstances, who are not aware of your own financial conditions and who are not completely focused on your own financial objectives.
 
I am sure Yoga is good for many many people, but just as with managing your wealth, it is not a case of one size fits all. Far from it.

With the new year well and truly established, you may have started to look at the gaps in your life. Perhaps you’ve established new year’s resolutions to deal with them, or perhaps having made such resolutions you have already broken them! But when it comes to managing the gaps in your finances, you have to be focused.
 
It’s about priorities. For many people this year is about prioritising the gaps in their finances, however substantial their wealth might be. At the core, it’s about whether they are making the right financial decisions to bridge the gap that troubles them.
 
For many the concern tends to be about protecting the wealth already established, while for others it is about getting the wealth in the first place and shrugging off the worries that keep them awake at night.  Whether the gaps are more general, such as ”am I doing the best I can?” or more specific “do I have the right spread of assets I need?’, if it worries you then that gap needs to be addressed.
 
So recognise that you might have a financial gap in your life, determine what troubles you more specifically and then take action – whatever you do, have a superb 2011 and mind those gaps!

I think this is a rather scary time to be an investor who manages their own portfolio. There is just too much choice in terms of new products and investment structures.

It used to be the case that an investor would simply need to decide between a few different product types, whereas now the list is never ending. It is not just the case of staying on top of stockmarket and economic developments but now also understanding the complexities of each investment structure. Even a simple mutual fund can carry additional layers of risk that were previously unknown and don’t get me started on the number of people that think an Investment Trust is low risk……

The reality of the situation is that with the lack of decent cash products and National Savings unable to accept new investments, it is increasingly hard for investors to keep their investment approach simple. This can mean that the products they select end up being inappropriate for them, where perhaps the risk is too high, the charges too great or the contract is simply too complex.

So what is the solution? You need a financial review. Yes, you would expect me to say that, but I believe that there has never been a more important time to seek advice, even if you think you can usually manage your finances yourself.  With stockmarket volatility, the recognised move of potential value from Western economies to the East, the low cash rates and significant changes imposed on pensions, taxation and benefits by the Government, this is a time of significant change.  You really need a health check of your finances to make sure they are on target to meet your expectations.

Also, please don’t be taken in by the marketing hype of investment firms trying to position their funds, they are highly skilled at making their offerings as attractive as possible. Always keep focused on your investment aims and maintain an appropriate balance of risk at all times. The general rule is that the more persuasive the marketing, the more cautious you should be.

Investing shouldn’t be scary. Recognise that times are changing, that you need advice and make sure it is of the highest quality.

The aftermath.

Last night Panorama ran a programme on pensions, which focused on the potential impact charges can have.

While the cost is an essential part of considering whether a pension (or any product for that matter) is appropriate, it is not the only point, indeed asset allocation, fund choice and flexibility are other factors to include. Although I found the content of the programme rather alarmist, what really struck me is that rogue financial advisers can have such a detrimental effect on a person’s financial future that they can virtually wipe out a person’s wealth, indeed I am coming across so many instances of this of late that I can see this problem is not going to go away in a hurry.

There are various pitfalls to watch out for (perhaps the subject of my next blog?) and charges or commission should be the biggest warning signs. Yet there are certain financial advisers who seem to find ways of blinding clients so that the true cost of what they are getting into is not clearly understood. There may be more regulation in place now, in terms of showing clients what charges might be deducted and the amount of commission their financial adviser would get paid, but in the midst of so much paperwork, are the figures clearly discussed and understood? My concern is that whatever the regulation, there are financial advisers out there that rip people off and recommend products that generate too much commission. This can leave people’s lives in tatters, meaning they cannot retire when they had planned, their quality of life might be severely impacted and it can cause considerable levels of stress, sometimes health-affecting. But what can you do to avoid this situation?

Here are my 5 initial thoughts:

1.  I would suggest you choose an adviser who works only on fees, but of course I would, as that is my approach! Seriously though, a fee-based adviser eliminates the uncertainty and potential for bias that commission can bring.

2.  Get your pensions reviewed. It is not just about charges but performance and also what income you need pre and post retirement. Just as you get your car MOT’d and carry out maintenance on your house, you have to review your pensions. Things change.

3.  Remember that you don’t have to use a pension to save for retirement, there are plenty of alternatives out there from the obvious ISA to setting up a business or investing in your career.

4.  There are also a great deal of options available on retirement, so the decision about how to invest is just the start of the process. Make sure you get appropriate advice at every stage.

5.  If charges remain a major issue you can do something about it, look for a cheaper option or consider the passive investment route. Just don’t write off pensions or any form of savings as too expensive to be worthwhile.

The programme should give most people a good opportunity to rethink their retirement strategy and look at different approaches but don’t let it put you off saving for retirement – it would be a decision I believe you would regret.

 ARE YOU ON TRACK WITH YOUR MONEY?

I have been having a look round at recent surveys and discovered some interesting stats, well they are interesting to me!

In a survey carried out in May 2010, by www.unbiased.co.uk, they found that of the advice needs people had, Personal Retirement Planning and Investments & Savings advice came out top.

In April 2009 The Mental Health Foundation published a paper entitled “In the face of fear” and it found that “49% of people get anxious about money with 66% experiencing some degree of fear or anxiety about the current financial situation”.

A survey conducted in May 2010 and published in June by Allianz Life Insurance Company of North America found that outliving your money was feared more than death, indeed in excess of 90% of baby boomers in the US who took part in the survey were said to “have a limited understanding of how much they’ll need and fear they’ll outlive their income”.

 So are you on track? Here are ten questions to consider and while they might not all be relevant, they could help to get you thinking…

1.  Do you know exactly where all your money is invested, whether in cash, pensions, investments, property or your business?

2.  Are you able to tell whether you are on track to meet any financial goals you may have, such as retiring at a particular time, passing assets on to your beneficiaries, or making your income work harder?

3.  Are you using the right tax wrappers where possible, such as ISAs or pensions?

4.  Are you comfortable with what you already have in place or do you feel that they are either too aggressive for you or even perhaps too cautious?

5.  Do you believe that the charges taken from your products are reasonable or have they been set up for some time and could be too high compared to what is generally now available?

6.  Do you feel that your investments are in the right holdings, do you have the right spread and are the returns on track?

7.  Did the recent budget raise any issues that you have yet to address, such as the increase in Capital Gains Tax?

8.  Do you have a mechanism in place whereby you can review your finances at least every six months or do you have someone who will do that for you?

9.  Have you made preparations for later life events, such as Power of Attorney or Inheritance Tax?

10. Do you enjoy spending time on your financial products, or would you prefer someone else to handle all the paperwork and reviews for you?

I feel that there are enough worries in this world but managing money should not be one of them, which is why most people need an adviser, perferably fee-based and definitely Independent. 

Philippa.

I have always been a fan of RDR (The Retail Distribution Review). Working on fees is, I believe, the best way of providing a professional financial service to clients and with RDR due to come into force at the end of 2012, it will herald a time when commission is no longer allowed, where a fee will be charged and all costs disclosed to clients.

So all is well? Perhaps not.

A comment was made to me yesterday by someone who works with hundreds of IFAs out there, many charging fees and knows the sector well.  His words to me were literally “You are the only person I know to carry out a full holistic financial planning service” and let’s get this straight now, I know perfectly well that there are plenty of skilled advisers out there who also carry out the full financial planning service, so I am certainly not saying I am in any way better than these, and also the chap was not touting for business, for those cynics out there! But it really did make me wonder what is going on.

I then learnt that there are IFAs out there who are already working on fees, but fail to follow through with the depth and range of advice that I would automatically assume they would include.  Take the issue of cash and national savings; basic investment contracts but tend to be the bedrock of most investment portfolios, whether the client has limited amounts or significant sums to invest. These products can be a useful way to underpin a portfolio and reduce the overall risk (even if the inflation proofed offering is not currently available!). But it seems most IFAs simply refer to cash in their recommendations in very general terms “you should ensure you have adequate emergency resources in cash” and don’t even consider national savings. This is not good enough.

So being a fee-based adviser is, for some, less about delivering an exceptional service and more about a marketing tool for getting clients in. It is about remuneration, not advice or quality of service. So for me, I now see a future (post RDR) where this problem could be countrywide, as clients will feel the bad days are behind them, that they can trust their adviser implicitly and depend on them for a professional service. But the reality could be that the adviser is just as focused on their own personal finances and not the client’s as they are now.

How can we deal with this issue? It seems as if choosing an IFA who works on fees is not the end of the selection process, you still have to question their quality of advice, the service they provide and make sure they are of the highest calibre.  There are fantastic advisers out there, but just because someone works on fees it does not automatically mean that they fit into the high quality category.

When I ask a client if they want a cup of tea, it takes me a while to recite the list of options available as the range seems to increase each week; green tea, white tea, camomile tea, strawberry tea, the list goes on and on. But it seems there is a change afoot. I was reading yesterday how tea drinkers appear to have had enough of all this choice and that the standard “builder’s tea” is making a comeback.

Could this change also apply to the financial world? Certainly the range of products available is constantly increasing and yet investors’ lives are not being made any easier. In essence they ideally want a product that will be transparent, with no hidden complexities that could derail the product at some future point, that performance is fairly consistent so that they don’t need to keep transferring to something else and that charges are not too high. Yet with all the choice available it seems that achieving this set of requirements is harder than ever for investors making their own decisions.  Those products backed by the biggest marketing budgets, rather than the soundest investment principles, draw the crowds.

But a change could be afoot.  Investors have had enough of making the wrong decisions, getting caught out by the small print and running complex portfolios, or at least those I have talked to feel this way. They want something simpler, something that doesn’t come with bells and whistles, something with less surprises.

Perhaps this is sign of a change.  Investment companies should take note.

I feel old. Today has made me realise how the industry is changing even more than I had thought.

IFA Promotion, or unbiased.co.uk as it is now called, originated on the basis of showing the benefits of seeking independent financial advice. You could call them up, or go to their website and get a list of three IFA names in your area to consider approaching for advice.  The company has excellent brand recognition, produces good research and is well supported by the press and public alike.

In the last month, part of my marketing plan has been getting my business included on various websites that list IFAs, so unbiased.co.uk was at the top of my list.  The problem was that I could never find my online listing, even when I typed in the postcode for my office, in fact the nearest IFA was shown to be 8.94 miles away!

So I called them up to find out what was wrong. I was told that on page two of the form visitors would complete in order to find an IFA, they would have to un tick a box to choose NOT to “display only IFAs that have a website and email links”. Now to be fair to unbiased.co.uk, they do then say that this is a paid for option, but I am not sure who would un tick the box as most clients want an adviser with web links and email, which I have but cannot display them unless I pay. Also, how many clients would read that level of detail faced with a form with quite a few boxes and questions to consider?

In my limited knowledge of other search facilities you can still see paid and unpaid positions, so for Unbiased to automatically just show paid listings seems strange to me.  I appreciate paid listings will stand out, but for unpaid listings to be excluded altogether makes no sense to me. Also, it means that clients wanting a local adviser end up believing the nearest one is a car journey away. 

Being the responsive lot they are, unbiased.co.uk have already got in touch with me to discuss this.  There are two points they make and I can see the logic of both; firstly they have communicated this change to the industry over recent years, to make sure it is transparent. Secondly that it is a commercial world in which we live and they need the money coming in to keep marketing the service to the public, and why should those who don’t pay, benefit from something others are willing to pay for?

This all makes sense to me, but it’s just not the ideal that used to exist. Clearly I need to get the cheque book out and would I then want non paying IFAs to ride on my coat tails? Probably not. Mea Culpa.