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DANGEROUS DRIVING GERMANY’S DISASTROUS CORPORATE GOVERNANCE SEPTEMBER/OCT 2015

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ISSUE 42

30/09/2015 17:09

CONTENTS C O N T R I B U TO R S

Brian Tora an Associate with investment managers JM Finn & Co. Lee Werrell a senior compliance consultant and industry adviser.

Richard Harvey a distinguished independent PR and media consultant.

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

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Vorsprung Durch Cheating VW’s emissions fraud highlights a deeper problem in Germany’s corporations says Michael Wilson

16

Nick Sudbury known for his columns in many leading financial magazines.

Still Awaiting Clarity

Neil Martin has been covering the global financial markets for over 20 years.

18

Michelle McGagh brings a wealth of experience on industry developments.

Abbie Tanner is Managing Director at Gliocas Consulting.

9-10/15

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

THE FRONTLINE: Just how did Wolfsburg get into this mess?

And what happens now?

7

Just when we thought it was getting easier, says Brian Tora – and the problems are back

Bond Funds Yellen’s sure US rates will go up at Christmas, says Nick Sudbury. Which funds can stand the pressure?

23 The Joys of Multi-Currency Novia’s new offshore platform for expats looks likely to shake things up

27 The Qatar Conundrum Qatar’s being kicked by everyone – isn’t it?

Check your facts, says Nick Wilson

32 A Grow-Your-Own Strategy Neil Martin talks to Helm Godfrey about a different approach to exit strategies for advisers

35 Thinkers: John D Rockefeller Unscrupulous, endlessly inventive, and a true forward thinker

Editor: Michael Wilson

42

Art Director: Tony Merlini

The Other Side

Publishing Director: Alex Sullivan

Your local IFA might just manage to save your marriage, says Richard Harvey

editor@ifamagazine.com

tony.merlini@thewowfactory.co.uk alex.sullivan@ifamagazine.com

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IFAmagazine.com

30/09/2015 17:09

CONTENTS

September/October 2015

‘IFA Magazine’ is a trademark of IFA Magazine Publications Limited. 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.

IFA Magazine is published by IFA Magazine Publications Ltd The Old Wheelwrights, Ham, Berkeley, Gloucestershire GL13 9QH Tel: +44 (0) 1179 089686 ©2015. All rights reserved IFA Magazine is for professional advisers only.

Full subscription details and eligibility criteria are available at: www.ifamagazine.com

IFAmagazine.com

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30/09/2015 17:03

“Wolde ye bothe eate your cake, and have your cake?”

John Heywood, 1546

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Our carefully selected range of fund managers picks the stocks while Witan directs the overall portfolio strategy. The goal is to outperform the relevant equity benchmark and to grow the dividend faster than the rate of inflation. Naturally, this cannot be guaranteed so please read the risk warnings carefully.

By playing to the individual strengths of our managers we strive to reduce volatility which can arise from being dependent on a single manager. What’s more, Witan offers exposure to the world’s major equity markets, diversified by manager, geographical region, industrial sector and individual stocks. All of which could help your clients to both have their ‘investment cake’ and eat it…

Your clients can invest in Witan Investment Trust plc in a number of ways. Witan’s shares can be traded through many online platforms.

Witan is also available for investment via an ISA, share plan and children’s savings schemes.

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40 YEARS OF CONSECUTIVE DIVIDEND GROWTH FOR FINANCIAL ADVISERS ONLY. Issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne’s Gate, London SW1H 9AA. Witan Investment Services Limited provides investment products and services and is authorised and regulated by the Financial Conduct Authority. We may record telephone calls for our mutual protection and to improve customer service.

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30/09/2015 14:02

WORDS OF WILSON

September/October 2015

Big Bad Bears Me and my big mouth. In my last Welcome column for IFA Magazine, I said that September was a traditionally dangerous month (though October’s worse), and that I feared the possibility of a bigger slide that might hold at a correction but could also turn into something nastier.

Have you ever wished you’d kept your mouth shut? By the time the last few days of September flapped onto the desk calendar, the Footsie was trading at a year to date loss of 10% - which translates into a 17% drop since its peak of 7103 on 27 April. All driven by a combination of the Chinese slowdown, massive falls in commodity prices and a growing awareness that America might really start to pile the pressure onto interest rates.

You could see why Janet Yellen was in a mood to get cracking with the tightening programme.

With US unemployment levels heading down toward ten-year lows, she could see the opportunity to apply the brakes to US consumer demand and hopefully slow the pace of consumer purchasing while also strengthening the dollar.

It’s just that Janet’s timing is lousy. Neither China nor Japan is ready for a stronger dollar just now – not while they’re having to pay for their raw material imports in dollardenominated prices. Japan is back down into negative inflation, and the UK hasn’t exactly been far behind.

That 20% Bogeyman All that, of course, was before Volkswagen AG came

along to brighten all our lives with the revelation that the Wolfsburg-based corporation had been cheating on its US emissions by building a ‘defeat device’ into its diesel cars that effectively let them sail through the NOX tests when the regulator was looking but emitted up to 40 times the limit when he wasn’t. So, once VW America had admitted guilt and VW Europe had conceded up to 13.5 million similar devices in its European diesel cars, the stage was set for a price meltdown that may well prove to be the costliest and most stupid errors of judgement in the history of motoring.

lot of people reckon that a 20% drop is the full-on denominator of a bear market. And I really, really hope that those triggers don’t get activated.

Except that this wasn’t an error, of course. We don’t need to wait for the investigators to tell us that this was a deliberate fraud on the US regulators and the Volkswagentrusting public.

Comparisons with Enron are only halfvalid, because where Enron’s sins were mathematical, VW’s transgressions were measured in damaged lungs.

Mike Wilson, Editor

Not least, because an awful lot of over-55s in Britain have been turning their pension pots into drawdown since April.

April, of course, would have been a fine time to cash up some of your chips. But how many of them are aware of the damage that the share price plunge has done to their remaining investments since then? So are you going to tell them, or will you leave it to the BBC?

I just said that UK shares are down 17% at the time of writing. A

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30/09/2015 14:02

“Anyone can hold the helm when the sea is calm.”

Publilius Syrus (100 BC)

When markets are volatile, you need a steady hand on the tiller.

Witan’s multi-manager approach could offer you a smoother course through choppy waters.

Witan is the only fully multi-managed, global equity investment trust. Which offers you a double benefit - we’re constantly striving to perform better than global equity markets and deliver a growing income - and by virtue of being a multi-managed fund we aim to smooth out the volatility associated with a single manager.

In essence, Witan offers you diversified exposure to the world’s major equity markets so that you gain diversification by manager, geographical region, industrial sector and individual stock.

It’s all designed to help you enjoy a smoother passage to help realise your investment goals.

At Witan, we hope many years of plain sailing await you.

Anchors aweigh! Contact us today, to find out more.

Witan Investment Trust is an equity investment. Please remember that past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise, as a result of currency and market fluctuations, and you may not get back the amount originally invested.

Visit www.witan.com

Call 0800 082 81 80

Issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne’s Gate, London SW1H 9AA. Witan Investment Services Limited provides investment products and services and is authorised and regulated by the Financial Conduct Authority. Calls may be recorded for our mutual protection and to improve customer service.

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30/09/2015 16:00

NEWS

Gordian The

Knot

Complexity is deterring wealthier individuals from saving through pensions, says Matt Phillips, Managing Director of Thomas Miller Investment

In a response to the Government’s green paper on pensions tax relief, Matt Phillips, Managing Director of Thomas Miller Investment, argues that complexity is a deterrent to saving for a pension, that there should be tax relief on financial education, and the £1m Lifetime Allowance for tax relief on pension contributions represents a tax on investment performance.

Key points from his response are: Do not remove tax relief from pension contributions Using an alternative system of TaxExempt-Exempt (T-E-E) would require

IFAmagazine.com

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faith by the general public that a future government would not impose tax on taking retirement benefits.

It is questionable whether this faith would exist and therefore act as a reason for individuals taking less personal responsibility.

Complexity For those who face Lifetime Allowance and Annual Allowance issues the current system is very complex.

An increasing number of key decision makers in businesses are being dis-incentivised, through complexity, to save through pensions.

no longer works as a mechanism to recoup excess tax relief provided.

It is now a tax on investment performance. This is both unfair and acts as a disincentive to make savings into pensions.

Set a uniform rate of tax relief The proposed tapering system for additional rate taxpayers is very complicated, especially for active members of defined benefit pension schemes.

Remove the Lifetime Allowance

The amount that can be contributed should be set at £40kpa for everyone and a uniform rate of tax relief set to offset the cost to the taxpayer.

With contributions capped at £40,000, the Lifetime Allowance

A uniform tax rate of 30% would make system affordable,

reduce complexity, redistribute tax relief to the lower paid and create a fairer system.

Financial education The most effective method of encouraging savings would be for the Government to use the tax system to encourage financial education.

Currently advice on pensions can be given to an employee up to £150pa without it creating a p11d benefit.

This allowance should be expanded to cover all sources of retirement income and raised to £500pa.

In the 10 years before state pension age the limit should be raised again to £1,000pa to reflect the added complexity at retirement.

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30/09/2015 16:00

NEWS NEWS IN BRIEF

Citizen Corbyn Labour’s new leader Jeremy Corbyn told the Labour Party conference on 29 September that he was determined to start a new form of political dialogue with the grassroots supporters who had elected him by a convincing majority. It was unclear how this would mesh with the parliamentary system, where his support was less obvious.

Broadly, Corbyn’s key economic platform is that the deficit is not to feared, and that austerity is causing more harm than good.

New Resources Source appoints new team to spearhead drive into UK financial adviser market Source, one of the largest providers of Exchange Traded Products (ETPs) in Europe, has appointed a five-strong team to service the UK financial advisory market. The move is in response to

growing demand for ETFs among UK financial advisers.

New research(1) commissioned by Source shows that nearly one in five IFAs (18%) have increased their clients’ exposure to exchange traded products/funds (ETPs/

ETFs) over the last year and 34% of IFAs expect this to increase over the next 12 months. Only 4% expect this to decrease.

Nearly half (44%) of the IFAs say they have increased their clients’ exposure to passive investments since the

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unique, first-hand intelligence – enabling him to unearth and capitalise on the very best stocks.

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offered downside protection during market declines adopts a truly active approach to deliver superior returns

This only, andand should not be upon by private investors.

The valueThe of investments and the income fromincome them can down can as well up and clientsasmay This advertisement advertisement isisforforInvestment InvestmentProfessionals Professionals only, should notrelied be relied upon by private investors. value of investments and the fromgo them go as down as well up get andback clients may get less than Past performance is not aisguide the future. data is taken the from Retailthe Accumulating Share Class as atClass 30.06.15.

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Copyright 2015Morningstar MorningstarInc. Inc.AllAllRights RightsReserved.

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30/09/2015 16:00

Damian Yeomans

implementation of the Retail Distribution Review (RDR) at the end of 2012.

David Lake, Managing Director of UK Coverage, Source, commented: “ETFs offer fantastic value in terms of fees and choice.

ETFs have largely been the preserve of institutional investors, but more recently they are being used far more

Chris Norsworthy

widely. The advent of RDR has focused UK advisers’ attention on the benefits of this product class and we are delighted to offer them a team dedicated to their needs. We believe that UK financial advisers will represent an increasingly significant investor base for Source.”

The new team comprises Dominic

Ngozi Onyenemelu

Clabby, Director at Source, who was formerly Development Director at AXA Elevate where he focused on building and developing relationships in the UK advisory market; Damian Yeomans, Director, formerly Associate Director at HSBC Global Asset Management; Chris Norsworthy, Director, formerly responsible for intermediary coverage

Antoine Boulet

at Margetts Fund Management; Ngozi Onyenemelu, Marketing Associate for UK and Ireland, formerly Senior Client Communications Executive at Henderson Global Investors and Antoine Boulet, coverage analyst, who previously worked at Societe Generale on structured products distribution.

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News.indd 9

Cumulative Performance (%)

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Index

2.9

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1st

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9

30/09/2015 16:00

NEWS NEWS IN BRIEF

Dear reader The team at IFA Magazine will soon celebrate five years as a leading industry publication and as we look forward we would value your feedback in helping us shape our editorial and event content for the coming year. We want to ensure that all of our reporting in both print and digital media continues to focus on Bad bank Portugal increased its official budget deficit outcome for 2014 from 4.5% to a worrying 7.2% of GDP, as a result of reluctantly adding in its bailout of Banco Espirito Santo to the government books. It was not immediately clear how this might affect the cost of credit, but the country is still reckoned to be on target for a 2.7% deficit in 2015.

the areas of greatest interest to you - our readers.

As we are now planning our features, supplements and events for 2016, it would be hugely appreciated if you could take a few moments to complete the following questionnaire.

It will only take three minutes and, as an added incentive, we would like to offer all participants who complete the survey the following: n Access to the results, so you can see what issues fellow advisers and peers have told us are of importance. n Everyone who completes the survey will receive free delivery plus £20 off a case (min value £89.99) of wine at Averys. You´ll be automatically sent a discount code on completion of survey. n Entry into our competition to win 2 tickets to the world rugby awards and rub shoulders with the winning rugby world cup team the day after the rugby world cup final. n Entry into a prize draw to win two full VIP hospitality tickets at the Bobby Moore club at Wembley for the England vs France game on 17 November.

Please go to http://bit.ly/1Vn0EGV to enter the IFA survey.

This opportunity to contribute will be available until Friday the 9 October.

Thank you in advance for helping to shape the IFA 2016 agenda.

Phew The world held its breath as the US Federal Reserve voted narrowly against raising US interest rates.

Underlying US growth indicators were felt to be encouraging, with the Commerce Department reporting an upgraded annualised growth rate of 3.9% in the second quarter, up from an original estimate of 3.7%. Strong consumer spending, business investment and residential construction were credited for the growth.

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IFAmagazine.com

30/09/2015 16:00

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08/09/2015 16:00 14:46 30/09/2015

September/October 2015

N AT I X I S S U R V E Y

Investors’ Confidence is Being Tested New research from Natixis Global Asset Management has revealed the enormous challenge faced by investors in today’s markets. In a poll of UK financial advisers, a majority (54%) said the level of investment risk their clients were willing to take was no longer increasing The same majority (54%) of financial advisers also said that their clients were only willing to take minimal investment risk, even if it means sacrificing returns, while nearly three quarters (73%) of advisers said their clients were conflicted between making returns and preserving their capital.

This was despite the fact that more than half (54%) of the clients these advisers represented were under 50, at a stage when asset growth should still be a priority.

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2015 has so far seen extraordinary levels of turbulence in the markets, with crisis after crisis acting to shake investors’ confidence. Russian military intervention in Ukraine, the flaring up of the Greek debt crisis, and the freefall of the Chinese stock market are just some of the events that have affected global markets and increased the conservatism of investors.

Advisers were concerned that individual investors were too focused on these shortterm market events and risked making bad investment decisions

which threatened their longterm savings. When asked which were the biggest mistakes being made by individual investors, they highlighted the following: 1.

Making emotional investment decisions

2.

Focusing too much on short-term market noise and movement

3.

Failing to have a financial plan in place

4.

Keeping too much cash

5.

Not setting clear financial goals

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30/09/2015 16:20

September/October 2015

“Given the extent to which these market issues have been discussed in the media, it is worrying but no surprise investors might feel compelled to sell up and look for a safe haven,” said Chris Jackson, Deputy CEO at Natixis Global Asset Management – International Distribution. “By making emotional decisions investors are most almost always missing out on market return.

Therefore it is crucial to keep long-term goals in mind; far better to keep their eyes on the prize and stay the course.”

Providing Emotional Support Given the tendency among their clients towards making rash and later regretted investment decisions, one of the most important roles now played by professional advisers is as a counsellor.

More than eight in ten UK advisers (82%) said that their ability to keep clients from making emotional decisions is a critical factor in their success. 78% said it was important to prevent investors from making emotional decisions with their portfolios which often prove irrational.

It is the services beyond portfolio construction where advisers really add value however; 87% of UK advisers believe that demonstrating value beyond investment guidance is critical to their success.

One of the main elements of this is helping clients develop highly specific goals as a way to benchmark their investment performance independent of market benchmarks, in order to help avoid making rash investment decisions. 75% of UK advisers said that their clients would be happy if they achieved their own investment goals over a year even if they underperformed the market.

“It is no longer enough just to ask clients to ride it out and stay invested,” said Jackson. “Advisers are

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particularly helpful showing clients the bigger picture and helping them to develop specific personal goals, like knowing how much they will need to save to retire at a certain age on a particular annual sum. This can help investors judge performance on the basis of whether they are on track to meeting their goals, rather than if their portfolio is returning a few basis points below the index.”

Advice Gap Worsens Despite Rise of Robo-advice A key worry highlighted by advisers was their growing inability to service massmarket clients, a problem worsened by 2012’s Retail Distribution Review (RDR), one of the most significant shakeups the UK financial industry has seen. The Natixis research found evidence that the RDR has contributed to a widening of the ‘advice gap’ – a segment of the market with money to invest, but insufficient funds to be able to afford the services of a professional adviser.

The advisers surveyed said that the average investable assets required to engage their services had risen by nearly £20,000 (from £47,610 to £66,702) since RDR took effect. Equally, 70% of UK advisers said the RDR had made it more difficult to provide financial advice to the mass market, while 73% said the regulation had limited investors’ ability to seek financial advice in the UK. Much attention has been given of late to the trend for ‘robo-advisers’ and how these may help to plug the advice gap; however advisers were concerned about these firms’ ability to guide their clients through tough times. 83% of those surveyed predicted these firms would experience redemptions during difficult periods due to their inability to give personalised support.

In contrast, advisers have proved highly adept

at helping their clients navigate around market crises – a separate piece of research in to the allocations of advisers’ model portfolios conducted by Natixis’ Portfolio Research and Consulting Group found that despite the intensely negative coverage surrounding Greece and its impact on European markets earlier this year, advisers had in fact slightly increased exposure to European equities (which have outperformed over the long-term).

A majority of advisers (61%) do not view the new automated firms as a threat to their businesses.

In fact, 59% of them see it as an opportunity to better communicate their value advice to clients.

Reaching the Next Generation One of the reasons the advice gap remains a major concern for advisers is that nearly three quarters (71%) said that establishing relationships with the next generation of investors was crucial to the long-term success of their businesses.

A majority (53%) said that advisers with a younger clientele will grow faster over the long-term than those with an older client base.

It is, however, these same younger investors who have typically been overlooked because of the ‘advice gap’.

Currently, an average of just 9% of advisers’ clients are aged under 35, and having been overlooked at this stage of their lives may feel less inclined to take professional advice later on when they have built up sufficient sums. But advisers recognise the importance of having a greater focus on younger generation and to start adapting their businesses to suit their needs.

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30/09/2015 16:20

September/October 2015

SOAPBOX

Vorsprung Durch Cheating If you’ve ever wondered why Frankfurt’s financial markets are so small and underdeveloped for a country of 81 million, the current rumpus about the Volkswagen Group’s incorporation of ‘defeat devices’ into its cars’ engine management systems might just produce a few clues for you

But first a personal note. As a committed Germanophile (and a former Berliner), I need to break this to you gently. Germany’s corporate management simply isn’t run like ours. Or America’s, or even France’s. It simply doesn’t add up to a situation where the small stock market investor feels comfortable. And there are reasons for that.

exchange. (Okay, it didn’t help matters that small-timers got the tech investing bug in the late 1990s, just in time to get wiped out by the 2000 dotcom crash.) But that still doesn’t quite explain why Germany’s hundreds of thousands of mid-sized companies still don’t float equity even today. A nice little loan from the local-state Landesbank is much more to their conservative tastes.

Another Country, Another Standard...

The Social Dimension

Take, for instance, the fact that insider trading has only been illegal in Germany since 1994. Consider the strange fact that credit cards weren’t allowed to offer revolving credit until we were into the 21st century – meaning that your Visa had to be paid off every month like a charge card. (“A nasty, dangerous Anglo-Saxon habit”, as the good people were being told as recently as 2005.)

More to the point, ask yourself why small investors say they would rather put their money in the bank at 0.5% interest than risk it in the hurly—burly of the stock

14

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But that isn’t to say that big German business isn’t trusted on a wider level. One of the things we’ve been learning in the last month is how very integrated companies like the Volkswagen Group have become into their local communities. If the present crisis turns out to clobber VW, Audi, Skoda and all the rest – as it seems almost certain to do, then Wolfsburg will be about as lively as a Welsh steel town. (I exaggerate slightly.)

A huge stake in the car giant is owned locally, and it runs its workers’ lives in ways that would have Unison and the TGWU running for its lawyers.

Ah yes, you might say, but Germany has always been a bit of a one-off when it comes to old-fashioned values. You might have noticed that the defence of workers’ rights means you can’t go shopping on a Sunday – or on a Saturday afternoon either, in many places. (Only last December, the highest court in Hesse confirmed the Sunday ban in Frankfurt, and even Berlin only lets its stores open on two Sundays during the run-up to Christmas.) As long as the trade unions are in such a strong position, it’s likely to remain that way.

A Different Kind of Management Struucture But what’s this? When VW’s deception in the small matter of 11 million cars hit the headlines (plus another 2.5 million Audis), some of the first people to be called in for an investigative grilling were the trade union leaders.

That was because, since last April, the chairmanship of the entire VW Audi group has been exercised, in a temporary capacity, by the workers’ representatives.

Pause for effect. Yes, since 1951 nearly every major German

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September/October 2015

company has had a separate company guidance committee (or ‘supervisory board – nominally independent), in which – theoretically!

– the workers get their say. In practice, however, the twin-board practice has been under suspicion for years for the slippery ease with which difficult business decisions are greased through behind firmly closed doors. And for the way that senior management figures slide in and out between the company board and the separate supervisory board with nary a nudge or a wink.

‘Endlessly sorry’: the words of VW’s boss Martin Winterkorn (pictured on his knees below) ring true as the costs could spiral

Have a guess, for instance, what year it was when The Economist magazine wrote this?

‘Germans are increasingly questioning the way that their large public companies are run. State prosecutors are investigating why Volkswagen kept a pair of parliamentarians on its payroll for years, while last week a Frankfurt court ruled that a reluctant Deutsche Bank must disclose how much it pays to members of its elite executive committee.’

Okay, it was 2005, and the knives were already out for Germany’s cosy style of corporate management. If only the people demanding change had been able to push their reform stipulations through, it might have been better for Volkswagen....

But as it is, VW’s own unions (as chairmen) now find themselves having to defend their management’s decisions in what their head of US operations has openly admitted was a deliberate fraud by the company. That’s not going to make anybody feel comfortable.

A Sir Humphrey Moment One thing they’ve all got to explain is how the now-ousted chief executive of Volkswagen Group, Martin Winterkorn, turned out to have been head of research and development during the exact period when the illegal ‘defeat’ mechanisms were being built into those 11

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million dodgy Volkswagens.

And Winterkorn’s protestations that he didn’t know about it are raising eyebrows on both sides of the Atlantic, along with the very pertinent question: “Why not? Were you in charge of clean-diesel engine development, or weren’t you?”

Shall we pass over the fact that, only last April, Winterkorn removed the company’s own chairman, the family business patriarch Ferdinand Piech, after a long feud in which Piech had told journalists that he was “at a distance to Winterkorn,”and that he had he had lost his trust in him? How does that exchange look in the cold light of six months further down the line?

As Sir Humphrey might have said: “Some people might ask these questions. I couldn’t possibly comment.”

A Crisis of Confidence There are darker suggestions flying around which we won’t dignify with any thoughts of our own at all. Some observers have said that the closed management structures in large German companies are

rife with backhanders that would make FIFA look like a playground amusement.

Again, it would be absurd to make unacceptable generalisations, because it’s clear that VW is in deep water which has certainly put an end to its credibility in the United States, and which may well bust the company in the end. A break-up, a sell-off and a series of jail sentences are all on the cards, and at IFA Magazine we’re not comfortable with commenting on matters that are technically sub judice.

But exactly how can the secretive German model of corporate management recover the confidence of the wider investing marketplace? It isn’t at all clear, unless Chancellor Angela Merkel is prepared to grasp the nettle and force the thorough-going overhaul that she bottled out of ten years ago.

If she doesn’t, some say, the perceived difference between German and Chinese standards of corporate governance might not be as clear as some would wish. We couldn’t possibly comment on that, either.

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September/October 2015

B R I A N TO R A

Ever Wider Brian Tora Looks at What the China Crisis has done to the Wider Emerging Markets Situation In an ideal world we should have enjoyed a peaceful summer which allowed investors and their advisers to relax, free from concerns over markets. Unfortunately, nobody appeared to have mentioned this to the Chinese authorities - who kicked off a season of turmoil by announcing an unexpected devaluation of the renmimbi. In itself this should not have appeared too surprising, given the recent strength of the dollar; but it sure set the cat amongst the investment pigeons and sent markets into a tailspin.

The background to what is going on in the world’s second largest economy has been done to death in the financial media, but it is the collateral damage that this apparent loss of confidence in the Chinese authorities that worries me the most. That China needs to manage a shift from its export driven and infrastructure rich economic base to a more consumer led structure with greater emphasis on the service sector is a given.

Accomplishing such a transition

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without either slipping into recession or creating financial instability is what is causing investors to head for the hills..

An Emerging Markets Rout China does, after all, account for 15% of global output and is expected to overtake the US as the world’s largest economy before this century is very much older. But there are only so many new cities, high speed rail links and motorways that a nation can build.

Little wonder that the prices of so many of the basic commodities that have relied on Chinese demand in the past have been in steady retreat.

from commodity-based assets.

Meanwhile, investment in more typical emerging markets has been in decline for some little while, however: since the early summer of 2014, investors have been dumping their emerging market funds - and the recent performance of this particular sector has been horrid. It is estimated that more than a trillion dollars has been withdrawn since the start of this year alone. Knowing when to return will be a smart call if it can be made correctly.

The trouble is that many so-called emerging countries have come to rely on this demand for future growth.

Now, Australia is hardly an emerging market, but both its currency and its stock market have suffered from investors retreating

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September/October 2015

Stark Contrast The situation today is in stark contrast to that which existed just a few years ago. I well recall chairing conferences for independent financial advisers where fund managers specialising in the emerging markets were extolling their market place as the only serious game in town. The arguments then were compelling, though with the benefit of hindsight, they were probably insufficiently compelling to justify the significant premium that many of these markets enjoyed over the developed world.

Valuations have been reined back significantly - but then, so have the prospects for so many of these countries.

Brazil has a shrinking economy, Russia has seen its currency plummet as the fall in the oil price and western sanctions

bite and we all know about China. Only India amongst the BRICs promises to deliver robust economic growth, but the world’s largest democracy is not exactly problem free. The second tier MINT countries – Mexico, Indonesia, Nigeria and Turkey – can also point to tougher times than hitherto.

Is Value Returning?

But some managers are pointing to value returning in these markets. Jupiter Merlin’s John Chatfield Roberts recently went on record to say that value was opening up in the emerging world - although he did not own up to turning a buyer just yet. Indeed, the problems faced by emerging markets may have further to run. A strong US dollar and strengthening signs of a sustainable economic recovery there has been sucking cash out of the lesser developed

world and back to the global economic leader. This is not a trend that looks likely to be reversed anytime soon, even though the Fed sensibly decided in September against an immediate rate rise.

As for China, perhaps the knock on effect in the developed world has been a little overdone, but we probably needed to see some cooling in home markets anyway.

Not as much as was clearly due in China, though.

Don’t forget, all that has really happened is that this year’s strong Bull Run was given back in a few short summer weeks, with the main casualties those domestic investors sucked in earlier this year. Perhaps the wider setback will have thrown up opportunities, but it remains prudent to choose carefully when bottom fishing.

An individual approach At JM Finn & Co, we understand the importance of treating you and your client as an individual. This is why our Tailored Platform Solution is a discretionary service that can integrate seamlessly into your proposition.

Mike Mount T 02920 558800 E mike.mount@jmfinn.com

www.jmfinn.com LONDON

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September/October 2015

PRODUCTS

Bonded Labour The first increase in UK interest rates for more than six years is approaching – and some reckon that fixed income funds will be among the biggest casualties.

But does it have to be that way? Nick Sudbury reports

The ultra-low interest rates introduced in the wake of the financial crisis have fuelled a surge in the value of fixed interest securities. From the trough in April 2009 to the peak at the start of February 2015, the average sterling corporate bond fund rose 86% - which is the sort of return more normally associated with equities.

But, like all good things, the trend had to come to an end at some point. The endless recent speculation about the timing of the first Bank of England rate increase, together with trends in the United States, has reduced the attractiveness of fixed income as an asset class, with the average sterling corporate bond

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Products - Bonds.indd 18

fund falling 3% since February as yields have moved higher.

It’s a similar situation on the other side of the Atlantic.

At one stage the probability of a Fed interest rate hike in September rose above 50%, although the slowdown in China and the ensuing market volatility appears to have persuaded Fed chairman Janet Yellen to back off for the time being. But for how long?

Some People Still Need Bonds This change of mood is understandable, but it’s also a problem for anyone who needs fixed interest investments within their portfolio. Income investors, pension funds and institutions in particular are all well advised to hold bonds or bond funds of some sort.

But the recent downward pressure on bond prices has created an actual risk to capital, which is the last thing that many of them need.

Many people believe that the Fed will still act later this year, despite the increase in downside risk to the US economy. William Dudley, a

senior official at the Fed, has said that higher rates would be a sign of confidence, but it will all depend on whether the data is strong enough to warrant it.

The slowdown in China and the prospect of higher interest rates in the US could dampen global growth sufficiently to encourage the Bank of England to leave rates on hold for longer. This is what the overnight index swap rates suggest with the likely timing of the first move having been pushed back from next April to September.

Short Term Strategies?

Heavy Hedging?

Higher interest rates will act as a headwind for the majority of fixed interest securities, although a lot depends on how much of an increase has already been priced in. The trick is to find the least vulnerable areas of the market, as these will continue to act as useful diversifying holdings without detracting from your clients’ overall returns. Here are some of our choices, anyway.

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September/October 2015

Henderson Strategic Bond Fund

High Yield Strategy Some of the most flexible mandates are to be found in the Strategic Bond sector, where the only requirement is that at least 80% of the assets have to be held in sterling denominated fixed interest securities, or be hedged back into sterling. The managers of these funds can position their portfolios for almost any eventuality including higher interest rates.

It has been a difficult 12 months for the sector, but one of the better performers over that period has been Henderson Strategic Bond. The fund is actively managed and can invest in all areas of the fixed income market, although it has a clear preference for high yield. This allows it to pay an attractive 4.8% with quarterly distributions.

The manager, John Pattullo, has recently said that the main issue with interest rates is the

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Type:

OEIC

Sector:

Strategic Bond

Fund Size:

ÂŁ1.33bn

Launch:

January 1995

Yield:

4.8%

Ongoing Charges: 1.41% Manager: Henderson Global Investors

henderson.com

speed and direction of the move rather than the actual timing.

He thinks that the closest parallel may be the period after the Second World War when it took six years to increase rates by 2% and points to the datadependent nature of the process espoused by Janet Yellen, the chairwoman of the Fed. A sudden dramatic rise in interest rates would be bad for bonds, but Pattullo believes that such a move is extremely unlikely and that the key question is how much has already been priced in.

His more immediate concern is the increase in credit risk,

as there has been a significant escalation of the number of distressed bonds in the high yield market, most notably in the energy sector following the fall in the price of oil.

The fund is conservatively positioned, with 57.5% of the assets in BBB or BB rated securities. There is also a higher than normal cash weighting of 13%, which allows the manager to take advantage of any market opportunities, such as the new issue by Centre Parks that is paying 7% and matures in 2020.

Henderson Strategic Bond has one of the highest yields in the sector, and the quarterly distributions make it an attractive option for income seeking clients. The fund has generated consistent annual total returns and has an unusual portfolio compared to many of its peers. This has enabled it to continue to deliver positive performance despite the prospect of higher interest rates.

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September/October 2015

AXA Sterling Credit Short Duration Bond

Better Safe than Sorry The obvious way to limit the impact of higher interest rates is to invest in shorter duration securities. There are a handful of funds operating in the sterling corporate bond sector that specifically target this area of the market, with one example being AXA Sterling Credit Short Duration Bond.

Over the last 6 months it has lost 0.3%, which is almost 1% better than the average return from its peer group.

The risk of higher interest rates is compounded by the decline in liquidity. This was not a problem before the financial crisis, as the proprietary trading desks of the banks kept the fixed income market functioning efficiently, but their operations have now been significantly scaled back. The result of this is that bond funds now hold a higher proportion of each issue, which could make it difficult for them to find enough buyers if a

20

Products - Bonds.indd 20

Type:

OEIC

Sector:

Sterling Corporate Bond

Fund Size:

ÂŁ266.2m

Launch:

November 2010

Yield:

1.6%

Ongoing Charges: 0.88% Manager: AXA

axa-im.co.uk

large number of investors head for the doors at the same time.

Short duration bond funds are not as vulnerable to the lack of liquidity because their holdings typically mature much sooner. This means that there is less chance of the managers being forced into selling them to finance client redemptions.

About a quarter of the AXA Sterling Credit Short Duration Bond fund’s holdings reach maturity each year, which is the best insurance you can get in the event of a major market sell-off.

The ÂŁ266.2 mn portfolio is highly diversified, with the money divided between 208 different corporate bonds.

Nicolas Trindade, the manager, expects yields to carry on rising

in anticipation of higher interest rates and has recently increased his exposure to securities issued by Anglo American and Glencore so as to benefit from the wider credit spreads due to falling commodity prices.

He believes that the coupons will be the main factor driving returns, which explains why he has invested 84% of the assets in securities rated A or BBB. Trindade also likes the medium-term outlook for issuers based in the Eurozone due to the low interest rate policy being followed by the European Central Bank and the improving growth outlook in the region.

The main drawback to the fund is that the yield is just 1.6%, with the net income falling in each of the last two calendar years. Returns are likely to be modest, but risk-averse clients will be largely protected from the impact of higher rates and any liquidity problems arising from a mass exodus from the sector.

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PRODUCTS

September/October 2015

Nomura Global Dynamic Bond Fund

Hedging Hodges Dickie Hodges, the manager of the new Nomura Global Dynamic Bond fund, is concerned about the medium term prospects for the fixed income market and has designed his portfolio accordingly. Almost 22% of the assets are invested in bonds that will mature in the next 36 months. This has enabled him to keep the duration of the fund down to 2.54 years, which he says will minimise the negative impact of higher interest rates.

Nomura Global Dynamic Bond can invest in the full range of fixed income securities, including corporate and government bonds, indexlinked bonds, high yield, convertibles and floating rate notes. The objective, says Hodges, is to build a diversified portfolio that can deliver an attractive yield with the potential for capital growth.

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Type:

ICVC domiciled in Ireland

Sector:

Global Flexible Bond

Fund Size:

$111.2m

Launch:

January 2015

Yield:

n/a

TER:

1.20%

Manager: Nomura Asset Management

nomura-asset.co.uk

The manager typically uses options on interest rates and on credit markets to implement the hedges. He then adjusts the positions as the situation develops. There are also plenty of other tools at his disposal including total return swaps.

The fund was only launched in January 2015, but Hodges has a successful track record having run the L&G Dynamic Bond fund for a number of years prior to leaving the company last May. During his period in charge it was a top quartile performer.

Hodges uses derivatives to protect against some of the key risks with the fund hedged against a sudden increase in government bond yields and widening credit spreads. This is a permanent feature that will limit the downside risk, although the cost of the hedge will detract from the upside potential.

Nomura Global Dynamic Bond is an offshore fund that is hedged back into US dollars, so there is an element of foreign exchange risk for UK based clients. Despite this, it is one of the most defensive fixed income portfolios that you could imagine and is ideally positioned to protect against the risk of rising interest rates and other potential seismic events.

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30/09/2015 14:18

Welcome to London Capital Club

Your space in the heart of the City for meeting, dining and networking

A Space for Meeting

Events & Networking

London Capital Club is the perfect location for meeting with clients over an informal coffee, a spot of lunch, or in one of our sumptuous private meeting spaces.

We host a range of networking events, as well as keynote speaker events. We have spaces for members’ events and can accommodate up to 150 delegates in a variety of room set-ups.

London and Beyond

Restaurant Fine Dining

Club members receive the same exceptional service in over 250 clubs worldwide, which make up the IAC network, as well as access to further benefits, such as discounts at some of the country’s best golf courses and hotels.

Enjoy the brasserie-style ambience in our public bar and restaurant, @15, formal dining in our members’ restaurant The Walbrook Grill, or hold a private function in one of our historic rooms for an outstanding fine dining experience.

We look forward to welcoming you to London Capital Club T: 0207 717 0088 E: enquiries@londoncapitalclub.com A: 15 Abchurch Lane, London EC4N 7BW W: www.londoncapitalclub.com Find Us:

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30/09/2015 14:51

G U E S T F E AT U R E

September/October 2015

Going Global Pippa Russell, Communications Director at Bath-based Novia Global, explains how multi-currency platforms can add to the offering for high net worth and especially expat and internationally-oriented clients

r Advisers who wish to deal with clients in the international market currently have traditionally had a somewhat limited choice when it’s come to wealth management solutions – or at least, compared to their UK counterparts.

For the latter, with

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some 29 platforms now in existence in the UK, the choice is endless. Whether the solution includes cheap and cheerful low cost custody / administration services, or full blown wrap service offerings including ETFs, shares, and sophisticated modelling tools, the UK adviser will probably find a platform

to suit their needs. This, however, is hardly the case in the international market.

With offshore solutions being historically largely concentrated around bank assurance models, or dominated by the opaque, high charging structure of the offshore bond, there is some might say - something

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September/October 2015

Business Efficiency: Advisers looking to trade around the world do not want to be dependent on time consuming paper based communication including faxes and post.

These old style methods bring with them the problems of wasted time, increased man hours, and increased error rates.

Entering the Market Much Faster: The time taken to set up a client, and exit a trade is vastly decreased when using an efficient platform. Advisers will have clients who want to invest in Dollars, Euros and Sterling and do not want to wait for weeks before their investment in the market is placed.

Transparency: of an investment revolution waiting to happen.

We are already witnessing an influx of regulation offshore, similar to the RDR here in the UK. Examples of this would be the recent banning of commission in Holland, and the removal of indemnity commission in Hong Kong from 1st January this year.

This is a growing trend throughout these markets.

Mainly for Expats So what can a multi-currency platform offer to advisers dealing in these markets that they do not have already?

And what advantages would such a wealth management service provide to advisers and their clients?

Firstly, it’s important to note that offshore platforms

24

Guest Feature - Novia.indd 24

such as the ones offered by Novia Global are intended primarily for ex-pats. These ex-pats can be from any country in the world – hence the need for multi-currency.

And the thing is, clients need the flexibility at all times to trade and invest in a wide choice of currencies.

When researching for the Novia Global platform, we found from day one that the most popular currencies include USD, GBP, EUR, HKD, CHF. A platform offering multi-currency will enable all reporting, charging, investing and trading to be done in a choice of currency.

A multi-currency offering can also provide a higher level of protection against currency movements than traditional single currency investment accounts.

With no exit fees or hidden costs, what you see is what you get. This transparency builds trust.

Single Portal for a Huge Investment Universe: This can include a selection of DFMs, ETFs, and a vast range of funds.

FCA Approval: Hot news – the FCA formally granted authorisation of the Novia platform on 25th September 2015. Novia says it will now be applying for a European passport.

More details from www.novia-global.com

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30/09/2015 14:51

G U E S T F E AT U R E

More Flexibility This flexibility enables clients to invest in a currency that’s more suitable to their needs, depending on what currency they earn in and what they would consider a “safe haven” for their investments.

For the record, the UK and its crown dependencies are regarded as being politically stable. Just as we are seeing an influx of foreign investments into the UK property market – with empty houses bought as investments dominating the streets of Knightsbridge and Chelsea - the same is happening in the investment market, with investors who wish to de-risk their portfolios opting to invest in lower risk jurisdictions such

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Guest Feature - Novia.indd 25

as the Crown dependencies.

These dependencies enjoy a reputation for honesty and political stability.

But a multi-currency offering like this is nothing without a first-class technology service to back this up. Today’s advisers are looking to move away from the world of faxes and post and into that of straight through processing and scalable solutions.

Online portfolio modelling, construction and reporting tools and 24 hour online trading now de-rigour the UK market and the international market is now moving that way.

Flexible charging and transparency to support different business models with supporting reporting processes are essential.

September/October 2015

Alongside the ability to build and select model portfolios and to monitor investment performance in line with benchmarks, should all form part of a platform offering.

So, as we start to witness the spread of the RDR (and similar) across Europe and further afield - with some countries now actually using the RDR label (South Africa) for their regulatory changes we believe that a sea change is about to take place in the global investment markets.

Fully automated online wealth management solutions offering multicurrency and round the clock trading facilities will arm the adviser and trustee looking to support their clients changing needs in the shifting international markets.

25

30/09/2015 14:51

ACQUISITION AND SALES

O F I FA BUSINESSES Retirement?

Time for a change?

There are countless reasons to dispose of an IFA business, just as there are countless reasons to get hold of one.

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We consider every business to be unique, and therefore finding the right solution for you starts with a thorough understanding of your business operations and your wish list.

Only from here can we make valuable introductions which align to both party’s needs.

If you would like to discuss options to sell, exit or retire, or acquire IFA businesses, please get in touch for a confidential discussion.

louise.jeffreys@gunnerandco.com

gunnerandco.com IFA View - Qatar Investment Fund.indd 26

30/09/2015 14:31

FUND MANAGEMENT

September/October 2015

Looking Beyond Oil Neil Martin talks to Nick Wilson, Chairman of Qatar Investment Fund plc, on the fund, the country, and (oh yes) the football

Let’s not duck the issue.

Qatar has been off most people’s radar for all sorts of reasons – the unfamiliarity, the liquidity, and the complications for investors who want to deal. But when the former British protectorate got thrown into the spotlight earlier

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IFA View - Qatar Investment Fund.indd 27

this year, it was for all the wrong reasons. FIFA has got a lot to answer for. So when we chatted with Nick Wilson, Chairman of Qatar Investment Fund plc, on how the fund is doing and about Qatar itself, any question at all was up for asking.

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September/October 2015

Football World Cup 2022

The Fund

A Resilient Oil Economy

Yes, if you ask most people in the West about Qatar, the one thing they know is that, all things being well, the Gulf country is set to host the Football World Cup in 2022.

Unfortunately, most people will also know that FIFA’s decision to choose Qatar as the host to the world’s premier football event has not been without questioning - not just with regard to the process which saw the country win the bid, but also whether players or fans are ready for such a novel and hot location.

Initially listed in London on AIM in 2007, the fund joined the main market in 2011 and quickly attracted the attention of institutional investors looking to share in the wealth that comes from a flourishing economy. If you want to directly invest in Qatar it is very hard, explained Wilson. Not only do you need a ‘custodian’, but there are also high charges attached.

Like Saudi Arabia, Qatar seems determined not to panic about the oil price which has dropped dramatically from its plus-$100 high to well below $50 for Brent.

The reason for Qatar’s relaxed attitude is simple: it costs just $10 a barrel to lift it out of the ground, so even at today’s prices the gross profit is significant.

And yes, there have also been well-publicised concerns raised over the rights of migrant workers who have flocked to the country to benefit from the boom in construction.

Some fairly shocking accident statistics among Asian construction workers have done the country no favours. But, leaving those difficult issues aside, we’d be missing the point about the power of the country’s economy if we didn’t look to the fundamentals.

28

IFA View - Qatar Investment Fund.indd 28

Whereas Qatar Investment Fund has the advantage, said Wilson, of having the Qatar Insurance Company, the biggest insurance company in the GCC, as its manager since 2007. This gives Qatar Investment Fund an active management team on the ground, says Wilson, and one which has valuable insight into what’s going on with the country’s companies.

Some of the facts and figures about this country are amazing. Starting with the fact that it has the highest GDP per capita globally of $143,000.

That’s twice that of the US and three times the UK.

This headroom allows the Qataris to budget with some confidence, says Wilson. “Yes, at current levels they can hold out indefinitely. Last year, when they were doing their budget for this year, even though the oil price was $110 at the time, they actually based their budget on $65. They always take a pretty conservative view. And at $65 they were going to show quite a good budget surplus.

Well the average for the year is still over $70, so they’ll probably show a small surplus this year. Next year they’ll just pitch their budget to think what the oil price will be.”

As for its future strategy, Wilson explains: “What they want to do is create in

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FUND MANAGEMENT

Qatar alternatives to oil and gas. They also have a lot of overseas investments, not just in London, but they are buying in America and Asia, so that they have got a secure income from investments from around the world.”

Diversified Portfolio But oil, as we’ve said, is only one area of interest. The Qatar Investment Authority has been a big buyer overseas. In London alone, it owns The Shard, Chelsea Barracks, Harrods, 1 Hyde Park (a large development), the Olympic Village (and much of the land around it ear-marked for affordable housing), The Berkeley Hotel, The Connaught (a controlling interest), Claridges and The Savoy.

Internally, says Wilson, this strategy manifests itself in long term infrastructure projects. “At the moment there is a lot of infrastructure spend, and this is going to be driving the economy like mad between now and 2011. Project spending is estimated to be in the region of $200bn, and that’s the highest planned project spend per capita in the region.”

This includes an entirely new City which is being built.

Called Lusail, it will have eventually a population of around 400,000, the size of Edinburgh. A new airport, opened last year, is being further expanded and is set to have an annual passenger capacity of 50 million, making it probably the largest hub airport in the region. Qatar is also building a new sea port.

But, for Wilson, the project that most interests him is the new metro underground system in Doha, the country’s capital.

With a 402km track length, it’s roughly half the size of the London underground - but whereas that took 150 years to complete, this new system will be ready in four years.

says Wilson, and the country is currently seeing a lot of white collar workers coming into middle management posts - which, he says, is good for the economy.

Part of the future for the people of Qatar is in improved education and health systems.

Between now and 2018 the Government is due to spend around $60bn on 85 schools.

The Qatar Foundation is also financing a 14 square kilometre ‘Education City’ development on the outskirts of Doha, housing six leading universities that will include those of Texas A&M, Cornell and University College London, plus the Qatar University Facility of Islamic Studies.

Regional Tensions?

But we still weren’t about to give up on the tough questions.

Such as the tensions that currently resonate throughout many of the Arab nations.

And on this point, Wilson was clear. “Qatar is a lot more progressive than some of the other countries in the region,” he told us. “I’ve spent quite a bit of time there, going three to four times a year, and you don’t get any feeling of oppression, or that people feel in any way inhibited by conservatism.”

As to external pressures, Wilson is equally confident that these are insignificant for Qatar. He said the country has the advantage of being home to the largest US military base outside of America. “Qatar takes a reasonably low profile in international affairs. It has become more focused domestically in improving the situation in the country, improving the infrastructure.

The prospect of unrest in Qatar, or an attack on Qatar is just so low as to be dismissible.”

And After 2022?

Population Growth

Asked whether the current boom will fuel a problem down the line, when the football fans leave, Wilson is dismissive.

Population is growing at a rate of about 10% per year,

“The ongoing development will extend well after the

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September/October 2015

World Cup,” he told us.

“Certainly, there are some projects directly linked to the tournament - building some extra hotels and stadia for example. But as for other things like upgrading the road system, the metro system, the overland rail system, those were going to be done anyway, and they were in hand long before Qatar won the right to host the World Cup.” Tourism, from inside and outside the region, is also going to play an increasingly important part over the coming years, he says. “Tourism is booming and occupancy rates are high. I’ve been going there since 2007, and okay, you can spot the suits that go there to do the deals, but there are more and more tourists, people on the beach, around the pool.”

There are plenty of other industries represented besides oil and gas, he says - including steel, and one of the largest aluminium plants in the world.

What’s more, he adds, the financial services industry is now worth nearly 50% of the main index on the Qatar Stock Exchange. It is also the biggest allocation within Wilson’s Qatar Investment Fund.

The Banking Proxy Ironically, it seems, you can’t invest directly in the oil and gas industry in Qatar, as that is owned by the Government.

But as Wilson explains, a very good proxy for the economy is the banking sector: “With the infrastructure spend, with the increase in population and the expansion of the financial services, it all feeds into the banking sector.”

The Qatar Investment Fund portfolio is weighted over 50% in banking stocks, plus another 15% or so in industrials, telecoms and insurance. So what’s the draw? Wilson says it comes down to mainly high dividend yields, which are about 4.4% currently. And the valuations are attractive, he says.

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September/October 2015

MSCI Upgrade The country has just recently achieved another milestone, being accepted by the MSCI as an emerging economy, rather than its former frontier market status. This has meant increased foreign investment and introduced a lot of liquidity.

“It confirms that business conditions are investor friendly,” says Wilson, “and that there is a lot of institutional interest in Qatar as a place to invest.”

Fund Results The fund recently announced its final results for the year ended 30 June, 2015. Profit for the year was US$22.6 million, with earnings per share at 15.31 cents. Net asset value per share rose 8.4% compared to 6.2% for the Qatar Exchange and a rise of 4.6% in the MSCI Emerging Markets Index. Shareholders received a 3.5c per share dividend in January and the Board intends to pay an increased four cents per share dividend for the period to end June 2015.

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FUND MANAGEMENT

“The performance of the Qatar Exchange was strong,” Wilson told shareholders, “despite headwinds from lower oil prices and the ending of the effect of the MSCI upgrade which occurred in June 2014. Saudi Arabia, Kuwait, Oman and Bahrain posted negative returns during the period, but the Qatar Exchange remained resilient.”

Wilson So what of the Chairman himself? Wilson, who now lives in the Isle of Man, says he started his working life as a petroleum geologist in Libya – having moved there in 1967, two years before the reign of Gaddafi started. When things got ‘difficult’ in Libya, he says, he moved to the Isle of Man and entered the financial services sector. When he’s not heading up the Qatar Investment Fund, he says, he busies himself with a number of other directorships within the financial services sector.

Asked what he does to relax, he says he likes coastal fishing around the Isle of Man. Big fish are there for the taking, he says. And we’ll bet that, throughout his long career, Wilson has caught some very big fish indeed.

Qatar Sitting on the north eastern coast of the Arabian Peninsula, Qatar measures just 4,467 square miles but commands a resource which makes it potentially one of the most influential countries in the world. Its 25 billion barrels of oil reserves – enough for 60 years’ production at current rates – are only the start of it: it also has the world’s third largest gas reserves, enough to last around 160 years at present rates.

Yet Qatar is working on diversifying its economy in a way that moves away from its total reliance on just oil and gas.

Strikingly, only 12% of its two million population (2014) are Qatari nationals, the remainder being expatriates.

Formerly a British protectorate, Qatar gained independence in 1971. An absolute monarchy, it is ruled

by Emir Sheikh Tamim bin Hamad Al Thani, whose family has run the sovereign Arab state since the middle of the 19th Century.

Its only land border is with Saudi Arabia in the south After Saudi Arabia, it is said to be one of the most conservative countries within the Gulf Cooperative Council (GCC) and most of the nationals follow a strict Wahhabi interpretation of Islam.

IFAmagazine.com

30/09/2015 14:31

Professional Clients only 1Defined as CCC bonds directly exposed to the shale oil market

Jan’14

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The team decided NOT TO INVEST We felt that the level of risk did not reflect the yield available at the time.

The team focused on other asset classes

Jan’15

Oil supply increased², plummeting sale prices and devaluing these bonds¹ by more than 23%³

We know

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Trusted to manage more money than any other investment firm in the world4 This material is for professional clients only and should not be relied upon by retail clients. Sources: 2. Info Energy Agency – Q1 2015. 3. Barclays High Yield Oil Field Services Index 01/01/14 – 31/01/15, CCC bonds fell by at least 23% (USD). 4. BlackRock as at 31/12/14, AUM based on $4.525 trillion. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: 020 7743 3000. Registered in England No. 2020394. For your protection telephone calls are usually recorded.

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September/October 2015

E X I T S T R AT E G Y

Organically Grown

Choosing the right exit strategy is probably the biggest decision an IFA will ever have to make. IFA Magazine looks at what some leading firms are offering advisors who want to retire. Neil Martin talks to Graham Cross, Managing Director and CEO at Helm Godfrey

It would be fair to say that Helm Godfrey is a great believer in nurturing its own people - which is why, when the firm takes on IFAs looking for an exit, it looks for advisers with very similar client bases to its own.

London-based Helm Godfrey is a specialist provider of holistic, independent advice on wealth management, employee benefits and financial planning for businesses and individuals. From its offices near Fenchurch Station, managing director Graham Cross and his large team of advisers, paraplanners and administrative staff look after clients who are mostly based in London, or the home counties.

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When Helm Godfrey does take on an IFA’s client base, it doesn’t see it as a quick process. Cross explains: “Our process is very much that we don’t believe that any transition from one adviser to another works with a single meeting handover. Ideally, it needs to have a handover that probably lasts anywhere between 12 and 24 months. So we would expect the retiring adviser to be actively involved in the handover relationship.”

The type of IFA Helm Godfrey prefers is also dictated by the firm’s client base. The typical client, says Cross, is one that sees the value in getting advice.

“Just because a client might have an investment

portfolio of five million for example, it doesn’t necessarily mean it’s going to be an ideal client. If its focus is chasing returns, then we’re probably not in the position to add value, so what we are seeking are those clients that see benefit from a firm providing a good advice process, where advice adds value.”

Which begs the question, are there clients that are willing to pay for that advice? “Indeed,” says Cross.

“Absolutely, so that they actually see a real value in the actual advice process, rather than necessarily in things such as selecting individual funds.

Because that’s very much not where our focus is at all.”

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September/October 2015

Checking the Client Model As to the model that the firm can offer an IFA, Helm Godfrey says it would base this on a detailed analysis of their relationship it has with its clients. This would include the demographics of the clientele, and where the income is coming from. What Helm Godfrey looks for, he says, is a very clear client agreement, and one which shows that there is a need for an on-going service.

“Where a service is actually taking place,” said Cross, “that would be given a different value to one where there may be legacy trail income, or passive income, which might be coming in with no adviser engagement.”

“There are two very different structures that would apply to clients that fall in between the particular groups. Very typically for most advisers, they have clients that sit in both sides, so we would look at each individual case on an individual basis. We would assess it, based on a very clear understanding of the advisor’s clients and the relationship that exists between them.”

No Time for the Beach Cross stresses that Helm Godfrey is interested primarily in talking to IFAs who are

genuinely retiring. But he doesn’t see it as an advantage for the retiring IFA to head straight for the beach. “It’s very clear that the relationship pretty much immediately passes from old adviser to new adviser straight away, because obviously the new adviser needs to be motivated to develop the relationship with the client on an ongoing basis. But we wouldn’t have a situation whereby we would just say take a client base and say goodbye to the adviser.

We would expect there to be an ongoing relationship for a 12 to 24 month period.”

Selection Strategy Helm Godfrey has its own advisers, says Cross, who are looking to exit in five to ten years, and it has developed its own strategy to cope with that is to develop its own organic adviser base. Helm Godfrey has initiated a programme which sees the firm developing certain paraplanners into advisers.

“All our paraplanners, for example, come in as level four,” says Cross. “So technically they are able to give advice, but they may not necessarily have the people relationship skills

needed to do the advisory role.

So we’re currently this year taking three advisers through that process. We very much hope they will be advisers from 2016.

A new intake of paraplanners are coming in to replace the ones becoming advisers.”

Furthermore he explains, the firm has created an academy for its own administrative staff who wish to become advisers.

It’s an organic, self-regenerating process, says Helm Godfrey, and bringing in external resources from people retiring is just one way in which the firm will build its business.

The last word goes to Cross: “We are also bringing in advisers who are self-employed, who are bringing in their clients, and also want to continue working. And that’s fine too - that’s an area of growth.

“We’re also bringing in new employed advisers who will work particularly very closely with our employed benefits department.

We have a number of substantial corporate schemes whereby we have employees who require wealth management advice, and we are trying to grow and develop that particular part of the business as well.”

Helm Godfrey IFA Retirement Offer – At a Glance n Must have similar client base n Clients need to be those that value advice n Various business models available depending on the client’s needs n Interested in IFAs at differing levels n Likes to promote home-grown talent n “We are looking for a very clear client agreement, where there is a clear need for an on-going service.”

For more info or for a confidential introduction to Helm Godfrey, please email hr@ifamagazine.com or speak to our Publishing Director on 07974 708771

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Compatibility: Requires IOS 6.0 or later. Compatible with iPhone, iPad, and iPod touch. This app is optimized for iPhone 5. Available on Android.

Aviva Investment Doctor.indd 34 IFA Magazine App.indd 1

Twenty Four Seven IFA Magazine, Britain’s premier online portal and print publication for financial advisers, has launched its ver y own app designed to help you stay up to date with all the latest financial and economic news as it happens.

Main Features: Reviews Features Funds Market and Economics Trading Expert FCA Compliance Jobs

30/09/2015 21/11/2014 13:30 09:43

INVESTMENT DOCTOR

September/October 2015

Does Debt Matter?

Editor Michael Wilson’s faintly tongue-in-cheek take on a sore topic What better way could there be to start a fight in a pub than to walk in and ask a question like that? What dyedin-the-wool investor with even half an eye on the fundamentals wouldn’t raise a fist and demand to have his say?

I mean, how hard can it be to understand that, if you’re a company and you owe money, then you’re hammering your balance sheet with liabilities that are going to haunt you and hold you back - for as long as you live, or until they’re all paid back, whichever is the sooner?

The Value Investor’s Perspective And yet there are plenty of investors who disagree.

Value investors, in particular, will often declare that it’s the driving market force behind a company’s share that makes it a potential ten-bagger, and to hell with the handful of small weights that are dragging around its ankles, because they won’t count for much by the time it’s the size of a small African country.

Every single up-andcoming company has a chunk of debt attached to it, they say. Taking on a bit of debt is the price you pay for leaving the beginners’ pool and starting to swim lengths in the baths. It’s expensive making the transition from the one stage to the other – and surely, a company wouldn’t willingly put itself into hock unless it had already satisfied itself (and its

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backers!) that its idea was good enough to make it a viable risk?

These investors, of course, have right and logic on their side. On the strict supposition that their hotshot company really is on the way to superstardom – or, equally, to a lucrative takeover offer from some huge predator – then there’s not much doubt that debt is the fastest way up the escalator. (Or share issues, if it should turn out that the borrower really can’t get the money at an affordable rate.)

I once heard it said that a teenage boy’s acne was nature’s way of announcing to the world that there was something worthwhile happening in the trouser department.

And that, although superficially unwelcome and unattractive, it was essentially a positive signal forward. Viewed like that, who wouldn’t be prepared to give a bit of debt a fair hearing?

Government Debt Things change, of course, when you start talking about government debt. The main difference between governments and companies is that the former have the power to issue as much money as they think fit. And that, with every little tranche of quantitative easing or every month of easy credit, the inflationary balance comes under pressure to the point where suddenly everything you owe becomes a little less serious in terms of the burden it imposes on you.

Nobody over 50 who has ever had a mortgage will need reminding of how this works. When the mortgage rate hit 17% in 1979, the pain was incredible – but it swiftly turned to delight as inflation took the sting out of the experience and left you with a debt that hadn’t shrunk except in real terms. Inflation is great for governments (and large corporations too), just as long as you survive the experience.

Witness, for example, the experience of Britain’s continental European partners in the 1980s, who splurged vast sums of debt on road-building and infrastructure while Margaret Thatcher’s Conservative government was watching the pennies and shrinking the UK deficit.

It’s arguable, in retrospect, that the spendthrift continentals got the better of the deal in terms of their enhanced ability to grow faster. But, of course, they did then plough into a debt crisis of their own making which many have yet to resolve, four decades later.

Paul Krugman thinks that government debt doesn’t matter, because in the end, he says, “the world economy as a whole [is issuing money that] it owes money to itself. And because debt is money we owe to ourselves, it does not directly make the economy poorer (and paying it off doesn’t make us richer)” And so to Jeremy Corbyn, who has a different reason for not minding debt.

What’s your view?

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Thinkers.indd 36

30/09/2015 14:27

THINKERS

September/October 2015

Terrifyingly Gifted John D Rockefeller Born 1839 in New York Died 1937 in Florida distribution system. The New York World described Standard Oil in 1880 as “the most cruel, impudent, pitiless, and grasping monopoly that ever fastened upon a country.”

No understatement there, then.

A Life That Spanned The History Books The owner and originator of the Standard Oil Company, which monopolised America’s oil industry well into the twentieth century, was always the confident type. He attended business classes for all of ten weeks before starting out in the commercial world. Within four years he had his own food distribution business, and within eight he had built his first oil refinery, supplying kerosene lamp oils as a cheap substitute for whale oil.

A Forced Retirement

“Good management is showing average people how to do the work of superior people”

Information is Power That was just the warm-up. The young Rockefeller spent the Civil War years buying out his oil rivals and planning an ambitious distribution network based on the new and fast-growing railway network. Most importantly, he employed a ‘market research’ team of observers to track the quickly expanding industry in oil-rich Ohio. Sure enough, within three years Rockefeller owned the biggest refinery complex in the world, which became Standard Oil in 1870. Research and strategy had paid off handsomely.

The Dirty Game Begins Standard Oil was one of five competing oil majors in Ohio, but it set about squeezing out its rivals by persuading the rail companies to double all their usual freight rates while simultaneously allowing it 50% discounts for its own ‘bulk contracts’. These rail cartels were eventually broken up by angry state legislators, bringing Rockefeller into public disrepute. But, undeterred,

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he still continued to buy out his competitors with cash while simultaneously pressing the railroads for further bulk transport discounts and sweetheart deals of every kind. Rockefeller’s instinct for the efficiencies of scale were unmatched: by 1874, just four years after Standard Oil’s incorporation, all 26 of its Cleveland rivals had sold out to it.

Monopolising the Pipelines The end of a beautiful friendship came in 1877, when Rockefeller annoyed his railway friends by investing in oil pipelines instead – thus prompting them to start building their own pipelines in response. Standard Oil promptly laid siege to the rail companies by withholding its commissioning altogether - and eventually, starved of revenue, they obediently sold out to Rockefeller.

This left him with a virtually complete monopoly of the

By 1885 Standard Oil owned 20,000 domestic wells, 4,000 miles of pipeline and over 90% of the world’s oil refining capacity. By 1890 it was also alarming legislators with an attempted entry into the iron ore industry, which brought it into direct conflict with Andrew Carnegie’s steel empire. And, as government outrage grew, Rockefeller sensibly took a back seat in 1897 and restyled himself as a gentle philanthropist.

Philanthropy If he had known that he would live to nearly 100 – his lifelong aspiration – the old toughie would probably have stayed in business just to spite them all.

But his remaining 40 years, through the First World War, the Depression and the start of the Hitler era, proved to be the salvation of his public image.

Rockefeller had always been a devout Baptist and had funded religious and educational causes, including an Atlanta college for black women (now Spelman College). But his General Education Board (1903), his Sanitary Commission (promoting public health) and his Institute for Medical Research (later Rockefeller University) took the giving to new levels. An $80 million gift virtually founded Chicago University. But the press still remembered him for handing out nickels and dimes to everyone he met – including some very rich men. A nice irony.

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September/October 2015

F C A P U B L I C AT I O N S

FCA Publications

OUR MONTHLY SUMMARY OF THE LATEST OFFICIAL PUBLICATIONS Consumer Credit Feedback on CP15/6 and Final Rules and Guidance Policy Statement Ref: PS 15/23 28 September 2015

Guidance on the FCA’s Approach to the Implementation of RingFencing and Ring-Fencing Transfer Schemes

Terms and Definitions for Services Linked to Payment Accounts and Subject to Fees

Guidance Consultation

15 September 2015

47 Pages

Ref: GC 15/5

In CP15/6, the FCA outlined its proposed changes in a number of areas, including:

18 September 2015

n Credit broking n Lending (including guarantor lending) n Financial promotions n Debt Having reviewed the feedback, the regulator is introducing the majority of the changes we consulted on, but it has made some modifications and is also planning further work in some areas.

Some changes came into force on 28 September 2015, but most will apply from 2 November 2015 General Insurance Add-Ons Market Study – Including feedback on CP15/13 and Final Rules and Guidance

17 Pages This consultation sets out the proposed general guidance on the FCA’s approach to the implementation of ring-fencing in the UK, including its approach in relation to ring-fencing transfer schemes (RFTSs).

In addition, the regulator says, it is required under the secondary legislation on ring-fencing to make rules specifying the information that non ring-fenced bodies must provide to certain individuals.

The consultation on proposed rules in this area were published in July 2015 (CP15/23).

Consultation period ends 30 October 2015

Feedback Statement Ref: FS 15/4 37 Pages The FCA reports on the main issues arising from responses to its Call for Input and publishes the provisional UK list of terms and definitions. In response, it has: n Added five additional services to the list n Set out terms and definitions to describe these additional services n Changed the term ‘unplanned overdraft’ to ‘unarranged overdraft’ n Made minor amendments to some of the definitions Changes to the Approved Persons Regime for Solvency II firms: Final Rules and Consequentials Relating to CP22/15 on Strengthening Accountability in Banking Policy Statement

Policy Statement

Amendments to Various Forms

Ref: PS 15/21

Ref: PS 15/22

Consultation Paper

13 September 2015

28 September 2015

Ref: CP 15/29

138 Pages

66 Pages

18 September 2015

Following its March 2014 General Insurance Add-Ons Market Study, the FCA consulted in March 2015 on rules banning opt-out selling across financial services and improving information provided to customers buying general insurance add-ons.

560 Pages

Following feedback received to CP15/15, this document:

This Policy Statement finalises the rules to ban opt-out selling, and also finalises both the Handbook and non-Handbook guidance to improve the information that is provided early on in the sales journey.

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FCA Publications and IFA Calendar.indd 38

The FCA and the PRA are introducing a new accountability regime for deposit-takers, insurers and PRA-designated investment firms.

As part of implementing the new regime, the regulators have consulted on amendments to a series of forms used by firms and individuals relating to regulatory approval for certain roles.

Consultation period ends 19 October 2015

n Sets out amendments to the arrangements for small NDFs we proposed in CP15/15 n Consults on a reformed regime for larger NDFs , and n Consults on changes to forms necessary for the implementation of the reformed regime for all NDFs, as well as transitional arrangements for implementing the reforms.

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September/October 2015

Quarterly Consultation Paper No. 10 Consultation Paper Ref: CP 15/28 4 September 2015 47 Pages The regulator is proposing to make changes: n In relation to offshore life insurance bonds n To the Handbook to implement the Mortgage Credit Directive n To the TC list of appropriate qualifications n To the FSA guidance on Consumer Redress Schemes, and to incorporate it into CONRED n To SUP Chapter 16 to improve the data collection process for both firms and the FCA n To DISP rules, to make complaints reporting requirements more consistent and clear n To the Glossary, LR, DTR, PR, GENPRU and SUP in light of the SAAD and make some miscellaneous amendments to these sections n To provisions in GEN.

ELTIF Regulation will apply from 9 December 2015. Part III consults on changes to the Handbook to keep our rules and guidance for authorised investment funds up to date.

Consultation period is staggered until 7 December 2015 PSR Regulatory Fees 2015/16 Consultation Paper Ref: CP 15/26 20 August 2015 11 Pages This paper explains how the regulator proposes to calculate and collect PSR fees from participants in regulated payment systems.

Changes to the Approved Persons Regime for Insurers not Subject to Solvency II: Reforms for Larger Non-Directive Firms Consultation Paper 13 August 2015 67 Pages The proposals in this CP15/25 should be considered in the context of the reforms set out in CP15/15 and read alongside it.

UCITS V Implementation and Other Changes to the Handbook Affecting Investment Funds

Finalised Guidance

3 September 2015 235 Pages The paper consults on rules and guidance to transpose the most recent changes to the UCITS Directive (UCITS V), as required by 18 March 2016.

Part II consults on a set of changes to the Handbook to ensure the EU Regulation introducing European longterm investment funds (ELTIFs) will operate effectively. The

OCTOBER 2015 1

New permanent rules under PS 15/14 (Restrictions on the Retail Distribution of Regulatory Capital Instruments) come into force

5-7 Institute of Financial Planning annual conference Newport, Wales 12

Ref: CP 15/25

Risks to Customers from Performance Management at Firms

Ref: CP 15/27

for your

Consultation period ended 17 September 2015

Consultation period is staggered until 5 November 2015

Consultation Paper

Dates Diary

Consultation period ends for CP15/24 (Cash Savings Remedies)

25-25 World Economic Forum Summit on the Global Agenda Abu Dhabi, UAE 31

Tax assessment deadline for paper forms only

31

Rugby World Cup Final Twickenham, UK

Ref: FG 15/10 27 July 2015 15 Pages This Statement reports on the main issues arising from the MCD elements of CP15/6 and finalises this guidance, which is relevant to all firms with staff who deal directly with retail customers and some small and medium-sized enterprise (SME) customers, where relevant.

The Statement summarises the risks and conflicts of interest affecting managers at all levels and provides details of feedback received.

Continues overleaf IFAmagazine.com

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September/October 2015

F C A P U B L I C AT I O N S

Cash Savings Remedies Consultation Paper

Pension Wise – Recommendation Policy

Ref: CP 15/24

Policy Statement

23 July 2015 91 Pages

Dates Diary for your

NOVEMBER 2015 2

New rules on PS 15/23 (Consumer Credit Feedback on CP15/6 and Final Rules and Guidance) come into force

22-29 Financial Planning Week (Institute of Financial Planning)

DECEMBER 2015 8-9

Institute of Financial Planning Scottish Conference & Exhibition Edinburgh, UK

17-18 European Council Meeting Brussels, Belgium

This paper follows on from the cash savings consultation which found that the market was not working well for many consumers and proposed remedies in four areas: disclosure; switching savings accounts; convenience of saving with different providers; and transparency of interest rates paid to longstanding customers.

The consultation summarise the feedback received on the proposed remedies.

Consultation period ends on 12 October 2015 Feedback on CP15/01, Finalised Guidance and Rules Policy Statement Ref: PS 15/18 15 July 2015 114 Pages This Policy Statement reports on the main issues arising from Consultation Paper 15/01 (FCA Competition Concurrency Guidance and Handbook amendments.)

Ref: PS 15/17 3 July 2015 18 Pages This Policy Statement reports on the main issues arising from CP15/12 (Pension Wise, April 2015) and publishes the FCA’s recommendation policy. The initial introduction of Pension Wise was something of an interim affair, with many of the finer details and regulatory points being left until June to be explained in more detail.

Although this policy primarily affects the designated guidance providers delivering Pension Wise, it will also be of interest to: n Consumer representative bodies interested in the outcomes of Pension Wise n Charities and other organisations with a particular interest in retirement advice n Individual consumers n Pension scheme trustees, advisers and providers FCA Regulated Fees and Levies Consultation Paper Ref: CP 15/21 24 June 2015 72 Pages

Market Studies and Market Investigation References Finalised Guidance Ref: PS 15/9 15 July 2015 26 Pages

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King George VI Chase Kempton, UK

HAVE WE FORGOTTEN ANYTHING? Email editor@ifamagazine.com

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In January 2015 the regulator consulted on draft guidance setting out its powers and procedures in relation to conducting market studies under FSMA or under the Enterprise Act 2002 (EA02) and referring markets to the Competition and Markets Authority for in-depth investigation under EA02. This Policy Statement summaries the feedback and sets out its responses.

The FCA is consulting jointly with the Prudential Regulation Authority (PRA) on reforming some of the rules for credit unions, which were inherited from the former FSA. The PRA’s proposed responsibilities deal exclusively with matters affecting the financial safety and soundness of credit unions, whereas the FCA’s proposals concern the ways in which credit unions conduct business. The FCA does not envisage any significant changes to the existing sections of CREDS, whereas the PRA wants to delete CREDS in its entirety, replacing it with a new Credit Unions Rulebook Part, Consultation period ends 30 September

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J0213 P

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24/07/2015 17:26 30/09/2015 14:55

September/October 2015

T H E OT H E R S I D E

Marriage Guidance The pensions reform has created a new niche for advisers says Richard Harvey – trying to keep your family’s mitts off your money It appears that doomy predictions from some in the savings industry that new pension freedoms would lead to foolhardy folk splashing out on fripperies such as Lamborghinis and posh holidays, were overly pessimistic.

While many with pension pots up to £10,000 quite sensibly took the money and ran, the innate caution of those with bigger funds has trumped any temptation to ‘spend, spend, spend’.

Nevertheless there is increasing evidence that the role of the IFA has now gone beyond simply advising clients on savings, pensions and investments, and instead they are having to take on the role of family guidance outreach counsellor (the sort of job much beloved by local authorities and the advertising director of The Guardian) .

Pastoral Guidance When I recently visited the office of my IFA mate Nige, I earwigged a speakerphone conversation which went something like this......

Nige: “Charles - good to hear from you. And how can I make you a happier client today?”

Charles: “Well, I thought I should take advantage of these new pension rules.

The kids think so, anyway.”

Nige: “They do?”

Charles: “Indeed. The lad has his beadies on a deejay mixing desk, speakers the size of Canary Wharf, and a flashing lights system dazzling enough to make contact with little green men on Pluto.”

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Nige: “Is there much call for that where you live?

I mean, Lowestoft is hardly the hub of hip-hop action....”

some advice for you, Charles.

Start buying lottery tickets...”

Charles: “...and Charlotte has asked me to pay for a Birkin bag, a Victoria Beckham dress, a holiday with her chums in Ibiza, and a vajazzle, whatever that is.......”

Apart from the decades of incompetence and corruption which has led to the Greek Tragedy, there may be one other reason - the disconnect between price and value in the country’s restaurants.

Jeepers Croesus

Nige: “Don’t ask, Charles, don’t ask. Anything else?”

Charles: “As you’d expect, the good lady wife has got in on the act. Says we should live for today, to hell with tomorrow, and how about a nice little farmhouse in Provence? I do wish she’d stop watching ‘A Place in the Sun’.”

Nige: “How much damage do you reckon that’s going to do?”

Charles: “Not likely to see much change out of a mill-and-a-half, I fear”.

Nige: “And you reckon that raiding your pension pot - which, incidentally, currently stands some way south of £300,000 will bring family harmony?”

Charles: “Good Lord, no.”

Nige: “And what about you, Charles. What do you want?”

Charles: “A peaceful life, old boy. Maybe a couple of pints of Old Gutbuster of a Friday with the chaps at the golf club.

And a lifetime subscription to Wisden wouldn’t go amiss.”

Holidaying in Santorini during the summer, I was astonished by the enormous improvement in the standard of food and wine since those dark days when dinner at a taverna meant muddy moussaka and local hooch which took the enamel off your teeth.

Having troughed and imbibed royally at an eatery where the quality and presentation of the meal was matched only by a spectacular view over the Aegean, I felt positively guilty paying a bill of less than £55 for two, more than half of which was accounted for by a bottle of the island’s best wine.

If you haven’t booked your autumn hollies yet, then go Greek. They need your Euros.

Charles

Nige

Nige: “I have

IFAmagazine.com

30/09/2015 14:24

ENGLAND V AUSTRALIA TICKETS AND HOSPITALITY AVAILABLE FOR ALL ENGLAND MATCHES AT RUGBY WORLD CUP 2015 AVAILABLE NOW FROM £895 www.rugbyworldcup.com/hospitality Prices exclude VAT. Rugby Travel & Hospitality Ltd is the exclusive provider of official hospitality for Rugby World Cup 2015 TM © Rugby World Cup Ltd 1986

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For Adviser use only, not for onward distribution or use with clients. No other person should rely on the information contained in this document.

PruFund.

All the ingredients for reduced investment volatility.

The PruFund range aims to provide smoothed returns, removing some of the day to day fluctuations associated with direct stock market investments.

Every quarter we announce the growth expectations for each of the funds in our PruFund range. This quarter our Expected Growth Rate for the PruFund Growth Fund is 6.0%.

Past Performance Proof Annualised performance of the PruFund Growth Life Fund over the last 10 years.

3 years to 31/07/2015

5 years to 31/07/2015

10 years to 31/07/2015

7.2%

8.3%

6.9%

Percentage growth since 25 November 2004 Prudential PruFund Growth Life Fund 120.0%

We think we’ve got the right ingredients. The proof of the pudding is in the eating. Visit www.pruadviser.co.uk/10years

100.0% 80.0% Performance %

We hope these Expected Growth Rates can offer some re-assurance on what PruFund is likely to deliver to you and your clients.

60.0% 40.0% 20.0% 0.0% -20.0% Nov 04

Dec 05

Dec 06

Dec 07

Dec 08

Dec 09

Dec 10

Dec 11

Dec 12

Dec 13

Dec 14

25/11/04 to 31/07/2015

Source: Financial Express, bid to bid, net income reinvested but net of fund tax Prudential PruFund Growth Life Fund ABI Mixed Investment 20%-60% Shares PruFund Performance shown is gross of all applicable charges. Please note that some if not all of the funds comprising the sector average will have fund management charges deducted from their performance. Past performance is not a reliable indicator of future performance.

The value of investments can fluctuate which will cause fund prices to fall as well as rise, investors may not get back the original amount of capital invested. The charges will vary depending on the product. Visit www.pruadviser.co.uk for details on the products (including charges).

“Prudential” is a trading name of the Prudential Assurance Company Limited, which is registered in England and Wales. This name is also used by other companies within the Prudential Group.

Registered office at Laurence Pountney Hill, London EC4R 0HH. Registered number 15454.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

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