IFA Magazine July/August 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

JUL

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ONLY FOOLS AND HORSES this time next year we’LL be miLLionaires... or maybe not

f ix ing the safety netWHY BASEL III MATTERS

LUxUry goodsMADE FOR cHINA

WHAT IS OBAMA AND THE uS gOvERNMENT TO DO WITH THE DEBT?

timeit’s decision

Cover 03.indd 1 7/7/11 13:50:43

A brand apart

This communication is for financial advisers only. Investec Structured Products is a trading name of Investec Bank plc, registered address 2 Gresham Street, London EC2V 7QP.Investec Bank plc is authorised and regulated by the Financial Services Authority.

1001484.006_SP26_IFA mag_297x210_DPS_v2_A brand apart 01/06/2011 11:52 Page 1

Cover 03.indd 2 7/7/11 13:50:46

Clear, transparent and client-focused, we are leaders in our field.

We appreciate that no client’s needs are the same, so we offer consistently

available equity-linked deposits and equity-linked investments covering a

variety of risk and return profiles.

Voted Best Structured Products Provider six times by four different industry

bodies since our launch in 2008, our levels of service go far beyond just the

range of products we offer.

To complement our valuations page we've created an innovative comparison

tool for advisers that analyses the structured products market to help you

make easier, informed decisions.

We offer a due diligence support pack, technical helpline and full

administration service making the investing process smoother for you

and your client.

Plan on getting in touch with us soon.

To order client literature

08000 890 305For technical enquiries

020 7597 4065www.investecstructuredproducts.com

1001484.006_SP26_IFA mag_297x210_DPS_v2_A brand apart 01/06/2011 11:52 Page 2

Contents.indd 3 5/7/11 17:19:14

features

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59

66

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NewsAll the big stories that affect

what we say, do and think.

Town versus GownIs a traditional graduate degree still the

way to go? Paul Clutton investigates.

FSA PublicationsOur monthly listing of FSA publications,

consultations, deadlines and updates.

ThinkersKarl Marx – great economist, philosopher,

historian, or just another failed intellectual?

And Finally...Frederick Smythe-Allinson can’t make up his mind. Oh, yes he can. Oh, no he can’t.

Editor’s Soapbox Basel? Basel! BASEL! Michael Wilson bemoans the faulty past of banking accord.

Don’t Look a Gift Horse...Steve Bee explains why we’d be daft to refuse the government’s easy money.

56The Compliance DoctorLee Werrell of CEI Compliance discusses some of today’s most pressing issues.

The IFA CalendarConferences, economic summits, race meetings... All the dates you daren’t miss.

44

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IFA Magazine is for professional advisers only. Full subscription details and eligibility criteria are available at: www.ifamagazine.com

48Pick of the FundsNick Sudbury’s monthly review of what’s hot and what’s not.

Only Fools and HorsesEmma-Lou Montgomery consults a 170 year

old book in pursuit of the herd mentality.

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This month’s contributors

Neil Crossley writes for The Guardian,The Independent, The Financial Times and The Daily Telegraph, mainly on technology, business, media affairs and TV.David Nicholson writes on business, technical, scientific and financial for The Financial Times, The Wall Street Journal, The Sunday Times, The Guardian, The Observer and GQ.Emma-Lou Montgomery, the former editor of Moneywise, has an impressive record of print and broadcast journalism including editor-in-chief at Interactive Investor. She is a qualified investment adviser.Nick Sudbury is an experienced financial journalist and investor who has worked both as a fund manager and as a consultant. He is also a chartered accountant.Paul Clutton, Director of Professional Recruitment Ltd, specialises in financial services recruitment and is a regular contributor to many publications on emerging HR legislation. Monica Woodley, senior editor at the Economist Intelligence Unit. She has previously worked on Money Management, Investment Adviser and Investment Week.

Editorial Advisory board:

Paul Wilson, Mark Pullinger and Nicola Mould

07.11Editor: Michael Wilson

[email protected]

Art Director: Tony [email protected]

Publishing Director: Alex [email protected]

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

N e w sN e w sN e w s r e v i e wr e v i e wr e v i e w c o m m ec o m m ec o m m ec o m m ec o m m ec o m m e NNN ttt a n a ly s i sa n a ly s i sa n a ly s i sContents.indd 4 5/7/11 17:19:19

features

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Decision Time for the Deficit America’s government debt has hit its legal ceiling, says Monica Woodley. But it would be stupid to let it damage a gradually slowing economy.

Recruiting tomorrow’s IFAs

Michael Wilson interviews the CEO of the Financial Skills Partnership,

which is working to bring young talent into the industry.

Sybarites UniteLuxury goods are outperforming every other sector of the consumer industry, says David Nicholson. And you can thank wealthy Asians for that.

Guest Insight: Aviva Investors

US High DividendManager Henry Sanders III,

on why high-yielding US stocks are looking promising.

Looking out for the Little Guy Can a platform provide unlimited broking for a fixed annual fee? Neil Crossley interviews the man with the plan.

16 COvER STORy

24

30

Obama needs a long-term

strategy to properly calm

the markets➹

IFA Magazine is published by The Wow Factory Publications Ltd., 45 High street, Charing, Kent TN27 0Hu. Tel: +44 (0) 1233 713852. ©2011. 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.

High Street Banks Under Siege

Johanna Ayling explains why bank shares are under such pressure.

37

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a n a ly s i sa n a ly s i sa 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 5/7/11 17:19:25

This is a financial promotion and is not intended as investment advice. The information provided within is for use by professional investors and/or distributors and should not be relied upon by retail investors. *1-month LIBOR +4% before charges in all market conditions over the medium to long-term. †Source: Lipper, as at 31/05/11. Fund performance is calculated as total return including reinvested income net of UK tax and annual charges but excluding initial charge. The impact of the initial charge, which may be up to 4% can be material on the performance of your client’s investment. Performance figures including the initial charge are available on request. Past performance is not a guide to future performance. Issued by BNY Mellon Asset Management International Limited (BNYMAMI). BNY Mellon Asset Management International Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Services Authority. All information relating to Newton Investment Management Limited (Newton) and the Newton Real Return Fund has been prepared by Newton for presentation by BNYMAMI. BNYMAMI and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. The Prospectus and/or Simplified Prospectus should be read before an investment is made. This document can be obtained from www.bnymellonam.co.uk. To help us continually improve our service and in the interest of security, we may monitor and/or record your telephone calls with us. BNYMAMI and Newton are ultimately owned by The Bank of New York Mellon Corporation. Newton is a member of the IMA. PC6961-29-06-2011(3m)

The beauty of the Newton Real Return Fund is its capacity to generate positive returns in all conditions. It can capture equity-like returns on the upside and protect against market falls on the downside. And because investments are spread globally across several asset classes, it can further maximise opportunity and minimise risk. This explains why the Fund is currently the only S&P AAA-rated fund in the absolute return sector: it’s bucked the market trend and delivered an impressive annualised return of 9.08% over the last 5 years. Quite significant during a credit crisis. Run by a highly experienced team with a clear strategy that doesn’t rely on complex computer modelling, the Newton Real Return Fund will be of real interest to your clients.

For further details call 0500 66 00 00 www.bnymellonam.co.uk

Newton Real Return Fund

Performance as at 31 May 11 †

Period Fund (%) IMA Absolute Return Sector (%) Quartile rank

1 year 12.04 3.75 1st

3 years 28.19 9.63 1st

5 years 54.44 28.53 1st

• Top-rated IMA Absolute Return Sector fund (S&P)

• Targets cash +4%*

• Strong record of real returns, in changing conditions

1

Source & Copyright: CITYWIRE as at 31/05/11


Be prepared for changing conditions.

BNYM0027 RR_TRADE_wheels_A4.indd 1 05/07/2011 16:01


6 June 2011 www.ifamagazine.com

Ed's Welcome.indd 6 5/7/11 17:29:55

I wandered...w

or

ds

of

wils

on

No, it’s not the one in the guide books but another cottage that the poet and his wife owned for a while, and we’ve rented it for a family celebration. Once you get to grips with the thought that the great poet once gazed out of those very same windows as you, and into pretty much the same view – along with Coleridge and maybe Sir Walter Scott as well – it gets harder, not easier, to find the right words.

Wordsworth really had no time for the business world. His romantic heart was with the French revolutionaries. (At least, it was until they started chopping people’s heads off.) And he liked doing things the old-fashioned, pre-industrial way – indeed, he’d probably have refused a typewriter even if it had been invented. Whereas, by contrast, the cottage now buzzes with wireless broadband and 81 digital TV channels bearing a torrent of news that would have driven William to the laudanum bottle.

Wordsworth’s world was changing fast, but his choice was to turn away from the massive efficiency of the industrial revolution in search of something older, simpler and much more personal. We don’t have that option. Suddenly we’ve got to be computer whizzes, and our clients are on databases, and lord help us if we don’t get their requirements right, so we hire people full-time just to take care of compliance. We’ve got to upgrade our qualifications and put in the hours on CPD, and make sure we never get caught out by the difference between an asset backed ETF and a structured one, and so on and so on. Tolley’s Tax Guide is longer than War and Peace.

Meanwhile, at our backs ‘we always hear, time’s winged chariot changing gear’ (Eric Linklater). This year’s FSA becomes next year’s PRA, FCA and CPMA. And you can bet that OBR, ONS, OTS and all the rest of the newcomers will be bending our ears as well. The FSA’s policy documents alone weigh in at more than 2,000 pages a year, and the quarterly updates can top 120 pages apiece, and they show no signs of getting any thinner.

Will we have a leaner, fitter, more effective financial services industry by the end of it? Yes, we probably will. But there are times when the pace of change gets a little too fast, and this is one of them.

By an odd coincidence, one of my great-great-great-uncles was Wordsworth’s gardener – the man in charge of the daffodils, perhaps. I think I’ll just nip out and see how his life’s work’s coming on.

Write to Michael [email protected]

...lonely as a cloud. well I am wrItIng thIs from wIllIam wordsworth’s study, up In the lake dIstrIct.

Michael Wilson, Editorifa magazine

MikeThis is a financial promotion and is not intended as investment advice. The information provided within is for use by professional investors and/or distributors and should not be relied upon by retail investors. *1-month LIBOR +4% before charges in all market conditions over the medium to long-term. †Source: Lipper, as at 31/05/11. Fund performance is calculated as total return including reinvested income net of UK tax and annual charges but excluding initial charge. The impact of the initial charge, which may be up to 4% can be material on the performance of your client’s investment. Performance figures including the initial charge are available on request. Past performance is not a guide to future performance. Issued by BNY Mellon Asset Management International Limited (BNYMAMI). BNY Mellon Asset Management International Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Services Authority. All information relating to Newton Investment Management Limited (Newton) and the Newton Real Return Fund has been prepared by Newton for presentation by BNYMAMI. BNYMAMI and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. The Prospectus and/or Simplified Prospectus should be read before an investment is made. This document can be obtained from www.bnymellonam.co.uk. To help us continually improve our service and in the interest of security, we may monitor and/or record your telephone calls with us. BNYMAMI and Newton are ultimately owned by The Bank of New York Mellon Corporation. Newton is a member of the IMA. PC6961-29-06-2011(3m)

The beauty of the Newton Real Return Fund is its capacity to generate positive returns in all conditions. It can capture equity-like returns on the upside and protect against market falls on the downside. And because investments are spread globally across several asset classes, it can further maximise opportunity and minimise risk. This explains why the Fund is currently the only S&P AAA-rated fund in the absolute return sector: it’s bucked the market trend and delivered an impressive annualised return of 9.08% over the last 5 years. Quite significant during a credit crisis. Run by a highly experienced team with a clear strategy that doesn’t rely on complex computer modelling, the Newton Real Return Fund will be of real interest to your clients.

For further details call 0500 66 00 00 www.bnymellonam.co.uk


Performance as at 31 May 11 †

Period Fund (%) IMA Absolute Return Sector (%) Quartile rank

1 year 12.04 3.75 1st

3 years 28.19 9.63 1st

5 years 54.44 28.53 1st

• Top-rated IMA Absolute Return Sector fund (S&P)

• Targets cash +4%*

• Strong record of real returns, in changing conditions

1

Source & Copyright: CITYWIRE as at 31/05/11


Be prepared for changing conditions.

BNYM0027 RR_TRADE_wheels_A4.indd 1 05/07/2011 16:01

www.ifamagazine.com July 2011 7

Ed's Welcome.indd 7 5/7/11 17:29:56

sho

rts

China: still as inscrutable as ever...after watching the price of his Fidelity China Special Situations fund fall by 17% in the space of only six weeks. Last year’s stellar performance had seen the shares soar by nearly 30%, hitting 129p in November 2010 from their launch price of 100p in May. But if the ensuing drop to 114p in early May was sobering enough, the horrible decline to 94p in mid-June was simply teeth-grindingly bad.

Up to a point, Bolton is probably right to blame the sharp rise in oil prices, together with the generally darkening global economy and the fears about the dollar, for what he openly admits has been a disappointing result over the last six months. Losing all the NAV gains you’ve made during your first six months of business is not a matter to be taken lightly. But he offers some more intriguing insights.

Firstly, he says, his fund was forced to spend a lot of money on put options, in order to secure itself against any armed conflicts between North and South Korea – something which

had mercifully not come to pass by the time we went to press. But another reason was that the China fund is underweight on oil companies such as PetroChina – which meant, in effect, that it hadn’t been able to capitalise on the considerable price rises that these companies experienced during the second quarter of 2011.

All this, of course, was coming at a time when Beijing was tightening its credit controls in an effort to choke off rising inflation. But Bolton’s still bullish despite everything. He sees no reason to change the fund’s stock-picking approach, he says, and he isn’t worried about inflationary pressures hurting businesses.

But he does have a warning for anyone who tries to invest in China without local expertise. The quality of investment analysis in China is very poor, he says, and traders tend to lump all companies in a particular sector together without inspecting their specific qualities or weaknesses. That’s good if you’ve got better information that enables you to swim against the tide. But it can also conceal serious weaknesses. He hopes that his Hong Kong-based unit can make the difference.

One in five savers aged 30-50 are making no provision at all for their retirement, according to a new survey from Scottish Widows. The survey found that 59% of the over-50s were laying down the foundations for retirement. But would it be enough? The average requirement for a comfortable life at 70 would be £24,300 a year, the survey found. But that would require a massive pension pot of nearly £450,000!

For more comment and related articles visit...

www.ifamagazine.com

Legendary fund manager, Anthony Bolton, has had some explaining to do...

N e w s r e v i e w c o m m e N t a n a ly s i sa n a ly s i s

magazine

News.indd 8 5/7/11 17:35:37

ne

wsRetail sales dipped by

2.1% in May against last year’s levels, according to a survey by British Retail Consortium. The survey reinforced the trade’s suspicions that the late Easter and an extra bank holiday had artificially boosted April’s figures and that May had seen a return to trend.

The Institute of Directors has said that David Cameron’s Conservative/LibDem government has failed to lighten the tax burden on British businesses during its first year in office. A report published in June says that small and medium sized businesses are effectively paying between 32% and 43% tax, in marked contrast to the headline tax rates of 20% and 26% respectively.

A Greek Tragedy...If anybody thought that the Euro Club had weathered its recent storms reasonably successfully after the disappointments in Greece, Ireland and Portugal, they were sorely mistaken. The markets were shaken in June by the resurgence of worries about Greece’s parlous position, as it struggled to keep its rioting population at arm’s length from the need to impose stricter austerity measures – the latter being essential for the granting of IMF approval for more tranches of bail-out cash.

The tensions eased on 23 June as the EU’s senior leaders agreed in principle to a second €120 billion ($170 billion) bail-out, on top of the €110 billion which had already been agreed. And there was a collective sigh of relief the next week as the

Greek government finally managed to vote the necessary reform

packages through Parliament.

The new money is being provided partly by the European Financial Stability Facility (i.e. the 17 Euro Club member states) and partly by the International Monetary Fund. Meanwhile the French government has floated a relief plan that would mean private creditors rolled over their Greek bond holdings, rather than cashing them in.

But the deal hasn’t done much to quieten fears that the worst isn’t over yet. What will happen if Greece is still forced into default? Could the country be ejected from the Euro Club? Opinion was still divided on the feasibility of such a complex measure, although German and British sentiments suggest that it might actually be desirable.

But of more concern, it seems, is the feeling that, if Greece were allowed to default, it would quickly contaminate the quality of government bonds in Portugal or Ireland, which were delivering bid yields of around 12% on ten-year paper in late

June. Greece’s own bonds, meanwhile, were delivering 17% on nine year paper and a thumping 30% on two-

year paper.

...but who’s going to be next?


www.ifamagazine.com

a n a ly s i sa 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 sNews.indd 9 5/7/11 17:35:43

sho

rts

Qualified Praise from the IMF

The IMF reported in June that it expected the UK economy to grow by 1.5% in 2011, down from its forecast of 1.7% in April and 2% as recently as November 2010. But it worries that inflation is likely to remain above 4% for most of the year, and that unemployment is too high.

IMF acting managing director John Lipsky warned that “uncertainty around the central forecasts remains high”, and that measures to improve matters might include ‘expanding the Bank of England’s programme of asset purchases’ (quantitative easing) or a temporary tax cut. It seems unlikely that Chancellor George Osborne will go for the latter.

Feeling was growing among bond market specialists that the Bank of England will be forced to raise the base lending rate, which has been stuck at 0.5% for the last two years. With the Retail Price Index at 5.2%.

Others, however, object that the RPI paints an illusory picture of Britain’s demand economy, because the problem is not that consumers are spending their cash recklessly on things they shouldn’t be trying to afford. Instead, they say, the public is being coerced into paying more for food, petrol, gas and other non-discretionary goods whose prices have soared in the last year. And let’s not forget that the 2.5 percentage point hike in VAT at New Year can fairly be blamed for some of that higher expenditure.

Volume consumption of goods has barely moved at all, say the sceptics, and retail sales are still generally on the floor – proof, it would seem, that a rise in interest rates would miss the point. If anything, it would deepen the misery of Britain’s shoppers without achieving anything useful.

Britain’s economic policy is broadly on track, according to the International Monetary Fund.

US Treasury Secretary Timothy Geithner (right) annoyed UK financial practitioners by claiming that Britain’s “tragic” experiment with lightly regulated markets had given America a valuable lesson in what to beware of. Yet Geithner demanded capital controls on banks should be “not excessive”, opening himself up to claims that he was condoning US banks’ lax lending practices.

The pass rate for someLevel 4 papers is only 50%, financial recruitment consultancy BWD reports and some 35% of advisers have yet to pass a single paper. Accordingly, BWD is launching an e-learning initiative aimed at speeding up and reinforcing the learning process.

Details from www.bwd-search.co.uk


www.ifamagazine.com

“Uncertainty around the central forecasts remains high.”Acting Managing Director of the IMF John Lipsky (left), endorsed UK’s present deficit cutting plans, but suggested pursuing a new approach if problems linger.

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 5/7/11 17:35:48

ne

wsThe German government is to shut

all its nuclear power stations by 2022 in a response to public anger following the near-meltdowns at the Fukushima plant in Japan. Of the 17 plants scheduled for closure, three have had their shut-off dates advanced to between 2015 and 2019. Meanwhile coal prices have been driven sharply upward by expectations that the “dirty fuel” may yet receive an unexpected lease of life.

Peru is giving the international mining companies cause for concern. The election of left-wing president, Ollanta Humala, in June has aroused fears he might follow the path of his close ally, Venezuela’s Hugo Chavez, in nationalising strategic industries and generally making life difficult for foreigners.

Where Eagles

Dare

...as new government statistics suggested that the much-

touted consumer boom – the expected response to President

Barack Obama’s extension of George W Bush’s tax breaks – was little more

than a fast-vanishing memory.

First-quarter growth was a somewhat disappointing 1.8% in year-on-year terms, according to the Government – the problem being that the markets had been hyped up to expect much better figures. As a result, the second-quarter growth estimates have been trimmed back from 3.5% to around 2.6% - still not bad by UK standards, but slow enough to undermine most of the expectations that had been shoring up Wall Street. American consumers bought an impressive 6.7% more goods in the three months to end-April, when measured in dollar terms; but by the time the economists had allowed for a 30% rise in gasoline prices and a higher-than expected rate of food price inflation, the increase was a mere 2.2%.

More worrying, however, was the news from the Bureau of Labor Statistics that non-farm payroll employment had risen by only 54,000 in May – barely a quarter of the growth rates recorded in each of the previous three

months. US strategists tend to rely heavily on the earliest guesses when it comes to jobs or output, rather than waiting for the (often delayed) revised figures to appear. So the payroll data resulted in a sizeable exodus of risk capital from Wall Street, plunging the S&P 500 index

President Obama seemed unfazed by the bad news. “There are always going to be bumps on the road to recovery,” he insisted, suggesting that high fuel prices, the economic problems in Japan and instability in the Middle East had all played their part in the disappointment. But none of this seemed likely to defuse the problems of slowdowns in the manufacturing sector and in consumer spending. Or, indeed, the fact that house prices are predicted to fall by a further 10% this year.

Where will it lead? The smart money is backing another round of quantitative easing in the second half of the year, experts insist. If the Fed were to restart its programme of buying up its own bonds, so as to inject new flows into the money supply, it would push up consumption and help businesses, while also threatening to weaken the dollar. Possibly...

Worries about economic growth brought the halting recovery

of the US financial markets to a shuddering halt in June...


www.ifamagazine.com

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 sNews.indd 11 5/7/11 17:35:50

10 YEARS OF OUTSTANDING RESULTS

108% OVER 10 YEARS.MANY HAPPY RETURNS

INDEED!

steady as she goes

A lot has happened in the world since the VAM US Small Cap Fund opened for trading 10 years ago. And while we couldn’t have predicted the biggest global financial meltdown in 80 years, we were prepared for it. From the very beginning, VAM’s approach has been to partner with a Fund Manager who has a brilliant track record of consistent outstanding returns - through good years and bad – which is why we have been able to more than double our initial investors’ money. We look forward to many more happy returns in the years ahead. You’re invited to join the party.

Visit www.vam-funds.com today.

This financial promotion is published by VAM Funds (26 Avenue de la Liberté L-1930 Luxembourg). For professional investors only. Authorised by the Financial Services Authority (UK). This is not an offer to purchase shares, which may only be bought under the terms of the prospectus. The value of shares may go down as well as up. Changes in the rate of currency

exchange may cause the value of the investment to go down or up. Past performance is no guarantee of future results.

For further information on VAM Funds please contact VAM Marketing on + 230 465 6860 or email us at [email protected]. Alternatively visit our website at www.vam-funds.com

VAM US SMALL CAP FUNDS CELEBRATES 10 SUCCESSFUL YEARS

Dow Jones Industrial Average TR (IN)VAM Funds (Luc) SICAV US Small Cap Growth B (MF)S&P 500 TR (IN)

FROM 16/3/2001 TO 18/2/2011

Source: Lipper Hindsight

User may have modified the original chart and axis titles provided by Lipper.

10 YEARS

2001-2011

110

100

90

80

70

60

50

40

30

20

10

0

41.0

60.3

108.4

16065

News.indd 12 5/7/11 17:35:51

ne

ws

Six of the BestThe Financial Services Authority has named the first six professional bodies upon which it plans to bestow “accredited body status” during the course of the forthcoming RDR restructuring of the UK industry. Quarterly consultation paper No 29 (CP 11/11), published in June, declares in Section 3.14 that the six selected bodies are to be as follows:

n The CFA Society of the UK

n The Chartered Institute for Securities and Investment

n The Chartered Institute for Bankers in Scotland

n The Chartered Insurance Institute

n The Institute of Financial Planning

n The Institute of Financial Services

The six ‘accredited bodies’ will be responsible for issuing IFAs with so-called Statements of Professional Standing, which will certify that they have attained the qualification standards required by RDR with effect from January 2013. It will also certify that they have completed the required 35 hours of continuing professional development (CPD) activity, and that they have declared their compliance with the approved persons code of practice.

The FSA readily concedes that not all of these six bodies are currently fully equipped to take on these responsibilities, which is why its approval is still conditional. And it adds that it is expecting to receive further applications from other candidate bodies in the coming months.w

The FSA’s document says that accredited bodies “will need to satisfy requirements in four broad areas:n to act in the public interest and further

the development of the profession;n to carry out effective verification services;n to have appropriate systems and controls

in place and provide evidence to us of continuing effectiveness; and

n to cooperate with us on an ongoing basis.”

As you’d expect, the announcement has aroused a good deal of resentful comment among the IFA community. Talk of ‘gravy trains’ and ‘jobs for the boys’ is everywhere.

It was ever thus.

Accredited bodies named by the FSA

Canada’s serving Prime Minister Stephen Harper (right) won a clear re-election majority during the May polls – the first time in seven years that Canada has not needed a coalition government. Analysts expect that the new right-wing government will be able to liberalise the country’s foreign investment regime.

New capital adequacy rules for small IFAs might not be implemented by the end of 2013, as originally scheduled, FSA Chief Executive Hector Sants intimated on 23 June. Under the plans, capital requirements are due to rise from £10,000 to either £20,000 or three times the IFA’s monthly fixed expenditure. But, Sants said, “we are carefully considering whether we should revisit the timelines.” Enough said.


www.ifamagazine.com

“Not all of these bodies are currently fully equipped to take on these responsibilities”The FSA readily concedes of its choices, which is why its approval is still conditional.

10 YEARS OF OUTSTANDING RESULTS

108% OVER 10 YEARS.MANY HAPPY RETURNS

INDEED!

steady as she goes

A lot has happened in the world since the VAM US Small Cap Fund opened for trading 10 years ago. And while we couldn’t have predicted the biggest global financial meltdown in 80 years, we were prepared for it. From the very beginning, VAM’s approach has been to partner with a Fund Manager who has a brilliant track record of consistent outstanding returns - through good years and bad – which is why we have been able to more than double our initial investors’ money. We look forward to many more happy returns in the years ahead. You’re invited to join the party.

Visit www.vam-funds.com today.

This financial promotion is published by VAM Funds (26 Avenue de la Liberté L-1930 Luxembourg). For professional investors only. Authorised by the Financial Services Authority (UK). This is not an offer to purchase shares, which may only be bought under the terms of the prospectus. The value of shares may go down as well as up. Changes in the rate of currency

exchange may cause the value of the investment to go down or up. Past performance is no guarantee of future results.

For further information on VAM Funds please contact VAM Marketing on + 230 465 6860 or email us at [email protected]. Alternatively visit our website at www.vam-funds.com

VAM US SMALL CAP FUNDS CELEBRATES 10 SUCCESSFUL YEARS

Dow Jones Industrial Average TR (IN)VAM Funds (Luc) SICAV US Small Cap Growth B (MF)S&P 500 TR (IN)

FROM 16/3/2001 TO 18/2/2011

Source: Lipper Hindsight

User may have modified the original chart and axis titles provided by Lipper.

10 YEARS

2001-2011

110

100

90

80

70

60

50

40

30

20

10

0

41.0

60.3

108.4

16065 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 13 5/7/11 17:35:54

ne

ws The Council of Mortgage

Lenders has named Paul Smee (right), the founding director-general of the Association of Independent Financial Advisers (AIFA), as its new director-general. Mr Smee replaces Michael Coogan, who was due to step down at the end of July after holding the post since 1996.

China’s inflationary pressures have been successfully overcome, according to Premier Wen Jiabao. The government’s policy of capping retail price increases has paid off, he says. Headline consumer prices rose by 5.5% in the year to May, but food prices soared by 11.7% - arousing fears that it might cause discontent among vulnerable poorer consumers. China investment funds strengthened a little on the news.

Do you want the good news or the bad news first?You could be forgiven for thinking it was simply evidence of weak consumer confidence during a time of economic hardship which is only gradually easing. The Investment Management Association reported in June that net retail sales of funds in April had been £100 million down on year-earlier levels, declining from £2.5 billion in April 2010 to just £2.4 billion.

But that, of course, was only the bad news. The rather better news was that April’s sales were still the best in the last twelve months, and that they compared with a typical monthly average of £1.8 billion.

Nearly half of the new investments, or £1.1 billion, went into equity funds, the IMA reported, with bond funds accounting for another £516 million. Net ISA sales were up significantly to £1.2 billion, perhaps reflecting the slightly increased investment thresholds, and overall the IMA said the outgoing season had been the best for nine years.

Fund Platforms are continuing to make their mark. Net sales were the highest since figures began in 2008, the IMA said, totalling £1.3 billion in April 2011. And in gross terms, the fund platforms reported their highest

gross ISA sales on record in April 2011, at £1.3 billion. The total value of UK-domiciled funds under management for all platforms was up by 15.1% to £594.5 billion in April, compared with only £517 billion in April 2010.

Funds under management for fund platforms were £112 billion in April 2011, the

highest on record, the IMA said. And gross retail sales of all products through

fund platforms totalled £3.6 billion - comfortably above the monthly average of £3.2 billion for the previous 12 months. This meant, in effect, that platforms’ market share was 42% of total gross sales for the industry during April 2011.

Most of the rest of the sales came from ‘other

intermediaries’ including wealth managers and

stockbrokers, who sold £3.9 billion

of investments in April. And gross retail sales

through direct channels totalled

£1.1 billion in April, the IMA said - the

highest level since April 2010. Overall,

sales through direct channels accounted for

13% of total sales, but the proportion appears to be declining.

Get out from behind the sofa. The ISA season’s results are in.


www.ifamagazine.com

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 14 5/7/11 17:35:58

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This document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances. 1 Source: Lipper. Performance is based on NAV prices with income reinvested net of basic rate tax and in Sterling terms to 30 April 2011. Sector is IMA North America. 2 Fund launched 10 November 2008. 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. The Fund is managed in a concentrated manner with the aim to optimise long-term capital appreciation. Issued in May 2011 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 2011. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

News.indd 15 5/7/11 17:35:59

“The previously unthinkable - that the US could default on its debt - is now considered a serious possibility. Oh yes, it’s as bad as that.”


16 July 2011 www.ifamagazine.com

Crisis USA.indd 16 5/7/11 17:47:48

de

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timeIT’s DecIsIon

TIme on The Us DebT DebT Deb

What happens when one of the world’s ultimate investment havens suddenly doesn’t seem so safe any more? That’s the situation that’s been worrying holders of US Treasuries recently, as the previously unthinkable - that the US could default on its debt – started to become a serious possibility. Oh yes, it’s really been as bad as that.

Well, maybe. As we went to press in July, it finally seemed to be dawning on Washington that something would really have to shift, if the government was not to breach its legal borrowing limit on 2 August when its temporary reprieve runs out. Senior senators spent Independence Day (4 July) arguing that all of Congress’s holiday leave should be cancelled until something had been sorted out. And, in truth, it would be extraordinary if the government really had to slam on the repayment brakes on 2 August – and, effectively, default on part of its $14.3 trillion accumulated debt. That would put the skids under the dollar, and probably the whole global economic system.

Which is not to say that a default couldn’t happen, at

least temporarily. But the bigger question, assuming the debt gets sorted, is how Washington intends to stop the debt growing still larger in the coming years. That’s where important decisions need to be taken that President Obama simply hasn’t had the nerve to confront yet.

You don’t have to look far to find the doomsayers. Depository Trust and Clearing Corporation, one of America’s main defences against financial disaster, has already said that the gross value of derivatives contracts, which would pay out in the event of a default, has doubled in the past year. And the price of this insurance has shot up in recent weeks, to the point that investors are now paying more to protect themselves from a US default in the next year than one in Indonesia or Slovenia.

Indonesia? Slovenia? Come on, are they serious? Well yes, it seems they are. And adding to the general fears has been the credit ratings agency Moody’s issuance of a warning of a “small but rising risk” that the US could actually default. Remember, too, that it was only in April that Standard & Poor’s changed its outlook on the

WaShingTOn Will prObably manage TO raiSe iTS debT ThreShOld, bUT iT’ll Take a lOng-Term STraTegy TO prOperly calm The markeTS, SayS Monica Woodley

US’s credit score from “stable” to “negative” and said there was a “material risk” that the government will be unable to agree on a credible plan to reduce the budget deficit - an action that implies that S&P sees at least a one-in-three chance of a downgrade within the next two years.

Oh goodness. The US has had a monstrous amount of debt for many years, of course, and yet it has always maintained its credit rating – enabling it to borrow at low rates. So what has changed to threaten that privileged status?

Political stalemateAt the moment, the main issue is the political deadlock over raising the debt ceiling (the total aggregated amount that the US is allowed to borrow at any one time). The current limit is $14.3 trillion – or slightly more than one whole year’s Gross Domestic Product - and unfortunately, unless politicians can agree to raise it, the country will be unable to pay


Crisis USA.indd 17 5/7/11 17:47:50

its bills, resulting in a “technical default”. The

US Treasury has said this must happen by August 2nd but the markets will be looking for signs of an agreement in the next few weeks or else the US risks having its credit rating reviewed for downgrade. Moody’s has said that if the ceiling is raised in time, the US will maintain its AAA rating.

But that’s where it gets nasty for President Barack Obama, who doesn’t hold a majority in either the Upper or the Lower House of Congress.

In exchange for supporting the essential rise in the debt limit, the Republicans are demanding budget reforms and deep spending cuts to match the proposed $2.4 trillion increase in the debt ceiling. And these cuts include radical changes to Medicare and Medicaid (the government healthcare programmes for, respectively, the elderly and poor) - effectively privatising them by introducing a voucher system for private health insurance. That

would be a slap in the face for Obama’s Democrats, who made a hard-fought set of health care reforms the key plank of their first-term strategy. They’d rather solve the problem by raising tax rates for the top 2% of America’s earners – but, predictably, the “small-government” Republicans are refusing to countenance any tax increases.

Market reactionOddly, the stubborn concern about default has not dented the enthusiasm of many US debt investors. And that’s encouraging in itself. Although some major investors, like asset management firm Pimco, have been reducing their bond holdings, treasury prices have continued to push upward; in May, for the first time in six months, they saw stronger gains than dollar-denominated company debt. And many investors still see Treasuries as a better bet than other developed-world debt – specifically, that of Eurozone countries, which are under a cloud of their own...

de

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obama’s bigger problem is only partly to do with the Republicans. He’s discussed, and to some extent agreed, a set of cuts that are reportedly in the range of $150-200 billion – which sounds like a lot, but which is actually just small change in a budget the size of america’s. and even those cuts won’t come into force for many years, assuming they actually happen at all. all right, further cuts of up to $1 trillion are perfectly well within reach, according to a small bipartisan group led by vice president Joe Biden. But the question is, does the political will exist to deliver them?

it’s all very different to the UK, where chancellor George osborne has recently launched a vast programme of cuts in an effort to reduce the deficit. Part of the problem, according to a recent Financial times editorial, is that America has a major election every two years – and that each and every election is a moment when the

public can show its disapproval of tax policy by throwing out the incumbent leadership’s majority. Whereas a British government can consider itself electorally unassailable for five lovely long years - during which it can administer whatever unpleasant medicine it thinks appropriate – Us policymakers find it nearly impossible to tighten the nation’s belt without endangering their own position.

is it really that bad? isn’t it true that America has always managed simply to grow its way out of those tight situations in the past? Yes indeed, it has. But then, America has never had to face a surging chinese competitor in the past, or a foreign bond debt of quite this exorbitant size – much of it financed by Asia, remember. And nor has the Us had anything quite like the tea Party, whose anti-austerity libertarian platform is making such huge strides especially among poorly-educated voters who simply aren’t willing to do the maths.

Blame those biennial elections Michael Wilson says:

“June opened with the worst one-day fall in the S&p 500 since last august, and a week later it was nearly 5% down. Ouch.”

Crisis USA.indd 18 5/7/11 17:47:51

Short-term or structural problems?Although any number of external factors have been variously blamed for the disappointing data – including, for example, the Japanese disaster, the recent spate of extreme weather in many parts of the US and the generally rising state of oil prices - other structural reasons are at last beginning to be discussed.

Recently Pimco’s CEO, Mohamed El-Erian, argued in the Financial Times, that for too long the US has relied on inwardly looking sectors, such as construction, housing, retail and leisure, as the engines of employment - and that, in the process, it has lost its edge in educating and training its workforce. He added that solving the problem will require a coordinated set of structural measures to improve the functioning of the labour market - as well as housing, credit and medium-term fiscal sustainability.

If the debate on debt had not already reached such an impasse, the normal expected government response would be to throw money at the problem of job creation, knowing that putting people into jobs increases consumer confidence, which gives companies the conviction to start spending and hiring again – all of which leads to more tax revenues. But instead, government spending cuts have actually hit job growth, as jobs have been cut at the federal but more particularly the state level. That hopeless figure we just quoted about 54,000 jobs being added in May is actually the 83,000 jobs the private sector created, less the jobs lost from the public sector. Over the past year, almost half a million government jobs have been cut.

The public sector job cuts could be the sensible rationalisation of the government workforce and a necessary pain to endure on the road to fiscal responsibility. But it and

other federal budget cuts are hampering growth. Recently on Economist.com, the website of The Economist, it was argued that there is a 0.5 percentage point drag on economic growth from spending cuts, which was considered less problematic when it looked like GDP would grow by 4% this year than now when expectations are lower.

Whatever happens, the markets will be looking for progress from now on. And everybody knows that a technical default (basically just the late payment of coupons on Treasuries, not a proper full-blown default) could spook markets and impair future growth. That’s why it’s unlikely to happen. But rarely has the fate of a supposedly “safe haven” investment seemed so uncertain - or so dramatic..

For more comment and related articles visit...www.ifamagazine.com

*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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Crisis USA.indd 19 5/7/11 17:47:52

You can’t have missed the front-page headlines recently, although some of the stories beneath them do take a bit of following. “Grim Geithner warning over derivatives trading under Basel III”. “EU accused of watering down Basel III rules for bancassurers.” And so on. What does that all mean, exactly?

Well, you probably wouldn’t want to know exactly what it means even if we spent the next twelve issues of IFA magazine explaining it to you. Banking is one of those areas where the devils are in the most excruciatingly boring details. But the gist of it is that the world’s biggest banking nations are having yet another stab at fixing the gaping holes in the financial safety nets that their banks are supposed to adhere to.

What It’s All AboutSpecifically, the great and the good are trying to agree on how large the banks’ capital deposit requirements ought to be. That’s the amount of money, or assets, or whatever, that they’re forced to deposit with their various central banks in case there should be another crisis and the need arises to fend off a run on their funds.

Actually, even that’s not true. The real tactical reason why banks have to deposit this capital is to dissuade them from lending too much, too recklessly. If a bank knows that it’s going to have to stick 8% of

its lending portfolio into a non-interest-bearing vault every time it advances a loan, it might be a bit less inclined to lend more than it can afford.

Okay, that’s the basic principle of the thing. The Basel III Capital Framework, as this stitched-together monster is called, is scheduled to have been agreed by all the major G-20 financial centres by the end of this year, and eventually around 27 countries are due to sign up. Which would be great if it weren’t that the Basel III rules aren’t scheduled to come in until 31st December 2019. And that’s still an awfully long time away.

Never mind, it’ll be worth it the end. Basel III will cost a bit, but it’ll help to keep us from falling into subprime lending crisis like the last one. That, at least, is the theory. The trouble is, it’s also what they said ten years ago, when Basel III’s predecessor Basel II was finalised. And again back in 1988, when Basel I first made its appearance. So have they

finally got it right this time? (Deep sigh.)

We need better bank capital rules, says Michael Wilson. not in 2020, but right noW. and stop Whingeing please

“banking is one of those areas where

the devils are in the most

excruciatingly boring

details.”

Fixing the net

afe t ys



Eds Soapbox.indd 20 5/7/11 17:51:11

ed

’s s

oa

pb

ox“it was round

about the year 2000 that i got

fired by one of america’s

leading investment

research associations.”

A Sorry Sequence of Basel BotchesBack in the blissful days of Basel I, when banks weren’t generally reckoned to be a suicidal risk to the world’s economy, the international capitalisation rules stated simply that banks ought to set aside a flat-rate 8% of their lending as a capital reserve – a sort of deposit which they were forced to pledge to their countries’ central banks in the form of either cash, bullion, government bonds or other completely solid assets. (I’m oversimplifying somewhat, but bear with me.)

But that 8% rule was expensive for the banks, because having 8% of their money lying dead in the vault was a drain on profitability. So the protests soon started to come in from banks that did most of their lending against property - which was considered to be a solid kind of collateral at the time. Why, they asked, should all these hyper-safe mortgage institutions have to set aside the same reserves as credit card companies and other unsecured lenders who were taking much bigger risks? And so the long struggle began to implement Basel II (2004), which basically said that banks should be able to adjust their capital ratios according to their risk profiles.

Instead of having to set aside one unitary 8% capital proviso for all their lending, Basel II allowed the banks discounts on that 8% requirement - of 50% or even 80% on some parts of their lending portfolios - depending on how much risk they were taking. And that was the “Pillar 1” side of things, the part that related to capital risk. “Pillars 2 and 3” of Basel II required the banks to assess their own risks properly, and to tighten up their market discipline so that everybody could see what they were doing.

The Big CatchSo far so good. But those self-assessment profiles under Basel II were always a bit flaky, and they rang alarm bells among those of us who didn’t entirely trust them. With some justification.

It was round about the year 2000 that I got fired by one of America’s leading investment research associations for writing an essay in a learned journal that questioned whether it was really safe to describe US mortgage lending as a copper-bottomed low-risk activity? And in which I also queried whether the outgoing

administration of President Bill Clinton was really right to endorse the US credit card companies’ demands for lenient treatment under

Basel II because they weren’t really such a high risk at all? (Clinton threatened to veto Basel II unless the other parties gave in. Eventually, grumbling, they did.)

That was seven years before the subprime mortgage crisis of 2007 that was to finish off America’s mortgage lending boom and sink Lehman Brothers. I still don’t regret writing the essay, although the lavish fees from Washington were very nice while they lasted. But the fact is, subprime lending was an obvious time-bomb, and the credit card companies were asking for trouble. Eventually it all blew up - exactly as it was bound to.

Third Time Lucky?And so onward to Basel III, which is now being thrashed out before our very eyes. On the one hand, banks won’t be getting such a big discount on the capital requirement rate for their lowest-risk activities – it’ll go up to at least 4.5%. And the “Tier 1” rate of core deposit (for top-class securities) will change from 8% to only 7%, which sounds more affordable in theory. Except that there’ll be higher requirements for companies involved in trading, derivatives and securitisation. And there’ll also be a new “countercyclical buffer” of up to 2.5 percentage points, which will vary according to the state of the economy at the time. Now that at least sounds like a good idea...

The unavoidable fact is that Basel III is going to cost more. The Organisation for Economic Co-operation and Development estimated in February 2011 that Basel III will slow the world

about the year 2000 that

A Sorry Sequence of Basel BotchesBack in the blissful days of Basel I, when banks weren’t generally reckoned to be a suicidal risk to the world’s economy, the international capitalisation rules stated simply that banks ought to set aside a flat-rate 8% of their lending as a capital reserve – a sort of deposit which they were

in the form of either cash, bullion, government bonds

dead in the vault was a drain on profitability. So the protests soon started to come in from banks that did most of

administration of President Bill Clinton was really right to endorse the US credit card companies’ demands for lenient treatment under

Basel II because they weren’t really



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!

ed

’s s

oa

pb

ox “if china feels like

running some derivatives trades

through london but the counterparty

doesn’t want to stump up a big

chunk of collateral, there’s probably very little we can

do about it.”

economy by somewhere between 0.05 and 0.15 percentage points per annum. That’s because banks will probably have

to raise their lending rates by 15 basis points in order to meet the tighter capital requirements effective in 2015. Is that a lot? No it’s not. The sooner we have it, the better.

Geithner’s BluffSo let’s go back to that opening story about how US Treasury Secretary Tim Geithner has warned us all about derivatives trading. It would baffle a lot of us to know that derivatives had anything to do with bank lending in the first place. Or that they should have any place in the bank capital calculations within Basel III.

Mr Geithner’s point, to put it simply, is that some banks are more deeply involved in derivatives than others, and that this puts them at extra risk. And up to a point that’s true. It’s not good for a bank to claim that it’s got $10 billion of solid assets on its books if it also has $30 billion of exposure to derivatives markets that could, theoretically, go wrong at any moment.

The US has a clear idea of how we ought to deal with this risk. It plans to force its own banks to require financial collateral from all the counter-parties to all their uncleared derivative contracts, so as to put a safety net under the banks’ own safety net. This is new, and it’s expensive, and it’s plainly intended to put a brake on derivatives. And Mr Geithner is annoyed that other jurisdictions – most notably Hong Kong, Singapore and of course London – are letting their banks conduct massive international derivatives operations without apparently making similarly draconian provisions.

Unfortunately, though, there are three major flaws in Mr Geithner’s argument about how we should incorporate international derivatives trading into the Basel III.

The first is that we have no national control over every part of the derivatives trade. If China feels like running some derivatives trades through London but the counterparty doesn’t want to stump up a big chunk of collateral, there’s probably very little we can do about it. Another non-signatory territory like Russia or Bahrain will be very glad to pinch our business.

The second objection is that the volume of potential exposure in a derivatives contract

would be too enormous for one counterparty to cover, even partially. Normally, the counterparty will effectively ‘farm out’ the risk by buying third, fourth or fifth-hand contracts from other counterparties. Unless I’m misunderstanding Geithner’s intent, covering the entire exposure would be a non-starter.

And the third point is that Mr Geithner is letting his peeve about London’s attractiveness get just a little bit too obvious. By declaring that Britain’s “horrific” 2007 banking crisis happened because of its light-touch supervision over activities like international derivatives, the Treasury Secretary is showing that he doesn’t know very much about British banking.

Talking To the Home AudienceNorthern Rock, Bradford & Bingley, HBOS, RBS and all the rest came to grief because of 100% home-grown misjudgements, such as overdoing it with self-certified mortgages – not because some high roller in Hong Kong had decided to chance his arm on an all-or-nothing gamble. Or have I been reading the wrong papers?

On reflection, I think it’s got more to do with the fact that Barack Obama has an election to win next year, and that this sort of rhetoric simply plays well to the home audience. It’ll pass, but not for a very long time.

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Traditional inheritance tax mitigation options aren’t appropriate for many of the people who need help the most: the very old, the seriously ill, or those with an appointed Power of Attorney. With Octopus you can offer them a real alternative. Our Business Property Relief solutions deliver inheritance tax relief in just two years. Clients retain full control over their assets, so there’s no need for gifting arrangements or extensive medical questionnaires. So now you can hand your clients a solution that works for them, despite their circumstances.

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1141-01-IHT-0611 IFA Magazine ALL THREE 210x297mm.indd 1 13/06/2011 12:21Eds Soapbox.indd 23 5/7/11 17:51:13

A Welcome BlAst of fresh AirLiz FieLd, ceo of the finAnciAl skills PArtnershiP, tells Us Why the fUtUre is Bright for recrUitmentYou don’t have to look very far these days for depressing news about the IFA industry’s mood. New exam qualifications, more compliance procedures, new-fangled platform technologies, tighter regulatory supervision and a weekly welter of new rules are driving many IFAs, if not actually to drink, then at least to thoughts of early retirement. For some older practitioners, the change of pace after a lifetime of is simply too much to bear.

So step forward Liz Field, the CEO of the Financial Skills Partnership, which is about to initiate a bold new drive to get more young people interested in IFA-related careers. The “Future Talent Portal”, due to be launched in September, is a Web-based solution that’s intended to carry forward the Government’s programme for increasing the number of school-leavers going into the professions through work placements, apprenticeships and so forth. Equally importantly, it’s hoped that it will raise the profile of IFA work in the eyes of a generation of young people who might otherwise never have been aware of its existence at all. That’s surely got to be a good thing for the industry?

The Financial Skills Partnership But first, a word about the FSP itself. Formed in March from the former Financial Services Skills Council , the organisation describes itself as a non-profit-making “strategic, impartial, employer-led organisation which aims to enhance professionalism and talent for finance, accountancy and financial services across the nations and regions of the UK.” (Phew.) That emphasis on the “employer-led” bit is crucial, by the way, because it’s in no way a government mouthpiece.

The FSP’s professional orbit includes accountancy and finance, insurance, banking, wealth and investment management, as well as pensions and financial planning, and it aims to be an employer-led link between the needs of industry and the educational system, with a sideline in government lobbying. One of its primary activities is setting standards of competence and accreditation

for young employees, as well as developing and accrediting frameworks such as apprenticeships and the more structured “modern apprenticeships”.

Connecting IFAs with Future TalentThe FSP’s Future Talent Portal is designed to appeal to students aged anywhere between 13 and university graduate level. Although it will provide all sorts of general information on financial services, Ms Field says that the portal’s main operational element consist of a series of employer web pages, each of which will be ‘owned’ by one of the IFAs. Within that space they’ll be able to present themselves to tomorrow’s youthful talent, with a view to encouraging students to step up and find out more about what the industry has to offer.

But the service goes further. Apart from a database of interested participants from the educational sector, the FSP’s website says that the new project provides “flexible data analysis against your criteria (e.g. geographical location, diversity or competence)” A complete matching service, in short.”Because of our reach into schools, colleges and universities, we can literally drive the traffic to the portal,” says Ms Field. “For employers, it’s an opportunity to flag up the fact that they’re interested in taking on young people for work experience.”

As you’d expect, there are financial incentives available to the employers. Typically, an apprenticeship or a workplace arrangement is a three-way affair in which the trainee is supervised and advised by a third party consultant who will effectively accredit the student’s experience and open up the funding.

Not all of the people being recruited will be destined for client-facing tasks at QCF Level Four. A Level Three qualification is more than adequate for backroom work, Fields says, or for paraplanning. And there’ll be ample demand for admin tasks at Level Two. But equally, graduate entrants will be looking for fast-track access at somewhat higher levels. “This is our opportunity to showcase to young people what a varied and interesting career being an IFA can be.”



Apprenticeships.indd 24 5/7/11 17:52:34

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Work experience programmes are something rather unfamiliar to many traditional IFAs, who have little enough experience of teenagers or of what they want from life. But Ms Field says there’s no need to worry about how the programmes should be shaped. “We’ll be consulting with some of our partners on what a good work experience ought to look like,” she says, “so we should be able to provide good guidance.”

Extending the Industry’s Outreach to Young Women There’s another aspect of IFA activity which Ms Fields thinks is likely to improve the balance of young women in the industry. If the March of tech-nology has been causing headaches for the middle-aged men who tend to dominate the scene, it has also opened up new

possibilities for home working, part time distance working and flexible-hours working – all of which are especially attractive to female students who might be wondering how they’re ever going to combine the challenge of a well-paid job with the other challenge of motherhood. (Lest we fall into allegations of sexism here, let’s also say that young men are taking paternity leave in growing numbers while their partners work, and the benefits are just as apparent for them.)

And not just at a desk level either. “We’ve got many women running their own IFA businesses,” she says, “and who tell us how great it is to be able to raise a family, juggle all the commitments, and also build a successful

business. We want young people to know all that.“Women,” says Ms Fields, “tend to be

better than men at organisational tasks, and their better social and communication skills also allow them to work more effectively at a distance

than men. The ability to set their own working hours ought to make all the difference.”

She rejects the popular view that IFAs don’t know what to do with young

people. “These organisations are open to new ideas, and to young people too,” she

insists. “All they need is a bit of help with making the link. And the benefit of attracting them young is that you have longer to embed them within your organisational culture.

“At the end of the day, IFAs have to accept that the traditional sources of talent are drying up. Instead of relying on people transferring from the big product providers with all their qualifications in place, they need to think more widely. That’s where we can help.”

Finding Out More The plan at present is that the portal will

start in on the work experience side, with mainly younger teenagers, and

that other channels, such as apprenticeships or graduate programmes, will follow on as it develops. “We’re very excited,” says Ms Field. “We’re talking to HSBC and PWC, both of whom have signed up, and lots of ideas are coming through”

At the time of writing, the Portal concept was still in its final consultative stage with its business partners, but by the time you read this there ought to be more detail available. The old Financial Services Skills Council web site (www.fssc.org.uk) has links to the Financial Partnership programme, and a newsletter

(http://tinyurl.com/6hunxnr) will be carrying more details as they become available.

“this is our opportunity to showcase to young

people what a varied and interesting career being an ifA can be.”


www.ifamagazine.com


Apprenticeships.indd 25 5/7/11 17:52:37



lucent land new l akes development“Lucent is positioned to be the uK Leader in Land deLivery.”says, Anthony Brindley, Head of Planning, Lucent Group

The Lincolnshire Lakes project will create a major new development within an ecologically sound setting. The development comprises:n 10,000 housesn 100,000 square metres of

commercial development n 123 hectares of water bodiesn Schoolsn Hotels, shops and

leisure facilities.

The idea of living in the countryside is always appealing; being able to step outside your front door and enter a habitat made up of lakes, trees and open fields within a rich ecology is a dream for many people. Frequently, this means sacrificing the benefits of urban living. However, Lincolnshire Lakes is designed to achieve both.

Through the development of a number of fresh water lakes, a backdrop will be created for the development of new homes, employment areas and services. This ‘garden city’ will be a low density development, which has the benefits of services within easy reach but also the ability to enjoy the high quality landscape and associated recreational facilities.

Lucent is delivering Lincolnshire Lakes in partnership with North Lincolnshire Council. Lucent, having secured the controlling land interest in the project, acted as the ‘expert witness’ for the Council at the recent Inquiry which will confirm the designation of the site within the Local Plan and have signed an exclusivity agreement with the Council. Introduced to the project by the Homes and Communities Agency (UK), who are the national housing and regeneration agency for England and funded by central government, this is one of a number of pipeline projects Lucent is involved with.

The Lucent Strategic Land FundThe Lucent Strategic Land Fund (LSLF) is a Open Ended SICAV_SIF (OEIC) domiciled in Luxembourg. The Lucent Group, a site assembly specialist headquartered in the Isle of Man, launched the LSLF in September 2010 with the investment objective of providing capital gains in excess of 12% through a targeted acquisition program of land sites in high growth areas throughout England.

The fund acquires land assets which have been identified for residential development within its relevant Local Plan but prior to the grant of planning permission. This acquisition strategy is aimed at mitigating planning risk while enabling shareholders to benefit from the largest capital gain anywhere within the real estate cycle. Following an intensive acquisition and planning period the fund will begin to deliver ready-to-build sites to the house building market in approximately an 18-24 month period as demand for development land peaks and the economy is anticipated to resume an upward trajectory.

The Professional TeamLucent operates a “top-down” analysis of macroeconomic trends in the wider economy as well as demographic, social and political trends or influences to identify land opportunities in growth areas throughout England. Site specific research and analysis of opportunities is carried out by looking at individual assets to create value through planning and design around that asset in its local market.

Our land team in conjunction with the finance team carries out an initial financial and conceptual analysis to establish whether an opportunity is worth looking at in more detail.

the Lucent strategic Land Fund has been named master deveLoper oF LincoLnshire LaKes, a deveLopment oF 10,000 homes and 1 miLLion square Feet oF commerciaL space on 5,000 acres oF Land.

A detailed financial model is created so that all assumptions can be flexed to present a range of scenarios, from the base case, to those required to achieve super-returns. This enables us to see clearly what factors the project returns would be most or least sensitive to.

Before we acquire any land site we carry out extensive due diligence together with our planning and site investigation teams, valuers, legal and tax advisers. This ensures that we are fully aware of the status of the site that we are buying and that we have correctly assessed our investment returns and financial exposure as a result of such a transaction.

As a result of the detailed due diligence that we carry out at pre-acquisition, our planning experts are able to put together a detailed business plan to ensure that each site is effectively promoted through the planning process.

Lucent has comprehensive in house asset advisory capability to oversee all land sites through the planning process, taking control



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To see the current fact sheet for the Lucent Strategic Land Fund:www.lucentgroup.co.uk

Lucent Strategic Land Fund NAV performance


Lucent Strategic Land Fund NAV performance per share as at 31.05.11Lucent Strategic Land Fund NAV performance per share class 31/05/2011


Lucent.indd 26 7/7/11 14:00:47


lucent land new l akes development“Lucent is positioned to be the uK Leader in Land deLivery.”says, Anthony Brindley, Head of Planning, Lucent Group

the Lucent strategic Land Fund has been named master deveLoper oF LincoLnshire LaKes, a deveLopment oF 10,000 homes and 1 miLLion square Feet oF commerciaL space on 5,000 acres oF Land.



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lucent land new l akes developmentof the site assembly opportunities and all strategic decisions such as design work and submitting planning applications. Site assembly projects under management with Lucent have specific return criteria based on Internal Rate of Return (IRR) expectations. Project expenditure is rigorously scrutinised to ensure that cost savings are accrued throughout the life of each project, always aiming to exceed IRR expectations.

Market Overview n The UK is witness to an acute

housing crisis which has been created by a chronic lack of supply over the last few decades, exacerbated recently by temporary economic factors.

n After a period of sustained growth from 2001 until late 2007, housing starts were strongly affected by the economic downturn and declined rapidly to a trough in March 2009. Starts are still 41 per cent below their March quarter 2007 peak, but 88 per cent above the trough in the March quarter 2009.

n According to the Department for Communities and Local Government (DCLG), which sets planning policy, in a report published in November 2010, the number of households in England is projected to grow to 27.5 million by 2033, an increase of 5.8 million (27%) over 2008.

n The New Homes Bonus, the Coalition Government’s house building incentive program, offering Local Authorities match funding of council tax on new homes for 6 years, could see additional Government investment of over £1.2 billion annually in meeting the official household projections

The StrategyRegional and national house builders are increasingly focusing their efforts on housing delivery rather than investing in strategic land for development because of the constraints on their equity resources and the need to increase operating margins. House builders are being forced to adapt to a less capital intensive model, which means finding ways of engineering down building costs and focusing on selling houses. Finding more capital effective means of acquiring land ready for development is essential to them.

This has created a gap in the market where the Lucent Strategic Land Fund is ideally positioned to act as the leading platform in preparing and delivering land ready for construction. Lucent undertakes the acquisition, design, masterplanning and promotion of strategic sites and then sells consented land on to the house builder market. This approach is fully aligned with the government’s housing delivery incentives and Localism agenda.

A World Class Product One of the most important aspects in terms of investment is the end result but this also extends to the quality of our developments. Lincolnshire Lakes is an example of a scheme where Lucent will work with the local community to produce a high quality urban extension. This joint venture relationship with the local authority means that they have a significant input into the masterplanning process. Lucent use the best designers from around the world to produce world class developments.

Once the masterplan is finalised a detailed design guide is produced. This can be adopted by the Local Authority as a Supplementary Planning Document (SPD). Developers who acquire land will need to conform to the design criteria. This ensures the quality of the end product is consistently high, maximising land value. This attention to detail is a key aspect of the Lucent ethos.

To see the current fact sheet for the Lucent Strategic Land Fund:www.lucentgroup.co.uk



Lucent Strategic Land Fund NAV performance per share as at 31.05.11Lucent Strategic Land Fund NAV performance per share class 31/05/2011


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Lucent.indd 27 7/7/11 14:00:48

Everywhere you turn, financial services publications seem to be telling us about the unending need for higher qualifications. The bar just seems to get set higher and higher, doesn’t it? And okay, in the case of RDR, we’d

have to agree there’s not much that any of us can (or should) do to stem

the pressure for self-improvement. But when we look still further

up the education ladder, we have to confront a harder

question. Are university-level qualifications just the medals of an outdated era? Or are they still a real passport to a better future?

Fings Ain’t What They Used To Be

We need to confront some ugly realities here. Twenty years ago, an MBA or even a bachelor’s degree was a gilt-edged qualification that was held by only the most highly talented academic elite. It guaranteed them the pick of the jobs, and a seemingly astronomical salary, too, when compared to their parents or grandparents who hadn’t had the same aspirations, opportunity or resources for a formal education.

Today, if not exactly ten a penny, bachelor graduates and MBAs are far more common than they used to be, and their currency has been devalued accordingly - it is no longer a passport to fortune and master of the universe status. Some graduates, indeed, are beginning to question whether the payback for all the hard work and serious financial investment was really worth it.

The cynically-minded might observe that every city in the UK has a university that offers full time, part time and distance learning courses,

and they churn out thousands of graduates every year. Sadly, all too many of these fresh-faced youngsters fail to achieve their employment dreams, settling instead for disappointing alternatives well within the grasp of a less-educated worker.

With not inconsiderable academic fees falling at the feet of the undergraduate, or their parents, it’s no surprise many are doing the sums and looking around at the alternatives.

But that’s not the whole story. Although the quality spectrum of both schools and graduates is admittedly rather wide, a degree from one of the top business schools – London, Warwick, Manchester Business School, Henley Management College and Cranfield School of Management, or a red brick University – still commands a premium. And what’s more the well-qualified still appear to enjoy accelerated career progression and salary expectations.

So perhaps those figures should be taken with a pinch of salt. After all, the sort of ambitious, talented and hard working individuals who put themselves through a period of structured

learning are the sort who would have risen quickly to the top in any case.

Graduates Still Make the GradeDespite many arguments to the contrary, many employers believe the investment of three years at university broadens people’s skills, their understanding of other areas of business, their horizons and also their networks. It also provides a life experience and a transition vehicle from dependent to independent, from teenager to adult and from rookie to reality. From a recruiter’s perspective, the qualification can be a differentiator amongst otherwise equally qualified candidates.

TownGown

TownGown

Versus

RecRuitment specialist Paul Clutton says the smaRt money is still on the gRt money is still on the gR RaduatesRaduatesR



Clutton.indd 28 5/7/11 17:56:55

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There’s no doubt that qualifications increase your worth and employability, as well as broadening your knowledge base and vocabulary. They can’t be all bad and have served many generations well

in the past.And yet,

increasingly, many regard

graduates or freshly qualified professionals

with a sort of disdain, pointing out

that they might have great theoretical knowledge gathered

from years of study but that they’re still poorly grounded in reality. When you’re sitting around the strategy table, you don’t want people who think they have all the right answers - you want people who know how to ask the right questions.

So, Where Next?So, having made the decision to embark upon the process to gain a higher qualification, should you opt for a generalist or specialist course of study?

Well, with financial pressure a real consideration, undergraduates are rightly looking beyond the three years of study and the halcyon days we used to spend in the quad, socialising and debating the meaning of life. Instead, these young people’s agenda is firmly focused on achieving paid employment, an opportunity

to re-pay debts, and a career with future and prospects upon graduation.

So, with this mindset, some of the more vocational study

choices are being eclipsed in popularity by those

that offer a glimmer of employment

prospects. Who would have thought one day

there would be a degree in Financial Services?

But then again, why shouldn’t there be?

The Generalist ArgumentThere’s a school of thought that

holds that budding financial advisers should have access to

a general management course at degree level – a course that provides

them with a core body of knowledge combined with opportunities to take specialist options. This kind of study, combined with practical work experience, should produce highly-marketable talent that would be capable of entering the industry and making an immediate impact.

Well, with financial pressure a real consideration, undergraduates are rightly looking beyond the three years of study and the halcyon days we used to spend in the quad, socialising and debating the meaning of life. Instead, these young people’s agenda is firmly focused on achieving paid employment, an opportunity to re-pay debts, and a career with future and prospects upon graduation.

Whilst this sort of study format has obvious advantages to any future employer, it’s also likely to be good for the industry in general. It would elevate the number of practitioners at Diploma and Chartered Status to levels that have never been seen before.

That’s what the FSA wants, and it’s what the general public needs. Although the “old school” IFA has provided the industry with many years of sterling service, it really is time for change. The old-school career path, starting out as a “door knocker” or insurance premium collector and then simply accumulating experience as you went along, is the stuff of yesteryear - and a good thing too.

What we want instead is bright young talent coming into

an industry where the average

adviser is already getting on a bit. Confident,

skilled young people have the power to change negative perceptions - driving initiative, vibrancy and elevated levels of customer service.

The young are good at challenging norms and breaking with tradition – and that’s why the financial services industry needs them. And if this can be achieved by offering school leavers an alternative route though academia it should be embraced.

To be a Chartered Financial Planner is a highly respected business qualification - not an inevitable prerequisite to achieving Boardroom success, perhaps, but a very useful tool, bang up to date, and perhaps also the passport to a better future...

Paul Clutton is a qualified Management Accountant and Director of Professional Recruitment Ltd; specialists in middle/senior management financial services appointments. www.professionalrecruitment.co.uk

He is also a Director of TOMORROW, a business realising value for retiring IFAs or those looking to leave the industry www.ifafum.com


Clutton.indd 29 5/7/11 17:56:56

The enduringAppeAl of

It’s official. The death of retail therapy has been much exaggerated, according to a new report from financial consultancy Capgemini. Okay, so your local high street is looking a little jaded these days, and your neighbourhood Primark seems to be selling more clothes than Harvey Nicks. But that’s because you’re looking at the wrong high street - and in the wrong continent too. Set those two little errors to rights, and suddenly it’s a whole different story.

Forget about your M&S and your Tesco and your Currys and your Ford and General Motors, and lift your sights instead to brands like LVMH, Tiffany, Burberry or the luxury boatbuilder Sunseeker. Take a look at the Swiss Richemont Group, which includes Cartier, Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, and see if it doesn’t put a smile on your face.

All these brands are doing just fine at the moment – somewhat to the surprise of anyone who doesn’t get around very much. Burberry can thank a booming Chinese market for its recently-announced 27% sales increase. Bulgari was recently snapped up by LVMH for a super-cool $5.2 billion. Do we have your attention yet? Yes, I thought so.

The Asia PhenomenonIn the Asia Pacific region, the number of high net worth individuals (HNWIs) with more than $1

million worth of investible assets has risen sharply in the last couple of years, at a rate of more than 25% each year. It now stands well above 3 million people with a total wealth of more than $10 trillion – more than the equivalent peer group in Europe.

There are now more than 447,000 dollar millionaires in China, says CapGemini - up by 31% on 2010 levels. Hong Kong’s HNWIs have doubled in the last year, and India’s millionaire population also grew by 50% in the same period.

“Asia Pacific has proved more resilient than other regions,” says Capgemini, “and it’s expected to continue to fare well as part of the global recovery - supported by robust private demand, strong intra-regional trade and favourable consumption levels, which should help to offset weakness in exports.”

It gets better. “APAC now contains over 19,000 ‘ultra-high-net worth individuals’ each valued at $30m or more. Plus 241,000 ‘mid-tier millionaires’ with fortunes ranging between $5m and $30m, and the rest comprising ‘next door millionaires’” says Capgemini. “Rising affluence in the region has boosted demand for all types of tangible assets in recent years, attracting more auction houses and luxury goods retailers and providing more options for Asia Pacific HNWIs.”

AsiAn consumers Are keeping Top-clAss brAnds profiTAble, sAys DAviD NicholsoN

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Luxury Goods.indd 30 5/7/11 21:18:27

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For the Asian consumer, well-known, iconic Western brands are a means of demonstrating their new wealth in a way that is obvious to the public. Demand has also been released like floodwater after decades of restriction, both political and economic. “These purchases by HNWIs are indicative of a broader affinity Asia Pacific investors have for tangible goods and the established role of physical assets in financial investment strategies,” says Capgemini. Or, to put it more robustly, they simply love to show off.

Tourism as a Demand DriverWhat’s more, as Chinese consumers gain more disposable wealth, they’re travelling more widely and are buying more Western goods in other countries. As Roger Farah, chief operating officer at Polo Ralph Lauren, explains: “We believe that as we build up our presence in China, consistent with our global image, we will also see a lift in our business in Europe.” His range of men’s clothing has expanded sharply in recent years, particularly in Asia, including Japan (despite the earthquake and tsunami).

The Enduring Appeal of BlingBut upmarket clothes are far from being the only tangible assets that interest these new and affluent customers. The search is also on in Asia for jewellery, gems and watches, says Capgemini, with Taiwanese and Malays leading the charge, closely followed by Chinese and Indian consumers, and then by South Korean and Hong Kong residents. Premium collectibles such as private jets, yachts and exclusive cars are most widely sought by Australians, followed by Chinese, Malaysian and – perhaps surprisingly - Japanese consumers. It looks like the Tokyo downturn hasn’t hit everybody yet.

“There are now more than

447,000 dollar millionaires in china.”


Luxury Goods.indd 31 5/7/11 21:18:29

Stamp of QualityThat’s not the end of it either. Demand for art, wine and even

rare stamps is rising rapidly across Asia. Did we say stamps? Yes indeed, says Keith Heddle, investment director at stamp investment experts Stanley Gibbons in London: “There is certainly a new wave of interest coming from India, China and Singapore. We ran an advertising campaign urging them to acquire ‘a slice of British heritage’ and they’re now buying back a bit of Britishness, particularly Indians. In China there is a fi rm tradition of speculating and gambling, so stamps are benefi ting in the same way that wine as an investment has rocketed.”

And yet stamps are still some way behind wine as an up-and-coming investment: the prime Burgundy vintages such as Chateau d’Yquem, Chateau Lafi te and Chateau Margaux are now selling at many multiples their value in the 1990s, mainly due to Asian bandwagoning by newly wealthy investors keen to prove their connoisseur credentials. This in turn has provoked a rush to buy wine among British investors frustrated by low interest rates and a lack of conventional investment options. Expectations were further fuelled in January this year, when Lord Lloyd Webber auctioned off a cellar-full of his fi nest wines for just under $6 million - with one case of 1982 Petrus alone fetching $77,500. Your very good health, sir.

Waiter, this Investment is CorkedBen Smaje, the managing director at Kennedy Black fi nancial advisors in London, says that much of the burgeoning interest in grape-

based investments has been driven by Chinese acquisitions. Yet he remains cautious: “You really need to know what you’re doing with alternative investments,” he warns. “In wine for example, the retail mark-up takes a big margin, so it can kill the economic reasons for investing. Then there are the costs of storing wine, keeping the humidity and temperature stable, which can be expensive.”

Others point out that although fi ne wines such as Burgundies improve as they age, they also reach a zenith and start to depreciate beyond that age, meaning that there is an optimum time to sell. Whether you can achieve the ideal price depends on the state of the market at the time – a very hard judgment to make.

Debates currently rage over the dependability of wine as an investment asset: some studies purport to show terrifi c returns over 20 or 30 years, but critics argue that researchers have drawn upon selective and unrepresentative results, ignoring inconveniently poor returns which many wine buyers experience.

Remember to Have FunSmaje argues that many tangible asset investments are as much about the experience as about expectations of high returns. “I’d say you should treat these things as a bit of fun, because the risks to the uneducated investor are quite signifi cant.” Certainly wines took a major hit in the aftermath of the 2008 fi nancial crisis and have only just returned to near or above their pre-crisis values. Cars are, as Smaje points out, “typically a depreciating asset”. And the art market is notoriously volatile and fi ckle, with bubbles blowing up and popping with each swing of the pendulum of fashion.

A Suitable Fund for Sybarites?So that’s the wealth warning out of the way. But if we haven’t put you off yet, there’s an easy way to buy into a portfolio of luxury brands that really hasn’t been doing too badly at all. The Dominion Chic Fund (ISIN GG00B1W6TC74) is a Malta-based UCITS III fund which is suitable for some UK investors, and which invests in aspirational brands such as BMW, L’Oréal, Nike, Porsche, Sony and Starbucks.

The fund has been running since 2007, and its share price has almost exactly doubled since April 2009 from Euro 4.5 to Euro 9.0 – not bad going, under the circumstances. The initial charge is up to 6.5%, and annual fees are currently 2.1% thereafter. However, the minimum investment has been reduced from Euro 7,500 to Euro 2,500.

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Going postalOn 22 May 2010, a rare Swedish stamp called the ‘Three-Skilling Yellow’ was auctioned in Geneva for at least the record $2.3 million price it fetched in 1996.The

buyer was reportedly an “international consortium” and the seller was a fi nancial fi rm auctioning the stamp to pay the former owner’s debt. The exact price and identity of the buyer were not disclosed, and all bidders were sworn to secrecy. Inscrutable terms indeed.

buyer was reportedly an “international consortium” and the seller was a fi nancial fi rm auctioning the stamp to pay the former owner’s debt. The exact price and identity of the buyer were not disclosed, and all bidders were sworn to secrecy. Inscrutable terms indeed. For more comment and related articles visit...

www.IFAmagazine.com


32 July 2011 www.IFAmagazine.com

W

This advertisement is not to be taken as a recommendation or offer by anyone in any jurisdiction. Please note that the value of an investment can go down as well as up and past performance is not necessarily a guide to the future. © 2011 Dominion Fund Management Limited. All Rights Reserved. Dominion Fund Management Limited is licensed by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law, 1987. Dominion Fund Management Limited is a member of the Dominion Group of companies. Registered Office: Ground Floor, Tudor House, Le Bordage, St Peter Port, Guernsey, GY1 1DB. Company no. 42592

“Standard & Poor’s” or “S&P” refers to Standard & Poor’s Fund Services which is a subsidiary of Standard & Poor’s Financial Services LLC. S&P is one of the world’s leading providers of qualitative fund management research reports. S&P fund ratings and reports can be found on Standard & Poor’s Fund Services website (www.fundsinsights.com). An S&P Fund Management Rating represents an opinion only and should not be relied on when making an investment decision. “S&P” and “Standard & Poor’s” are trademarks of The McGraw-Hill Companies, Inc. Copyright 2010 © Standard & Poor’s Financial Services LLC.

The S&P A Rating logo is used with the kind permission of Standard and Poor’s.

Last month, we celebrated our fourth birthday. We work hard to deliver excellent returns for investors, by capitalising on the increase in discretionary spending in the world’s growth economies. What makes us particularly proud, is the way we use Active Risk Management to control volatility. We think it makes all the difference.

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As at: 30/06/2011

CH0256_CHIC Press Advert_NH.indd 1 05/07/2011 09:30Luxury Goods.indd 33 5/7/11 21:18:32

Steve Bee.indd 34 6/7/11 10:50:14

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QWPs advice is an ifa oPPortunity for the taking. so don’t say the government never gives you anything, says Steve BeeAll employers in the land will soon be faced with complying with the duties laid on them by the 2008 Pensions Act. The what, I hear you say? Oh dear, where have you been for the last few years? The 2008 Act is the big one as far as UK employers are concerned; the duties it imposes on employers are not to be sniffed at. Absolutely not!

Basically, the way things are about to pan out is this. All employers, even those employing only one employee, must soon make something called a Qualifying Workplace Pension Scheme (or a QWPS if you prefer) available to all their eligible employees. It also has to be available for employees who are not eligible, but life’s too short to go into the ins and outs of all that here.

One of the QWPS options open to employers is the National Employment Savings Trust, or NEST for short. NEST is a default QWPS (keep up at the back there!) which was put in place by the Personal Accounts Delivery Authority (the PADA - don’t even ask, it’s a long story…)

Anyway, the bottom line is that all eligible employees will need to be auto-enrolled by their employers (one of said duties) into a QWPS once any particular firm reaches its staging date. Its what, you ask? It’s staging date; there are forty-three of them and they’re kicking off from October 2012 and run on until September 2016. Basically, employers should regard them as their sort of go-live date for the new reforms.

Something like 1.3 million employers have been given their places in this longish queue and will simply have to wait their turn and then do what they can to hit the ground running on the pensions front when their turn eventually comes. This is something that I

would expect will come as second nature to the larger firms who have been chosen to go first, as they will be the ones with professional HR and (probably) pensions functions within their organisations. I mean, if they can’t cope what hope is there for the rest of the field?

But sooner or later the SME firms and the smaller so-called micro firms will find it’s their turn to step up to bat - and that’s when I think some may struggle. The subject of pensions, although it’s second nature to many of us engaged in the financial services industry, remains something of a mystery to the other 99.99% of the population. No, I don’t understand why either, but that’s the way it is, so that’s that.

Given that this stuff just doesn’t come naturally to most people - including most employers - it seems to me that the IFA sector in the UK will have its work cut out for the next five years or so, just with helping the SME and smaller firms to come to grips with all this.

I’ve heard some people saying lately that the IFA sector is dead; something that has been said many times and on many occasions before. It was clearly wrong to say such things back then - just as it’s surely wrong now...

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


Steve Bee.indd 35 6/7/11 10:50:19

Limo not available on all Upper Class fares, restrictions apply - see website for details. Excludes Nigeria, Ghana and Kenya.

What exactly is it about flying Upper Class?

Is it the complimentary limo service that

takes you from door to door? Is it the

business class seat that transforms itself into

one of the longest fully flat beds in the sky

to give you a proper night’s sleep? Maybe

it’s being able to mingle and unwind at our

onboard bar. Or is it simply that you get all

of this for a business class fare? It may be

impossible to pin ‘it’ down, but we certainly

think you’ll know it when you see it. Discover

more at virginatlantic.com/experience

Your airline’s either got it or it hasn’t.

It. You can’t bottle it.You can’t put your finger on it.But weirdly, you can fly it.

JOB NAME: 500480_6000440_GIRL_BED_297x210_F CLIENT: Virgin Atlantic SIZE: 297x210 mmDATE: 07.04.11 PAGE: 1 CREATOR: Claire PROOF: 01 FinalCREATIVE TEAM: Jason TALENT: Charlie SENT: 08.04.11 AGENCY NO.: WIP NO.:

PUBLICATION(S): SPECIAL INSTRUCTIONS: TBA

Aviva Portrait.indd 36 5/7/11 21:24:01

HigH DiviDenDs– AmericA’s next Big tHing?Henry SanderS III, founder of river road asset ManageMent and Manager of aviva investors’ new us equity investMent fund, explains why aMerica’s slowing econoMy offers an unusual opportunity.

As the US equity market has rallied to pre-financial crisis levels, investors have largely failed to embrace the attractions of dividend income. Since the announcement of QE2 in August 2010, high dividend paying stocks have lagged the broader market.

With inflationary pressures now building, policy support fading as QE2 comes to an end and the prospect of greater fiscal austerity ahead as the US faces up to its deficit, there is now a risk that the rally will begin to show signs of maturing. That is not to say that the bull market is over. However, investment strategies focused only on capital growth may no longer deliver the most attractive returns. Equity income plays may be poised to mount a comeback.

a market in transitionThe recent recovery in stocks has been one of the strongest on record. However, this bull market may be quietly transitioning to a new phase, one that may be characterised by slower price appreciation and higher volatility.

On the one hand, the ongoing improvement in the health of the US economy, low interest

gu

est in

sigH

t

Limo not available on all Upper Class fares, restrictions apply - see website for details. Excludes Nigeria, Ghana and Kenya.

What exactly is it about flying Upper Class?

Is it the complimentary limo service that

takes you from door to door? Is it the

business class seat that transforms itself into

one of the longest fully flat beds in the sky

to give you a proper night’s sleep? Maybe

it’s being able to mingle and unwind at our

onboard bar. Or is it simply that you get all

of this for a business class fare? It may be

impossible to pin ‘it’ down, but we certainly

think you’ll know it when you see it. Discover

more at virginatlantic.com/experience

Your airline’s either got it or it hasn’t.

It. You can’t bottle it.You can’t put your finger on it.But weirdly, you can fly it.

JOB NAME: 500480_6000440_GIRL_BED_297x210_F CLIENT: Virgin Atlantic SIZE: 297x210 mmDATE: 07.04.11 PAGE: 1 CREATOR: Claire PROOF: 01 FinalCREATIVE TEAM: Jason TALENT: Charlie SENT: 08.04.11 AGENCY NO.: WIP NO.:

PUBLICATION(S): SPECIAL INSTRUCTIONS: TBA

“equity income plays may be

poised to mount a comeback.”

The bull market may not be over just yet says, Henry Sanders.



rates and a cheap dollar continue to propel US equities higher. However, a rising oil price, the end of quantitative easing and

the prospect of greater fiscal austerity could provide enough headwinds to stall the advance and introduce greater volatility to market returns.

Amid that mixed environment, and after two years of rapid improvement, it is likely that US company earnings growth could slow to levels closer to trend rates. Earnings have increased by close to 100 per cent year-on-year as the economic recovery has taken hold but consensus estimates for 2011 point to a more modest 15 per cent pick up from current levels. In fact, in March, Wall Street analysts revised more of their small cap earnings expectations down than up. Management teams are increasingly commenting on inflationary pressures, profits being squeezed and, in some cases, weakening sales. Companies are clearly concerned about the strength of the recovery. Mind you, the long term trend growth rate of earnings is much closer to 7-8 per cent, so 15 per cent is still pretty good!

Nevertheless, the combination of lower earnings growth and more austere monetary and fiscal conditions could create an environment in which expected capital returns could be lower.

attractive dividend growth prospects remainWhile earnings and capital growth may slow in the months ahead, the prospect of ongoing dividend growth remains. Since the beginning of the year, 117 companies in the S&P 500 have initiated or increased their dividend to the tune of a record-breaking $16.6 billion. Financials accounted for 42 per cent of that increase following the completion of the latest round of stress tests by the Federal Reserve. Year-on-year, dividends have grown by 13.7 per cent. Yet, still, dividend growth lags earnings growth. The pay-out ratio for the S&P 500 sits at a record low of just 27.9 per cent. This has contributed to a surge in cash on corporate balance sheets which should support further dividend growth even as earnings slow in the coming year.

Making a move into equity incomeThese dividends will have an important role to play as the market transitions. The mounting concerns about rising inflation and interest rates have highlighted the relative attractions of higher yielding stocks to income-oriented investors. However, neither should those focused on capital accumulation overlook the opportunity. Reinvested dividends can play an important role in underpinning attractive long-term returns - 42.5 per cent of the total return of US equities has been attributable to dividends.


www.ifamagazine.com

The US has seldom been noted for its dividend yields. during the last 20 years it’s been rare for the american market to deliver even half of what London has been paying, and many of the country’s biggest corporations have routinely paid out nothing at all to shareholders. even now, the 1.8% yield on the S&P 500 compares poorly with 3.2% from the Footsie. But all that might be changing.

it isn’t so much that American managements have been tight-fisted, but rather that they‘ve traditionally believed in ploughing everything back into faster growth rather than paying out profits to

shareholders. And us investors, for their part, have been only too happy to accept capital growth rather than income.

it hasn’t always been like this. For most of the last century, right up until the mid-1980s, the s&P 500 paid an average 5% yield - and in the difficult climate of the early 1980s it peaked well above 6%. But by the roaring late 1990s dividends were widely seen as an irrelevance, and in 2000 the s&P yield dropped close to 1%.

the fightback from the dividend lobby came partially as a result of the post-2000 slump, and partly because rival foreign markets such as

London were drawing income investors away from Wall street. A critical turning point came in 2003 when the hugely profitable microsoft corporation finally (and reluctantly) paid its first dividend, and in the last few years the pressure on other companies from income investors has been growing rapidly.

since 2009 it’s often been noted that dividend payers on the s&P 500 have outperformed non-dividend-payers by a useful margin in capital growth terms. evidence, it would seem, that America’s rediscovered love for dividends is already a matter of fact.

America’s Forgotten Fondness for DividendsMichael Wilson says:





Platform technology:

Helping tHeSmall guyAnyone looking for signs of a radical business model in Barry Mumford’s offices would be hard pushed to find one. An IFA of 26 years’ standing, Mumford conducts his business from a modest suite of offices, nestled within a parade of shops in the village of Long Ashton, North Somerset. It’s all conservatively decked out, with dark wood, shelves stacked with reference books, and the usual framed certificates on the walls.

But that’s where the humdrum ends. Mumford is chief executive of Commfreefunds.com, a novel electronic marketplace that enables investors to manage their own funds online without paying any commission. Yes, that’s right. No advice, and no commission. The web-based service has been set up using the Cofunds platform, and it’s aimed at experienced investors who, through annual commission, are currently paying for ongoing financial advice.

Under Mumford’s scheme, a flat annual membership subscription of just £60 covers a client’s transfers of existing funds to Commfreefunds, new purchases, sales and switches, irrespective of fund size or the frequency of trades. There are no transaction charges. According to Mumford, it’s an offer that many potential clients feel must be too good to be true.

“People say ‘What’s the trick? There must be a catch’,” he says. “Well there really isn’t one. There is no hidden cost. The thing is that self-managing investors are so used to paying 0.05% commission year after year, and getting absolutely nothing for it, that they’ve got to be educated into the fact that they’re overpaying.”

90% Still Need AdviceStirring stuff. But is it a head-on challenge to the rest of the industry? No, says, Mumford. He and his partners – marketing director Don Whiting and financial director Chris Sims – stress that they have absolutely no problem with the normal IFA pattern whereby the intermediary takes a commission in return for a full advisory service. Indeed, Mumford himself still operates as an IFA, with over £25 million of assets under management. His team still takes the view that 90% of investors still need individual guidance and should be prepared to pay for it.

“But for self-managing investors, on the other hand,” says Mumford, ”the time is right to offer them this fairer and more radical solution, and to put their interests first.”

Best Advice? NAh, eAt your heAt your heA Art out, rdr. Neil Crossley heNeil Crossley heNeil Crossley Ars ABout A plA plA A plA pl tform Atform AtechNology thAt’s helpiAt’s helpiA Ng experieNced iNvestors cut their costs

“Self-managing investors are so used to paying 0.05% commission year after year, and getting absolutely nothing for it.”



IT Review.indd 40 5/7/11 21:26:10

it Re

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Helping tHeSmall guy

Mumford estimates that investors are collectively paying half a billion pounds a year to fund groups, via online financial advisors, for advice that they do not receive. He cites the hypothetical example of what would happen if you invested £10,000 each into five OBSR AAA rated funds: Invesco Perpetual High Income Fund Acc; Jupiter Merlin Balanced Portfolio Fund Acc; AXA Framlington UK Select Opportunities Fund Acc; First State Global Emerging Markets Leaders A Fund Acc; M&G Global Basics A Fund Acc.

If the online IFA decides to take initial commission on these five funds, he explains,

the cost to the investor is £1,500, with the first year’s annual commission adding

another £250, based on current values. By the end of Year 1 this

£50,000 portfolio would have cost an investor £1,750

in initial and annual commission charges.

figHtBack

the D2c modelSince the announcement of RDR, the popularity of Direct to Consumer (D2C) ecommerce solutions from providers and advisors has soared. One of the key aims of the RDR is arguably to increase engagement with the consumer and to encourage innovations around the distribution of financial products.

Some research suggests the D2c market will compete directly with the advice industry as clients turn increasingly to

execution-only models due to platform developments, greater access to information and cost.

according to a report published in february 2011 by platform consultants platforum, advisers operating in the post-commision world will need to have an execution-only platform in order to gain greater hold over clients’ assets.

the research also showed the D2c market in the uk was worth £65 billion in September of 2010, compared to the advisory platform market, which accounts for around £130 billion. there are 2.5 million D2c accounts,

with the average account size being £28,288, and the average age of account holders is 57.

consultant lucian camp, who co-wrote the platforum paper, said that an execution-only service would be “absolutely complementary” to ifas’ existing propositions.

“if you are an adviser in the post-RDR world and you want to maximise your share of the customer’s wallet when it comes to simple transactions like choosing an iSa, and customers are baulking at paying a fee just for that... then you need a platform proposition or they will go away.”


IT Review.indd 41 5/7/11 21:26:12

Subsequent annual commission payments of £250, based on current values, would take the

commission hit to £2,750 after five years and to £4000 after 10 years, he explains. And even where the online IFA gives up the initial commission but keeps all annual commission, the investor still loses £1,250 over five years and £2,500 over 10 years.

By contrast, Mumford says, a self-managing investor who takes out a £60 annual Membership subscription to Commfreefunds will recoup all those “unnecessary upfront and ongoing payments”. This is because Commfreefunds discounts all initial commission and rebates all annual commission, he says, leaving a net saving of up to £1,690 by the end of Year 1, up to £2,450 after five years and up to £3,400 after 10 years.

Investors who sign up to Commfreefunds will gain access to a fund platform that gives them unlimited trading but no advice. Mumford says the classic conversion of such an investor would be someone who originally bought an ISA through an IFA, paid commission of 3% and received no attention at all for five years. “So he withers on the vine.”

The types of investment currently available commission-free are ISAs and privately held non-ISA funds, investing mainly in Unit Trusts, and OEICs (Open Ended Investment Companies). ISAs are a prime example of the products most suited to this Direct to Consumer (D2C). “We decided we obviously needed to offer products that were more straightforward for people to handle,” says Mumford, “so we wouldn’t offer investment bonds for example.”

He stresses that, unless clients have £12,000 to invest, the model is not viable, because the £60 purchase will not pay for the saving. Beyond that barrier-to-entry point, the fixed fee model will reap savings for the client, he says.

No Free Advice, And No Kidding When they were first researching the business, Mumford and his partners Chris Sims and Don Whiting soon realised they could not compete with the likes of Hargreaves Lansdown in what was already a mature territory. “We’re a David, not a Goliath,” says Mumford. So they carved out their own sub-territory, emerging with the fixed-fee model which they believe is unique.

But the fixed-fee model brings it own challenges in terms of educating the client, says Mumford. While 95% of clients make the adjustment to self-managing their investments on Commfreefunds, some still expect a level of advice that is not workable within the £60 annual fee. He recalls one client who encountered problems while registering his ID.

“This guy was asking us to go and complain about his ID to Equifax, but for £60 we can’t do that. These clients have to learn the limits of what Commfreefunds will do for them. We can be very supportive, but it is not an investment dialogue,” he says.

A Rapid Take-UpSix months on from its inception, growth is encouraging. The team estimate that they need to take on a client a day to make it work, and they already have a seven-figure sum of assets under management via Commfreefunds. Mumford points to trends that suggest there will be five million investment ISAs within the next five years. This would imply a potential market of between 300,000 to 500,0000 investors.

Self-invested personal pensions (SIPPs) are his next big challenge. “That’s a market we really want to crack,” he says. SIPPs will have to imply some sort of reasonable charge for the gateway to get onto the platform. But once investors are

through the platform, a SIPP fund is no different to an ISA in terms of self-managing, he says.

Mumford takes pride in the fact that the Commfreefunds service has provided a stable platform since launching in December 2010, and says that no third party has reported any fault of any kind. He believes the company is ahead in its thinking and that the fixed fee model will become increasingly prevalent in the years ahead.

“At present, we’re getting the attention of the market, so it’s getting the message out there. As RDR approaches and that date passes, people will increasingly realise that they’ve no need to suffer the hidden commission. And people will realise, well if I can buy my holidays online, I can buy my own ISA online. That’s the stage we’re at. Watch this space.”

it Re

Vie

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“We’re a David, not a goliath,”

When they were first researching the business,

Barry Mumford (above) and his partners Chris Sims and Don Whiting realised early

on they could not compete with the likes of Hargreaves

Lansdown in what was already a mature territory.

For more comment and related articles visit...www.ifamagazine.com



IT Review.indd 42 5/7/11 21:26:14

IT Review.indd 43 5/7/11 21:26:16

An ExtrAordinAry

you wAnt to know whAt cAusEs mArkEt stAmpEdEs? A 170 yEAr old book hAs

thE disturbing AnswEr, writEs Emma-Lou montgomEry

If those wise words words at the top left sound a little, ahem, stilted to you, there might be a good reason. They were written no less than 170 years ago, by a man who’d never heard of a dotcom company, a futures contract, a triple witching hour, a Moodys downgrade or even an automated trade. And yet journalist and author Charles Mackay’s epic work on the folly of stock market behaviour still comes up just as fresh and relevant as it did back in 1841 when it was first published.

Widely acknowledged as the best book on stock market psychology, Mackay’s account of three infamous financial manias - John Law’s Mississippi Scheme of 1719, the South Sea Bubble of 1720, and the Dutch tulip craze of 1624, is a must-read for anyone who has ever been tempted to get caught up in the latest stock market craze. Actually, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds is a great rambling 800-page tome that covers a vast canon

of laughable human errors through the annals of recorded history; but it’s the chapters on financial market lunacies that we really ought to be taking to the beach with us this summer.

Bubbles and FrothIn this book, Mackay takes us on a fascinating and frankly alarming account of three of the most dramatic episodes of market mania the world had seen at the time of writing. The South Sea bubble occurred in the UK between 1718 and 1721 and started when a group of entrepreneurs talked the government into swapping its debt for equity, attaching a warrant which suggested investors would have the chance to participate in South Sea trade.

As Mackay’s account shows us, no one is immune from falling victim to market hype and hysteria. None less than Sir Isaac Newton himself jumped on board this one. And it was an experience that left his pockets noticeably less susceptible to the effects of gravity for

mA dnEss



Only Fools and Horses.indd 44 5/7/11 21:28:59

on

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mA dnEss

“men, it has been well said, think in

herds; it will be seen that they go mad

in herds, while they only recover their

senses slowly, and one by one.”

quite some time afterwards. “I can calculate the movement of the heavenly bodies,” the great man sighed, “but not the madness of men.”

Kiss those tulips goodbyeAs you read these endlessly gripping accounts of greed, naïveté and deceit from the good old days of floppy hats and public swagger, you can’t help reflecting that all this happened long before the dotcom boom (and bust), the roaring 20s, Michael Milken’s junk bond fiasco, or the Japanese bubble economy of the late 80s. And yet that it still stands as a modern day warning to anyone watching the price of gold, emerging markets or UK house prices today.

House prices, did we say? Would you believe that, at the height of the Dutch tulip mania, a single tulip bulb could (and did) fetch as much as a wealthy merchant’s town house in Amsterdam? And that the unfortunate workman who accidentally ate such a bulb, believing it to be an onion, was in bad odour with more than just his employer.

the mississippi mudbath Perhaps the best known tale in Mackay’s book is about John Law’s Mississippi Scheme. The Scottish economist-turned-gambler-turned-banker would have made a fine antihero for any

modern film-maker, spinning a tale of intrigue that included murder, exile and high adventure.

In 1716, with France in serious financial strife, the Scotsman stepped in with an audacious plan that resulted in the formation of the Banque Generale - a state chartered bank with the power to issue unbacked paper currency. Law’s belief that the bank could benefit commerce by increasing the quantity of money in circulation would have done credit to Ben Bernanke, if only it hadn’t all come unwound so fast.

The trouble was that the man who the French now thought unable to do any financial wrong went on to form the Mississippi Company, a French colony trading precious metals in Louisiana. Law had already secured exclusive trading privileges in the territory but needed funds to kick-start the operation. And here began the error of his ways. As soon as he started issuing them, the value of shares in his Mississippi Company went through the roof. Such was the demand for stock that people literally died in the crush. And as eager investors did everything they could to get their hands on the company’s shares, their soaring wealth soared led to a burst of crime, illegal trading and eventually civil unrest. It was all unsustainable, naturally - and when the bubble burst, it took down Law and a large part of the nation’s illusory wealth with it.



Lessons from historyMackay keeps us amused with a torrent of stories of what happened

to the victims; but he also shows an unerring fascination for the inventive lowlife who created the scams in the first place. People such as the gentleman who issued a blank prospectus for “a company for carrying on an undertaking of great advantage, but nobody to know what it is,” and who promptly disappeared with all the money that gushed in. Now that’s simply genius.

What quickly becomes evident from Mackay’s lessons from history is that bubbles and crashes are not actually all that rare. Historical records prove that they do indeed re-occur at alarmingly regular intervals of 10 to 30 years - taking the market down by between typically 15% and 50% each time.

So we’ve had the South Sea bubble, tulip mania, the Mississippi scheme, junk bonds, and the dotcom bubble - and now we’ve got the price of gold, oil, emerging markets, and (surprise surprise) the age-old feeling that the property bubble is yet to burst. Yet, there’s clearly something in our human nature that makes us think, over and again: “This time it’ll be different.” Mackay’s accounts and more recent

history suggests otherwise.

The Madness of Crowds is a must-read. If you’re looking for a book that will explain how we get out of the predicament we’re currently in, this isn’t it. All Mackay really confirms is that, as human beings, we’re all prone to the same faults and weaknesses today as we always have been. It’s in our DNA, it seems.

Memoirs of Extraordinary Popular Delusions and the Madness of Crowds might not stop you walking headlong into the next speculative bubble either or save you from running with the herd. But hey, at least you’ll know you’re in good company.

...an

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s

You can download Mackay’s out-of-copyright work (in convenient small chunks) from various places on the Web, such as:

www.econlib.org/library/Mackay/macex.html

“A company for carrying on

an undertaking of great

advantage, but nobody to

know what it is.”

raordinary

MadneMadne£

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CAERUS Portfolio Management Ltd Lynton House 7-12 Tavistock Square London WC1H 9LT T 0845 130 2044 E [email protected] W caeruspm.com

CAERUS Portfolio Management is a trading name of CAERUS Portfolio Management Ltd. For professional advisers only. This material is not suitable for retail clients. Past performance should not be seen as a guide to future performance. The value of investments and the income derived from them may go up as well as down and you may not get back the original amount invested. Please refer to the Simplifi ed Prospectus for full details of the additional expenses for these Funds. Issued in May 2011 by CAERUS Portfolio Management Ltd, Lynton House, 7-12 Tavistock Square, London WC1H 9LT. Registered No 03056894. Authorised and regulated by the Financial Services Authority 175524.

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IFA-Ad-FullPage-27.5.11-v1.indd 1 26/5/11 13:52:07




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CAERUS Portfolio Management Ltd Lynton House 7-12 Tavistock Square London WC1H 9LT T 0845 130 2044 E [email protected] W caeruspm.com

CAERUS Portfolio Management is a trading name of CAERUS Portfolio Management Ltd. For professional advisers only. This material is not suitable for retail clients. Past performance should not be seen as a guide to future performance. The value of investments and the income derived from them may go up as well as down and you may not get back the original amount invested. Please refer to the Simplifi ed Prospectus for full details of the additional expenses for these Funds. Issued in May 2011 by CAERUS Portfolio Management Ltd, Lynton House, 7-12 Tavistock Square, London WC1H 9LT. Registered No 03056894. Authorised and regulated by the Financial Services Authority 175524.

The DRP Funds can be purchased through the following Providers:

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££

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The new IM CAERUS Portfolio Funds from CAERUS Portfolio Management allow you to invest at an extremely competitive price. Managed by Evercore Pan-Asset, the Funds invest in a range of predominantly passive investments.

With Annual Management Charges (AMCs) starting at just 0.25%, these Funds bring investors low-cost access to the potential of the stock market.

Dynamically rebalanced to match asset and risk profi les

Each of the Funds in this range has been modelled to match a particular attitude to risk and is monitored to ensure consistency. Evercore Pan-Asset regularly reviews the Funds’ asset allocation and can change the portfolio daily. The Funds are dynamically rebalanced each quarter to ensure the asset allocation matches the ideal asset mix.

Investment Managers with a proven track record

Evercore Pan-Asset is a market leader in the research of Index Tracking investments such as Exchange Traded Funds (ETFs). Evercore Pan-Asset uses Index Tracking Funds to match market or sector performance. Dynamic asset allocation ensures that portfolios are structured to suit market conditions and match investors’ risk profi les.

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To see how much an investor could potentially save with an AMC of just 0.25%, download our new iPhone app. As you’ll see, the savings make compelling investment sense.

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IFA-Ad-FullPage-27.5.11-v1.indd 1 26/5/11 13:52:07Only Fools and Horses.indd 47 5/7/11 21:29:03

First State Global AgribusinessIt seems we have a challenge on our hands. It’s currently estimated that the global population will grow by 40% by 2050 - which will mean that there are an awful lot more mouths in the world to feed. And we can’t do this unless the agribusiness sector can dramatically scale

up its output. The First State fund aims to capitalise by investing in a whole range of companies involved in different aspects of the agriculture industry.

The fund’s mandate requires it to invest in a concentrated portfolio of 25-75 stocks drawn from an investment universe of 400 companies. The managers target

conservatively-run businesses that can drive profit growth through increased production.

At present the fund’s largest exposures are to fertiliser producers, forestry, crop protection, agricultural equipment, supply chain and farming. The biggest individual weightings in

the 52 stock portfolio include such well-

known names as Potash Corp, Deere And Co, and the

biotech specialist Monsanto.Just over half of the

money is invested in US stocks - which reflects the huge R&D

investment that has gone into this area, as well as the global reach of these

multinationals. There is also a significant exposure

to Asia-Pacific and to Latin America, where profit

margins in food production are expected to increase.

The fund has had a successful start, and at the time of writing had

a one year return of 24.6%, which put it seventh in its sector. At £26m it is still small

and nimble enough to take advantage of new opportunities as and when they come along.

TAKING STOCKFood for thought

Fund FactsName: First State Global Agribusiness Fund

Type: UK OEIC

Sector: Global

Fund Size: £26mLaunch Date: 24 May 2010

Portfolio yield: n/a

Charges:Initial: 4%, Annual: 1.5%

Manager: First State Investments

Website: www.firststate.co.uk


48 July 2011 www.iFamagazine.com

Product Reviews.indd 48 5/7/11 21:32:05

TAKING STOCKp

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Ct r

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IEw

S

nicK sudBuRY’s SELECTION OF WHAT’S NEW, WHAT’S POPULAR – AND, MOST IMPORTANTLY – WHAT YOUR CLIENTS ARE READING ABOUT IN THE SUNDAY PAPERS.

a glass half full Guinness Global Energy FundOur next thematic fund is Guinness Global Energy, which offers exposure to an equally-weighted portfolio of 30 companies involved in the exploration, production or distribu-tion of oil, gas and other energy sources. Around half of these are listed in the US.

The man in charge is the highly experi-enced Tim Guinness, a member of the famous brewing dynasty, whose unchanged team had previously applied the same approach to the Investec Global Energy over a successful 10 year period. Guinness and his fellow managers be-lieve that over the next 20 years the combined effects of population growth, developing world industrialisation and diminishing fossil fuel supplies will force energy prices higher and will generate growing profits for energy companies.

Historically the Guinness fund has had a very high correlation to the oil price - drop-ping sharply when it launched in March 2008 and then recovering strongly since the low in the first quarter of 2009. At time of writ-ing it had a one year return of 37.4%.

Some will ask why we should pay this fund’s high management charges when we could hold a cheaper oil ETF instead? The answer, according to Guinness, is that the value that the market is placing on the proven oil reserves of the world’s largest oil companies is now at an historic low. If he’s right, then the fund would seem to offer us an attractive buying opportunity as we move into what promises to be a strong long term trend.

Fund FactsName: Guinness Global Energy Fund

Type: Ireland listed OEIC

Sector: Offshore

Fund Size: £162.2m

Launch Date: 31 March 2008

Portfolio yield: n/a

Manager: Guinness AssetManagement

Est imated TER: 1.99%

Website: www.guinnessfunds.com

www.iFamagazine.com July 2011 49


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New gold backed ETNs from iShares and db X-trackersThere’s no question that gold is one of the very few investments to have done really well out of the credit crisis. The precious metal has doubled in value since the collapse of Lehman Brothers back in September 2008. And for most of the investors who didn’t go for coins or ingots , the obvious choice has been the cheaper alternative of a gold-backed Exchange Traded Note or Commodity (ETN/ETC). Until recently ETF Securities had more or less cornered the market in these products; but there are now a number of other providers out there, each offering a slightly different proposition.

ETFS physical gold [PHAU] tracks the spot price almost perfectly, apart from the fees. Like the other gold-backed ETCs, the only holding in the fund is allocated metal bars that are stored in a secure bank vault. This means that all these securities are virtually free of credit risk, as the physical gold is held by the trustee on behalf of the investors.

The company also has a second established product called Gold Bullion Securities [GBS]. This was created in conjunction with the World Gold Council, and in theory it allows investors to go and collect their own metal; however, because of this the fund cannot be held in an ISA. Both PHAU and GBS currently have around $6bn in assets under management. And there are also two smaller equivalents that are priced (not hedged) in pounds rather than dollars.

The success of these products has recently prompted other providers to launch new versions of their own. One such is iShares Physical Gold ETC [SGLN] which along with the ETFS version is backed by allocated bars held by the custodian. It is much smaller with net assets of just $10.7m, but has a significantly cheaper TER of 0.25% compared to 0.39%.

Deutsche Bank’s db X-trackers has had a physical gold ETC for some time, but in April it launched a new version whereby the returns are hedged into sterling. As with the other products the db Physical Gold GBP Hedged ETC [XGLS] is backed by allocated gold, but in this case the managers hedge the currency exposure on a daily rolling basis. It has a competitive annual management fee of 0.29%, although the cost of the hedge adds a further 0.4% per annum.

The hedge should reduce the volatility, as it eliminates most of the currency risk - although whether it will result in better performance depends on the GBPUSD exchange rate. Gold, like all commodities, is denominated in dollars – so, if you expect the greenback to strengthen against the pound, it would be more logical to opt for one of the unhedged versions.

Fund FactsNames: EtFS physical Gold iShares physical Gold db physical Gold GBp Hedged

Type: physical

Sector: precious Metals

Fund Sizes: $6bn $10.7m £4.8m

Launch Dates:

April 2007 April 2011 April 2011

Managers: EtF Securities iShares db X-trackers

TERs: 0.39% 0.40% 0.69%

Websites: www.etfsecurities.com uk.ishares.com www.etc.db.com

all that glitters... ...really is gold

For more comment and related articles visit...www.iFamagazine.com


50 July 2011 www.iFamagazine.com



There May Be TrouBle ahead......BuT while There’s MoonlighT and fun and roMance, why give The whingers a chance? JoHANNA AyliNg ponders Banking’s uncerTain fuTure.

...BuT while There’s MoonlighTand fun and roMance, why give The whingers a chance? JoHANNA AyliAyliA Ng ponders Banking’s uncerBanking’s uncerB Tanking’s uncerTanking’s uncer ain fuTain fuT Ture.You’ve got to give them full marks for sheer resilience. At the exact moment when the whole political and business establishment is raining doom, blame and denunciation down on their heads, Britain’s bankers are back on the splurge. All over London, restaurant tills are ringing with the joyous sound of fat bonuses being redistributed. Porsche sales are near record levels. Estate agents are reporting a massive rise in demand for top-end properties from the same bankers who were being treated as outcasts by the press only six months ago. How, the clients ask, can this be happening?

Here’s how. According to a recent survey by Income Data Services, the average bank bonus payment for the banking industry as a whole (including all those lowly provincial employees, remember) reached £760 a week in March 2011 – compared with £714 in March 2010. Indeed, in February it reached £901 a week, largely thanks to end-of-year earnings. And at the same time, according to IDS, bankers’ regular pay has risen by around 5% over the past year.

Foot in Mouth SyndromeThe pay revival is happening, at least in part, because the government struck a deal in February called Project Merlin, under which it effectively agreed to stay quiet on the thorny subject of bankers’ remuneration in return for an undertaking by the banks to lend to UK businesses. Under Project Merlin, they were supposed to lend £190 billion during 2011, of which £76 billion was to go to small and medium-sized enterprises (SMEs).

Which makes it all the more embarrassing that the lending really isn’t happening. Trade Minister Stephen Green is only the latest in a long

line of ministers to warn that small companies are being stifled by an inability to borrow money at reasonable rates - if at all. “The first-

quarter numbers show that [the banks] are behind the

curve,” he said, “and it’s important to deliver on the Merlin commitment”.

It was a disgrace, he said, that only one in five SMEs is currently able to export for Britain. No small indictment, considering that until only last year Mr Green was chairman of HSBC Bank.

But oh, if only he hadn’t happened to be in Rio de Janeiro at the time, on a 45-strong trade jolly alongside Deputy Prime Minister Nick Clegg, who was making the headlines for a different but related reason. The DPM gave the UK papers something to talk about when he rather clumsily declared that he had written to George Osborne demanding that shares in RBS and Lloyds Banking Group should be simply handed out to their proper majority shareholders, the taxpayers. (Or rather, to the voters – which is not quite the same thing.)

“Psychologically it is immensely important that the British public feel they have not just been overlooked and ignored,” Mr Clegg said. “Their money has been used to the tune of billions to keep the British banking system on a life support system, and they have absolutely no say at all in what happens when normality is restored.”

It took Downing Street all of two hours to put the damper on the DPM’s idea. Mr Clegg’s suggestion was one of several under consideration, said a spokesman, but “we need to make sure we get value for taxpayers.” His Lib Dem party colleague, Business Secretary Vince Cable, added in an interview on Sky TV that the sale of government stakes in the banks (no mention of a handout)



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was still “several

years” away. One of the

problems with Mr Clegg’s idea is that the costs of

distributing shares and printing share certificates for all of the nation’s 45 million

voters would significantly outweigh the political advantages. Another is the fact that his plan has already been mooted before, by his party colleague Stephen Williams, and it would have been a damp squib even then.

Mr Williams had proposed that the free bank shares should have been designed so that they remained worthless until the ordinary share price reached the price at which the government had bought its majority stakes in RBS and Lloyds in 2008: effectively, 51p

and 74p respectively. The fact that RBS was

down to 36p by end-June, with Lloyds at 44p, would have meant that the recipients would have gained nothing and the government would have earned itself a headache.

Eat, Drink and be Merry, for Tomorrow We Diet All of which leads us seamlessly on to the proposals for the ring-fencing of the UK high street banks, as originally proposed in the Independent Commission for Banking’s report in the spring. The report isn’t due to be released until September, but already the understanding is clear that the Government favours a set of measures that’s going to mean a lot of belt-tightening for the banks.

The latest of the ICB’s proposals says that Britain’s banks should be forced to ring-fence their exposure to the securities markets by creating subsidiaries which would be charged with handling UK depositors’ money. By keeping ‘risk’ money firmly separated from their lending activities, it says, it could help reduce their vulnerability.

But what would it cost? Well, the banks aren’t keen to say very much, for the obvious reason that rumours of impending expenses might make their shares even less attractive than they are now. HSBC stuck its head above

the parapet with a guess that the cost for all banks could be between £8 billion and £10 billion, with the bulk of this being spent by Lloyds and Barclays. But that’s a matter for conjecture.

It certainly doesn’t help matters that the UK banks are also under threat of having to set aside much larger proportions of their cash as capital

ratios. As we’ve explained on Pages 16-18, the forthcoming Basel III

international rules envisage a rise in Tier 1 bank capital ratios to 7%, with effect from 2019; but the ICB itself has proposed a rather tougher 9% provision for UK banks.


www.ifamagazine.com

provision for UK banks. Just to make it all more interesting, the

Basel III group has yet more ideas about capital ratios. The current plan is that the world’s banks should be classified into three different risk categories, each of which will incur an additional capital requirement on top of the 7% Tier 1 provision. The Financial Times reported that Barclays, RBS and HSBC may be required to find an additional 2.5% capital ratio – alongside such other large institutions as Citigroup, JP Morgan, Deutsche Bank and BNP Paribas. Less bulky banks will be assigned to two lower categories, qualifying for additional capital requirements of 2% or less.

We should stress that some of this just informed conjecture at present. And that the European Commission is lobbying for lower capital requirements for its own banks. And that George Osborne has been taking a swipe at his European colleagues for being so namby-pamby while Britain is being so strong. And, of course, that America’s view of Britain’s banks is being negatively tinged by the upcoming presidential election and by the consequential urge to defend the purity of its own institutions. And so on, and so on….

So how long will it be before we have the full picture? Nobody has the faintest idea. But one thing’s for sure. With these levels of uncertainty hanging over the lenders’ heads, we’re not going to see a major surge in UK bank lending any time soon.


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Our mOnthly summary Of the latest Official publicatiOns by the fsa. These listings exclude the fsa’s routine monthly handbook updates.

Financial Crime: a Guide for FirmsConsultation Paper Ref: CP 11/1222nd June 2011 137 pages Of interest to IFAs but not, primarily, consumersThe document contains guidance, in the form of self-assessment questions and examples of good and poor practice, which firms can use to assess and improve their existing approaches to meeting their legal and regulatory obligations in relation to financial crime. Consultation period closes on 21st september

Product Intervention Feedback StatementDiscussion Paper Ref: FS 11/314th June 2011 65 pages Reports on the Product Intervention discussion paper (DP), published on 25 January. The original paper proposed a new direction for retail financial services regulation, moving away from an approach largely focused on point-of-sale, to one that actively regulates all aspects of the product life cycle, including the design, development and management of products.

Proposed Guidance on the Selling of General Insurance Policies Through Price Comparison WebsitesGuidance Consultation Ref: GC 11/138th June 2011 11 pages Clarification for firms on the relevant need to: • Reviewtheirregulatedactivities,ensure

they are appropriately authorised;• Ensuretheyonlyenterintocontracts

with firms holding the appropriate authorisation and permissions.

• Withdrawtheirassistancefromthirdpartiesiftheparty is in breach of the general prohibition.

• Reviewtheirdisclosuredocumentation,salesprocedures and terms and conditions

Code of Practice for the Relationship Between the External Auditor and the SupervisorFinalised Guidance Ref: FG 11/09May 2011 6 pages The Code sets out principles that establish, in the context of a particular regulated firm: • thenatureoftherelationshipbetween

the supervisor and auditor.• theformandfrequencythatcommunication

between the two parties should take.• theresponsibilitiesandscopeforsharing

information between the two parties. The aim and focus of the Code is to enhance the regulatory process and contribute to high-quality external auditing by promoting an effective relationship between the auditor and supervisor in the context of a particular regulated firm.

The Client Money and Asset Return (CMAR): Operational ImplementationPolicy Statement Ref: PS 11/0627th May 2011 38 pages This Policy Statement reports on the main issues arising from our proposals on implementing CMARonGABRIELforCASSmediumandlargefirms in Consultation Paper 11/4 (The Client Money and Asset Return (CMAR): Operational Implementation) and publishes final rules.Of interest to:• allCASSfirms;• consumers;and• individualswhomayhavesenior

management responsibilities in relation to a regulated firm’s client money and assets.

Note: the CMAR regime will come into effect from 1 October, rather than 1 June, as previously indicated


54 July 2011 www.IFAmagazine.com

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Pension Reform - Conduct of Business ChangesPolicy Statement Ref: PS 11/0828th May 2011 33 pages This Policy Statement reports on the main issues arising from Consultation Paper 10/26 (Pension reform – Conduct of business changes) and publishes final rulesRelevant to pension providers, advisers, consumer groups and professional bodies. The proposals in this paper will affect consumers who have a pension now, expect to make contributions to a pension in the future, or who will be automatically enrolled into workplace personal pensions from 2012.This Policy Statement discusses the responses received to CP10/26 and includes final rules.

New provisions and guidance come into effect on 1st October 2012

Consolidated Policy Statement on FSA Fee-Raising Arrangements and Regulatory Fees and LeviesPolicy Statement Ref: PS 11/0727th May 2011 236 pages This Consolidated Policy Statement (PS) summarises the FSA’s policy with regard to its fee-raising powers under the Financial Services and Markets Act 2000

Consumer Complaints: The Ombudsman Award Limit and Changes to Complaints-Handling RulesConsultation Paper Ref: CP 11/1028th May 2011 68 pages Of interest to consumers and consumer representatives, and to all firms involved in retail financial services markets, where their customers are eligible to complain to the ombudsman service. Some applications to non-regulated firms and organisations.This paper contains final policy, rules and guidance, and consults on a proposed change to the definition of ‘eligible complainant’ in response to feedback received to CP10/21.It also contains guidance and rulings on remuneration to the ombudsman, and on tighter complaints handling procedures generally. Consultation period closes on 31st August

Proposed Guidance on the Supervisory Formula Method and Significant Risk TransferGuidance Consultation Ref: GC 11/1225th May 2011 4 pagesMainly for BIPRU firms who undertake securitisation as an originator or sponsor:Guidance aims to set out the FSA’s expectations on firms using the Supervisory Formula Method (SFM) to calculate risk-weighted exposure amounts (RWEA)forunratedsecuritisationpositions.thisarises from ‘significant concern’ that firms’ use of the SFM undermines the significant risk transfer requirement with the reduction inRWEAs,duetotheuseoftheSFMbeingdisproportionate to the credit risk transferred. Consultation period closed 21st June

Proposed Guidance on Reporting Derivative Transactions Conducted Through Derivative Exchange PlatformsGuidance Consultation Ref: GC 11/1125th May 2011 3 pagesMainly for Firms that deal in on-exchange derivativesGuidance aims to: • provideclearerandsimplerguidance

that removes the need to distinguish between transactions for fungible and non-fungible derivative instruments conducted through exchange platforms.

• provideguidancethatreflectsmoreaccuratelythe status of the transactions and is easier for firms to integrate into their transaction reporting systems.

• extendtheguidancefromjustAlternativeInstrument Identifier (Aii) derivative transactions to allderivativetransactions(ISInandAii)conductedthroughEEAderivativeexchangeplatforms.

Consultation period closed 2nd June

www.IFAmagazine.com July 2011 55

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FSA Complaints Handling Changes

The FSA has confirmed the awaited new complaints handling rules. This is done as part of a package of measures to drive up standards across the industry.

The new rules include:

n Abolition of the ‘two-stage’ complaints handling rule to make sure firms resolve complaints fairly and do not dismiss them the first time, requiring persistence from the customer to pursue the complaint.

n Requirement for firms to identify a senior individual responsible for complaints handling.

n Additional guidance to help firms understand the processes they might need in place to meet FSA requirements on root cause analysis; and

n Further guidance requiring firms to take account of ombudsman decisions and previous customer complaints.

The consultation statement also confirms an increase to the limit on awards made by the Financial Ombudsman Service from £100,000 to £150,000.

Complaints handling has always been a key part of the FSA’s intensive and, more lately, intrusive approach to supervising how firms deal with their customers. In September 2010 the FSA started to publish firm-specific complaints data, enabling customers to compare and contrast the way different firms deal with their complaints.

Impact: To most IFA firms is minimal for details see CP11/10 . Any IFAs operating a two stage complaints process need to identify their complaints data and make sure they have a new “One stage” complaints system in operation. Details of the changes can be found at http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/046.shtml and Complaints Data can be found at http://www.fsa.gov.uk/Pages/Library/Other_publications/commentary/index.shtml

Lee Werrell, Managing Director of CEI Compliance Ltd, gives his personal round-up of the key issues that are currently shaping the compliance agenda See also the listings of FSA publications on Page 62 of this issue.

KPMG Warns e-Privacy Laws to Uncover “Painful Truths”

New e-privacy laws will uncover some painful truths – and financial services firms are not immune, according to KPMG

Commenting on the new E-Privacy Directive, George Thompson, information security director at KPMG, warned that very few organisations are ready to meet this new burden of proof - despite a recent spate of high profile, commercially damaging data breaches and incidents of loss.

The main problem seems to be that British businesses now have a year to ensure their websites meet the requirements of this directive. It remains to be seen how the Information Commissioner’s Office (ICO) will wield its new powers, but the inevitable audits will surely uncover some very painful truths about risk and compliance.

This will impact on any companies where IFAs ask people to register via an automated system that places a “cookie” on the user’s computer. This is normally done by a request for permission to use cookies. The key is that organisations need an accurate record of who has and has not consented and this cannot be done retrospectively.

Impact: Whereas IFAs may be used to dealing with the FSA, the ICO are very different and satisfying them may presents a new and complex challenge. The new law makes the collection of consent compulsory as part of another set of sensitive customer data. All IFA companies that use websites to interact with their customers need to review and examine up their data management policies and make sure that every new data composition is covered.



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of the higher qualification standards that all advisers will have to achieve post RDR.

A total of 84 per cent of advisers saying they intend to remain independent. However, restricted advice is set to play an important role with 11 per cent of advisers saying they intend to offer a restricted advice service. Eight per cent of this group intend to provide restricted advice on top of the existing independent advice service they offer, while three per cent believe they will switch entirely from independent to restricted status.

Six per cent of advisers intend to leave the industry and two per cent said that they already had plans to leave the industry before the RDR is implemented. Only four per cent believe the RDR will force them out of the industry.

Impact: To most IFA firms the implications are variable dependent on their strategy and business model. Individual IFA strategy needs to be confirmed and assistance from financial, regulatory as well as HR perspectives in planning for the next 5 years is essential. The IFAOnline full article can be found here http://www.ifaonline.co.uk/ifaonline/news/2074113/ifas-stand-market

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.

IFAs to Remain Whole of Market?

Most IFAs will remain ‘whole of market’ after 2013, a new poll suggests and is reported by Wolters Kluwer Financial Services Europe.

IFAonline reports that the Dunstan Thomas poll of 127 advisers revealed that three-quarters of respondents plan to remain whole of market IFAs after the Retail Distribution Review (RDR).

The same poll reportedly revealed ‘fierce opposition’ to the regulator’s tightened definitions of independent and restricted advice, with 72 per cent describing the labels as ‘wrong’.

To add to the melee Skandia’s latest “Adviser Confidence Barometer” revealed that 43 per cent of financial advisers think the RDR will improve advice. It also found that 29 per cent believe the RDR will have no effect on the quality of advice given to consumers, and a further 29 per cent consider it will have a negative effect on advice.

Skandia said that these findings dispel the myth that the majority of advisers fear the day commission is abolished. In fact 19 per cent of the advisers that believe the RDR will improve the advice provided to consumers felt this would be because of the ban on commission.

However, the majority – 73 per cent - felt the quality of advice would improve because

*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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No one has more out-performing UK Equity Funds over 3, 4 and 5 years

Important information Information for investment professionals only. All data as at 31.03.2011 unless otherwise shown. 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 an investor may not get back the amount invested. The UK, UK Growth & Income, UK Institutional, UK Overseas Earnings and UK Mid 250 Funds are in the IMA UK All Companies Sector, the UK Equity Income and UK Monthly Income Funds are in the IMA UK Equity Income Sector and the Monthly Extra Income and Managed Income Funds are in the IMA UK Equity & Bond Sector. Subscriptions to a fund may only be made on the basis of the current Prospectus or Simplifi ed Prospectus and the latest annual or interim reports, which can be obtained free of charge on request. This material is for information purposes only and does not constitute an offer or solicitation to an order to buy or sell any securities or other fi nancial instruments, or to provide investment advice or services. Threadneedle Investment Funds ICVC (“TIF”) and Threadneedle Specialist Investment Funds (“TSIF”) are open-ended investment companies, each structured as an umbrella company; incorporated in England and Wales, authorised and regulated in the UK by the Financial Services Authority (FSA) as UCITS schemes. Investors should note the “Risk Factors” section of the Prospectus in terms of the risk applicable to investing in any fund and specifi cally the funds shown above. The research and analysis included in this document has been produced by Threadneedle for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. In some instances the information contained in this publication, other than statements of fact, was obtained from external sources believed to be reliable but its accuracy or completeness cannot be guaranteed. Any opinions expressed are made as at the date of publication but are subject to change without notice. Threadneedle Investment Services Limited. 60 St Mary Axe, London EC3A 8JQ. Registered No. 3701768. Authorised and regulated in the UK by the Financial Services Authority. Threadneedle is a brand name, and both the Threadneedle name and logo are trademarks or registered trademarks of the Threadneedle group of companies. threadneedle.com

Over 3, 4 and 5 years, nine of our UK Equity Funds have consistently out-performed their respective IMA sector averages.

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Fear not, you can now bluFF it with the best oF them, thanks to IFA MAgAzIne’s monthly crib-sheet on all the great theorists.

Capitalism’s ultimate bogeyman wasn’t wrong about everything. His theoretical analysis of the emerging capitalist economy was both brilliant and correct in many ways, and it is still taught in business schools. But Marx was of course looking through the ‘wrong’ end of the telescope, in that as his focus was on social liberation rather than on business realities. And his readiness to demand violent unrest was always unhelpful. Still, knowing your enemy is never a bad thing.

Marx was a failed law student who preferred boozing to books, although he later turned to journalism and philosophy with more success. He could never have afforded the luxury of his writing if it hadn’t been for the wealth of his industrialist friend Friedrich Engels, the heir to some of the filthiest cotton mills in Europe, who had rebelled against his family’s ethos. The two travelled widely across Western Europe’s war-torn hotspots before Engels eventually went back to running a Manchester mill.

The big idea Marx’s great historic insight was that capitalism had turned people quite literally into ‘human resources’ whose importance was measured solely in terms of their economic value. Even he couldn’t deny that this brutal ‘alienated’ structure worked brilliantly when it came to creating value for their employers. But he was equally sure that the competitive nature of capitalism would become steadily more brutal, ending with the total dominance of giant monopolies which would swallow up everybody else.

Before long, Marx declared, capitalism would implode completely as the super-monopolies tried to devour each other. And in 1848, as a wave of attempted revolutions shook France, Germany, Italy and Austria, he declared rather

rashly that capitalism’s hour had finally struck and that it was now time for the masses to seize their historic chance with violent revolution.

The big mistake What would happen next? The proletariat would create a new economic model, he said, in which it would permanently own the entire means of production. The profit principle would be abolished, and the landowners would be dispossessed, or worse.

Marx was, of course, wrong. The 1848 dissent was soon quashed, and the hated monopolists invented anti-competitive cartels which somewhat blunted their urge to destroy each other. Ultimately, the 1848 Paris rebellion did nothing except soften up the city to not one but two Prussian invasions.

Nearly forgotten by history Having missed his moment in 1848, Marx retreated to London in 1849, where he lived quietly, writing books until his death in 1883. And there it might all have ended, had Lenin’s Bolsheviks not eventually staged their 1917 attempt to turn Marx’s mainly theoretical economic ideas into a fully functioning communist Russian state - with consequences that need no further explanation.

Constant change is here to stay As an early fan of the philosopher G.W.F. Hegel, Marx believed that all change, for better or worse, derived from endless conflict. The repeated clash between one idea (thesis) and its opposite (antithesis), resulting each time in synthesis, was the core of his historical idea of dialectics and the main rationale for his revolutionary social urgings. It all sounds less frightening if you call it “creative destruction”, an artsy-sounding buzzword which means much the same thing. Funny, that.

Karl Marx Born 1818 in Trier, Germany, died 1883 in London

“sell a man a fish, he eats for a day, teach a man how to fish, you ruin a wonderful business opportunity.”

Social ViSionary

www.IFAmagazine.com July 2011 59

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

Financial Planner - Manchester

Our client is looking for an experienced Financial Planner to provide independent advice to bothHNW/ UHNW individuals. The role will see you maintaining and developing relationships withexisting clients as well as developing external professional relationships with a view to generatingnew business. This is a fantastic opportunity to work for an RDR compliant business, working in anon-aggressive environment and being given the support and time needed to develop a profitablebook of business. Diploma qualified is a pre-requisite along with evidence of progress towardsChartered status.

Basics to £50,000 plus benefits and bonuses

Unit 3, Woodside Mews, Clayton Wood Close Leeds, LS16 6QE Telephone: 0113 274 3000 Fax: 0113 274 3031

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

www.bwd-search.co.ukVisit our website at

Senior Financial Planner - Investment Management Firm, London

An excellent opportunity has arisen for an experienced Financial Planner within a leadingInvestment Management firm in London. They specialize in providing Investment Managementand Financial Planning services to HNW clients and are looking to expand their London teamwith a high quality adviser. There is no requirement for this individual to draft across any existingclients of their own and there are generous packages and bonuses on offer. The ideal candidatewill be at least working towards Chartered status and have experience in providing high caliberfinancial planning solutions to HNW clients.

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

Basic salary up to £75,000 plus benefits and bonuses

Senior Financial Planner / Manager - Wealth Management firm, London

Our client is a top-end investment management and wealth management firm with animpeccable reputation within the HNW & UHNW market. They are currently seeking a seniorlevel Financial Planner and man-manager to assume responsibility for their financial planningteam. Working closely with the Head of Financial Planning this individual will operate in aplayer-manager capacity, leading and developing an existing, team of very high qualityFinancial Planners whilst maintaining a client facing focus themselves, writing high levelsof business and bringing in significant levels of new funds.

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

Basic to £200,000 plus benefits and bonuses

Pensions Specialist - Midlands

An opportunity has arisen with a leading life and pensions provider to join the companyas a Pensions Specialist within the Midlands region. You would be responsible for the region'spensions' target, mentoring / training the team of field based Sales Consultants and developingnew business relationships with a hand full of business accounts. Interested candidates mustbe diploma qualified, have pensions experience within the broker sales arena and havesales experience.

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

£45,000 basic plus £85,000 OTE plus car and managerial benefits package

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

Financial Planning Area Manager (IFA)

A hybrid advisory and management role; you will supervise a team of HNW Private Client focusedIFA's with the majority of time and duties focused on advising rather than management. You willbe responsible for driving business forward, attending joint client meetings with IFA’s, leading theteam by example generally; coaching IFA’s with training and development duties included.Applications are invited from experienced financial planning professionals qualified with Level 4Dip PFS. You must have experience of managing a successful team of financial planners, be adeptat generating new business through professional introducers and a track record of success.

Up to £60,000 including bonus and full benefits

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



IFA Calendar.indd 60 6/7/11 06:34:45

Please contact Mark Ford on 0113 239 5312 to discuss any of these positions or email your cv to [email protected]

The Tenet Groupare the largestindependentlyowned advisergroup supportingover 5,500advisersnationwide. We’re looking for IndependentFinancial Advisersto join our winning team.

IFA’s Scotland – Negotiableremuneration deals available.We are an established IFA firm with offices inEdinburgh, Aberdeen and Dundee. Due to our uniquelead generation model we are looking for advisers tocover all areas of Scotland to service introducedbusiness along with self generated referrals. Alongwith leads we are able to offer Paraplanner support,admin support, office space if required, back officesystems and mentoring support. You must be CASand working towards diploma.

IFA – Midlands. Renowned Business withexcellent support/lead gen sources.We are a well renowned IFA business based inLeicestershire and have been serving the needs ofour clients since 1982. Our business benefits fromworking closely with 3 substantial solicitor firmsalong with a number of accountancy practices actingas introducers. A further lead generation source arethe seminars we run regularly to new introducers,affinity groups and IHT clients. Having recentlyestablished ourselves with the UK’s leadingindependent network we are now looking foradditional advisers to join our business on a selfemployed basis.

Employed IFA Positions x 4. Midlands,North West, Middlesex, South Yorkshire.All firms are supported by a leading financialsupport provider, leads are provided from existingclient banks, in-house accountants, retirementseminars to professional groups and estate agentintroducers. All salaries are negotiable, car or carallowance, DIS and medical care benefitsprovided. Office or home based with full officesupport provided for all positions. You must beCAS and diploma (or working towards)

Employed IFA – Hove Brighton. CAS or TraineeWe are looking for a customer focused individual tojoin our established IFA firm. You may be newlyqualified or have been working in a tied or multitied environment and want to make take the stepinto the IFA arena. You will be given access to1500 clients, receive support from in houseadministration, paraplanner, compliance and salessupport. Diploma study program is also available.We are also looking for advisers on a self employedbasis who are looking to alleviate the businessburden of trading on their own. Commission splitsare fully negotiable.

I want to be part of awinning team

T10268 Tenet Recruitment Ad 24/05/11_T10145 Tenet Recruitment ad 24-08-10 24/05/2011 09:28 Page 1

Business owner / entrepreneur

To learn more about this exciting opportunity contact Paul Mullarkey on 0131 557 9668 or 07875 341758 for the inside scoop or email him on [email protected]

www.keillar.comkeillar Resourcing operates as a recruitment agency

The company A change in direction can be daunting especially when that change means a step into the self employed but taking hold of your financial future and becoming a leader of your own destiny need not be such a complicated transition when you have the support of the right network.

Keillar Resourcing is working in conjunction with one of the UK’s leading IFA networks. With UK wide coverage and a brand name that’s synonymous

with excellence you can be assured of the right levels of support along the way.

Commission rates are high and you can decided on the right levels of support from a variety of choices and only pay for the support you decide to utilise and that means you don’t pay more than you have to. This RDR ready network can support you with everything from office to admin and might even supply the odd lead or two!

abouT you Maybe this is the right time to take hold of your own financial future? If you think it could be, then get in touch and we will tell you how this network could be just the ticket!

The packageWith excellent commission rates up to 90% the eventual level is entirely up to you.

LocaTionGenuinely national so wherever you want it to be.



For more information please call 0117 344 5115, apply directly on [email protected] or visit our website www.professionalrecruitment.co.uk

Professional Recruitment is a specialist consultancy providing comprehensive recruitment solutions within

the Financial Services sector from offices in the South West of England and South Wales.

Senior Financial Planner

Bristol. Employed salary up to £45k plus excellent

benefits & bonus

RDR ready firm seek Diploma or Chartered level Financial Planner to service existing Devon client base. Strong emphasis on quality service and holistic planning in a fee based

environment.

Paraplanner

Bristol. Employed salary up to £35k

IFA division of a respected South West of England Accountancy

practice seek a technically astute paraplanner. Must be minimum

Diploma status with ability and ambition to become an Adviser

– support provided.

Senior Consultant

Reading. Employed salary circa £60k+ benefits

Accountancy firm with offices in South and South West of England seek Senior Consultant with client portfolio. Suit well qualified (min Diploma) experienced professional accustomed to complex/corporate

planning in a highly polished environment.

IFA

Bristol. Employed salary £40-£60k plus bonus –

realistic OTE £Six figures

Long established but contemporary IFA firm seek seasoned Adviser with trail. Business development support and internal resources will enable

considerable fee income. Minimum Diploma qualification. Suit an individual with drive & hunger

for success.

Current Vacancies

hays.co.uk/financialservices

You are in demandiFa: accountancy Practice: directorship Prospects n.Yorkshire £competitive basic + bonus + package

Join the financial planning division of this established accountancy practice. This is an excellent long-term career move offering a future directorship. You will be responsible for continuing to service and develop an existing client base whilst driving forward the financial planning business. Experience of working as an IFA within a professional practice environment (i.e. solicitors or accountants) is beneficial. You will have excellent client relationship and business development skills together with a highly professional and ethical approach. Good quality clients are provided, therefore own client bank is not required. ref: 1368370 [email protected] or 0161 929 7039.

iFa: Professional Practice: managerial Prospects manchester c.£45-60,000 basic + bonus + package

This is a first-class career opportunity to work within a professional practice providing holistic and truly independent advice to a well established client bank. Ability to identify your clients’ requirements and provide bespoke advice to achieve financial goals will be recognised and rewarded. Own client bank is not a requirement as you will have good quality clients to work with. Your clients will typically include business owners, company directors and higher net worth individuals establishing their personal financial planning requirements to ensure a quality independent advisory service is provided. Managerial opportunity available if desired. ref: [email protected] or 0161 929 7039.

FS-03476-1_IFA_Pg_June.indd 1 02/06/2011 09:07

Senior Financial Planner Location: Devon Salary: £35,000 – £60,000 Our client is one of the South West's most foremost Financial Planning Firms, delivering creative solutions across comprehensive and bespoke financial planning, investment portfolio management, tax and estate planning. They are seeking an experienced Diploma Qualified Senior Financial Planner with a proven record of success in the field and previous management skills. This role will require some travel to Bristol for training purposes, and will involve liaising with the current incumbent with a view to running the practice upon their retirement. Skills Minimum 5 years experience in similar role Diploma in Financial Planning (Dip PFS) Competent Adviser Status (CF30) Experience of holistic financial planning, and dealing with HNW clients Ability to manage a small team and delegate tasks accordingly Excellent communication skills, both written and verbal Strong IT skills, knowledge of 1st Software would be an advantage Benefits Competitive salary, depending on experience and qualifications, 23 days holiday, Group Life Assurance scheme (4 times salary), Private Medical Insurance for employees, their spouses/partners and any dependent children, Permanent Health Insurance scheme, Employer's Pension Contribution (7% of basic salary), Free on-site parking

Heat Financial Services provides a highly tailored service to the UK Financial Services industry assisting Clients across the Banking, Life & Pensions, Mortgage, Investment and Stockbroking Markets, consistently assisting Clients to adapt and respond to the relevant regulatory and industry challenges in partnership with Heat Training’s Financial Services Trainers. Heat Financial Services Specialist Consultants are consistently updating their industry knowledge to allow them to provide high level assistance to Clients in both niche areas of the industry and the general Financial Services Market, whilst working closely with Clients on each individual requirement to ensure they fully understand the organisation and the position(s) they are looking to fill. Heat Financial Services Specialist Consultants will only present relevant candidates, with the experience and knowledge that matches the Client requirements. A quality approach to business makes Heat Financial Services a key partner in the recruitment process, coupled with Specialist Financial Services Training via Heat Training. The proposition for Clients and Candidates alike is a one-stop shop for all Financial Services Industry Recruitment and Training needs. Contact one of Heat Recruitment’s Specialist Consultants to discuss any of the above: [email protected] or Tel: 0845 375 1747




For more information please call 0117 344 5115, apply directly on [email protected] or visit our website www.professionalrecruitment.co.uk

Professional Recruitment is a specialist consultancy providing comprehensive recruitment solutions within

the Financial Services sector from offices in the South West of England and South Wales.

Senior Financial Planner

Bristol. Employed salary up to £45k plus excellent

benefits & bonus

RDR ready firm seek Diploma or Chartered level Financial Planner to service existing Devon client base. Strong emphasis on quality service and holistic planning in a fee based

environment.

Paraplanner

Bristol. Employed salary up to £35k

IFA division of a respected South West of England Accountancy

practice seek a technically astute paraplanner. Must be minimum

Diploma status with ability and ambition to become an Adviser

– support provided.

Senior Consultant

Reading. Employed salary circa £60k+ benefits

Accountancy firm with offices in South and South West of England seek Senior Consultant with client portfolio. Suit well qualified (min Diploma) experienced professional accustomed to complex/corporate

planning in a highly polished environment.

IFA

Bristol. Employed salary £40-£60k plus bonus –

realistic OTE £Six figures

Long established but contemporary IFA firm seek seasoned Adviser with trail. Business development support and internal resources will enable

considerable fee income. Minimum Diploma qualification. Suit an individual with drive & hunger

for success.

Current Vacancies


Aisa Direct LtdUnit 4, Fordbrook Business CentreMarlborough Road, Pewsey, Wiltshire SN9 5NU

Phone: 01672 569 111

www.aisapro.co.uk

Advanced Independent Specialist Advice

Client Relationship ManagerReference code: CRM1435Salary: £30,000 - £45,000 OTELocation: WiltshireJob Type: Full TimeCV’s to: [email protected]

Company:

We are a successful well established company; already RDR compliant, winners of many financial awards currently applying for ‘Charter Status’ we are looking to expand our team. Our business model is strongly based around TCF, ensuring our high net worth clients are our priority. We have a strong client bank which needs taking forward. We pride ourselves in offering our clients the best service possible.

The Role:

As a client relationship manager your priorities would be:

• Proactivelycreatingrelationshipswithexistingclients

• Proactivelynetworkwithhighnetworthindividualsincreasing our client database

• Preparecompanyfactfinds

• ProvidesupporttoourdirectorsandIFA’s

• MaintaincompanystandardsandFSAregulations.

• Measureclientsatisfaction

• Deliverabespokecustomerexperience

We would like a dynamic individual to assist with hands on networking with our current and new clients. Full administrative support would be offered.

The Candidate:

We are looking for a self-motivated driven individual with over 2 years experience in the financial industry, who wants to continue operating with a directly authorised firm not seeking regulation as an individual. You must be confident on the telephone with the flexibility to handle social settings. Organisational skills are essential and you must be abletoprioritisedailytasks.YoumustholdtheminimumqualificationFPC1orCeFA.




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rDates for your diary

JuLYJuLYEntry into force of some rules under FSA Policy Statement PS 11/01 (Distribution of Retail Investments: Delivering the RDR - Professionalism). Firms are now obliged to notify the FSA if any adviser falls below the required standards of competence or ethical behaviour.

Consultation period ends on Consultation Paper CP 11/08 (Data Collection: Retail Mediation Activities Return and Complaints Data).

AuGuSTFourth anniversary of the US banking collapse.

SepTemberIBC’s investigation into the UK banking structure due for publication.

Martin Wheatley becomes chief executive designate of the Consumer Protection & Markets Agency.

Ladbrokes St Leger Race, Doncaster. Unofficial end of the summer slack period.

Consultation closes on FSA Consultation Paper CP 11/12(Financial Crime: a Guide for Firms).(Financial Crime: a Guide for Firms).

End of transitional period for auditors with regard to declaring Client Assets (Policy Statement PS 11/05).

ocToberNew provisions and guidance come into effect from FSA Policy Statement PS 11/08 (Pension Reform - Conduct of Business Changes).

Revised start date for FSA Policy Statement PS 11/06 (The Client Money and Asset Return).

Money Management Financial Planning Awards.

World Economic Forum Summit on the Global Agenda, Davos, Switzerland.

World Economic Forum Summit on the Middle East and North Africa, Jordan.

25th anniversary of the ‘Big Bang’ deregulation in London.

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

novembernovemberChild ISAs scheduled for introduction (maximum annual investment £3,000).

G20 Summit in Cannes, France.

AIFA annual dinner, London.

FT Advisor Service Awards.

Financial Planning Week (Institute of Financial Planning/NS&I).

decemberdecemberFSA restructuring process (CPMA, PRA etc) scheduled for implementation.

Basel III Capital Framework - All major G-20 financial centres scheduled to have committed.

jul - dec 2011

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

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Frederick Smythe-AllinSon struggles with the meaning of life. and words, and everything else actually.Everything Clear? Investors have nothing to fear from higher fees after RDR, the FSA has confidently assured us. Well, sort of. In an amendment to its consumer web page, the regulatory body has performed a body-swerve that’s half Wayne Rooney and half Paul Daniels. Smoke and mirrors and fast footwork.

There aren’t many ways to tell people nicely that they’ve been paying for things without noticing, but the website has a good try. “Investment advice has never been free,” it explains. “The price you currently pay for advice is often hidden within the charges of the product that you buy.” Well yes, Allinson agrees, that’s fair comment. The average client probably does think he’s getting his advice for free at the moment, and the sooner he knows differently the better for all of us. But what’s this?

“The [RDR] changes are not altering how much the advice should cost, but rather enabling you to agree how much the adviser gets paid, rather than that decision being taken for you by a product provider.”

Whoa, stop. Now, imagine I’m a client, and run that past me again. The advice I get will cost just the same as before, but I get a say in deciding how much the fees are? Spot the non-sequitur there.

It goes on. “If you prefer, you will still be able to get advice [after RDR] without having to write a cheque. For example, you could instead agree with the adviser to have their fee taken from your investments; the difference in future is that you will agree with your adviser, in advance, how much you will pay for their advice.”

Leaving aside the fact that nobody much will be writing cheques in the future, given that they’re scheduled for abolition (do the FSA’s copywriters know this?), the public’s brow is still likely to be furrowed. Isn’t all this the same as saying: “Your adviser used not to tell you what you were paying, but now he will, and it’s the same amount, honest. Unless it isn’t. Trust us. Would we lie to you?”

Misleading Sales Pitches (Continued)Picture the scene. A PPI salesman stands at the Pearly Gates, and St Peter realises he has a problem. “Look,” he says, “I know you’ve tried all your life to be a loving husband and father. But you’ve also led thousands of innocent people astray - and often deliberately so, I’m afraid. I’m not sure whether you belong here or in the other place.”

“Tell you what,” says the PPI salesman brightly. “Why don’t I take a look at both places and then come back to you with a decision?”

“Fair enough,” says St Peter.So the salesman takes a tour of heaven.

All is tranquillity, and everything is bathed in celestial light. As far as the eye can see, there are thousands of blessed souls sitting on clouds playing their harps, as they will do for all eternity. The salesman isn’t impressed.

“Looks a bit boring,” he says to St Peter. “Can I see the other place?”

St Peter summons Old Nick, who leads the salesman to the forbidden door and opens it up. The air is filled with the sounds of a first-rate party. Champagne corks pop in the background, the music is excellent, and the goings-on in the corner suggest that some of the occupants are having a very good time indeed.

The salesman goes back to St Peter. “Right, I’ve seen enough,” he says. “It’s the other place for me.”

St Peter heaves a heavy sigh. “Take him away Nick, he’s all yours.”

The devil opens the door again. The air is rent with a hideous screaming, and black smoke belches out of the room. The heat is unbearable, the stench is appalling.

“Hang on a minute,” says the salesman. “This isn’t what you showed me yesterday.”

“Yesterday,” says Old Nick, “you were a prospect. Today, you’re a client.”



And Finally.indd 66 6/7/11 06:35:31

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eRegisteR today to Receive IFA MAGAZINE foR FrEE and you could wIN a FErrArI trAck dAy!RDR and the Global Financial Crisis have obviously stimulated a massive shake up of the financial industry and IFA Magazine is the media vehicle for this new era. It is based on filtering out the irrelevant news spam, and focusing on the key issues, giving you the information you need in a concise format, in a style that you appreciate and a tone that is easy to digest.

We believe you, as the new generation of sophisticated investment and financial professionals, deserve and need a quality publication.

Published ten times per annum, every issue will contain the most salient news review, comment and analysis; columnists insight, training features, product news, company profiles and more, fashioned into a style befitting and written for the modern investment and financial professional.

To receive your FRee copies, simply register online at www.ifamagazine.com/ content/subscribe

magazine

And as if more incentive were needed, all qualified registrants will be entered into our prize draw. deadline for entry to the Ferrari draw is 31st August 2011.

experience the phenomenal acceleration, braking and handling. Discover the stunning combination of power, style and finesse with this fantastic Ferrari driving opportunity. A truly unforgettable experience, to go with a truly unforgettable magazine.

Terms and Conditions apply. Visit IFAmagazine.com for full details.

N e w s r e v i e w c o m m e N t a n a ly s i sCover 03.indd 3 7/7/11 13:51:50

For professional advisers only. This material is not suitable for retail clients. Past performance is not a guide to future performance and may not be repeated. The data contained in this document has been sourced by Schroders and should be independently verifi ed before further publication or use. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. The funds hold investments denominated in currencies other than sterling investors should note that exchange rates may cause the value of these investments, and the income from them, to rise or fall. Funds which invest in a smaller number of stocks can carry more risk than funds spread across a larger number of companies. Source for performance, Lipper Hindsight, bid to bid net income reinvested, data to 31/05/2011. Source for ratings, Citywire as at 31/05/11. *For security purposes, telephone calls may be recorded. Issued in July 2011 by Schroder Investments Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 2015527 England. Authorised and regulated by the Financial Services Authority. UK01287

T R U S T E D H E R I T A G E A D V A N C E D T H I N K I N G

Schroder Alpha Plus Range

0800 718 777*schroders.co.uk/alpharange

Give talented and highly experienced fund managers the freedom to back their best ideas in an unconstrained way, and you give yourself the best chance of delivering exceptional long-term results – even when markets may disappoint. That’s the strongly-held conviction behind our growing Schroder Alpha Plus fund range.

In 2010, the Schroder Global Alpha Plus Fund, managed by Virginie Maisonneuve, earned a place alongside three well established funds. Richard Buxton’s Schroder UK Alpha Plus Fund, Matthew Dobbs’ Schroder Asian Alpha Plus Fund and Nathan Gibbs’ Schroder Japan Alpha Plus Fund. These have all proved more than worthy of the Alpha Plus name, delivering 1st quartile performance over three years.

So unchain your investment thinking from the benchmark, and give your clients the best opportunity to break away from the pack.

Alpha+

Give talented and highly experienced fund managers the freedom to back their best ideas in an unconstrained way, and you give yourself the best chance of delivering exceptional long-term results – even when markets may disappoint. That’s the strongly-held conviction behind our growing Schroder Alpha Plus fund range.

Alpha

Cover 03.indd 4 7/7/11 13:51:51

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