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For today’s discerning financial and investment professional









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Contents.indd 3 C31320.010_SP_Geared Returns_IFA mag_Nov12_297x420_v1.indd 2

14/11/201213:28 11:49 25/10/2012

Nick Sudbury is a financial journalist and investor who has also worked as a fund manager. Kam Patel a former deputy editor at Hemscott. He is a qualified investment adviser. Monica Woodley is a senior editor at the Economist Intelligence Unit.

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

Brian Tora a Communications Associate with investment managers JM Finn & Co. Richard Harvey a distinguished independent PR and media consultant. Gillian Cardy managing director of The IFA Centre.


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

THE FRONTLINE: Don’t let the grins fool you. The deficit is a life and death issue that demands respect and compromise from both sides




All the big stories that affect what we say, do and think

Editor’s Soapbox


Britain’s relationships with Brussels aren’t getting any better, says Michael Wilson.


Financial Planning

There’s no time like the present to beef up your department, says Sue Whitbread

Lessons From History

Did we learn anything from the crash of 1987, asks Brian Tora? You bet we did


The Future, From 2016

Steve Bee emerges from his time capsule to explain all

PI Insurance After RDR

Stephen Spurdon investigates the strange disappearance of affordable cover


Pick of the Funds


Nick Sudbury’s pick of a promising crop

The IFA Centre

A tangle of definitions will result from RDR, says Gill Cardy




FSA Publications

Our monthly listing of FSA publications, consultations, deadlines and updates



There’s nothing like an uncertain period to focus the mind, says John Anderson of Recruit UK

Thinkers: Sir John Templeton

Editor: Michael Wilson

Art Director: Tony Merlini

Publishing Director: Alex Sullivan


The emerging markets pioneer was so much more than just a fund manager

The Other Side

Whoever thought of RDR had a warped sense of humour, says Richard Harvey. And here’s why


This month’s contributors



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

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features 22

Germany: A Game of Two Halves Angela Merkel is struggling to be both a good Chancellor and a good European, says Monica Woodley. Next year’s going to be tougher



Barack Is Back

But hold the fanfares, folks, we still have a few little problems to sort out. Michael Wilson reports



Segmenting Your Client Propositions

Don’t be embarrassed about offering different services to different types of clients, says Aviva’s Dave Robson. It’s the secret of success and efficiency after RDR



Passive Funds

Legal & General’s Simon Ellis explains why there are so many ways to run a passive fund – and where his own preferences lie


Film Reels

Film finance has been getting a bad press this year, as HMRC has launched a crackdown on evaders and abusers. But a new generation of EIS-approved schemes are on the way. Kam Patel reports

As I was walking up the stair, I saw a cliff that wasn’t there. It wasn’t there again today. I wish that debt would go away...


Fees, And How To Charge Them

It’s all in the mind, says Peter Welsh of Touchstone. Know what you’re offering, and know your own value first

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

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

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CHINESE WHISPERS BY THE TIME YOU READ THIS, THE WORLD’S MOST POPULOUS COUNTRY WILL BE UNDER NEW MANAGEMENT. BARRING ANY DRAMATIC UPSETS, THE COMMUNIST PARTY CONGRESS WILL HAVE ELECTED XI JINPING, A PARTY INSIDER, AS PRESIDENT HU JINTAO’S SUCCESSOR Well, they’d better have, because he was the only name on the ballot. Not much is known about Mr Xi, except that he’s made some pro-business comments in the past, but so far the financial markets seem to think the transition will be just fine. The FTSE China 25 is already back to its level in April, when serious jitters first emerged about slowing economic growth. Industrial confidence is now improving after seven straight quarters of shrinkage, and inflation is steadying at a manageable 1.9% - down from 4.5% as recently as February. The government is anxious to capitalise on the good news while it lasts. In the last week of October alone, the central bank pumped a record $61 billion into the country’s money markets, so as to set up the financial basis for yet another massive government programme of infrastructural investment. But Mr Xi knows well enough that all is not yet well. If it hadn’t been for the government’s boost to public spending, slow consumer demand and a strong renminbi might have doomed the economy to a period of slower domestic growth. Rising urban wages in China have not just failed to produce better sales of big-ticket purchases – sales of cars, for instance, are flagging. They have also annoyed the rural populations who still live in earthbound poverty. Unless the manufacturing economy can get its mojo back soon, the risks of social dissent may become politically dangerous. Ah yes, you might be saying, but even that so-called slower growth rate is still nudging 8%, which is better than any developed country has had for decades. How can that possibly be bad for investors? Answer: Because China’s equity scene is already pricing in its assumptions of a still-higher rate of growth, and anything less may be exponentially badly received. For the last forty months at least, Shanghai’s flatlining stock market has failed to match national economic growth in any way. As investors, then, we have missed out on the boom. The question is, has the flat spot been just a temporary correction, or are we looking at a longer-term imbalance? So far, stronger state spending is now substituting for free-market growth as a driver of GDP. But the stock market might not be so easily fooled.

M ik e

Michael Wilson, Editor IFA magazine

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Write to Michael at

November 2012

7 14/11/2012 12:23



US investigations

into Libor rigging allegations were significantly from seven to 16 institutions, as the Lloyds group, Bank of America, Bank of Tokyo, Mitsubishi UFJ, Credit Suisse, Rabobank, Royal Bank of Canada, Société Générale, Norinchukin and West LB joined Barclays, Bank of Scotland, HSBC and others under the spotlight.

BANKING... it finally getting somewhere? It seems it’s never too late to give up hope after all.

Jose Manuel Barroso and Angela Merkel don’t quite see eye to eye

Months of wrangling over the future shape of Europe’s banking system came to an apparent end on 19th October, as France and Germany finally hammered out a compromise deal that will allow the transition of the European banking system toward direct supervision by the European Central Bank. January 2013 will see the creation of the legislative framework, and the new supervisory system should be in action some time next year. Well, that’s the theory. The October deal is important not so much because of what it is, but rather because of what it will now allow to happen. And let’s stress, by the way, that this is a Eurozone matter that doesn’t impact immediately on the Bank of England or the UK banking system at all. (But see also below...)

What It’s All About So, where shall we start? Well,

if you cast your mind all the way back to July, you might remember that the euro zone’s leaders hammered out a new bank stabilisation pact, the so-called European Stability Mechanism, that would allow the EU to issue unlimited quantities of so-called euro bonds, backed by the ECB, which could be offered to struggling banks in Spain, in Greece and perhaps in Italy, on the strict condition that their governments grovelled before Brussels and formally requested assistance. The trouble was that, at that time, there was no way that the ECB could issue any bonds because it didn’t have any proper supervisory authority over its member countries’ banks. France’s new president, the socialist François Hollande, wanted a quick ‘solidarity’ resolution that would encompass all of the Eurozone banks, but Germany’s Angela Merkel was holding out for a tighter solution that applied only to the biggest ones. To tell you the truth, they still haven’t go that issue sorted, but everyone is aware that time is pressing and that the market’s enthusiasm for the rescue is waning fast. So Frau Merkel agreed, vaguely, that “banks

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must be supervised in a differentiated way. That means that some will be direct, at the ECB level, and others indirectly, via the national authorities.” Whatever that means. Did the European stock markets signal their approval of the deal? Hardly. The FTSE Eurofirst 300 index greeted the news with an exhausted grunt that left the index back at its August levels. Then again, perhaps they were feeling upset by the troubling state of the US economy, which is marching toward a ‘fiscal cliff’ as George W Bush’s tax cuts expire at the end of this year. Or maybe it was the dawning realisation that €60 billion of aid to Spain and maybe twice that to an indignant Greece might not be the end of the matter. Italy is still tottering, and even France itself can’t feel properly secure as it pitches into a €30 billion austerity programme that may plunge the country into a long winter of discontent.

Britain Getting Bounced? But the question for Britain, as a non-eurozone member, is slightly different. Yes, it’s perfectly true that the decision to give the ECB direct supervisory powers won’t touch the UK in any direct way. Only the 17 eurozone members will be affected by the coming change. And it’s also true that Britain’s banks are already much more heavily capitalised than most of their continental


Italy’s markets


breathed a sigh of relief as it became clear that ex-premier Silvio Berlusconi had little chance of staging a personal comeback attempt in next year’s elections. Berlusconi had been sentenced by a Milan court to four years in prison for tax fraud. Mr Berlusconi says he will appeal the verdict, and has intimated that he will still try to organise a campaign for one of his associates.

platform Cofunds announced that its assets under administration had reached has £45 billion – a 25% increase on January’s £36 billion. The company said that sales had been strong right across its three core propositions Investor, Wealth and Enterprise.

counterparts, so that we’d really have very little to fear from the Frankfurt whiplash. What will really be troubling the Chancellor, and his boss David Cameron, is the likelihood that Britain will find itself squeezed further and further toward the policy margins by a European financial system that thinks in terms of the Eurozone and not the European Union. There are a thousand different ways in which the Commission could decide EU policy on the basis of Eurozone expediency, and it wouldn’t be so surprising if core decisions – for instance, those involving the MiFid II provisions (see pages 17-20) – were to be shaped by Eurozone thinking. Mr Cameron is already short of friends in Brussels, having alienated rather a lot of his counterparts with last December’s veto on the revised European Treaty. And his latest threat, to veto the EU’s Budget unless it chops both its staff and its six-figure salary levels, is hardly likely to endear him to his fellows – although, to be fair, Brussels is well used to having its annual budgets thrown out by a stroppy European Parliament, so the reputational damage might not be as severe as expected. But it doesn’t bode well for a peaceful political ride in the next twelve months. The Prime Minister’s best hope is that the bank harmonisation scheme will fall apart of its own accord, just as last year’s Lisbon Treaty reforms did. Whether that will be a good thing for Spain or not is another matter. For more comment and related articles visit...

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Equity fund flows in Europe

are on the move again, according to new data from Morningstar. Flows were positive in September to the tune of €1.91 billionn in September, for the first time since February. European largecap funds saw fresh inflows of €506m, Morningstar said, and the ex-UK largecap equity category experienced the largest influx in four years, at €320m.

The cost of renting

a home in England and Wales rose by 1.1% in September to reach a new record high, according to the group that owns Your Move. Hefty increases in London and the South East meant that the average rent was now £741 a month – 1.1% up on August and 3.2% higher than September 2011.

Only one in five ...of Britain’s smaller firms with payrolls of 250 or less feel that they properly understand the provisions of the auto-enrolment rules that will apply to them between 2014 and 2017, according to a recent survey by the Association of Consulting Actuaries. And of those small firms that have studied it, the vast majority describe the rules as ‘complex’ (55%) or ‘very complex’ (23%). Only 28% of the 541 smaller firms studied by ACA said that they have already budgeted for the cost of auto-enrolment. And of that rather small number, the average expectation is that employee opt-out rates will range between 11% and 35%, with the highest opt-out rates in the very smallest firms. Of those firms that are currently operating a pension scheme (about 25%), the ACA says that half say that they are simply likely to autoenrol all their employees into an existing scheme. But the proportion who say that they are unsure what they will do has tripled to 27%, from 9% two years ago. About 10% say they are considering auto-enrolling their employees into a new workplace scheme, and a similar number say they plan to place the balance of employees into NEST.

Only 4% of the companies with pension plans said that they intended to close their existing schemes and place all their employees in NEST. But of the remainder that don’t operate schemes, 38% say they expect to auto-enrol all their employees into NEST, with 19% looking to enrol into an employer’s scheme instead. The ACA isn’t disputing that the new regime is sound in principle. “It is right that pension provision should be available to employees in even the smallest firms,” says chairman Andrew Vaughan. “But we do question whether the auto-enrolment rules are overly complex for businesses of this size.” Might there be scope for a voluntary regime for ultra-small firms with up to four employees each, say? The question is still open. The ACA 2012 Smaller Firms’ Pensions Survey report is available at: http://tinyurl. com/99tqbxy

For more comment and related articles visit...

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More good news on the GDP front, as the official numbers for total economic activity in the third quarter came in at an unexpected growth of 1% - thus putting a formal end to a recession that had lasted for three successive quarters. The improvement, attributed partly to the Olympics, implied that the UK economy had regained about half of the 6.4% decline in production that had been observed between January 2008 and the middle of 2009.

Public sector net borrowing

was down to just £12.8 billion in September, from £13.5 billion a year earlier, according to new figures from the Office for National Statistics. That was quite a bit better than the markets had been expecting. And just to add to the mood, the August figure was also revised downward from £14.4 billion to £12.8 billion.

Financial Planning Week It’s that time of year again when the Institute of Financial Planning launches its annual campaign to get Britain’s households thinking more effectively about their financial fitness. Sure enough, the fifth Financial Planning Week (26th November to 2nd December) promises to be another multimedia extravaganza encompassing print, online and the broadcast media networks. The IFP’s website at will be publishing a daily series of consumer polls on various aspects of personal planning, together with expert responses drawn

from its own members, from professional advisers and from supporters of every kind. The Institute is particularly keen to get the message across that financial planning differs in certain important ways from the transactionorientated financial advice that conventional IFAs have traditionally offered. The growing number of advisers who have beefed up their own planning and paraplanning operations during the last 18 months is proof positive that the message is now getting through about how an enhanced willingness to work with clients’ personal needs, rather than focusing on solution-based advice. And that this is likely to bring loyalty rewards once the commission axe has fallen on independent operators and it’s all down to fee-based relationships. The Institute will also be making a series of real-life case studies exclusively available to journalists, all drawn from the clientele of its IFP Accredited Financial Planning Firms. And an online ‘Ask A Planner’ facility will be available for queries. Email fpweek@ for more details, or to get involved. For more comment and related articles visit...

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Don’t Panic!

CBI DirectorGeneral John Cridland declared that small businesses are desperate for a return to old-fashioned relationship banking. Demanding a return to ‘Captain Mainwaring banking’, Cridland insisted that a one-stop shop and a proper manager relationship would do the country a power of good.



announced plans to axe up to 10,000 back-office jobs in its latest attempt to reduce its costs after a $2.3 billion loss – the result, apparently, of a trading scandal involving an alleged rogue trader. The cuts, which will represent about one job in six, will be accompanied by a spinning-off of a large part of its fixed income trading business into a non-core unit.

Preposterously Piratical Institutions Another bad month for UK banks, as the FSA announced that complaints about the sector had risen by 59% during the first half of the year, reaching a horrific 3.58 million. Of these, 62% were about the alleged mis-selling of PPI (payment protection insurance) products. It would have been a comfort to know that the expansion was mainly due to the activities of professional claims agencies, many of whom have been cold-calling UK telephone subscribers with promises of rewards that have often resulted in specious or fraudulent claims. But the figures speak differently. UK banks paid out £2.9 billion in compensation on insurance products during the first six months, and the total redress on PPI products was £3.2billion. The FSA confirms that fully two thirds of the PPI claims so far this year have been upheld. And Barclays has famously upped its provisions for PPI claims by £770 million. Apart from PPI, however, it’s all been (relatively) quiet. Complaints about banking products such as loans and credit cards rose by a mere 5% in the first half, to ‘only’ 828,040 of the year. But protests about current accounts actually fell by 13%.

The Cap Didn’t Fit That will have been only a small comfort to Bank of Scotland, now part of the Lloyds Banking Group, which was fined £4.2 million in October for failing to keep adequate records of the mortgage payments from 250,000 customers between 2004 and 2011. Many of the bank’s customers had missed out on a planned concession involving the interest rate cap, because of anomalies in its recordkeeping, with the result that around 160,000 were initially excluded from benefits worth some £162 million. Indeed, the FSA said, the problem might never have surfaced at all if it hadn’t been for customer complaints.

For more comment and related articles visit...

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The Hong Kong dollar surged as international investors started to explore Asian prospects again, following some statistical news from China that wasn’t as bad as some had feared. The Hong Kong central bank was forced to intervene four times in the space of a week to quieten the rise of the currency against the dollar.

BP agreed to sell its partial

stake in the Russian arctic oil prospecting group TNK-BP for $12.3 billion in cash, plus a 19.75% stake in the acquiring company Rosneft. The deal, wich altogether encompassed some $55 billion of equity and cash, is the oil industry’s biggest deal since Mobil went to Exxon in 1999.

Shock News – The Crackdown Is Working Well, it’s progress of a sort anyway. New figures from the Treasury show that the so-called ‘tax gap’ – the amount that HMRC reckons is underpaid because of tax evasion or simple errors – shrank to just £32 billion in 2010/11. A fine achievement. So shall we pop the champagne now or later? The good news is that the uncollected tax – which is the difference between the taxman’s calculations and the amount actually received – was equivalent to just 6.7% cent of all taxes due in 2010/11, compared to 7.1 per cent in 2009/10 and 8.2% in 2004/05. The bad news is that that’s equivalent to more than £1,000 per employee, which is still quite a lot. Exchequer Secretary David Gauke MP put a brave face on the findings. “These tax gap figures show that the vast majority of people and businesses pay the tax they owe on time,” he said. “Last year £468.9 billion was collected,

“THE VAST MAJORITY PAY THE TAX THEY OWE” David Gauke puts a brave face on the findings

including £13.9 billion that was brought in through HMRC’s work policing the rules.”

Statistics, Damned Statistics The BBC noted that the government’s 2010 Spending Review had handed HMRC £917 million in new funding to tackle the tax gap, with the objective of raising an extra £7 billion a year by 2014-15. So how’s it working out in practice? A quick back-of-envelope calculation at IFA Magazine HQ suggests that the 0.4% of additional tax take that’s been raised last year would have been worth around £2 billion to the Treasury in real money. That sounds reasonably on course, then. But £2 billion would also seem to be pretty feeble compared with the impressive £4 billion improvement which was logged between 2008/2009 and 2009/2010. A time, let’s remember, when the extra investigative capacity at HMRC wasn’t even available. Hmmmm, are we getting value for money? For more comment and related articles visit...

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Eds Soapbox.indd 17

“For what must have seemed an eternity of flashbulb diplomacy, the two leaders stood stiffly, smiling benignly and flatly contradicting each other” 17 14/11/2012 13:21


magazine... for today ’s discerning financial and investment professional For what must have seemed an eternity of flashbulb diplomacy, the two leaders stood stiffly on the press platform, smiling benignly and flatly contradicting each other – with Cameron threatening a UK veto over the EU Budget and Merkel saying not a chance, sunshine, take it or leave it. And when the two went their separate ways at the end of the day, like ships passing in the night, there was no sense at all that either had done anything more than register the other’s existence. But then, if there was ever much doubt as to where Her Majesty’s government stands on its relationship with Europe, the last couple of months ought to have consigned it to the ‘sorted’ file. Whether it’s failed aerospace link-ups that we’re talking about, or the euro mess, or the plan to enforce control from Frankfurt over all the Eurozone banks, or simply the implementation of the Markets in Financial Instruments Directive - popularly known as MiFID II – you won’t go short of pointers as to how far adrift of mainstream European sentiment the government is currently becoming. Not that that’s necessarily a bad thing, of course. There’s much to worry about in the current line being taken by Brussels – not least, the fact that the financial markets themselves aren’t taking the least bit of notice of all the optimistic guff that seems to be pouring out on the euro issue. On the one hand, Chancellor George Osborne’s spat with the German government over the aborted link-up between the aerospace giant BAe Systems and Europe’s EADS – the Airbus manufacturer – cast a stark light on the cultural differences between Britain’s free-market approach to defence procurement and that of France or Germany - both of whose governments hold what amount to golden shares in EADS. The sharp snap-back which Mr Osborne got from Germany’s Chancellor Angela Merkel – and the terse way that the German Chancellor vetoed the wishes of her French counterpart, François Hollande of France in trashing the deal over this flightless bird – tell us a lot about how brittle the general state of European co-operation has become. And how thin those summit smiles are getting.

The Devil and the Deep Blue Sea Meanwhile, in the background, the clock is quietly ticking on Europe’s gigantic attempt to harmonise the European consumer financial market. On 26th September the revised text of MiFID II was unanimously passed by the relevant committee of the European parliament.


November 2012

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And by the end of October, the parliament had given its blessing to a Europe-wide ban on commissions for independent financial advisers – but had ducked out of banning commissions for restricted firms as well, as both Britain and the European Commission had wanted. And to think, we hardly even noticed… Now, this magazine has not been slow in the past to chide Mr Osborne for his outspoken and sometimes clumsy tendency to inflame European tendencies. But remember, it wasn’t just the Tory old guard that grunted its approval back in October when Prime Minister David Cameron chose the closing moments of the Conservative Party conference to drop a heavy hint about the prospect of a referendum on Europe at some time in the fairly fardistant future. There’s fairly clear evidence on the street that many ordinary Britons have genuinely had enough of Brussels. Although whether they’ve really given enough thought to the possible consequences of euro-isolation is a valid question that still begs to be answered.

Thunder and Lightning Looking back on the BAe/EADS affair, it’s hard to deny that things would have become very complicated if the deal had gone through. There was never much doubt that the Chancellor’s resentment at continental Europe’s political muscle within the company would have created ructions as soon as Paris or Berlin objected to some US military supply contract or other, on the grounds that their own military agendas on Iran or Israel or Turkey didn’t tally exactly with those of the White House. And you can also see where George’s objections to the proposed European banking reforms come from, because Europe has made little secret of its envy at the predominance of London’s institutions – to the point where France had openly attempted, last December, to get a pan-European trading levy implemented that would have levelled the playing field to Britain’s disadvantage. Cameron, if you recall, didn’t so much nip that one in the bud as stick an axe into it, as he vetoed a quite different decision on European political collaboration under the Lisbon treaty. Ever since then, his face has been a necessary but largely unwelcome feature of the EU summit circus. Continental newspapers are now talking quite openly about how it’s only a matter of time until Britain makes its departure from the European Union and stumbles off into an uncertain future in America’s embrace. (In the meantime, by the way, a small group of countries has just voted to go ahead with the proposed trading levy on a unilateral basis.)

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“The smiles at the October summit betrayed a seething conflict which isn’t over yet” The Kraken Wakes

Anyway, Cameron’s Lisbon veto was last winter, and this is the current one. Brussels’s political elite has hardly covered itself in glory over the euro rescue plan, having produced a succession of big plans that have hardly set the markets alight. Three times since the summer (or is it four?), we’ve seen the stock markets of continental Europe catching brief fire on the news of some debt-purchasing scheme or other - only to subside within a week or ten days as it becomes clear how much work still remains to be done, and how little the investing public still trusts the political movers and shakers. But the Lisbon veto issue came back to haunt us yet again in mid-October, this time wearing a different disguise. Against all the odds, the Euro-summiteers managed to pull off what seems to have been a partial victory in their attempts to beef up the European banking system in a way that might – just might – be robust enough to rescue the southern European economies. The snag, for Mr Osborne, was that their success in agreeing on a unified bank supervision system may also have given them the power to steamroller the UK on contentious financial issues in the future. But whoa, we’re probably going too fast there. Let’s slow down and take it one step at a time: Firstly, as we’ve said, this autumn’s bank rescue scheme will effectively require every euro-zone bank (though not, of course, those of the non-euro members) to be regulated by the European Central Bank, with effect perhaps from 2015. For the first time ever, that will give the ECB the muscle that it needs to issue so-called euro bonds on its own authority, and

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it will be able to use those bonds for buying up ‘unlimited’ quantities of awkward sovereign bonds that are currently stuck in the bank vaults of Lisbon, Madrid and probably Milan and Paris. So far, so good. But the smiles at the October 19th summit betrayed a seething conflict which isn’t over yet. France’s Hollande had been demanding a ‘solidarity’ resolution that would encompass every single one of the Eurozone banks; but Germany’s Angela Merkel had been stubbornly insistent that only to the biggest ones should be regulated. By agreeing to a compromise wording that simply said that the banks “must be supervised in a differentiated way” – or, as she added, “some of them directly, at the ECB level, and others indirectly, via the national authorities,” she had found the weasel wording she wanted. For better or worse, the legislative structures for the ECBs new supervisory powers should be in place by January, and there are hopes that the 17 eurozone members might be getting seriously into empowering the ECB by mid-2013. Fat chance. There is a mountain of national enabling legislation to be pushed through before that can happen – and also a major PR campaign to be waged before bank shareholders’ fears about a loss of operational sovereignty can be assuaged. If all this can be achieved by 2015, that’ll be a miracle. Will it be soon enough to rescue the Spanish banks? It isn’t at all clear. But the real worry for the Chancellor is that the 17-member euro-deal will pave the way for a fiscal unity push that will end up marginalising the ten euro-outsiders – Britain included. The Treaty of Europe itself proclaimed as far back as

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magazine... for today ’s discerning financial and investment professional 1957 that the continent should be moving toward a unitary financial system - and last December’s vetoed agreement still left 23 EU members voluntarily offering to have their national budgets scrutinised and even policed by Brussels. (The other refuseniks, besides Britain, were Hungary, Czech Republic and Sweden.) So, if at some later date the group of 17 euro-insiders decides to push its combined agenda onto some other fiscal policy topic that extends beyond its normal reach, who’s to stop them? Certainly, Britain will have the formal power to refuse such a measure – but the likelihood of finding ourselves squeezed further and further toward the policy margins by a European financial system that thinks in terms of the Eurozone, and not the European Union, is considerable.

registered in Cyprus, say, is to be allowed parity of opportunity with one in Frankfurt, then the better those investor protection systems are co-ordinated, the better for everyone. So the MiFID II monster is fated to rise from the bench and stagger determinedly toward its eventual realisation. And, as we’ve said, the key stage has now been reached, because the European Parliament has now cleared the text, after much heated discussion on issues that have ranged from high frequency trading to “dark pools” of in-house liquidity. From commissions for non-independent traders to the creation of a new category of trading venues for OTC products. But you’d be wrong. Yes, the MiFID II text has been officially approved, and it now goes forward to the next stage toward enactment. Unfortunately, the next stage is

“Osborne, safe in the knowledge that Britain does have some leeway to interpret the MiFID II rules in its own way, will be cackling with a strange mixture of glee and trepidation” There Be Dragons

At present it’s fair to say that all hands in Europe are working furiously at the pumps to douse the flames that are still arising from the Mediterranean banking system. And that there’s very little real enthusiasm for tackling other important policy issues. But all the while, down in the stone cold basement, Professor Frankenfurt’s great MiFID monster has been twitching into life with every new jolt of power that the mad scientists of Brussels have dared to send through its ugly, ravaged, stitched-together frame... That’s going much too far, of course. It would be ridiculous for anyone to suppose that Europe doesn’t need at least some sort of a harmonised regulatory system with which to make its single financial market work. Never mind the single currency, we already have a flotilla of mutual-recognition treaties that mean that a Ucits sold in Malta is worth just as much as Ucits in London. The passport system sees to that principle, and it’s a good one too. So it follows that we need some sort of a minimum standard of conduct when it comes to investing our clients’ money across European borders. And not just for shares and funds, either. If you’re going to be issuing Euro bonds in a few years, and if any bank that’s


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yet another round of high-level talks, the socalled “trialogue”. which brings together the European Commission, the Parliament and the Council of the European Union. And that’s where the claws and the fangs will be out. You see, the European Commission absolutely hates the Parliament’s decision to allow commissions for non-independent advisers, and it’s pretty peeved that the Parliament has overturned its proposal for a ban. It hates the Parliament’s stipulation that high frequency traders should be forced to let trade orders to rest for a minimum of half a second, so as to stabilise the situation in volatile moments. (I’m over-simplifying, but bear with me.) For the next three months, at the very least, the sparks will be flying and the blood will probably flow. And Mr Osborne, safe in the knowledge that Britain does have some national leeway to interpret the MiFID II rules in its own way, will be cackling with a strange mixture of glee and trepidation. Do you have a good reason for the Editor to jump back onto his soapbox? Not that he needs any encouragement, please send your requests to and stand well back!

14/11/2012 13:22

The evolving role of the DFM and the Intermediary Business The Bristol Hotel, Bristol

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The Bristol Hotel is just a short stroll from Brunel’s SS Great Britain, the At Bristol science centre, the Arnolfini contempary arts centre and the Gothic splendour of Bristol Cathedral. The events will be filmed and edited to appear on web sites and will also be distributed via BrightTALK thought leadership channel.

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




November 2012

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14/11/2012 13:29

Merkel, for her part, has tried to tread a fine line – showing sympathy with the Greek public for the sacrifices required of them by their government’s austerity measures, while also remaining firm with the government on maintaining a schedule for fiscal and structural reforms. But her tough stance on the timetable for reform is seen by the Greeks as unrealistic. Finance minister Yannis Stournaras has said that there is now ‘an assumption’ that Europe’s deadline for reforming the fiscal balance will be extended by two years to 2016, as his government has requested – albeit with the fiscal measures heavily front-loaded. But Merkel has not budged at all on the original deadline of 2014. What the German Chancellor has offered, in place of timing concessions, is the prospect of further bilateral and multilateral support for


Angela Merkel must feel like she can’t do anything right. When she made a visit to Athens in mid-October, to bolster Greece’s fragile coalition government and its fiscal reform programme – her first visit to the country since 2007 - her support was seen by the Greek public as a provocation to a suffering people. And the media happily played along with it Indeed, the Greek television pundits even pointed the finger at her ‘insensitive’ choice of clothing: apparently she was wearing the same outfit that she’d worn to watch Greece’s defeat by Germany’s national soccer squad back in June in Euro 2012. That’s a lot of political significance to be attaching to a simple fashion choice.

bank, KfW, could get involved in joint ventures that are being developed by Greek and German businesses. There’s no question that more efforts to support the Greek economy are needed. By the end of 2012, it will have contracted by a fifth from its peak in 2008. And clearly, the fear is that the strain of this severe contraction will – no matter what support is given – result in a so-called ‘Grexit’. The Economist Intelligence Unit puts the odds of Greece leaving the Eurozone in the next two years at 40%.

A Hard Sell At Home

The German people don’t seem very fussed about preventing a Grexit. A Financial Times/Harris poll conducted in October found that only a quarter of Germans currently think Greece should stay in the eurozone or even get more help from other countries in the currency union. Mind you, their attitudes won’t have

Germans weren’t very impressed by images of Greek protesters burning nazi flags during Merkel’s visit in October the Greek economy. She has pointed to the recently-boosted resources of the European Investment Bank - and also to the fact that the European Commission’s Task Force, led by a German, is pushing hard for the release of development aid to Greece. Merkel has even suggested that a stateowned German investment

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been helped by images of Greek protesters greeting Merkel’s October visit by burning flags emblazoned with the Nazi swastika – or that some were dressed in Nazi-style uniforms. But the thing that Merkel grasps, which her public obviously doesn’t, is that

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magazine... for today ’s discerning financial and investment professional Germany’s economic fate is inextricably tied to that of Greece. A Grexit would in fact hit Germany’s economy hard – but, because the uncertainty over Greece’s future is currently having only a mildly negative impact, with occasionally mixed or even positive signs, the German public simply doesn’t grasp the severity of the situation. So what exactly are the leading indicators telling us about Germany’s prospects?

Mixed Messages

The resilience of the German economy over the past few years has been impressive, but in recent months the erosion of sentiment has been gathering pace - a reminder that, despite being the EU’s strongest economy, Germany still remains at serious risk from the continuing Eurozone crisis. Recent business surveys suggest that a period of weaker economic activity is coming,

and there’s even the possibility of a return to recession. The good news is that the ZEW index - an indicator compiled by the Centre for European Economic Research based on financial investors’ view of German economic activity over a six-month horizon - rose in October for a second month. But the ZEW indicator still remains in negative territory, having fallen for the four consecutive months until September. So, although the picture has improved slightly, the majority of investors still expect conditions to deteriorate over the next six months. So much for the investors, but the news from ‘closer to the ground’ looks a bit less reassuring. The Ifo Institute’s business climate index, based on a poll of 7,000 companies across key sectors, fell for the fifth consecutive month in September to its lowest level since February 2010. The Ifo index is widely considered to give a more realistic view of

the country’s true economic situation than the ZEW survey. German companies that rely on exports have particular cause for concern. True, exports rose by 2.4% month-on-month in August, and by 5.5% year-on-year. But that seems to be a blip in a year of steady decline. Back in July, export growth had been just 0.4%, following on from a growth of 1.6% in the second quarter and 2.3% in the first quarter. Exports to the rest of the Eurozone, which account for around 40% of German exports, were – unsurprisingly

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Shaky Domestic Scene

Industrial production contracted in August, driven by decline in manufacturing output and especially by a drop in construction activity. Overall industrial output has been volatile this year, with one monthly rise being repeatedly followed by a decline in the next month. But recent data on new orders data suggests that the trend is down. Generally, activity looks set to weaken to the point of stagnation in the near term, or even a modest contraction.

The source of this deteriorating trend is the home market, where orders were particularly weak in August, falling by 3% during the month. The early signs of weakness had already been present in the second quarter, but they have now become much more pronounced. What do households think? Well, overall consumer sentiment in Germany was 3.3 points lower in September than a year earlier - but that still leaves it fairly close to its longterm average.


– weak. Year-on-year sales were down by 3.1% in August, a sharper pace of decline than had been recorded in previous months. Things were a little better when it came to exports to non-Eurozone EU member states, which represent just under 20% of German exports: total sales were up 6.8%. But the strongest growth of all was in exports to non- EU countries, which rose by 13% year-onyear in August. The question is, what impact will subdued global demand have on this one segment that is solely supporting Germany’s export growth?

The thing that Merkel grasps, which her public obviously doesn’t, is that Germany’s economic fate is inextricably tied to that of Greece

.....? Call 0117 908 9686 to speak to your specialist consultant Email:

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magazine... for today ’s discerning financial and investment professional And when you ask them about their future financial situations the picture is still generally positive above the long-term average, apparently, and only slightly weaker than a year earlier. But the past few months have brought a slight weakening of sentiment on future prospects. That slight decline is probably linked to unemployment, which has been rising modestly since the second quarter of 2012. The Economist Intelligence Unit forecasts a gradual rise in unemployment over the remainder of 2012 and into 2013, from an average of 5.5% this year to 5.7% in 2013.

Election Focuses The Mind So what are exactly are the indicators pointing to? The Economist Intelligence Unit predicts real GDP growth of 0.8% for 2012 and for 2013 as well. But this stagnation is based on a gradual stabilisation of the Eurozone crisis and the restoration of investor confidence. If the situation in the Eurozone does not improve,

there is a danger that Germany could fall into a recession. Sensing this danger, Merkel has held out the prospect of government action to stimulate domestic demand, including possible tax cuts. She recognises her country’s role “to do something for the stimulation of the economy in Europe”. If Germany could deliver higher domestic consumption, she says, “that would have the advantage that we would naturally be able to buy imports from other countries in the European Union”. Germany also faces an upcoming leadership contest in 2013, in the form of a general election. The main opposition Social Democratic Party (SPD) has nominated Peer Steinbrück, a former minister of finance, as its candidate to challenge Merkel for the chancellorship; and although Merkel is still the favourite to win the election, a more splintered party system could make building a coalition more difficult in the interim – thus increasing the prospect of the SPD gaining office in 2013, and

creating more work for Merkel to maintain the support she needs for her Eurozone efforts. With resolving the Eurozone crisis and protecting her own country’s economic growth already on her plate, Merkel doesn’t need any more distractions right now. Germany remains the strongest economy in the Eurozone, but its fate is too tied to that of its other members for it leader to be complacent. While she has been able to rely on Germany’s economic strength and focus on the problems of the Eurozone, she now needs to split her attention and consider steps to improve growth at home as well. Fortunately, Merkel knows that the key to a strong Eurozone is not just keeping Greece in but also keeping Germany strong at its core. She may not remember what she wore to a football match, but she’s not taking her eye off the economic ball. For more comment and related articles visit...

The SDP’s Peer Steinbrück is set to challenge Merkel for the chancellorship; and although Merkel is still the favourite to win, a more splintered party system could make building a coalition more difficult 26

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Page 2

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This document is aimed at Investment Professionals only. All content is intended as general information only and does not constitute advice, recommendation or investment research. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Ltd, an appointed representative of Trustnet Ltd which is authorised and regulated by the Financial Services Authority. For our full disclaimer please visit

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


It was a nail-biter at the end, but the incumbent came through with a late surge. Yes, we’re all agreed that Barack Obama’s stiff, rather un-empathetic manner ought to have made him an easy knock-down for any presidential opponent who had had any genuine warmth to show the electorate. And that’s what might have happened if only Romney hadn’t flashed his gleaming teeth, slicked back his hair and played evasive about his aggressive business dealings as if he’d never heard of Wall Street the movie. Whereas Obama had looked for most of the time like he was too exhausted from his workload to be able to argue back convincingly. Obama always looked like the more honest operator.

A Social Divide...

The reason that so few wavering Democrat swing voters could bring themselves to trust Mr Romney on polling day had commendably little to do with the challenger’s Mormon faith - even though the distinct possibility of Mormon church elders claiming the right to priority consultation in the White House was certainly a little alarming. (As a state governor, Romney had been forced to concede to their political intrusion several times.) Nor was it even the abortion debate, which divided the religious American electorate in ways that we can hardly imagine in Britain. No, it was probably Romney’s willingness to write off 47% of the American electorate as welfareloving, tax-dodging losers (and therefore hopelessly Democrat voters) that convinced half the population that the Republican leader had no judgement. That and his numerous geopolitical goofs - such as the hilarious claim that Iran was backing Syria because Damascus was Tehran’s only land route to the sea. All of which brought back unwelcome memories of Sarah Palin, who didn’t know that Africa wasn’t a country. How would you ever trust these people with the Big Red Button? It was a serious question. It was this sense of Romney’s fundamental ignorance about the great world outside the US that troubled Europe, where a solid 75% of voters favoured Obama over the Republican candidate. And indeed, the European preference for the Democrat candidate was notable in itself, since Mr Obama has shown very little active interest so far in a continent that he sees


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as tangled up in its own little civil war over its own little currency and its great big debts.

An Economic Chasm...

Admittedly, the markets were more than glad that a newly-elected President Romney hadn’t been given the chance to declare China a currency manipulator on his first day in office – a move that would have brought automatic sanctions and the start of a global trade war. (Fact, though: prominent Democrats such as Senator Chuck Schumer have been demanding the self-same market-rigging sanctions against China for most of the last decade, so let’s have no stone-throwing in the glasshouse please.) But what shook the markets, and still continues to do so, is the fact that although Mr Romney never stopped talking about how he was going to slash the budget deficit, he never got around to telling us exactly how he proposed to do it. Would he impose higher taxes on the wealthy, or on corporations, or would he cut subsidies for poorer claimants? Would he increase the puny levels of sales tax on gasoline, or would he launch a campaign to prevent tax evasion? The question was asked many times, and each time the silence from the Romney camp was deafening. It wasn’t too surprising that a challenger who’d been quizzed about his own tax-payment record wasn’t very keen to annoy the public with talk of more taxes. But now is Mitt’s big chance to tackle the issue. Will he dare? And what will happen if he doesn’t?

...And No Parachute

In case you’ve been slumbering in a cave for the last 15 months, you’ll know that the end of this year marks the beginning of a double whammy that will, in its worst-case scenario, knock about 4% off next year’s Gross Domestic Product and send the country into economic freefall. In fact, even its milder form it still looks ghastly. Whammy Part 1 is the imminent expiry of George W Bush’s tax cuts, part of a $787 billion stimulus package, which were reluctantly extended for another two years by Barack Obama in 2010. The loss of the tax breaks in December will knock perhaps a hundred billion dollars off the disposable incomes of a middle class population that hasn’t seen a real rise in income in a decade. I think we’re starting to understand why nobody wanted to talk about it before the election…

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WILSON. NOW WE FACE THE FISCAL CLIFF Whammy Part 2 will be heralded by the sound of an axe coming down on every part of the federal budget – the result of a cross-party deal that was struck in August 2011 as Congress failed yet again to get to grips with the ballooning $16 trillion federal debt. Unless the politicians can pull a very convincing rabbit out of the hat between now and then, automatic cuts will slash both welfare and defence spending – thus hurting both Democrats and Republicans respectively. The total effect of the increased taxes and the cuts is popularly estimated at $607 billion, which would be disastrous. In theory, the deficit reduction deal needs to be signed by about February; in practice, however, it won’t get broached until the President Obama has been formally installed on 21st January. So is the pressure concentrating anybody’s mind? Not that you’d notice. At the time of writing, the low-tax, low-welfare Republicans were still refusing to countenance any tax increases, and the welfare-minded Democrats were sitting tight on their budgets. It’s still not looking good.

Bernanke and the Banana Skin

Is there anything hopeful out there? Yes, the fact that Federal Reserve Governor Ben Bernanke will still be in his post in the new year. Mitt Romney had made no secret of his dislike for Mr Bernanke’s loose-market policies, which have included three rounds of quantitative easing – two of which have really worked quite well for both corporate profits and the stock market. Although,

to be fair, you can’t print money without creating an inflationary risk if the economy itself isn’t growing fast enough to absorb it all. What’s also slightly odd about Romney’s dislike for Bernanke is that the Fed chairman was an old friend of Republican ex-President George W Bush, whose own contribution to economic growth was substantially inflationary. But that just underlines the significant change that the Republicans have undergone during the last four years. On the one hand, the influence of the right-wing Tea Party has been felt in an increased demand for small government, and in a return to conservative values that align strongly with religious principles on social issues like welfare and medicare. On the other, as we’ve seen, the party itself has become crystallised down to an obstructive refusal to compromise. Which is a large part of the reason why so many of Obama’s policies have foundered in the face of Republican opposition during the two years since the Democrats lost their working majority in Congress. Either way, the day after election day was a humdinger. The triumph of the election lasted right up until the opening bell on Wall Street, when the S&P 500 lost a quarter of its year’s earnings and the Footsie lost a third. Now, who was it who said you should buy on the rumour, sell on the fact?

For more comment and related articles visit...

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

SEGMENT & DAVE ROBSON, IFA INVESTMENT MANAGER AT AVIVA INVESTORS, EXPLAINS WHY ADVISERS WILL NEED TO TAILOR THEIR PROPOSITIONS CAREFULLY TO EACH CLIENT IN THE POST-RDR WORLD The concept of fee-based advice is hardly new. For the last 20 years or more, advisers have been debating charging fees - and thereby putting their services on the same professional footing as those of lawyers and accountants. But now, with the fee-based RDR regime almost upon us, the focus is sharpening on client segmentation. In the post-RDR world, the advisers most likely to thrive will be those who can segment their client base according to profitability, while still providing an individually-tailored service that grows to meet each client’s changing needs.


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Distilling your Proposition

As any fee-charging professional will agree, the most important first step is to agree your proposition. Namely, the service you plan to provide, who it will be offered to, and how much you intend to charge for it. To do this, you’ll need to segment your client base - or risk extending too extensive a service to those clients whose business doesn’t warrant it. Start by separating your clients from your customers. You will have a relationship with the former, but you deal with the latter on a more transactional basis.

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CONQUER Next, focus on identifying those clients who are (or may one day be) the most profitable. You’ll quickly find that the most profitable ones aren’t always those who generate the most revenue. There are numerous criteria you might employ, but we often recommend that advisers sort their larger clients into three categories: pragmatists, activists and theorists. This can help you to get a better feel for their likely time needs - and whether they’ll be willing to pay a fee for the experience.

Communicating your Offering

Once you’ve segmented your clients, you can start to define the level of service that each tier should receive. Keep in mind here that clients could well move between tiers as their lifestyle needs change. So you’ll need to be very clear about how you communicate the services on offer to each separate tier. An important point, when differentiating between tiers, is to avoid thinking along the lines of “luxury”, “business” and “economy”. This can be serious snub to those outside of the highest service bracket. Instead, try thinking in terms of “Sandringham”, “Balmoral” and “Windsor”. The key questions here are what services are most appropriate for each tier of your client base; whether you need to extend your services; and how you intend to market them to new prospects. It might also help to consider the events that will trigger a review for clients in each tier. Next, you need to consider how these services are delivered from face-toface meetings and telephone calls to webbased solutions, email, client seminars and newsletters or via Skype or social media.

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Managing Expectations

The most important consideration is deciding exactly how you intend to charge for your services to each client. It’s crucial to provide transparent guidance about the service level that each client can expect. That way, they can appreciate the added value in the service they receive. But remember, if your proposition looks too pricedriven it risks becoming ‘commoditised’ - which might encourage clients to shop around. At this stage you should start to get a feel for how well your likely income covers your running costs. You’ll need to assess the costs of the analysis, research, report writing, implementation and reviews required for each tier. If you find that there’s a significant income shortfall, you probably need to be more ruthless with your segmentation. It’s also a sign that you should look to outsource the expensive overheads that come with the new requirement to demonstrate “comprehensive and fair analysis” of “all retail products which are capable of meeting the investment needs of the client”.

Choosing an Investment Partner

For larger, more sophisticated clients, managed investment funds can provide an attractive core portfolio holding, which an adviser may want to augment by recommending suitable satellite investments that the client can hold alongside them. But these managed funds can also provide a highly cost-effective total solution for smaller clients, because of the way they allow advisers to outsource the research, analysis, due diligence and reporting involved in portfolio management. At Aviva Investors we’ve spent several years developing our postRDR proposition so that we can partner with advisers and clients of all sizes.

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The Benefits of Targeting Risks, Not Returns The Aviva Investors range of Multi-asset Funds (MAF) is divided into five distinct risk bands, which allows us to deliver suitable investment solutions for clients from right across the risk spectrum. They offer investors peace of mind in the knowledge that their managers are focused on getting the best investment return per unit of risk, free of the arbitrary asset allocation limits imposed on other multi-asset fund managers. To ensure our MAF team is never restricted in this way our risk-targeting funds are registered in the IMA Specialist sector. Because the majority of performance returns in these portfolios derives from asset allocation, not stock selection, they also offer the opportunity to reduce costs by reducing the reliance on expensive active asset management in different asset classes. For the investor, this means the potential for smoother risk-adjusted returns and the security of knowing that a ‘cautious’ approach will remain exactly that. With five well-defined client risk bands in place, moving between funds also offers a cost-effective way to adjust client risk levels as their needs change.

When Only Alpha Will Do As a matter of principle, Aviva Investors three funds of funds – Cautious, Balanced and Growth – invest only in the funds of external managers. The three funds offer a ‘one-stop’ multi-disciplinary approach that combines strategists, economists and portfolio managers with some of the UK’s leading experts in manager selection. This allows Aviva to construct genuinely diversified portfolios that we feel are capable of delivering strong, sustainable risk-adjusted performance. The Aviva Investors Funds of Funds team focuses on finding the creativity in each manager’s approach, understanding the investment philosophy they follow and the risk controls they have in place. It selects only the very best active managers, but it will also opt for


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passive strategies in areas where active managers have failed to demonstrate additional value. Because the three Aviva Investors Funds of Funds target investment alpha, they will appeal to clients who recognise the value of active asset allocation and the benefits of investing in only ‘best of breed’ fund managers. For each of these portfolios, Aviva Investors aims to create an optimal blend of funds that complement one another in terms of style, philosophy, process, positioning and outlook. Blending different potential alpha sources in this way can help to ensure that alpha can be generated in a range of different market conditions.

Untying Your Hands In the new RDR world, both approaches offer self-contained investment solutions that diversify across all major asset classes and global markets with robust due diligence and suitability all built in. To help advisers of all sizes, we aim to provide a full suite of clear and transparent reporting and documentation to simplify the client review process, as well as fielding any RFPs and due diligence questionnaires the adviser may have. In the new RDR era, we believe advisers will need both hands free if they are to deliver real value for the fees they charge. For more comment and related articles visit...

14/11/2012 13:41

Sparkling investments || JULIUS BAER LUXURY BRANDS FUND Swiss & Global Asset Management (Luxembourg) S.A. UK Branch 12 St James’s Place, London T +44 (0) 20 7166 8176 The exclusive manager of Julius Baer Funds. A member of the GAM group.

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

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14/11/2012 13:41


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


It was twenty five years ago that stock markets around the world reverberated to a financial shock that made even the events of the autumn of 2008 feel almost calm by comparison. A bear market was condensed into a few short trading days. Even hardened hands who, like me, had experienced the market rout that followed the Yom Kippur war of 1973, walked around the trading floors of the City in a daze. Those were testing times indeed. The Great Crash of ’87 was different to other market crises, in that there was no apparent trigger. The situation in London had been exacerbated by the closure of the London Stock Exchange on the Friday before Black Monday on October 19th. Two terrible days on Wall Street needed to be dealt with by a London market where participants were still clearing up after the hurricane that tore through south east England during the previous Thursday night. The result was a 25% fall in the value of shares in London in a single day.

A Complex Correction

Understanding what makes markets behave in the way they do is a skill not easily gained and will not necessarily help in every situation. The real insight comes by looking back, with the benefit of knowing what finally transpired. In 1974 it was the coincidence of a number of adverse factors that drove markets down – with the UK falling more than most. The quadrupling of the price of oil was the dominant factor on the world stage. Here at home, a banking crisis, industrial strife and political uncertainty added to the toxic mix. And yes, for a while the very future of capitalism looked in doubt.

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November 2012

Doing It Better in 2008

You could feel the same fear in 2008, when the collapse of Lehman Brothers appeared to undermine the whole banking system. Once again, asset classes tumbled across the board. And once again, fear drove the markets. But this time, a less complex and professionally dominated market, together with slower communications, meant that the fall in shares took place at a more leisurely rate than in 1987 - although eventually the value attrition was even greater, top to bottom. In 2008 the lessons had been learned from the debacle a couple of decades earlier, so circuit breakers slowed the decline. It still felt uncomfortable, though. What is common between all these bear markets – and others less dramatic – is that we got through it all in the end. Capitalism survived and shares recovered. Remember, markets always over-react – in both directions. Spotting the point at which the rise has become unsustainable or when the fall throws up extreme value is what every investment manager hopes to do, but seldom accomplishes. So I look back at those testing times a quarter of a century ago and it gives me hope for the future. Unfortunately we are not looking at a bear market ripe for turning. Rather, we have a sideways moving market that many fear could break out in either direction. Whatever happens in the future – and we really cannot know for certain – I am confident we will survive, somehow. For more comment and related articles visit...

14/11/2012 14:06



ETFs. You may know a little. You may know a lot. To become an ETF expert, visit our e-learning centre and discover the A-Z of ETFs in plain and simple terms. Complete the learning modules at your own pace, in a way that best suits you:

How can I check my ETF knowledge? (Simple - visit our e-learning centre)

• Face-to-face workshops • Videos • Guides • Online tutorials As well as building your knowledge, you can earn CPD credits too. Visit the address below to test your ETF know-how. 0800 917 5508

Learning. It’s the Vanguard Way.™

This advertisement is directed at investment professionals in the UK only and should not be distributed to retail investors. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2012 Vanguard Asset Management, Limited. All rights reserved. VAM-2012-10-05-0177 VAN_2021 ETF Knowledge IFA Ads 122x155mm v1.indd 1 JM Finn.indd 35

November 2012


16/10/2012 09:54 14/11/2012 14:06

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



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GUEST INSIGHT Tracking the performance of a specific benchmark index might sound like a simple task. But in practice it can often be a lot more complex than you might think. For a start, the indices themselves don’t account for the transaction and management costs associated with running a fund, so that’s one significant cost hurdle that managers have to overcome from the start if they’re really going to accurately replicate an index. Costs are just one of the ‘hidden’ issues that you wouldn’t normally even think about when considering a tracker, but they rank among the most important. Either way, advisers are now faced with a wide choice of passively-managed products, many of which are using different strategies that need to be understood before making a selection. There are, broadly speaking, four major ways in which a fund can track an index and each has its own issues and specific needs in order to be as efficient as possible.

Full Replication

Some managers aim to fully replicate the index, which means holding every stock in the same percentage as it is represented in the index. When the index rebalances, so too will the fund – this ensures the accuracy of portfolio holdings, but it can also limit flexibility. Full replication is perhaps the purest method of index-tracking, and it should produce a low tracking error. But it can also be expensive, since the transaction costs tend to be high for illiquid stocks. Fund size is therefore crucial, because larger funds are able to benefit from the economies of scale that minimise the impact of individual transactions and make this methodology viable.

Stratified Sampling

Rather than attempt to hold all of the stocks in an index at the exact weighting, some passive providers

Guest Insight - L&G.indd 37

hold representative stocks, or a sample of the market - a strategy known as ‘stratified sampling’. Shares are selected by dividing the index into subgroups (say, by industry sectors for equities, or by maturity bands for bonds), and representatives are taken from each. The objective here is to create a portfolio that mirrors the characteristics of each sub-group – and which, collectively, will also represent the whole market and thus track the index. This can be achieved using computer-based models, but, compared to other methodologies it tends to have greater human interaction in the selection of the representative stocks. Adopting a sampling technique also has an effect on tracking accuracy, because of course the fund is not holding all of the stocks, and accordingly it may develop a sector or market cap bias. For example, a manager might choose to represent the retail stocks within an index by holding just the largest companies in that space. So, if smaller companies did better than large cap, the fund would suffer a hit to its relative performance. The upside, however, is that this method can be cheaper to manage than full replication - thereby reducing the negative impact of transaction costs on tracking error.


Optimisation is often described as the ‘blackbox’ technique of passive strategies, because computer or statistical models are used to make buying and selling decisions. In this form of sampling, mathematical models, based on historical data, are used to construct a portfolio that aims to track the chosen index. This approach is not easily adaptable to a changing investment environment and it will always play catch-up with the market. It is, however, the cheapest of the passive strategies to operate.

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

Synthetic Replication

Rather than buying physical securities, funds can use derivatives to obtain synthetic exposure to an index. This is common in the Exchange Traded Product (ETP) market. Synthetic ETPs generally involve holding a basket of securities, often with no reference to the index; the return from this basket of stocks is then translated into the index return via a derivative ‘swap’. EThis method is therefore more complex than other methods, and it raises a number of questions surrounding counterparty risk. At present, it is the subject of some regulatory scrutiny.

Optimisation is often described as the ‘black-box’ technique

For more comment and related articles visit...

The Legal & General Approach Legal & General is one of the biggest providers of index-tracking investments in the UK, managing £227 billion in passive assets under management (as at 30 June 2012). As a responsible index-tracking provider, we believe that we have two equally important objectives: close tracking and maximising returns. Our portfolio construction involves using the most appropriate tracking technique for the fund concerned, depending on the asset class, structure of the index and the size of the fund. L&G favours a commonsense approach to managing index-tracking funds that it calls ‘pragmatic replication’. We aim to hold all constituents of the index in line with their index weights, but we refrain from trading if natural sources of liquidity cannot be found. In such circumstances, a measure of sampling will be temporarily used until liquidity improves and the full positions can be built up. Moreover, we allow individual weightings to fluctuate within a narrow band (and consistent with the target tracking error), to reduce unnecessary rebalancing and hence transaction costs. For some funds, we may use a more traditional stratified sampling technique - but this decision is taken based on the size of the fund and the structure of the index it is designed to track. In practice, stratified sampling is used mainly for funds tracking corporate bond indices, although it may also be used in emerging market equity funds due to the relative poor liquidity in some of the underlying stocks. It is, however, important to note that any deviation from the benchmark is subject to strict risk parameters. Enhancing returns is an integral part of L&G’s index fund management process, and one of the primary sources of added value is through the implementation of index changes. The


November 2012

Guest Insight - L&G.indd 38

aim here is always to minimise price impact and hence not to destroy value. We conduct the execution where and when we find natural sources of liquidity, and we try to avoid times when prices are artificially squeezed. This often leads us to adopt a phasing strategy around the index rebalancing date, based on the liquidity of the security and the prevailing market conditions. We also tend to participate in new issues, placings and other capital raising exercises by companies or governments which we expect to result in a change to the index composition: each issue is analysed on a case by case basis and appropriate actions taken. Moreover, we do not confine ourselves to trading only within the local market of the security concerned. The search for natural sources of liquidity can, at times, take us instead to other appropriate regulated exchanges. Stock lending is another important topic to consider in this context. Legal & General does not participate in stock lending with securities held within our index unit trusts. There are many reasons why we have this policy - one of which is that the associated risks are not readily apparent to retail clients. We also take an active approach to corporate governance issues, and we highly value the voting rights that come with being a shareholder (Legal & General holds around 4% of all shares listed on the UK market, largely due to the size of our indextracking business). Lending stock means forfeiting voting rights – we see this as too great a price to pay because exercising these rights can quite often add value by contributing to an environment of strong corporate governance in the market. L&G’s goal is to have carefully planned trading strategies that enable us to track indices tightly while adding value where possible.

14/11/2012 14:20


For professional advisers only

Factsheet The Xafinity SIPP is a “full” SIPP product aimed at more sophisticated investors who wish to maximise investment choice through all acceptable investment types. This includes commercial property (where we specialise, with over 900 in our SSAS and SIPP portfolio), unlisted shares and other investment types.

Xafinity SIPP product features n Unlimited number of investment types/products can be held n Investments in Funds – choose from the whole of market – Platforms, WRAPs, Fund Supermarkets, managed funds (including investment trusts, unit trusts and OEICs) n Commercial property & land investments n Unlisted company share purchases – up to 70% of your client’s SIPP could be invested n UCIS investments accepted, subject to technical review n Joint / Family SIPPs available with shared fees for jointly owned assets n Comprehensive retirement options available including Flexible and Capped Drawdown n On-line valuations available to members and IFAs n Flexible IFA remuneration, paid monthly

Xafinity SIPP fee summary n £0 SIPP Set up fee n Annual fee of 0.24% of SIPP assets held. Minimum annual fee of £162pa, maximum fee of £530pa n Additional fees apply for establishment and administration of new investments eg commercial property n No additional fees for VAT administration & borrowing administration on property/land n Flexible & Capped Drawdown fees at £120 for set up and £11 per regular payment n Exit fee applies only if member transfers all assets out of the Xafinity SIPP prior to benefit settlement.

Further information can be found at: Xafinity SIPP Services Ltd is authorised and regulated by the Financial Services Authority, Scotia House, Castle Business Park, Stirling FK9 4TZ. Registered No SC69096. 932XSP(02/12)

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



November 2012

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It’s been a year of the good, the bad and occasionally the downright ugly where the UK’s film industry funding has been concerned. We can’t deny it, the newspapers have been full of unwelcome reports about an ongoing HMRC campaign against suspected tax dodgers – and, although the news has certainly made for lurid headlines, it’s also left the other fund managers in something of a quandary.

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HMRC’s well-publicised attentions have been focused on a handful of sharp operators who appear to have been abusing the generous tax breaks attached to the Enterprise Investment Scheme (EIS). And indeed, several funds have been struck down this year for doing exactly that. But a new determination is now taking hold among fund managers to reel in the renegades and put the industry’s standing back where it properly belongs.


The good news is that the EIS, a government-backed vehicle designed to encourage investment in deserving enterprises, has been getting more attractive in the last six months. In April the special allowances - which can be in any industry, remember, not just in film – were increased so that the income tax relief for investors rose from 20% to 30% always providing, of course, that the underlying investments are held for at least three years. At the same time, the individual EIS investment limit has been raised from £500,000 to £1 million per tax year. Other key EIS benefits include capital gains tax deferral; 100% inheritance tax relief (provided

Film Investment.indd 41

that funds remain invested at the time of death); and up to 50% loss relief on any holding that falls in value. Taken together, these incentives at both ends of the investment would effectively leave a higher rate taxpayer more than 90% protected against a loss. What’s not to like about that? Meanwhile what has really changed the territory is that the annual investment limit for qualifying companies under EIS has been raised from £2 million to £5 million, a move that is likely to attract bigger players with bigger projects. With the new EIS rules having secured EU State Aid approval during the summer, as well as having been made even more enticing for investors and won considerable praise from the UK film industry, one might have imagined a blossoming outlook for the sector. But there has been trouble riding over the horizon, in the shape of a posse of sustained attacks on ‘outlaw’ UK film investment schemes that have shaken investor confidence and tarnished the image.


The flow of bad news for the film sector began in earnest in April 2012, with HM Revenue & Customs winning a landmark case against a film financing scheme called Eclipse 35. HMRC


Eclipse 35 investors will be paying tax for the next 20 years on the license income they receive from Disney

accused the scheme of being essentially a tax avoidance vehicle instead of a genuinely trading concern. In the same week that David Cameron had accused some aggressive tax avoidance scheme as “morally wrong”, a tax tribunal agreed with HMRC’s finding - leaving Eclipse unable to claim an estimated £117 million in tax relief. What had the fund done that was so wrong? Well, Eclipse 35’s 289 investors had put £50 million of their own money into the scheme, then borrowed another £790 million from Barclays Bank, and then finally bought two films from Disney for £500 million. Disney had agreed to lease back the films from the investor for the sum of £1 billion, which was to be repaid over a 20 year period. But Eclipse’s plan was to claim back the £117 million in tax relief right away, even though the interest on the loans would actually be paid out during the forthcoming 20 year period. That was what rankled with the HMRC inspectors. Well, that and the fact that the investors could perhaps have exited the scheme well before the burdensome taxable payments came through. It would have been a smash and grab followed by a quick getaway. The tribunal’s thumbsdown meant that it had all gone horribly wrong for Eclipse’s well-heeled investors, who were reported to have included several football stars, a couple of city chief executives and a sprinkling of major celebrities. These lucky individuals will now be paying tax over the next 20 years on the license income that they receive from Disney. And their tax bills may well end up being far greater than the tax that they originally tried to avoid. Predictably, Eclipse’s investors are furious about this turn of events, and some have turned their wrath on their own financial advisers. And equally predictably, the organiser behind Eclipse

November 2012

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magazine... for today ’s discerning financial and investment professional 35 is standing its ground. Future Capital Partners has insisted that it stands “absolutely behind the investments” – adding, slightly peevishly: “We now have a situation where because of the current economic environment HMRC, and latterly the government, are challenging what are both legally structured and commercial investments.”


The question of what divides the “technically legal” from the “morally indefensible” is one for m’learned friends to sort out, and in this instance the extended ramifications look set to continue. Yet there is no doubt that the Eclipse 35 saga proved to be a watershed moment for UK film financing in general and that a wholesale clean-up seems to have come out of it. HMRC, having successfully nailed Eclipse, has been looking closely into many other film schemes. As many as 600 of them, according to some press reports. But the flurry of bad publicity has focused the industry’s mind on rectifying the situation. New products and new approaches have been accompanied by a concerted PR campaign that’s being aimed as much at the international community as at the domestic one. In early July, Amanda Nevill, the chief executive of the British Film Institute, led the charge in a letter to The Times that was intended to reassure international producers over the UK tax regime for celluloid projects and protect inward investment into the industry. “It is vital,” she said, “that we distinguish between governmentapproved tax reliefs, such as the Film Tax Credit and the EIS on the one hand, and tax schemes which have nothing to do with those statutory reliefs and just happen to use film as vehicle for minimising the tax contributions of individuals, on the other.”


November 2012

Film Investment.indd 42

Hear hear, said Adrian Wotton, the chief executive of Film London and the British Film Commission, who echoed Nevill’s plea for a clear line to be drawn between schemes that fall outside any specific legislative framework and governmentbacked schemes such as the EIS.

Quiet On The Set!

It’s a differentiation that is strongly stressed by industry executives too. Michael Cowan, the joint chief executive of Brighton-based Stealth Media, an international sales, finance and executive production company, says: “The bad press is not over EIS but over other aggressive investments in film and TV using other aggressive structures as the mechanism of the write off. They are not regulated EIS’s which have to be pre-approved and run as proper commercial companies reporting to shareholders.” Cowan, who has produced over 60 films from budgets ranging from $1 million to $55 million including 2004’s Bafta nominated Merchant of Venice starring Al Pacino, and who has worked with all the major US studios and European majors, adds that the government’s greater encouragement of EIS and accompanying compliance will enable it to limit the cap on tax exposure more effectively. By contrast, he says, “billions were being lost via sole trader vehicles since there was no limit as to what investors could put in based on what they wanted to claw back.” “Most of the investors in the UK who have invested in aggressive tax schemes have done so to get back as much tax as they could,” says Cowan. “They have not looked at the schemes for commerciality, and that has been the biggest problem. Combine this with ignorance and everyone wanting to make money from selling the product, and you get a licence for disaster. “What is needed is more information for investors, more education for them, on

risk and reward in our industry, how financing, recoupment, and distribution works, and how they can be protected in a good commercial deal.” Stealth Media itself is in the process of setting up EIS qualifying companies in which investors can hold direct shares. The companies will focus on film and TV production, and Stealth is looking to raise around £20 million initially. For Cowan, who has structured and brought to market a number of media funds, raising in excess of $500 million over the years in the process, “the great thing” about an EIS investment is that investors know from the outset what the worst case risk will be to their investment at the end of three years. On an income tax only basis, he says, the loss is limited to 36p in the pound; on an income tax and capital gain basis it works out to a 22p loss in the pound, he says. “With the film and TV production products Stealth Media have in mind, the worst case loss we are looking for at the end of the three years if the film does not work is around 4p. We are aiming at returns of around 150% end of year three. We are passionate about film and TV, and we believe we have a good investment product for those interested in film and TV investments that makes money, look to protect the investor from the downside as much as possible, and are not about tax reclaims.”

That’s A Wrap!

Predictably, the skirmishes between the HMRC and film industry financiers have not gone unnoticed at the FSA. The Authority indicated recently that EISs and allied Venture

14/11/2012 14:31


Capital Trusts may well fall under its upcoming guidance on unregulated collective investments schemes (UCIS) and ‘UCIS-like’ products. The proposals, which were mooted by the FSA consultation paper published in August (CP 19/12), may eventually lead to VCT and EIS sales being restricted to “sophisticated” or high net worth investors only - thus effectively banning their promotion to investors with less than £250,000 in their investment portfolios or £100,000 a year in income. This would not be such a surprise, since EIS and VCT investments are most attractive to higher rate taxpayers anyway. But, if the FSA does go ahead with its planned UCIS guidance, IFAs will need to be on their toes in recommending EISs and VCTs, especially in areas such as suitability of risk. It is not yet a foregone conclusion that the Authority will in fact include EISs and

When a Venetian merchant defaults on a large loan, the moneylender demands a gruesome payment VCTs in its UCIS guidance. But it leaves us in no doubt about how the recent spate of financial scandals involving personal vehicles has sharpened the general awareness of the need to keep everything scrupulously compliant.

ETFs. You may know a little. You may know a lot. To become an ETF expert, visit our e-learning centre and discover the A-Z of ETFs in plain and simple terms. Complete the learning modules at your own pace, in a way that best suits you:

How can I become an ETF expert? (Simple - visit our e-learning centre)

• Face-to-face workshops • Videos • Guides • Online tutorials As well as building your knowledge, you can earn CPD credits too. Visit the address below to become an ETF expert. 0800 917 5508

Learning. It’s the Vanguard Way.™

This advertisement is directed at investment professionals in the UK only and should not be distributed to retail investors. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2012 Vanguard Asset Management, Limited. All rights reserved. VAM-2012-10-05-0177

VAN_2021 ETF Expert IFA Ads 122x155mm v1.indd 1 Film Investment.indd 43

16/10/2012 09:32 14/11/2012 14:31


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


I’ve been living in 2016 for the last seven years or so now. I first went there for a few days back in 2004, and I quite liked it. After that I spent a couple of weeks there in the summer of 2005, and I decided I liked it so much that later that year I moved to 2016 permanently. And I’ve lived there ever since. Obviously, these days I have to come back to 2012 every day to go to work, but by the end of the day I just can’t wait to get back home. Clearly, for those readers still living fulltime in 2012 - which means most people in the UK - it’ll be hard to appreciate why I prefer to live in the future. But in these pre-RDR days, when the pension reforms and HMRC Real-Time Information haven’t yet become a reality, I can see why it’s hard to fully appreciate the world I have chosen to live in.

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November 2012

It’s odd for me too, because some of the people I encounter back here in 2012 don’t actually live in 2012 either. Just like me, in fact, except that they go home at night to 2003, where they live, while I go off to 2016 where I live. I find I don’t have a lot in common with them; the stuff we watch on TV every night, for instance, is completely different.

Back To The Day Job While I’m at work here back in 2012, I’m keeping myself busy writing articles for magazines and building my J&rgonFree range of products that go down so well with IFAs and their employer clients in 2016. So well, in fact that I’m quite famous back home in the future. People there think I had great insight when designing

14/11/2012 14:32


new service-based HR products that allowed IFAs to remodel their post-RDR businesses and develop a new role providing valuable and valued middleware services to employers. I’m happy to accept their adulation, by the way - even though I find it amusing that they’ve never been aware that I’ve been living among them for over half a decade now, and that all I’ve really done is observed what their world is like and simply built the products that I already know they’ll go for in my day job back in their past. I’m a bit of a fraud in that way, I guess. Still, I won’t dwell on that. And I’m sure when you yourselves get to 2016 you’ll see exactly what I mean, as it’s written about everywhere. Although not actually in magazines -

something I really can’t bring myself to tell the editor about!

One More Small Step… But by the time you get to 2016, I doubt I’ll still be there. Just recently, I’ve been spending more and more of my time in 2021. You won’t know it yet, but that’s when pensions and ISAs effectively become the same thing, and it’s also when the whole post-auto-enrolment workplace savings world gets truly revolutionised. I’m pretty energised by some of the stuff that’s going on there, and I’m seriously considering moving there full-time any day soon. I dare say I’ll pop back to 2016 from time to time though, so keep an eye out for me when you get there.

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


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JM Finn & Co is a trading name of J. M. Finn & Co. Ltd which is registered in England with number 05772581. Authorised and regulated by the Financial Services Authority. Registered Office: 4 Coleman Street, London EC2R 5TA.

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


We’re now into the final two months of preparation for the arrival of RDR, and even the firms that aren’t yet RDRready ought to have a plan in place to ensure that they’ll make it by the 31st December. For those working in such firms, it may feel like the runup to a house move, with lots of tasks to be completed and a hard deadline to work to. Except that, for many, the emotions surrounding this ‘house move’ are rather different. They like where they live, thank you very much, and they resent having to ‘up sticks’ because their ‘home’ is subject to a ’Compulsory Purchase Order’! For those feeling a little resentful, there are basically three choices. You can chain yourself to the front door, in the hope that the bulldozers will halt in their tracks and the ‘Council’ will revoke the order. You can make the move

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November 2012

obediently, whilst muttering under your breath and generally being unhappy with life. Or - in my opinion the best option – you can accept the situation, be optimistic, and make the best of the new opportunity.

Know Your Own Worth One of the areas causing the most resistance to change is Adviser Charging - and this is often a values conflict. I suspect that, when you boil this down, it’s due to a couple of fundamental reasons. Firstly, the new way of charging involves a change to the implicit ‘emotional contract’ that an adviser believes he has with his clients. In many cases the depth of trust and relationship goes back years, and the

Adviser is seen as a family friend. That contract runs somewhere along the lines of “I’ll look after your financial wellbeing, the product providers will pay me, and I won’t have to spoil our relationship by haggling with you over what I earn”.

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T MAKE YOU FEEL? Secondly, discussing explicit fees with a client raises a personal existential question for Advisers: “What am ’I’ worth?” And my hunch is that this is the area on which Advisers would benefit from focussing. It’s important for any Adviser moving to a fee model to be very comfortable with his or her own worth, and to truly believe that the level of fee being charged is fair value for the clients. Any wavering doubt will be unconsciously picked up by the clients, and it may lead, at best, to an uncomfortable justification of the fee charged, and at worst, a lost client. We human beings communicate our emotions nonverbally via the limbic part of our brain - a mostly unconscious process that we don’t even notice is happening. So, if you follow the received wisdom that consumers base their purchasing

decisions on emotions, not on logic, then any doubts in an Adviser’s head about his or her own worth, or about the level of fee charged needs to be eliminated. If not, clients will definitely pick up on that emotional insecurity, and a client may get ‘spooked’. So here are some tips to help eliminate any nagging doubts in the back of Advisers’ minds about charging:

Know What the Client Gets For His Money There has been much talk of ‘value propositions’ in the run-up to RDR. For me, all this needs to be is a simple list of things the clients get for their fees - many of which they’ll never see or would not ordinarily talk about. A great exercise I’d encourage all Advisers to do, either alone or even better with those they work with, is to brainstorm as long a list as possible of such things. Everyone I’ve suggested this exercise to has found it valuable, because we all take for granted some of the things we do so much that we don’t value them highly enough. Reminding ourselves of what we’re worth helps to embed in our subconscious that, like the woman in the L’Oreal advert, ‘we’re worth it’.

Benchmark Pricing Get an idea from peers you’re networked with about the level of fees charged and the model used. This will provide reassurance on the ‘market rate’ for a particular level of service. Additionally, it’s worth seeking out objective data on Adviser charging. That can be done free via the IFA database

Have an “Elevator Speech” This concept might sound a bit too ‘transatlantic’ for

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some, but trust me, being able to concisely and eloquently articulate exactly what you do and why it’s a benefit to your clients in 30 seconds is a powerful confidence booster. Invest time in practising your speech, taking feedback from trusted colleagues or friends until it trips off the tongue. (It’ll be harder than you think to get it right!) It’s a real confidence booster, and again it re-programmes the subconscious.

Walk in Your Clients’ Shoes Spend time thinking through the situation from the client’s point of view. There’s another psychological phenomenon called ‘cognitive fluency’, which is the human tendency to prefer to stick with things that are familiar and easy to deal with. Like a trusted Adviser, for example! Equally, for many clients the first conversation with an Adviser about fees will be familiar to them if they’ve ever engaged with an accountant, lawyer, architect, surveyor of any other professional service in the past. It might feel like a big deal to us in this industry, but most clients who are talked to professionally and confidently will take the move to fees in their stride, because they’re used to it with other professional services. So my advice for anyone yet to make the transition to fees is pay attention to your own emotions about the subject. Because, just like the saying “If Mum’s happy, everybody’s happy”, if you are, your clients will be too. For more comment and related articles visit...

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

Was this summer’s demise of Honister following its failure to obtain professional indemnity insurance (PII) cover the low point in the business cycle of PII, or an indication of things to come? That’s the question that’s plaguing the minds of IFAs, underwriters and regulators as the final steps are taken toward the implementation of RDR. What is beyond doubt is that PII cover is currently more difficult to obtain, more expensive when it is provided and usually with more stringent terms and conditions attached than in the recent past. David Parry, managing consultant at market research consultancy Finaccord, certainly thinks so. “While we don’t see a structural problem for PI cover for UK IFAs,” he says, “there’s an unfortunate coincidence regarding RDR and problems relating to PI coming together at the same time. There is the possibility of past claims [resulting from RDR] weighing on the records of advisers, and of underwriters taking a dim view of it.”

A Shrinking Field

Proprietary Solutions

In 2010, he says, the AIFA Directory of Services included four organisations that provided PI cover for IFAs, but now there are only two of them listed there. The departure of PYV (whose PII team transferred to Lloyd’s broker Howden in May 2011) and PI Financial have radically reduced the competitive pressure.

Apart from just paying up to get cover where possible, the industry has reacted with a torn toward self-insurance and the occasional use of captive insurers – usually the sole preserve of larger networks or those with well-capitalised backers – and affinity groups. BIBA has offered such a scheme to its own members for some time, but in October, the Institute of Financial Planning (IFP) also launched an affinity scheme for Accredited Members brokered by IFA Solutions, a division of Lloyd’s broker The Underwriting Exchange. IFA Solutions’ Jamie Newell was commendably forthcoming on the subject. When asked about how the terms and conditions provided in the IFP scheme compare with the general market, he highlighted the claims notification clause, which says that claims must be logged “as soon as practicable”. Whereas some other insurers insist that notification must be “immediate” or “within 14 days”. Little things can mean a lot.

Jamie Newell of Lloyd’s broker IFA Solutions agrees. “I would estimate that capacity has reduced by some 30%-40% in the last 12 months,” he says. “This has primarily been due to matters such as Keydata and the subsequent action being undertaken by the FSCS/Herbert Smith against advisers who sold Keydata products. And then there’s Arch Cru, of course, and more recently the collapse of Connaught.” Alas, things seem set to get stickier in the new year. “The FSA’s proposal to ban the sale of UCIS to retail investors [Consultation Paper 12/19] and the review of [UCIS] sales made to date will possibly lead to more insurers withdrawing from providing PII to IFAs in 2013.”


November 2012

Risk Profiling And when I asked him whether, in sectioning off a favoured group of advisers, the terms and conditions for those outside the circle might become even more draconian in the future, Newell was clear. “No,” he says, “the concept of insurance will always remain. Those firms that deploy robust business models, that are prepared to spend time, energy and resources in de-risking their

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COVER businesses, and in employing risk management procedures such as Accredited firms - will enable insurers to identify risk more readily. That will make it easier for them to risk-profile and rate the business accordingly against other businesses.” This enhanced risk profiling of business practice is also reflected in the fact that businesses making claims involving risk-rated multi-asset funds by the Tenet network can qualify for sharply reduced excesses. Tenet provides cover through Paragon Insurance, its Guernsey-based captive insurer.

Network Envy Amongst the networks, however, there is still no single response to the PII situation which is hardly surprising, as not everyone agrees on the exact nature of that situation. At one end of the scale is Positive Solution chief executive officer Richard Pearson’s phlegmatic reasoning that he has been in the business for 28 years and witnessed many cycles in PII cover; at the other is SBG’s George Higginson, who presents a more apocalyptic vision. Pearson says that the backing of Aegon and strong risk controls provides some insulation for his network - but that “even so, we too have seen costs rise.” And Higginson says that Hanover, SBG’s PII underwriter, pulled right out of cover for IFAs in February 2012 forcing the group to secure alterative cover through a combination of a Lloyd’s syndicate deal and self-insurance. Pearson says that he is bemused at the attitude of the

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FSA towards PII insurers, as revealed in the letter sent to them by Clive Adamson, director of supervision of the regulator’s conduct business unit, regarding cover for firms which sold Arch Cru funds. He claims that this letter “indicated that [the FSA] had been taken by surprise by the insurers’ reaction in not wanting to underwrite this type of business. But it is up to underwriters to make that call.”

A Hole in My Business Higginson agrees about the troubled state of the current market. “Where cover is provided, it is not unusual to find that the premium has doubled, terms have tightened, and there is a rise in excesses. To take one example, an adviser looking to join us came to us and said that his premium had risen to £100,000 a year with a £50,000 excess on every claim.” And that’s enough to blow a hole in the basic economics of the situation. “There do not have to be a lot of claims for a large amount to become due,” he says. “We have done some work on this and we found that for a £1 million investment we make circa £10,000 and the adviser £40,000 (=£50,000 in total) which is very small when you compare that to the potential liability and the associated costs, such as PII cover.” Higginson explains the logic of the situation: “Imagine if SBG was not here – and we are circa 25% of the market, after all. This would mean that the FSCS would have to pick up the bill. What would happen to all the remaining advisers in the market if we were not here? It would mean that they would have to pick up the bill instead.”

The situation regarding PII reflects a form of fiscal drag operating within financial services precisely because of the chosen method of obtaining money to compensate consumers for miss-selling, fraud and the risk of final salary pension schemes going under. In the latter case, there is the pension protection fund which imposes financial strains on well-run schemes by imposing a levy on them to pay for badly-run ones. Similarly, the FSCS demands a levy from existing, presumably well-run IFAs to pay compensation for the actions of defunct, badly run ones. Of course, these same firms bear the brunt of understandable reluctance amongst underwriters to accept their PI business on anything except punitive terms.

Sympathy For The Devil? But if you’re thinking that the insurance industry is a villain of the piece, perhaps we should remember that underwriters too can hardly be blamed for avoiding a sector which may still contain claims relating to toxic ‘assets’ whose nature has yet to become apparent? That fiscal drag may ultimately result in whole-ofmarket independent advice becoming the sole preserve of the top 10% or so. Leaving highly restricted advice or direct sales for the bulk of the population, and the Citizens Advice Bureaux to mop up the difference elsewhere. For more comment and related articles visit...

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SPECIALIST HEALTHCARE AND BIOTECH FUNDS CAN PROVIDE A MUCH-NEEDED BOOST TO PORTFOLIO PERFORMANCE. NICK SUDBURY DONS HIS WHITE COAT TO INVESTIGATE Rugged Good Health AXA Framlington Health Fund Large healthcare companies are typically seen as a defensive option on account of their solid balance sheets and reliable cash generation. And the good thing is, many are now trading at attractive valuations - which suggests that they are ideally placed to outperform while the rest of the market is being held back by the slow economic growth. The big unknown, of course, is what will happen to the US healthcare reform plan in the wake of the presidential election. This has already been written into law, but it is not actually due to be implemented until 2014 – which means that any significant changes between now and then are FUND FACTS likely to affect Name: AXA hospitals, manager Framlington Health healthcare facilities Fund and associated areas Type: Unit Trust such as medical supply companies. Sector: Specialist And all the while, of Fund Size: £270.3m course, the ongoing saga of the Eurozone Launch: Feb 1987 crisis is likely to put Portfolio Yeild: 0% pressure on healthcare programmes all Charges: Initial: 5.5%, across the continent. Annual: 1.5% AXA Manager: AXA Framlington Investment Managers Health is one of Website: the most consistent performers in

the sector, and it has followed its MSCI World Health Care benchmark fairly closely with an impressive 5 year gain of 49.7%. As you would expect, the bulk (77%) of the £270 million portfolio is invested in the US, which is home to most of the world’s largest drugs companies. The scope to diversify really kicks in at the sub-sector level, where the manager, Gemma Game, has a wide enough remit to take advantage of the best opportunities wherever she finds them. This allows her to invest in pharmaceutical companies, biotech firms, medical device and instrument manufacturers, distributors of healthcare products and care providers. At the end of September the largest weighting was in Healthcare Services, which made up a third of the fund. This was followed by Medical Devices at 22%, Biotech Products at 17% and Pharmaceuticals at 12.4% - with a further 11% being held in Speciality Pharma. There are a total of 90 holdings in the fund, with the top ten accounting for only 24.3% of the fund. These include household names like Pfizer and Merck, as well as less well known companies such as Express Scripts and Celgene. The eclectic mix is a reflection of the manager’s bottom-up approach, based on the underlying fundamentals. The strength of the US economic recovery and the healthcare policy in the wake of the election will have a big influence on future returns, as will the manager’s ability to identify the best companies. If she gets it right, she has every chance of outperforming the wider market until the economy really starts to pick up.

The US economic recovery and the healthcare policy in the wake of the election will have a big influence on future returns 50

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Your Life in Their Hands Worldwide Healthcare Trust plc To successfully run a healthcare fund requires a lot of specialist knowledge - and it’s hard to imagine a firm better equipped to do this than OrbiMed Capital. The USbased investment manager is owned by seven principals who all have extensive experience of valuing these types of companies. They are supported by a team of science and business analysts who carry out detailed research into the various drugs programmes and regularly visit the companies concerned. Samuel Islay, the principal in charge of the Worldwide Healthcare Trust plc, has an astonishing track record. Over the 5 years to the end of August, the fund has achieved a total return of 85.1%, whereas the benchmark is up just 68.4%. Islay says that he’s currently extremely bullish, and that he believes that they can carry on generating annual returns of 15%. The fund invests in pharmaceutical and biotech companies, as well as in related securities in the healthcare sector. There is the scope to use gearing of up to 20% of net assets to boost the returns, although at present the figure is a modest 6%. The manager can also invest up to 5% in derivatives and a further 8% in equity swaps. This is a concentrated portfolio, with its £410 million of net assets allocated among just 56 individual holdings. Around two-thirds of the money is invested in large caps, with the balance concentrated mainly in the small-cap discovery end of the sector. The latter are a regular takeover target for drugs giants like Glaxo or Pfizer, which are then able to

market their discoveries worldwide. The fund is unusual in that its US weighting is much lower than you’d normally expect. Just 59.1% of its holdings are in America, with another 20.9% invested in European stocks – of which only a very few are in the troubled South. The remaining 20% is spread across Asia and the Emerging Markets. The top ten holdings make up 42.1% of the fund, with the largest being an 8.8% weighting in the Swiss drugs giant Roche. This is followed by a 5.4% exposure to Merck, 4.6% FUND FACTS in Pfizer and Name: Worldwide 4.2% in Sanofi. Healthcare Trust plc At time of (WWH) writing, Worldwide Type: Investment Co. Healthcare Trust was trading at a Sector: Biotechnology 6.2% discount to & Healthcare NAV. This is the Market Cap: £378.3m level at which the Board can intervene Launch: April 1995 to buyback the Portfolio Yeild: 2.1% company’s shares. Ongoing Charges Unusually for the (inc perf fee): 1.34% sector, it is paying a 2.1% yield too – Manager: but obviously, it’s Frostrow Capital LLP the potential for Website: further capital growth that is the main attraction.

This is a concentrated portfolio, with its £410 million of net assets allocated among just 56 individual holdings

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

Cutting Edge Approach PowerShares Dynamic Pharmaceuticals Portfolio The top performing ETF in the sector is the US-listed PowerShares Dynamic Pharmaceuticals Portfolio that trades under the ticker PJP. This is one of the new breed of ‘smart beta’ products that track a theme or characteristic that has been shown to produce higher historical returns than the comparable cap weighted index. It certainly seems to have worked, because over the last five years it has risen in value by almost 90%. The index universe consists of 29 US pharmaceutical companies engaged in the research, development, manufacture, sale or distribution of various drugs and treatments. These are weighted in an unusual way, using criteria such as price momentum, earnings momentum, quality, management action and value. The holdings are rebalanced every quarter. At time of writing, the fund’s largest exposure was in Eli Lilly at 5.79%. This was followed by Gilead Sciences, Abbott Laboratories, Merck, Pfizer and Amgen - all at above 5%. Between them the large caps make up 54% of the fund, with the mid caps a further 16% and the balance invested at the smaller end of the spectrum. The result is a concentrated portfolio with an average PE ratio of 13.66 and an attractive Return on Equity of 19.71%. A smart beta ETF is an interesting concept, as it suggests that by using objective, quantifiable and repeatable factors it is possible to outperform an equivalent cap-weighted benchmark. This has

certainly been the case with PJP, which has beaten the S&P Pharmaceuticals index that comprises the same 29 stocks hands down. But don’t expect any miracles. The fund had a shaky start, with the 2006 and 2007 calendar years showing an underperformance of several hundred basis points. It wasn’t until 2008 that things improved, with the ETF falling by only 9.81%, compared with an index decline of 17.92%! But 2010 brought a welcome growth of 28.62%, nearly 15 times the 2% increase in the underlying benchmark. It has FUND FACTS also added a huge Name: PowerShares amount of value in Dynamic the year to date. Pharmaceuticals The historical Portfolio (PJP) returns suggest that Type: ETF listed PJP can deliver in the US outperformance at the same low cost as a Sector: Pharma, normal index tracker. Health and Biotech If correct, then this Fund Size: $335.9m would clearly be a win-win scenario for Launch: June 2005 clients. But it is not Portfolio Yeild: 0.71% an easy idea to sell, Manager: Invesco and it demands a PowerShares fair degree of faith that the innovative Website: invesco weighting scheme will continue to deliver.

Historical returns suggest that PJP can deliver outperformance at the same low cost as a normal index tracker 52

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Gene Genie iShares Nasdaq Biotechnology Index Fund As we’ve said, the more volatile and potentially lucrative returns are to be found in the biotech sector. These mostly small but innovative companies are faster on their feet than the pharmaceutical giants, and they concentrate their activities on pioneering new drugs and treatments. This makes the returns a lot less predictable than you’d find among the drug majors – but, by investing in a diversified fund, it may be possible to achieve superior long-term performance. A good example is the US-listed ETF, FUND FACTS iShares Nasdaq Name: iShares Biotechnology Index, Nasdaq Biotechnology which is up by an Index Fund (IBB) impressive 67.2% over the last five years. Type: ETF listed The fund’s benchmark in the US consists of companies Sector: Pharma, which meet three Health and Biotech essential criteria: that they are primarily Fund Size: $2.4bn engaged in Biotech Launch: Feb 2001 (although some are classified as Pharma); Portfolio Yeild: 0.40% that they are TER: 0.48% listed on the Nasdaq Stock Manager: BlackRock Exchange with a Website: market cap of at least $200 million; and

that they have an daily average trading volume of at least 100,000 shares. Almost three quarters of the fund is described as in Biotech, with the balance in Pharma, and there are 117 separate holdings, with the ten largest accounting for 56.6% of the $2.4 billion portfolio. These include Alexion Pharmaceuticals, Regeneron Pharmaceuticals and Amgen, each of which represents around 8% of the portfolio. It’s certainly an interesting portfolio, with a high P/E ratio of 31.15 and a low beta of 0.48 when measured against the S&P 500. This is due to the fact that so much of the return from these sorts of holdings is driven by the stock specifics – and, in particular, the success or failure of their clinical trials and any associated M&A activity. The rate of innovation in this part of the market is absolutely staggering - with more new products under development than ever before. Many of the pharmaceutical giants are desperate to increase their drugs pipelines - and in many cases the easiest way to do it is to snap up a successful biotech company, even if it means paying a large premium. This helps to explain why over the last 5 years the iShares ETF is up 67% whereas the S&P 500 is back to where it started. But it has not all been plain sailing, with sharp corrections in excess of 20% in both 2008 and 2011. Normally this type of stock specific area would warrant an actively managed fund, but the passive mandate has worked so well that it clearly offers a viable alternative.

It’s certainly an interesting portfolio, with a high P/E ratio of 31.15 and a low beta of 0.48 when measured against the S&P 500

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.community .community spirit spirit

Join Jointhousands thousandsofofIFAs IFAsand andFinancial FinancialPlanners Plannerswho whouse useIFA IFALife Life totonetwork, network,share sharebest bestpractice, practice,debate debateindustry industryissues, issues,access access business businessresources resourcesand andtotoprovide providehelp helpand andsupport supporttotoone oneanother. another.

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14/11/2012 14:54 28/09/2011 28/09/2011 11:44 11:44


IN A MINEFIELD OF INFORMATION CONFUSION OVER WHO’S REALLY INDEPENDENT WILL LAND THE BURDEN OF RESEARCH ON THE CONSUMER, SAYS GILLIAN CARDY. WORSE LUCK As I write, there are 61 more shopping days until Christmas and 68 days to the implementation of the now infamous Retail Distribution Review. Adviser firms are busy fine-tuning their advice and client service propositions, clarifying how they will work with their clients on New Year’s Eve and beyond – and, most importantly, whether they will offer Independent or Restricted advice, or perhaps both, depending on the client’s circumstances or wealth. The changes have led various adviser search engines, some of them previously 100% IFA, to change their parameters so as now to include firms and individuals who will offer Restricted advice. A retrograde step in my view! So, the question of how consumers will be able to source Independence financial advice in the future has been taxing me lately. The problem is that there is not going to be any mechanism by which a consumer will be able to find out from an impartial source, such as the FSA register of firms or individuals, whether the firm they are consulting - or the advisers who work for it - are indeed offering Independent or Restricted advice. Certainly, firms must report to the FSA how much of their company’s income is derived from Independent or Restricted advice - but this does not then translate into a public disclosure of a firm’s regulatory status on an accessible register. Firms which ‘hold themselves out’ as Independent must only offer Independent advice. So a firm describing itself as an IFA or Independent will obviously fit the bill for a client looking for Independent advice. But a firm which makes no claim to its Independence in the company name could offer Independent advice, or Restricted advice, or both.


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Individual advisers won’t declare themselves as Independent or Restricted for regulatory purposes - not least, because if they work for a firm that offers both advice options, the same adviser could provide Independent advice to a wealthy client on one day of the week, and Restricted advice to a client of more modest means on another day. So, if a client approaches a firm which clearly states in its company name that it is an IFA or Independent, then at least that client will know what to expect from that firm. But in any other circumstance the client is going to have to make some quite detailed enquiries about whether they can expect Independent or Restricted advice. Clients will need to be able to get to grips with disclosure documentation. This does not have to be set out in any sort of prescribed format, which will make the information even harder to dig out. And where firms offer both types of advice, clients will need to be clear as to what circumstances would lead to being given different types of advice. Is it, for instance, dependent on how much clients are prepared to pay, or on their income, or on assets under advice for example? If Independence is important to advisers and to clients, then organisations and publications totally focused on supporting Independence would do well to make sure that they are the resource of choice for consumers who want to find Independent advice. For more comment and related articles visit...

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

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

Mortgage Market Review – Feedback on CP11/31 and Final Rules Policy Statement Ref: PS 12/16 25th October 2012 312 pages

The Statement summarises the responses received in relation to Consultation Paper CP11/31 (‘Mortgage Market Review: Proposed package of reforms’), and provides final guidance. The majority of the MMR changes will come into effect on 26th April 2014. Key features include: •

The removal of the requirement on intermediaries to assess affordability.

Most interactive sales (e.g. face to face or telephone) to be advised.

Every seller to be required to hold a relevant mortgage qualification.

Lenders to be fully responsible for assessing whether the customer can afford the loan.

Interest-only loans to be permissibly only where there is a credible strategy for repaying the capital.


An ‘execution only’ sales process for non-interactive sales (internet and postal).

Cancellation of the obligation to provide customers with an Initial Disclosure Document. Instead, certain key messages about a

November 2012

FSA Publications + IFA Cal.indd 56

firm’s service must be given to customers. •

The Key Facts Illustration (KFI) will be required only where a firm recommends a product or products, where the customer asks for a KFI, or where the customer has indicated what product they want in an execution-only sale.

The FSA now proposes to initiate a series of conversations with firms to help them understand the MMR reforms, to address any resulting systems changes, and to keep them informed of the next steps in the implementation strategy. A review of the impact from these proposals is scheduled in not more than five years after implementation.

SIPP Thematic Review Findings and Guidance Guidance Consultation Ref: GC 12/12 23rd October 2012 12 pages

Of interest to SIPP operators, firms, trade bodies and consumer representatives. The publication follows on from the last SIPP review, which investigated concerns about how far SIPP operators had adapted their processes and procedures to reduce risks following the 2009 report. The FSA had also considered the level of compliance among SIPP operators with our Client Money and Assets rules (CASS). The FSA says that its survey showed up poor firm compliance with regulatory requirements, particularly in

the area of risk planning and mitigation, which it said had significantly increased the risk posed by SIPP operators. And the majority of SIPP operators had been unable to articulate accurately the application of CASS to their business structure. The paper therefore calls for improvements in: •

The level of understanding among firms’ senior management of regulatory requirements.

The effectiveness of senior management oversight.

The application of CASS to the firm’s business model and the effectiveness of systems and controls to comply with the rules.

Consultation period ends 20th November 2012

Quarterly Consultation Paper No.34 Consultation Paper Ref: CP 12/27 5th October 2012 174 pages

Key proposals include: •

Changing the Conduct of Business sourcebook (COBS) and Glossary in relation to the exemption from the Retail Distribution Review (RDR) rules for certain Holloway policies. Amending the Senior Management Systems and Controls sourcebook (SYSC) to bring the rules on voiding and recovery into line with policy on remuneration principles proportionality.

Amending the Retail Distribution Review (RDR) adviser charging and remuneration rules regarding referrals to discretionary investment managers.

Making changes to the Enforcement Guide (EG) and Decision Procedure and Penalties manual (DEPP) to include investigation and enforcement powers for financial and nonfinancial counterparties under the European Market Infrastructure Regulation (EMIR) and the EMIR statutory instrument (EMIR SI).

Regulatory Reform: The PRA and FCA Regimes for Approved Persons Consultation Paper Ref: CP 12/26 3rd October 2012 183 pages

The 2012 Finance Bill created a new UK regulatory architecture, including the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The Bill also proposed changes to the Financial Services and Markets Act 2000 and a number of other Acts of Parliament. Substantial changes to the existing FSA Handbook are required to align the new rulebooks with the future objectives and functions of the PRA and FCA. This paper consults on those changes. Consultation period ends 7th December 2012

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Consultation Paper Ref: CP 12/25 2nd October 2012 252 pages

The Paper discusses responses to CP12/2, which set out proposals for changes to the Listing Rules, Prospectus Rules and Disclosure Rules and Transparency Rules. The second part of the publication contains a consultation on proposed amendments to the Listing Rules to enhance the effectiveness of the Listing Regime, and draft rules. At the same time, the FSA is consulting on proposed amendments to the Listing Rules relating to the implementation of the Alternative Investment Fund Managers Directive (AIFMD). Consultation period ends 2nd January 2013

‘General Guidance on Proportionality’ for Remuneration Finalised Guidance Ref: FG 12/19 25th September 2012 20 pages

The Paper sets out the FSA’s proportionate approach to implementing the Remuneration Code and the Pillar 3 remuneration disclosure rules.It also clarifies how firms may comply with the Code and disclosure rules in a manner that takes account of their size, internal organisation and the nature, scope and complexity of their activities. The new framework replaces the original four-tier structure (based on capital resources) with three new ‘levels’ (based on total assets).

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Financial Services Compensation Scheme Policy Statement Ref: PS 12/15 28th September 2012 49 pages

Of interest to firms, consumers, consumer representative bodies and advice agencies. The statement summarises the feedback to CP12/7 Financial Services Compensation Scheme (“Changes to the Compensation Sourcebook), and presents final rules. The original proposal entailed amendments to the rules in the Compensation sourcebook relating to the operation of the Financial Services Compensation Scheme (FSCS). One of the subsequent changes relates to the eligibility of directors of a failed firm and persons who, in the opinion of the FSCS, are responsible for, or have contributed to, a firm’s default. Some limited flexibility will now be allowed in these circumstances. The FSA has also clarified the manner in which deposit takers are required to alert depositors about FSCS compensation arrangements, and under what circumstances they should contact the FSCS.

Regulatory Reform: PRA and FCA Regimes Relating to Aspects of Authorisation and Supervision Consultation Paper Ref: CP 12/24 12th September 2012 302 pages

The paper, compiled in consultation with the Bank of England, sets out the proposals for changes to existing regulatory rules and guidance, in the context of the Financial Services Bill in January 2012.


Enhancing the effectiveness of the Listing Regime and Feedback on CP12/2

Dates for your diary NOVEMBER 2012 26-1

Financial Planning Week (Institute of Financial Planning)


Financial Advisor Service Awards winners announced


Consultation period ends on Consultation Paper CP 12/22 (Client Assets Regime: EMIR, Multiple Pools and the Wider Review)


Consultation period ends on Guidance Consultation GC 12/20 (Review of the Client Money Rules for Insurance Intermediaries)

DECEMBER 2012 2-4

Private Wealth Management Summit Las Vegas, USA


Consultation period ends on Consultation Paper CP 12/26 (Regulatory Reform: The PRA and FCA Regimes for Approved Persons)


Consultation period ends on Consultation Paper CP 12/23 (Addressing the Implications of Non-EEA National Depositor Preference Regimes)


Consultation period ends on Consultation Paper CP 12/23 (Addressing the Implications of Non-EEA National Depositor Preference Regimes)


EC Directive on the ending of gender-based insurance premium differences comes into force


Retail Distribution Review operational from midnight

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DECEMBER 2012 31

New rules on SIPP disclosure come into force from midnight


New EU Regulation on OTC derivatives, central counterparties and trade repositories comes into force from midnight


FSA and financial firms to apply COREP common European reporting standards from midnight

JANUARY 2013 1 2

Ireland assumes the EU Presidency until 30th June Consultation period ends on Consultation Paper CP 12/25 (Restrictions on the Retail Distribution of Unregulated Collective Investment Schemes and Close Substitutes)

Risks to Customers from Financial Incentives

The FSA says that the creation of the new PRA and FCA rulebooks will involve substantive changes to the existing FSA Handbook, so that the new rulebooks can be aligned with the future objectives and functions of the PRA and FCA.

The FSA has flagged up its concern about incentive schemes with high risk features and the potential for sales staff to earn significant bonuses were common across the firms we assessed. Most firms did not have effective systems and controls in place to adequately manage the increased risks of misselling arising from their incentive schemes.

Consultation period ends 12th December 2012


World Future Energy Summit Abu Dhabi, United Arab Emirates

Addressing the Implications of Non-EEA National Depositor Preference Regimes


Inauguration of the President of the United States Washington DC, USA

Consultation Paper Ref: CP 12/23 11th September 2012 41 pages


World Economic Forum Annual Meeting Davos, Switzerland


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

FEBRUARY 2013 10

Chinese Year of the Snake commences


European Union-China Summit Beijing, China


Global Tax Summit 2013 Monte Carlo, Monaco


Let us know about any forthcoming events you think ought to be in our listings. (Sorry, press and official events only.) Email us at and we’ll do the rest.


The Bill provided for the creation of the new UK regulatory architecture, including the creation of the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). It also proposes changes to the Financial Services and Markets Act 2000 and various other Acts of Parliament.

November 2012

FSA Publications + IFA Cal.indd 58

The FSA is anxious to address a problem which occurs in certain non-EEA countries, whereby domestic depositors take precedence over nondomestic depositors if a firm should become insolvent. The agency is therefore calling on firms from non-EEA countries that operate these national depositor preference regimes to take appropriate steps to address the subordination of UK branch depositors (specifically) compared to those of home country depositors Of interest to firms from non-EEA countries which operate deposit-taking branches in the UK and which are subject to national depositor preference regimes in their home countries. Consultation period ends 11th December 2012

Guidance Consultation Ref: GC 12/11 5th September 2012 32 pages

Of interest to all firms in retail financial services with staff who are part of an incentive scheme and who deal directly with retail customer transactions.

The agency’s guidance aims to help firms identify and manage the risks from incentive schemes, in accordance with the relevant requirements set out in the FSA Handbook. It says it expects firms to: •

Properly consider if their incentive schemes increase the risk of mis-selling and, if so, how;

Review whether their governance and controls are adequate;

Take action to address any inadequacies – this might involve changing their governance and/ or controls, and/or changing their schemes;

Where risks cannot be mitigated, take action to change their schemes; and

Where a recurring problem is identified, investigate, take action and pay redress where consumers have suffered detriment.

Consultation period ends 31st October

14/11/2012 14:56

Exciting Times Ahead BACKGROUND NLP Financial Management Limited (NLPFM) was founded in 2005 by Lee Pittal and Adam Katten. Having previously been instrumental in establishing and growing a successful wealth management business within accountancy firm BDO Stoy Hayward, Lee and Adam recognised that there was significant demand for a niche financial planning business, where client service would truly be at the core. CLIENT SERVICE Adam and Lee expect a very high standard of client service, which is ably delivered with the support of a highly qualified team. They regard their clients as partners and treat them as they would wish to be treated themselves – swiftly, fairly and professionally. The team at NLPFM are constantly reviewing and considering their clients’ circumstances and this is reflected in the advice proposition. The company provides an ongoing service with regular meetings; by default biannually. Clients receive a detailed pack analysing the performance of their portfolios since the last meeting. The regular reviews are an essential part of the service to ensure that changing client circumstances are reflected in advice provided and investment decisions made. INVESTMENT MANAGEMENT Prior to the end of the tax year, where appropriate, portfolios are reviewed with a view to taking advantage of tax year end opportunities. This will include consideration of pension contributions, use of capital gains tax allowances, investments in ISAs and other tax efficient investments. These will depend on the risk profile of the client and their particular circumstances. NLPFM has a robust client proposition for its 300 plus high net worth clients. Of the approximately £310 million invested through the company, around £160m is held within its Discretionary Management Service with the residue dealt with on an advisory basis. NLPFM believes in “investment advice in a safe pair of hands”as many of its clients who typically have £750,000 to £1 million of funds, do not want to risk the high volatility typically associated with direct stock market investment. The Discretionary Management Service offered by NLPFM is designed with these clients in mind. Its Investment Panel consists of both Adam and Lee as well as an in-house researcher and Michael Ezra, a Chartered Accountant, who during the past twenty years, has focused on financial investments. Michael has a solid pedigree,

FSA Publications + IFA Cal.indd 59

having been an adviser to funds with assets exceeding $1.4bn. Michael oversees the asset allocation strategy and assists with the management of investments for the company’s clients. As NLPFM has discretionary permissions, it constantly studies returns, both in terms of volatility as well as performance, with the aim of producing the optimal mix of both. Weekly meetings take place and reviews of fund performance over various durations are undertaken. Face to face or remote meetings with all the investment fund managers or one of their team are undertaken regularly to ensure that the outlook and remit of the chosen funds are aligned with the aims and objectives of the NLPFM Investment Panel. All of this data is assimilated by the Committee and used to assess the suitability of funds for clients, taking into consideration their individual attitude to risk. ACCOUNTANCY TIES NLPFM has grown steadily over the years by developing strong ties with other professional firms, especially Nyman Libson Paul Chartered Accountants. As Adam and Lee are also Chartered Accountants, they are able to understand the requirements of their colleagues in the profession and are able to mould their offering accordingly. This has stood them in good stead in developing such relationships. NLPFM also provides a wealth management service to the clients of Landau Morley Chartered Accountants, under the label “Lanmor Wealth Management”. EXPANSION PLANS As part of its ongoing, but controlled expansion, the company is actively seeking similar relationships with other firms of chartered accountants and solicitors, who want to provide their clients with an independent, high quality, financial planning and fund management service. The company is also actively seeking highly qualified advisers with a loyal client following who recognise that their respective firms are not yet in a position to meet the demands of the Retail Distribution Review (RDR). The expansion plans include the possible acquisition of client banks or entire trading entities. This will be a steady process as the company will continue to put client care at the forefront of all its dealings. If you would be interested in joining NLPFM as an employed IFA or interested in in the NLP acquiring your business please in the first instance drop an e-mail through to to arrange a confidential discussion.

14/11/2012 15:22

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

TO RECRUIT OR NOT TO RECRUIT? THAT IS THE QUESTION, SAYS RECRUIT UK’S JOHN ANDERSON It looks like being another tough year for IFAs. With the onset of RDR, and with the IMF downgrading the UK growth forecast for 2012/2013, one could be forgiven for perpetually viewing the glass as half empty. And no wonder. RDR has led to the evaluation of working practices across the whole industry. No matter how big or small a company. Each one has been asked to find a solution to the conundrum of how much time advisers give advice in front of clients versus regulatory and performance monitoring - not to mention new systems and edicts to be implemented and adhered to. Indeed, I’ll wager that each company will have a different strategy for managing until the RDR landscape becomes clearer. In addition, clients need to be seen just as normal, and their cases reviewed at timely intervals, or at particular life changing milestones. Except that, this time, the clients must also be educated into accepting a new way of paying for their expert financial advice.

Getting To There, From Here

But this is now. Let’s try imagining the picture twelve months hence. RDR is here, and it‘s all understood. IFA practices can manage the regulatory


November 2012

Recruitment.indd 60

requirements, having devised robust processes which encourage advisers to be with clients. With a positive atmosphere permeating through to the financial directors, the purse strings are loosened and growth is now back on the agenda as clients demand more and more of your time. So how do we get to this utopia? After all, at the moment most financial practices are caught between somewhere rocky and hard. The need to grow is balanced with the need to recruit, and how to recruit the right person. How can you help yourself? (And save some money?)

Work Out Who You Need

Firstly, devise your ideal candidate and figure out the value that he or she can bring to your business. Try and put some figures around the whole benefit that a new incumbent can bring. Think about office dynamics, and about the hard and soft skills that a new person would require. Would your business be best served by an IFA to manage some of your clients? Do you want to increase the assets held by your company? Or maybe you require a paraplanner to free up your time, or your advisers time, to see clients? Know what you’re looking for before you go hunting. Then, once you know what or who you’re looking for, you need a strategy.

Utilise your network. Identify people who fit your business culture, and set some time aside to call them.

Employ An Expert

Invest in a recruitment consultancy, which will come to see you, and which will dedicate its time to understanding your business culture. A consultancy that already has a proven track record in finding similar candidates for organisations in your market. An company and individual that will help create your recruitment strategy, and one that can help you reduce your hiring time and your recruitment cost. Cost, did we say? Would that be the size of the recruiter’s fee, or the amount that you’ll save by appointing a dedicated expert who’ll create a recruitment strategy and leave you free to do what you’re best at? They’re not the same thing. Remember, the recruiter is billing for his expertise in exactly the same way as you’ll be doing after RDR. So, the real proof of the pudding is the quality of the service itself. That, and the knowledge that you’re doing the very best thing for your firm. It can be an expensive mistake to get it wrong. For more comment and related articles visit...

14/11/2012 15:25


“The need to grow is balanced with the need to recruit, and how to recruit the right person”

Recruitment.indd 61

November 2012

61 14/11/2012 15:25

Financial Services Recruitment Specialists

Paraplanner Opportunities

Investment Manager

Birmingham, London, Nottingham, Manchester, Stoke


Circa £35k

Up to £40k+ with Profit share

Our client is the UK’s largest independent private client investment management companies, who have a very large client base, significant assets and plenty of opportunities due to growth and expansion

To be considered for this role, our client requires the following criteria;

Currently our client is seeking a self motivated and ambitious Paraplanner to provide the appropriate support for the financial planning managers. You will facilitate the smooth processing of new and existing business and create and maintain affective working relationships with a range of clients and colleagues. You will monitor the compliance standards across the financial planning department and prepare business generating documentation for the financial planning managers including report writing, whilst ensuring that standards and deadlines are met.

■ Preferably educated to degree level

Due to the way our client is evolving, technology is being implemented which places less emphasis on the need for administration, so they are seeking an individual who has strong technical capability that will compliment the financial planner.

Recruit UK DPS Nov 12.indd 62

■ Full level 4 diploma in financial planning with evidence of studying towards chartered status. ■ Minimum of 4 years experience in a paraplanning role. ■ Experience in Tax and trusts ■ Experience in systems such as O&M Pension profiler/ATEB/First software ■ Attention to detail is essential.

A leading Private Wealth Company, is looking to expand their team with a high calibre Investment manager. The ideal individual will be chartered or very close to obtaining with experience in providing Investment advice within an UHNW market. Preferably you will have significant AUM to bring with you, however this is not essential. The office has over £1.5 billion AUM, and the successful individual will be joining a team under the office umbrella that could be responsible for up to £300 million AUM.

■ An articulate manner and ability to communicate effectively in verbal and written form with HNW clients. ■ Highly organised, methodical, analytical and disciplined with good administrative skills.

In return, my client offers a competitive salary up to £35k with great benefits and the opportunity to develop and progress with a well-established and prestigious company.

14/11/2012 15:45

Contact us to discuss our latest opportunities:

T 0844 371 4031

Investment Manager Chester


IFA Self Employed Central London

Up to £40k+ with Profit share Our client, a leading Private Wealth Company, is looking to expand their team with a high calibre Investment manager. The ideal individual will be chartered or very close to obtaining with experience in providing Investment advice within an UHNW market. Preferably you will have significant AUM to bring with you, however this is not essential. The office has over £1.5 billion AUM, and the successful individual will be joining a team under the office umbrella that could be responsible for up to £300 million AUM

Employed IFA Bristol £40k basic + Bonus

My client is a Top 100 independent financial management firm based in the City of London who can offer one of the best self-employed IFA options in the market. Aiming to provide the highest standard of impartial and informative advice to High net worth clients, they require an experienced and level 4 qualified financial professional who has strong relationship management skills and a team player attitude. My client has an excellent retention rate with a vibrant, fun sharing environment that offers motivational leagues, presentations and awards and they seek an outgoing and intelligent entrepreneur to fit their culture. You will be a strong business developer as although leads are provided, they are not constant so the ability to generate your own business will be a key factor to success in this role. In return, my client offers; ■ A spacious, vibrant and professional office to work from that is situated in a great City location

Based in the heart of the financial district of Bristol our client, a highly regarded financial services company is seeking an experienced IFA to join their established team With over twenty years of experience, our client has continued to flourish through the many changes in the market. With a solid reputation with clients in the commercial and private sector they are on plan and require an experienced Financial Planner with a solid track record as an IFA to help fuel growth. The ideal candidate will have effective communication and negotiation skills. A client bank to bring is not essential, our client has a significant level of business through their strong relationships they have in place through introducers In return our client offers a salary up to £40k for the right candidate. You will receive quality support in and the backing and support of a reputable company.

■ Support in helping you increase business performance with a 70% conversion rate in leads (Average business written per year is a minimum of £200k) ■ Internal compliance and administration team ■ In-house para-planner (provided for a small fee) ■ In house Mortgage advisor (commission provided for leads)

Recruit UK DPS Nov 12.indd 63

14/11/2012 15:45

Thinkers.indd 64

16/11/2012 09:21


GOD’S WORK “The four most dangerous words in investing are ‘This time it’s different.’” Sir John Marks Templeton Born November 1912 in Winchester, Tennessee. Died July 2008 in Nassau, Bahamas Emerging markets pioneer Unquestionably the boldest proponent of emerging market investment, Templeton’s biggest success in the 196os was in turning a suspicious mainstream America into an enthusiastic backer of emerging equities. Templeton’s own Growth Fund, started in 1954, was the first to take an emerging post-war Japan seriously, and he rode the Tokyo market until the late 1980s, when he sold out in the nick of time. Before long Templeton had branched out into other Asian markets, also with phenomenal success. It’s been calculated that $10,000 invested in the Templeton fund in 1954 would have grown to $5.5 million by 1999, assuming that all distributions were reinvested. In 1992, meanwhile, he had sold the Templeton to the Franklin Group for a reputed $440 million. And the secret? 50% Ben Graham and 50% something else, you might say. Like Graham, Templeton looked for solid value plays which he would always aim to run for at least five years at a time. Unlike Graham, however, Templeton attached fierce importance to fundamental analysis, and he possessed a profound sense of cyclical patterns which enabled him to ride every upward escalator until shortly before it stopped. He had little but contempt for technical analysis. A fighter from the start Well, he had to be. Templeton had hardly started his studies at Yale Business School when his father’s heavy business losses almost forced him to quit his studies and earn a living. But the young student survived by scraping together a number of bursaries, while also starting a college newspaper to fund his education. He left Yale as top scholar. A master of timing The arrival of war in 1939 prompted an instinct that the impending conflict might kick America out of the 1930s manufacturing depression. Deciding

Thinkers.indd 65

to buy $100 worth of every US stock priced at less than $1 a share, including all the bankrupt ones, he quadrupled his money in four years. He later went on to found his own famous series of funds. Religious conviction Templeton once said that he thought of his investments activities as a “ministry”, and that he saw the workings of the money market as part of God’s plan. But his Presbyterian convictions were only the launch-pad for his religious endeavours. Templeton became convinced that most religious institutions were stuck in a theoretical rut, and in 1973 he founded a Templeton Prize for Progress in Religion, which was intended to stimulate a sort of scientific inquiry among religious theorists – a sort of Nobel Prize for thinkers. The subsequent winners included Buddhists, Muslims, Jews and Hindus. And so to the beach... In 1963, aged only 51, Templeton moved to Nassau, where he acquired British citizenship and continued to run his funds until 1992 – after which he settled down to devote the remainder of his life to philanthropic works. The John Templeton Foundation, originally created in 1987, is now worth some $1.5 billion and disburses around $70 million in grants every year. Too late the prophet But his opinion still mattered. By the late 1990s Templeton was warning volubly about the dotcom crash that he saw coming in 2000. And in 2005 he wrote despairingly about the reckless property market surge which he said would soon send America into a recession that would last many years. His words were timely, but sadly they remained unread until it was too late. Written in a private letter to family and friends, they remained tragically undiscovered until after his death. By which time Lehman was gone and the whole sorry mess was upon us. November 2012

65 14/11/2012 15:48

T H E OT H E R S I D E. . .



I’ve been doing some research into the shares of manufacturers of aspirin, ibuprofen and paracetamol. Given the collective headache that IFAs and their clients are currently suffering, it seems a sure-fire investment. Depending on who you listen to... • Thousands of Britain’s IFAs are contemplating spending more time tending the garden instead of advising clients, because they can’t face taking all the RDR exams. (A sentiment shared by those unfortunate sprogs forced to sit their English GCSEs again); • Clients faced with average £150-an-hour fees for advice will bid a fond farewell to their IFAs, and will instead manage their own funds. (“Darling, do you think we should invest in Nigerian cocoa futures?”) Thus ensuring that... • Hiring an IFA will become the preserve of the wealthy. Which is the polar opposite of the regulator’s intention of ensuring that everyone can receive advice from a highly qualified advisor whose perfumed palms are untainted by commission payments. As Jeff Prestridge, personal finance editor of the Mail on Sunday, put it: “It seems blindingly obvious that the regulator’s determination to professionalise the financial advice industry is going to backfire spectacularly.”


November 2012

The Other Side.indd 66

In order to keep their clients, IFAs who survive the nuclear blast of ill-thoughtthrough regulation may have to lower their fees, particularly those who work in the less affluent provinces.

The Wages of Good Old Sin

Meanwhile, with Christmas on the way, the Scrooges in the European courts have shoved Santa aside, decreeing that sex equality legislation means that the already derisory annuity rates for men will nosedive even further after 20th December. All these changes are sufficient to persuade senior savers to take up the fags again, raise their blood pressure and bring on a heart attack. At least they might get an annuity enhancement. It’s an ill wind...

Cost Analysis

An interesting calculation made by an IFA chum... Cost of passing four RDR exams – 200 hours of study at £150 an hour, plus £298 for study manuals, plus £342 entry fees = £30,640. Add to that £4,000 in FSA and Financial Services Compensation Scheme charges. A grand total of £34,640. Do the initials RDR stand for ‘Regulations Destroy Revenue’?

14/11/2012 15:51



Very good in its make up and content. Sets itsel aside from other publications in the marketplace lio o mph Excellent. Thank you. Really refreshing. High quality production with some good thought provoking articles and useful information. Good useful content. Up-to hly inco m , date useable, very good and easily read. Very ifully ba einfo lanced good articles, relevant to my work. Very interesting extremely useful. Very impressive read and lots o S N nice to see it in “magazine” style forma useful articles Monthly incIoG me, S beautifullythan ather balanced usual newspaper. A comprehensive read. Very good layout and informative. Good content, appealing to the female reader as many TAXSvery publications are ISE driven and focused IUNRmale Thank you. A quality magazine for ’s. Good pape with good content which is plain talking. Good ayout and easy to read. Not seen anything like this or IFA market. Really good. Worth reading. Interesting content. Very professional and upmarket, exactly what is needed in the ifa community. Absolutely antastic. Not cluttered by endless comparison ables. Punchy contemporary style.. More of the RED please. A very readable same in the months to come publication. It looks likeC an interesting and enjoyable D AR read that I would be happy to have delivered o the office - not something I could Tsay abou HE PAIN IN magazine manyThe financial publications! Great - look forward o subsequent editions. Brilliant! Very impressive the top IFAs and all interesting publication. Looked and felt like SIS a proper magazine rather than other cheape N T A N A LY E M M O C arepublications. talking about... W EWSREVIE ooking Breath of Nfresh air and topica get your free subscriptionI’m going get it instead of the n biteTosimply size chunks. fill out the form online at: professional adviser papers and financial advise content/subscribe papers. Enjoyed the read. Keep up the good work 2 0 12


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Sparkling investments || JULIUS BAER LUXURY BRANDS FUND


Swiss & Global Asset Management (Luxembourg) S.A. UK Branch 12 St James’s Place, London T +44 (0) 20 7166 8176 The exclusive manager of Julius Baer Funds. A member of the GAM group.





of Julius advice. It is given for information purposes only. Julius Baer Multistock - Luxury Brands Fund is a sub-fund Important legal information: The information in this document constitutes neither an offer nor investment from Swiss & in the UK. Copies of the respective prospectus and financial statements can be obtained in English Baer Multistock (SICAV according to Luxembourg law) and it is admitted for public offering and distribution the Financial Place, London, SW1A 1NX, as a distributor of the aforementioned fund (authorised and regulated by Global Asset Management (Luxembourg) S.A., UK Branch, UK Establishment No. BR014702, 12 St James’s Baer Group. London, SW1A 1NX, United Kingdom. Swiss & Global Asset Management is not a member of the Julius Services Authority) or by the Facilities Agent: GAM Sterling Management Limited, 12 St. James’s Place,

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IFA Magazine November 2012  

For discerning Investment professionals

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