IFA Magazine August 2012 issue

N E W S R E V I E W C O M M E N T A N A LY S I S

For today’s discerning financial and investment professional

SUNRISEDELAYED

IS THIS JAPAN’S MOMENT?

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ISSUE 13

PLATFORM RE-REGISTRATIONWHY IT WILL WORK DESPITE EVERYTHING

MORTGAGE ADVISERSTHE MODEL ISN’T DEAD - IT’S JUST EVOLVING

OIL MARKETSSLIPPERY STUFF

Cover 13.indd 1 01/08/2012 09:32

This communication is for financial advisers only. It should not be relied upon by retail investors. The value of an investment in the fund can go down as well as up andinvestors may get back less than originally invested. Investec Structured Products is a trading name of Investec Bank plc, registered address 2 Gresham Street, London EC2V 7QP. Investec Bank plcis authorised and regulated by the Financial Services Authority.

C31068.005_SP_Objective Returns_IFA mag_July12_297x420_v1_Objective thinking 04/07/2012 17:12 Page 1

Cover 13.indd 2 01/08/2012 09:32

ObjectivethinkingObjective Returns plc. A new structuredfund from Investec Structured Products

Investec Structured Products has launched Objective Returns plc, its first

UCITS fund. The Objective Returns – FTSE Enhanced Kick-Out Series 1

is the first sub-fund. The aim of this fund is to provide investors with a

predefined return dependent on the performance of the FTSE 100 Index.

The fund is accessible through wraps and a minimum investment

of £3,000 is required.

Visit our website to find out more and see Lawrence Gosling interview

Gary Dale on Structured Funds.

www.investecstructuredproducts.com020 7597 4065 for technical enquiries

Follow us on Twitter @Investec_SP_UK

Best Structured Products Provider 2010 & 2011

C31068.005_SP_Objective Returns_IFA mag_July12_297x420_v1_Objective thinking 04/07/2012 17:12 Page 2

Contents.indd 3 23/07/2012 09:46

features

features

regula

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17

44

NewsAll the big stories that affect

what we say, do and think

Getting What You Pay ForToo many people don’t read the

small print, says Brian Tora

The Compliance DoctorLee Werrell of CEI Compliance looks at

the top current issues of interest to IFAs

The IFA CalendarConferences, economic summits, race

meetings... All the dates you daren’t miss

Editor’s SoapboxIt’s a peculiar market but there’s no reason to doubt the long-term prospects of oil

Acronymically SpeakingIt’s a funny old business, pensions-speak. Steve Bee muses on a private language

59Thinkers: Nouriel RoubiniThe scourge of tramlined thinking, and the man who saw 2007 coming

49

56

IFA Magazine is published by The Wow Factory Publications Ltd., 45 High Street, Charing, Kent TN27 0HU. Tel: +44 (0) 1233 713852. ©2012. All rights reserved. ‘IFA Magazine’ is a trademark of The Wow Factory Publications Ltd. No part of this publication may be reproduced or stored in any printed or electronic retrieval system without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies. Wherever appropriate, independent research and where necessary legal advice should be sought before acting on any information contained in this publication.

54FSA PublicationsOur monthly listing of FSA publications, consultations, deadlines and updates

Pick of the FundsNick Sudbury goes all

technological on us

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This month’s contributors

Editor: Michael [email protected]

Art Director: Tony [email protected]

Publishing Director: Alex [email protected]

THE FRONTLINE: Never mind the debt, and ignore the politics. According to those ratios, now’s the time to buy08

.12

32

8

66The Other SideA nice cup of proper tea, vicar? Richard Harvey is beyond being surprised by anything these days

Emma-Lou Montgomery is a broadcaster and fi nance journalist and qualifi ed investment adviser.

Nick Sudbury is a fi nancial journalist and investor who has also worked as a fund manager.

Kam Patela former deputy editor at Hemscott. He is a qualifi ed investment adviser.

Monica Woodleyis a senior editor at the Economist Intelligence Unit.

Lee Werrell is the Managing Director of leading UK consultancy, CEI Compliance.

Brian Toraa Communications Associate with investment managers JM Finn & Co.

Richard Harvey a distinguished independent PR and media consultant.

Gillian Cardy managing director of The IFA Centre.

Editorial advisory board:Richard Butler, Michael Holder, Ian McIver and Mark Pullinger

N E W S R E V I E W C O M M E N TC O M M E N T A N A LY S I S

magazine... for today ’s discerning financial and investment professional

N E W SContents.indd 4 23/07/2012 09:46

features

features

Delayed SunriseJapan’s imminent stock market recovery has been forecast for two decades, says Kam Patel. Could that be the fi rst true glimmerings of the dawn?

Platform Re-Registration

In theory the re-registration rules are supposed to be ready by New Year, says

Stephen Spurdon. Don’t bet on it

Alice in Squanderland History is littered with oddities, says Dick Turpin of Artemis Fund Managers. But today’s pretty weird too

Staff Leavers – Keep It Legal

What if your leavers take your clients with them? Steve Goodrham from lawyers Gateley says preparation

is the best form of defence

Changing the Mortgage Culture

Emma-Lou Montgomery says the mortgage adviser model

isn’t dead - just evolving

Asian Income InvestmentsDon’t think Asia is all capital growth and no dividend, says Schroders’ Richard Sennitt. Things are changing fast

22 COVER STORY

28

34 GUEST INSIGHT

Japan: 21st century

companies at 1980s prices.

Just look at the quality. How

can you lose?

IFA Magazine is for professional advisers only.

Full subscription details and eligibility criteria are available

at: www.ifamagazine.com

INSIDE TRACK 38

46

41 GUEST INSIGHT

CO

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A N A LY S I SN E W S R E V I E W C O M M E N T A N A LY S I SContents.indd 5 23/07/2012 09:46

Octopus Gateway helps yourclients looking to settle

on UK shores.

Octopus Gateway helps yourOctopus Gateway helps yourclients looking to settle

on UK shores.

Octopus Gateway helps yourclients looking to settle

on UK shores.

octopusinvestments.com0800 316 2298

Please note: investments into Octopus Gateway can only be accepted from UK registered banks and building societies. Investors will also be required to complete anti-money laundering and due diligence checks. Octopus can make no guarantee of investment performance or the level of capital gains or income that will be generated.For professional advisers only. Not to be relied upon by retail clients. Past performance is no guide to future performance. The value of an investment in an Octopusproduct may go down as well as up and an investor may not get back the full amount invested. An investment may only be made on the basis of the information containedin the relevant product brochure. Octopus Investments Limited is authorised and regulated in the UK by the Financial Services Authority. FSA Registered Number: 194779.Registered office: 20 Old Bailey, London EC4M 7AN. Registered in England & Wales under No. 3942880. All information correct as at 18 June 2012. Telephone calls may be monitored and/or recorded for legal and training purposes.

High net worth individuals from outside the European Economic Area can fast-track their UK visa application by investing in certain UK assets. But they may not want exposure to volatile equities or to tie their money into low yielding gilts. So what’s the alternative? Octopus Gateway, an innovative product that focuses on capital preservation and generating a reliable return, invests in the same well-managed companies that have served our IHT investors well for years. The targeted 3% annual return (after charges) helps fight the effects of inflation. So, if your clients need a helping hand – or eight – to build a life in the UK, come talk to Octopus.

01.07.2012_IFA_297x210mm.indd 1 18/06/2012 14:01

Ed's Welcome.indd 6 23/07/2012 10:10

FAREWELLTO ALL THAT

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And for good reason. By the time you get back from your fortnight on the beach, you might fi nd that the rest of the market has taken fright and decimated your adventurous portfolio. (Such things have certainly happened in July and August before now – the 1997 Asian scare, the 1998 Russian bond crisis and the fi rst inklings of both the 1929 Wall Street crash and the 1987 panic, for a start.)

Then again, the converse could always apply. If the markets are too dozy to take proper stock of some major new economic development – a shock jobs fi gure (good or bad), an oil squeeze or a banking situation, then that could in fact create a useful opportunity to get in at bargain levels before the rest of the world catches up. But the snag is that these opportunity situations rarely come without risk which needs to be carefully weighed.

This summer, the risks seem to defy the scales altogether. We’ve got the Libor scandal, which is spreading internationally with the speed of a brush fi re. We’ve got the very real possibility of a Spanish or Italian exit from the euro, unless Brussels’s latest plan for bank stabilisation can be made to work, and fast. We’ve got the November elections in Washington, which will put a special premium on any economic news that might discredit either Barack Obama or Mitt Romney. We’ve got Iran and Syria and Egypt and Libya to think about.

And did we say an oil squeeze? Yes we did. Perish the thought that the oil hype only warms up in the autumn when the northern hemisphere’s boilers start to fi re up: the highest ever Brent prices occurred in July 2008, when it hit an unseasonable $146 on the back of panicky derivatives markets. But then, as we explain on Page 17, oil does have a habit of emulating Keynes’s observation about markets. In the long run, it may very well be a weighing machine - but in the short run it’s a voting machine.

Myself, I’m off to sunny France in a few days. And my choice, right now, is to take some retail profi ts, stock up on burgundy and then forget the whole business until I get back. Anxiety can wait.

Write to Michael [email protected]

THE SUMMER LULL IS NEVER A GREAT TIME FOR TAKING UP BIG NEW POSITIONS

Michael Wilson, EditorIFA magazine

Mike

www.IFAmagazine.com August 2012 7

Ed's Welcome.indd 7 23/07/2012 10:10

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It all started gently enough in late June with a computer glitch at RBS that froze up a large part of the banking giant’s activities, including most of its online banking and customer transfers. And that, together with the revelation that the ratings agency Moody’s had downgraded RBS by a notch – because of its “signifi cant exposure to the volatility and risk of

outsized losses” – was enough to prompt RBS’s boss Stephen Hester to renounce his second bonus in the space of fi ve months.

But if Mr Hester thought his disgrace was bad enough, he didn’t know what was about to hit Barclays. First the bank was fi ned £290 million by US and UK regulators for having systematically rigged the Libor system since 2007 – apparently by traders who had understated

Cash investments, including cash ISAs, were up by 66% between April and May, as risk-averse investors turned away from equities. BestInvest reports, however, that they are also getting wise to the advantages of cash ISAs, whose popularity continued to grow well beyond 5th April and into the current tax year.

Bank to Rights

Britain’s banking industry was rocked by a surge of revelations that put an abrupt end to a period of relative calm and brought on a series of threatening political developments – including the Serious Fraud Squad’s declaration that it was launching a criminal investigation into the workings of the London Interbank Offer Rate (Libor) system that monitors the rates that banks pay each other when they borrow.

N E W S R E V I E W C O M M E N T A N A LY S I SN E W S

magazine

News.indd 8 23/07/2012 10:26

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WSGovernment departments

cut their spending by an unexpectedly large £6.7 billion more than their budgeted reductions in the last fi nancial year, according to Treasury data. Total spending fell by £11 billion compared with 2010-11, against a £4.4 billion target. And the National Health Service came in at £1.7 billion under budget.

Quantitative easing was back on the agenda as the Bank of England voted to release a further £50 billion of new funding in an attempt to refl oat the economy. The latest issue comes on top of £200 billion in 2009, £75 billion last October and £50 billion this February – bringing the total to £375 billion.

For more comment and related articles visit...

www.IFAmagazine.com


www.IFAmagazine.com

the actual rates paid by the bank, so as to make Barclays look more successful than it was (and, not coincidentally, to boost their own bonuses).

Then, as the Libor scandal spread, the bank chairman Marcus Agius was forced to resign – partly in a futile attempt to keep his boss, chief executive Bob Diamond, in his job. Alas, too late! Within days, the rock-hard Mr Diamond had also been squeezed out of offi ce, allegedly by pressure from the Bank of England which was furious about the Libor shambles. Mr Agius was hurriedly reinstated for as long as it would take to fi nd a new chief executive, and the circus rolled on.

Well, it did for a few more days. Chancellor George Osborne ordered a parliamentary review of the Libor system, while frantically fending off a demand by Labour that the whole business should go to a judicial review like the Leveson inquiry into media standards. His reasoning being, presumably, that the unruly masses had already sated their appetite for blood with Rupert Murdoch’s gang and that it was now time to stand shoulder to shoulder with the bankers whose essential honour he had so stoutly defended in the court of Brussels only months earlier.

Meanwhile, a YouGov poll had unhelpfully shown that fully 60% of Britain’s high street bank customers didn’t trust their bankers to look after their money; that 49% thought they are dishonest; and that an even more astonishing 45% reckoned that they were incompetent.

Incompetent? Dishonest? Pah, we haven’t seen the half of it. Even Sir John Vickers, whose recent report called for a root-and-branch reform of the banking system by 2019 – including the separation of high street banking from investment banking – is accusing Mr Osborne of wimping out on the reforms needed in the industry.

Meanwhile regulators on both sides of the Atlantic are continuing to look into possible rate manipulation at other banks. Who’s next? And what will it do for Britain’s reputation? It’s tempting to be gleeful, but in this matter everyone loses.

DIAMOND GEEZERBarclay’s CEO, the rock-hard Bob Diamond, has been squeezed out of offi ce, allegedly after pressure from the Bank of England which was furious about the Libor shambles

A N A LY S I SN E W S R E V I E W C O M M E N T A N A LY S I S

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intermediaries a discretionary management

service across a range of ten discrete multi asset

'strategic' portfolios which are risk graded 1-10.

The aim of the Arjent Managed Portfolio Solution

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For more information please contact: Adam Sketchley ([email protected]) or James Hutson ([email protected]) Telephone: 0207 965 0615LONDON | BRISTOL Arjent Limited is authorised and regulated by the Financial Services Authority (FSA no. 197330). Arjent Limited is registered in England. Registered No. 4077864. Registered office: Arjent Limited, 25 Christopher Street, London, EC2A 2BS.

News.indd 9 26/07/2012 17:01

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This Year, Next Year, Some Time?

...according to Aviva’s Summer Real Retirement Report. And nor are older workers getting adequate advice about how to scale back their working hours if they should choose to remain in employment on a reduced basis.

“Choose”, of course, is a euphemistic term. With stock markets at a low ebb, and with annuities at an all-time low, we’re constantly being told that it’s far better to postpone retirement if at all possible. And with the statutory retirement age rising inexorably, the ‘right’ to work longer is looking more like an obligation for many millions.

Aviva’s survey, based on a survey of more than 13,000 over-55s, confi rms that the fi nancial squeeze on older workers is getting drastically worse – presumably because older workers spend more of their incomes on food and energy, both of which are getting rapidly more expensive. Indebted over-55s owe 31% more than last year, Aviva says,

and although their typical monthly incomes have increased by 4% since the start of the year, over one in ten is surviving on less than £500 a month.

Yet only 36% of employers offer their workforces any kind of guidance in the run-up to retirement, Aviva says. Which is tough considering that today’s retired over-55s have typically been with their last employer for 16 years – or a third of their working lives.

But it’s not just the employees who suffer. Clive Bolton, ‘at retirement’ director at Aviva, points out that companies that fail to provide support and guidance risk the permanent loss of valuable workforce skills if they don’t draw their attention to opportunities for part-retirement which could be good for both sides. Only one in ten companies say that they currently offer their workers the option of part-time or fl exi-time employment as they approach retirement, and another 9% look at ways to extend the careers of their employees if desired.

What sort of help to the over-55s want? 35% say that they would like to see workshops on retirement fi nances, and 35% say that printed literature on the subject would be useful. But 27% say that they would have liked a dedicated member of staff to discuss their retirement issues with them. Even a list of recommended IFAs would have welcomed by 21% of them. Surely that doesn’t seem such a lot to ask?


www.IFAmagazine.com

Britain’s older workforce isn’t getting the support it deserves from employers when it comes to making plans for retirement...

Advisers who object to the growing interventionist power of fi nancial regulators need to accept that this is the price we must all pay for the greater fi nancial responsibility being carried by private individuals, according to Treasury Financial Secretary Mark Hoban (pictured right). The FCA will soon be empowered to amend or even to ban forthcoming new products if it thinks they pose a risk of consumer detriment.

Platform provider Cofunds intends to offer access to the whole structured product range by early next year, the company reports. Talks are under way with “a provider”, with a view to launching a limited pilot project with a small number of advisers. RDR requires all independent advisers to cover structured products.

* For investments made from 1st February 2012 to 31st May 2012. Aviva Investors reserve the right to amend or withdraw this offer for new business at any time without notice. The value of an investment and any incomefrom it may go down as well as up. Investors may not get back the original amount invested. When funds invest in overseas assets, the value will go up and down in line with movements in exchange rates. Aviva Investorsis the business name of Aviva Investors UK Fund Services Limited. Registered in England No. 1973412. Authorised and regulated in the UK by the Financial Services Authority. FSA Registered No. 119310. Registered address:No 1 Poultry, London EC2R 8EJ. An Aviva company. www.avivainvestors.co.uk MC2352-V001-226126 CI062064 04/2012

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To achieve this, we take a global, unconstrained approach to asset selection. We invest in a broad range of asset classes including equities, bonds, convertibles, commodities and property, and use both active and passive funds.

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N E W S R E V I E W C O M M E N T A N A LY S I SNews.indd 10 23/07/2012 10:26

* For investments made from 1st February 2012 to 31st May 2012. Aviva Investors reserve the right to amend or withdraw this offer for new business at any time without notice. The value of an investment and any incomefrom it may go down as well as up. Investors may not get back the original amount invested. When funds invest in overseas assets, the value will go up and down in line with movements in exchange rates. Aviva Investorsis the business name of Aviva Investors UK Fund Services Limited. Registered in England No. 1973412. Authorised and regulated in the UK by the Financial Services Authority. FSA Registered No. 119310. Registered address:No 1 Poultry, London EC2R 8EJ. An Aviva company. www.avivainvestors.co.uk MC2352-V001-226126 CI062064 04/2012

FIVE RISK-TARGETED MULTI-ASSET FUNDS

PRECISION TARGETED TO REFLECT YOUR CLIENTS’ ATTITUDE TO RISKOur Multi-asset Funds focus on optimal returns for defined levels of risk, with five funds covering a comprehensive spectrum from defensive to adventurous. As market conditions change, they’re dynamically managed to keep volatility within precise parameters. So if you recommend one of our Multi-asset Funds based on a client’s attitude to risk, you can be confident it will be managed to the same risk profile over the term of the investment.

To achieve this, we take a global, unconstrained approach to asset selection. We invest in a broad range of asset classes including equities, bonds, convertibles, commodities and property, and use both active and passive funds.

The result is a range of risk-managed portfolios that are cost efficient too. For further illumination, just get in touch.

CALL 0800 015 4773

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VISIT www.avivainvestors.co.uk/maf

For investment professionals only, not for personal investors.

2%discount on initial charge*


NE

WS Auto-enrolment

pensions are to be promoted to the public via a series of TV commercials in September and October, according to industry reports. The government has hitherto rejected demands that it should extend its awareness campaign beyond the print media.

One in four savers is no longer putting any money away at all, says National Savings & Investment, whose recent survey also reports that the average individual has cut his savings from £100 per month last year to just £87 a month.

The Euro Fudge

Well, it was nice while it lasted. Within seven days of the announcement, most of the optimism had faded as new information about the state of the US economy started to come in. America’s troubles aren’t enough to dwarf those of Europe, and nor should they really be considered bad enough to cancel out any genuine change of sentiment in Europe. But they came at a critical moment when the dazed European market was trying to pick itself up. It promptly fell over and banged its elbow, as 2% of the initial 5% uplift in the FT EuroFirst 300 evaporated.

If nothing else, it was good to see the German Chancellor Angela Merkel bending just a little bit toward her European counterparts with a concession that there might, after all, be something to be said for splashing some of her country’s wealth on a proper solution to the debt crisis. But it was the structure of the concession that made the difference. Europe’s new rescue plan is intended to bust through the complexity of the last twelve months in a way that last Christmas’s special EU/IMF funding package couldn’t.

How? It’s a complex business, but essentially the euro group has moved away from encouraging banks to support their failing government’s debts by buying bonds, as the 1% subsidised loans from the ECB had attempted to do. Instead, the 17 eurozone members are pumping a rather less ambitious €100 billion or so into direct support for the banks themselves – much of which will, in practice, go

toward recapitalising them. In return, the Eurozone banking system is to be subject to direct supervision by the European Central Bank – instead of by the various national central banks, as at present.

At the same time, we were told that the EU had effectively committed itself to guarantees that the existing bank holders of Spanish and Italian debt wouldn’t be penalised by being forced to take a haircut on their exposures. Sadly, though, a search for detail on this undertaking had proved fruitless by the time we went to press, and cynicism was soon back.

Which is a pity. What’s right with this package is that it doesn’t pour vast amounts of European taxpayers’ cash straight into bailing out governments that might not deserve their generosity after what may have been 20 years of telling fi bs. What’s more, by focusing on the banks that have fallen victim – often perforce – to their own governments’ incompetence, it puts the money where it can most obviously work to the advantage of business, rather than expecting the governments themselves to bail them out. The difference was especially apparent in Greece, where the lender Eurobank’s shares put on 16% on the day of the announcement. But for Spanish and Italian banks too, tying a concrete block of debt around their legs would have been a sure way to sink them, and hence to delay the commercial recovery when it comes.

What’s wrong with the deal is that it’s still too small to make an important difference. And that

Meanwhile, over in Brussels, the markets were briefl y lifted in late June by some hopeful signs of serious intent from the senior politicians who alone have the power to determine the future direction of the euro.

N E W S R E V I E W C O M M E N T A N A LY S I SN E W SN E W SN E W SN E W SNews.indd 12 23/07/2012 10:26

NE

WSBuilding societies are

fi ghting back against the banks in the fi ght for lending business, the Building Societies Association announced. Year-on-year loans were up by 48% in the fi rst fi ve months of 2012. The announcement came in the same week as a YouGov fi nding that 60% of consumers ‘didn’t trust’ their banks.


www.IFAmagazine.com

The Euro Fudge

A sell-off of French holiday homes is being forecast, now that the new socialist government of François Hollande has reaffi rmed its plans to increase capital gains tax on properties from 20% to 35.5%, and to levy an annual wealth tax of up to 1.8% on individuals’ entire worldwide assets.

(Con

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the planned new banking structure won’t become a reality until at least the end of next year. That’s an awfully long time in banking – as Britain’s own institutions are about to learn.

It has, however, reignited anxious talk in the UK about the wisdom of shackling itself to fi nancial dominance from Brussels, and rejectionist British parties such as UKIP have been making hay on the news. It is by no means clear that the June agreement will in fact extend outside the 17 members of the euro club to embrace Britain too. But hey, it makes for good scary headlines.

A N A LY S I SN E W S R E V I E W C O M M E N T A N A LY S I SN E W SN E W SN E W SN E W S R E V I E WR E V I E WR E V I E WR E V I E W C O M M E N TC O M M E N TC O M M E N TC O M M E N T A N A LY S I SA N A LY S I SA N A LY S I SA N A LY S I SNews.indd 13 23/07/2012 10:26

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WS Tax avoidance schemes

were back in the spotlight, as Prime Minister David Cameron took personal aim at comedian Jimmy Carr over his involvement in the so-called K2 scheme. (Whereby clients become employees of their own offshore companies but take their income in nominal ‘loans’ instead of taxable salaries.) Mr Carr beat a very public retreat and apologised.

JP Morgan’s boss Jamie Dimon revealed that rogue credit derivatives trading in the bank’s London offi ce had increased its losses for the year to date to $5.8 billion. Meanwhile HSBC faced fi nes of up to $1 billion after a money-laundering investigation into a Mexican subsidiary.

Platforms – The Mills are Still GrindingHot news. The FSA is still, its own words, “consulting on proposals which would ensure that investors can make fully informed choices” if they opt to consolidate their investments on one platform, or switch them to another one.


www.IFAmagazine.com

Which is a bit rich, considering that theoretically the re-regulation rules at least are set to come into force with a bang at the end of this year. (See Stephen Spurdon’s feature on Page 28.)

If we were hoping that the FSA’s 27th June Consultation Paper (CP 12/12) would shed a little decisive light on the hows and whens of the process – never mind the wheres and the whos – then we were likely to have been disappointed with the rate of progress. Instead, the report focused on the things we already know – namely, that clients will need to be informed on the way in which the costs they currently pay (via commission) will be transferred onto a fee basis.

The idea, says the FSA, is that both investors and advisers should be able to compare the costs of investing through different platforms and make an informed decision on whether using a platform represents good value for money. So it’s proposing a ban on all payments from product providers to platforms – regardless of whether an investor using a platform is advised or non-advised.

Sheila Nicoll, director of conduct policy at the FSA, stepped out boldly with the news that the agency is “proposing changes that give investors and their advisers more control and mean that they know exactly what they are paying for a platform’s service.” Which seems like saying too little, and rather too late for comfort.

The FSA seems to disagree. It says it plans to publish its fi nalised rules on platforms before the end of 2012 - thus allowing platforms over a year, it says, to implement the necessary changes to their business models before the rules come into effect on the proposed date of 31 December 2013. Ascentric is one of the few platform providers to be already charging on a fee basis.

But what’s this? The FSA is also “seeking views on whether the ban on payments from product providers should be read across to the wider retail investment market, such as to life companies and Self-Invested Personal Pension (SIPP) operators.” Surely it’s getting a little late in the day to have uncertainties like that hanging around the place?

Responses, please, to the FSA by 27th September.

This document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances. ¹Source: UBS Global Asset Management, 30 June 2012. Historic yield is based on distributions declared over the last year as a percentage of the share price. It does not include the effect of any initial charge paid. ²Source: Lipper. Performance is based on NAV prices with income reinvested net of basic rate tax and in Sterling terms to 30 June 2012. Sector is (IMA) Global Emerging Markets. Quoted yield and performance figures shown are both representative of the A income share class. ³Fund launched 31 January 2011. Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and are not guaranteed. Investors may not get back the amount originally invested. Changes in rates of exchange may cause the value of this investment to fluctuate. Investments in less developed markets may be more volatile than investments in more established markets. The Fund is permitted to, and may, on occasion, hold a limited number of investments. As the annual management fee of the Fund is charged to capital, the potential capital growth of the Fund will be reduced. Issued in July 2012 by UBS Global Asset Management (UK) Ltd, a subsidiary of UBS AG, 21 Lombard Street, London EC3V 9AH. Authorised and regulated by the Financial Services Authority. Telephone calls may be recorded. © UBS 2012. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

abWe will not rest

An emerging yield of 5.6% p.a.The UBS Emerging Markets Equity Income Fund.

Despite the current environment of low interest rates, the UBS Emerging Markets Equity Income Fund has still managed to deliver a historic yield of 5.6%¹.

How has this been achieved?

Leveraging off a fundamental research based, bottom up, investment process, all stocks within the portfolio pay income and are selected on

both their current and forecast dividend yields.

To date, the Fund has not only delivered a significant yield but, as can be seen in the table below, it has also consistently outperformed its sector.²

Fundperformance

Sectoraverage

Out-performance

Quartile

6 months 4.3% 2.1% +2.2% 1

1 year -4.9% -14.0% +9.1% 1

Since launch3 0.0% -12.4% +12.4% 1

We believe this investment process has the potential to continue to reward clients and provide them with the opportunity to

diversify their sources of income and exposure to emerging markets.

To find out further information on this emerging source of income, please visit www.ubs.com/emei or call us on 0800 587 2111.

Shanghai, China; a booming international city, representing the dynamism of Emerging Markets.


This document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances. ¹Source: UBS Global Asset Management, 30 June 2012. Historic yield is based on distributions declared over the last year as a percentage of the share price. It does not include the effect of any initial charge paid. ²Source: Lipper. Performance is based on NAV prices with income reinvested net of basic rate tax and in Sterling terms to 30 June 2012. Sector is (IMA) Global Emerging Markets. Quoted yield and performance figures shown are both representative of the A income share class. ³Fund launched 31 January 2011. Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and are not guaranteed. Investors may not get back the amount originally invested. Changes in rates of exchange may cause the value of this investment to fluctuate. Investments in less developed markets may be more volatile than investments in more established markets. The Fund is permitted to, and may, on occasion, hold a limited number of investments. As the annual management fee of the Fund is charged to capital, the potential capital growth of the Fund will be reduced. Issued in July 2012 by UBS Global Asset Management (UK) Ltd, a subsidiary of UBS AG, 21 Lombard Street, London EC3V 9AH. Authorised and regulated by the Financial Services Authority. Telephone calls may be recorded. © UBS 2012. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

abWe will not rest

An emerging yield of 5.6% p.a.The UBS Emerging Markets Equity Income Fund.

Despite the current environment of low interest rates, the UBS Emerging Markets Equity Income Fund has still managed to deliver a historic yield of 5.6%¹.

How has this been achieved?

Leveraging off a fundamental research based, bottom up, investment process, all stocks within the portfolio pay income and are selected on

both their current and forecast dividend yields.

To date, the Fund has not only delivered a significant yield but, as can be seen in the table below, it has also consistently outperformed its sector.²

Fundperformance

Sectoraverage

Out-performance

Quartile

6 months 4.3% 2.1% +2.2% 1

1 year -4.9% -14.0% +9.1% 1

Since launch3 0.0% -12.4% +12.4% 1

We believe this investment process has the potential to continue to reward clients and provide them with the opportunity to

diversify their sources of income and exposure to emerging markets.

To find out further information on this emerging source of income, please visit www.ubs.com/emei or call us on 0800 587 2111.

Shanghai, China; a booming international city, representing the dynamism of Emerging Markets.


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27654_sippcentre_210x297.indd 1 20/1/12 13:01:42News.indd 16 23/07/2012 10:26

IS OIL STILL WORTH BUYING? THAT’S PROBABLY THE SILLIEST QUESTION YOU’VE HEARD THIS YEAR, SAYS MICHAEL WILSON.

ED

’S S

OA

PB

OXDON’T BE A

DIPSTICKEverybody knows that the trouble with oil is, they’re not making it any more – or at least, not in the quantities we need it. And that China and India are buying x million cars every year, and that every factory chimney costs y, and blah blah blah. How can you lose?

And yet. At the time of writing (mid-July), the price of Brent crude was lingering at $104 per barrel – a drop of nearly 18% from the $126 that it would have fetched in late March. So much for the worries that we might fi nd our way back to the $148 that some of us still recall from just four years ago. And America’s slightly lower-quality West Texas Intermediate was fetching $88 – also 20% down on the $110 that you’d have paid in late February.

So what’s all that about? Have we really seen a 20% drop in global oil demand since the spring? Or are we expecting one? Is it perhaps simply that summer is ecumin in, tralaa, and that the affl uent northern hemisphere has turned all the radiators off? And can we say with certainty that this would be an ideal moment to buy, buy, buy all the oil we can get our hands on, in readiness

Crude Behaviour Crude prices on NYMEX fell back below $90 a barrel on 4 July, after surging more than 3 per cent amid one of the biggest commodity-sector rallies ever the previous day, as new evidence of grim economic conditions in Europe offset expectations of fresh stimulus measures.


Eds Soapbox.indd 17 23/07/2012 10:29

for when the winter season starts and the prices soar?

Alas, no. Even the most superfi cial look at the oil price charts will confi rm that prices are just as likely to peak in midsummer and to plummet in December. People generally don’t choose to go to war in winter, and the instabilities that rack the supply market tend to be worst when the machine guns are rattling. But that’s only part of the story.

Lies. Damned Lies and StatisticsI heard the other day that it typically takes the earth a million years to ferment the amount of crude oil we get through in a month – and although I have no idea whatsoever whether that’s true, by the way, it doesn’t sound that improbable. And yet the price of oil has come down by a third since July 2008. I mean, come on, it can’t all be down to eco-savings and fuel effi ciency, can it?

Indeed it can’t. Of the many things that kick oil prices about, one is the fact that nobody has the faintest idea how much more oil we can expect to get out from under the earth’s crust. But hey, maybe that isn’t such a major concern?

The BP World Energy Outlook for 2030 (http://tinyurl.com/7hlmqxn) forecasts that by 2030 we’ll be getting through 4.7 billion tonnes of liquid fuels by 2030 – or about 22% more than in 2010 – but that getting on for half of this demand will come from Asia, which will have raised its required volumes by 45% during the same period. But Asia’s rather limited oil production will actually shrink by 20% - thus forcing Middle East production levels up by around 50% at a time when political instability is already rather marked.

That’s not a good starting point for a bearish price argument, is it? Yet the other thing that we say is that the volume of reserves is rising.

Rising? Really? Yes, the BP World Energy report for 2012 insists that the volume of proved oil reserves hit 1.65 trillion barrels last year, up from 1.27 trillion in 2001 and barely a trillion in 1991. That’s what it calls reasonably recoverable reserves, by the way – not just the awkward stuff that’ll be hard to get.

And it’s here that we get to the point. Improving technologies for oil well extraction are making it possible to extract more from any well – and the rising price of oil makes it worthwhile collecting even the trickier stuff. Suddenly the overpowering logic of a tightening market seems less clear.

And then there are the tar sands which are reputed to hold a quarter of a trillion

barrels of recoverable bitumen worldwide, and 175 billion barrels in Canada alone. (Up to nine times as much again is thought to be further down.) And if even a quarter of that could be converted into a pseudo-crude and then into vehicle fuel base, it seems clear that the world’s supply projections will need a bit of rethinking.

Little Local Diffi cultiesThat, of course, is a rather facile way of putting it. Tar sands oil can be industrially extracted at a cost of around $35 per barrel (compared with $11 for a typical oil well), so every time the oil price holds above $40 or so the industry is in the money. But that’s not counting the hideous environmental costs that tar sands can involve – or the vociferous public opposition to the further development of this particularly dirty, smelly activity.

Then there are the other political diffi culties that blight the oil companies’ lives. I’m not just talking about the little territorial disputes that get in the way when a small oil prospector is trying to drill in Tanzania. I’m talking about the wholesale threats from some South American countries to nationalise foreign oil companies’ assets. (Take a bow, President Hugo Chavez).

I’m talking about Shell and BP’s decisions to sell up parts of their promising oil and gas activities in the east of Russia, after a solid decade

of being kicked around by the local oligarchs and their tame judicial systems. And yes,

ED

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18 August 2012 www.IFAmagazine.com

Eds Soapbox.indd 18 23/07/2012 10:29

I’m talking about BP’s rather brutal treatment at the hands of the Obama regime after the Macondo oil spill. There was never much doubt that the President’s heavyweight sanctions against the disgraced “British Petroleum” oil major owed a good deal to his need to win voter approval at a time when mid-term elections were coming up. (And to distance himself from his predecessor George W Bush, who had so publicly failed to act strongly enough after Hurricane Katrina destroyed New Orleans).

Fortune Favours The BraveAnd yet these crises, when they happen, can set up some fantastic buying opportunities for anyone who’s prepared to do a little fundamental analysis. When Obama announced in the spring of 2010 that BP would be made to fi nance a $20 billion fund for environmental making-good, the stock market instantly knocked £80 billion sterling off the company’s value. Which would have been more than enough to get Ben Graham, the father of value investing, chortling about the absurdity of Mr Market.

Anyone who bought BP shares at their July low of 300p, as I urged some of my newsletter readers to do, could have sold them for 500p six months later, and would still have cleared 445p this summer.

And it’s at times like these that you can learn to love a blue-chip share that yields 5.3% on a price/earnings ratio of less than 5. Or Royal Dutch Shell, which was offering a 5.1% return in June on a p/e of 6.3.

That’s quite a lot better than America’s Exxon Mobil, which has the advantage of being in dollars but which is currently yielding only 2.6% on a fat p/e of 11. Never mind Brazil’s Petrobras,

which is delivering 0.4% on a p/e of 43. Or even China’s PetroChina, which yields 4.3% but is on 10.5 times earnings – and which has lost half its value since the spring of 2009.

The School of Hard Knocks What you’ll notice, if you compare the share price performance charts of all these companies, is that they lurch about like corks on a storm-tossed sea. There are hardly any here that haven’t lost nearly half of their value during the last four years, only to recoup it just as fast. RDSA has been everywhere between 1300p and 2400p in that period, and BP fell from 640p to 300p before its turn. Even the well-favoured Exxon went from $95 to $55 in 30 months before regaining $87 at the start of this year.

I reckon that sort of wild volatility would have scared most of the little old ladies whose husbands used to put their life savings into these ‘unsinkable’ blue chips thirty or forty years ago. The days are long gone when it was enough to be the world’s biggest. (For the record, the 2011 rankings by market capitalisation listed RDSA, Exxon, BP, the refi ner group Sinopec and China National Petroleum in second, third, fourth, seventh and tenth place – beaten only by Wal-Mart in the top slot.)

Why does this volatility happen? Up to a point, you can put it down to the cyclical fl uctuations that affl ict all commodity industries. You can also attribute it to the fact that oil supply pipelines are a surprisingly hand-to-mouth kind of affair. Nobody wants to keep much more than 60 days’ worth of this bulky, fl ammable substance in an above-ground store, so any kind of bottleneck – for instance, a threat of military disruption to deliveries - will push prices up pretty fast.

ED

’S S

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PB

OXGetting Out of

Deepwater BP has overcome the biggest setback in its history to put itself in a position to reward shareholders with strong fundamental growth once more.

BP lost 53 per cent of its value in the two months that followed The Deepwater Horizon explosion in 2010 that caused the largest spill in the petroleum industry’s history.

BP is still transforming itself from the company it was prior to the Gulf of Mexico oil spill. It plans to sell off more low-returning assets and invest in those which have higher growth opportunities.

BP stock has been out of favour following two tumultuous years that saw it cut its dividend and put it in the fi ring line of US politicians.


Eds Soapbox.indd 19 23/07/2012 10:29

Do you have a good reason for the Editor to jump back onto his soapbox? Not that he needs any encouragement, please send your requests to [email protected] and stand well back!

No Place for the Naïve But you can also attribute the price volatility to two other factors.

The fi rst is that oil investors are a remarkably canny bunch, and that they don’t get fooled easily. Check into any online bulletin board, and prepare to be blown away by the sheer depth of technical knowledge that these people have. It’s no place to be the naïve and impressionable unless you’re just backing a cyclical hunch.

The second point, and probably the more important, is that the whole oil industry revolves around derivatives. A physical tankerload of West Texas Intermediate isn’t a very fl exible tool for speculation, or even for defensive hedging - and nor does it really address the fact that the oil market, with its medium-term consumption focus and its short-term supply situation, couldn’t possibly function without forward price undertakings of every sort.

The result is that the volume of derivative contracts for oil is substantially larger than the quantity of oil that’s physically there for real-world delivery. And, since hedge fund managers and others are much happier working with paper promises than with black, gunky, smelly oil itself, it becomes clear that fi nancial market forces alone can sometimes force the price of the black stuff up and down in ways that bear little relationship to how much oil the world actually needs, or how much is available for physical delivery.

If a sudden price drop were to send every futures trader in the world rushing to sell, the resulting downward force on prices would be every bit as destructive for the people who own the barrels as it was for the ‘paper oil’ merchants. That, of course, is pretty unlikely, because there’s a bottom price for oil in there

somewhere, and the arbs would pretty soon fl ush out where it was and pile in when the right moment came. But you get my drift.

A Long Game If nothing else, all this ought to remind us of all the reasons why you wouldn’t have got rich by buying oil as a long-term investment in the last fi ve years. The certainty that demand will rise and supply will stagnate is getting harder to defend that it used to be. In the meantime, though, I’ll stick with my Royal Dutch Shell shares, which are yielding 5% even at today’s so-so prices. And which, at a time when all other sources of income seem uncertain, will suit me for a little while yet.

ED

’S S

OA

PB

OX

Dire Straits The European Union’s embargo on Iranian oil came into full effect in July. This unprecedented historical situation has reportedly moved Iranian lawmakers to demand that the Strait of Hormuz be shut down.

In the hope of protecting the strait - its key oil-shipping route - the United States has been quietly building up forces in the Persian Gulf to discourage Iran from following through on threats to shut down the waterway.

The volume of derivative contracts for oil is substantially larger than the quantity of oil that’s physically there for real-world delivery



Eds Soapbox.indd 20 23/07/2012 10:29

Julius Baer Multistock - Luxury Brands Fund is a sub-fund of Julius Baer Multistock (SICAV according to Luxembourg law) and it is admitted for public offering and distribution in the UK. Copies of the respective pro-spectus and financial statements can be obtained in English from Swiss & Global Asset Management (Luxembourg) S.A., UK Branch, UK Establishment No. BR014702, 12 St James’s Place, London, SW1A 1NX, as a distributor of the aforementioned fund (authorised and regulated by the Financial Services Authority) or by the Facilities Agent: GAM Sterling Management Limited, 12 St. James’s Place, London, SW1A 1NX, United Kingdom. Swiss & Global Asset Management is not a member of the Julius Baer Group.

Sparkling investments || JULIUS BAER LUXURY BRANDS FUND

Swiss & Global Asset Management (Luxembourg) S.A. UK Branch 12 St James’s Place, LondonT +44 (0) 20 7166 [email protected]

The exclusive manager of Julius Baer Funds.A member of the GAM group.

Eds Soapbox.indd 21 23/07/2012 10:29

A NEW DAWN?IT’S BEEN 22 YEARS IN COMING, SAYS KAM PATEL. BUT IS IT FINALLY TOKYO’S MOMENT TO SHINE AGAIN?History can be a harsh judge of those brave optimists who reckon they’re onto the next big thing. And the hard thing, for commentators who’ve spent the last 15 years or so forecasting the resurgence of Japan’s economy, is that by all the normal rules they ought to have been right by now.

Japan is a stable, hardworking, innovative and geopolitically essential country whose shares are trading at a 75% discount to the values of 23 years ago. Its banks have been cleaned up, and its politicians partially so. It has a vast trade surplus. So what’s been holding us back?

Well, we might as well start with the politics. The country’s longer-term post-war political history - and in particular its attendant chronic economic

mismanagement – has done nothing to counter the reservations that investors still feel. Japan’s current prime minister may not have come from the stable as his corrupt predecessors, but he’s the sixth in as many years. And that in turn suggests that his powers are circumscribed by traditions that don’t allow any one person to defi ne policy. That may now be changing, as we’ll see shortly.

The Past The historical problem, of course, is that one party, the centre-right Liberal Democrats, managed to hold power for most of the post war period,

during which time it had ample opportunity to set up a system based on institutionalised infl uence-peddling and corruption. Both soon became intractable features of the political landscape. That much, at least, is common knowledge.

And yet the remarkable thing was that despite (or perhaps because of) the shortcomings in Japan’s post-war management, Japan managed to engineer a revolutionary manufacturing sector during the 1970s and 80s that secured global domination in carefully targeted areas like consumer



Japan.indd 22 23/07/2012 10:51

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A NEW DAWN?electronics and cars. That colossal expansion enabled Japan to boast of the world’s second biggest GDP, behind the US, during much of those two decades.

A relentless focus on exports sustained the success during much of those decades. But during the second half of the 80s there was a signifi cant shift towards supporting domestic consumption. With the country now running huge trade surpluses, and with a government-backed culture of saving deeply rooted in the public psyche, investment overseas naturally followed. As did speculation on the Tokyo markets - and, inevitably, on real estate – both of them fuelled by an absurdly lax bank lending policy and very low interest rates.

And so it came about that by the late 80s Japan’s property boom was primed for bursting. And sure enough, all that was wrong crystallised on Tokyo markets in December 1989 as the Nikkei 225 peaked at 38,916 before

crashing ignominiously into a defl ationary depression that would not lift for twenty years.

Successive (mostly LDP) governments spent the next two decades trying without success to breathe life into the moribund economy, mainly through massive spending sprees - notably on massive public building programmes that were mostly unwanted and unneeded, and always with a fair few of the lucrative contracts handed out toward politically-favoured businessmen. Old habits die hard, they say.

That would have been bad enough. But all the while the yen remained stubbornly strong - partly because of the repatriation of earnings and partly because of the infl ow accrued from the country’s huge foreign holdings, including nearly $900 billion of US treasuries alone. Japan’s fi nance ministry currently estimates that foreign reserves and overseas investment assets exceed the volume of foreign holdings in Japan by an astonishing $3.2 trillion.

The PresentMore recently, and perhaps a little ironically, the awkward strength of the yen partly refl ects Japan’s ‘safe haven’ status amidst the enormous turmoil elsewhere - notably in the Eurozone and, until recently, also amid the subprime meltdown in the US and the subsequent global downturn.

But the ghosts of past policy failures continue to blight the nation’s prospects. The stream of failed stimulus measures over the last two decades and the rising costs associated with an ageing population have led to Japan piling up massive volumes of debt. Japan is now the world’s most indebted country with gross public debt standing at a scarcely believable 236% of GDP. That compares to around 100 % of GDP for the US, 145% for Greece and 140% for Spain.

And as if macroeconomic woes and political incompetence are not enough to contend with Japan is

JAPAN IS NOW THE WORLD’S MOST INDEBTED COUNTRY WITH GROSS PUBLIC DEBT STANDING AT A SCARCELY BELIEVABLE 236% OF GDP


Japan.indd 23 23/07/2012 10:51

also having to cope with the aftermath of the

earthquake and tsunami that hit the country last March and led to the Fukushima nuclear disaster, wreaking both human suffering and economic damage with the country’s manufacturing capability severely damaged.

The Future? With such seemingly insurmountable problems, the recent upturn in investor sentiment appears surprising. Yet it’s worth remembering that Japan has not always been as unrewarding as the experience of the last two lost decades might suggest.

According to data from Lipper, the MSCI Japan index between 1969 and June 2012 has generated an average annual return of just over 10% during that 43 year period. If

that surprises you, so it should. If you’d looked instead at the 22 years between the peak of December 1989 and June 2012 you’d have come up with an annual loss of 2% a year. Ouch.

We’d be crazy, then, to suppose that the 10% plus returns of the past are likely to return anytime soon – wouldn’t we? Well, there’s a growing body of opinion that argues that they might. Versus global alternatives, the optimists claim, Japan offers upside potential for yields and value that haven’t been seen for an awfully long time.

Let’s start with valuations. More than two thirds of the Topix index (which houses all the large wcaps) is currently trading below book value, compared to around 28% (including the banks) for the FTSE 100 constituents. Indeed Topix is estimated to be currently trading at its lowest price-to-book valuation for more than 30 years.

Now let’s consider yields. Société Générale estimates that Japan’s dividend yield on stocks is running at around 2.4% - higher than the 2.1% for the US stocks - and that, if you adjust for rising US infl ation and Japan’s near-defl ation, Tokyo’s real yield is effectively even higher than that.

Another important factor supporting recent positive sentiment over Japan has been its impressive recovery from last year’s earthquake and tsunami tragedy. Over the fi rst quarter of 2012 investors noted the rebound in its economy, with a weakening yen supporting its exporters. That all helped Topix to soar by 18% in the fi rst quarter of 2012 - making up for much of the 19% loss it had suffered over 2011.

But it all went wrong in the second quarter, as the Topix gave up over 15% of its valuation on worries about

JA

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Other types of multi-asset funds have a traditional approach to balancing bonds (for their defensive properties) and equities (for their long-term growth potential). Such funds may deliver signifi cant growth when markets are rising. But the downside can be large losses when stock markets fall.

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By constantly assessing risk and balancing our exposure across all three asset classes, we aim to deliver long-term returns with reduced volatility for a smoother investment journey.

Visit www.invescoperpetual.co.uk/balancedrisk where Scott Wolle, Chief Investment Offi cer of our Global Asset Allocation Team will tell you more about how we’ve re-engineered risk for a less volatile ride.

This advertisement is for Professional Clients only and is not for consumer use

We don’t promise all the upsBut we do aim for fewer downs

The value of investments and any income will fl uctuate (this may partly be the result of exchange rate fl uctuations) and investors may not get back the full amount invested. Where Invesco Perpetual has expressed views and opinions, these may change. The Invesco Perpetual Balanced Risk 6, 8 and 10 funds will make signifi cant use of fi nancial derivatives (complex instruments) which will result in the funds being leveraged and may result in large fl uctuations in the value of the funds. Leverage created from borrowing on certain types of transactions including derivatives may impair the funds’ liquidity, cause them to liquidate positions at unfavourable times or otherwise cause the funds not to achieve their intended objective. Leverage occurs when the economic exposure created by the use of derivatives is greater than the amount invested resulting in the funds being exposed to a greater loss than the initial investment. The funds will

gain exposure to commodities which are generally considered to be high risk investments and may result in large fl uctuations in the value of the funds. Fixed income securities to which the funds are exposed are open to credit risk which may result in issuers not always making interest and or other payments nor is the solvency of the issuers guaranteed. For more information on our funds, please refer to the most up to date relevant fund and share class-specifi c Key Investor Information Documents and the Supplementary Information Document, the ICVC ISA Key Features and Terms & Conditions, the latest Annual or Interim Short Reports and the latest Prospectus. Further information on our products is available from us at Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH. Invesco Perpetual is a business name of Invesco Fund Managers Limited. Authorised and regulated by the Financial Services Authority. IF

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the Eurozone and about the prospects of a hard landing for China, a major export market for Tokyo. That would have been bad enough, but the yen chose its unpropitious moment to strengthen on its haven status. Not good.

So, then, just when you thought the case for investing was becoming just that little bit clearer it becomes murky again. There are signs, however, that a chastened Japanese government is determined to act. The track record is poor, for sure, but the fear of a slowdown or hard landing in China and disintegration of Eurozone looks to be mobilising Japan’s policymakers into determined action.

Time to Deliver There is certainly a lot of external pressure being brought to bear on Tokyo to get its act together. The rating agency Fitch, concerned about the country’s rapidly deteriorating fi scal situation, downgraded the country from AA to A plus in May. And the International Monetary Fund declared that the country needed to take a series of urgent fi scal actions, beginning with a tripling of the national consumption tax to 15%.

That’s a heck of a burden to dump onto a country whose

GDP growth is still fragile and whose infl ation is already skidding along the zero line. And it will take a lot of selling to the Japanese public.

In June the ruling Democratic Party of Japan managed to enlist enough support from opposition parties, including the LDP, to lay the groundwork for a doubling of the tax to 10% by 2015. It was a rare and welcome act of political togetherness which may yet have other positive consequences for the country. And there is widespread expectation that in time the

rate will be increased to the 15% being demanded

by the IMF.









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gain exposure to commodities which are generally considered to be high risk investments and may result in large fl uctuations in the value of the funds. Fixed income securities to which the funds are exposed are open to credit risk which may result in issuers not always making interest and or other payments nor is the solvency of the issuers guaranteed. For more information on our funds, please refer to the most up to date relevant fund and share class-specifi c Key Investor Information Documents and the Supplementary Information Document, the ICVC ISA Key Features and Terms & Conditions, the latest Annual or Interim Short Reports and the latest Prospectus. Further information on our products is available from us at Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH. Invesco Perpetual is a business name of Invesco Fund Managers Limited. Authorised and regulated by the Financial Services Authority. IFA

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GIVEN JAPAN’S SEEMINGLY INSURMOUNTABLE PROBLEMS, THE RECENT UPTURN IN INVESTOR

SENTIMENT SEEMS A LITTLE SURPRISING


Japan.indd 25 23/07/2012 10:51

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IFAmagazine.com

But Christine Lagarde’s team at the IMF aren’t stopping there. Tokyo is also being urged to seriously consider further monetary stimulus, in order to help weaken a yen that it says has become ‘moderately’ overvalued over the last year due to safe haven capital infl ows triggered by the worsening crisis in the Eurozone. If this advice is also taken on board, we might at last be getting somewhere.

Then there’s the Bank of Japan’s decision in February to ‘target’ an infl ation rate of 1% - the fi rst time it has set such a goal. The move again was in response to intense pressure for it to act against price falls that undermine corporate profi ts, household spending and wages.

Getting a grip on yen appreciation, which does so much damage to the country’s exporters, is critical, not least as to encourage manufacturers to remain based in Japan rather than shift operations abroad and ensure unemployment, which has been edging up recently and currently stands at 4.6%, remains under control.

Investor Interest Grows That foreign investors have recently been piling into Japanese property suggests that there is real confi dence that the policymakers will get it right this time. Tokyo-listed real investment trusts (J-Reits) are currently offering forward yield of around 6% compared to a measly 0.85% on Japan 10-year bonds and 3.5% and

4.5% in Reit counterparts in the UK and US respectively.

Last month Bloomberg reported that Goldman Sachs plans to launch a private real estate investment trust with as much as 50 billion yen ($628 million) that will invest in Japan’s property market. The Reit is expected to be up and running in August and Goldman is expected to increase its size to 100 billion yen within 2-3 years.

Elsewhere, confi dence in Japan is also being shown by highly regarded fund managers James Sullivan and Martin Gray. The duo, who manage the £780m CF Miton Special Situations and the £225m CF Miton Strategic funds, increased the exposure of the funds to Japan signifi cantly late last year and reaped handsome rewards as a result of the surge by Japanese equities over the fi rst quarter.

Japan now accounts for around 7% of both funds’ portfolios and is represented mainly through holdings in CF Morant Japan fund and GLG Japan CoreAlpha. The reversal by Japanese equities over the second quarter will not bother Sullivan and Gray - they are in it for the long haul and do not set great store by three-month moves.

There are many funds available to investors looking to gain exposure to Japan. According to Lipper data the top IMA Japan fund over three months to 12 June 2012 was Legg Mason Japan Equity with

a return of 3%, followed by FF & P Japan Equity (–4%) and Aberdeen Japan Growth (-5%).

Over the last 12 months CF Morant Wright Nippon Yield produced the top result with a return of 8.32%, followed by Legg Mason Japan Equity (5.33%). Over three years, Legg Mason Japan is well ahead of the IMA Japan pack, returning 53%, followed up by CF Morant Wright Nippon with a return of 34.5%.

Investors should not ignore funds focused on the medium to smaller Japanese companies – many are offering good discount value and performance metrics. Interestingly, according to Lipper, the IMA Japanese Smaller Companies index is the only major one to have generated a positive return (1.35%) from December 1989 to date. That performance compares to -2% for MSCI Japan; -2.25% for the Topix; and –0.97% for IMA Japan over the same period.

IMA Japanese Smaller Companies is also the only one to have produced positive returns over the last 12 and six months, +1.34% and +0.74% respectively. IMA Japanese Smaller Funds available include Ballie Gifford Japanese Smaller Companies, the top performer over three months (-1.75%); M&G Japan Smaller, the leader over 12 months (+9.7%); and Aberdeen Global: Japanese Smaller Companies, the best performer over three years (+45%).



Japan.indd 26 23/07/2012 10:51

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Lowering the barrier...

M00

211_

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....maintaining values

M00211 Meteor A4 Advert.indd 1 31/05/2012 13:17Japan.indd 27 23/07/2012 11:06

DO PIGS FLY?

The ability to re-register funds as they are (in specie) from one platform to another is a

key element of the RDR regime as it applies to the handling of client assets. It is due to come into

force at the end of the year, and at present there are no indications

of any change to that timetable.But there still remains an

alarming degree of doubt as to whether or not the entire regulatory regime

around in specie re-registration will be in fact in place soon enough for the process to

start as planned. And that’s bad, because it has led to speculation about a possible delay to implementation.

Who’s to blame? Some accuse the FSA of failing to provide the final statements that will presumably fill in all the remaining details that will be required. Others point to the sheer technical difficulty that the industry will inevitably face. And the conspiracy theorists point the finger at major platforms which they accuse of placing obstructions in the path of the FSA – for openly commercial reasons, they say.

A Little History But we’re getting ahead of ourselves here. To see why uncertainties remain, just months away from implementation, and how far the industry is away from being able to implement it, let’s go back to the beginning of this process.

The issue dates back to the June 2007 FSA Discussion Paper 07/2 (‘Platforms: the Role of Wraps and Fund Supermarkets’), which first raised the matter of removing barriers to the transfer of assets between

CAN PLATFORM RE-REGISTRATION

BE ACHIEVED BY DECEMBER?

NOT ENTIRELY, SAYS STEPHEN

SPURDON, BUT DON’T PANIC YET



Platform Re-registration.indd 28 23/07/2012 10:52

DO PIGS FLY?R

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platforms without the client needing to encash. The FSA noted that the cumbersome process of encashing a holding on one platform, only to reinvest in it on another, put consumers at a disadvantage both in terms of cost and time out of the market. There had to be a better way.

At present, where in specie re-registration is possible at all, the task is performed manually – and the amount of time taken generally depends on how efficient the process is at both ends. The time lag can vary considerably between organisations – from weeks to months.

It was always clear that, if the delay was to be reduced to meet the FSA’s demand that it be ‘reasonable’, it would be imperative to automate the re-registration process. Without automation, even the most efficient organisations could have found processing times and costs increasing exponentially when faced with the anticipated increase in re-registration volumes.

Indeed, the lack of automation has hitherto been one of the key reasons the major fund supermarkets have given for not allowing in specie re-registration of Isa wrapped funds. Their critics, meanwhile, have claimed that this is more a case of a commercial decision to maintain their present market positions, and of allowing their advantage to take precedence over consumer interests

Seven to Ten Days for Settlement? Yet, if automated in specie re-registration had been the only consideration, the process could probably have been up and running well before the scheduled date of 31st December 2012. Work done in setting up TISA Exchange (TeX) means that the industry is already a long way down the road toward agreeing a common standard of messaging between nominees for the automation of the process, and toward gaining agreement from all necessary parties for this to take place. The messaging system in question is based on the ISO20022 standard developed by SWIFT (the society for worldwide interbank financial telecommunications) to perform such transactions.

The FSA has determined only that re-registration should take place on a ‘reasonable’ time-scale, but parameters determined by those developing TeX means that this should be 7-10 days at most. The main problems still waiting to be resolved centre on money, of course – and mainly the treatment of cash rebates.

But the FSA has been dragging its feet. The rebate issue, and various other outstanding matters such as fund information regarding fundholders’ voting rights, were supposed to have been resolved in a FSA platform policy document that was originally due for publication in March 2012. But at the time of writing (mid-June) it still hadn’t appeared - and I was informed by an FSA spokesperson that it might not be along for another two months. There is, of course, no specific date, but by my reckoning that takes us into August.

Making the Best of It There’s no disguising the anxiety that’s currently being expressed in parts of the wrap/platform section of the financial services industry because of this delay. Systems will have to be changed, contracts renegotiated and so forth. And until we see the final small print that’ll be a big ask. Yet still the final, immovable deadline for in specie re-registration approaches.

Fortunately, others are hard at work on the task. Stephen Mohan, managing director of operational services at Cofunds, has been at the heart of industry work on in specie re-registration, being chairman of TISA’s UK Platform Group which looked into the legal and regulatory aspects.

He says the basic task was to ensure that all liabilities were covered through a mutual contract between nominees and fund managers, which is provided by TeX. His concern now is mostly about the “challenges” coming from the regulators with regard to the uncertainty over treatment of cash rebates, and its stance that platform to platform re-registration is not advised.

Mohan says the reason the regulator took this stance was that it“did not want to set up new rules, so the reliance is on guidance in PERG (the Perimeter Guidance Manual).”

“The original purpose of PERG is to define advice so that you will know when you have to pay VAT for it. The FSA says that in specie re-registration is not a purchase or a sale. But in reality it can often involve purchase or sale. So you have to work out [for yourself] when it is advised or non-advised, and there is no coding within the ISO20022 message set to let us know if that is the case.”

In this he is supported by Hugo Thorman, managing director at Ascentric. “I disagree with the



RE-

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FSA, who said that re-registration does not have to be advised,” says Thorman. “The problem is

that only a handful of platforms have the same charging structure. Now, if there is a difference in charges, then that, by definition, has to be advised - because an adviser cannot change charges without informing the client. I just don’t see how any other interpretation is possible.”

New Share Classes Mohan also points to the introduction of new share classes as being a problem. Cofunds will work on an unbundled model basis post-RDR - implying a 75 basis point annual charge share class while others retain a bundled 150 basis point class. He says this will mean either that every platforms holds every share class, or else that a re-registration class will have to be introduced.

The implications of this, he says, are “that we would almost certainly not be able to meet our service commitment of re-registration within 7-10 days. And that would be simply because of the quantity of share conversions involved.

“Almost all of these things mean a system change. Now, our time scales on such changes to our system are long – not just a matter of a couple of months – and the regulator has asked us to do a lot for RDR already. The last thing we need is another system change.”

Paul Pettitt, managing director, Origo Services - which participated in the first successful test of the messaging system in March - also intimates that things are getting a bit tight, time-wise.

He says that, until the FSA has produced its final pronouncements on cash rebates and share classes, the UK Funds Market Practices Group – which was established to develop market practices for the implementation and use of financial messaging under ISO20022 – cannot possibly dictate what is necessary to take place for the share class conversions and rebates.

Pettitt adds, not unreasonably: “Once that is provided we can amend the systems as necessary and go to users and get them to implement it and test the system to get the market ready. To get all that done by everyone involved to be ready for 1 January 2013 will be a tough ask.”

Implementation in Stages But not everyone is quite so daunted by the challenge. Terry Huddart, technical communications manager at Nucleus, insists that the deadlines will be selectively allowed to slip. “In fact RDR is being implemented in stages,” he says, “with certain measures like in specie re-registration due to come into place by the end of the year, but with resolution on matters such as rebates arriving in 2013.”

Nick Dixon, marketing director, Skandia UK, also believes this scenario is inevitable. “I think the FSA consultation on fund rebates will create an R2 date to follow the R1 date,” he says. “R2 will be later and will reflect the rules on how fund rebates should be managed. R1 day is critical, because that is when all platforms and providers must have RDR compliant adviser charging in place to replace commission on new business.”

Ed Dymott, head of business development, Fidelity is also relaxed about the situation. He says that while the FSA platform consultation may have been delayed, “in any case it is not due for implementation until 2014. However, the rules on in specie re registration have to be implemented this year. This can be done without a resolution to the rebate question.”

Problem? What Problem? Some other players take the view that they can see little problem with what is planned because their businesses models are more suited to the new regime. One such is Novia’s chief executive Bill Vasilieff, who is firmly of the opinion that fears of delay and disputes are merely a sideshow being thrown up by the big platforms so as to protect their commercial interests.

“The whole issue regarding the delay in the FSA Policy Statement on rebates does not matter,” Vasilieff insists. “If a client wants to

re-register, the rebates are a matter for the accepting scheme to decide what to do. Some

time ago the FSA effectively said to us ‘you do it for

yourself,

or we’ll do it for you’. But

here we are, and

they [the big platforms] are

waiting till the last minute. Again,

it’s a purely commercial decision on their part.”

Either way, one thing that most people will concur upon is the immovability of the implementation date for in specie re-registration, and that rumours of delay are just rumours. But it looks increasingly as though that date can now be regarded as the start of a more extensive process that will evolve over the next two years.




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www.IFAmagazine.com

RUMOURS OF ANY DELAYSEEM TO BE JUST THAT,

RUMOURS



DO YOU REALLY KNOW WHAT YOU’RE BUYING?B

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The pure theatre that was the appearance of Barclays ex-boss, Bob Diamond, before the Treasury Select Committee made a pleasant, if worrying, change from charting the progress – or lack of it – of Europe’s leaders as they struggle to save the euro. Worrying, because the die now seems cast for open season to be declared on the banks. Whatever the view of the wider British public, I cannot help but feel that this will do us all little good in the longer term.

Once, banks were the cornerstone of the income manager’s portfolio. The financial crisis put paid to all that. The collapse in capital values and the suspension of dividend payments provided a harsh lesson to those who had relied on banks’ income streams to underpin investment returns. And what has replaced them in the UK’s benchmark index as the most important sector? Why, that most capricious group of industries – resources.

Yes, mining and oil stocks are now the biggest component of our FTSE 100 Index, replacing the financial sector which has fallen from grace. As such, they will be featuring in a wide range of investment portfolios. This could, though, create problems in that many of these companies may be listed in London but actually conduct little, if any, of their business activities in the UK. Indeed, there are a fair few that are really foreign in every sense of the word, except their listing.

Going Off TrackThis is worth taking on board, as recently a report suggested that index tracking vehicles and processes now account for a majority of the money managed in the UK market. The explosive growth of Exchange Traded Funds (ETFs) has increased accessibility of index tracking to the wider retail investment community. Platforms are broadening their offering to accept such products. Yet regulators have been making worrying noises over their rising popularity

The principal issue appears to be the increasingly esoteric nature of these vehicles. From delivering pure vanilla flavoured index matching properties, the sector has mushroomed out into all manner of potential returns, with gearing, specialist sectors, commodities and even inverse performance all now available. The very same rocket scientists in the investment banks that brought you collateralised debt obligations now appear to be hard at work devising ever more complex means of providing portfolio diversification.

What concerns me in all of this is the apparent lack of understanding by the investment public (and some of their

TOO MANY PEOPLE SEEM TO BE BLIND TO THE IMPORTANT DETAILS, SAYS BRIAN TORA



JM Finn.indd 32 23/07/2012 10:57

DO YOU REALLY KNOW WHAT YOU’RE BUYING?advisers, I suspect) of how these products work. It puts me in mind of the early days of retail index tracking funds – something with which I was intimately acquainted. Having failed to bring the fi rst UK Index tracker to market, the unit trust group for which I was marketing director

endeavoured to make up lost ground by launching a range of index matching funds.

A Tiger by the TailIncluded amongst these was a so-called Tiger Tracker. Designed to match the combined performance of seven Far Eastern markets, it used derivatives to assist in exposure and had built in a wide margin of tracking error. This was just as well, because the fund consistently underperformed its benchmark during its early months of existence. Mind you, no one complained. But if you think about it, calculating a market-weighted composite index would have been beyond most private investors back in the 1980s. It probably is today, too.

So beware of what you buy for your clients. Indices are dynamic and change in composition. And simple concepts, like tracking an index, can be delivered in a variety of ways. Perhaps most important, nothing – not even the security of the banking system – comes with a cast iron guarantee. Investing was never designed to be easy. But then, we wouldn’t all have a job if it was.

*As we pay all running costs out of our AMC, we expect that our AMC will be the same as our TER. This advertisement is directed at investment professionals in the UK only and should not be distributed to retail investors. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2011 Vanguard Asset Management, Limited. All rights reserved. UK11/0882/0911

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www.IFAmagazine.com


JM Finn.indd 33 23/07/2012 10:57

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“It would be so nice if something made sense for a change”



Guest Insight - Artemis.indd 34 23/07/2012 11:03

Ah, the comforts to be gained by studying history. Why, just think...

In 1923, it took 4.2 trillion Deutschemarks to buy one US dollar. Yet the Reich recovered. In 1952, when our second Queen Elizabeth ascended, an average acre of English farmland cost £56. That fi gure is now £6,156, a rise (give or take) of 10,000%. Yes, in the long run we’re all dead. But regression, and then recovery, endure.

And so, as the intractable meets the interminable and Europe’s crisis continues, we consider the predictive powers of the past.

■ Latin American Debt Crisis (early 1980s).In the ‘60s and ‘70s, Brazil, Argentina and Mexico borrowed huge amounts for industrialisation and infrastructure. Then in the early 1980s oil went up and growth came down. Enter the IMF and austerity. Most of Latin America has prospered greatly since.

■ International Banking Crisis (late 1980s).After Lat Am’s defaults, contagion. Enter Brady Bonds, allowing commercial banks to change their claims on developing countries into tradable instruments. Thus began the market for emerging debt.

■ US S&L Crisis (early 1990s). The “thrift” industry (essentially, mutually owned mortgage banks) was deregulated in 1980. Disaster. Enter the Resolution Trust Corporation, which “resolved” 747 thrifts with $394 billion in assets.

■ Swedish Banking Crisis (early 1990s). A bank-fi nanced real estate bubble burst. Sounds familiar? But this time, in 1992, the government forced the banks to write down their losses and issue warrants to the government. Distressed assets were sold through a new agency. Unemployment rose from 2% at the start of 1990 to 12.6% in June 1993 – and down again.

GU

EST INSIG

HTALICE

IN SQUANDERLANDTHE TALE IN EUROPE MAY LEAVE A BAD TASTE, SAYS DICK TURPIN, MANAGING DIRECTOR OF ARTEMIS FUND MANAGERS. BUT SOME SHARES STILL LOOK GOOD ENOUGH TO EAT

■ Asian Debt Crisis (1997-1998). The Thai baht in virulent batter. Enter the IMF (again), this time with a “structural adjustment package” (SAP), aka extreme austerity. The results speak for themselves. For example, from its high of 16,673 on 8 August 1997, the Hang Seng Index fell by over 60% to 6,660 – and then climbed by over 375% (to 31,638) in the next decade.

Down the Rabbit Hole We could go on, but we won’t. Our point is that, by contrast, Europe’s emollient leaders seem to be following, if any, the indecisive Japanese model. Perhaps they have no choice. This time there is little or not enough vigour elsewhere in the world to make up for real austerity in Europe; and the banking system epitomises the dangers of that hideous neologism, “interconnectedness”.

So? It’s either a major melt-down or – and happily, we think this much more likely – more muddle-through. We agree with former US Treasury Secretary Lawrence Summers: “Not all problems can be solved. It is not certain that the full repayment of all currently contracted sovereign debts, sustainable growth for all and the eurozone retaining all its current members will be feasible.”

There will be, no doubt, more “solutions” of increasingly brief longevity. The IMF can call all it likes for “a banking union and more fi scal integration.” But the Euromess is all but as complex as computing’s non-polynomial problems. Resolution is far from impossible. That said, it will take years.

The Sea of TearsMeanwhile, the biggest risk we can see out there is, simply, debt: the developed world’s net income and gross habits. The amount of eurozone sovereign bonds that need to be issued to service public debt and fund spending is expected to reach €794 billion this year. As Ronald Reagan said, “A billion here, a billion there, and pretty soon you’re talking real money.”



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At the end of last year, US treasury debt was a record $15.2 trillion. The labour force was 153.9

million. So each American worker (employed and unemployed) holds a record $98,925 of this debt, while employed workers hold a record $108,125. We learned recently that there is, apparently, $53 trillion in global dollar-denominated debt out there – but a total money supply of only $2.7 trillion in circulation. Would you buy a $20 dollar bill for $392?

Italians evaded €120 billion in taxes in 2010 – almost four times the savings that Mr Monti’s ‘austerity package’ is meant to achieve. Act. Cut. Do. Such imperatives, even optimists must admit, are not inherently Italian.

Another 120 billion, this time in sterling, is what the UK government will have to borrow this year to make up the difference between its income and expenditure. Meanwhile the hapless taxpayer picks up the £6 billion “overspend” at the MoD on projects running, in aggregate, 26 years late.

Thus (too) many still draw deeply on the teats of the state. The result is that our total national indebtedness exceeds £1 trillion. And although it already owns around a third of all UK gilts, the Bank of England has produced another £50 billion of fi nancial alchemy. Does it really sound better as quantitative easing?

The European Central Bank’s name for the same thing, of course, is Long Term Refi nancing Operation (LTRO, aka “Love the Risk On”.) When you add its €529.5 billion in March to the €489 billion doled out in December last year, European banks have taken over €1 trillion from LTRO at (or around) a handy 1%. To put this into context, €1 trillion would be enough to buy every major bank and fi nance house in Europe, and still have about €300 billion left to buy most of the big American banks.

The Mock Turtle’s Story It is, in short, a lot of money; Alice in Squanderland; beyond the interstices of intelligence. And its contribution to a “solution” to the Euromess? Perished as though it had never been.

Well, it’s a funny old world, which never ceases to surprise. The red-brick cornershop on Grantham’s Broad Street, where one Margaret Thatcher grew up, is now a chiropractic centre and “holistic retreat”. The sole Japanese passenger on board the Titanic, a civil servant called Masabumi Hosono, survived – only to be sacked when he got home for the dishonour of being alive.

But it’s certainly one in which there are stocks – and certain bonds – to buy and hold. In an uncertain world, we are sure of at least one thing: we would rather own a sound equity paying a sustainable dividend than most supposedly ‘risk-free’ government bonds. The question isn’t whether these stocks and shares will reward patient investors, but when.

We own, at any one time, around 1,000 stocks and 140 (mostly corporate) bonds. What strikes us,

on the whole, is how healthy they are. That doesn’t mean that the market prices them correctly. It does mean that it might, or even will, in time. We note that the cash balances of FTSE 350 companies, ex-fi nancials, stood in aggregate at a total of £160 billion in cash at the end of each quarter last year. Companies in general have learned the lessons of 2008. Their exemplary management of their balance sheets is not yet, we reckon, ‘in the price’.

Cash-rich companies do what? Apple’s recent and inaugural dividend is at one end of the scale. Option 2, of course, is M&A. In short, corporate Darwinism is alive and well. Come bull or bear some companies will not only survive, but thrive. We have been (re-)considering the lessons from such fi ne works as The Triumph of the Optimists or Anatomy of the Bear. Forecasting the economic cycle may be fascinating; but it is unlikely to make you money. Good equity market returns are primarily the result of low starting valuations.

For those, and although of course it could fall, the price/earnings (p/e) ratio on the UK market is down to around 10. Since 1965, that ratio has reached over 20 (in 1968/69 and 1999/2000). Other than the low of 1974, when it fell to 3.2, the p/e has rarely traded below 8 and has averaged over 14. So, on most defi nitions, the equity market is currently cheap and gilts are expensive. It was probably time for a decent rally. And after a torrid few years, investors could be forgiven for thinking that we all deserve a further rally – or even more.


www.IFAmagazine.com

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The Xafinity SIPP is a “full” SIPP product aimed at more sophisticated investors who

wish to maximise investment choice through all acceptable investment types.

This includes commercial property (where we specialise, with over 900 in

our SSAS and SIPP portfolio), unlisted shares and other investment types.

n £0 SIPP Set up fee

n Annual fee of 0.24% of SIPP assets held. Minimum annual fee of £162pa, maximum fee of £530pa

n Additional fees apply for establishment and administration of new investments eg commercial property

n No additional fees for VAT administration & borrowing administration on property/land

n Flexible & Capped Drawdown fees at £120 for set up and £11 per regular payment

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200_Sipp_ad.indd 1 27/2/12 11:06:41Guest Insight - Artemis.indd 37 23/07/2012 11:03

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FISHING IN THE IFA TALENT POOLEMPLOYMENT DISPUTES AND BREACH OF CONTRACT CASES ARE ON THE RISE, SAYS STEVE

GOODRHAM, PARTNER AND HEAD OF COMMERCIAL DISPUTE RESOLUTION

AT LAWYERS GATELEYPoor redundancy strategies, combined with an increased demand for key personnel to provide businesses with a competitive edge, have led to an outright war for talent in the IFA sector recently. Our research at Gateley shows a signifi cant rise in cases being brought against people who breach the terms of their employment contracts when joining rival companies. But interestingly, there has also been a marked increase in cases where not only have specifi c individuals been targeted, but entire teams.

Once I caught a fi sh alive As you’d expect, business heads understand the need to invest in top talent, even against a backdrop of economic uncertainty. Inevitably, this has led to more senior-level hires and, equally inevitably, a spike in poaching from the competitor talent pool.

And nowhere more so than in highly competitive fi elds, like the IFA market, where talent and personal relationships are at a particular premium. As such, IFA businesses need to take a fi rmer stance in protecting their interests and enforcing restrictive covenant clauses. If not, they could leave themselves open to losing important clients as they move across with ex-employees.

“IFA businesses need to take a fi rmer stance in protecting their interests and enforcing restrictive covenant clauses. If not, they could leave themselves open to losing important clients”Steve Goodrham gives notice to all IFA businesses



Inside Track - Gateley.indd 38 23/07/2012 11:10

Then I let it go again The instability resulting from the increase in organisational restructuring has left many employees feeling vulnerable and demotivated. If you factor in pay freezes and salary cuts that are still being implemented in some companies, then you can see why businesses are fi nding themselves more exposed than ever to competitor approaches towards their staff.

There are a number of steps businesses can take to ensure that their commercial interests are better protected in future - such as ensuring well-drafted restrictive convenants are included in employment contracts from the outset, and tightly drafted gardening leave clauses are built in to limit competitive damage. However, a business that feels an employee is already in breach of post-termination obligations, such as restrictive covenants, should seek legal advice quickly.

In the well-publicised Towry case heard earlier this year, a wealth manager was ordered to pay full costs after a judge found that its advisers had not broken non-solicitation clauses when leaving the fi rm. The response in the marketplace was that restrictive covenants in advisers’

employment contracts will continue to be enforced despite the High

Court loss. The key point to come out of the case was that they will

need to be carefully drafted to avoid

having no legal benefi t.

Why did you let it go?The law dictates that all clauses must be deemed reasonable. And tt must also be remembered that restrictive covenants should be designed to protect employees, employers and clients too. So all parties need to read and understand their contracts, make sure that they adhere to them, and ensure that clients will not be disadvantaged as a result of any contract terms.

Commercially, it does not make sense to hold a client against their will and, in exceptional circumstances, it can make better sense for the IFA fi rm to concentrate efforts on keeping the existing client happy, rather than chasing after the adviser who has left the business.

It’s also worth considering that employees may not realise that what they’re doing is wrong! Because a relationship between an IFA and a client is so personal, the adviser can easily overlook the fact that he’s doing something he’s not legally entitled to do by taking ‘his’ clients with him to another fi rm. For his employer, sometimes just fl agging up the terms in the employment contract can put a pretty sharp stop to the issue.

Individual advisers also need to put themselves in the position of their employers, if they are subject to an approach from a competitor. It’s likely that the employer has invested heavily in training, infrastructure and creating a support team that has all led to the development of a book of business. And, to avoid confusion, it’s crucial that clients understand that the advice they receive is the fi rm’s and not specifi cally the individual they deal with.

Because it bit my fi nger so It’s vital to strike while the iron’s hot, if your employee is in breach of restrictive covenants within his contract, and employers should not be put off from pursuing a claim. The most effective legal option available to an employer is to obtain an interim injunction which prevents the ex-employee from working for a competitor, and from soliciting customers or staff for the duration of any non-compete covenant. But this must be done without delay.

Businesses and individuals alike need to seek high quality legal advice as soon as possible and not act in a way that could cause further complications down the line.

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www.IFAmagazine.com



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As far as global markets are concerned, many investors are currently talking about groundhog year – a period that’s defi ned by global markets falling on concerns over slower global growth, the euro sovereign debt crisis and less accommodative bank policy. H1 2012, they say, is starting to look very much like H1 2011.

Certainly, the economic headwinds and challenges being faced by Europe and the US have a direct impact on Asia through demand for the region’s exports. This, combined with concerns over the pace of slowdown in China, has seen Asian markets hit hard.

Better News on Earnings and Infl ation But when we look at Asia, we fi nd that there are some key differences between where we are now and where

we were last year. Back in mid- 2011, rising infl ation was the big issue for domestic Asia, with interest rates either high or rising, and with other tightening measures putting pressure on markets. Today, however, we are operating against a backdrop of falling infl ation, which may open the way for interest rates cuts and other stimulus. From this perspective – as far as Asia is concerned – we are at a much better stage of the cycle than we were last year.

Another difference is that earnings expectations for this year are much more

reasonable that they used to be. If we look back at 2011, calendar-

year earnings growth expectations were in the mid to high teens,

which was far too high for comfort. Today,

however, we’ve got single-digit expectations

in view for 2012.

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THE WAY TO GODIVIDEND-YIELD STRATEGIES CONTINUE TO BE AMONG THE STRONGEST PERFORMING EQUITY STRATEGIES IN THE ASIAN REGION, SAYS RICHARD SENNITT, MANAGER OF THE SCHRODER ASIAN INCOME FUND


Guest Insight - Schroders.indd 41 23/07/2012 11:13

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This means that, although earnings revisions are likely to remain downward in the near

term, the size of earnings disappointments is likely to be smaller. On top of this, valuations are now supportive - not far off their lows, and at levels which historically have proven to be an attractive entry point for the longer term investor.

China WorriesThe China slowdown and the outlook for the economy remain a major risk for the region. Growth in China has been slowing - which is no surprise, and which is what the authorities actually wanted, given the tightening policies which they have been pursuing since 2010. And now, with infl ation starting to fall, we are in position to see easing measures coming through.

Indeed, that is exactly what we have started to see. But we do not expect the sort of stimulus we saw in 2008, and therefore we remain cautious on the outlook for growth. Clearly, a hard landing in China would be very negative - but we believe that there are a number of levers that still can be pulled from both a fi scal and monetary perspective to help soften that landing.

The Charms of an Income Strategy Given the current uncertain backdrop, we think that an income approach is a very souand way to get exposure to the region. It typically means investing in companies with better than average balance sheets and cashfl ow characteristics, which generally means that the overall volatility of income stocks remains lower than the broader market.

Contrary to popular perception, investing in Asia is not all about chasing growth stocks – indeed, if you look at the broader Asian market, nearly 50% of the market’s total return has come from the reinvestment of dividends.

Moreover, for an investor with large UK income exposure, Asian income can be an important source of diversifi cation.

Asia is particularly well blessed with dividend paying stocks - meaning that yield is not concentrated among just a handful of stocks. And, although Asian companies make up around only 12% of global market capitalisation, you’d fi nd that things look rather different if you were to focus on stocks that yield more than 4%. About 32% of the global total are in Asia (excl Japan). Obviously, for an active investor, this gives me a great opportunity set from which to choose.

Economies to Watch From a regional point of view, we like the economies of the ASEAN group. [The Association of South East Asian Nations, comprising Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam.] Companies in these markets have been quite disciplined in their spending, with investment to GDP still at a reasonable level. However, performance in these countries has been so strong that we have now started to lock in profi ts across the smaller markets including Thailand and the Philippines, as valuations now look less attractive. Overall, we still like ASEAN longer term as it represents a very big potential economic unit. For a lot of companies across the region, the Asian crisis of the late 90s is still at the forefront of their minds. Asian corporates are now more cautious as a result leaving the debt to equity in the region at a low level versus history.

Elsewhere, we are relatively modestly weighted in Korea, which is traditionally a low-dividend paying corporate sector. For this reason, Korea remains our biggest underweight position - and this is unlikely to change any time soon.

India is also a market where dividend-paying opportunities are fairly thin

on the ground. But in the rest of the region good yields are on offer.

Furthermore, pay-out ratios for the region are now back to pre-fi nancial crisis lows, indicating that

even if earnings do come down, there is no immediate need for companies

to slash dividends. During the height of




the global fi nancial crisis, companies worked hard to defend their dividends - a clear indicator of how the dividend culture has progressed in the region.

Cautious on Australia and ChinaWe continue to be cautious on Australia, as the domestic consumer has been weighed down by high interest rates. It is a market we are still watching closely, however, because the recent rate cuts could ease pressure on consumers and make the area look a bit more interesting during the second half of this year. Conversely, however,the weakening of the currency could introduce new risk.

We are also very cautious about China, mainly because of the lack of visibility in the corporate sector and the limited number of income ideas that we are fi nding in the market. Instead, our current bias is towards Hong Kong, where we’ve been spotting some attractive opportunities in names that have been sold down.

Over the last six months, we have been nudging the portfolio away from the traditional dividend-paying sectors into names that have been depressed despite a strong long-term outlook. These are the kind of stocks that offer strong income as well as good capital growth potential.

Sectors to WatchIn terms of sectors, telecommunications tends to be where investors go to fi nd stable dividends. While we maintain a strong exposure to the telecoms sector within the fund, we have begun taking profi ts in telecoms that have performed well over the last year. This has allowed us to take advantage of depressed stocks across the industrial and consumer discretionary sectors where value has begun to emerge.

In Hong Kong, in particular, we are pinpointing some good-quality industrials trading at attractive valuations. While the fund is currently neutral information technology, we have been watching this sector closely for a while, and the recent spate of earnings downgrades

has created some compelling opportunities for us to buy into our favoured names.

Another sector we have our eyes on is materials. This, historically, has been one of our biggest underweights – and yet the sector’s recent collapse has seen stocks now starting to discount much more reasonable long term commodity prices. Thus, we have been tentatively adding.

OutlookValuations in Asia have now reached levels that have historically been a good buying environment for Asian investors. However, with fear overriding all other emotions in the market, short-term performance is impossible to call.

Investors should therefore focus on companies with internally generated cash fl ows, which would help shield them from any short-term turbulence emanating from the global economy. Overall in the longer term, we are confi dent that from current market levels, there is a very good potential to make signifi cant gains in Asia.

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The challenges being faced in

Europe and the US are having a direct

impact on Asia through demand

for the region’s exports



THE LONG AND THE SHORT OF ITMy diary’s a complete joke. Not of the “I used to be a werewolf, but I’m alright now-w-w-w-w-w-w!” variety, but a real joke. All over the weekend, I’ve been looking at my diary on my Blackberry and wondering what “IFAMAD!” meant, and I couldn’t for the life of me remember. It turns out to mean “IFA Magazine – Absolute Deadline!”, which I now recall quite clearly following the editor’s panic-stricken (and I thought unnecessarily accusatory phone call), that just jarred my memory. (Who, me? Ed.)

Obviously I told him I’d written it ages ago and can’t believe I hadn’t sent it, etc, etc. But the truth is that I’ve now bought myself only minutes of leeway before he gets back on the phone again, what with this apparently being the second time in as many months that I’ve been solely responsible for holding up the entire publication run. (I’ll get you for this. Ed.)

GSIPPS? OMPPS? PADAS? QWPS? ROFL, STEVE BEE’S GONE ALL OTT ON US

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A Private Language So here goes with some typically incisive musings as to why acronyms are not always particularly useful in the pensions industry. You see, the trouble with acronyms (like the aforesaid IFAMAD!, for example) is that they are pretty much meaningless to non-initiated outsiders. As my wife said only yesterday when I asked her if she could think what this latest enigma in my diary might mean: “No, but then, why should I?” Which is, of course, a very valid point.

On the way to the offi ce this morning, I was reading an article about the way GPPs and DC MPPs are differently regulated by the FSA and the TPR. It was making the point that NEST (the scheme implemented by PADA if you remember (but not called PA after all)) is a default QWPS, but QWPSs can be contract-based GPPs whereas the NEST scheme is a trust-based OMPPS.



Steve Bee.indd 44 23/07/2012 11:16

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This whole thing has RDR implications, as you can probably imagine. It gets more complex if a SSAS or an EPP are used as a QWPS (both of which are OMPPSs, of course, but where special regulatory rules apply), which they can be, or a SIPP or more likely a GSIPP (which are both GPP’s really, but not really regulatory-wise) are used as a QWPS. The whole thing gets stratospheric in combinations and ramifi cations on the regulatory front once the PA2008 AE regs kick in. I mean, should we have one regulator for AE schemes or two (or three for that matter)?

Newbies Start HereAnd that’s the point really. If you’re reading this and you thought “One would be better than two”, or “I can see why

Steve Bee, a well-known campaigning pensions activist, is the managing pensions partner at Paradigm and the co-founder ofwww.jargonfree pensions.co.uk

two, or even more are necessary and all we need are consistent guidelines so it’s apparent to all parties concerned” then I’m guessing you’re as hopelessly caught up in this pensionspeak as I am. And I’ll never convince you that acronyms are getting in the way of our ability to communicate.

If, on the other hand, you instantly thought “Whaaaaat.....?” on reading it then you’re either a normal person or new to fi nancial services and therefore still have time to be saved. So, if you are normal or a newbie

to the industry, I wonder if I can invite you to join PAAA (the Pensions

Anti-Acronym Association), we’ll be having our fi rst meeting any day now;

I’ve just jotted ‘PAAAMTG – to arrange’ in my diary so I don’t forget...


T

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Steve Bee.indd 45 23/07/2012 11:20

HIGH HOPESYOU THINK THE MORTGAGE MARKET IS DEAD? EMMA-LOU MONTGOMERY BEGS TO DIFFERThere’s no question that the mortgage market has been in the doldrums for five years. With house sales now almost 40% lower than at the peak of the boom, the majority of private borrowers have either gone it alone, plumping for any deal they can get their hands on, or given up on getting a mortgage at all as picky lenders have continually raised the bar.

All of which is leaving advisers with something of a conundrum – and a distinct lack of clients. According to the Royal Institution of Chartered Surveyors, the average number of completed sales per surveyor during May was just 15.6 – representing an almost 40% drop from May 2007’s figure of 25.4. Frightening.

Pressure on AdvisersPeter Bolton King, RICS Global Residential Director, says the fall in the number of completions is little surprise at all. “Ongoing economic instability in the UK and overseas has continued to undermine consumer confidence,” he says, “and the reluctance of many banks to offer affordable mortgage products has created something of a stagnant market.”

While the Council of Mortgage Lenders insists that 81% of British adults hope to be homeowners in ten years’ time, and 74% aspire to it within two years, given the economic climate, anyone could be forgiven for thinking that that’s an unlikely scenario. Interest in first-time buying advice fell from 39% in April to 38% in May, and by the time you’ve

added in the fact that so many lenders seem reluctant to lend (a function not just of the Mortgage Marketing Review but of the squeeze on banks’ capital ratio requirements), you’ve got a real problem for borrowers and advisers alike.

It’s even less of a surprise, then, that so many erstwhile mortgage advisers have given up on the sector and opted to focus their businesses on more lucrative and easier-to-come by business instead - such as pensions, for instance. Six out of ten independent advisers and intermediaries I contacted for comment said they were not currently advising clients on mortgages.

And that situation’s not likely to change any time soon. We are still operating in a tumultuous economic environment. Average mortgage rates have shot up by around 0.5% in the last six months - in response, partly, to problems caused by the Eurozone crisis. And let’s not forget the massive hike in fees for fixed and tracker mortgage products that have increased by over 20% since September 2009.

Taking a StandFor intermediaries working in this difficult area, it’s been a case of shape up to the new regime or else ship out to friendlier pastures, such as pensions. But JF Financial Associates, a St Albans-based adviser, is one of the



Mortgages.indd 46 23/07/2012 11:22

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handful of hardy warriors who are taking up the cudgels for the less well-heeled as well as the relatively affl uent. And little could JF’s founder Justin Fordham have known, when he started operating in this sector of the market nine years ago, that he’d end up campaigning so prominently in the battle for mortgage equality.

“In 2007, when the credit crunch hit,” says Fordham, “essentially there was a knee-jerk reaction with everybody pulling their rates out of the market.” But, not content to stand by and watch the inevitable happen, Fordham has started something of a private campaign to get the industry to wake and see that something needs to be done - and sooner rather than later.

Indeed, he’s done more than that. Fordham has taken the courageous decision to position his mortgage business in what is undoubtedly the toughest sector of the industry. Dealing specifi cally with clients who have fi nancial problems, county court judgments and debt management plans, which makes them highly undesirable to the majority of lenders, he has found himself a lucrative niche. “I’m trying to get the industry to understand that these people who have debt management plans have held up their hands and said look I’ve got into trouble, but we need help here,” he explains.

“Really we should be looking at helping these clients. More so now than ever before.

I’ve been speaking to the lenders that have pulled out of the market, saying listen guys, we need to look into it now.”

“Someone who’s been

on a debt management plan for an extended period of time has shown their commitment to it. Surely we should be looking at offering those clients a fi xed rate mortgage to continue the stability they’ve got, so they can continue to pay their debts back?”

The process might start by arranging a meeting with a lender to look at the client’s profi le. Eventually the ultimate result will be to get them back to the high street lenders, and to get their borrowing records back on track.”

The Coming Rate ShockCreditworthiness aside, the other proverbial elephant in the room is, of course, interest rates. Even among the most creditworthy of borrowers, the inevitable rise in

With house sales now almost 40% lower than at the peak of the boom,

the majority of private borrowers have either gone it alone or given

up on getting a mortgage at all


Mortgages.indd 47 23/07/2012 11:23

interest rates is a concern. Thousands of borrowers who might once have favoured multi-year

fi xes have been taking a fl ier on base rate trackers instead. But, with the base rate left unchanged for such a long time, how does an adviser drum up interest in switching back to fi xed rate deals when the current incentives to do so are so low?

As Fordham says: “Inevitably, the base rate is going to go up. All these clients have gone on to variable rates. And when rates are low, as at the moment, their household budgets are based heavily on their mortgage payments.”

“What concerns me at this point is that, if the rates do start moving up, which inevitably they will do, these clients may not be able to get themselves into a fi xed rate deal to continue with the stability in their budget. The mortgage payments will go up, and that throws their debt management

plan off track - potentially sparking

default. It’s almost an accident waiting to happen.”Indeed, we’ve already seen a number of

lenders, including Halifax, Bank of Ireland, Yorkshire and Clydesdale Banks, RBS and Co-operative Bank, increasing their standard variable rates - leaving over a million borrowers with higher mortgage payments.

“If the rates move, that has a knock-on effect for some of the clients I work with,” says Fordham. “And there’s no reason for it. Clients come to me saying: ‘Our payments have just shot up by £100, £200 a month and I can’t afford it.’ And all of a sudden that starts to have a serious knock-on effect on their debt management plans. I think the banks are being very short-sighted by ignoring it.”

Karen Barrett, chief executive of unbiased.co.uk, agrees. “Although current mortgage rates are still signifi cantly lower than they were

fi ve years ago,” she says, “a small percentage tweak here or there

can make a big difference to your overall expenditure.”

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Mortgages.indd 48 23/07/2012 11:25


www.IFAmagazine.com

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“Although current mortgage rates are lower than they were fi ve years

ago, a small percentage tweak can make a big difference”

Adding Value to the Client ServiceAdvisers can add value to their client relationships simply by making quite sure that clients understand exactly what mortgage products they are looking at, says Michelle Ford, of Surrey-based JML (Financial) Associates.

Ford, who has continued to specialise in mortgage broking despite the diffi cult economic climate, insists that it’s that specialist knowledge that can provide experienced advisers with business. “We sell our services on expertise in the mortgage market,” she says. “Knowing the lenders’ criteria, and whether they would lend to a borrower before any credit search is done. Research is the key. And the best rate is not always the cheapest. We even compare the ‘direct deal’ they have already been offered, and check whether the direct-deal lender will actually lend on their income. If they will, we will advise them to go to that lender instead.”

Advisers can also win business by showing clients new ways to get onto the property ladder. Statistics show that since 2007 nearly a million more people between the ages of 20 and 34 have been forced, usually for fi nancial reasons, to live at home. But there are new products launching that are aimed at giving customers alternative ways into the traditional mortgage market. For instance, Woolwich mortgages from Barclays has created a new mortgage scheme called Helpful Start which has a family affordability plan, allowing parents to help their children with loan affordability.

Slowly but surely, the number of lenders are also directly providing mortgages via intermediaries is picking up. Abbey for Intermediaries has a fi ve-year fi x for homebuyers at 3.99% and a £995 fee and a 5-year fi x for those who want to remortgage at 4.09%, also plus a £995 fee. It has also increased the LTV to 70% on a number of our fi xed rate homebuyer products. And NatWest Intermediary Solutions says it has reduced the rates on its 60% LTV two-year fi xed rate deals in its core and corporate ranges.

A Prod From The Chancellor Of course, the hope is that the mortgage industry will see something of a revival – or even an outright boom - if the ambitious scheme to boost mortgage lending, recently announced by the Chancellor and the Governor of the Bank of England should come to fruition. (Briefl y, the plan, announced in the Mansion House speech, is that £80 million of new BoE money could support up to £80 billion worth of new loans, mainly by incentivising lenders to extend their lending and to increase loan valuation ratios.)

It’s still early days, but as we went to press there were signs that the market indeed might be picking up. First-time buyer numbers climbed during May, following the April dip, as the number of valuations for fi rst-time buyers showed an 8% month on month rise and a 12% increase compared to May 2011.

But there are also stirrings in other sectors of the property markets too. Remember good old buy-to-let? Figures show that those seeking buy-to-let advice increased from 19% in April to 21% in May and the number of searches were 1% above average compared to monthly numbers

of enquiries over the last 12 months. We can but hope that the fi gures

from June onwards continue to display a similarly upbeat

pattern. Here‘s to more of the same.


Mortgages.indd 49 23/07/2012 11:25

LIKE...YOU THINK THE FLAT-ON-ITS-FACEBOOK LAUNCH MARKED A NADIR FOR TECH FUNDS? NICK SUDBURY THINKS DIFFERENTLY

Henderson Global Technology You won’t have missed the fact that the last few months have been pretty diffi cult for tech shares – a trend that’s also been refl ected in the performance of the specialist funds that invest in them. These high-beta stocks are some of the most volatile in the market, and suffer more than most when the prevailing sentiment turns bearish. But maybe that’s just a contrarian way of telling us that this is a good point to buy?

For all kinds of reasons it’ll be clear that a tech fund won’t suit everyone. But history suggests that clients who can tolerate the high volatility may well

be rewarded by decent long-term returns. This would certainly have been the case for anyone who invested in Henderson Global Technology. Despite all the ups and downs, it has achieved an impressive 5 year gain of 49.9%.

The fund aims to provide capital growth by investing in companies from around the world that derive their profi ts from

technology. As you’d probably expect, there’s a very large US bias - with 73% of the £386 million portfolio currently invested in America. The

performance of the local economy will obviously have a big infl uence

on these companies, but it should be remembered that a high percentage

of their revenues are generated abroad. Given the relatively small universe of stocks

to choose from, it is no great surprise that the largest holdings include

the likes of Apple, Microsoft, IBM and

Google. The top ten of these account for just over half

of the fund, with another 61 making up the balance. There is no real sub-sector bias: software companies, semiconductor producers, computer makers and IT service providers all have similar weightings.

Henderson’s managers believe that their main strength is the ability to identify companies with under-appreciated growth and barriers to entry. They think that these characteristics, combined with the gradual increase of technology’s share of spending within the overall economy, should provide an attractive risk/reward trade-off for long-term investors.

There’s no getting away from the fact that consumers cut back on their IT spending when they are concerned about the future. This explains the periodic sharp pullbacks in the unit price, but you’ll also notice that they’ve not been enough to derail the overall uptrend. Clients with a long-term view may fi nd that the recent sell-off turns out to be a good entry point.

FUND FACTSName: Henderson Global Technology

Type: UK OEIC

Sector: Tech & Telecoms

Fund Size: £386m

Launch: Oct 1984

Yield: n/a

Charges: Initial: 5% Annual: 1.5%

Manager: Henderson Global Investors

Website: henderson.com

A Buy Moment

Given the small universe of stocks to pick from, it’s no surprise the largest holdings include Apple, Microsoft, IBM and Google

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Product Reviews.indd 50 23/07/2012 11:28

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An extensive portfolio with over 260 individual holdings – yet, as with Henderson’s fund, it is dominated by the real mega caps

iShares S&P North American Technology Sector Index (IGM) The cheapest way to invest in tech is usually to buy a sector ETF. There are several that trade in London, but they are all relatively new and on the small side, and so the safer option is to go for one of the more established vehicles that are listed on the NYSE. These US funds provide plenty of choice and liquidity, and they track many different indices.

One of the broader examples of these tech funds is the iShares S&P North American Technology Sector Index ETF, whose benchmark is designed to capture the performance of US listed tech stocks. These are fairly evenly divided between Software and IT services, with additional exposure to computer makers, semiconductors and communications equipment.

It is an extensive portfolio with over 260 individual holdings – yet, as with Henderson’s fund, it is dominated by the real mega caps. The largest of these is Apple with a weighting of 8.56%, followed by Microsoft at 8.53% and IBM at 8.52%. Taken together, the top 10 stocks account for 54% of the iShares fund.

The ETF was launched in March 2001, which was rather unfortunate timing because the sector was still in sharp decline following the bursting of the dot com bubble. It then rallied with the rest of the markets before suffering another heavy sell-off during the credit crunch of 2008/09. Since then, the fund has bounced back strongly - but because it had missed out on the early boom years it has scored only a deceptively small 16% dollar growth during its whole 11 year history. (Rather more in sterling terms.)

option is to go for one of the more established vehicles that are listed on the NYSE. These US

tech funds is the iShares S&P North American Technology Sector Index ETF, whose benchmark

US listed tech stocks. These are fairly evenly

with additional exposure to computer makers, semiconductors and communications equipment.

It is an extensive portfolio with over 260 individual holdings – yet, as with Henderson’s

The largest of these is Apple with a weighting of 8.56%, followed by Microsoft at 8.53% and

The ETF was launched in March 2001, which was rather unfortunate timing because the sector was still in sharp decline following the bursting of the dot com bubble. It then rallied

another heavy sell-off during the credit crunch of 2008/09. Since then, the fund has bounced back strongly - but because it had missed out on the early boom years it has scored only a deceptively

year history. (Rather more in sterling terms.)

iShares S&P North American Technology Sector Index has a chunky AUM of $402m, and it is also reasonable value in terms of costs, with a TER of 0.48%. It pays out a yield of about half a percent.

In a specialist area like technology, a good active manager should be able to add enough value to more than compensate for the higher management fees. An ETF is probably best used for a more tactical exposure to try to take advantage of the sharp upswings in the sector. Timing the market like this is incredibly diffi cult - but those who get it right are likely to be well rewarded for their efforts.

Big Hitters

FUND FACTSName: iShares S&P North American Technology Sector Index (IGM)

Type: ETF listedin the US

Sector: US Technology

Fund Size: $402m

Launch: Mar 2001

Distribution Yeild: 0.57%

Manager: BlackRock

TER: 0.48%

Website: uk.ishares.com



AXA Framlington Biotech Clients who want a more focused source of long-term growth might be well advised to consider a biotech fund, as distinct from the hardware/software emphases that we’ve seen so far. Although correlated with the wider tech sector, these funds tend to be driven more by stock specifi c factors like the results of clinical trials and M&A activity.

One option that fi ts the bill is AXA Framlington Biotech. This has been around for more than a decade and has built up a decent track record with a 5 year return of around 57%. The manager, Gemma Game, invests in companies in the global biotech sector, as well as those involved with genomic and medical research. Most are based in the US with 90% of the portfolio listed in America.

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There has been a recent fl urry of M&A activity which has helped the sector to outperform the wider market

Despite the cutting-edge nature of these businesses, they tend to have more in common with the healthcare sector than the mega cap tech stocks. Fortunately Game, a former pharmacology student, has extensive experience of this specialist area.

The portfolio currently has 103 individual holdings with the top 10 accounting for just over 50% of the fund. In terms of the sub sectors, the biggest exposure is the 70% investment in Biotech Product, with most of the balance split between Devices and Drug Delivery. The largest company weightings are in Regeneron Pharma, Amgen and Alexion Pharmaceuticals.

There has been a recent fl urry of M&A activity which has helped the sector to outperform the wider market. The manager believes that this is set to continue, and that it will give it the edge over other industries. Other than that, she expects the performance to be driven by the results of a number of clinical trials that are due out in the next few months.

Not all of these companies will succeed, but those that do are highly likely to be bought out. This means that you are largely dependent on the stock picking skills of the fund manager to compensate for the risk. Game, who took over in October 2007, has established a decent record which bodes well for the future. The main drawback is that because of the small, specialist nature of the fund it has slightly higher initial and annual charges.

FUND FACTSName: AXA Framlington Biotech

Type: Unit trust

Sector: Specialist

Fund Size: £67.4m

Launch: Dec 2001

Portfolio Yeild: 0%

Charges: Initial: 5.5%, Annual: 1.75%

Manager: AXA Investment Managers

Website: axa-im.co.uk

Soft Tech

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In the last 10 years the NAV has increased by 40.1%, which isn’t bad given the lacklustre performance of the market as a whole

Impax Environmental Markets An alternative strategy, and one which appeals more to ethical investors, would be to invest in the technology that is designed to make the world more environmentally friendly. Many Western governments are actively promoting this area at present, and are enacting legislation to speed the process along.

Recent policies to reduce or reverse environmental damage have created a signifi cant demand for the cleaner or more effi cient delivery of basic services such as energy, water and waste. There are now more than 1400 listed companies operating in these areas with combined annual revenue of around $500 billion.

And yet, surprisingly, there are only a handful of funds that actually specialise in this sector. One shining example is Impax Environmental Markets, which says it aims to provide long-term capital growth by investing in tech companies involved in alternative energy, energy effi ciency, water treatment and pollution control.

The team at Impax look for high quality businesses with proven track records, successful management teams and solid balance sheets that are exposed to long-term growth themes. Their top 10 holdings include a Swedish producer of ground source heat pumps; a manufacturer of electric motors in America; and an Irish supplier of insulation products.

Despite this somewhat narrow remit, Impax

have put together a reasonably diversifi ed 76 stock portfolio with the largest geographic weighting being the 39% exposure to the US. The UK makes up a further 15% followed by Hong Kong at 6%.

Over the last 10 years the NAV has increased by 40.1%, which isn’t too bad given the lacklustre performance of the market as a whole. Unfortunately, however, investors have seen very little of this, with the shares sliding to an 18% discount. The board of directors has recently responded by stepping up the fund’s share buy back programme to try to narrow the gap.

Proven companies with exposure to the environmental markets should have a successful long-term future, but they are certainly not immune to an economic slowdown. The portfolio is now trading on a forward PE ratio of 13.6 times earnings, which the managers consider to be cheap given the high growth prospects. If they are right the large discount to NAV would make this a decent buying opportunity.

Green Shoots of Recovery?

FUND FACTSName: Impax Environmental Markets (IEM)

Type: Investment Co.

Sector: Environmental / Alternative Energy

Fund Size: £269.3m

Launch: Feb 2002

Portfolio Yeild: 0.94%

Manager: Impax Asset Management

TER: 1.05%

Website: impax.co.uk



FSA PublicationsOUR MONTHLY SUMMARY OF THE LATEST OFFICIAL PUBLICATIONS BY THE FSA These listings exclude the FSA’s routine monthly handbook updates.

Solvency II and Linked Long Term Insurance BusinessDiscussion Paper Ref: DP 12/229th June 2012 26 pages

Of interest to life insurance fi rms and friendly societies that write unit-linked business or have existing books of unit-linked and index-linked business. Also to fi nancial advisers and consumers with long-term polices and consumer groups.

The Paper sets out the responses that the FSA received to Consultation Paper (CP) 11/23 in 2011, and it sets out the regulator’s proposals for changes to both the rules and the guidance on the operation of unit-linked and index-linked insurance policies, to ensure that they comply with the requirements of Solvency II.

Specifi c areas tackled included:

• Removing redundant and overlapping prudential requirements covered in Solvency II;

• Maintaining rules specifi cally related to conduct regulation;

• Replacing the current list of assets in COBS 21.3 with SOLPRU 7 and a revised COBS 21.2 for institutional policyholders.

Payments to Platform Service Providers and Cash Rebates from Providers to ConsumersConsultation Paper Ref: CP12/1227th June 2012 44 pages

The Consultation Paper sets out the FSA’s policy proposals and draft rules for the Handbook, following last year’s Policy Statement PS11/9, which said that it would be desirable, in principle, to ban payments by

product providers to platforms and cash rebates to consumers.

The FSA is seeking views on:

• Preventing platforms in both the advised and non-advised market from being funded by product providers. Platforms would only be remunerated through a platform charge agreed and paid by the consumer.

• Banning cash rebates from product providers to consumers using platforms on a non-advised basis.

Consultation period ends 27th September.

Independent and Restricted AdviceFinalised Guidance Ref: FG 12/166th June 2012 18 pages

This detailed guidance, consisting of two PDF documents, follows on from the fi nal rules which were published in March 2010 in Policy Statement 10/6.

From 31 December 2012, fi rms providing advice on retail investment products to retail clients will need to describe these services as either ‘independent’ or ‘restricted’, and the FSA has also updated the rules that set out what is expected of a fi rm that describes its advice as being independent.

The fi nalised guidance paper includes a 16 page summary of common questions that have been raised by fi rms during the run-up to RDR.

Quarterly Consultation Paper No.33Consultation Paper Ref: CP 12/116th June 2012 107 pages

Topics include amendments:

• To the advanced measurement approach (AMA), giving

fi rms guidance on how to communicate AMA extensions and changes (Chapter 2);

• To the rules on the calculation of counterparty credit risk exposure values for fi nancial derivatives, securities fi nancing transactions and long settlement transactions in the Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU) (Chapter 3);

• To implement the latest review by the European Commission on amounts laid down in the Insurance and Reinsurance Directive (Chapter 4);

• To the Professional Firms sourcebook, removing a rule allowing authorised professional fi rms under fi ve designated professional bodies to carry out non-mainstream regulated activity (NMRA) without being subject to rules from those bodies (Chapter 5);

• To give the FSA powers to consider applications to become recognised auction platforms (Chapter 6);

• To extend applications in Chapter 5 of the Listing Rules sourcebook (LR) and to modify the annual notifi cation requirement for sponsors in LR 8 (Chapter 7);

• To the implementation date of Chapter 14.4 of the Conduct of Business sourcebook (COBS) and the insertion of a new Glossary defi nition (Chapter 8).

Consultation details are set out individuality within each Chapter.

Product Projections, Transfer Value Analysis and Statutory Money Purchase IllustrationsConsultation Paper Ref: CP 12/1031st May 201246 pages



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This Consultation Paper (CP) is a joint consultation between the FSA and the Financial Reporting Council (FRC). As well as updating the assumptions to be used for non-MiFID product projections and transfer value analysis (TVA), the proposed changes are designed to make our rules for personal pensions more consistent with the FRC assumptions

Of interest to life assurers and personal pension providers, and to fi rms that advise on personal pensions, transfer value analysis software providers, and employee benefi t consultancies.

The FSA is consulting on:

• Updating the mortality assumption to be used when illustrating a personal pension;

• Introducing a separate Consumer Prices Index (CPI) assumption for TVA when benefi ts under a defi ned benefi t pension scheme are compared with the possible benefi ts under a personal pension scheme; and

• Changes to the investment return assumptions (projection rates) in the Conduct of Business sourcebook (COBS).

The FRC is consulting on possible changes to the assumptions used for Statutory Money Purchase Illustrations, to make them more consistent with the FSA assumptions in COBS (amended as proposed by the FSA in the fourth chapter of the CP).

Consultation period ends 29th June (Chapter 2) and 31st August (Chapters 3 and 4) Responses to Chapter 5 should be sent direct to the FRC.

FSA Fee-Raising Arrangements and Regulatory Fees and Levies 2012/13Policy Statement Ref: PS 12/1129th May 2012214 pages

Of interest to all authorised fi rms and other bodies that pay fees to us and levies to the Financial Services Compensation Scheme (FSCS), the Financial Ombudsman Service (FOS) and the Money Advice Service, as well as potential applicants for FSA authorisation and listing by the UK Listing Authority.

Contains reports on the fi nal 2012/13 FSA periodic fees, Financial Ombudsman Service (FOS) general levy and Money Advice Service levies consulted on in CP12/3; and also on the fi nal policy changes consulted on in CP12/3.

Also includes feedback on CP12/3 and ‘made rules’.

Deposit Protection: Raising Consumer AwarenessPolicy Statement Ref: PS 12/1028th May 2012 30 pages

Of interest to all deposit takers operating in the UK, including banks, building societies and credit unions.And also to consumers and consumer representative groups

Contains fi nal rules arising from Consultation Paper 11/29 – ‘Deposit Protection: Raising Consumer Awareness’.

The FSA aims to ensure that consumers are aware of the protection their deposits with banks, building societies and credit unions will enjoy if the deposit taker fails, and to set out the limits of that protection.

To complement and strengthen existing compensation disclosure requirements aimed at raising consumer awareness, the FSA has strengthened the disclosure requirements. Specifi cally, it now requires deposit takers to prominently display stickers and posters in branches and on websites (in electronic form) explaining the compensation arrangements.

UK Implementation of Amending Directive 2010/73/EU – Simplifying the EU Prospectus and Transparency DirectivesPolicy Statement Ref: PS 12/925th May 2012 56 pages

This PS summarises the responses received by HM Treasury and the FSA to CP11/28, which discussed the UK implementation of changes to the EU Prospectus and Transparency Directives.

The policy process needed to be implemented into national legislationby 1 July 2012; accordingly, the document contains the FSA’s ‘near-fi nal’ rules.

Of interest to issuers and their professional advisers, and also to consumers and investors.

Transaction Reporting of Strategy TradesFinalised GuidanceRef: FG 12/1416th May 2012 7 pages

This guidance follows on from a consultation in January 2012, and it applies to exchange traded strategy trades whereby two or more legs that are dependent on each other are executed simultaneously. The guidance applies only to transaction reports submitted to the FSA: other authorities may have different rules.

Essentially, the guidance is that all transactions that include the combined execution of multiple legs should be reported with each reportable leg logged as an individual transaction at the FSA.

The new guidance will be effective from 15th August 2012.

Guidance on the Practice of ‘Payment for Order Flow’ Finalised Guidance Ref: FG 12/1314th May 2012 13 pages

The FSA takes the view that certain market makers make payments to brokers that direct order fl ow to the market maker – either as a direct payment per order or as another form of incentive. Thus, PFOF creates a confl ict of interest between the broker and its client, because the broker has an incentive to direct order fl ow to market makers offering PFOF arrangements over the interests of its clients.

This paper, therefore, sets out the FSA’’s view about payment for order fl ow (PFOF) arrangements. Essentially, it says, such payments can only take place where all three tests of the inducements rule are satisfi ed and both the best execution and confl icts of interest rules are complied with.


FSA Publications.indd 55 23/07/2012 12:03

Lee Werrell, Managing Director of CEI Compliance Ltd, gives his personal round-upRegulatory Changes – Summary of Speech by Clive Adamson

Clive Adamson, Director of Supervision, Conduct Business Unit, made a speech on the 14th June (http://tinyurl.com/77gsvbq) concerning the forthcoming regulatory changes and RDR from an FCA perspective. What did he tell us?.

Background The FSA has begun taking steps to separate prudential and conduct regulation in preparation for the creation of the new Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA), for early 2013, and shaping what these two regulators are going to look like.

Initially and internally, in April 2011, they split into two business units – the Prudential Business Unit (PBU) and the Conduct Business Unit (CBU). In April this year when they split banking and insurance supervision into the Prudential and Conduct Units, so that they now essentially operate internally under the FSA umbrella how they will operate after they are legally formed in 2013.

Strategy The strategic objective of the FCA is to ‘make markets work well’. Additionally, it has three operational objectives of ensuring;■ Consumer protection■ Market integrity■ That competition is in the interests of consumers

This will apparently be viewed as a primary statutory objective, where the FCA will be under the obligation to consider the role of competition as a driver of poor outcomes in markets and work out how to best address these problems.

Style The FCA intends to be markedly different from the FSA by moving away from a reactive style to be a judgement based, confi dent and pre-emptive regulator that acts to ensure consumers get a better deal and markets are fair and orderly. The new supervisory approach will comprise of fi ve main elements:■ To be more forward-looking in

assessment of potential problems■ To intervene earlier when we see problems■ To address the underlying causes of problems

that it sees, not just the symptoms

■ To secure redress for consumers if failures do occur ■ To take meaningful action.

IFA professionalism? The Retail Distribution Review is an example of fulfi lling one of the FCA’s operational objectives – consumer protection. It continues to be their view that consumers should have:■ Clarity in the service they receive■ A transparent and fair charging

system for the advice received■ Advice from respected and professional advisors.

The Retail Conduct Risk Outlook document sets out the FSA’s views on how professionalism needs to be at the core of advice for long-term savings, including pensions and retirement planning. Practically, this means that: ■ Securing fi nancial wellbeing during retirement

as paramount to most pension investors, the quality of advice and product suitability for pension and retirement planning becomes of signifi cant regulatory concern and interest

■ As retirement planning involves complex decisions, it creates the risk that poor advice results in lower retirement income and/or purchase of products with excessive risks

■ Any impact of detriment is compounded by limited means to recover from fi nancial loss, especially among vulnerable groups.

So what does the FSA want to see from the industry? The FCA’s aim is not to take away the consumers’ responsibility, but to ensure that the decisions they make are informed ones.

To give consumers more confi dence in the advice they are receiving, it is important that advisers look at their customers as unique individuals, consider their personal situations and fully understand their objectives and potential fi nancial needs.

Questions that IFAs should be asking are:■ Have you decided if you are going to be

independent advisory or restricted? ■ Is your pricing structure clear? And do

you have the systems in place to ensure your clients fully understand how your advice translates into costs to them?



Compliance Doctor.indd 56 23/07/2012 11:40

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CP12/10 Product Projections and Transfer Value Analysis

See also the listings of FSA publications on Page 54 of this issue

■ If you are advising on high-risk investments, do the individuals providing that advice have suffi cient understanding of the products being offered?

■ Are you looking at undertaking a wider range of business? If so, have you identifi ed all the risks associated with these products?

Advice should be just that, advice – not a sales/product driven process. It should focus on the following issues: ■ Are advisers providing the right product for

the right person with the right information?■ Are fi rms ensuring customer treatment

is at the core of their business model?■ Are fi rms providing common sense, professional

and clear advice to their customers?.

Impact: You need to fully consider;

• Whether providing independent or restricted advice model best suits your client base

• Whether your client base is correctly and effectively segmented

• Whether your sales process is documented accurately

• How you demonstrate and test suitability of advice

• Whether you ensure that clients get a fair outcome based service that provides clear solutions.

And fi nally: The FSA wants to see you start to test and implement suitable adviser charging structures now.

Projection rates or running scared? The Financial Services Authority (FSA) is consulting (http://tinyurl.com/bqvfuja) on rules to ensure investors taking out a retail investment product such as a personal pension or a life policy receive a realistic indication of potential future returns and charges. The consultation period ends 31st August 2012, and it is important to respond to these consultation papers.

As we know, by defi nition, projection rates do not provide a guarantee of future investment returns, but offer investors an indication of what they might receive back from an investment.

Under the FSA’s current rules, fi rms must project on three different rates of return, revising these rates downwards where a product is unlikely to achieve returns in line with these rates. However, providers often fail to comply with this requirement, so the FSA is strengthening the rules to emphasise that providers should always use appropriate rates of return, subject to the FSA’s maximum projection rates.

Following the publication of independent and peer reviewed research by PricewaterhouseCoopers (PwC), the FSA is consulting on a reduction in the current projection rates.

Current rates Proposed ratesTax-advantaged 5%, 7%, 9% 2%, 5%, 8%products (e.g. personal pensions)

Tax-disadvantaged 4%, 6%, 8% 1.5%, 4.5%, 7.5%products (e.g. endowment policies, investment bonds)

To ensure consistency across personal pensions and statutory money purchase/ defi ned contribution schemes, the FSA and Financial Reporting Council (FRC) will hold a joint consultation on a reduction in projection rates. Consistency across different types of pensions will allow both advisers and investors to compare projected rates of return on a like for like basis.

The consultation paper also addresses other issues aimed at giving investors a fairer indication of future pension benefi ts:

The FSA will consult on revised mortality rates for insurers to use in Key Features Illustrations (KFIs) from 21 December 2012 onwards. The consultation follows on from the European Court of Justice ruling

which requires insurance fi rms to charge the same rates for men and women to ensure gender equality.

The FSA will consult on an explicit Consumer Price Index (CPI) assumption which advisers will use when assessing whether a member of a defi ned benefi t pension scheme would be better off moving their money into a personal pension. An explicit CPI rate will allow all advisers to use the same rate and will provide pension scheme members with a more accurate analysis of the benefi ts of a transfer.

Is this necessary or accurate? PWC’s own website projects 10 year Treasury bond yields interest rate growth as 2015 3.9%, 2016, 4.3% and 2017 to 2021 as 4.7%, indicating a growth factor and not a decrease. ThisisMoney.co.uk currently shows the top 5 ISAs with interest greater than 3%. Is 2% too low?

Impact: All the chapters will interest life insurers and other providers of personal pensions and also fi rms that advise on personal pensions.

Chapter 3, on the introduction of explicit CPI-linked assumptions, will also interest TVA software providers and employee benefi t consultancies as well as employer sponsors of DB schemes.

Chapter 4, on changes to the projection rates in COBS 13 Annex 2, affects all non-MiFID packaged products, not just pensions, so will interest providers of these products and fi rms that advise on them, including fi rms advising on TVA.

Chapter 5 will be of interest to administrators and trustees of occupational pension schemes and fi rms that advise on occupational pensions.

Source: PWC (http://tinyurl.com/82gzskm) ISAs: (http://tinyurl.com/7hd9ujb)

Remember: If you have any concerns regarding these issues, please contact your compliance department or an independent consultant who is a member of the Association of Professional Compliance Consultants (APCC), recognised as a trade body by the FSA.


Compliance Doctor.indd 57 23/07/2012 11:40

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Thinkers.indd 58 23/07/2012 11:50

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Economic Thinker? Surely just a lucky pundit?Hardly. We’ll agree that Roubini’s main claim to fame is that he presciently warned the International Monetary Fund about the subprime housing bust in 2006 - more than a year before it happened – and indeed, that he’d predicted the entire US housing meltdown in the New York Times a year earlier than that. And that he’s still dining out on his ‘Perma-Bear’ reputation, and running one of the world’s most infl uential and provocative blogs.

But that would be to ignore the vast range of experience which had led to his famous 2005 conclusion that we faced a wave of “homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unravelling worldwide and the global fi nancial system shuddering to a halt”. Or that he now dines with central bank governors and fi nance ministers, all of whom seem to be listening with a rapt attention that he wasn’t getting seven years ago.

A Cosmopolitan CareerBorn into an Iranian Jewish family in Turkey, Roubini spent his school years in Israel and then Italy before moving on to Harvard where he completed a doctorate in international economics. A teaching career at Yale soon beckoned, but that didn’t stop him fi nding time to work at the International Monetary Fund (IMF), the Federal Reserve, the World Bank and the Bank of Israel. He is now a US citizen.

Roubini spent the Clinton years (1992-2000) at the Council of Economic Advisers, where he was a senior economist - and then just to complete the full set he moved to the US Treasury under Tim Geithner. Nothing fl ukey there, then.

A Third World Problem Roubini hasn’t always been applauded for his claim that his insight into the impending US

crisis came from his long-standing familiarity with emerging markets, particularly in Asia and Latin America. “I’ve been studying emerging markets for 20 years,” he’s reported to have said, “and I saw the same signs in the U.S. that I saw in them - which was that we were in a massive credit bubble.”

Not what the then President George W Bush would have wanted to hear, probably. But it chimed in well with what Fed Chairman Al Greenspan was starting to think at the time – and, by no particular coincidence, with the thoughts of Larry Summers, the former President of Harvard, who is also getting a lot of airtime in Europe these days with his thoughts on the euro crisis.

Other Infl uences? Start with John Maynard Keynes, proceed through Jeffrey Sachs, and go on to Paul Krugman, the Nobel Prize-winning columnist for the New York Times, who says his “once seemingly outlandish” predictions have been “matched or even exceeded by reality.”

Throw in the fact that his parents sent him to a non-orthodox Jewish school rather than the one they might have been expected to favour, and all that Turkish-Iranian-Israeli-Italian-Asian-Latin American infl uence, and you start to appreciate the outrageous breadth of the views he’s expressing.

Serial BloggerA breadth which can also be annoying at times. Roubini’s website (www.roubini.com) isn’t short of self-confi dence, but nor is it afraid to shake up our preconceptions. The site has become a forum for similarly radical-thinking economists, commentators and the occasional fantasist. Now, if only we could tell which were which, perhaps the old guard would fi nd it easier to know which groups they could afford to ignore….

“Everybody’s kicking the can down the road. But the can is becoming heavier and heavier.”

DOCTORDOOM

Nouriel Roubini Born March 1959 in Istanbul. Currently teaching in New York.


Thinkers.indd 59 23/07/2012 11:50

DON’T FORGET THE LITTLE GUYS

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A mere six months before one of biggest upheavals in the regulation and supervision of retail fi nancial services, a new report from KPMG tells us that some wealth management fi rms “will need to change radically and rapidly if they are to survive.”1

KPMG also says that clients’ needs, requirements and expectations have changed and that wealth managers may therefore need to review their business models. Apparently, “inertia will become a thing of the past, even among ‘old money’”.

KPMG has attributed various wealth management business models to affl uent, high net worth and ultra-high net worth investor groups, and then estimated market share, average portfolio size and pre-tax profi t margin for each of these segments. The results are eyebrow-raising.

Big Margins Now, discussions about client segmentation are ubiquitous in the IFA community, often swiftly followed by debates about how to provide services to less wealthy clients (if at all) and what services to provide to higher net worth investors. Some advisers are confronting the question of how to offer competitively priced services to clients of modest means, while others are simply ceasing to deal with those clients.

There is a general assumption that clients want, and advisers should deliver, increasingly high-touch (and thus increasingly expensive) advisory services. But the levels of assets and average portfolio size for lower-touch services identifi ed in the KPMG analysis should serve as a warning to wealth managers and Independent advisers alike.

The pre-tax profi t margin quoted for multi-family offi ces and investment banks (average portfolio sizes £20m+ and £1.3m respectively) is 5%. Surprised? By contrast, discretionary managers generate pre-tax profi t margins of 23% on an average portfolio of £350k. You could argue from these fi gures that this looks like a

“sweet spot”. But you ain’t seen nothing yet.If we look at the IFA sector – which

has a market share equivalent to execution-only brokers, traditional brokers, private client investment managers, UK private banks, discretionary investment managers and investment banks combined - the average portfolio size is quoted as just £50,000 but profi t margins range from 5% (similar to ultra-high net worth family offi ces advising on portfolios of £20m+, don’t forget) to 35%. That’s signifi cantly higher than the margin quoted for discretionary managers and private banks advising on portfolios averaging £350k-£400k.

KPMG notes that traditional wealth management fi rms need to beware of

increasing competition from independent advice fi rms. This new threat, it says, comes from more client-centric advisers who provide holistic

fi nancial planning services which attract clients seeking

more professional, better qualifi ed and fee-based trusted advisers who are focused on considerably more than pure asset gathering.

My Conclusions?Firstly, Independent advisers who are feeling unloved and under pressure should fi nd this report hugely encouraging.

Secondly, those fi rms considering how to reposition their business to serve the ultra high net worth investor should remember the profi t margin fi gures and should be slower to reject more modest clients.

Finally, providers must not underestimate the signifi cance of Independent advisers in wealth management. We may be smaller, and we may not describe ourselves as wealth managers, but in aggregate we advise on around 50% of invested wealth. That makes us a sector which must be respected and which cannot be ignored.

THE BEST THINGS SOMETIMES COME IN SMALL PARCELS, SAYS IFA CENTRE’S GILLIAN CARDY


www.IFAmagazine.com

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IFA Centre.indd 60 24/07/2012 10:14

Senior Financial Planner - Gloucestershire

This is a fantastic opportunity for a highly skilled and experienced Financial Planner to workwithin a vastly reputable wealth management firm. No requirement for a transferrable clientbank as you will be capitalizing on internal business sources as well as developing a presencein the local area. This opportunity would suit a proactive and dynamic individual; preferablyat Chartered status. You must feel comfortable dealing with wealthy individuals and haveexperience in meeting their exacting demands.

Please contact Danielle at: [email protected] or on 01727 884 662

Basic to £70,000 plus benefits and bonuses

Please contact James at: [email protected] or on 01727 884 662

Senior Financial Planner - Investment Management firm, The City

Our client, a highly respected Investment Manager with a very established wealth planningdivision are currently looking to appoint a new Financial Planner to their London office.Working closely with the discretionary team, you will be responsible for offeringindependent, holistic advice to the firms existing client base, mainly consisting ofprivate clients with between £2-5 million. The ideal candidate will have exceptionalinterpersonal skills, HNW client exposure and be qualified to Chartered Status.

Basic to £80,000 plus benefits and bonuses

Ground Floor, Mayesbrook House, Lawnswood Business Park, Redvers Close,Leeds LS16 6QY Telephone: 0113 274 3000 Fax: 0113 274 3031

Sales Proposition Trainer - London Based/UK Travel

Are you an experienced Financial Services Sales Trainer? BWD Search & Selection are workingwith one of the UK’s leading Platform providers to recruit a ‘Sales Proposition Trainer’ in theSouth East. Candidates must be in easy reach of Central London and be able to demonstratesignificant experience in delivering training to support the Proposition and Sales Developmentteam. A highly competitive package is on offer, along with the opportunity to join a market-leading Financial Services organisation.

Please contact Adam at: [email protected] or on 0113 274 3000

Highly competitive package

Suite 4, Ground Floor, Breakspear Park, Hemel Hempstead, HP2 4TZTelephone: 01727 884 662 Fax: 0113 274 3031

www.bwd-search.co.uk

Regional Admin Manager - Accountancy Practice, East Midlands

Our Client is a top tier accountancy practice with a widely respected Wealth Management armwho seeks to appoint a Regional Administration Manager. The role is to provide managementand leadership to the local Administration Managers & support teams within each regionwhilst achieving the Group’s wider business targets and service standards. Knowledge ofmanaging support teams and experience within financial services is essential as well asexceptional communication and leadership qualities. This is a key hire and you will beexpected to travel to the Group’s regional network. A rare opportunity not to be missed.

Please contact Gary at: [email protected] or on 0113 274 3000

Basic to £35,000 plus benefits and bonus

Visit our website at

Employed Financial Planner - North West

This well established, reputable and profitable IFA firm is looking to recruit a QCF level 4financial planner as it looks to continue expansion plans into 2012. The business model isRDR ready and also provides full support in terms of admin and paraplanning. There will beadditional client allocation and leads provided as and when, as well as the opportunity to linkin with other areas of the business and account manage and take and develop lead provisionfrom them. A great opportunity to develop yourself, your client base and consequently yourearnings further.

Please contact James at: [email protected] or on 0113 274 3000

Basic to £50,000 plus car allowance, flexi benefits and bonus

Head of Corporate - Midlands

An employee benefit consultancy is seeking an experienced hire to grow the Midlands. Youmust have an EBC background with knowledge across Trust and Contract based pensions(DB and DC) and ideally Risk and Flexible benefits and be accustomed to working on a feebasis. Your technical knowledge must be strong. You must also have experience of building,managing and coaching a team of corporate consultants and exceeding revenue targets forboth new business and retaining existing clients. Level 4 is expected as a minimum whetherAPMI/ACII/DipPFS/FIA qualifications.

Please contact Zoe at: [email protected] or on 0113 274 3000

Excellent package including bonus

the financial services e-learning specialists

T 0845 850 9995 F 0113 274 3031 E [email protected]

Wanted: Quality financial advisers....Only those with Level 4 Qualifications need apply

More and more large groups are demanding that candidates have already achieved at least Level 4 qualification. In fact, many haven’t even picked upa book yet. Without large numbers of qualified advisers the FS sector has a difficult future to say the least.

The BWD Group, an established search & selection firm, have taken action to help with the launch of a new service - BWD development.

• Advisers and others taking the Level 4 exams can now access e-learning programmes and on-line mock exams. • This allows candidates to learn at their own pace - at a time and place to suit them• They can take on-line assessments along the way and take up to five mock exams to make sure they are on track to pass the live examination

If you like the sound of this, go to www.bwd-development.com where you can seea full demonstration of the service or call BWD development on 0845 850 9995

Get your skills up todate the easy way


Thinkers.indd 61 23/07/2012 11:50

For further vacancies please visit:www.shortlistme.co.uk

ASPECT COURT, 47 PARK SQUARE EAST, LEEDS, LS1 2NL T: 0844 248 5292 E: [email protected]

WEALTH MANAGEMENT ADVISERSLondon, Essex, Home Counties & South East£45,000 plus excellent bonus and benefits O.T.E c£75,000Our client needs a number of experienced Wealth Advisers to offer acomprehensive service to a portfolio of HNW clients in the South East of England.The job role forms part of the wider Wealth Management Sales Team thereforeworking in close partnership with the introducers and peers in this team will bepart of any successful applicants’ day-to-day activity.

You will be responsible for achieving targets in meeting the demands of thebusiness by converting introductions into new business, conduct interviews withnew and existing clients to review and meet their immediate and on-going financialneeds; actively selling and/or introducing appropriate products and services andreferring to other product specialists where required.

Successful applicants will be fully diploma qualified. Ref: 2016

FEE BASED FINANCIAL PLANNING DIRECTORSouth Coast£70,000 plus bonus and benefitsOur Client a well respected firm of Chartered Accountants and Business advisersbased in the South East. They now require an experienced Chartered FinancialPlanning Director for its specialist Wealth Management division.

Successful applicants will be required to give advice on all aspects of financialplanning from pensions, Investments and annuities to inheritance tax planning andtrusts to a portfolio of clients

Qualified to Chartered status you will be given your own portfolio of clients rangingfrom private individuals to Charities and trusts and professional connections

The successful applicant will have experience of working within a Fee basedenvironment on a time/cost basis with HNW Clients. In return you will receive acompetitive remuneration package and a defined career path. Ref: 1999

PREMIER INDEPENDENT FINANCIAL ADVISER Manchester, Bristol & Londonc£45-£50,000 plus bonus and benefitsOur Client a leading Bancassurer need a number of Premier Independent FinancialAdvisor’s to provide professional independent financial planning services to bothnew and existing high value customers. This means identifying and meetingcustomer needs with particular emphasis on protection, pension, investment andinsurance products available through the bank’s UK branch network, whilstconsistently treating customers fairly. The role requires the candidates to bequalified to a minimum of Diploma level.

You will be responsible for working with a sophisticated customer base, providingspecialist advice on relevant financial products and services including full financialplanning reviews and portfolio management.

Optimising appointments with customers to identify needs and opportunities andprovide solutions in order to achieve personal and team sales targets. Ref: 2076

WEALTH MANAGERS London, South Coast, Norwich, Leeds£75,000 plus benefitsOur Client a National firm of Wealth Managers and Investment Advisers who giveFee based Independent financial advice to private clients need a number ofexceptional individuals to service and further develop their Client proposition,based out of one of their UK offices.

Ideally, you will be an experienced diploma qualified IFA already with a minimum offive years financial planning experience, covering all areas of Pensions &Investments and be familiar with operating a Wrap service. The successfulapplicant will be given on-going support and development to ensure they are givingtheir Clients the best advice.

In return the successful applicants will be given an excellent opportunity to developtheir career within this organization Ref: 1885

COMPLIANCE OFFICER Manchesterc£30,000Our client who provide a truly independent range of financial services frominvestment and portfolio management, through to trust and estate planning areurgently seeking a compliance officer, to carry out compliance reviews in accordancewith the risk based business quality monitoring programme.

Assess the quality of advice and adherence to business standards and regulatory FSArequirements and identify material risks to clients and the company

Occasional file review required to determine whether the suitability of advice againstbusiness standards and regulatory requirements and identify material risks.

To provide effective feedback and direction of the remedial action required to manageor mitigate the material risks identified.

Minimum 2 years experience of working in a regulated financial services environment

CF1-4 or equivalent Ref: 2053

WEALTH MANAGER Birmingham£40,000 plus bonus and benefitsOur Client a well respected firm of Asset Managers with a National network ofOffices who manage in excess of £10 billion of funds on behalf of Clients

They now require an experienced Financial Planner for its specialist WealthManagement division.

Successful applicants will be required to service a Wealthy portfolio of clientsranging from private individuals to Charities and trusts and professionalconnections You will be responsible for working with a sophisticated customerbase, providing specialist advice on relevant financial products and servicesincluding full financial planning reviews and portfolio management.

The successful applicant will have first hand knowledge of working within a Feebased environment on a time/cost basis with HNW Clients. In return you will receivea competitive remuneration package and a defined career path. Ref: 2077

EMPLOYEE BENEFITS CONSULTANTLondon & South£70,000 basic plus benefitsOur client is a successful and respected firm of Chartered Accountants andBusiness Advisors, with over 25 offices across the UK and worldwide. They arelooking to expand their UK Employee Benefits Consultancy service with theappointment of an experienced Employee Benefits / Corporate PensionsConsultant to their offices in the London office. Primarily based in London, workingalongside the existing teams you will be responsible for developing the businessthroughout other regions, you will be servicing clients of the organisation as well asdeveloping new business with large corporate clients.

You must be Diploma Level 4 qualified, with specialist pension’s qualifications, andbe experienced of developing and managing group pension schemes with c200 –2000+ employees. Typically you should be generating a minimum of £250,000 in Feerevenue per annum. Ref: 1396

EMPLOYEE BENEFITS CONSULTANT North West/North East£50,000 basic plus benefitsOur client is a successful and respected firm of Chartered Accountants andBusiness Advisors, with over 25 offices across the UK and worldwide. They arelooking to expand their UK Employee Benefits Consultancy service with theappointment of an experienced Employee Benefits / Corporate PensionsConsultant to their offices in their Manchester/Leeds office. Primarily based in theNorth West, working alongside the existing teams you will be responsible fordeveloping the business throughout the North East regions, you will be servicingclients of the organisation as well as developing new business with large corporateclients.

You must be Diploma Level 4 qualified, with specialist pension’s qualifications, andbe experienced of developing and managing group pension schemes with c200 –2000+ employees. Typically you should be generating a minimum of £250,000 in Feerevenue per annum. Ref: 2020

FINANCIAL PLANNING MANAGER Reading£50,000 basic plus benefits Our client is a successful and respected firm of Chartered Accountants andBusiness Advisors, with over 25 offices across the UK and worldwide. They arelooking to expand their UK Wealth Management service with the appointment of anexperienced Financial Planning Manager to their offices in Reading. You will beoffice based; working alongside the existing teams responsible for developing thebusiness throughout each specialist area and you will be servicing clients of theorganisation as well as developing new business with clients.

You must be a minimum Diploma Level 4 qualified, with specialist pension’squalifications, and be experienced of developing Time Cost; Fee based businesswith High Net Worth Clients. Typically you should be generating a minimum of£250,000 in Fee revenue per annum. Ref: 2078

CASE OFFICERS Bristol & Huddersfieldc£32,000 plus benefitsOur Client a well respected Financial Services group, require experiencedindividuals to research and resolve customer complaints within agreedcompensation limits and negotiate solutions to the satisfaction of all partiesconcerned ensuring requirements of external regulators and internal standards aremet.

Investigate customer records produced by the sales forces to ensure that the advicegiven is in line with standards laid down by the Group and Regulator.

Examine standards of remedial action undertaken as a result of reviews, whenappropriate, to ensure that customers have not been disadvantaged or the Groupput at risk.

To effectively identity, control and escalate any perceived risks which may impactcustomers or the group

Produce effective communications to internal and external customers in a clearand concise format, ensuring that any corrective action undertaken is appropriate.Ref: 2023

TRAINEE EMPLOYEE BENEFITS ADVISER Merseysidec£30,000 plus benefitsOur Client is an independent firm of actuaries and consultants who offer a full rangeof services to trustees, employers, insurance companies and individuals. They arenow looking to recruit a trainee adviser for their Liverpool office. The ideal candidatewill be responsible for supporting employee benefit consultants advising clients andwill require excellent written and oral communication skills to be effective in this role.

Some previous pensions experience is essential and attention to detail, coupled withthe ability to work well in a team environment.

In return on offer a competitive remuneration and study package. Study towardsprofessional qualifications (Diploma in Financial Planning) is an essentialrequirement and is necessary to progress to the role of an experienced Adviser. Ref:2079

EMPLOYEE BENEFITS ADMINISTRATOR Londonc£32,000 plus benefits A London based IFA is looking for a corporate administrator to work within theEmployee Benefits administration Support Team, responding to customerenquiries and carrying out administration tasks in support of the sales process.

Processing of group life & group pensions schemes, including checks to ensurethat documentation is correct.

Identification of possible new business leads from the existing client bankand liaison with the client and/or Employee Benefit adviser to maximise theopportunity.

Obtaining new business illustrations and policy valuations for adviserswhere required.

Typing of letters and reports, where required.

Ensure all administration is completed in an effective manner tomeet the firm’s record keeping and file qualityrequirements. CF1-4 or equivalent

Knowledge of 1st Software andExchange is preferred Ref: 1397


Thinkers.indd 62 23/07/2012 11:50

For further information please contact Simon Charlton, Matthew Tatnell or Gareth Blades60 Lombard Street, London EC3V 9EA 0207 464 8429 [email protected] www.rolanddowell.com

Private Client IFA £60-80,000 + Bonus + Benefits Ref: 09393International insurance brokerage with a large UK presence has recently set up a wealth management offering to advise personal and corporate clients. They now require a senior individual to work in the City office and develop referrals internally and advise wealthy individuals of SMEs/FTSE firms that they have relationships with. You must have experience of internal business development and a proven record of producing both high quality and high levels of fee business.

Wealth ManagerTo £60-80,000 + Bonus + Benefits Ref: 3244Our client is one of the UK’s leading Investment Management firms with c£10bn under management combined with a fantastic offering in the wealth management arena. As part of a continued expansion plan they now require a senior wealth manager in London to work with the IMs and advise wealthy individuals on all areas on a fee basis. You must have experience of working with professional introducers and a record of success in a similar arena.

Associate Director, Private Clients£70-90,000 + Bonus + Benefits Ref: 1303An excellent opportunity now exists for an accomplished Private Client IFA to work within this wealth management boutique and inherit a substantial client base comprising HNW/UHNW Private Clients. You should be a Chartered Financial Planner (or progression towards) and be able to offer a background of providing fee advice to a wealthy client audience. Since you are servicing an existing portfolio you are not required to transfer any clients or funds to this role.

Professional Practice IFA£80-100,000 + Bonus + Benefits Ref: 2000An exceptional opportunity now exists within this medium sized Accountancy practice for a senior individual to work closely with the partners of the practice. You will ensure that a level of trust is maintained in order to refer business to you and provide high quality advice to the wealthy clients that are referred. You must have a strong sales record and ideally have experience of working with professional introducers. London based.

Wealth IFA Up to £60-85,000 + Bonus + Benefits Ref: 210104This small National IFA has an excellent opportunity for 3 IFA’s to join their existing team of specialist consultants in London, Herts and Surrey. The firm offers holistic and niche financial planning advice to HNWIs and you will advise a captive client base currently being dealt with by specialist divisions but seeking wider generalist financial planning advice. This is an exceptional opportunity with no need to bring any client bank. Chartered status preferred.

Executive Consultant Salary: to £75,000 + Bonus + Benefits Ref: 5323Private Bank with a hugely successful fee based financial services operation now requires an experienced consultant to work with retained clients and advise on all areas of employee counselling. Ideally, you should be currently carrying out a similar role at present and be familiar with pre/post retirement/redundancy counselling, mid-career financial planning and director/senior management advice. Experience of fee based work would be a distinct advantage. London based.


Thinkers.indd 63 23/07/2012 11:50

Institute ofFinancial Planning

To find out more or join visit www.financialplanning.org.uk or contact us on 0117 9452470

Support you through regulatory change Engage with a community of professionals Follow a structured career path Increase your personal and business potential Harmonise your goals with those of your clients Keep up to date with relevant issues and news

Post RDR, it will become even more important for advisers in the UK to align themselves with a relevant professional body or accredited body. Membership of the IFP offers you support and guidance whether you are a Financial Planner or Paraplanner. With a huge range of benefits, why not have a look at some of the ways in which we can help you?

THE PROFESSIONAL BODY FOR FINANCIAL PLANNERS AND PARAPLANNERS

IFA Calendar.indd 64 23/07/2012 11:53

magazin

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eIFA

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RDates for your diary

Unoffi cial start of the autumn stock market season

Fourth anniversary of Lehman Brothers bankruptcy

Consultation period ends on Consultation Paper CP 12/12 (Payments to Platform Service Providers and Cash Rebates from Providers to Consumers)

OCTOBERWorld Economic Forum MeetingMoscow, Russia

European Council MeetingBrussels, Belgium

Deadline for self-assessment tax returns 2010/2011 (paper only)

NOVEMBERPresidential and Congressional Election DayUSA

Money Management Financial Planning Awards

World Economic Forum Summit on the Global AgendaDubai, United Arab Emirates

JULYJULYJULYUS Pensions Summit Chicago, Illinois, USA

2012 Olympic Games opens

Consultation period ends on Consultation Paper CP12/9 (Consumer Redress Scheme in Respect of Unsuitable Advice to Invest in Arch Cru Funds)Invest in Arch Cru Funds)

AUGUST2012 Olympic Games closes

Finalised Guidance FG12/14 (Transaction Reporting of Strategy Trades) comes into force

Republican Party presidential candidate to be formally confi rmedTampa, Florida, USA

Consultation period ends on Consultation Paper CP 12/10 (Product Projections, Transfer Value Analysis and Statutory Money Purchase Illustrations)

SEPTEMBERDemocratic National Convention confi rming Barack Obama as the offi cial candidateas the offi cial candidateCharlotte, North Carolina, USA

World Economic Forum – Annual Meeting of the New ChampionsTianjin, China

General electionsNetherlands

St Leger’s Day raceDoncaster

Have we forgotten anything? Let us know about any forthcoming events you think ought to be in our listings. (Sorry, press and offi cial events only.) Email us at: [email protected], and we’ll do the rest.

1214

JULY - NOV 2012

Institute ofFinancial Planning

To find out more or join visit www.financialplanning.org.uk or contact us on 0117 9452470

Support you through regulatory change Engage with a community of professionals Follow a structured career path Increase your personal and business potential Harmonise your goals with those of your clients Keep up to date with relevant issues and news

Post RDR, it will become even more important for advisers in the UK to align themselves with a relevant professional body or accredited body. Membership of the IFP offers you support and guidance whether you are a Financial Planner or Paraplanner. With a huge range of benefits, why not have a look at some of the ways in which we can help you?

THE PROFESSIONAL BODY FOR FINANCIAL PLANNERS AND PARAPLANNERS

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IFA Calendar.indd 65 23/07/2012 11:53

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WHAT DO YOU DO WHEN YOU LOSE A FORTUNE IN PROPERTY INVESTMENT? BUY SOME MORE, OF COURSE. RICHARD HARVEY RAISES AN EYEBROW

MORE TEA VICAR?

Tell Me the Old, Old StoryIf there’s one sector of society capable of summonsing divine intervention it’s the clergy. And if reports into the state of the Church Commissioner’s pension funds are to be believed, they’ll need all the help they can get.

There was a time when the money sloshing around the Church of England’s coffers easily covered all outgoings. Churchmen who had spent their lives living on an annual stipend roughly equivalent to a City trader’s weekly bar bill could at least look forward to a comfortable retirement.

However, a series of worldly unwise investments in property, shares and – ironic, or what? – the propensity for clean-living vicars to outlive the rest of us have resulted in clergy pension

fund liabilities estimated at £1.7 billion.So the new Archbishop of Canterbury, whoever he may

eventually turn out to be, will not just need to reverse the

dramatic decline in weekly church attendances – currently down to 826,000 which, the

Sunday Times chirpily records, is fewer than the number who tune into a single

episode of the TV soap Neighbours.

He will also need to resolve the Church Commissioners’ finances.

Surprisingly, despite the dwindling congregations, it is also reported that those who do attend church are giving more generously to the collection. (If it doesn’t fold, don’t put it on the offertory plate.) So it looks as if the admission price to the Kingdom of Heaven is at least keeping pace with earthly inflation.

But that’s nowhere near enough to plug the pensions black hole, and one suspects that prayers are being said that the Commissioners’ new investments, such as luxury apartment and retail developments in central London, will help plug the gap.

Mammon to the rescue....

Illustrated PeopleAs a card-carrying coward, I cannot understand why so many people submit themselves to the tattooist’s needle.

Astonishingly, it is estimated that one in five UK adults is now permanently illustrated. Once a peccadillo of sailors and wife-beaters, then adopted by film stars and rock singers - some of whom bear more tattoos than Queequeg in Moby Dick – body decor is now mainstream fashion.

So it was no great surprise to learn that Barbers of Sheffield, a company in the steel city that makes needles for tattoo parlours as well as the medical and veterinary markets, has just won significant venture capital investment for expansion.

I reckon it’s probably a worthwhile punt, despite my strong aversion to tattoos - engendered some years ago when a guy bumped into me in a Liverpool pub, slopping beer down my shirt. I turned round to take issue, but thought better of it when I saw he had ‘Everton FC’ tattooed across his forehead.

Going NegativeYou know the world has gone stark, staring bonkers when international investors, as they did early last month following yet another upheaval in the markets, bought two-year German government bonds with a yield below zero.

Yup, there are money men out there, ostensibly serious financial players, who are actually paying to lend to Germany. Send for the men in white coats.



The Other Side.indd 66 23/07/2012 11:59

Very good in its make up and content. Sets itself aside from other publications in the marketplace.Very good in its make up and content. aside from other publications in the marketplace.Very good in its make up and content.

Excellent. Thank you. aside from other publications in the marketplace.Excellent. Thank you. aside from other publications in the marketplace.

Really refreshing.aside from other publications in the marketplace.


High quality aside from other publications in the marketplace.

High quality aside from other publications in the marketplace.

production with some good thought provoking articles Really refreshing.

production with some good thought provoking articles Really refreshing. High quality

production with some good thought provoking articles High quality

and useful information. production with some good thought provoking articles and useful information. production with some good thought provoking articles

Good useful content. Up-to-production with some good thought provoking articles


date info useable, very good and easily read.Good useful content. Up-to-

date info useable, very good and easily read.Good useful content. Up-to-

Very Good useful content. Up-to-

Very Good useful content. Up-to-

good articles, relevant to my work. date info useable, very good and easily read.good articles, relevant to my work. date info useable, very good and easily read.

Very interesting, date info useable, very good and easily read.

Very interesting, date info useable, very good and easily read. Very

Very interesting, Very

extremely useful.good articles, relevant to my work. extremely useful.good articles, relevant to my work.

Very impressive read and lots of good articles, relevant to my work.

Very impressive read and lots of good articles, relevant to my work. Very interesting,

Very impressive read and lots of Very interesting,

useful articles nice to see it in “magazine” style format extremely useful.useful articles nice to see it in “magazine” style format extremely useful. Very impressive read and lots of useful articles nice to see it in “magazine” style format

Very impressive read and lots of

rather than usual newspaper. useful articles nice to see it in “magazine” style format rather than usual newspaper. useful articles nice to see it in “magazine” style format

A comprehensive useful articles nice to see it in “magazine” style format

A comprehensive useful articles nice to see it in “magazine” style format

read. Very good layout and informative. rather than usual newspaper.

Very good layout and informative. rather than usual newspaper. A comprehensive

Very good layout and informative. A comprehensive

Good A comprehensive

Good A comprehensive

content, appealing to the female reader as many Very good layout and informative.


publications are very male driven and focused. content, appealing to the female reader as many publications are very male driven and focused. content, appealing to the female reader as many

Thank you. A quality magazine for Thank you. A quality magazine for publications are very male driven and focused. Thank you. A quality magazine for publications are very male driven and focused.

IFApublications are very male driven and focused.


’s. publications are very male driven and focused.


IFA’s. IFApublications are very male driven and focused.




Good paper publications are very male driven and focused.

Good paper publications are very male driven and focused.

with good content which is plain talking. Thank you. A quality magazine for with good content which is plain talking. Thank you. A quality magazine for Good paper with good content which is plain talking.

Good paper Good

Good paper Good

Good paper

layout and easy to read. with good content which is plain talking. layout and easy to read. with good content which is plain talking.

Not seen anything like this for IFA market. Really good.layout and easy to read. for IFA market. Really good.layout and easy to read.

Worth reading. Interesting Not seen anything like this


content. for IFA market. Really good.content. for IFA market. Really good.

Very professional and upmarket, exactly for IFA market. Really good.

Very professional and upmarket, exactly for IFA market. Really good. Worth reading. Interesting

Very professional and upmarket, exactly Worth reading. Interesting

what is needed in the ifa community. Very professional and upmarket, exactly

what is needed in the ifa community. Very professional and upmarket, exactly

Absolutely Very professional and upmarket, exactly


fantastic. Not cluttered by endless comparison what is needed in the ifa community. fantastic. Not cluttered by endless comparison what is needed in the ifa community. Absolutely fantastic. Not cluttered by endless comparison

Absolutely

tables. Punchy contemporary style.. More of the tables. Punchy contemporary style.. More of the fantastic. Not cluttered by endless comparison tables. Punchy contemporary style.. More of the fantastic. Not cluttered by endless comparison

same in the months to come please. A very readable tables. Punchy contemporary style.. More of the same in the months to come please. A very readable tables. Punchy contemporary style.. More of the

to the offi ce - not something I could say about

to subsequent editions. to subsequent editions. and interesting publication. to subsequent editions. and interesting publication. to subsequent editions.

a proper magazine rather than other cheaper and interesting publication. a proper magazine rather than other cheaper and interesting publication.

tables. Punchy contemporary style.. More of the same in the months to come please. A very readable tables. Punchy contemporary style.. More of the same in the months to come please. A very readable tables. Punchy contemporary style.. More of the

publication. same in the months to come please. A very readable publication. same in the months to come please. A very readable

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The magazine all the top IFAs are talking about... To get your free subscription simply fi ll out the form online at:www.ifamagazine.com/ content/subscribe

magazine

N E W S R E V I E W C O M M E N T A N A LY S I S

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NEWS

For today’s discerning financial

and investment professional

MA

R 2

011

■

ISSUE

1

V ICKER S ’KN ICKERSHAS THE IBC’s NEW

CHAIRMAN GOT WHAT IT TAKES?

REDBOX DAYWILL THERE BE ANY RELIEF

IN THE BUDGET BOX?

NOTHING UP

MY SLEEVESIS GEORGE SERIOUS

ABOUT ENDING THE

ANNUITY TRAP?

LOOK

NORTH A FR ICAN CR I S I S

BUT EUROPE HAS NOTHING

TO BE SMUG ABOUT

➹

L EAV ING PART YRDR, SORTING THE STAYERS FROM THE LEAVERS

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agazine

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BOX DAYWILL THERE BE ANY RELIEF

IN THE BUDGET BOX?

NOTHINGMY SLEEVESIS GEORGE SERIOUS

ABOUT ENDING THE

ANNUITY TRAP?

LOOK

➹➹➹ANNUITY TRAP?➹

ANNUITY TRAP?

Thank you. A quality magazine for with good content which is plain talking. Thank you. A quality magazine for with good content which is plain talking. Thank you. A quality magazine for



JUN

2

011

■

IS

SU

E

2

STRUCTURED THINKINGINVESTEC - NEW THINKING ON STRUCTURED PRODUCTS

THE FSA HAS FINALLY HAD ITS PRAYERS ANSWERED OVER PPI MIS-SELLING

SANTSA S IMPLER TAX CODE?DON’T HOLD YOUR BREATH

AFTER THE GREAT WAVEJAPAN - IT ISN’T OVER YET

DAY OF THE MIFIDCOMING SOON TO A SCREEN NEAR YOU

AND SINNERS

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SANTSAND SINNERS

N e w s r e v i e w c o m m e


JUL

20

11 ■

is

sU

e

3

structured thinkinginvestec - new thinking on strUctUred ProdUcts

the fsa has finally had its prayers answered over ppi mis-selling

USAA s imPLer tAx code?don’t hold your Breath

After the greAt wAvejapan - it isn’t over yet

crisis

content, appealing to the female reader as many publications are very male driven and focused. content, appealing to the female reader as many publications are very male driven and focused. content, appealing to the female reader as many

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content, appealing to the female reader as many content, appealing to the female reader as many

N E W S R E V I E W

For today’s discerning financial


SE

PT

20

11 ■

I S

SU

E

4

IS IT GETTING TOO

HOT TO HANDLE?

BRAZIL

BRITAIN AFTER THE RIOTSWHAT HAVE WE LEARNED?

KEEP IT LEGALDO YOU KNOW THE UCIS RULES?

CL IMBING A WALL OF WORRYHOW DO WE GET OUT

OF THIS ONE?

MULT I -ASSET FUNDS

AND WHY YOU CAN’T IGNORE THEM

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with good content which is plain talking.







fantastic. Not cluttered by endless comparison Absolutely

fantastic. Not cluttered by endless comparison Absolutely

tables. Punchy contemporary style.. More of the fantastic. Not cluttered by endless comparison tables. Punchy contemporary style.. More of the fantastic. Not cluttered by endless comparison tables. Punchy contemporary style.. More of the same in the months to come please. A very readable tables. Punchy contemporary style.. More of the same in the months to come please. A very readable tables. Punchy contemporary style.. More of the






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a proper magazine rather than other cheaper are talking about...a proper magazine rather than other cheaper Breath of fresh air and topical are talking about...Breath of fresh air and topical

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with good content which is plain talking.

BRAZILFor today’s discerning financial


OC

T 2

011

■

I S S U

E

5

CREDIT

RATING

AGENCIES

THOSE HALOS ARE

FINALLY SLIPPING

FINANCIAL

PLANNING

WEEKARE YOU

READY?

ETHICAL

INVESTMENT

CHANGING TIMES,

CHANGING OBJECTIVES

THE

VICKERS

BANKING

REPORTBUT IT

COULD

HAVE

BEEN SO

MUCH

WORSE

JOKEJOKEJOKETHE

IS ON ALL OF US

EUROPE BURNS WHILE

POLITICIANS FIDDLE

Cover 13.indd 3 01/08/2012 09:32

Schroder Managed Monthly High Income Fund

0800 718 777**www.schroders.co.uk/highincome

For professional advisers only. This material is not suitable for retail clients. *The expected yield of 5.5% per annum is not a reliable indicator of future performance. The income and return of your clients’ original investment is not guaranteed. As the annual management charge is deducted from capital, this may be eroded. Past performance is not a guide to future performance and may not be repeated. Investment in bonds and other debt instruments including related derivatives is subject to interest rate risk. The value of the fund may go down if interest rates rise and vice versa. The fund will not hedge its market risk in a down cycle. The value of the fund will move similarly to the markets. A security issuer may not be able to meet its obligations to make timely payments of interest and principal. This will affect the credit rating of those securities. Non-investment grade securities will generally pay higher yields than more highly rated securities but will be subject to greater market, credit and default risk. The fund invests in other funds and its liquidity depends upon the liquidity of those underlying funds. If underlying funds suspend or defer the payment of redemption proceeds, the fund’s ability to meet redemption requests may also be affected. Schroders has expressed its own views and these may change. **Please note that phone calls may be recorded. Issued in May 2012 by Schroder Investments Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 2015527 England. Authorised and regulated by the Financial Services Authority. UK03009

Monthly income, beautifully balanced

Broaden your clients’ income horizons with the new Schroder Managed Monthly High Income Fund:

– Catch some air. With an income aim of 5.5%* p.a. or around 0.5% paid each month.

– Keep your balance. With four well diversifi ed income sources, bond coupons, dividends from shares, property income and Schroders’ proven Maximiser income enhancement strategy.

– Stay on top. With multiple investment strategies run by highly rated Schroders’ fund managers including Thomas See, Gareth Isaac, Nick Kirrage, Kevin Murphy and Richard Sennitt, with a single fund management fee.

Make your income seeking clients smile. Be the fi rst to get on board.

Cover 13.indd 4 01/08/2012 09:32

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