149 days of tax

Tax Freedom Day is the day when Britons begin working for themselves rather than the taxman and falls on May 30 in 2011, compared to May 27 in 2010. The Adam Smith Institute calculates this each year and this is the latest.

http://www.adamsmith.org/blog/tax-and-economy/tax-freedom-day-will-be-30-may-2011/

The main reason for the three extra days appears to be the rise in VAT (Value Added Tax), which increases from 17.5 per cent to 20 per cent on January 4.

Tom Clougherty, executive director of the Adam Smith Institute, described Britons as being “desperately overtaxed”.

It is interesting to view the tax freedom date and the comments of Mr Clougherty alongside the recent Government announcement that a review of the tax system will be undertaken with 'tax simplification' the aim. Call me a cynic but I just don't see the taxation system becoming simplified anytime soon and I have less faith that the overall tax burden on the nation will fall...

Tax Freedom Day has moved on six days since 2009, but remains less than the previous decade’s peak of 2006 when Britons needed to work until June 4 before they began working for themselves rather than the taxman.

So this means the average Briton will have to work for 149 days to pay their taxes in 2011. Every penny earned in the UK between January 1 and May 29 will be taken by the taxman to support government expenditure.

I have long maintained with my client facing work that much of my value lies in helping clients to pay less tax on their income - legitimately - and that whilst I cannot promise returns of x% or y% each year I can guarantee savings of 20% or 40%. This makes a big difference in capital needed to support income and the benefit increases over time, especially when tax freedom day moves later in the year.

Crikey! BAD News about pensions - FOR ME!

Readers of yesterday's blog would have rejoiced over the latest changes to pension legislation.

Not such good news for me as in the post today I received two annually updating technical reference books, over 1,000 pages combined, total cost to me North of £200 - much of which is now out of date.

Bah!

Crikey! - Good News on Pensions

Today, the government has given more details of how it is planning to make changes to pension legislation from April 2011.

These include:
• no specific age deadline for buying an annuity
• a cap on the amount "drawndown" annually from a pension pot by an individual without buying an annuity
• a withdrawal of this cap if the individual can prove they have enough income to never run out and rely on the state.

The level set for this cap, and the minimum income required for the cap to be taken away, will be part of an eight-week consultation on the proposals.

Regular readers and clients of Green Financial would have been aware that there was an interim measure announced in the budget that increased the maximum annuity age from 75 to 77.
Assuming the new proposals get through Parliament the new rules should be in place by April 2011.

One of the best announcements, in my opinion, was the removal for many of income drawdown limits. As long as a lifetime income of £20,000+ can be secured, there will be no limit. In effect, you’ll have to show that you won’t run your fund down to nothing and THEN go cap in hand to the state for benefits. Thus rewarding those that save a decent sum into their pension, letting them extract a level more commensurate with what they were used to during their working lifetime.

There is a sting in the tail – tax on death benefits looks set to rise to 55% from 35% thus making any kind of pension related / inheritance tax loopholes look unlikely but this is a fair trade off given the positives and the real purpose of pensions ie to provide income in retirement, not to bypass inheritance tax for future generations

It remains to be seen what the actual effect of deferring annuity purchase past 75 will be as ‘mortality drag’ may have a detrimental impact.

Mark Hoban, financial secretary to the Treasury says "The more you save for retirement, the more control and flexibility you will have and ultimately, the more you will be able to pass on to your family on death. Combined with the tax breaks available on pensions, these simple messages will be very popular with investors."
To encourage people to take greater responsibility for their financial future, including in retirement, we need to give people greater flexibility over how they use the savings they have accumulated”

I started on a positive but cynically perhaps, will finish on a slight negative. Let’s hope, unlike so much other recent legislative change, that the positive ‘headlines’ are not undermined with negative detail. More on the new proposals as the details emerge…
Ian Green

for Green Financial Employer Clients - Am I ready to NEST?

Many of my employer clients are now being bombarded with info on the impending 'NEST' pension requirements, due to land in 2012.

For most Green Financial clients, compliance with the new rules will be simple.
It will likely mean increased overall pension expenditure on employee contributions and ensuring this is factored into budgets and accounting, but the actual legislation itself should hold no fears.

Do contact me if you have any questions. Meanwhile, there is some helpful info below. I am indebted to the pensions technical department at AEGON for originating much of the following text:

For many Green Financial employer clients, so-called ‘self-certification’ (see orange text below) will be the best way to meet their employee pension contribution obligations from 2012.
But it's likely to mean reviewing the current contribution structure and making changes to scheme design. This will take time, so we need to start taking action now.

From October 2012, employers will have a number of new obligations. Not only will they have to auto-enrol their eligible jobholders (see jargon list at end of blog) at the right time, they also have to make sure jobholders benefit from at least the minimum contribution into an auto enrolment scheme.

This creates a challenge for employers. The problem is that the vast majority of ‘defined contribution schemes (such as group personal pensions or stakeholder arrangements) don't base contributions on qualifying earnings. Contributions tend to be based on basic salary with no salary offset. This means you will have to carry out onerous checking either monthly or yearly, to make sure that every jobholder in an auto enrolment scheme receives the minimum contribution. And if the contribution actually turns out to be less than the minimum, the employer has to make up the difference!

Of course, one solution to avoid this administrative hassle and complexity would be to simply base contributions on qualifying earnings. But this 'levelling down' of contributions means the first £5,715 a year wouldn't be pensionable, which means lower earners, especially women, would be worse off – not something that most employers would want to do to their valued employees.

A much simpler solution, avoiding onerous checking and reducing administrative costs, while also reducing the risk of levelling down of contributions, is for employers to self-certify each year that their contributions meet a minimum test. This is appropriate for schemes which have high total contributions. The Pensions Act 2008 allows for a process known as self-certification. This allows employers to certify with the Pensions Regulator that, overall, their scheme meets the quality test for a DC scheme. The pension industry and employer groups have worked very closely with the Department for Work and Pensions (DWP) to develop a workable self-certification model. So far the model is still a proposal, but the approach has been accepted in principle by the government.

Under the proposed self-certification model, a scheme meeting one of the following tests allows the employer to certify that it meets the quality test:

Test 1
The scheme has minimum contributions for each jobholder of 9% of pensionable pay where the employer pays a minimum 4% contribution.

Test 2
The scheme has minimum contributions for each jobholder of 8% of pensionable pay, where the employer pays a 3% minimum contribution, but pensionable pay is at least 85% of total pay. The ratio of pensionable pay to total pay can be calculated as an aggregate across the scheme.

Test 3
The scheme has minimum contributions of 7% of pensionable pay for each jobholder (where the employer pays a minimum of 3% contribution) and 100% of pay is pensionable.
Employers will need to self-certify that their scheme meets the quality test every year.

The minimum contribution will be phased in from 2012. It's expected that the self-certification test will reflect this. We expect the DWP to issue the self-certification draft guidance and draft regulations before the end of the year.

Action for Green Financial Clients

Start talking to me now about your staging date, how you’re going to comply with the new obligations and how you can meet the minimum contribution. I can help you to:

• review the total contributions level for all categories of member
• review the employer's contribution for all categories of member
• review the definition of pensionable pay against gross earnings
• draw up a plan to increase contributions using a phased approach
• find out when the employer's staging dates falls
• consider salary exchange
• consider matching of contributions and save more today
• put together a communications plan explaining the value of saving

Jargon Buster:

Eligible jobholder – employee who earns £7,336 (in today's terms), aged at least 22 years but under state pension age and ordinarily works in Great Britain.

Qualifying earnings – a band of earnings between £5,715 (in today's terms) and £33,540 (in 2006/07 terms) with proportionate amounts for a period less than 12 months. Earnings for this purpose include salary and a number of variable payments such as bonuses, overtime, commission, shift allowances and some statutory payments, for example Statutory Maternity Pay.

Staging date – the latest date an employer must start auto enrolling eligible jobholders.

Minimum contributions – 8% of qualifying earnings, of which at least 3% must be paid by the employer. Any balance is payable by the employee and will include tax relief from the government.

Quality test – for a defined contribution (DC) scheme, this is a check to see that at least the minimum contribution is paid into a scheme.

Auto enrolment scheme – an occupational pension scheme or a personal pension that meets the quality test and allows the jobholder to join without the need to make any choices or provide any information.

The above is correct as of my understanding as at November 2010. Further updates will be made on this blog as and when required.

Commitment

Combined with todays early morning motion and debate in the House of Commons, I recently read an article in a professional magazine (MDRT, Round the Table, Commit to your future) which has prompted me to write this blog post.

The article discussed how keeping pace with change requires constantly renewing commitment to clients and the financial services profession.

It occurred to me this might be another area where I undertake a lot of work ‘backstage’ but I am guilty of not telling clients and putting it ‘frontstage’.

The financial services profession is often overloaded with uncertainty. Changes in economics, legislation, tax, Government, products, providers – the list is endless.
Even I am guilty in a small way having changed my company operating name a few times over the last few years.
In fact it seems change is the only certainty.

And this is true of other professions, not just the financial world.

I see part of my role for my clients in bringing certainty, in an uncertain world, to their financial life.

I find many clients are calling for an evolved adviser. They want someone who is always learning, adapting and growing with each change to the marketplace rather than retreating.

In the House of Commons today the FSA ‘RDR’ (Financial Services Authority Retail Distribution review) was being debated, with many MPs opposed on behalf of their local IFAs. There are parts of the RDR I am opposed to – I think that unfortunately it will make it easier for the banks to sell unsuitable products to the mass market – and thus continue ‘mis-selling scandals’ – but there are giant swathes of the RDR that I am massively in favour of.

One of these is education.

Since starting as an IFA (15 years and counting now) I have undertaken Continuing Professional Development each year. I also make sure I have at least the minimum educational requirements whenever they are changed (I currently have more than the minimum) and I continue to take exams in areas I operate in (next up is the Society of Tax and Estate Practioners Trust exams in early 2011)

Commitment to Education
As an adviser I believe education is the cornerstone of continued success for my clients. Not only what is in my head but also paying large sums of money each year for access to the very best professional minds and publications available. If I don’t know the answer myself, I know a man (or woman) that does.

But it is not just education that makes a financial adviser. So here are a few other commitments that I make personally and as Green Financial.

Commitment to Expertise
There is a difference of course between the kind of experience and knowledge I am referring to and that which anyone can google. If looking for an answer that has serious consequences for a client’s finances, I know I’d rather it was coming from the mouth of an expert in the field rather than Wikipedia! Information and data are everywhere, knowledge and wisdom are harder (and more expensive) to come by.

Commitment to Green Financial clients benefit
To analyze what is working in the business and re-evaluate any areas found in need of attention
Build long lasting strategic alliances and professional connections
Assemble a team of experts and professionals

Commitment direct to Green Financial Clients
To offer a bespoke, personalised service, where ‘everyone knows your name’
To strive to exceed expectations
If it ever goes wrong, admit it, and put it right
Help clients understand how new rules and regulations affect them personally
Maintain a genuine concern for clients’ objectives (see also http://www.iangreen.com/ethics.php )
Never, ever forget that it’s your money

Commitment to my professional standing
To give back, by being an active member of local, national and international professional organisations (see future blog post for more on this)
Strive to be on cutting edge, to lead and educate, but to retain traditional values
Learn from other professional experts

Blue and Green Tomorrow - issue 1

I’ve recently been involved, as a founding supporter, in the launch of a new free magazine titled ‘Blue & Green Tomorrow’

It is a magazine for those that want the planet to be as blue and green tomorrow as it was yesterday. (see end of this post for which famous author to thank for the name)

It is NOT just for tree huggers. It is for those that make positive choices where they can, when they can. Clean energy maybe, buying fair-trade goods, ethical investing (my area of expertise), recycling at home & the office and so on.




Nothing’s perfect though, and we all know we can usually do better.
Many companies are now operating with ‘people, profit & planet’ in mind. Sadly some aren’t, they just make the right noises. Blue & Green Tomorrow is not about ‘Greenwash’, where an organisation just pretends they are doing right – and it is not about sensational headlines. It will print good news but also report on bad.

It seeks to provide relevant, interesting, informative and enjoyable news and features.




There are a few sample pages from the first edition here. The front cover, the editorial, my specialist subject ‘ethical investing’ and just to ‘bee’ different (ahem), an article on what bees are doing and what might happen if they stop doing it!











If you’d like a copy, drop me an email at iangreen@iangreen.com with your postal address and I’ll rush one out to you.

Alternatively you could sign up for the e-newsletter at www.blueandgreentomorrow.com/register

I hope you enjoy it.

Ian Green
Blue and Green Tomorrow magazine
Founding Supporter

* We're indebted to Douglas Adams for writing The Hitchhiker's Guide to the Galaxy, in which he describes Earth as "an utterly insignificant little blue-green planet". Now you know...

Banks - Treating Customers Fairly (Badly) 2

Following yesterday’s blog, about how I feel banks are not really entering into the spirit of the FSA's 'Treating Customers Fairly' initiative, just a quick follow up on bank advertising and marketing tactics.

I should be clear, I am not naïve. I understand the power of marketing and advertising as much as the next person. What irks me is the way that banks and other direct financial product sellers operate in a vacuum and in a fashion that independent financial advisers don’t.

So I am happy if they want to play in the same space as retailers and have an advertising battle a la the supermarket price comparisons (eg best interest rate rather than cheapest baked beans) but it troubles me that they seem to almost mislead with their advertising safe in the knowledge they can hide behind the ‘small print’ and wriggle out of complaints.

This year the banks have had more complaints than ever made against them over product sales (excluding anything to do with the credit crunch)

It is not that these products are necessarily bad (although some are), it is just the constant cross selling of almost anything to anyone (just like my post office gripe yesterday) who walks through their door.

So as promised, I trotted down Putney High Street, read a paper and watched a bit of prime time TV to select a few bank ads that irked me: (It didn't take long!)

TV: Halifax – radio jingle advert telling us how much they love their customers – so much so that they will give you £5 a month if you pay in £1,000 a month and have your current account with them.
Dig a bit deeper – so that is 0.5% of the £1,000. You get nothing more, for any more saved. Plus they know have you as a customer to cross sell – and they make a great deal more than 0.5% profit margin on all the other stuff they’ll now bombard you with!
But it gets better. The ad even tries to ‘upsell you’ to their ‘rewards’ account. In the background the radio is now playing ‘Lucky You’ as they tell you all the rewards you can have. Only in the small print at the bottom of the screen is it now saying you need to pay them £12.50 a month for these ‘rewards’ – Lucky You!

Newspaper: Abbey/Santander – “Earn £100 and 5% for 12 months when you switch to Santander” – little table showing how this deal appears better than 5 other banks. Doesn’t mention anywhere that First Direct, for example, will also give you £100 to switch to them! As with Halifax, no interest on anything over the £2,500 and you need £1,000 minimum. I think it would be great to just play them at their game, switch a few direct debits, pay in the money, and take the maximum £1,500 interest! Again, I don’t have a problem per se with the deal, it just irks me that ‘terms and conditions apply’ yet the adverts (press, TV, billboard) mainly show the £100 and 5% figures in giant neon numerals on top of a building. And if anyone complained about being mislead, the small print would ensure Santander would have done no wrong.

High Street : NatWest – the charter. Don’t get me started. On the one hand I applaud their intention, if true, to become the most ‘helpful’ bank. Having more branches, more branches open, longer hours etc are all things to improve what they do. But on the other hand, woolly commitments to ‘try’ a bit harder at stuff are not so impressive. Nor is the amount of volunteer days/hours they say they give when divided up amongst the number of employees and I’m afraid the NatWest in schools leaves me feeling a little cynical over whether they really are trying to help educate the nation or perhaps just be first past the post when the time comes to open student accounts?

Personal experience: three clients in the last three months have approached me saying they were going to take out a product recommended by a bank employee. Without going into the details, constant theme across all three (a high street bank, a smaller building society, a private bank) were bank employee bringing up the subject when another item was the main discussion, the investment product was complex and the complexities were not explained but boiled down to an eye catching headline (see Santander above), the product was sold as an alternative and comparable to cash but clearly is no such thing, elements of the product not at all suitable for the client (time scales, risk factors etc)

So to bring things back to the start, I don’t have an issue with the banks, or the products themselves - and certainly not the staff personally – they are just sales targeted and told what to sell – I assume they have mortgages to pay too…

It is just that clients are being shown (or worse, just told and not shown) attention grabbing headlines: “5%”, “34% over 4 years”, “no risk” and it is not the whole story.

In summary, I don’t believe the banks are being anywhere near as fair, friendly or helpful as their marketing and adverts would have us believe. But perhaps I am just naive...

Banks - Treating Customers Fairly (Badly)

Banks – Treating Customers Fairly?

The Financial Services Authority (FSA) have a long standing aim/theme named Treating Customers Fairly (TCF) for those in financial services.
Many IFA firms spend large sums of money and/or commit huge resource to ensuring that they not only act in the spirit of TCF (and frankly without that, as a small business they would wither and die anyway) but also comply with the TCF guidelines.

Yet it would appear big name banks, both private and high street, whilst outwardly appearing to comply with TCF guidelines don’t actually treat customers fairly in many ways.

This was picked up by the weekend FT (see link below) where they discussed how now even the private banks, whose traditional focus was on excellent customer service, are now simply trying to cross-sell more product in order to remain profitable, as simply having customers holding accounts makes them no or little money – or even loses them money.

So what we are hearing is that banks don’t make money by selling their core business proposition so they think it is alright to sell (often) non suitable product to their customers to make up their profits. Hardly Treating Customers Fairly?

http://www.ft.com/cms/s/2/d2bf65be-f3f1-11df-901e-00144feab49a.html#axzz1609LK54U


I have posted and discussed on a number of professional forums about the less than savoury tactics of banks and below I have copied a number of replies.
It is a shame that banks (even ignoring the current bad feeling towards them post credit crunch) have been unable to stay profitable at what they should be doing (banking)
– it reminds me of the Royal Mail. When I go into my local main post office all I normally want to do is post a special delivery parcel and get out again but the people behind the (franchised?) counter are more interested in selling me holiday money or contents insurance…

Below, my posts are labelled, otherwise they are anonymous here but were named on the original posts on professional private forums.


IG – posted Oct2010 : Banks - Private Wealth Managers?I have noticed a number of my clients have had renewed and vigorous attention from their banks recently either upselling them to a private banking service or if already subscribed, trying to sell them what are essentially multimanager portfolios dressed up as full wealth management.
A few have then attempted to (at worst) rubbish my advice or (at best) just start to attempt to undermine the client and ask questions of me.
On the one hand I am entirely open to this and welcome the opportunity for my advice and value to be queried by a third party and I am happy to stand by my advice and service.
But at the back of my mind I am thinking that the high street banks are not making money elsewhere and need to sell this type of service - thus they are throwing a lot of money at pushing these services - far more than I can ever do.

REPLIES: I have just had a simular battle with Lloyds TSB and Barclay's private banking. The client had used them for some time. The client was not aware of the cost of these services as they had never been explained to him.
"The level of personal service has never been as good with the banks as it is with me", his words not mine.
He has had a least 2 different account managers in 3 years.

REPLY: Your strength is the level of personal service that you provide for your client ,which a bank cannot provide, even though they will promise to.
Ian, knowing you as I do I would simply point to experience and excellence - have recently "won" over £3million from a Bank and their Wealth Management arm, based on doing what we said we'd do, providing a broader spread of advice than just the "product" (a perfectly fine one, but no tax considerations given) recommended by the Bank, and our reputation/ integrity, built locally and further afield over many years. Like the internet, Banks tend to provide excellent information, when what is really needed is wisdom and knowledge.

REPLY: Previously I worked in a Private Banking environment and clearly understand your point raised. It has, and still does, sadden me that Banks create the impression that they are the first and last line in administering all things financial, including financial planning advice. I have witnessed first hand the aggressive 'pitch' that these so called financial experts use to 'entice' their prey (sorry, I mean clients). I always resisted this approach and preferred to deal with my clients fairly and without bias...........obviously, taking a professional and ethical stance with my clients did me no favours when it came to hitting the ludicrously high 'sales' targets set.
I am pleased to say that I am now working as a fully fledged IFA and am happy to take on the 'might' of the banks financial advisors because, having experienced first hand the general levels of incompetence, I know that greater professionalism and knowledge will prevail through the IFA medium.

REPLY: In terms of what you can , in my mind, is quite simple. Keep being the expert financial planner you are. There is no way that these advisors will provide the levels of service, information and quality advice that you can. The one thing that is of enormous advantage to us as IFA's is that we will not grow bored of our clients. I guess it is a fact of life that we will always lose the odd client to competition but in the main, given the amount of personal and professional commitment we give to our clients, this should see us prevail.
Naturally, any clients that are lost, we should be prepared to quickly welcome them back once they have seen their serious error of judgement.

IG post – Sept 1010 A client gave me valuation sheet prepared by [High Street Bank] Financial Planning1. still lists PEPs
2. PEPs listed as owner=joint
3. ISAs listed as owner=joint
But this is the best bit - under the "valuations summary" it says:
"This information has been prepared...as part of our committment to client service and does not represent an official valuation of your investments...B******s Financial Planning makes no representations or warranties to you about its accuracy or completeness"
So, a valuation that is not a valuation, and if it is, don't expect it to be complete or accurate!


IG Post – Aug 2010: A few years back I recommended Chelsea Building Society for a client of mine for an instant access deposit account.
They had decent rates and crucially, were just down the road from the client who puts great stock in being able to walk into a branch.
Despite me sending in the forms they have continued to try to cross sell the client over the years - this is the latest! :
Remember - this is cash the client needs for instant access...
A 1 year fixed bond paying 6% (so far so good-ish)... combined with an Aviva 5 year defined returns fund - so returns dependant on FTSE100, counterparty risk, money locked away for 5 years...all for a client with low risk profile...
I have just spent 20 mins with this client explaining the above because they left the meeting with the impression it was low risk and instant access.
You can't make this up...

REPLY: Nationwide is another who have done similar things and I could name others. You recommend a client keeps money back for short term needs and emergencies and these clowns come along and stitch up the client. And it is you or the client that pays for putting it right. Then there is the scam whereby you go into the bank to improve the rate that you are currently getting having seen it advertised but you cannot get the best rate unless you meet with their branch adviser. It is then denied that this is the case when you phone in to head office.......

REPLY: Hi guys I've had this with the Halifax - I recommended a 1 year fixed rate bond to client - they provided her with an Investment Bond.
By the time I saw documentation some 6 months plus later client's plan had gone up in value but she couldn't get out without a tax charge due to income etc. She wouldn't complain as she didn't like to make a fuss.
I saw copy of SR which said nothing about it being short term monies and that Tax Planning etc not covered as client had her own IFA doing this for her!!!! Well I was until some stupid so called bank employee stuffed up what I had been doing for her.....
The staff member was not happy when I questioned why this had been done - my client thought it was instant access as he'd told her there were no exit penalties (correct - but forgot to tell her about potential tax penalties on encashment etc etc).
Next time I recommended a client did cash (same one incidentally) I went and picked up the application and completed it on her behalf and although I didn't go in with her to set up the plan advised her to say "no" to their pressure to see an adviser..... Incidentally, when I asked for the application in the branch on her behalf, they didn't want to give it to me as the people behind the counter said I "couldn't advise clients on their products, only their advisers could" I couldn't stop laughing once the red mist had disappeared!

REPLY: Hi all, a very interesting debate, and one which sadly, will go on and on until the Banks are held accountable for their aggressive sales tactics. I have, unfortunately, worked in this environment in the past and am all too aware of the strategies employed by these 'so called money experts' - said by the way in the loosest possible terms. I am pleased to say that I have now left this petty and arrogant environment behind having refused to follow their rancid code of conducting business. Like you all, our clients deserve advice with integrity and merit and only when they can be steered away from this vile culture can they truly access such advice.

REPLY: Don't you just love 'em.....clients looking for life and CIC ask Lloyds. it comes in at a competitive price, but everyone forgets to mention that it is reviewable. Luckily I manage to get to them before they sign on dotted line, and for £1 more get them guaranteed premiums and cover them for 10 more critical illnesses.
Having discussed this with someone I know who used to work for Lloyds, they said 'oh yes, they get more points towards their targets for reviewable', we were told to sell our cover on the basis that we are much more reputable than an IFA being a high street bank, even if it costs them more! it may well have been going to be put in the SL by Lloyds, but sure as hell no-one was going to bring their attention to it!!!
I just don't understand how they get away with it,

REPLY: I recall a broker consultant from one of the bailed out banks telling me that even though he had increased his sales because he hadn’t hit his target on a certain product sales he wouldn’t be getting a bonus.
This just proves that banks target specific products to the detriment of clients.

IAN: And in closing, my final bug bear, which I’ll compile a few examples of for another post is adverts showing interest rates that look comparable with standard deposit rates yet have either complex financial instruments behind them or multiple requirements that benefit the bank before you get the rate…

Ian Green wins Award

I am delighted to announce I have been named runner up in the Social Media Financial Adviser of the year Awards 2010.
http://ow.ly/i/5d8y






At the start of 2010 my social media status was really limited to the fact that I had dabbled in LinkedIn for a while but not really made much of it.
LinkedIn: http://uk.linkedin.com/in/ianjamesgreen

Then, after attending a seminar and hearing about the virtues of a ‘proper’ online presence I made it my immediate mission to improve my output.

I immediately fully updated my LinkedIn profile and in short order also created a twitter account.
Twitter follow: @ianjamesgreen
After a brief period deciding whether to split personal and business etc I settled on a style and format that matched the image I present to clients. That of a personalised,
bespoke, not too stuffy IFA.
I market my services on this basis ‘offline’ so ensured my online presence matched it.

At the same time I joined an IFA online forum (www.ifalife.com) and have contributed over the months since, both posing questions and offering solutions where appropriate. I also hope the odd jovial aside has raised a smile or chuckle amongst my colleagues.

I then commissioned a brand new website, from scratch, and have had many positive comments, mostly along the lines that it differs greatly from most IFA websites and really gives a flavour of what I do, how I do it and who I am – as opposed to just being a brochure or selling a policy online.
See my Website for yourself at www.iangreen.com

Since then I have created a facebook for business page which has also gathered positive comment (Search for ‘Green Financial’on Facebook search) and I am a consistent poster using desktop, home, iPhone and blackberry sources to ensure continuous service unhindered by my physical location.

Integration of all this, bringing it to a cohesive and useful tool, rather than just a lot of online status postings is demonstrated by, for example, me utilising foursquare.com, linked with twitter and LinkedIn to update my geographic and access status. This means clients can see where I am and what I am doing if they are trying to contact me. They don’t need to be a tweeter or on LinkedIn as the feed shows on the homepage of my website, giving access to all. It remains confidential (which I think is important) as I never disclose actual client names or places, just general info.

But from a business perspective does this activity justify itself? Is it ‘worth it?’
I have received a referral from an existing client who saw I was in a certain location via twitter and mentioned they had a friend there – thus I was able to introduce myself and develop the relationship from there.

Another client who works in the new media, music and arts world cited my online presence and activity as evidence that I was "a progressive financial adviser, aware of modern methods, providing a modern service, combined with the traditional face to face service" thereafter as needed.

In the last few months I have also been blogging which has proved very popular. One in particular (a scan and comment on a 1950’s Midland Bank booklet) was picked up by ‘This is Money’ and ‘The Daily Mail’ and was retweeted to tens of thousands of twitterers.
http://greenfinancial.blogspot.com/2010/09/1959-midland-bank-how-to-open-account.html

I’m delighted that positive feedback on my social media presence has been provided by clients, friends, peers and suppliers leading me to be nominated for and to win this award.

Boffins and odds

I recently met with a fund manager, a research analyst and an investment house representative (this is sounding like the start to a dull joke!) who were keen to foist upon me a big, glossy, heavy tome titled ‘Global Equity Strategy’.

Suspecting it was a volume more suited to a fund manager than me and not wanting to commit to reading hundreds of pages that would not add any value to my clients or my business I asked if they could give me a simple overview before I took it and agreed to digest it.

The succinct answer was “It’s a summary of a load of work done by boffins”

Nevertheless, having read it (well, most of it) I'll pass on one fact - If there are 1,894 funds to pick from, the chances of picking the best one, 3 years in a row, are 6,794,224,983 to 1

Ask the Expert - then do the opposite?

Free advice – Is it worth it?

There is much chatter amongst the financial adviser community at present of 'RDR', that is, the FSA ‘Retail Distribution Review'.
It means many things but a few of the items being legislated upon financial advisers is fee charging instead of commission and a higher level of qualification. My clients will be aware that I already have the level of qualification being set so that causes me no issues and I have had fees instead of commission as an option since the year 2000.

Some financial advisers are lobbying their MPs AGAINST RDR whereas I warmly welcome RDR.
As can be read on my website (http://www.iangreen.com/approach.php) I provide the ability to purchase as much or as little guidance and advice as a client wishes.

Two recent direct quotes from clients when asked what I do for them in terms of financial planning:
“I just point them in the right direction" or I "hold their hand from start to finish"
I offer specific project fees, investment management based fees and if requested, hourly rates for some work.

For me this approach came about when I decided (at the turn of the millennium when first setting up my own business) that it didn’t make commercial sense to have my company income dictated by a third party – ie product providers and their commission.

So RDR is due to be implemented in 2012 and until then, unfortunately, many financial advisers still give the impression that a commission generating product is somehow ‘free’ to the client. For over a decade now I have been at pains to point out to clients that even if they opt for me to be paid a commission (which sometimes works out cheaper and/or better value) it is not ‘free’. The cost simply is bundled into the product.

Which brings me to the title of this blog. I remember reading an article a few years ago by Toby Young, spectator columnist and author of ‘How to lose friends and alienate people’. He told how three times he had sought the ‘free’ advice of acquaintances or ‘friends in the city’ who were ‘experts’ in their field.
* He consulted an economic analyst regarding interest rates for his mortgage – he followed their free advice – and lost out
* He consulted a currency speculator on whether he should be paid in pounds or dollars for the rights to his film – he followed their free advice – and lost out
* He consulted a friend who specialised in securitising debt regarding an overseas deal buying a property from a bankrupt firm - he followed their free advice – and lost out.

Toby Young ended the article light heartedly saying that sharp eyed readers would notice that despite his losses he kept going back to ‘friends in the city’ for ‘free advice’. He ended by stating “The truth is, I’m too mean to actually pay a financial advisor to give me some proper advice. However, even someone as innumerate as me is beginning to realise that this is a false economy”

So if you are in the market for financial advice, don’t ‘lose friends and alienate people’ by following Toby’s example. Don’t even try to obtain ‘free’ advice from a financial adviser. Consult an adviser and pay a professional fee for professional advice. Because you’re worth it!

"We have a big deal here" - SPAM!

I just had to post this spam email I received. Hilarious stuff.
I especially like the idea of the lawyer wanting me to help 'distribute the dough'.
and remember - "We have a big deal here"


Dear Ian Green,

This letter is reaching you as it was necessitated by my urgent need to get your response. Am, Barrister Chandra Sekharan an Attorney at law. A deceased client of my with the given name Late Mr. Alexander Green, who died as the result of a heart-related clause on the 12th July, 2007. Well I have contacted you to assist me in the distributing the dough/money left behind my late client, since you have the same suffix/last name. The bank have issued me a notice to present his beneficiary or it will be abstracted/confisicated if no present deviser/next of kins, as un-serviceable by the Bank which the deposit is esteemed at, [18.042m.USD] and plead you to reply this mail (Remember we have a big deal here).

My proposition to you is to seek your consent as to present you as his beneficiary, since you have matched suffix/last with my late client, so that the tranfer will be debited to you. All I require is your honest and cooperation during this transaction. (This operation will be executed under a justified array that will shield you from many contravene of the law.)This matter will be treated privatly with absolute confidentiality as well as upmost sincerity. I look forward to your quick reply.

Best Regards,
Barrister Chandra Sekharan
(Principal Attorney)
This message was sent by: Chand Sekharan & Associates, No. 62, Jalan Perak,Taman Kolam Air, 80200 Johor Bahru. Malaysia, Taman Kolam Air, Johor Bahru 56000

Dear Diary, Friday

Friday 15th

A trip to the gym first thing makes it three times in one week – first time for a while, so start the day and end the week feeling good about that.

A round of client telephone calls this morning. The first is to obtain further details from a client who had provided basic info but not really enough for me to do my job. I do understand that for a client one of the hardest parts (and possibly boring parts) of financial planning is providing all the data.

However it is imperative that I do have everything to hand so that I can provide the best possible advice. The devil is in the detail as is often said. I am also fond of saying ‘you don’t know what you don’t know’ and this is very true in financial planning. It is easy for the law of unintended consequences to come into play with an element not thought important to a client ending up having, say, tax implications on other planning carried out.

Have an interesting conversation regarding premium bonds. I used to be a giant fan of premium bonds but nowadays the overall returns are down , the odds are of winning a prize are lower, the odds of winning a big prize are lower, as always the value purchased doesn’t keep pace with inflation… There are so many reasons NOT to have premium bonds these days but there is also something to be said for the thrill of receiving a winning cheque, even if only £50! And of course someone somewhere is winning a million. But unfortunately, fun aside, I don’t recommend premium bonds for pure financial reasons these days. It is a shame that National Savings have pulled so many of their products. In just a few short years since the banks needed propping up and savers needed to be given guarantees in once private institutions (a la Northern Rock) National Savings has gone from a wonderful institution to a shadow of its former offering.

Round off the morning with a rare (for me) business lunch with a client who works in a private members club. The food, as ever, is exquisite. I opt for the fish, aiming to be healthy but must admit to pangs of envy as my companion’s chunky chips are delivered to the table!

From here to the school run and straight off to watch my son play 5-a-side.

I hope you have enjoyed this week’s diary with a little insight as to what I do, who I do it with and where I do it.
As can be read over the last 5 blog posts, the life of an IFA (or me, at any rate) will not be making it into the pages of ‘Hello’ magazine anytime soon but I also hope you have read that I practise what I preach in that it is not all work, work, work and that a balance is needed. Being a financial planner is all very well and I love the financial, tax, insurance and investment work I do – when I am at work I work hard - but I also encourage clients to spend it where necessary, to enjoy life, to take time with their family and have their money work for them sometimes rather than always working for the money.

Dear Diary, Thursday

I was so busy last week I didn’t have time to blog.
So this week I thought I’d write up a diary of last week to give a little insight as to what I get up to, where I do it and who I do it with!

Thursday 14th

An exception to the norm today as I join the throng of commuters heading into central London. I truly could not be happier at having relocated my work base out of the City of London. The sheer additional quality of life, not to mention the time gained, by NOT commuting each day is fabulous. However, today, my Oyster card will be pushed to the limit!

From Putney to Waterloo on 'the big train' as my son used to call it and then underground. My destination is The Institute of Directors on Pall Mall to meet with a software supplier. I am currently updating my CRM system having used ACT for many years but wishing now to migrate to a ‘cloud’ based solution. This will give greater security and flexibility.

Onto the tube and from The West End straight back to SW London and a meeting in Wimbledon. The client was recommended to me by their accountant. Over the years the client has built up a number of investments, in a number of places, with a number of providers. Some have been good, some not so good and some not very good at all. Having thoroughly reviewed the portfolio (at no cost to the client – this is so they can experience my work for what it is and to see if I really ‘do what I say I will do’ – this is a courtesy I extend to all introduction from accountants or solicitors) I make my recommendations. A short big red bus bus ride shared with some college students (and without wishing to sound TOO Victor Meldrew I am sure I didn't make this much noise or mess or swear quite so much was I was a lad...) takes me to their home.

At the first meeting the client expressed concerns over the investments in that they didn’t know what they had, where it was, how much it was costing or how it was doing. They also expressed a desire to ‘simplify’ the whole situation, their desire these days (in retirement) to have a less hands-on approach with a preference for being told what was happening in a clear, jargoin free manner .

I was delighted to be able to provide that service and now the administrative task begins of consolidating the investments to bring lower cost, simplified administration and regular monitoring and management.

Jumping back onto public transport I zoom all the way across London from West to East, taking in the main line rail, the tube, and the new overhead network, to a meeting at a corporate client in Shoreditch. Today I am wearing full smart business attire which looked fantastic at my retired client’s home but looks hugely out of place in the trendy hotspot of East London (Not only does my suit mark me out as an outsider but also the use of the words here, ‘trendy’ and ‘hotspot’!)

Transport for London (TfL) seems to be conspiring against me and I have to be there by 4pm so I run the mile or so from the station to their office, in formal shoes, suit & tie and with case. Only to find their lift out of order and I need to walk up the 8 flights of stairs.
I arrive on time, just, and more than puffing lightly!

A very enjoyable meeting with the MD, helping to tidy a few pensions collected over previous employments and then a short while with a new key employee, enrolling him into the pension scheme and assisting with a few elements of generic financial advice in other areas whilst there.
Many employers engage me to perform this role, reasoning that if their key employees have access to a trustworthy, dependable, independent adviser to assist with financial matters it is a valued employer provided benefit and saves the employee having to DIY their finances in their own time (or even sometimes in worktime!)

Reversing my travel I head back East into town I have the carriage to myself for a while until we pass through the middle and continue out to the West and I am joined by the commuters heading home. Squeeze off at Putney and then walk the brief journey home grateful I won’t have to spend as much time on trains tomorrow as I have today.

Dear Diary, Wednesday

I was so busy last week I didn’t have time to blog.
So this week I thought I’d write up a diary of last week to give a little insight as to what I get up to, where I do it and who I do it with!






Wednesday 13th

A brisk bicycle ride in the darkness takes me to the gym for a personal training session before work. What might seem like a complete luxury is now something I can’t recommend enough for anyone wanting to get or keep fit or lose a little weight. I plodded along at the gym (or across fields, along roads etc) for many an hour on my own in an attempt to shape up but can honestly say the results from working out with a personal trainer once or twice a week far outstrip the cost. I packed in my central London gym membership and spend the same money on personal training locally. And the results speak for themselves (I’m told - judge for yourself with the before & after shots here!). Many clients have commented on the all new trim Ian. If you are in Wandsworth or nearby do try out www.fredfitnesswithstyle.co.uk

Once back in the office I prepared for the day’s meetings.
First up, with the founder of the firm that will be answering the phones whilst my wife is on maternity leave from Green Financial.
They have fulfilled this role before on an occasional basis but from next week until the new year will be full time.
All goes well and I look forward to Pauline and Deborah picking up the calls and passing on the messages from next week.

Then a brand new client meeting with a couple that need the basics looking after so that they can concentrate on their lives rather than using their spare time to manage their finances. This is a very normal situation for me. Much of my work is with clients who could quite easily do much of what I do for them but choose to pay a professional to do it thus leaving their own time for themselves. As I so often find myself saying it is a question of capacity, not capability.
Life insurance is a priority (to replace policies lost when leaving employment), then a tidy of investments, along with a pension review possibly with a consolidation exercise if appropriate. All topped off with a plan for going forwards.

Leave work at half past two to collect my son from school. I find a further four of his school mates in tow and we all head off to the local sports ground to play football. Collecting time arrives at 5pm and slowly passes into the past as the other dads join in for a ‘dads v lads’ game. It fizzles out as the drizzle starts to rain about an hour later with the sounds of ten year old boys demanding to stay and the ring of mobile phones with mums demanding to know why dads and lads aren’t home yet and the threats of dogs being fed the dinner. It is hard to determine if the only other sound that can be heard is the creaking of the five-a-side court door shuttingor the creaking of my knees complaining about 3 hours of football just two days after the hour on the squash court. This never used to happen when I was 19…

Dear Diary, Tuesday

I was so busy last week I didn’t have time to blog.
So this week I thought I’d write up a diary of last week to give a little insight as to what I get up to, where I do it and who I do it with!


Tuesday 12th October

An early start as I head into The City for a breakfast meeting with one of our key business/technology supplier/partners – Standard Life.

Green Financial use the Standard Life Wrap as a core part of our wealth management proposition for clients so keeping up to date with changes and improvements – and ironing out the occasional problem – is a key strategic job for me.


The time passes pleasantly and quickly eased by a delicious coffee from a small, niche, establishment you may not have heard of. If you ever notice a shop called tucked away on a street near you, do give it a go. I think 'Starbucks' might catch on…


Straight off then to the Hoxton Hotel. The location of recent client visits mean I get a hatrick of mentions on Twitter from the Hoxton Hoxbot!

Today though is an all day training course on a piece of software I use for client lifetime cashflow forecasting.

I learned a number of new things, brushed up on a few elements I was rusty on but as always, despite the course and trainer being of the highest quality I would argue I learned as much from my fellow delegates as the material itself.

Perhaps the biggest eye opener for me in using this software in recent times, given where we are as a nation economically, and why my clients consult with me on their financial planning, is the use of annuities in lifetime cashflow creation. Annuity has almost become a dirty word in some quarters but there is no doubt that for the right person, at the right time, an annuity can be key to a lifetime of income – or to put it another way, a great way of ensuring that bills can be paid for life without worrying about running out of money. But as with all similar things, they are not right for all folks at all times.
More information on how I use this software with clients is on my website at http://www.iangreen.com/timeline.php

As I cram onto the tube in rush hour to return home I consider myself thankful that I don’t have to do this everyday now that Green financial is located ten minutes from my house in Putney and make a mental note to sign up to the Boris Bike scheme to avoid the crush in future.

Dear Diary, Monday

I was so busy last week I didn’t have time to blog.
So this week I thought I’d write up a diary of last week to give a little insight as to what I get up to, where I do it and who I do it with!

Monday 11th October
Having made my son what I thought was a breakfast fit for a hard day at school, a delicious bowl of porridge with chopped bananas, I was greeted with the response that ‘he’d rather have coco pops’. Now I know how Jamie Oliver feels!

A busy retirement
The working week then began with a meeting in the Putney office with a client who recently retired from a career in banking. As with many retired clients he seems to be busier now than when he was working!
The meeting was around the ongoing management of an investment portfolio and the portfolio construction for the pension retirement income. As is usual in situations such as this we also strayed into estate planning matters. I now have a number of questions to answer and finer details to clarify before we proceed further.

Family Matters
Then a dash out of the office to the train station (anyone who is also on www.foursquare.com could track me at this point!) and to ‘Sunny Brighton’.
The pleasure of meeting a prospective new client was tinged with sadness at the circumstances. Too often tragedy strikes when we least expect it and this gentleman was dealing with a recent bereavement of a too young wife and mother to a too young family.
Despite the circumstances the time together was positive and I feel well able to help (in purely financial matters only) the family move on from what has happened and position themselves for their future.

Life is a jigsaw
Then straight back to Putney for a meeting in the office with a client that I have only fairly recently started working with. It has taken the best part of six months to unravel their previous financial position thanks to the existing providers giving almost no information on small matters like performance or costs! We have started to work out a plan to determine if they have enough money to last a lifetime. A huge part of my work is helping people to discover “How much is enough?”. With this client the pieces of the jigsaw are almost all in place but to continue the analogy there seems to be a corner piece missing. I have left them with a few questions and if the answers are positive then we’ll complete the jigsaw and admire the view – but if the answers are not as hoped we may well be scrabbling around on the floor or simply hoping to find the missing piece down the back of the sofa…

Injury Time
Monday finishes with a particularly pleasing event for me. My first game of squash for over six months, thanks to a knee injury in the spring and then tearing an ankle ligament in the summer after falling – and in case you wonder the fall was non-sports related - and also non alcohol related before you ask!
To hammer home the time that had passed my regular squash partner had no idea I had set up Green Financial as a stand alone entity and last time we played my wife and I had just had the 12 week scan for the new baby, now due any week!
The score on the night: Well, that’s not important. It’s the taking part that counts…

Planes, (Indian) Trains and Automobiles

Planes, (Indian) Trains and Automobiles




Whilst visiting Mumbai last week I took the time to look at advertising in general and financial services in particular to compare what I saw with what we are told of the ‘Indian investment story’ in the UK press.

Around Mumbai there were many street adverts for ‘luxury’ items such as perfume, chocolate, smart (if not designer) clothes and savings plans.
There were also the global city standards, such as McDonalds and there was a massive amount of mobile phone advertising. On individual poster sites and billboards as could be expected but also crammed onto every spare inch of bus stop, lampost and street vendor stalls the latest handsets and tariffs competed for attention and sales.

The financial services adverts mostly fell into one of three basics.

The first was a version of what we call unit trusts or OEICS and the Americans call mutual funds. Often referred to in India as unit plans these were focused on inward investment or infrastructure. Many funds shouted about their capacity to reinvigorate and/or build trains, bridges, roads and cities.
There is an advert above showing the T.I.G.E.R. fund from Blackrock (a familiar UK fund house, currently famed for a gold related fund). In the UK in the late 90s TIGER in investment terms was the Asian Tiger economies. In India 2010 it is The Infrastructure, Growth and Economic Reform fund. Described as “An open ended diversified equity Scheme, seeking to generate capital appreciation, from a portfolio that is substantially constituted of equity securities and equity related securities of corporates, which could benefit from structural changes brought about by continuing liberalization in economic policies by the Government and/or from continuing investments in infrastructure, both by the public and private sector.” It is typical of this type of available investment opportunity and often the wording in the advertising was in terms of ‘building YOUR India’.

On that note, the second type of financial services advert was for shares. Remember the ‘demutualisation’ and ‘privatisation’ frenzy of the 80s in the UK when building societies and insurance companies (Halifax, Norwich Union etc) became PLCs and national industry (British Airways, British Gas) became privatised? “If you see Sid, tell him”
It was similar to this with shares in companies that will build infrastructure being offered. There were also a number of sites with ‘Thank You’ adverts, congratulating the Indian Public for buying up all available stock in a certain company that would now build a bridge or dam.
Private equity ownership, either directly or through funds is definitely an aspirational ideal and with returns at a decent level as the economy grows (unlike the recent UK recessionary numbers we are seeing related to interest rates and equities)

The third and final main type of financial advert was educational and promoted saving, either through unit plans (see above), an ‘all in one plan’ the UK saver would recognise as an endowment. There were also pensions for old age. Even allowing for translation UK readers may well be charmed by the following given our more cynical minds with regard to financial services products and advertising:

For Savings: “…special plans are not plans but opportunities that knock on your door once in a lifetime. These plans are a perfect blend of insurance, investment and a lifetime of happiness”
Given the discredited nature of endowments in the UK I wonder what the FSA (Financial Services Authority) would make of a UK insurer advertising an endowment in that fashion here!

For a Pension: “Pension Plans are individual plans that gaze into your future and forsee financial stability during your old age. These policies are most suited for senior citizens and those planning a secure future so that you never give up on the best things in life.”
Again, interesting to note the focus on the individual taking their own responsibility as compared to a cultural feel in the UK of a traditional entitlement or right to state benefits. It was also fascinating to see that marketing executives in India are no more creative than their UK & US counterparts in that nearly all pension adverts show an unnaturally young looking senior couple laughing and pointing into the distance :-)

More seriously and pleasingly there were a number of adverts extolling the benefit and value in saving regularly and starting early. It seems this financial wisdom is truly global and timeless. This was super to see as one of the reasons I was invited to India and one of the subjects we discussed at the ‘best practices’ meeting I attended was how MDRT could promote the idea of its members extolling the virtues of ‘financial literacy’ in their own communities.

So I enjoyed my overview of a small slice of Indian Financial Services Advertising and it was a pleasure to see areas such as Life Insurance, which is often neglected here being promoted and purchased en mass (and remember as a nation the UK is generally woefully underinsured, a fact which I sadly see all too often when advising families that have lost a loved one).

But it will be interesting to see what happens in the future. Another of the reasons I was invited was because the UK has endured massive amounts of regulation in financial planning. Much of it needed, some of it overbearing. Developing (in the financial services sense of the word) nations want to learn from our mistakes and successes and MDRT and its global network of members wish to help.

And what about when things don’t work out like the adverts?
So far the Indian Financial Services story has been one of success, with the economy growing, more and more people saving and becoming wealthier and markets rising. I hope the Indian Financial Services profession will deal just as well with the falls in markets, the consolidation of companies and the introduction of regulation when it all surely comes as it has with the current growth and expansion.

Green Penguins?

A Green Penguin?...One of the problems I face with being 'Green' is that sometimes I am required to undertake more travel than may be strictly necessary. So one of the measures I implement is to plant a tree to carbon offset air travel.

As you can see above, Green Financial paid for a tree to be planted in the charmingly named Penguin Wood in Botany Bay, in South Derbyshire. I chose this strangely titled place as when I was in India, I visited the Hanging Gardens which overlook Mumbai and was surprised to find a litter bin in the shape of a Penguin!

Panorama, Pensions and my Pension Performance Review Service

Are you worried about the Panorama Pension news last night?
http://www.bbc.co.uk/news/uk-11452857

My clients are not.

For anyone who attended my Pension Review Seminars in 2009 the news that the Co-op have one of the most expensive plans is not news – I used data from the Financial Services Authority website to demonstrate that over 18 months ago.

Have I ever advised a client to have a Co-Op Individual Personal Pension, an HSBC World Selections Personal Pension or Legal and General's Co-funds Portfolio Pension ? – No.

Are charges one of the ways in which pensions can be worth less than you thought? Yes!

Is this the only factor? – No! Of course not, but it is one of three main factors. And over-charging on old style pensions is a problem.

It is just one of three, along with poor performance and lack of monitoring and management in line with your personal attitude to risk and volatility that contribute to under performing pensions.

Click here to read about my Pension Performance Review Service.

http://www.iangreen.com/pensionperformance.php

You’ll discover the three main factors that contribute to ‘The Under Performing Pension Trap’
You’ll also discover how I can help if you are worried this affects your pension.

I am offering a free Pension Performance Review* (usual fee £470+VAT) for any UK based pension worth over £60,000 if you mention ‘Panorama’ – just email iangreen@iangreen.com to discuss your situation with no obligation.

* Offer ends 12 noon 31 October 2010

A (short) Passage to India

Last week I visited Mumbai in India to participate in an International Practice Management Committee.

It was a brief trip – I arrived Tuesday morning and left Wednesday evening so I only had a short time to visit Mumbai and do any sightseeing. There are a few pictures above showing the city skyline, the Gateway to India and the Taj Hotel.

The whole of Wednesday was spent in the meeting, discussing global best practices for Financial Planners and Insurance Agents. The meeting was arranged by the organisation MDRT – The Premier Association of Financial Professionals.
The main focus of the work was how best MDRT can assist its members in communicating the great work they do.

My hosts were wonderful. They are shown above in the first picture (L-R) Ramanathapura S. Ramanuja, Sunil Sohoni, - along with fellow committee members Helen Jenkins and Jayne White, MDRT staff Pam Brown and the committee chairperson Radhakrishna K Shetty. Then me, Ian Green

So sadly, too short a time in a wonderful city, but happily a great meeting with lovely people.

More blog posts to follow on elements of the trip including more about MDRT and how/why I am involved (and the benefits to my clients), The ‘Green’ Aspects of Business Travel and Investing in India.

Recession or no Recession

This will be my third and final post for now on recession and related matters. A return to more positive postings is promised for October!

I wrote previously of economists I had listened to at conferences telling of a slow exit from recession, and of other more recent surveys showing that there may not be 'green shoots' after all - But with the release on 23 July of the initial figures for second quarter economic growth, it could be said with some certainty that the UK has seen three consecutive quarters of growth, bringing an end to the most recent recession.

The average length of recession in the UK has been three consecutive quarters, with a fall in economic output of just over 2%. To put the 'Great Recession' (as we shall now refer to it, Q2 2008 to Q3 2009) in context, it was the longest and deepest on record with a term of six consecutive quarters of contraction and an aggregate fall in GDP of 6.2%. It beats by some margin the notorious 1980’s recession which saw a fall of 4.7% from peak to trough.

In fact, the preliminary estimate for growth for the April to June period was surprisingly strong. The Office for National Statistics estimates that real gross domestic product increased by 1.1% compared with that of three months earlier and 1.6% on a year-on-year basis. Of course, initial estimates are often revised – they are based on only around 40% of the final surveyed data – but this surprising level of momentum in a recovery is undoubted good news. It is also encouraging that the data suggests that the economic gains were broad-based, with growth in services (1.7% year-on-year), production (1.5%) and construction (5.8%).

The outlook is not one that supports sustained strong momentum, however (remember previous postings speaking of a gradual exit from recession, not boom, nor bounce). There are fears that the coalition Government’s commitment to cutting the deficit so swiftly – combining tax rises with austere spending cuts and welfare reforms – is likely to weigh on domestic demand, particularly if the labour market remains weak. Much depends on the performance of Britain’s exporters.

Britain presently imports more goods and services than it exports (the deficit is in the region of £7–£8 billion) meaning that our trade position tends to act as a brake on economic expansion as measured by GDP. An improved export position would encourage higher growth rates.

Currently, over half of British exports are bound for the euro-zone. Looking ahead, it seems likely that continental demand will be dampened as increasingly austere measures are introduced (see previous blog post on what we might expect in the upcoming HM Treasury economic review) to combat deteriorating government balance sheets - witness the reported imminent collapse of Ireland...?

On the continent the Greek Government’s debt crisis has not yet run its course and problems persist in Portugal, Spain and Ireland. These problems have taken their toll on the value of the euro.
Sterling gained 10% vis-a-vis the euro in the first seven months of 2010. Unfortunately that has the effect of increasing the relative cost of British goods for continental purchasers.
Indeed, June and July brought some renewed strength for sterling relative to the US dollar, the Canadian dollar and the Japanese yen.

More comment on the above, as usual in our Monthly Market Commentary (for clients of Green Financial with larger sums invested) but as promised at outset, cheerier topics to come in the blog in October :-)

40% of adults in Britain worry over their personal debt

In a recent post I discussed my concern that even if we come out of recession as a nation, my fear was that behind all this was a massive level of personal debt from the days of cheap lending before the credit crunch hit (remember all those credit card applications that were posted through your letterbox on a daily basis?).
It seems I'm, not alone in worrying...


Four in ten adults in Britain (almost 19 million people) are worried about their debt, according to research by R3, the insolvency trade body.


The findings show that Londoners are the most likely to be worried, with almost half (49%) saying that they are concerned about their current level of debt.


Londoners are followed closely by those living in the North East and North West where forty-four percent of residents are worried about their debts.


For those who worry about their debt, credit cards caused the most concern (51%). Thirty-two percent of those worried about their debts were most concerned by their overdraft, with nineteen percent worried about bank loans and mortgages payments respectively.


Those living in the East of England were the least worried with just under a third (33%) saying that they were concerned with their overall level of debt. However, those in the region who do worry about their levels of debt were the most likely to be worried about credit card debts (63%). Those concerned about debt in Scotland and the North West follow closely behind, with fifty-nine percent saying that they worry about credit card debt. However, Londoners, who were most concerned about their debts overall were least likely to be worried about this specific form of debt (39%).


R3's President, Steven Law commented:

"It is alarming, but not surprising that so many people are worried about their debt. The research shows how debt has become a fact of adult life - starting with a student loan and eventually graduating to a mortgage, credit cards and loans. However, seeing debt as a way of life can lead to years of worries about financial stability. People who feel that they are struggling with personal debt should seek professional advice on managing their household budget early."

Also a concern was that the trend I discussed of housing availability and pricing slowly picking up has reversed in the last month and quarter with a raft of different, more negative figures, from a number of different organisations. More on this another blogpost.

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HM Treasury Spending Review and The Recession

It is just under a month now until the HM Treasury 2010 Spending Review.

The Spending Review is a Treasury-led process to allocate resources across all government departments, according to the Government's priorities. Spending Reviews set firm and fixed spending budgets over several years for each department. It is then up to departments to decide how best to manage and distribute this spending within their areas of responsibility.

In addition to setting departmental budgets, the 2010 Spending Review will also examine non-departmental spending that cannot be firmly fixed over a period of several years, including social security, tax credits, some elements of local authority spending and spending financed from the proceeds of the National Lottery.

Spending Reviews have been an important part of governmental planning since the late 1990s. Prior to their introduction, departmental budgets were set on a year-by-year basis which made multi-year planning more difficult. The 2010 Spending Review will cover the four years from 2011/12 to 2014/15

This year it was made more interesting as the Government launched the Spending Challenge website to give us – The Great British Public - the opportunity to shape the way government works and to help get more for less as they attempt to tackle the GIANT deficit.
The response was quite big: over 100,000 suggestions, including more than 44,000 ideas from the public.
The Spending Challenge website is now closed and the theory is that the powers that be can investigate the ideas in further detail to see which can be taken forward in time for the Spending Review on 20 October.

At the same time we have the political ‘conference season’ kicking off.

So in advance of this I thought I’d summarise a few of the key themes, comments and ideas I have heard relating to the spending review, the recession and the economy in general in recent weeks at financial conferences I have attended.

We are all aware by now that we have been in an economic recession in recent times, ever since the credit crunch.
It has been said the technical definition of a recession is typically defined as a decline in GDP for two or more consecutive quarters.
I prefer to say a recession is when even those who had no intention of buying stop paying!

The average recession in the UK (as measured above) has been 5-7 quarters. Currently we are in qtr 6 of this one.
At the moment it is popular to discuss whether we will be having a plain old ‘U’ shaped recession or the worse ‘W’ shaped double dip recession.
I met an economist so pessimistic he was predicting an ‘L’ shape!

But on a more serious note, it is always instructive to remember that someone’s expenditure is someone else’s income.
And the Government are still spending (although how much that will reduce by we will see clearly on 20 October)
The previous Government (and this is fact, not political comment) spent 155 billion (that’s a thousand million) MORE than they collected in tax in one fiscal year.

Our current Net Debt (as a % of GDP) was forecast at 75% for 2013 by Chancellor Darling in his last days. 40% is what is reckoned is a sustainable level. Anything over 40% and basically the next generation has to bail us out.
So nationally (as we are all aware) we are in trouble.

Interest rates are currently 0.5%. They hit this low in April 2009. It is the lowest in over 300 years, since records began. And we have become accustomed to it. But how soon we forget. It was actually only March 2008 when interest rates were at 5%
The Bank of England Monetary Policy Committee meet each month to set the rate. They haven’t done anything since April 09 and I don’t see them doing anything soon (what a great job, they must just spend the 2 days drinking tea and eating biscuits!)

Someone with a national average mortgage of £150,000 owing, is £4,000 a year better off now than 2.5 years ago.

So will we lift out of recession or is it, like low interest rates, here to stay?
Well, there are some positive indicators. Generally, in surveys, confidence is up across manufacturing, services and construction.
House prices and mortgage approvals are VERY slowly increasing. It is a slow improvement but it appears to be off the floor where it has been slumped in recent times.
Retailers that have spent the last year running down stock are now starting to spend to restock (remember that earlier line, someone’s expenditure is someone else’s income)
Export growth is starting.
So this points to a slow recovery – at a modest rate – which is good as we should try to avoid a bounce, or a boom.

The economy, as a whole, dropped in size by 5% in 2009. This year 1.2% growth is forecast so again, not brilliant, but better than it was. Remember we ideally need a growth rate of 2.5% for ‘business as normal’ with a generally healthy growing economy.

So far , so good. But let’s remember back to BEFORE the credit crunch and recession. Back to the days when you couldn’t open your front door when you returned home due to the giant pile of offers from loan companies and credit card companies pushing cheap credit.

This is where I think we still have pain to come. At the time it was popular in the financial press to talk of the Personal Debt issue in Britain. The consumer debt total was reckoned to be £1.5 TRILLION.
To put this in perspective the total UK economy is only £1.4 trillion.

So we have a vast ‘debt overhang’ to deal with as a nation. Why mention this in a piece about Govt spending? Because whilst the focus is on Govt spending (or what they won’t be spending) to get the economy going, it is worth remembering that in 9 out of the 11 years before the recession 2/3 of all spending was consumers. This is equivalent to 2% of the 2.5% growth we saw as a nation in those years.
The AVERAGE debt in the country represents 19 months pay.
The AVERAGE is 160% debt to earnings ratio.
(that said, do remember average is meaningless in this context. You could argue someone with their head in an oven and their feet in a freezer is, on AVERAGE, comfortable!)

Consider this – if you are one of the people with no debt, or at least less debt than equates to 19 months pay, what of those with above average debt?. There are some big personal debt problems stored up out there and when the cheap credit ends (ie loan deals or credit cards taken out in 2007) there will be issues.

What will these people do? Currently consumers are not borrowing - and/or banks aren’t lending – depending on your viewpoint.
The cost of food, energy and utilities is on the up.
And the debt overhang, for many people, is still there in the background.
So discretionary expenditure, the nice things in life, will be under pressure.
There are short term sticking plasters around (“buy a big new flat screen TV now before VAT increases”) but these are just sticking plasters, not cures.
Remembering back to the election, and again thinking of the upcoming spending review, a big issue has been public sector spending.

But some people (probably conveniently in the case of politicians!) forget that the issue is not really how much debt you have, more, what does it cost.
As a consumer, it could actually be worse to have a small mortgage when interest rates are high (remember 15%+ in the 90’s) than a big mortgage when rates are low.
This principle applies to Governments too. The John Major Govt had higher interest rates than now with lower public spending but actually the overall cost as a % of the GDP was higher.
We had ‘QE’ (or printing money) to the tune of £200 billion but we are still debating whether companies and individuals are not borrowing or if it is the banks not lending.

So we really need to hear what is announced in October to see what will really happen. However, even if the Govt hit all their targets when we get to 2015 there will still be a VERY big debt.

Of course some cynics say that if they make it sound worse than it is now, they can take the credit when it gets better sooner!

Interest rates look like they will stay low for a time yet, perhaps edging up (or is it doubling!) to 1% early next year and maybe getting to 2% by late 2011.
But as interest rates are still less than inflation it remains a stimulus to activity rather than saving.
As before, not great, but better than a year ago.

So when do I think the recession will end, whatever happens in the spending review?
I say with absolute conviction…around half past ten.