The Retail Distribution Review (RDR)

On 1 January 2013, the Financial Services Authority is changing the rules about how financial advisers describe their services and the way consumers pay for them. These changes are commonly known as the ‘Retail Distribution Review’. At the end of this post is the FSA consumer leaflet for your further information.

You’re likely to hear more about this in the media over the next few months – I’ve mentioned it in previous correspondence and I wanted to make sure you heard about it, in full, from me first.

What the new rules mean

Whatever you may hear, these changes do not mean that you’ll have to pay any more in the future for our services or the products we recommend. The new rules are designed to make sure it’s clear what services financial advisers offer, how much we’ll charge you, and that you formally agree to all of this before we give you any new advice.

We’re not planning to make any major changes to either the services we offer, or how much you’ll pay for them because we already explain our services and how much they cost before we start work for our clients.

Therefore our relationship with you will not change in the future.

There’s no need for you to take any action

As you can read on the graphic below, I already provide a service entirely compatible with the new format (and have done for years and years), I hold the necessary qualifications for the business I advise on and I have a statement of professional standing in good order (see below).

Communications from providers

You may also hear directly from your product providers over the next few months. The changes to the rules and how financial advisers operate means they’re likely to make some of changes to their products, especially the older ones.

I should be notified of any changes providers plan to make to your products, so there’s normally no need to tell us if you receive a letter. But if they’re making changes that impact you and you have any concerns please get in touch straight away, I’ll be happy to clarify anything.

Making better financial decisions

What matters is that you do get in touch with me if your plans or circumstances change. Whether there’s been a major event in your life, or you’re reconsidering your plans for the future, we’re here to help you make the right decisions to help achieve your financial goals.

Making the right decisions today can make a huge difference in the future.

Below is the FSA (Financial Services Authority) consumer guide that I enclosed with the letter
 

Pensions as food?

Today I've had my eye on pensions and food after @GHLumsden posted a piece suggesting ISAs were like fish 'n' chips. He's now comparing pensions to kebabs (?! - you can view here : http://citywire.co.uk/money/how-pensions-work-and-why-theyre-like-kebabs)

Later today whilst reading the professional press I noted Andy Zanelli of Axa saying "Advising on pensions is like peeling an onion. As you peel off the skin it starts to get painful and by the time you have chopped, sliced and diced, the eyes are really stinging and full of tears"
As an IFA, I know the feeling Andy.

Axa Andy's quote reminded me of seventy-year-old Eletharias of Greece. I saw him on the news last month collecting onions from some wheelie bins.


Since the euro crisis he says he cannot afford to go the supermarket any more, so for the past few months he has started rummaging for food in dustbins. He goes out in Athens at night so that no one sees him.
"Since my pension was cut, I can't buy food so I look through the garbage," he said.
http://news.sky.com/story/20186/families-crumble-in-greeces-economic-crisis
 
Just a few days ago NEST, the new goverment designed compulsory pension thingy showed the results of a survey : Food, fun and football? ... why ‘Tomorrow is worth saving for’
The survey suggests that low confidence, rather than unwillingness, may be one of the main reasons for people not saving enough for their later lives.
http://www.nestpensions.org.uk/schemeweb/NestWeb/includes/public/news/Food-fun-and-football-NEST-asks-consumers-why-Tomorrow-is-worth-saving-for.html
The majority (71 per cent) agree they may not have put enough aside because they don't want to make the wrong decision about saving for retirement, whereas nearly half (47 per cent) agree it’s because they don’t know enough about what would be their best option.

Here's a final sobering statistic that I calculated myself. If you retired at age 60 and ate a Happy Meal 3x a day (say £3 for the McMeal) and you lived for 25 years, even without inflation, that would be over £80,000 you'd spend on food. From a taxable pension income that means a fund of £100,000!
http://www.mcdonalds.co.uk/ukhome/more-food/happy-meal.html

So if you have aspirations to live happily ever after, but eat more than just happy meals, do visit your retirement planning. Perhaps even consider allowing Green Financial to assist ...




 

TP - No conflict of interest for Green Financial

Green Financial have been offered shares in a piece of software we use as a wealth platform and back office for clients.
We have rejected the offer and elected not to participate in order to avoid any suggestion of conflict of interest. Green Financial place independence and doing the best possible job for our clients at the heart of everything we do.

The shares were offered in return for placing business on the wealth platform element. It has nothing to do with the back office or client facing site. As you can read below, technically it appears there would be no legal conflict of interest. Green Financial recognise that TP is a great piece of software as a back office and client site system and the wealth platform element has much to recommend it to many clients. But not all clients. We will continue to only recommend TP as a wealth platform if we believe that is the best solution for a client.
We will NOT receive any shares or inducement for placing business on it.

We asked TP if they thought this represented a conflict of interest. Their response included:

“…whether a conflict actually exists when the units being offered represent no current or real value and are issued within a trust of a non-authorised entity, True Potential LLP, which is a completely separate legal entity and has no bearing or influence over the regulated Platform nor over the advisers giving advice to their clients.


The actual rules state that for the purposes of identifying the types of conflict of interest that arise, or may arise, in the course of providing a service and whose existence may entail a material risk of damage to the interests of a client, a firm must take into account, as a minimum, whether the firm or relevant person directly or indirectly linked by control to the firm:


1. Is likely to make a financial gain, or avoid a financial loss, at the expense of the client


2. Receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service


What is important here is identifying the risk, loss or damage to your client – if the platform is suitable for your client then there is no loss or disadvantage and in turn no conflict.


Furthermore the FSA guidance states that the circumstances which should be treated as giving rise to a conflict of interest covers cases where there is a conflict between the interests of the firm and the duty the firm owes to a client or between the differing interests of two or more clients to whom the firm owes in each case a duty. It is not enough that a firm may gain a benefit if there is not also a possible disadvantage to a client or that one client to whom the firm owes a duty may gain or avoid a loss without there being an associated possible loss to another such client - this guidance means that if there is no loss to a client or no client loses out as a result of another client being placed on the platform then there is no conflict."

It is worth noting another wrap platform we used recognised our excellent quality and volume of business by offering a 0.05% benefit. Rather than take this money we passed it on to all client accounts as a discount and it is disclosed on literature when it benefits a client.

Green Financial continue to believe that our remuneration should be based on the agreements between you the client and us for the work that we do for you.


We will remain independent and will not accept money or shares for placing volumes of client business with a provider.

A big THANK YOU to my clients

Green Financial is a small business, family owned and run, that provides a personal service to a limited number of clients. Recently, I needed to say Thank You and wanted to make the five thank you gifts something more than a branded freebie.


Background
In April 2010, I decided to relocate from working in the City of London to nearer home in Putney. This was so that when my new child was born (now aged 6 months) I would no longer need to spend a number of hours each day commuting, with the attendant stresses of dealing with Transport for London(!) and that time could be spent being a husband and father – whilst still maintaining or even increasing the hours worked on looking after my clients.

Part of this process involved the re-registration of my financial services licence with the Financial Services Authority, a process that normally takes six months but I proudly achieved in just three. Green Financial Advice was born about 6 months before my new daughter. Whilst most clients see our relationship as dealing with me personally, the formation of a new company also meant I legally needed to write to all clients to ensure they were happy to continue to deal with me via that new company name. Additionally, later in the year, as part of my annual International Standards certification process (I was one of the first thirty advisers in the UK to be accredited as ISO22222, Personal Financial Planner, compliant) it was suggested I place on record confirmation from all clients of their intentions to continue to deal with me personally for each of their existing financial plans or products.

This was quite an undertaking with many people to write to, covering almost three hundred different policies. I was delighted that the response rate was 93%.

When writing I acknowledged that most clients would send back the paperwork anyway with no incentive to do so, but I wanted to say thank you for taking the time and trouble to assist me in complying with my administrative requirements.

Charity Thank You

At Green Financial we have been supporting the work of The Royal Hospital for Neuro Disability in Putney. It is a national charity (www.rhn.org.uk Reg No 205907) providing assessment, rehabilitation treatment and care for adults with profound and complex disabilities caused by disease or damage to the brain. I was delighted to make a donation of £250 in the name of Green Financial Clients to the RHN

Client Thank You

here goes...

First ‘out of the hat’ was a client in London. They have a young child so I thought a money box would be appropriate, especially as I had seen this: Not a piggy bank, but a herdy bank! Made in bone china in Staffordshire’s potteries, almost in Green Financial green and with the slogan ‘Why should pigs have all the money?’. I hope it is enjoyed and brings smiles and prosperity for many years to come.





Next up: As the communication had been about letters, what better thank you than a Scrabble themed gift (geddit!?). Two clients in Hampshire and Berkshire have a scrabble mug and a set of scrabble coasters on the way.

As mentioned above, one of my main reasons for moving was to avoid commuting. When I saw a charming book about a pet that hit the news in 2009 after it took to commuting on a bus every day I hoped it would be just right as the fourth gift for an animal loving client in Oxfordshire.

Fifth, finally and by no means last, back to London with a local client in Wandsworth. Echoing my journey, they too used to work in the City so I trust the book below is of interest to them. It is a giant fold out panorama (many, many feet long when extended) that photographs the North bank of the River Thames all the way from Kew to Canary Wharf.

So there we have it, a big THANK YOU again to all my loyal clients, it truly is my pleasure to work with you and I look forward to Green Financial being of service for many more years to come.

FYE Tips - 5.5 Reasons - ISA

5 and a half reasons to use your ISA allowance before April 5th 2011

This is not intended to be a political statement. As with all my blog posts professionally I remain neutral. Of course I have a personal political point of view but that has no place here.

But have you, like me, noticed that the Government is getting better at taking our money off us?

With taxes rising and inflation eating into the purchasing power of our salaries and savings there has never been a better time to take advantage of one the easiest and arguably most generous tax break of all – investing in an ISA (Individual Savings Account)

Still not convinced? Here are 5 reasons to use your ISA before April 5th this year:

1. Avoid Higher Taxes
More and more of us are being caught in the higher taxation net. No matter what individual tax seems to go down, the overall tax burden is continuing to rise. The so-called ‘tax freedom day’ when we stop contributing to Govt coffers and start to keep our own money (see http://greenfinancial.blogspot.com/2010_12_01_archive.html) is getting later and later in the year – This year it is May 30th.

The Government’s stated desire to take increasing numbers out of the tax system altogether by raising the personal allowance (They are aiming for the first £10,000 everyone earns to be tax free) has come at a price. It is being paid for by those who would have been at the top end of the basic rate tax band but have now tipped into the ranks of the “higher paid” (even if bringing up a family on £40,000 or so doesn’t exactly feel like the high life!).

For those fortunate or hard working enough to earn over £100,000 the personal allowance is progressively taken away until at about £113,000 there is no personal allowance at all. So if you earn over £150,000 half of your earnings go straight to the government. All earners are about to pay another 1% a year on National Insurance (surely now just income tax by any another name!). I could go on

2. Save More Tax Free
The ISA tax break is actually getting better.
Having been increased to £10,200 last year, the annual allowance is due to rise by the rate of inflation in April to £10,680. That means that a couple can put aside more than £21,000 a year between them completely free of further income tax and with no capital gains tax to pay - ever. Mixing both cash based and shares based ISAs means that for most people the ISA allowance, coupled with the £50,000 a year that they can put in their pension each year, means they don’t need to worry so much about tax on any of their short, medium and long-term savings.

3. Use It or Lose It
If you choose not to take advantage of it by 5 April you can’t roll it over into the next tax year. Many people have built up really sizeable pots over time – At Green Financial with have many clients with six figure plus ISAs
We have many more clients with far more modest amounts gradually accruing via the discipline of regular monthly savings. But if you miss the opportunity there is no going back.

4. Flexibility
Sure, Pensions are great, they have their place in long term saving and the upfront benefit of tax relief on contributions is especially attractive to higher rate taxpayers (and even more so to those paying the top rate of 50% income tax). But there is a price to pay for the tax relief uplift and it is that your money is locked away until at least the age of 55 … and even then there are restrictions on what you can do with your money … and you pay tax on the income you earn from your pension pot. With an ISA there’s no upfront benefit but there is also no additional tax to pay ever again … and there’s no restriction on when and how much money you can take out of an ISA. For some this freedom is the difference between starting to save and not. ISAs are flexible in other ways too. You can shelter most forms of savings and investments in an ISA. With some limitations, you can mix and match cash and stocks and shares and funds (including property funds) within the ISA tax wrapper. If you don’t know where you want to put your money and are still deciding whether to go the ‘DIY’ route or to seek fee based professional independent financial advice then a ‘cash park’ type ISA could be a good stopping off point while you make up your mind.

5. Avoid CGT
Some people say that ISAs are not really all they are cracked up to be, especially for basic rate taxpayers. It is true that most people never exceed the £10,000 or so of CGT (capital gains tax) we are all allowed to incur each tax year before we are liable for tax. But you only need to accumulate a £100,000 pot for a 10% annual return to tip you into tax-paying territory. Steady saving and a tail-wind from the market could easily get you there but if you have not bothered with the ISA tax wrapper in years past you cannot rewind the clock later on. When CGT was just 18% that might not have seemed such a problem but at 28% it is much more of a consideration and who knows where it might go in future.

5.5 And finally … One of the best things about the use it or lose it ISA allowance is the way that around this time of year (often referred to as ‘ISA season’) it forces us to be disciplined about saving over time. The astute investor can, over time, benefit from the phenomenon known as ‘pound cost averaging’ – see http://greenfinancial.blogspot.com/2011/02/pound-cost-averaging.html)

Whether month by month or viewed as year by year, what this means is that we are obliged to invest in the market in all phases of the investment cycle and so we benefit from buying when markets are depressed and when, left to our own devices, we might shy away from committing ourselves.


So there we have it, five and a half reasons to use your ISA allowance before April 5th 2011.


The required small print: Please don’t take this article as personal or specific financial advice. It is intended to be guidance only. The value of any tax break will depend on your personal circumstances. Tax and the associated laws are subject to almost constant change. This is correct as at the time of writing. E&OE. If you are in any doubt as to whether this information is of benefit to you please seek independent financial advice, ideally fee based. Please remember if you invest in stocks and shares the value of your investment can go up as well as down. Other elements such as currency exchange fluctuations could affect the value of your investment. If you have property based investments you may not be able to sell when you wish to realise your funds. Past performance is no guarantee of future returns. If you invest in cash based investments inflation may erode the purchasing power of your savings.

Green Financial in the press- RTT mag

Green Financial in the press

Social Media article

MDRT Round the Table magazine, March 2011

Directions to Green Financial , Erico House

Directions to Erico House

From East Putney Tube (on District Line)
Exit station, turn left and walk under the bridge.

Keep walking, cross Carlton Drive, pass the VSO office on your left, Erico House is the next building on your left

From Putney mainline Rail Station
Exit station, turn left and walk to the junction
Keep on the same pavement, turn left past Foxtons estate agent
Keep walking past the numerous other estate agents, past HSBC bank and past Virgin gym until you reach Wallace & Co café.
Just past this is a crossing point on the main road.
Erico House is directly opposite

If you reach and cross Oxford Road or the Prince of Wales gastropub you have gone too far














Parking
There is no parking onsite, but outside the building is a layby with 1 hour parking
If more than 1 hour is required metered parking is available in Carlton Drive and the roads leading off it.

Blue & Green Tomorrow - Feb 2011

February issue of Blue and Green Tomorrow Magazine

Contents include a map of the UK showing where individuals who consider themselves 'socially responsible investors' reside

Travelling to Europe?
Can the plane beat the train when considering the strain?

And much more











Full details at www.blueandgreentomorrow.com or email me for your free copy

Ian Green Tube Advert

Just a bit of fun - Me, on a tube advert!