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the newsletter from carbon financial partners limited

Act now to keep your money from taxman’s clutches

Spring newsletter 2014

inside this issue: STOP PRESS: Major UK financial services industry award Page 2 Investment philosophy supported by Nobel Prize Page 3

By Nicola Coates, Financial Planner Time is running out to sort out your finances before the end of the tax year on April 5. It’s worth taking time to go through this Carbon checklist which could help save you thousands of pounds.

Have you checked if you will hit the Lifetime Allowance (LA)? This is a tax allowance that limits the amount of tax benefits across all of your registered pension schemes (including any company pensions) over your lifetime. The value of the LA is reducing at the end of this tax year – from £1.5million to £1.25million in the 2014-15 tax year.

With some simple steps, we can help protect more of your money from taxation during your lifetime and leave more for your beneficiaries. Full use should be made of allowances for Income Tax and Individual Savings Accounts (ISAs), plus your pension arrangements should be scrutinised regularly. Steps should also be taken to minimise the impact of Inheritance Tax and Capital Gains Tax. Checklist Have you made maximum use of your personal allowance for Income Tax? Your personal allowance is £9,440 for the 2013-14 tax year. If married, check how much Income Tax you are paying as a couple, as there are often savings that can be made. Have you maximised your ISA allowance? ISAs allow you to save money free of Income Tax and Capital Gains Tax - £5,760 into a cash only ISA and £5,760 into a stocks and shares ISA, or £11,520 into a stocks and shares ISA.

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Each time you take benefits from your pensions, the value of the pensions benefits must be tested against (and will use up part of) your available Lifetime Allowance. Have you topped-up your pension? This tax year, individually we are all able to contribute the lower of £50,000 or 100% of salary (both employee and employer together) and gain tax relief. This threshold is set to be reduced in 2014-15 to £40,000. Using carry-forward rules and something known as “pension input periods” we can often increase the level of tax relief available if you are in a position to afford contributions in excess of the £50,000 threshold for this tax year. You can also make contributions for your children and non-working spouses of up to £3,600 (i.e. £2,880 net of basic rate tax).

Investment Adviser of the Year Professional Adviser Awards 2013

If the value of the benefits you take from your pensions are more than the remaining LA, a Lifetime Allowance tax charge of 55% will normally apply to the excess amount. Have you considered Inheritance Tax (IHT)? We all can own assets up to the value of £325,000 on death, without suffering IHT at 40%. More families are being caught by the IHT rules, but there are many ways in which this tax can be reduced through careful planning.

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the newsletter from carbon financial partners limited

More qualifications success

By Gordon Wilson, Managing Director

Major award for Carbon Carbon has just triumphed at a major UK financial services industry awards event for the second year in a row. It was named Adviser Firm of the Year for Scotland at the Professional Adviser Awards 2014 in London. At the 2013 event, Carbon was recognised as UK Investment Adviser of the Year. The Professional Adviser Awards celebrate excellence and achievement in the financial services industry.

L-R: Barry O’Neill, Paul Gibson, John Bell and Richard Wadsworth Carbon is unquestionably in the top flight of UK financial planners when it comes to individual qualifications. Four of our chartered financial planners have now achieved the highest qualification awarded by the Chartered Insurance Institute - Fellowship of the Personal Finance Society. John Bell has just become a Fellow, joining colleagues Barry O’Neill, Paul Gibson and Richard Wadsworth. Just 1,560 or 5% of the 32,690 retail investment advisers in the UK are Fellows and fewer than 4,000 or 12% are chartered financial planners. Of the 11 financial planners in Carbon’s team, seven are chartered with others working towards achieving chartered status and ultimately Fellowship. The team is also encouraged to achieve professional qualifications through the Institute of Financial Planning and this has resulted in seven achieving certified financial planner status - an internationallyrecognised qualification. Richard Wadsworth is also a Fellow of the Institute of Financial Planning. So many high-level qualifications among a team this size may not be equalled by any other firm in the UK. Becoming a Fellow of the Personal Finance Society or the Institute of Financial Planning is the pinnacle

in terms of financial planner qualifications. Achieving Fellowship is a truly outstanding achievement and especially for John Bell, who raced through the 13 exams required to become our youngest Fellow by quite a distance! He joined as a graduate trainee and very quickly established himself as a key member of the team. John’s specialism is retirement planning and investment. He enjoys nothing more than being presented with a really technical case involving the likes of Self-Invested Personal Pensions, Small Self-Administered Schemes and property or share purchases using pension schemes. The prestigious qualifications gained by members of the Carbon team are good news for clients as it shows they have a level of knowledge perhaps unrivalled by any other firm. Clients should have the confidence that the standard of advice is therefore among the very best available anywhere. Qualifications success for Carbon staff and the national honours which continue to come our way underpin the quality and professionalism to be found at the firm. We are not complacent however and we will continue to work hard to raise our standards, increase our knowledge, and hopefully win a few more awards! Gordon Wilson can be contacted by e-mailing: gordon.wilson@carbonfinancial.co.uk

Investment Adviser of the Year Professional Adviser Awards 2013

Carbon’s Investment Director Barry O’Neill said: “To come away from the Professional Adviser Awards two years in a row with a top honour is a fantastic achievement. Competition at these awards is always fierce. “The judges commented that we are the benchmark for excellence. It is great to hear such glowing independent recognition of the business. “The honours which continue to come Carbon’s way are a ringing endorsement of the quality of the team and the quality of advice we offer our clients.” Carbon Managing Director Gordon Wilson added: “The Professional Adviser Awards recognise the very best of the UK financial advice industry and to win back-to-back awards is terrific.”

< Continued from p1 Have you checked whether you have or can reduce your liability to Capital Gains Tax (CGT)? CGT is a tax charge which arises from the disposal of assets, such as shares or investments, buy-to-let properties, etc. Our individual annual allowance for CGT is £10,900. CGT is charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers and any capital losses can be carried forward and offset against future gains. Please don’t hesitate to get in touch if you would like to discuss any of these points in more detail or would just like an annual check-up. Nicola Coates can be contacted by e-mailing: nicola.coates@carbonfinancial.co.uk

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Spring newsletter 2014

Investment philosophy supported by Nobel Prize By Barry O’Neill, Investment Director Carbon was delighted to see “father of modern finance” Professor Eugene Fama jointly awarded the 2013 Nobel Prize in Economic Sciences. The relevance of this to Carbon clients is that its portfolios incorporate much of his highlyacclaimed work.

EMH asserts that stock prices reflect values and information accurately and quickly, meaning that it is difficult if not impossible to capture returns in excess of market returns without taking greater risk. It also asserts that investors cannot identify superior stocks using fundamental information or price patterns.

Carbon’s investment philosophy is grounded in academic output from the economic sciences, making its approach more robust than many of its competitors who prefer instead to base their portfolios on what they see when they gaze into their crystal balls.

The Carbon portfolios were built using these and other key pieces of academic research. Its portfolios are hugely diversified and it shuns active stock-picking and market timing as a method of trying to achieve market-beating returns because academic research proves that it simply doesn’t work.

One key principle which drives Carbon’s investment philosophy is that “markets work; don’t try to pick shares or managers, just diversify”.

Instead, as a result of EMH and another academic paper by Prof Fama and his colleague Prof Kenneth French from 1993, Carbon favours holding more of the assets with higher expected returns than the broad market. These are the shares of smaller companies and “value” companies - those whose accounting valuation is worth more than the value of the outstanding shares in issue.

Carbon continually challenges the advocates of active fund management to produce evidence in support of their approach, but sadly is still waiting. Until Carbon is presented with any evidence that traditional active management works, then the firm will continue to base its investment decisions on the most robust academic evidence available to make sure its clients receive the greatest return from the asset classes they are invested in.

Not only did Prof Fama’s work further the general understanding of how investment markets work, but it was also instrumental in the foundation of

Barry O’Neill can be contacted by e-mailing barry.oneill@carbonfinancial.co.uk Twitter: @CarbonBarry

This has its roots firmly in two ground-breaking pieces of academic research carried out by Prof Harry Markowitz in 1952 and Prof Fama in 1966. Prof Markowitz won a Nobel Prize in 1990 for the contribution he made to our understanding of how risk can be reduced by diversifying a portfolio, while Prof Fama developed the Efficient Market Hypothesis (EMH).

Eugene Fama one of our major investment partners, Dimensional Fund Advisers in 1981, which now manages around $338billion of assets worldwide.

Cycling event for charity Carbon financial planners Stephen Rowntree and Richard Wadsworth are to cycle between all four of Carbon’s offices for charity. They set off on Friday, May 23, on their three-day challenge in aid of the Aberlour Child Care Trust. The 200 mile-plus event begins in Aberdeen and then takes in Perth and Glasgow before finishing in Edinburgh.

Gordon Wilson at the wheel Sharp-eyed clients may have noticed two of Edinburgh’s black cabs are now carrying Carbon branding.

Carbon Managing Director Gordon Wilson said: “Taxis are an effective and fun way of raising our profile in Edinburgh.

The firm is keen to promote its Investment Adviser of Year 2013 win and hopes the striking orange and black liveries will help to get it noticed.

“If you see a Carbon taxi, please tell us and even better send us a ‘selfie’ with the Carbon cab and we might even include your photos in the next newsletter!”

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Investment Adviser of the Year Professional Adviser Awards 2013

The pair said: “We are looking for other cyclists to join us, either for the whole route or part of it. The final leg, from Glasgow to Edinburgh on the Sunday morning, will be a route of about 50 miles, with a couple of stops on the way, and we hope we’ll be joined by a reasonable number to cheer us home.” For more details, e-mail: stephen.rowntree@carbonfinancial.co.uk or donations may be made online at www.justgiving.com/CarbonFourOffices


If you have any questions arising from the newsletter or if you have any other financial questions for our team of experts, please e-mail Alison Whyte on alison.whyte@carbonfinancial.co.uk or call any of the offices. Carbon Financial Partners Limited 7 Queens Gardens Aberdeen AB15 4YD

61 Manor Place Edinburgh EH3 7EG

3 Atholl Place Perth PH1 5ND

T 01224 619215 F 01224 626227

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To register your interest in receiving future issues of Carbon Copy please e-mail enquiries@carbonfinancial.co.uk

Fast-growing Aberdeen operation By Paul Gibson, Financial Planner The Aberdeen office of Carbon is one of the fastest-growing parts of the business. The city is booming and there is a real need for our services. The firm is very different to our competitors and that is why it continues to win new clients. Carbon is proud to say it is the only firm in Aberdeen which has achieved both chartered status, and accredited financial planner status with the Institute of Financial Planning. Only two Scottish firms can boast these credentials. Carbon has just been named Adviser Firm of the Year for Scotland, was UK Investment Adviser of the Year 2013 and was a finalist in the UK Chartered Financial Planners of the Year Award (Corporate) 2013. The firm occupies a position at the very top of financial planning and investment advice in the UK. Since the introduction of new regulations in January 2013, many of our competitors have chosen to become restricted advisers, limited to recommending certain products or product providers. Large competitor firms such Towry, St James’s Place, Coutts and Brewin Dolphin all now sit in the restricted camp.

Other office news Keep up to date with our latest news on:

Carbon has retained its independent status so can provide unbiased and unrestricted advice with a focus on financial planning, not products. This freedom allows us to provide the very best advice especially to clients with more sophisticated circumstances or who have larger sums to invest. Carbon’s award-winning investment process is a constant talking point. It has won new clients from most of the big household names based on its portfolios delivering higher returns at significantly less cost. The competition remains wedded to traditional active fund management which is extremely costly and which routinely fails to deliver any value whatsoever. Traditional active fund management has recently been likened to flying a plane with one engine on fire! When comparing investment portfolios for prospective new clients, in many cases Carbon can reduce the cost of investing by as much as 30%-50% and increase the expected returns or reduce the level of risk being taken. On a personal level, winning the FT Money

Carbon welcomed Iain Harper and David MacDonald as graduate trainees in November. Iain studied economics and business at Edinburgh University, whilst David studied history at Aberdeen University. There was another quarter of exam success in

Investment Adviser of the Year Professional Adviser Awards 2013

Management Retirement Planner of the Year title in 2012 was fantastic, as was being a runner-up in the Inheritance Tax Planner category last year. Carbon’s Investment Director Barry O’Neill also works from our Aberdeen office. Barry and I are always happy to have an informal chat over coffee if you want to find out more about what we do and how our advice might benefit you. Any initial meetings are free of charge and without obligation. Paul Gibson can be contacted by e-mailing: paul.gibson@carbonfinancial.co.uk

both the Perth and Edinburgh offices, with Kylie McCartney, Ben Lingard, Karen Smith, Simon Rounce, Amanda Wilson, James Pickles and Alyson Campbell all gaining exam passes from the Chartered Insurance Institute. Congratulations also to Senior Paraplanner Julie Wild, who passed her trusts exam with distinction.

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Feb 2014 newsletter