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For today’s discerning financial and investment professional








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C30509.003_SP_Objective Returns_IFA mag_297x420_v6_Objective thinking 27/03/2012 10:59 Page 1

This communication is for financial advisers only. It should not be relied upon by retail investors. The value of an investment in the fund can go down as well as up and investors may get back less than originally invested. Investec Structured Products is a trading name of Investec Bank plc, registered address 2 Gresham Street, London EC2V 7QP. Investec Bank plc is authorised and regulated by the Financial Services Authority.

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C30509.003_SP_Objective Returns_IFA mag_297x420_v6_Objective thinking 27/03/2012 11:00 Page 2

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

Emma-Lou Montgomery is a broadcaster and finance journalist and qualified investment adviser. Nick Sudbury is a financial journalist and investor who has also worked as a fund manager.


Editor’s Soapbox

The Hedge Fund boys are back in town, says Michael Wilson. But the industry is changing

Monica Woodley a senior editor at the Economist Intelligence Unit.

Heisenberg had it easy compared with a pensions adviser, says Steve Bee

Brian Tora a Communications Associate with investment managers JM Finn & Co. Richard Harvey a distinguished independent PR and media consultant.


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

THE FRONTLINE: Sarkozy’s campaigning has played up his own role in battling the Eurozone crisis, since polls showed a majority in favour of the euro

A strange lack of direction, says Brian Tora. But that doesn’t mean anything’s wrong

The Uncertainty Principle

US Funds. Plenty of ways to back this year’s global equity winner, says Nick Sudbury

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


The Compliance Doctor

Lee Werrell of CEI Compliance looks at the top current issues of interest to IFAs

Thinkers: Jim Rogers Who says you can’t be rich and have fun too?



Pick of the Funds

FSA Publications



Drôle de Guerre




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

Kam Patel a former deputy editor at Hemscott. He is a qualified investment adviser.

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



The IFA Calendar

Conferences, economic summits, race meetings... All the dates you daren’t miss

The Other Side Richard Harvey meets a sax maniac

Editor: Michael Wilson

Art Director: Tony Merlini

Publishing Director: Alex Sullivan

Luxury Account Director: Nick Edgeley

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



This month’s contributors

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features 22


France’s Election

Europe is holding its breath while France elects its President, says Monica Woodley. You can see why


Luxury Funds and Investments The beautiful people are still buying, says Kam Patel



Safety in Structured Products Investec’s Gary Dale explains why even bulls need the safety-net sometimes


Peer to Peer Lending

Probably the most profitable way to earn a halo. Emma-Lou Montgomery explains


The Learning Curve Continues


Standard Life’s Michael Beveridge looks at the long-term educational implications of RDR


RDR – It’s Looking Good

Aviva’s Andy Curran nails the improving trend with some scarce hard figures

All eyes are on the French election IFA Magazine is for professional advisers only. Full subscription details and eligibility criteria are available at:

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THE D WORD HERE WE GO, THEN, INTO THIS BRIGHT NEW FINANCIAL YEAR. AND WHAT A YEAR IT’S GOING TO BE The ISA season’s been a success. Britain’s economy is back out of the red zone and will make 2% growth next year, probably rising to 3% by 2015. America is bounding ahead, and its stock market has risen by 28% since last October. China and India are still putting in 6-8% economic growth and have logged 10-12% equity gains in the first quarter of 2012. And yet here we are, still rangebound, with the Footsie plateauing around 5,900 since January. (And that’s with the p/e ratio at only 10.) The Eurofirst 300 similarly. Markets are moving in a ghastly risk-on, risk-off lockstep, and breakouts are rare, and transient. Something just isn’t right out there. And a few brave analysts are starting to talk, hesitantly, about the dreaded D word. Deleveraging is the horror that daren’t speak its name. Households around the world have had a terrible shock in the last four years, and some of them are taking the frugality message all too seriously. America has 23% fewer credit cards now than four years ago, and its people are paying off debts while low bank rates make it possible. A recent McKinsey report declared that in Germany, in Korea and in Canada too, consumption is going off a cliff. Even in China, car sales growth is dropping. On a private level, we British are doing the same, but the statisticians haven’t noticed. UK families are reining in their expenditure, and net debt is falling. But our national debts include a vast and still-ballooning quantity of public liabilities which are more than twice the size of the 150% of GDP that we owe privately. Now, here’s the rub. In his March Budget Mr Osborne promised a sixfold decrease in the deficit by 2016-17. So, theoretically, where will that leave us? Facing the awkward truth, some say. And that truth is that our ballooning public debt is one of the things still keeping British demand on an even keel. That’s ludicrous, isn’t it? Well no, it isn’t. David Cameron got his knuckles rapped last autumn for encouraging consumers to stop buying things and start paying off their credit cards like the Americans. And what would happen if they did? It doesn’t bear thinking about.

M ik e

Michael Wilson, Editor IFA magazine



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Write to Michael at

April 2012

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8.3% of the UK economy derives from

the internet, according to the Boston Consulting Group (BCG), which said that Britain’s £121bn of purchases in 2010 (£2,000 per person) made it the biggest in the developed world. Around 23% of all purchases are expected to be internet-based by 2016.

Yawn... If you don’t normally like surprises, then this was the kind of Budget you were always going to enjoy So much of what Chancellor George Osborne said on 21st March had been widely trailed in advance – the 5% cut in the top rate income tax band, the invitations to the private sector to get involved in road-building and broadband infrastructure, the extension of the personal tax allowance from £8,105 to £9,205 by this time next year, the 7% levy on house sales of more than £2 million, and the creation of yet more planning and tax exemptions, especially in redevelopment and enterprise zones. And yet George had a few surprises left up his sleeve – some of which have left the sceptics scurrying round in search of the hidden catches.

The Economy

And yet George had a few surprises left up his sleeve – some of which have left the sceptics scurrying round in search of the hidden catches.

One surprise came on the economic front – which, admittedly, is where the Chancellor’s backroom boys have the most freedom to play games with the statistics. Britain will avoid a technical recession, he said – i.e. it won’t record a second quarter of negative growth – thanks to an unexpected carry-forward of momentum from the final quarter of last year. Last year’s forecast of a 0.7% GDP growth in 2012, the Chancellor said, would now rise to 0.8%, followed by 2% growth in 2013, 2.7% in 2014 and 3% in 20152016.

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Unemployment, said the Chancellor, will peak at 8.7% of the workforce this year but will come down by at least 100,000 a year to reach just 6.3% by 2016-17, with a million jobs being created in the next five years. (Plausible.) The inflation target of 2% is being retained for next year. (Slightly more plausible, given that February’s actual rise in the consumer price index was just 3.4%, compared with 5.1% in September 2011, and that this year’s projected outcome is still 2.8%.) But you needed to be a little more circumspect about George’s forecasts for the Budget deficit, which he said would decline from £126 billion in 2012 to £98 billion in 2013-14 and right down to £21 billion by 2016-17. (Hardly plausible at all.) Still, it gave the Chancellor a useful platform for insisting that Britain’s credibility as an international borrower was now so good, and its interest rate outlook so minuscule, that the Treasury could now look at issuing gilts with maturities of more than 50 years, for the first time since many decades. Why, it might even try its hand at perennial gilts with no redemption dates at all.

Taxes and Allowances We ought to be a little more generous about the Chancellor’s £1,100 rise in the personal allowance, which was genuinely unexpected and very welcome. Except, that is, by those earning £100,000 or more, for whom it will effectively disappear (at £116,000) – thus raising the probability that higher earners will find themselves paying effective marginal rates of 60% or maybe more on the parts of their salaries that exceed £116,000. To the relief of most pension providers, and our very own Steve Bee as well, the Chancellor wisely opted to leave the whole damn subject alone, at least while auto-enrolment is kicking in. There were no changes to annuity or drawdown rules, pension caps and so forth – or at least, none that could be immediately detected. (We never know the whole ghastly truth about these things until the Budget details have been published and then debated through Westminster.) The state pension system is being simplified for those who enter pensionable age after April 2013. For these people, the present system of age allowances is being scrapped and a bigger unitary pension is

India’s national Budget

for 2012 disappointed foreign investors by conceding that the budget overshoot for the year ending March had hit 5.9% of GDP, instead of the targeted 4.6%. The revised target of 5.1% for fiscal 2012 was decried by the Indian media – but not as much as an announcement that foreign companies faced a new tax liability, retroactive all the way to 1962, on transferring Indian assets overseas.



Asset Management suffered a 5.4% decline in assets under management last year, according to a new report – largely because of withdrawals from its strategic partners business. The good news is that AUM still remains above £100 billion (just), and that although underlying operating profit fell from £67.2 million to £65.2 million, new business from institutional clients rose from £5.7billion to £7.8billion.

After April 2013 a bigger unitary pension is being introduced being introduced. But the stopping of indexation for age-related allowances has provoked outrage among pensioners who claim that the Chancellor is granny-bashing to pay for the top-rate tax cut. Last year’s alarmingly clumsy removal of child benefit for families where at least one parent was earning more than about £42,500 a year came in for a rethink. The threshold is raised to £50,000, and even then it’s going to be staggered.

The Business Forecast Businesses will have been cheered by the drop in corporation tax to 24%, and by the prospect of a 22% rate by 2014. small firms turning over up to £77,000 a year will be exempted from some of the more onerous tax burdens that currently apply. Looser planning regulations for business development are on the cards. And so is a new £3 billion development of what might be Britain’s last unexploited oil and gas resource off the Shetlands. Less cheerful, perhaps, was the parliamentary response to George’s promise that the south east was to get more airport capacity. Just what Disgusted of Slough and Angry Bishops’s Stortford weren’t hoping for. We’ll know more about this by the late summer, when a report is to be published. Any more? Oh yes, much more. But the details will all out by the time you read this, and we’d hate to spoil your fun. The mere fact that George was able to risk boring us says that things are better than he would have expected a year ago. For more comment and related articles visit...

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UK small companies will find

George Soros’s

it cheaper to get loans under a £20 billion loan guarantee scheme launched by the government. The money doesn’t guarantee the loans as such – rather, it indemnifies the banks against the risk of their bank counterparties failing. This should make it easier for banks to get the wholesale credit for making the loans. In return, they will be required to knock 1% off the rates they charge borrowers.

crown as the world’s most successful hedge fund manager has passed to Ray Dalio (left), whose Bridgewater Pure Alpha fund made $13.8 billion last year. Mr Soros, of course, has now retired from active management and is no longer in the race. Spoilsport.

I Come Not to Bury Caesar... ... but to praise him. As more than one of the eminences currently queuing up to pay tribute to the outgoing FSA chief executive might have muttered if he’d thought it was a safe thing to do Hector Sants’s five year stint at the top has put him openly at odds with many IFAs - not just because of the content but also the delivery of his crackdown on what had once been a relatively self-regulated sort of industry. Ah, those long-lost days of innocence and general contentment... Mr Sants’s decision to stand down from the leadership of the Financial Services Authority, with effect from June, marks the end of a tough period of service which began in 2007 just as the international banking crisis was brewing, and which now ends with the first small glimmerings of hope that it might soon be over. Not that the international banking crisis itself was any of the FSA boss’s territory – or at least, not in any direct sort of way - but it soon became his business. The regulator’s decision to get tough with the whole UK financial scene in the chaotic aftermath of Northern Rock and the RBS and HBOS debacles was, in every sense, a consequence of the poisoned chalice that he’d been passed by history. Prosecutions and rule-tightening became regular events. RDR became completely unstoppable under Mr Sants’s stewardship, as any lingering hopes that the Level Four timetable might be relaxed were quickly rebuffed. Indeed, he drove the reforms through the protesting mob with all the determination of a stagecoach driver trying to scatter the highwaymen in his path by whipping and cracking for all he was worth. On balance, despite the grumbling, the industry will be

healthier for RDR. Less popular have been the two successive 10% increases in the authority’s funding – shortly to be followed by a third, of 15%. Sants’s first attempt to resign the FSA leadership, in February 2010, had been resisted by the soon-to-be Chancellor, George Osborne, who had persuaded him to stay long enough to help the new Prudential Regulatory Authority settle down in its new role when the FSA is finally broken up. Now that he’s succeeded in quitting, the FSA has lost no time in appointing Sants’s deputy, Andrew Bailey, as the future head of the PRA. For more comment and related articles visit...

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European active

managers of equity funds are finding it hard to maintain consistency, according to a new report by Lipper. The report claims that although 42.8% of the 2,500 managers surveyed beat their indices in an average year, and although 26.7% achieved it during an exceptionally hard 2011, only 0.5% (13 funds) has stayed ahead for all of the last decade.

Goldman Sachs

covered its collective face with its hands after a senior executive published an open resignation letter in the New York Times, claiming that his colleagues were describing clients as “muppets” and that he was ashamed to be a part of that culture. Goldman has long prided itself on its reputation for client care.

Drawdown Showdown Britons might not know it yet, but they’re at increased risk of buying the wrong products in the next few years because of the toxic mixture of slow economic growth, low interest rates and poor returns on investments And all because they’re saving more, shopping around and paying off their debt. Which means in turn that they’re looking round for investment deals that provide them with the very best returns. Well, maybe that’s putting it a little too colourfully. The FSA’s latest report on the consumer risk environment, the Retail

Conduct Risk Outlook (RCRO) for 2012, says that the next 12 to 18 months will see a rise in the risk that consumers will be mis-sold unsuitable products – not just in terms of inappropriate risk levels in relation to their personal situations, but also the clarity with which products are explained to them. The knives are out particularly for socalled decumulation products, which in this case effectively means income drawdown products that might entail a risk of capital erosion. The FSA says that, now that annuities are looking so much less attractive, people are more likely to look for these higher-yielding instruments – perhaps without properly recognising that the future is going to be a long time, and that depleting their capital now will hurt them later. The regulator also expresses concern that the eventual returns from drawdown products may fail to match the illustrations, or that rates might worsen in time. Accordingly, RCRO 2012 effectively put advisers on notice that they will be under enhanced scrutiny when it comes to making everything plain to the clients. “Consumers rely on financial firms and their products to provide them with vital services – literally the means to run their lives,” Martin Wheatley, the FSA managing director, said. “They need to be able to trust that the products they buy work for them and that they are getting a fair deal. But our report today shows that consumers worry they aren’t being sold the right products.” It isn’t all bad news, though. The FSA says that three of last year’s top dangers - UCITS IV, structured deposits and tax changes and their implications for financial products – are off the critical list for 2012. So that’s all right then.

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banks passed a stress test with flying colours, according to the Federal reserve, which said that only a small handful would not have the core resources required to survive another shock. The stock market loved it. Even Citigroup, one of the failures, saw its share price lifting vigorously.



risks becoming another Greece, according to Pimco’s chief executive Mohamed El-Erian. The original EU rescue package, worth €78bn, is now showing signs of failing, and a second round will be needed if the Greek crisis results in a further loss of confidence among Eurozone governments. The Portuguese government is already imposing tough austerity measures which will shrink the economy by 3.3% this year.

They (Still) Think It’s All Over The Greek tragedy creaked onward toward at least the expectation of a conclusion Things seemed to be looking up, as public opinion polls showed an improving domestic attitude toward the country’s membership of the Euro Club. A month earlier it had all looked very different, as angry protesters had clashed with police over Prime Minister Lucas Papademos’s tight budgetary constraints. Meanwhile the European markets remained cheerful that a successful outcome of the Euro crisis could be achieved – or, at least, one which didn’t involve a disorderly default. Mid-March saw a resumption of the 6-7% uptrend in the FT Euro 300 index, which had characterised the early months of the year. Euro Group president Jean-Claude Juncker (right).

The Euro Club gave its formal approval to the second €130 billion round of Greece’s rescue plan, and it authorised the release of the first multibillion-euro loan instalment. Euro Group president Jean-Claude Juncker declared that “all required national and parliamentary procedures [had] been finalized.” The International Monetary Fund was expected to ratify the Greek deal, which leaves commercial government bondholders facing a haircut of 75%. Ouch.

Meanwhile finance minister Evangelos Venizelos resigned after assuming the leadership of the Socialist PASOK party, in readiness for taking the left-wing party into new elections which are expected in late April or early May. But there’s no cause for panic yet. Recent polls have showed PASOK in fifth place, with only 11% of the vote. For more comment and related articles visit...

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China’s trade deficit soared to $31.5 billion in February, as its imports grew twice as fast as exports. The slowdown in foreign sales has been accompanied by a lull in domestic demand, leading analysts to speculate that further domestic demand incentives may be on the cards.

Equity fund

managers in their early forties are most likely to outperform, according to new research from Scottish Widows. But in the bond sector, the 38 year olds turned out to have the edge.

Bernanke’s Game So far, so good. With the presidential election barely six months away, Barack Obama must be wondering how he ever got so lucky with the state of the US economy? America’s GDP growth is showing a clean pair of heels to the rest of the industrialised world, and although its unemployment figures still seem uncomfortably high, that seems to be partly down to the fact that US job-seekers who’d given up on their employment prospects in the past are now re-enrolling. Job creation is coming on just fine. The stock market, too, is responding nicely. The S&P 500 has risen by 10% since the start of the year, and by 28% since the beginning of October. And some people are attributing all this to the quantitative easing policies employed by Fed Chairman Ben Bernanke, a Republican appointed by George W Bush, who is no friend of Mr Obama.

The S&P 500 has risen by by 28% since the beginning of October. Some people are attributing all this to the quantitative easing policies of Fed Chairman Ben Bernanke, a conservative appointed by George W Bush, who of course was no friend of Mr Obama.

Did we say that Bernanke’s quantitative easing was the cause of all this growth? No, it’s the mere threat of Q3 (the next mooted round of easing) that seems to be keeping the wheels turning. Like the sword of Damocles that doesn’t fall, the markets seem aware that every day without Q3 is a day when something useful has been achieved. And so far it hasn’t been needed at all, because growth is keeping up. As in Britain, of course, there are many people who bemoan the low rates of interest (which the Fed has vowed to keep exceptionally low until 2014). Savers can’t get decent returns, and that’s already stopping some of them from splashing out on new cars and furniture. All of which may in turn rebound negatively on the manufacturing economy in due course. And then there’s the high oil price, and the ending of tax breaks, and higher taxes, and a sense that a slower growth rate will be along soon anyway. And if that happens, Bernanke reserves the right to turn on the taps and warm things up with more loose money. (That’s how his ‘Twist’ policy works.) Will he do it? Certainly, says Wall Street, and probably in the third quarter of 2012. Or, as one strategist quoted in the FT put it: “Twist is the electric shock wire that keeps yields contained. The option of doing QE3 is more efficient and powerful than actually doing it and expanding the Fed’s balance sheet.” Precisely.

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April 2012

17 27/03/2012 15:54


magazine... for today ’s discerning financial and investment professional They’re the mysterious gunslingers of the financial scene. In the popular perception, they’re the faintly shadowy figures who ride into town without warning, their intentions masked from view and their methods deliberately obscure. The sons of Soros, who might still be riding the same horses they arrived on by the time that sundown comes – or, then again, some completely different kind of animal altogether. Bulls, bears, dragons, you never can tell...

That 5.3% loss might have been a fair reflection of the 5.5 decline in the Footsie – and indeed it was - but it looked a little sorry against the 0.4% rise in the S&P 500 – or the 4% that the S&P’s rise would have represented in sterling terms because of the strengthening dollar. Even the MSCI World Index made 2.23% in the same twelve-month period, or more than 6% in sterling terms. Looked at like that, a British investor in hedge funds would have been somewhere between 5% and 10% adrift of the market, depending on how he made allowances for currency shifts. Not very impressive. And less so when you consider that hedge funds worldwide lost a staggering $123 billion last year, according to one estimate from LCH Investments, a part of the Edmund de Rothschild group. But here we are in 2012, and at least some of the news is good. Man Group, the world’s biggest hedge fund operator, had some good news for its investors in March when it announced that its assets under management had actually increased by 1.9% during 2012. The fact that that alone was enough to trigger an 8% one-day rise in Man’s share price will give you some idea of just how jumpy the markets had been getting.

Like the shadowy figures who ride into town without warning, their intentions masked from view and their methods deliberately obscure The truth, of course, is rather more prosaic. If hedge fund managers were as keen on taking pure speculative positions as the public seems to think, they’d all be out of business in a week. The vast majority make their money by arbitraging large amounts of cash on small anomalies, or by taking principled long-term views and managing them intensively. Either way, hedge funds have historically proved their ability to bring home the bacon. Or the beef, or the bullion, or the bond trades. Hence their popularity with the pensions industry. You don’t create security by continually firing from the hip.

Once Upon a Time in the West And this year the boys are back. New data from the hedge fund administrator GlobeOp has shown that total net new investments to the sector grew by nearly 4.5% in the first two months of 2012, as investors have taken heart at the news that Europe may finally be stumbling toward a settlement on the Greek debt crisis. Total inflows grew by $174 billion in February – or, if you prefer, by 2.1% of the total assets invested. Which, on top of January’s 2.2%, was a convincing sign that things are looking up at last. Not before time, you might think. Further data from Hedge Fund Research shows that, globally, hedge funds made a loss of 5.3% last year, as clients started to fear that the sheer size of the political worries facing the western world might be enough to overwhelm even the hedgies’ legendary ability to anticipate and counterbalance whatever trouble might be around the corner.


April 2012

Eds Soapbox.indd 18

True Grit It’s the hedgies’ ability to switch at short notice from blue chips to gold to coffee futures to renminbi to junk bonds, unconstrained by the sorts of rules that shackle their earthbound contemporaries in other fund sectors, that makes them both revered and sometimes feared. The willingness to go long, short or into cash, all in the course of a day. (Eat your hearts out, day traders.) And it’s their unflinching reliance on their own ability to spot a mispriced opportunity that makes them worth the 25% rake-off from profits that they can often get from their grateful clients. Not that all hedgies are cast in the rampaging Soros mould, of course. Indeed, it’s the ability to use different strategies in a properly counterbalanced way – “fully hedged” – that identifies the vast majority of these funds. As long as the hedgies define their objectives as exploiting genuine market differentials, and not simply launching bear raids for the sake of using their weight in the market, their appeal to more moderate types of investors – especially pensions funds and cautious investors – is bound to be considerable.

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The Good, the Bad and the Ugly

Unfortunately that’s where things been going wrong recently. As the last few year’s dismal results for hedge funds have started to come in, growing numbers of investors, both retail and institutional, have been turning to absolute funds instead. Pension funds in particular have been going for these multi-asset instruments especially in Europe, where MandateWire reported in February that a booming demand for global tactical asset allocation, absolute return and diversified growth funds had reduced the sector’s net inflows into European hedge funds to just £669 million (around $1 billion). A word of warning, however. We Britons shouldn’t allow our perceptions to get too skewed by our own tight little geographical perspective. In the USA, pension funds continued to pump nearly $10 billion into hedge funds and absolute return vehicles (mainly run by hedge funds) during 2011. You can take that as a measure of how well market sentiment has been picking up in the run-up to what would normally be a tough presidential election year. (Election years are famous for the markets remaining suppressed until it eventually becomes clear whether the Republicans or the Democrats have the upper hand.) Now, I’ll freely admit that I’ve been under-impressed so far by the vaunted power of the absolutes. I must have been looking at the wrong ones, because I’ve yet to spot one that’s made a decent return over the middle distance. I’m also guessing that other investors are getting disillusioned with the same perennial disappointment – and that this year’s encouraging hedge fund trends (4.95% growth in the first two months of 2012, according to GlopeOp) will see more of the cautious market coming back onside.

Eds Soapbox.indd 19


No wonder, then, that there are so many other forms of investments that mimic hedge fund behaviours these days. Absolute return funds, which aim to provide positive results in either bull or bear markets conditions, are a kind of homage to the power of the cowboys. And the UCITS III rules, which allow a wide range of instruments to be traded, are another homage.

My Name Is Nobody

Alas, it’s at this point that we seem to return to one of the longest-standing issues surrounding the hedge fund industry – its deeply-entrenched secrecy, as perceived by many investors. Although there’s been plenty of recent progress in opening up the sector to public and official scrutiny, the private investing public still frets that it’s not getting enough information on the motives and the practices of its hedge fund managers. But is the criticism justified? The latest salvo on this subject came from SEI, a Nasdaq-quoted technology provider for institutional and personal wealth managers, which published its fifth annual global study of the hedge fund industry at the end of February. And SEI didn’t mince its words. “With significant dollars poised to flow into hedge funds in 2012,” it said, “managers must now address investor transparency and liquidity concerns to take advantage of new funding opportunities... Portfolio transparency is simply not enough to satisfy investors any more… In order to be successful going forward, [managers’] focus must expand to meet emerging client demands for increased personal interaction and dialogue.” Dialogue? What kind of dialogue? Well SEI was explicit on that score. “Investors want greater detail in terms of security-level disclosure,” it said, “including leverage detail, valuation methodology, and risk analytics. The study also showed that liquidity has emerged as a key area of concern among investors. Nearly a third of respondents (31%) cited ongoing liquidity risk among their biggest hedge fund investing worries, while “an inability to control exit strategy” was named by 46% of respondents.” Phew, that’s pretty strong stuff for an industry that makes its money by secondguessing the upcoming trends and then getting its retaliation in before everyone else has had a chance to react. Surely a fund that tells everybody what it intends to do is a fund that’s going to blow the gaff and lose its profits? But on closer inspection that’s not what SEI or the other critics are calling for. And nor is it what the regulators, in the USA or elsewhere, are seeking. A broad basis of trust is more important than knowing every single detail. Last autumn saw the launch of a UK initiative with the catchy title of Open Protocol Enabling Risk Aggregation (OPERA), which aims to create a standardised template that

April 2012

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magazine... for today ’s discerning financial and investment professional will enable help hedge funds to report risk information in a standardised fashion. Although the project is still at working party stage, and although it will presumably be a UK-only affair, it’s a good step forward for UK hedge fund investors. Details from

But what of the future? Well, it looks as though the days of the fastmoving renegades may be numbered for a different reason The Wild Bunch

And yet, some of those old ideas about secrecy are past their sell-by date. It certainly used to be true many years ago that the essential confidentiality of hedge fund managers’ activities opened them up to allegations of skulduggery on the beaches of Bahamas or Grand Cayman or the British Virgin Islands. And certainly, in the aftermath of the 9/11 attacks in America, when Al-Qaeda was thought to have made profits by betting on the impact of the very plane crashes that it intended to cause, the US Internal Revenue Service made life hell for anyone in the offshore sector who might be open to accusations of shuttling iffy money around, for whatever reason. Those days are largely over – and not least, because during the last ten years Washington has managed to get most of the world’s major power blocks onside in its own fight against tax evasion. (The real reason for of the IRS’s onslaught against the hedgies, although fortunately it chimed in nicely with Brussels’s own desire to axe the tax evaders in Europe as well.) These days even the pirates of the Caribbean are reporting meekly to the US authorities – or rather, to carefully chosen intermediaries who can be relied upon to give their US overlords an authentic flavour of what’s going down in Bahamas without naming too much in the way of detail. As for the rest of us in less sun-soaked climes, we’re being moved along in the direction of compliance and openness by initiatives from the FSA, the European Commission and, indeed, the banking community. It would be surprising if we didn’t see this trend continuing. Long may it last.


April 2012

Eds Soapbox.indd 20

The Big Country

But what of the future? Well, it looks as though the days of the fastmoving renegades may be numbered for a different reason. The world’s hedge fund industry is consolidating fast, according to a study by Deutsche Bank, which says that by the end of last year around 5% of hedge fund groups managed 90% of total assets. Pause for effect. The driver here is that institutional investors now account for 36% of all investments among Deutsche’s survey sample, compared with just 11% a decade ago. And that half of the respondents had more than $1 billion invested in hedge funds, double the number in 2004, and that a similar number said they looked for hedge funds that had more than $1 billion in assets of their own. You don’t get those kinds of balance sheets happening among the gunslingers. The bigger investors insist on more transparency, and the squeeze is on everyone to provide it. And that’s a positive development whichever way you look at it. A convergence of investor awareness, regulatory pressure and sheer market economics are combining to make the world a safer place. Long may it continue. Do you have a good reason for the Editor to jump back onto his soapbox? Not that he needs any encouragement, please send your requests to and stand well back!

27/03/2012 15:54

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This advertisement is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances. ¹Source UBS Global Asset Management, as at 31 January 2012. The estimated distribution yield is a guide only. It reflects the amount that may be expected to be distributed over the next 12 months as a percentage of the current share price. The calculation does not include any preliminary charges and investors may be subject to tax on distributions. The forecast distribution yield may be updated from time to time and will be replaced with a historic yield once the Fund has recorded distributions over a full year. The Fund has yet to make these distributions and as such, the historic yield is not currently available. ²Source: Lipper. Performance is based on NAV prices with income reinvested net of basic rate tax and in Sterling terms to 31 January 2012. Yield figures and performance shown represents the A income share class. Sector is IMA Global Emerging Markets. Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up, and are not guaranteed. Investors may not get back the original amount invested. Changes in rates of exchange may cause the value of this investment to fluctuate. Investments in less developed markets may be more volatile than investments in more established markets. The Fund is permitted to, and may, on occasion, hold a limited number of investments. As the annual management fee of the Fund is charged to capital, the potential capital growth of the Fund will be reduced. Issued in February 2012 by UBS Global Asset Management (UK) Ltd is a subsidiary of UBS AG, 21 Lombard Street, London EC3V 9AH. Authorised and regulated by the Financial Services Authority. Telephone calls may be recorded. © UBS 2012. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

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27/03/2012 16:09

THE FRENCH VOTE WHILE EUROPE magazine... for today ’s discerning financial and investment professional

HOLDS ITS BREATH THE PRESIDENTIAL ELECTION IS TURNING INTO A NAIL-BITER, SAYS MONICA WOODLEY With the first round of the French presidential election coming up fast on April 22nd, it isn’t just France’s own voters who are paying close attention to the views being put forth by the candidates vying for the top office. Paris’s key role, alongside Berlin, at the centre of efforts to sort out the eurozone crisis has meant that this election matters far beyond the country’s own borders.

22 France.indd 22

And it’s a neck-and-neck race, by the look of it. The latest poll, released on 14th March by market researchers CSA, showed the incumbent Nicolas Sarkozy and his Socialist Party challenger François Hollande each with 28% of the predicted first-round vote, with far right National-Front leader Marine Le Pen trailing in third place on 16%. Another poll, released the day before by Ifop, had actually showed Sarkozy taking a narrow lead —28.5% to Hollande’s 27% — the first time that the incumbent president had come on top of a poll. Sarkozy hopes he is building momentum that will carry him to a victory in the second round. Yet the polls still suggest that his chances of winning the presidency remain weak. In the event of a run-off between the two, which would be scheduled for 6th May, CSA found that

April 2012

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Hollande would beat Sarkozy by 54% to 46%, while Ifop gave Hollande a nine-point lead.

Oh la la Meanwhile, financial market participants are watching the election closely for any signs that its result might destabilise the still fragile eurozone situation. Their main concerns so far seem to focus on the impact that Hollande’s election could have on the French-German relationship - and especially the knock-on effects on the two countries’ leadership of the euro crisis management. Hollande has been stoking some of these fears with his troubling assertion that he intends to renegotiate the European Union’s fiscal compact. The European Central Bank’s liquidity injection

France.indd 23

Racial and immigration issues were wiped off the campaigning agenda on all sides after two murderously racist attacks against French Muslims and Jews. But will it stay that way?

April 2012

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During a recent visit to London to court expat voters, François Hollande declared that,

“Finance must be in the service of the economy to create wealth, and not to enrich itself on the real economy.”

has had a stabilising effect so far, and by the end of March it was still shoring up the European market quite well. The danger is that, by the time of the French election, confidence may be wearing thin again, and a renegotiation – which would probably weaken the compact – might crush market confidence. But if Hollande hasn’t been singing the European anthem with enthusiasm, some of Sarkozy’s own moves have seemed less than marketfriendly. As David Cameron might recall, France is currently pressing ahead with a financial transaction tax on share trades, modelled on the UK stamp duty system, which it says it is a first step towards a more comprehensive EU-wide tax system that would cover bond and derivative transactions as well. The Sarkozy administration insists that its new tax has been carefully calibrated to avoid a potential flight of financial business and jobs from Paris, while at the same time being seen to raise money from the financial industry to help pay for its part in the financial crisis. The tax is also limited to the purchase of shares from companies with a market value of €1bn or more.

Should The Markets Be Worried? If we dig deeper into the candidates’ economic plans, those of the socialist Hollande are undoubtedly more radical. In addition to his demand to renegotiate the European fiscal discipline compact, he has also called for a change to the mandate of the European Central Bank, giving it a role in stimulating economic growth; what’s more, he has said that the Eurozone’s €500bn rescue fund, the European Stability Mechanism, should be able in future to access ECB funds to boost its firepower. Closer to home, Hollande has already pledged to raise the top rate of French income tax to 45% - the same as perfidious Albion. But he managed to surprise even some of his advisers by further proposing a radical 75% tax rate on household incomes above €1m a year. Additionally, he has promised to raise taxes on financial income, to cut exemptions from the annual wealth tax, to end stock options and to cap bonuses. Hollande has made no secret of his dislike of financiers. During a recent visit to London to court expat voters, he declared that finance “must be in the service of the economy to create wealth, and not to enrich itself on the real economy.” He has tried to mitigate the effect of his past statements

France.indd 25

that the financial world was his “true adversary”, by adding that his target was not the mainstream banking sector but “mad finance which disrupts markets and puts states into dependency, which uses financial products and which has no links with economic activity”. So that’s all right then. Sarkozy seems to have kept his eye more closely on public opinion. His campaigning has played up his own role in battling the Eurozone crisis, since the polls show that the majority of French people want to keep the euro. But he has also threatened to impose tit-for-tat trade measures that would protect European companies by shutting off Europe’s public procurement markets to foreign countries that did not open their own markets. He has also pledged particular action against the dumping of foreign products in the EU sphere – a reflection of France’s own vulnerability to global competition. The country has lost more than 500,000 industrial jobs in the last decade, and its trade deficit reached a record €70 billion last year. Sarkozy plans to fund a cut in social charges on employers by increasing France’s already high value added tax rates. But he insists that more is still needed to restore competitiveness and encourage employment growth. Controversially, he plans to raise the minimum retirement age to 62 from 60 from 2017. Le Pen’s views are decidedly less nuanced. She argues that France should leave the single currency, stop the “madness” of pouring money into Greece, and protect itself against cheap imports.

Populism and Political Posturing That’s what the candidates are saying on the platforms, then. But how much of this represents actual plans for the future, and how much is just political rhetoric that can be tossed aside once in office? Well, Hollande’s hard tack to the left, with the proposal of a April 2011

25 27/03/2012 16:07


magazine... for today ’s discerning financial and investment professional 75% income tax on the rich, is clearly a play to curb the rise on the hard left of Jean-Luc Mélenchon, the Leftist Front candidate who has made a late surge. Mélenchon has proclaimed solidarity with the people of debt-strapped Eurozone countries against the austerity policies forced on them by the EU. He has stated the need for a strong leader to navigate France through the crisis, and mocked Hollande by labelling him “Captain Pedalo”. Mélenchon advocates high taxes on the rich, banks and large companies, as well as an increase to the minimum wage, lowering the retirement age back down to 60, nationalising the energy sector, and protecting France’s businesses against globalisation.

Meanwhile Sarkozy’s tack to the right with talk of protectionist trade measures – as well as tougher controls on immigration - is clearly an attempt to take support from Le Pen. Ironically, both may be opening the way for the centrist candidate François Bayrou, president of the Democratic Movement, who has taken a stand against excessive public spending.

So What Does France Actually Need?

The French economy needs a shot in the arm and its government budget needs a sword taken to it. Real GDP grew by 0.2% in the fourth quarter of 2011, resulting in an overall result of 1.7% for the year. But growth is expected to drop over the next couple of years, to just 0.1% in 2012 and 0.7% in 2013, according to estimates by the Economist Intelligence Unit, and they won’t return to 1.7% until 2016. The country’s unemployment rate is 9.3%, household consumption is being held back by stagnating real disposable income, and Far-right leader Marine Le Pen’s manifesto runs business investment remains into an astonishing 42,000 words, ten times below the 2008 level. as many as Hollande’s 4,300. Sarkozy hasn’t Since 2005 the current even published a dedicated manifesto. account deficit has been

“My presidential project is complete and coherent”

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April 2012

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The EU view As a rule, most countries prefer to stay out of each others’ elections – partly out of respect for sovereignty, and partly from the practical risk of alienating a potential winner by having supported another candidate. But with the current Eurozone crisis resolution being led by “Merkozy”, this election was never going to be normal. Although Germany’s conservative chancellor Angel Merkel will not be campaigning for her French counterpart, as had been mooted, we don’t expect her to rush out to support Hollande either. His desire to renegotiate the fiscal compact, a hard-won treaty on budgetary discipline, could yet upset the German leader’s carefully laid

plans. Politically, it only needs to be ratified by 12 Eurozone countries in order to take effect, but a refusal by France would still be a major blow. Hollande’s demands include radical calls for the European Investment Bank to provide new loans and issue eurobonds for development projects and financing enterprises - not for mutualising sovereign debt, but for financing projects in areas such as renewable energy, energy efficiency, transport networks, research, urban renewal and youth unemployment. All good socialist stuff - and Hollande probably knows that some of these demands are unrealistic. So it would be likely that some face-saving compromise would be found if he were to be elected. However, while the fiscal compact will have been signed by the time the 22nd April elections comes round, Sarkozy will not have had time to ratify it yet - giving Hollande a chance to interfere if elected. So, even though many Europeans may resent the “Merkozy” duopoly, they probably worry more about the prospect of a Hollande presidency that could derail the slow, painful process of resolving of the eurozone crisis. And they are right to do so. For more comment and related articles visit...

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steadily deepening. This January, Standard & Poor’s took away France’s AAA credit rating, after fears over its sovereign bonds (which have eased a bit). But France still has a public-debt stock worth nearly 90% of GDP, and it cannot rely on the good graces of the market for ever. Unfortunately, both of the main candidates look as if they intend to control the deficit with higher taxes instead of spending cuts - which looks like a straightforward unwillingness to tackle the inefficiencies of the French state. Growth is more likely to follow spending cuts than tax rises, but this doesn’t seem to be high on the agenda.

Job No: 45756-10 Publicaton: IFA Mag

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April 2011

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


Yes, it’s been a pretty reasonable year for equities so far. But you won’t have missed the fact that many global investors are still hanging out on the sidelines because of renewed fears about yet more bouts of intense volatility on markets. Can the euro crisis really be defused? Can America stave off a threatening slowdown as oil prices rise? Does the global deleveraging of consumer debt mean that consumption levels are likely to stay depressed for many years? There’s one part of the investment market that says phooey to any such structural worries. And it isn’t the part that makes its money from cars or furnishings or financial services. As the rising middle classes in Asia continue to assert their impressive spending power, there’s a fortune still to be made from luxury goods


April 2012

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sector and tangible alternative asset classes - such as art, wine and stamps. Right now, many of these sectors are looking pretty well bomb-proof.

Très Chic

Yes indeed, the super-rich are still buying fur coats and fast cars and jewellery, as any glance at your TV will tell you. Switzerland’s Compagnie Financiere de Richemont, which owns such classic brands as Jaeger LeCoultre, Cartier, Piaget, Dunhill and Montblanc, has seen its share price in Swiss francs soar from Sfr 35 to Sfr 58 in the last two years, leaving the Footsie in the dust. But that’s nothing compared with Dominion CHIC, one of the first truly dedicated funds, which launched in 2007. As at 29 February 2012, the Malta-domiciled CHIC has delivered 121% over three years, compared to the benchmark

(MSCI World) return of 57% The secret? Geographical diversification. As Ben Cook, chief operating officer of Dominion Fund Management, says CHIC is designed to capture returns from the increase in discretionary spending from the world’s growth economies. “CHIC was, we believe, the first fund of its kind to ignore traditional portfolio theory and geographic boundaries,” he says. “Instead, it has based its investment strategy on the emerging global trends of demographics, urbanisation and the redefinition of the economic landscape.” Unlike Richemont, which is very heavily committed to jewellery, CHIC is exposed to a very wide range of aspirational goods. Apparel and shoes, including sportswear, get a 19% weighting in the fund, while luxury lodging and gaming make up 11.8%, and accessories comprise 8.5%. Watches, jewellery and optics comprise another 11.5%, which is relatively low. “Managing downside volatility is the key to our success,” says Cook. “We actively disinvest in periods of high volatility, with the intention of protecting investors’ returns. We run two types of stop loss and control position sizes tightly. All of these have helped us achieve superior risk adjusted returns,” says Cook. What’s next? Cook reckons that the Macau gaming sector is a big one. Macau’s gambling revenues are five times that of Las Vegas, driven by wealthy Chinese tourists, and its casinos are enormous. CHIC’s holding in Galaxy Entertainment Group (GEG), one of the six casino operators in Macao, has given it valuable exposure to the Macau scene, he says. In mid-March Galaxy posted record breaking 2011 numbers with EBITDA rocketing 158% to reach $5.7 billion (£3.6 billion) on revenue across its operations doubling to $41 billion (£26.2 billion). That makes it one of the fastest-growing

27/03/2012 16:14


global entertainment groups. GEG accounts for only 2% of the CHIC portfolio at present – but what a contribution it’s making. “Galaxy’s new Macau casino is already achieving an 81% ROI, despite only being open seven months,” says Cook. “It’s a growth area that really demonstrates the increase in discretionary spending story.” Cook is also bullish about the high-end apparel sector. It has a holding in Salvatore Ferragamo, the Italian fashion house, which also issued excellent results in mid-March. “We believe in Western governance, Eastern growth,” says Cook We buy liquid, highly governed. “Western companies that access the growth markets in the East.

Pursuing Passions

Julius Baer Luxury Brands Fund, managed by Swiss & Global Asset Management, is another high-profile offering for investors looking to tap into the luxury sector. Like CHIC’s Cook, Andrea Gerst, the co-manager of the JB Luxury Brands Fund, cites rising wealth in emerging markets and the pricing power of high-end goods as major factors driving the fund’s outperformance. More importantly, she believes that this is a secular trend that will continue over the coming years as emerging market consumers continue to aspire to owning western luxury brands and develop an emotional attachment to top brands, design and quality. Gerst says the JB fund has a very broad investor base, of whom most are longterm investors.”Many luxury companies are very sound financially,” she insists. “They have strong balance sheets and generate a lot of cash.” Key sectors for the JB fund include fashion, jewellery and accessories (with a 49% weighting), distillers and vintners (11.8%), footwear (8.4%) and personal products (6.8%). Key holdings include

Luxury Investments.indd 29

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magazine... for today ’s discerning financial and investment professional Ferragamo, Hugo Boss, BMW, Swatch and Coach. And performance so far has also been impressive. Since its launch in January 2008 JB Luxury has returned 73% growth – and in the current year to 15 March, the fund delivered a handsome 19%. It hasn’t always been easy. The fund’s launch year was of course marked by a full-blown financial crisis in full swing - and, in line with the wider market, JB Luxury suffered a 30% loss before mounting a strong recovery in 2009. 2011 was relatively flat, but that in itself was an achievement given that the MSCI World Consumer index was down by 5%. Strong performances have come from cosmetics and spirits holdings such Estée Lauder, Remy Martin, Brown Forman (which owns Jack Daniels) and Hermès. Looking ahead, Gerst is expecting the luxury industry to grow by 6-9% over the current year: “We expect no growth from Western European consumers,” she says, “because of macroeconomic uncertainties. And although we also anticipate lower growth from the Chinese, it’ll still be in double digits.” “The long-term secular trend is very strong. In the short- them the main risk are geopolitical events that may stop people travelling abroad, as tourism is important for the industry. “

And So to Wine

But there’s more to the Asian market than just clothes, cars and swanky fashion. As the London-based wine merchant Justerini and Brooks (J&B) can testify, China’s burgeoning middle class has been driving up the prices of fine wines in recent years. J&B’s client base in the region has been expanding so quickly that it has justified

“Demand in Asia is still heavily focused on the blue-chip wines of Bordeaux” says Kate Janecek, private client account manager at London-based wine merchant Justerini and Brooks


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with a consensus expectation of a 10% rise for the full 2012 year. To minimise the risks associated with investing in wine, Janecek recommends that investors follow a series of key principles, such as viewing it as a medium to long term play; buying only from trusted and well-established merchants; buying cases under bond; and ensuring a diverse wine portfolio as trends can come and go and having all your holdings in one or two wines is a risky strategy.

Stamp of Success

Nor is wine the only aspect of the alternative asset sector that’s been booming on the back of Chinese demand. London-listed Stanley Gibbons, the world’s leading philatelic brand, has been busy making hay out of very strong demand for rare stamps, A six-bottle case of 1996 Dom Perignon champagne would have cost you £400 in 2006, but would have risen to £900 in bond by February 1012. And a case of Chateau Lynch Bages (Red Bordeaux) in bond opened in 1986 at around £140 but is currently trading at approximately £1,400.

both in the People’s Republic and all across the region. Under Chairman Mao in the 1970s, stamp collecting and trading was actually illegal in China. But since his death in 1976 the philatelic market has absolutely mushroomed. It is currently estimated that the country has 20 million serious stamp collectors - a third of the world’s total. And, like J&B, Stanley Gibbons has opened


the opening in early March of a J&B office in Hong Kong. Kate Janecek, private client account manager at J&B, says that demand in Asia is still heavily focused on the blue-chip wines of Bordeaux, including ‘first growths’, the most sought-after varieties from the best Bordeaux vineyards. More recently, though, J&B has noted a pickup in demand for ‘super seconds’ (second growth bordeaux) and the finest burgundies, including Domaine de la Romanée Conti and a few select others. The latest resurgence in the overall market has been largely driven by the very finest and rarest burgundies, and by the first tastings of 2009 bordeaux in bottle, which was recently hailed by the influential critic Robert Parker as “the greatest” he had ever tasted. J&B says it has seen a huge up-lift in activity with 2009 Bordeaux since Parker’s pronouncement. Looking further ahead, Janecek believes there is considerable upside potential for the sector, with demand for top-end fine wines growing not just from mainland China but also from other emerging heavyweights like India and Brazil. While the short to medium term outlook looks rosy, wine also boasts positive characteristics for the very long term investor, at least on the basis on historical Liv-ex data which shows it delivered average growth of 13-15% cumulatively per annum over the last twenty years. And yet fine wine is not immune to periods of exuberance and of subsequent correction. Prices slumped by 15% last year after a particularly poor second half, as the massive turmoil on markets as the eurozone debt crisis took its toll. The only consolation was that up until that point it had been doing excellently, with a 70% rise in prices since the end of 2008. And this year? Well, at the time of writing the Liv-index was up nearly 3% on the year,

an office in Hong Kong to tap into fast growing demand. The Chinese are very keen on British stamps like the Penny Black but the most revered is one of the country’s own issue, called the ‘1980 Year of the Monkey 8f’. The spectacular rise in value of this particular stamp indicates just how oxygenated the Chinese stamp market has become. In November 2006, a 1980 Monkey 8f was selling for £275 each on average. As of writing a fresh, unused Monkey 8f was available on the Stanley Gibbons website for £1,600 – an increase of 480%. Also like J&B, Stanley Gibbons has launched a trading platform to enable other stamp dealers and individuals to trade or auction their stock. It is generating new income streams for the company, including commission income, authentication fees and subscription fees for access to proprietary stamp collection management tools. In a January trading update, the company said that its full year performance to December 2011 would be in line with expectations. Key highlights, it said, would include a 67% increase in second-half internet sales, while its new Hong Kong officewas already contributing “substantial” new revenue. The company is now diversifying its product offering into rare coins, commemorative and military medals and other related activities. Broker Peel Hunt says it estimates Stanley’s full-year pretax profits at £5 million, up by 16%. It adds that the order pipeline is better than last year and that the company has £5 million of net cash. The shares closed on 17 March at 195p, valuing the company at nearly £50m and giving a PE of just over 12 and a yield of around 3%. For more comment and related articles visit...

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

DRÔLE DE GUERRE IT’S ALL A LOT OF FUSS ABOUT NOTHING, SAYS BRIAN TORA. MORE’S THE PITY Budgets are just boring these days. Aside from the fact that many of the details are leaked in advance, the occasions when Chancellors of the Exchequer announce truly draw-dropping reforms seem to be all in the past. Nigel Lawson managed it in the late 1980s when he cut the top rate of income tax from 60% to 40%. And back in the 1960s, the introduction of first Capital Gains Tax and then Selective Employment Tax caused a similar stir, although in the opposite direction. (SET didn’t survive the return of a Conservative government in 1970, by the way. But CGT is still with us.) Well, now we know what measures Mr Osborne has felt able to introduce to keep his Coalition partners on side - not to mention the right wingers in his own party, or the business lobby, which has been feeling pretty hard done by of late. In any case, the Chancellor’s room for manoeuvre is always limited in these days of global markets. A bit of tinkering at the edges can be taken as a sign that actually things are broadly on track. Indeed, the lack of excitement can be taken as a positive indicator.

Hector Sants

As for the imminent departure of Hector Sants from the FSA, I personally find it hard to get too worked up over that development either. It’s only two years since he last resigned, after all, and that didn’t come to much. Then, it was the same Mr Osborne who has been ushering in our latest bouts of austerity who persuaded him to stay his hand. And Sants has managed to become that most remarkable of individuals in the current climate – a respected investment banker. The new regulator which he was due to head, the PRA, will doubtless learn to live with a new leader – as will we all. It’s not hard to see why Sants has chosen now to hand over the reins. Problems in the

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financial sector have not yet been consigned to history. Before joining the Financial Services Authority in 2004 he had had a successful career in investment banking. And there is still time for him to revive that career if he so wishes. Or there will be other opportunities open to him, no doubt. Good people are always needed at the top of regulatory organisations. It’s his successor we need to watch out for closely.

Tax Planning But minds will doubtless be focused on tax year end investment planning as we race towards Easter. And even this has become less of an exhilarating exercise for those involved in the world of investment. With markets moving more or less sideways for well over a decade now – and with tax sheltered vehicles like ISAs and SIPPs, not to mention a generous annual tax-free allowance – only the seriously wealthy or those with a windfall gain are likely to be faced with an unavoidable bill for capital gains tax.

Global Unease So we head to the Easter holidays with markets still buffeted by fears over the global economy. Currently it’s the Chinese slowdown that’s giving investors a case of frayed nerves. But mining shares also took a recent hit on fears that demand from this manufacturing giant could stall. And oil has been rising in price, which could yet add to downward pressures on economic activity. Personally I feel the recent fear-driven surge in the oil price to be overdone. But like everything else, we’ll have to wait to see if I’m right. For more comment and related articles visit...

27/03/2012 16:27

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

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

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


GARY DALE, HEAD OF INTERMEDIARY SALES AT INVESTEC STRUCTURED PRODUCTS, EXPLAINS WHY EVEN BULLS NEED DEFENSIVE STRUCTURES The structured Investment industry is often hailed as one in which retail investors have a more alternative route to market in terms of underlying and the variety of pay-offs available. However, investors are easily daunted by comments such as ‘they’re ideal when volatility is high’, ‘when markets are low geared products have their place’, or ‘kick-out plans are less attractive when markets are toppy’, which are consistently thrown around by many familiar with investment markets. In truth, however, the flexibility afforded by these gems of the investment world means that they literally can be structured to suit not only many different individual risk appetites, but also many different investment market cycles.

Choosing Your Moment Over the last five years or so, and on top of the usual equity highs and lows, the investment markets have had to swallow some sizeable issues - such as the fall-out from Lehmans, the resulting credit and liquidity crisis, the banking crisis, recession, fear of a double dip recession and now the continuing Eurozone debacle. One has to ask oneself, is there really a good time for the retail investor to invest in the markets? To illustrate this point,

the table below highlights some interesting data on the FTSE100 over the last five calendar years. The FTSE100 is used here, as it is widely recognised as the proxy benchmark for most asset managers - and anyway, with correlation figures where they are, it remains broadly an indicative measure of most of the major world equity index movements. There are two key themes that can be taken from this table. Firstly, in each of the 5 years, the average volatility is higher than the long run average volatility in the FTSE100 which is around 14 (based on average of rolling 30 day volatility). The second point is, given that relative high volatility, returns were modest at best if not loss-making - with the exception, of course, being 2009. Interestingly, whilst 2009 did present some excellent buying opportunities, it was the second most volatile year of the last five. Hindsight is indeed a wonderful thing! Admittedly, the time period is not conclusive. But, for what it’s worth, many in the investment industry believe that the next five years may indeed be similar to the last. In other words, markets are likely to remain volatile and move in a sideways fashion for some considerable time yet. So where does today’s investor find value with palatable risk? Beating cash deposit rates whilst being mindful of the threat of inflation is no longer as simple as investing for the medium to long term in equity markets. Lastly, and with regard to interest rates, *Average of rolling 30 day volatility for each year Source: Bloomberg





































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Cometh the Time, Cometh the Fund In terms of Structured Investments, it isn’t surprising that we are starting to see real appetite for ‘defensive’ type pay-offs where investors stand to profit when equity markets fall. Structured Investments with defensive pay-offs are not a new phenomenon, but, in the current climate, are certainly proving popular with many different issues available from a variety of providers. Let me first say that a defensive pay-off does not necessarily imply a market fall. Clients who are looking to preserve wealth, however, might want to remain exposed to equity markets without the associated risks. Structured Investments can work exceptionally well in sideways or (up to a point) falling markets, which is a strategy rarely employed by traditional investments. Delivering positive returns when equity markets are flat or falling holds an obvious attraction in today’s market. For example, a FTSE100-linked product offering a potential fixed return of 65% in a flat market over a 5 year period, together with with a full return of capital providing the FTSE100 does not fall by more than half over the period, does not seem particularly defensive - but, in a sideways market, it’s akin to a defensive strategy. There is of course counterparty risk to consider, which can be also be collateralised potentially reducing an investor’s exposure to any specific credit risk. Delivering a pre-defined return over, say, a 3-5 year period when allowing for a fall in equity markets is a valuable proposition that I suspect many investors would be interested in.

Kick-Outs On the pay-off part of the structure, it is also possible to build investments that offer positive returns irrespective of market direction. Kickout plans are offered where the kick-out feature is triggered where the underlying index on any observation point is below its starting level. There are also examples where, on maturity, the index can be lower than its starting level to generate competitive positive returns. Having said that, the pay-off profile is of course only one part of the ‘defensive’ equation.


the five year swap rate (a typical measure used by providers of Structured Investments but a good proxy for interest rates in general) has fallen from an average of 5.68% in 2007 to 2.27% in 2011 - a drop in excess of 60% over that period, and with no immediate signs of improvement on the horizon. All in all, a pretty gloomy picture for investors.

Other variables such as term, optionality (American/European barriers), underlying asset exposure - not to mention collateralised counterparty exposure - can all be tailored to deliver defensive products that aim to mitigate and reduce a whole variety of different risks. The adviser’s job is simply to piece these elements all together in line with the client’s overall appetite for risk. The more defensive the strategy, the more expensive the structure. But finding the balance is definitely achievable, so I would hope to see some real enhancements to our product suite over the coming months.

Coping with Volatility It might seem counter-intuitive to invest in a product that pays out when equity markets fall. But there are some very strong reasons for doing so - not least, that many portfolios may in fact benefit from an element of ‘defence’ when it comes to equity market exposure. There is currently a real fear of volatility. And yet, almost as worrying is the fear of ‘missing the market’. Clients are also worried over market direction - and why wouldn’t they be? Short term market predictions have always been futile. But, even longer term, many experts are less certain on the course now being set for equity markets. Lastly, and given the last two points, many clients are still invested long equity, so what strategy is right for them? In simple terms, investing in a product that offers a pre-defined return for a fall in the markets held long, would seem to offer a specific benefit. So perhaps a natural hedging strategy could be considered? It is, of course, a truism to say that in order to benefit from market upswings one must be invested in the market – but that doesn’t stop it being true. Problematic, of course with this particular strategy, as already highlighted, is the associated volatility. So in summary, products that offer positive returns even in falling markets (to a certain extent) would seem to offer attractive benefits - and all the more so in the current climate of sideways movements. Being able to benefit from market downswings as well as upturns is, I’m sure, of potential benefit to many investors. Given the current fractious state of the market, with market falls not uncommon, these ‘defensive’ strategies should really be considered to let clients benefit from equity-linked returns, without trying to second-guess the market.

For more comment and related articles visit...

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


So here’s the deal. Your client is tired of making 3% from his building society, and he doesn’t want to lock up his money for five years in a structured product, and he reckons that he’s got enough exposure to equities already. Oh, and he’d like to do a little bit to help his fellow man - with the added bonus of getting maybe three times the interest rate on his money that anybody else would be likely to offer him. So what could be better than making an unsecured loan to somebody he doesn’t know? Somebody who says he can’t afford the rates that banks charge, or doesn’t want to? Somebody who knows he’ll rely on his own impeccable judgment of character to see that the two of them have a shared interest in making a cash advance that will leave both of them in pocket? Hmmm, when you put it like that it doesn’t sound so great. And yet peer-to-peer (P2P) transfers are gaining ground fast these days. What has made the difference in recent years is that the lender doesn’t need to rely solely on his own wits and his own judgment.

“We thought: why shouldn’t consumers benefit from this type of system?” says Giles Andrews, managing director of Zopa


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ERE IT’S DUE Thanks to the emergence of intermediaries like Zopa or Funding Circle or RateSetter, a private lender can select borrowers from a creditchecked list that will make him well aware of the exact nature of the risk he’s taking on. And which will allow him the freedom he needs to And it’s a measure of the success of these schemes that defaults are really extremely rare. It’s a good system, and it works. In fact the strange thing is that so many advisers have been slow to add it to their investment tool-kits.

Cutting Out the Middleman

Zopa (which derives its name from the rather unwieldy “Zone of Possible Agreement”) started the commercial ball rolling in the UK back in March 2005, when it first introduced peer-to-peer lending – giving both savers and investors the opportunity to cut out the middleman by arranging peer-to-peer loans. And yes, it was a bold concept at the time - although in practice it had been on the American scene for some years. And yes, even in those hazy days of economic

innocence there were undoubtedly those who saw it as something that was positioned at the sub-prime end of the market. However much truth there might have been in that perception seven years ago (and however heavy the falls of 2007-2008 might have been for some unlucky lenders), the P2P model has still survived with flying colours. In January alone, Zopa saw a record £8.2 million exchange hands across its platform, accounting for over 2% of all new unsecured lending in the UK. And, incidentally, 42% more than its previous monthly record. The industry currently expects the P2P market to grow to £200 million of new loans in 2012. Most importantly, perhaps, peer-topeer lending is operating – successfully and profitably - at the very heartland of an IFA’s typical ‘middle England’ clientele base. And the growing raft of companies offering platforms for savers and investors is testament to its burgeoning success. David Cameron’s Big Society doesn’t get much more real than that.

“We are changing the model. We offer something that we hope is simpler and safer.” says Rhydian Lewis, co-founder and chief executive of RateSetter

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

Growing Competition

Having been a lone player for quite some time after launching in 2005, Zopa has been seeing quite a number of other firms entering the market in recent years. RateSetter and YESSecure joined the fray in late 2010, along with Funding Circle, which offers loans to SMEs. 2011 saw the arrival of ThinCats, whose loans are secured rather than unsecured. Massows Angels, run by former IFA Ivan Massow, caters for commercial clients. As Rhydian Lewis, chief executive of RateSetter and a former Lazard investment banker, explains, peer-to-peer lending is now a serious contender for advisers looking for client opportunities. “P2P offers interesting alternatives for those looking for a decent income on their savings with yields from 5%-8%, depending on the term they are looking at.” “Borrowers are coming to P2P companies, not because they cannot access finance elsewhere, but because companies like RateSetter and Zopa provide some of the most competitivelypriced personal loans on the market.”

Low Default Rates

Zopa, on the other hand, says that its current rates are above 6% - which may not be unconnected with the fact that, as founder and chief executive Giles Andrews says, the risks are low. “The fact that nearly seven years after launch we continue to maintain a default rate of less than 1% provides even cautious people with the reassurance that Zopa’s person-to-person alternative works – and to their significant financial advantage”. RateSetter’s Rhydian Lewis says that is in optimising returns that P2P stands out as a key contender for any saver or investor. Its use as a tax planning tool is limited at present, but growing. SIPPs can already hold P2P lending, but there is still some way to go before sufficient interest leads to investment in new processes to simplify the process for investors. There are also steps being taken to make P2P investing eligible for ISA investors.


Coming onto the IFA Radar

Yet, despite the attractions for anyone seeking income, up until now P2P has probably not been on as many advisers’ radar as it should be. And that is something that the industry is keen to address. Zopa estimates that less than 1% of its business comes from IFAs: for a while it was offering advisers a small cut of the fee, but at present its position is that its £50 introduction fee, plus whatever fees advisers will be entitled to ask after RDR, is a better way forward. RateSetter’s Rhydian Lewis says that his firm is relying mainly on direct approaches at present, but that IFAs are still an important way forward. “Customers come to us direct, because this is an organic, consumer-driven kind of growth. It’s not driven by product salesmen, which makes it rather interesting. We have spoken to a few IFA groups, and we are talking to a few more about how it can work for them.” So what sort of people enter into P2P deals? “The average age of our savers is 55,” says Lewis, “with typically decent savings pots. These are not high net worth individuals with private bankers. It’s all sorts of people with decent savings pots.” Kevin Caley is managing director of ThinCats, which promises lenders a regular fixed monthly repayment income on secured loans at rates of between 7% and 15%, depending on the risk level chosen by the investor. He says: “IFAs should be considering Thincats loans as a part of any portfolio to increase overall returns and reduce volatility. Where else can you get such attractive returns with security and a regular monthly income?”

New Safety Models

Obviously, not all P2P firms are equal and there have been casualties along the way. We should stress, incidentally, that P2P firms are not regulated by the FSA but by the OFT, which means that they are not covered by the Financial Services Compensation Scheme. And one entire scheme, Quakle went bust at the end of 2011 (though its clients largely escaped the worst consequences.) But recently the industry has taken rapid steps to ensure that confidence in worthy players has been restored.

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The three largest P2P platforms in the UK - Zopa, RateSetter and Funding Circle - have cocreated the Peer-to-Peer Finance Association, in order to establish a framework and set out basic standards for the industry. Zopa says the group is still lobbying the Government for formal and appropriate regulation of peer-to-peer lending. In the meantime the firms themselves have also taken steps to make the process safer and simpler for savers and investors. Massows Angels operates a discretionary compensation fund that is an opt-in option for lenders, and which is capped at £5,000 per claim in the event of a borrower default. ThinCats, as we’ve mentioned, offers a fund that enables investors to make secured loans to businesses within an FSA-regulated managed fund run by the venture capital specialists Innvotec. The fund uses the ThinCats platform to make a minimum of 14 separate secured loans to SMEs - none of which represent more than 7.5% of total funds - and it has a target interest rate of 8%. But RateSetter has taken it one step further and created an entirely new model for the P2P industry. It has introduced capital into the lending system with its Provision Fund. As Rhydian Lewis explains: “Zopa categorises borrowers; they have these different markets. So the lender has to choose the level of risk they want exposure to. “With Zopa, you’re either an A borrower or a B borrower or a C borrower, and so on. The lenders choose the level of category they want to do business with. They make sure that they get these sufficiently different loans in order to stay diversified. But if one – or a few – of those loans go wrong, then the lender is exposed to that bad debt. And that model’s been replicated across the world by about 50 different companies. “RateSetter is different and unique, in that it has done away with those ABC categorisations. Instead, the borrower pays a modest fee into a fund, and that fund is sitting there to recompense savers if one of their loans happens to go wrong. “The fee is a percentage of the amount lent out. If you took a £5,000 loan and if you

were a really decent, prime borrower, then you might be charged let’s say 1%. So £50 is added to your loan. It goes straight into our fund. If in the event that you default, all the lenders, all the savers will be recompensed. “On RateSetter we’ve done over £17 million worth of loans, and every single lender or saver has received every single penny back. Which is unique. We are changing the model. We offer something that we hope is simpler and safer.” There is, of course, another side to it. RateSetter says it has approved only 12% of applications from borrowers, which lengthens the odds on a default somewhat. “All the lenders on RateSetter get the same rate,” says Lewis. “So, the lenders are in effect exposed to the risk that the [Provision] fund’s not big enough, and not to just their portfolio of loans.”

What’s In It For IFAs? So that’s all well and good for savers and investors, but what’s in it for the IFAs themselves? Well, we’ve already mentioned that Zopa pays £50 a time to anyone who introduces business, and ThinCats does something similar. Thincats’ Caley says: We don’t pay anything for lenders, but we are happy to share the ‘sponsors’ fee with an introducer. That is likely to be about 1% of the loan. So IFAs can earn fees from non-core business just by spotting potential borrowers and making referrals.” How they will play out once RDR comes in, is yet to be seen.” As Martin Campbell, spokesman for Zopa, says: “The bigger appeal for IFAs is adding Zopa lending to their clients’ diversified investment portfolios. It is a very attractive new asset class really, paying around 6% or more after charges at risk levels barely above cash. When the post-RDR world lands fully, then Zopa expects to have more people coming to us as a result of their IFAs’ advice.” For more comment and related articles visit...


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


MICHAEL BEVERIDGE, HEAD OF WHOLESALE SALES AT STANDARD LIFE INVESTMENTS , LOOKS AT THE LONG-TERM EDUCATIONAL IMPLICATIONS The Retail Distribution Review (RDR) is one of the most important developments in the regulatory landscape and its deadline is fast approaching. Its goals are commendable: striving to provide a cleaner and more sustainable retail market for the future and improving the quality of advice. The consequences of RDR are farreaching and the next few months will certainly represent a period of significant challenge for all firms and individuals that provide investment advice. Not least of these is meeting the professional standards requirement outlined in the Financial Services Authority’s (FSA) Policy Statement 11/1 on Professionalism. The final stage of RDR qualification readiness is now progressing at a pace, with both the Institute of Financial Planning and the Chartered Insurance Institute/Personal Finance Society receiving strong demand for the issuance of Statements of Professional Standing (SPS). It is also interesting to note recent comments by Faye Goddard, Chief Executive of the Personal Finance Society, who said that of its 19,000 authorised advisers, approximately 60% had reached the correct attainment level of qualifications for a post-RDR world, with the remainder bravely ploughing through gap filling. While there have been various surveys and predictions on future numbers of UK intermediaries, we believe this type of intelligence gives a true reflection on the future direction of the wholesale market in the UK. So with busy schedules and demands on time, meeting these requirements is no small undertaking for advisers and will take commitment well beyond the RDR deadline. Even when advisers have been assessed as competent, they must remain so and continually build and extend their technical competence throughout their careers. Under RDR regulations, they are expected to be always looking for ways to improve both their performance and the quality of their advice

Facing the Challenges Together At Standard Life Investments, we pride ourselves on being a trusted source of information and support to the adviser community. Given the far-reaching implications of RDR and the long- term educational challenges they pose to advisers, we launched


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Learning Gateway in June 2011, to provide a dedicated, content-rich, online training resource. Designed as a solutions-based educational portal, the Learning Gateway aims to help intermediaries maintain the professional standards requirements of RDR as easily as possible. Advisers can access up-to-date training that is free and convenient to use, and relevant to their role but flexible enough to fit around their busy schedules. In essence, the Learning Gateway provides a wide range of online modules designed to help advisers fulfil the requisite 35 hours per year of continuing personal development (CPD) – criteria under RDR that any individual who is registered to give advice and wants to continue providing advice must meet after 31 December 2012. Developed in partnership with Intuition, a leading global provider of learning services, the Learning Gateway contains over 100 tutorials. These include core investment topics, such as introductions to equities and fixed income, as well as more advanced economic and technical analysis, risk management and asset allocation. It also offers business-skills tutorials such as effective management and sales techniques, and FSA compliance courses.

The Learning Gateway offers over 100 tutorials including: ■ Introduction to Financial Markets ■ Equities ■ Fixed Income ■ Derivatives ■ Inflation-linked instruments ■ Securitisation - Value at Risk (VAR) ■ Custody ■ Macroeconomics ■ Portfolio Theory ■ Asset Allocation ■ Private Equity ■ Hedge Funds ■ Real Estate ■ Socially Responsible Investing (SRI) ■ Regulation ■ MiFID

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Because Learning Gateway covers such a wide range of topics, we believe it really does offer something for everyone. Users can choose the level of training most appropriate for their needs, from basic, to intermediate, to advanced. The sessions are interactive and simple to use, with multiple-choice questions throughout. Sessions can be stopped and saved at any point and restarted at a convenient time. Furthermore, all the tutorials are recognised as suitable for CPD by a number of professional bodies. Accreditation of training is essential for advisers to attain their annual SPS, and Learning Gateway is an ideal facility for this.

Tutorials are accredited for CPD by a number of professional bodies including: ■ Chartered Institute for Securities & Investment (CISI) ■ Chartered Insurance Institute (CII) ■ Institute of Financial Planning (IFP) ■ Chartered Financial Analyst (CFA) Institute ■ Association of Chartered Certified Accountants (ACCA) ■ Chartered Institute of Management Accountants (CIMA) ■ Chartered Institute of Public Finance & Accountancy (CIPFA) ■ Solicitors Regulation Authority (SRA)

Tutorials are also deemed suitable for CPD by: ■ Chartered Financial Analyst (CFA) Institute ■ Association of Chartered Certified Accountants (ACCA) ■ Chartered Institute of Management Accountants (CIMA) ■ Chartered Institute of Public Finance & Accountancy (CIPFA) ■ Solicitors Regulation Authority (SRA)

Another key benefit of Learning Gateway is that it provides a record of achievements, including courses undertaken, time spent in training and the results of any assessments. Individual CPD records are stored digitally and certificates can also be printed at any time. This provides a transparent audit trail of training, without the worry of recordkeeping. We believe this aspect of Learning Gateway will prove essential as, under RDR regulations, advisers may be required to provide evidence to the FSA of their qualifications and structured training.

Experience So Far Since the launch of Learning Gateway in June 2011, it has attracted over 3,000 registered users – and that number is increasing week by week. This impressive response is testament to our commitment to providing solutions appropriate

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to our clients’ evolving needs. We are also heartened by the endorsement that some of the industry’s major names have given to Learning Gateway. “It is particularly encouraging for us at the IFP and Financial Planners and Paraplanners to see developments like this from Standard Life Investments. There is a shortage of relevant content to meet specific regulatory requirements and Standard Life Investments have managed this in a particularly innovative and helpful way. I am sure that this service will be very popular and the IFP is delighted to be able to accredit this learning for the benefit of the Financial Planning community.” says Nick Cann, Chief Executive, Institute of Financial Planning (IFP). Since launching Learning Gateway, we have continued to enhance its functionality. For the convenience of advisers, we are currently working to hard-wire our training records into the IFP’s database. This means that when an assessment is completed on Learning Gateway, training records held with the IFP are automatically updated to reflect this. As the RDR deadline draws nearer, we expect significant challenges will emerge for firms and individuals that provide investment advice. Our hope is that the Learning Gateway can ease some of these challenges by providing easy, accessible and relevant support. Beyond the RDR deadline, advisers can use the Learning Gateway to fulfil long-term CPD requirements, as well as expand their knowledge of the industry and the ever-changing regulatory environment. The Learning Gateway is offered free of charge and can be accessed from our UK Adviser and UK Discretionary & Wealth Managers websites or directly at: www. For more comment and related articles visit... April 2012

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THIS GLORIOUS ANDY CURRAN, INTERMEDIARY, RETAIL AND PARTNERSHIPS DIRECTOR AT AVIVA, NAILS THE IMPROVING TREND TOWARD RDR WITH SOME SCARCE HARD FIGURES We’re getting ever closer to the biggest event of the year. Media coverage is building, and commentators are providing a stream of predictions. And yes, depending on your point of view, we might be talking about the Queen’s Jubilee celebrations, the Olympic Games - or the December deadline for the Retail Distribution Review (RDR).

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While all three have cost considerable time and money to produce, they will all affect the lives of thousands if not millions of people. Yet the one which is dominating the thoughts of financial advisers is most likely to be the RDR. The Financial Services Authority has recently published a guide for advisers that allows firms to track their progress and check that they are on course to be ready to meet the RDR requirements in time for 31 December 2012 deadline. Some of the main areas it covers include

27/03/2012 16:32


YEAR ensuring that advisers are ready to meet the RDR professionalism standards (which includes reaching QCF level four or completing any gap fill); finalising whether they will offer an independent or restricted service; and building in a charging model that consumers can understand and – crucially! - be willing to pay for. Aviva has been checking on the financial advisory sector’s progress toward the critical RDR deadline with what it calls its Advisor Barometer – a survey which monitors how advisers’ preparations are progressing so that the company can offer them tailored support to meet their needs as they evolve.

Staying Power

The company’s most recent research found that negative attitudes towards the RDR are now receding, and the number of firms thinking they may decide to leave the market has been declining. The vast majority of respondents (81%)

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said that it was ‘very likely’ they will still be in business come 1 January 2013. And the younger the adviser, the more likely they are to have committed to carry on. (91% of 18-34 year olds said they were ‘highly likely’ to remain, compared to 65% of

April 2012

43 27/03/2012 16:32


magazine... for today ’s discerning financial and investment professional those aged 55-64 and 50% of those aged over 65.) The most dominant concern for firms is not specifically related to the RDR, but simply how they will be able to remain profitable going forwards (with 40% of firms reporting that this is now their number one concern). This is ahead of more precisely RDR related concerns such as changes to adviser charging (36%) and gaining further qualifications (35%). As a result of these concerns, and in preparation for the RDR, firms have been planning and making changes to their firms. The Advisor Barometer found two thirds (67%) of advisers are adopting different levels of service for different types of clients (compared to just 14% who are not), and over a third (36%) of firms are actually planning to tackle the RDR by expanding their business and seeking to bring in more advisers.

Platforms? Decisions, Decisions, Decisions

One of the key issues affecting all financial advisory firms is the use of technology. All firms remain reliant on technology as a result of the RDR and other regulatory change, and a third (32%) said they are preparing for an increase or even a significant increase in technology use as a result. Adapting to front-office developments and back-office systems changes as a result of the RDR have meant that getting the most from technology is an important issue for all firms. Despite all the advances in recent years it is perhaps surprising to find that the reliability of systems is the biggest single tech challenge being faced by advisers (57%). Choosing the right systems is crucial, and it appears that firms are still coming to grips with deciding just how many platforms they are happy to use. Firms are registering with more platforms than they regularly

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April 2012

use, which suggests that some platforms are just being utilised for niche areas of business. While three quarters (75%) of advisers are using between one and three platforms regularly, they are most likely to be registered with five or more (23%). Choosing which platforms to use comes down to research capabilities (55%) and the breadth of online services offered (54%). However, technology always comes at a price. And, at a time when spending on other areas may be having an effect on the profitability of firms, cost is crucial. Interestingly, while larger firms can benefit from economies of scale with most parts of their business, the research found that smaller firms claim their expenditure on technology makes up a smaller proportion of their intended spend (as a proportion of their annual turnover) than larger firms. Almost half (46%) of single person firms said it will only represent up to 5% of their annual turnover, compared to a fifth (20%) of firms with more than 26 advisers. Despite the increased spend on technology, it has not replaced the human touch just yet, with almost all (97%) firms still using face-to-face meetings with clients and almost half (45%) saying they communicate with clients through their websites.

say they use social media such as Twitter, LinkedIn, and Facebook, and only 6% say they use direct messaging. As we move past the RDR deadline and into 2013, we can expect to see these numbers rise. Firms are already saying they expect to become more flexible about how they use technology and more are planning to adopt social media as a tool for communicating with existing – and indeed finding new – clients. Thirty-six percent of firms are planning to use social media to communicate with clients in the next year, and a fifth (18%) are even expecting to start using instant messaging. Preparation for the RDR is not something to consider in isolation. It will change the way firms do business, but it will also herald an increased reliance on technology. Providers need to be aware of this and make sure their systems are robust and deliver what advisers want. The RDR will bring around a significant change in the way some firms operate, but business never stops and costs need to be controlled. Those who have planned for a streamlined future where they can sync seamlessly with clients and providers will be best placed to transition smoothly into the new era.

Social Media Still Lagging Behind

And, while email is almost ubiquitous across all firms, with 92% using it to communicate with clients, social media has not yet caught on. The buzz around social media can appear to be all encompassing, and while converts quickly become devotees, it has not caught on in among advisers in great numbers as a method of communicating with clients. Just 15%

For more comment and related articles visit...

27/03/2012 16:32

The evolving role of the DFM and the Intermediary Business Park Plaza Hotel, Cardiff

Wednesday, 23 May 2012

IFA Magazine and JM Finn & Co are delighted to announce a series of seminars for the IFA community in 2012 This is the first in a series of lunchtime seminars that will bring together some of the UK’s leading industry experts and financial intermediaries to discuss the current financial environment and the evolving role of the discretionary fund manager and the IFA in the run-up to and post RDR world. Speakers and topics include:

BRIAN TORA : THE INVESTMENT ENVIRONMENT Topical insight from one of the industry’s leading commentators.

Sponsored by:

MIKE MOUNT : RDR IS EVOLVING THE ROLE OF THE DFM What options can the modern DFM bring to your investment proposition?

JM FINN & CO FUND MANAGER : Speaks about opportunities, insight and approach to investing. ALEC STEWART : Renowned international cricketer and speaker. Over lunch Alec will regale with stories and thoughts on key values of a strong team culture, independence of thought and building long term relationships. This seminar is CPD Accredited

Space is limited. If you would like to attend, please e-mail Sponsorships are available – please contact IFA Magazine for details


The award winning Park Plaza Hotel is located in the heart of the city centre, within walking distance of Cardiff Castle, the Millennium Stadium and the National Museum of Wales. The events will be filmed and edited to appear on web sites and will also be distributed via BrightTALK thought leadership channel.

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

WISE WORDS NOW YOU SEE IT, NOW YOU NEVER DID. UNLESS YOU DID, BUT IT WON’T EVER HAVE EXISTED BY THE TIME WE GET TO THE FUTURE. STEVE BEE DARES TO ASK THE BIG QUESTIONS When Werner Heisenberg formulated the Uncertainty Principle back in the mid-1920s, while he was working at Neil Bohr’s institute in Copenhagen, he really let the cat out of the bag - or the box, I suppose - on the physics front. Basically, if Heisenberg was right, then motion isn’t what we think it is, and the classical physicists’ assumption that cause and effect have to occur in a certain order would be turned on its head. The idea that quantum mechanics - the new physics - was non-local came as a bit of a shock to everybody, and it set off a whole debate between Bohr and Albert Einstein about what was real and what wasn’t. Einstein thought non-locality couldn’t possibly be right. Have we reached a decision yet? Well, you’ll probably know by now that a guy called John Bell came up with an experiment in the 1960s that demonstrated that the non-locality theory was right and that Einstein was wrong. That might not be the last word on the subject, though, because in March this year they published new experimental evidence for a violation of a narrow interpretation of Heisenberg’s Uncertainty Principle, which seems to even up the score somewhat. It’s all pretty interesting stuff; basically there’s still room for uncertainty about the Uncertainty Principle. I can’t wait for the next twist in the story.

Schrödinger’s Pension Similarly, I can’t wait for the next twists and turns on that other massive and ongoing social experiment that’s testing the Uncertainty Principle as it applies to pension savings in the UK. This again, on a universal scale, is a rather narrow field of investigation, but it ought to show whether or not long-term savings can co-exist with an everchanging pension system with necessarily uncertain


April 2012

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outcomes for individuals. Sort of “will my pension be there when I open the box, or won’t it?” kind of thing. I’m writing this in March 2012, just before the annual Budget announcement, so you’ll have the edge on me because you’ll already know what, if anything, the Chancellor announced about pensions in his Budget Speech. For you, it happened in something called the past so you’ll know what he said. But for me it’s going to happen in something called the future, and I can’t know what he’s going to say. (That actually may not be entirely the case either, but I don’t really have the time to go into all that right now; for the purposes of this article let’s simply assume that the ‘arrow of time’ concept is right.)

all I know; and you might even know for sure that it did. But regardless of whether or not our pension legislation changes in the 2012 Budget, it could still change in the 2013 Budget, or the 2014 Budget, or any other Budgets between now and the many dates in the future when today’s and tomorrow’s pension savers will retire... Millions of people today are putting money into long-term savings called pensions that some may not access for perhaps as long as 40 years. Some of them, indeed, might still be drawing benefits from those savings 60 or 70 years down the line from here. But in the meantime, the rules and regulations governing what we can and can’t do with those long-term savings could change at any moment. I mean, if that’s not uncertainty then I don’t know what is. I wonder what Einstein and Bohr would have thought about that?

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

The Randomised Legislation Principle Anyway, the point I’m trying to make is this. There’s no way of knowing from one Budget to the next whether our pension legislation is going to take a hit or not. It might be just about to, for

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This advertisement is directed atinvestment investment professionals in therely UK and should not be distributed to retail investors. Thebyvalue of investments, andLimited the income does not constitute legal, tax, or advice. You must not, therefore, ononly the content of this document when making any investment decisions. Issued Vanguard Asset Management, which is from authorised and regulated in the UK by the Financial Services Authority. © 2011 Vanguard Asset Management, Limited. All rights reserved. UK11/0882/0911 them, may fall or rise and investors may get back less than they invested. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offerAds or solicitation is not qualified not, therefore, rely on the VAN_1752 IFA 122x155mm v1.inddto2do so. The information in this document does not constitute legal, tax, or investment advice. You must27/06/2011 14:53 content of this document when making any investment decisions. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2011 Vanguard Asset Management, Limited. All rights reserved. UK11/0882/0911

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NICK SUDBURY NOMINATES HIS CONTENDERS FOR THE BEST US FUNDS IN A YEAR THAT LOOKS FULL OF PROMISE Heavyweight Contender iShares S&P 500 We’ll start this month’s round-up with the largest London-listed ETF that focuses on the US stock market - mainly because it would seem odd not to. The iShares S&P 500 (IUSA) has $10bn of assets under management – meaning that those who invest in this product can feel confident that there’ll always be plenty of volume and a miniscule bid-offer spread. Unlike some other funds, IUSA tracks the S&P500 by physically holding the underlying stocks. But, that said, its overall TER of 0.4% is on the high side – especially in view FUND FACTS of the revenue Name: generated by iShares S&P 500 (IUSA) the securities Type and Exchange: lending program. wETF listed on the LSE By comparison, other providers Sector: Equity USA such as HSBC Fund Size: $10bn charge rates as low as 0.09% for Launch: 1 5 M arch 2 002 the equivalent Distribution Yield: 1.32% exposure. But then again, they Manager: BlackRock are much smaller TER: 0.4% and can’t match Website: uk the liquidity or the tight spread.

The S&P 500 is a free-float cap-weighted index that comprises 500 of the largest US companies. It gives investors a much more diversified measure of the American stock market than the Dow, but is still not as broad as the more domesticallyorientated Russell 2000. The composition of the fund is overseen by a committee that rebalances the index constituents every three months. IUSA distributes its income on a quarterly basis and is currently yielding 1.32%. There is also a separate smaller version where the income is accumulated and reinvested. Its symbol is SACC. At the moment, information technology comprises 20% of the portfolio, with financials accounting for 14%, energy for 12% and healthcare for 11%. The four largest holdings are currently Apple, Exxon Mobil, Microsoft and IBM, which between them account for 11% of the portfolio. The average market value of all 500 constituents is a very large $22 billion, but individually they range from just over $1 billion up to $406 billion. That’s the good news. The less good news is that IUSA has been incredibly volatile, due to sharp upswings and downswings in the underlying index. Since its launch in March 2002 it has only achieved an average annualised return of just under 3%. (Though it’s up 7% on the year to date.) This suggests that the ETF might be more suitable as part of an active asset allocation strategy, rather than as a permanent core holding in client portfolios.

The average market value of all 500 constituents is a very large $22bn, but individually they range from $1bn to $406bn

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

The Prizefighter Henderson US Growth The US equity market is the largest and most efficient in the world, which makes it a difficult place for active funds to add value. Recently, however, one of the most consistent has been Henderson US Growth, which has achieved an impressive 38% growth in the unit price during the five years to January. Indeed, throughout that period it was consistently ranked in the first or second quartile. By comparison, its primary benchmark index, the S&P 500, actually fell slightly during the same timeframe. The fund has been around since 1976, although until last year it was part of the Gartmore stable instead – acquiring its new name when the firm was acquired by Henderson Global Investors. Despite the change in ownership, there has been continuity amongst the fund managers. Henderson US Growth is still relatively small, with just £356 million of assets under management. The fund aims to provide long-term capital growth by investing in the shares of large US companies. Unusually, it can also hold up to 15% in cash or other cash instruments, which gives the managers a bit of leeway when the markets are weak. This helped them to outperform their peer group by just over 2% during the sell-off in 2008. The fund is actually a very concentrated portfolio of 51 holdings – barely a tenth of the

stocks in its benchmark index. The top ten of these holdings account for almost a third of the fund - the largest being the off-price clothing retailer TJX, followed by usual corporate giants, Apple, Nike, Monsanto and Starbucks. Currently the main sector weightings are Consumer Discretionary 35.5%, Information Technology 17.9% and Industrials 12.5%. Compared to the S&P 500, the fund is overweight Consumer Discretionary, Materials and Industrials, and underweight Financials, Consumer Staples and Healthcare. A fund like this with its multinational holdings will always be affected by global macroeconomics almost as much as by what is happening in the US domestic market. In their latest monthly report the managers say that large cap FUND FACTS US stocks are Name: attractively valued Henderson US Growth in absolute and Type: UK OEIC relative terms, but that the direction of Sector: the markets will remain North America heavily influenced by Fund Size: £356m how Europe deals with its sovereign debt crisis. Launch: Despite this, January 1976 the managers have Portfolio Yeild: 0% shown that they are (accumulation units) consistently able to Charges: Initial: 5% add value by their Annual: 1.5% stock selection and willingness to back Manager: Henderson their convictions, with Global Investors the extra returns more Website: than compensating for the higher cost of active management.

The fund is actually a very concentrated portfolio of fifty-one holdings – barely a tenth of the stocks in its benchmark index. 50

April 2012

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Punching Above its Weight F&C US Smaller Companies The best way to eliminate the global exposure provided by the giant US multinationals is to hold an American smaller companies fund. This offers a much purer play on the domestic economy, which potentially makes it a more diversifying investment. There are only a few to choose from, with one of the most successful being the F&C US Smaller Companies investment trust (FSC). FSC aims to produce long-term capital growth by investing in a diversified portfolio of American small and medium sized companies with market values between $100 million and $3 billion. It is benchmarked against the Russell 2000 and has comfortably outperformed it. Over the 5 years to the end of February the share price was up 59% compared to an increase in the index of just 23%. The fund manager, Robert Siddles, has been in charge since January 2001. He has a conservative approach and attempts to beat the benchmark whilst also delivering decent absolute returns. His view is that the low dollar and low interest rates will help to promote US economic growth and as a result the market should move higher. Accordingly at the end of February the main sector FUND FACTS exposures were: Producer Durables Name: 32%, Consumer F&C US Smaller Discretionary 16% Companies (FSC) and Financial Type: Investment Trust Services 10%. A small cap Sector: American investment trust Smaller Companies like this tends to go Market Cap: £100m rather unnoticed, which explains Launch: why it only has March 1993 around £100 million Yield: 0% in assets under Manager: management. Over Foreign & Colonial 40% of the shares are owned by other TER: 1.12% F&C funds so at Website: least those in the know are making good use of it. The

recent strong performance has helped to keep the share price close to the underlying NAV so there has been no need to use the share buyback facility. FSC also has the authority to borrow so as to gear its returns, but currently has net cash equivalent to 3% of the portfolio. The sort of smaller companies the fund invests in are inherently more risky than the large caps and the manager tends to hold a pretty concentrated portfolio of 60 or 70 drawn from a range of different sectors. Given the specialist nature of the underlying holdings the annual management fee of 0.8% looks pretty reasonable as does the overall TER of 1.12%. For those clients who are comfortable with the risk this could make a valuable additional core holding.

The strong performance has kept the share price close to the underlying NAV so no need to use the share buyback facility.

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April 2012

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

Coming Off the Ropes AXA Framlington Global Technology Information technology is one of the areas where America still leads the world very decisively, and long-term investors who want exposure to this high-growth sector are still likely to be attracted to specialist tech funds such as AXA Framlington’s Global Technology. These funds have the potential to deliver exceptional returns – although, inevitably, they come with extra volatility that makes them unsuitable for some clients. Oddly, there are only a handful of specialist managed funds that can provide this sort of exposure – but the FUND FACTS AXA Framlington Name: AXA fund is arguably the Framlington Global most consistent. The Technology fund has a global Type: Unit trust remit, but there is inevitably a high Sector: Technology US bias simply and Telecoms because the majority Fund Size: £189m of the largest tech companies are based Launch: May 1999 in the USA. At the Portfolio yield: 0% end of January these US stocks Charges: I nitial:5 .25% accounted for 84% Annual: 1.5% of the portfolio. Manager: The fund’s AXA Framlington pleasing progress Website: a is all the more remarkable

because it was launched at the height of the dotcom bubble in 1999 and has had to survive the subsequent crash and the more recent financial crises. In the last 5 years it has actually done very well, with the unit price rising 80%. Jeremy Gleeson, the manager, has been running the fund since July 2007 and before that was involved with the technology funds at Close Brothers, which also has an excellent record in this area. His aim is to achieve longterm capital growth by investing in companies involved in the research, design and development of technologies in all sectors including IT and the internet, as well as those that manufacture or distribute the resulting products and services. As you would expect, this is a concentrated portfolio of 67 stocks, with the main holdings being Apple, Qualcomm, IBM, EMC, Oracle and Google. The manager acknowledges the importance of the macro environment, but he believes that the technology sector should do well in any event because of the strong fundamentals and a healthy demand for new products. AXA Framlington Global Technology is a small, specialist fund with £189m in AUM. It provides exposure to one of the highest growth areas of the market and offers the prospect of substantial long-term returns. The companies in this sector have come a long way since the dot com bubble and are now well established market leaders, but the fund is always likely to be highly volatile and would only be suitable for clients who can stomach the risk.

The fund’s pleasing progress is all the more remarkable because it was launched at the height of the dotcom bubble in 1999. 52

April 2012

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This advertisement is directed at investment professionals in the UK only and should not be distributed to, or relied upon by retail investors. It is designed only for use by, and is directed only at persons resident in the UK. Charges exclude purchase and redemption fees where applicable. 0.15% is the AMC for the Vanguard FTSE UK Equity Index Fund and excludes 0.5% SDRT charge. Vanguard Asset Management, Limited only gives information on products and services and does not give investment advice based on individual circumstances. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Services Authority. © 2012 Vanguard Asset Management, Limited. All rights reserved. UK10/0430/0711

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27/03/2012 17:49 28/03/2012 09:29

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

Regulating Bidding for Emissions Allowances

Quarterly Consultation Paper No.32

Consultation Paper

Consultation Paper

Ref: CP12/6

15th March 2012 100 pages The Treasury is consulting on legislative amendments that would make bidding on EU emissions trading auction platforms a regulated activity, under certain circumstances. This means, effectively, that the FSA will be required to specifically authorise certain firms intending to bid; namely investment firms, credit institutions and a category of firms that are exempt from the Markets in Financial Instruments Directive (MiFID). British practice will differ from the standardised European platforms, and will involve a Recognised Auction Platform (RAP), applying a regime similar to that applicable to Recognised Investment Exchanges. Consultation period ends 19th April 2012

Protecting With-Profits Policyholders Policy Statement

Ref: PS12/4

7th March 2012 79 pages Of interest to firms writing new or with existing books of with-profits business. It may also be of interest to affected consumers. Includes final rules. Subjects discussed include: • The fair treatment of with-profits policyholders generally, and in mutually-owned longterm insurance funds specifically; • Conflicts of interest; • Terms on which firms should write new business; • The effect of material reductions in new business; • Market Value Reductions (MVRs); • Strategic investments; • Charges; • Excess surplus; • Reattributions; • The role of independent judgment including With-Profits Committees and other aspects of corporate governance


April 2012

FSA Publications.indd 54

Ref: CP12/5

6th March 2012 244 pages Subjects discussed include: • Changes to advisers’ qualification standards under RDR; • Clarification of liquidity rules in the Prudential sourcebook for BIPRU firms and of the liquidity reporting rules in the Supervision manual; • Implementation of the Significant Risk Transfer (SRT) rules; • Modifying pension scheme disclosures in the Conduct of Business sourcebook to increase consumer protection for SIPPs; • Achieving a single regulatory regime for all credit unions in the UK by amending the CREDS sourcebook; • Clarifying certain situations between issuers and investment banks where shares are held briefly and ending individual guidance on a ‘no names’ basis; • Amending COLL so as to authorise two new legal forms of collective investment scheme: a co-ownership scheme and a limited partnership scheme. Consultation period ends 6th April and 6th May

Thematic Overview: Regulated Covered Bond Regime Finalised Guidance

Ref: FG12/08

6th March 2012 3 pages Following on from the FSA’s guidance on the role of the compliance function in November 2011, it was decided to issue further guidance on additional areas of the RCB regime to set out minimum expectations. These areas cover the scope and depth of engagement with the programme by the person who signs the annual confirmation of compliance (RCB 3 Annex 1D); the content of Management Information; and the appropriateness of systems and controls.

27/03/2012 16:56

Guidance Consultation

Ref: GC12/4

6th March 2012 2 pages Of interest to all firms who sold PPI and all previous consumer purchasers, claims management companies, and consumer bodies. The guidance provides advice on how firms should respond to customer enquiries, and how potential PPI liabilities should be analysed. Specifically: • What a PPI Customer Contact Letter should contain, and how it should be presented so that it is clear, fair and not misleading. • How FSA rules on complaint handling and the time limits on a consumer making a complaint are relevant to PPI CCLs. • Some other relevant obligations such as record-keeping. Consultation period ended 3rd April 2012

Collateral Upgrade Transactions (Includes Liquidity Swaps) Finalised Guidance

Ref: FG12/06

29th February 2012 10 pages Final guidance arising from last year’s consultation on liquidity swaps, a form of collateral upgrade transaction. The consultation ended in September 2011. Main points include: • A firm should be satisfied that the cash flows under the following scenarios are sufficient to meet its liabilities as they fall due: • · Stressed expected cash flows with the transaction(s): with no event of default (e.g. inability to liquidate securities lent, adverse selection due to substitution rights, additional margin calls). • Stressed expected cash flows with the transaction(s): with the counterparty default and retention of all collateral (e.g. maturity of collateral versus maturity of liabilities and reinvestment risk). • Collateral liquidity: firms should include stresses under which the collateral becomes increasingly illiquid. Banks (whether borrower or lender) are reminded that, as an extension of BIPRU 12.3, they are required under BIPRU 12.4 to consider multiple stress scenarios in addition to the regulatory stresses outlined in BIPRU 12.5 and above. Firms should document these stresses and associated risks in the Individual Liquidity Adequacy Assessment (ILAA).

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Payment Protection Insurance Customer Contact Letters

Transaction Reporting User Pack (TRUP) Finalised Guidance

Ref: FG12/07

1st March 2012 3 pages Version 3 of the TRUP, which was originally published for consultation on 3rd November 2011.The revisions aim to provide guidance to firms on understanding the transaction reporting obligations that come from Directive 2004/39/EC on MiFID, implemented through SUP17 of the FSA Handbook. TRUP 3 is effective immediately

Pension Transfer Value Analysis Assumptions Consultation Paper

Ref: CP12/4

28th February 2012 39 pages The consultation paper outlines proposals to change the way pension transfer analysis is carried out, so as to clarify and update the current standards and aim to ensure that pension scheme members considering a transfer are given a fair assessment of what they will receive in retirement. Consultation period ended 27th March

Distribution of Retail Investments: RDR Adviser Charging – Treatment of Legacy Assets Policy Statement 27th February 2012

Ref: PS2/3

40 pages

(See Compliance Doctor on Page 56 for more detail)

The RDR rules will prevent the payment of commission for new advice, and the FSA confirmed in CP11/26 that it did not propose to relax this ban. However, it accepted that guidance would be helpful to firms in complying with the ban. The draft guidance we consulted on in CP11/26 (to go in a new section of the Perimeter Guidance Manual) set out typical recommendations and whether they will be regulated as ‘advising on investments.’ Final guidance comes into force on 31st December

April 2012

55 27/03/2012 16:56

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

Lee Werrell, Managing Director of CEI Compliance Ltd, gives his personal round-up FSA Guidance Consultation: Retail Distribution Review: Independent and Restricted Advice The Retail Distribution Review (RDR) resulted in new and updated rules (http://, which will improve the clarity with which firms describe their investment advice services to consumers. From the end of 2012, firms providing investment advice to retail clients will need to describe these services as either ‘independent’ or ‘restricted advice. This has impact to the following Predominantly COBS 6.2A: Describing advice services. Some mention of: ■

Several of the Principles for Businesses

COBS 9: Suitability

COBS 2: Client’s best interests rule

TC sourcebook

Background to this consultation In March 2010 the FSA published the final Retail Distribution Review (RDR) rules on independent and restricted advice, which will apply from 31 December 2012. The proposed guidance aims to help firms with implementation of these rules, by providing additional material on commonly asked questions.

Summary of the key issues The proposed guidance pulls together published material on the standard for independent advice and elaborates on certain aspects, namely relevant. Responses are requested by 1. April 2012 (6 weeks consultation)

PS12/3: Distribution of Retail Investments: RDR Adviser Charging – Treatment of Legacy Assets This policy statement was issued in February, and it clarifies in what circumstances trail commission can continue to be paid. The Policy Statement covers the areas that IFAs have been querying for months, and it provides the answers you need for the following areas:


Product changes that take place without new advice post-RDR

Additional remuneration for post-RDR advice and the ability to offset trail commission against adviser charges

Cases where trail commission can continue to be paid

Top-ups and increases in regular payment

April 2012

Compliance Doctor.indd 56

Product changes that take place without new advice post-RDR As the adviser charging rules apply only where a personal recommendation on a retail investment product is given to a retail client, commission can continue to be paid on any increases to the investment, or on fund switches where no new advice is provided. The FSA have not added guidance on this, as it is clear from the rules that the adviser charging rules do not apply where no advice is provided. Impact: Providers and advisers will need to agree how they will ensure that commission is only paid where advice is not provided. Action:

Advisers need to identify those clients with automatic scheduled increases to open discussion with the providers on this.

27/03/2012 16:57

Some have suggested that “it should be acceptable to agree with the client that whatever is being received by the adviser as commission pre-RDR should simply be reclassified as adviser charges.”

Impact: This may affect many clients who do business over the December period and where post may be relied on for cheques etc. Action:

This would not meet the requirement for an adviser to have a standard charging structure set by the adviser himself or herself, and to give this information to the client before providing any advice after RDR. It would also not be acceptable for adviser charges to vary inappropriately for substitutable products, so as to reflect the different levels of commission received before RDR. However, an adviser who is receiving trail commission for pre-RDR advice or transactions can agree with the client that he or she will rebate the commission to the client as part of a new adviser charging agreement with that client, given that the commission relates to pre-RDR advice or transactions. COBS 6.1A.4R does not allow new commission to be accepted for advice, even if the adviser intends to refund the commission to the client. But this stipulation applies to commission for post-RDR advice, and does not prevent commission for pre-RDR advice or transactions being rebated to the client. New guidance in COBS 6.1A.4AAG(3) and (4) reinforces this. Impact: Advisers who may have been drafting “variable” or “adaptable” charging structures needs to consider the new rulings. Action:

If required, identify all clients where rebates may be required or could be offered to ease any transition. However, remember to ensure that you consider TCF and the fact that it doesn’t mean you have to treat the clients the same, but you have to treat them all fairly.

Cases where trail commission can continue to be paid Firm may continue to accept commission after 30 December 2012 if there is a clear link between the commission payment and an investment in a retail investment product that was made by the retail client, following a personal recommendation made, or a transaction executed, on or before 30th December 2012. The guidance gives the following examples of cases where a personal recommendation relating to a pre-RDR investment does not lead to an additional investment into the product: ■

No change to the product

A reduction in the investment amount or the level of regular payments

A change from accumulation units to income units or vice versa

Fund switches within a ‘life policy’ as defined in our Handbook glossary


Additional remuneration for post-RDR advice and the ability to offset trail commission against adviser charges

Clearly there needs to be an audit trail of when advice was provided or transaction executed needs to be recorded clearly on affected client files. Get into the practice of having a coversheet on the file with the salient dates of meetings, recommendations made, suitability reports provided, as well as notes of any delays in obtaining the funds for the transaction.

Top-ups and increases in regular payment Trail commission can continue to be paid on the investment amount resulting from pre-RDR advice or a pre-RDR transaction, and also on the previous level of regular payments. The FSA do provide some examples that are worth reading on Page 11. Impact: Although non-advised top-ups should be rare, following MiFID and the Client’s Best Interest rule, all transactions, whatever the reasoning, fall under the suitability COBS 9 ( specifically COBS 9.2.6R & COBS 9.2.7G) or appropriateness test COBS 10 (specifically 10.2 and 10.4) . Failure to comply could be seen as a breach of COBS 2.1.2R. Action:

Where top-ups are required, firms should satisfy themselves that they have adequate and robust practices reflecting the written processes to show how suitability or appropriateness is demonstrated in the sales process.

Additional Items explained There are some enquiries which have been clarified but which do not specifically fall under the new rules. These are on pages 11 & 12, covering: ■

Non-discretionary manager moves to adviser charging

Re-registration of assets from one platform to another

Advice to reinvest dividends

Providers and platforms being able to rely on advisers to inform them if there has been advice

Whether the original adviser can continue to receive trail commission if advice is given by a new adviser or a fund switch is made

The requirement on advisers to remind clients of trail commission they are receiving, and to discuss with them why an existing product might be better than a cheaper post-RDR alternative which does not pay commission

Remember: If you have any concerns regarding these issues, please contact your compliance department or an independent consultant belonging to the Association of Professional Compliance Consultants (APCC). See also the listings of FSA publications on Page 54 of this issue

Compliance Doctor.indd 57

April 2012

57 27/03/2012 16:57

TRANSPARENCY, EFFICIENCY, LIQUIDITY THE LYXOR ETF CHARTER OUR COMMITMENT TO CLIENTS The Lyxor ETF charter is a commitment to the highest quality standards for its clients. Across Asset Management, Index Tracking, Transparency, Counterparty Risk, Primary and Secondary Market Liquidity, Lyxor aims to provide best-in-class services to its customers. Discover the full charter on

T O TA L A U M O F € 2 9 B N – A S S E T M A R K E T S H A R E O F 1 5 % – L E A D I N G O N - E X C H A N G E R E P O R T E D T R A D I N G v O L U M E (24% MARKET SHARE) WITH A STRONG LIQUIDITY COMMITMENT BY SOCIETE GENERALE CIB.* − Asset Management quality: direct ownership of physical assets, no securities lending; application of best execution principles to derivatives transactions. − Index Tracking: direct index tracking. Tracking error published in monthly client reports and aims to be below 100 bps. − Transparency: daily web publication of key information: directly owned securities, collateral, counterparty risk, counterparties to all derivatives entered into by Lyxor ETF.

− Zero counterparty risk target: daily target reduction of counterparty risk to zero. − Liquidity: access for brokers to primary and secondary markets through more than 45 Authorised Participants and 15 market makers. Continuous pricing across 649 listings on more than 13 exchanges. And full transparency on creation and redemption costs.

ETF Risks: the index tracked by a Lyxor ETF may be volatile, investor’s capital is at risk and an investor may get back an amount less than originally invested.

More information on LYXOR <GO> or call 0800-707-6956 * Source: Bloomberg, Lyxor. Trading volume for September 2011, all other data as of end of September 2011. The products described within this document are not suitable for everyone. Investors’ capital is at risk. Investors should not deal in these products unless they understand their nature and the extent of their exposure to risk. The index tracked by a Lyxor ETF may be volatile. Prior to any investment, investors should make their own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us. We recommend that you consult your own independent professional advisers. Lyxor and Lyxor ETF are names used by Societe Generale to promote the products of Lyxor Asset Management. Societe Generale is a French credit institution (bank) authorised by the Autorité de Contrôle Prudentiel (the French Prudential Control Authority). Societe Generale is subject to limited regulation by the Financial Services Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request. Lyxor ETFs are open-ended mutual investment funds established under French Law or Luxembourg Law. The funds may not be sold to US persons or in jurisdictions where such offering or sale has not been authorised. The telephone number and e-mail address are provided by the London Branch of Societe Generale for technical questions relating to Lyxor Asset Management products only. Calls to this line and other Societe Generale telephone numbers may be recorded. For further details please visit

Thinkers.indd 58 C51298_IFA Magazine 297x210.indd 1

27/03/2012 17:00 01/12/2011 11:55




“As a young man, I traded using outrageous and terrifying leverage. I was either very lucky, very smart - or very dumb.” James Beeland Rogers Jr Born 1942 in Baltimore, Maryland. Currently living in Singapore. Multimedia Man Jim Rogers, the celebrated co-founder of George Soros’s Quantum Fund, has logged up many accolades during his 48 year career, but world-shattering economic theories have hardly been among them. Indeed, he does not really claim to follow any principle apart from the free market. Instead, his strengths have lain in an enduring fascination with the ever-changing macro environment, and with an uncanny ability to identify larger trends before they happen. This is not a coincidence By the age of 37, Rogers’s vast personal wealth had enabled him to enter a kind of retirement – which, in his case, meant riding his motorcycle. But that would scarcely have kept him satisfied for long. In the last three decades, Rogers has become better known for his economic perceptions, his TV work, his preoccupation with commodities, his philanthropy and his often trenchant opinions on US foreign and economic policy. Hardly a Conventional Career Start Raised in Alabama, Rogers first studied history at Yale (1964) before moving on to philosophy, politics and economics at Balliol College, Oxford (1966) – followed by a spell at wealth managers Dominick & Dominick, and then by another MA from Oxford. A spell with the US army (this was the 1960s, remember) was followed in 1973 by collaboration with George Soros on the foundation of the Quantum Fund, one of the first truly international hedge funds. During the following 10 years, the Soros fund was to put on around 4,200% at a time when the S&P 500 had advanced about only 47%. But by that stage the wanderlust was already getting too powerful to hold down. Rogers’s initial motorcycle ‘retirement’ in 1980 was followed in 1990-1992 by a much bigger project,


Thinkers.indd 59

the 100,000 mile ride across six continents which became the basis of his best-seller Investment Biker: On the Road with Jim Rogers. In this, and in a subsequent 150,000 mile journey in 20002002, he wrote of the vital economic learnings that first-hand travel experience could provide. A Global View The international bug, then, had bitten him badly. Rogers became increasingly strident in his conviction that the financial future would belong to emerging countries, especially China, and to the commodities market. He adopted controversial views on America’s post-9/11 involvement in Iraq, which he vehemently opposed. Rogers also took issue with US financial policy, accusing Fed Chairman Alan Greenspan in 2002 of having mismanaged the economy with his loose money policy. Greenspan, he said, had “caused two more bubbles to grow” in addition to the 1990s stock market bubble: “a real-estate bubble and a consumer-debt bubble.” And in 2006, a year before the banking crisis emerged, Rogers announced that he was shorting US financials and housing constructors. Prescient stuff. More recently, he has slammed Ben Bernanke’s quantitative easing programmes, and has opposed public bail-outs for failed banking giants. Anything Else? Certainly. In between frequent media appearances, Rogers found time in 2005 to write a book called Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market, in which he supported the view that commodity investments were a dead cert for the long term. This would not have surprised anyone who recalled that, as long ago as 1998, Rogers had founded the Rogers International Commodity Index, which tracks some 35 commodities across 11 international exchanges. April 2012

59 27/03/2012 17:00

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



Our client needs a number of experienced Wealth Advisers to offer a comprehensive service to a portfolio of HNW clients in the South East of England. The job role forms part of the wider Wealth Management Sales Team therefore working in close partnership with the introducers and peers in this team will be part of any successful applicants’ day-to-day activity.

Our Client a leading Bancassurer need a number of Premier Independent Financial Advisor’s to provide professional independent financial planning services to both new and existing high value customers. This means identifying and meeting customer needs with particular emphasis on protection, pension, investment and insurance products available through the bank’s UK branch network, whilst consistently treating customers fairly. The role requires the candidates to be qualified to a minimum of Diploma level.

London, Essex, Home Counties & South East £45,000 plus excellent bonus and benefits O.T.E c£75,000

You will be responsible for achieving targets in meeting the demands of the business by converting introductions into new business, conduct interviews with new and existing clients to review and meet their immediate and on-going financial needs; actively selling and/or introducing appropriate products and services and referring to other product specialists where required.

Optimising appointments with customers to identify needs and opportunities and provide solutions in order to achieve personal and team sales targets. Ref: 2076



Our Client a well respected firm of Chartered Accountants and Business advisers based in the South East. They now require an experienced Chartered Financial Planning Director for its specialist Wealth Management division.

Our Client is an independent firm of actuaries and consultants who offer a full range of services to trustees, employers, insurance companies and individuals. They are now looking to recruit a trainee adviser for their Liverpool office. The ideal candidate will be responsible for supporting employee benefit consultants advising clients and will require excellent written and oral communication skills to be effective in this role.

Successful applicants will be required to give advice on all aspects of financial planning from pensions, Investments and annuities to inheritance tax planning and trusts to a portfolio of clients Qualified to Chartered status you will be given your own portfolio of clients ranging from private individuals to Charities and trusts and professional connections

Merseyside c£30,000 plus benefits

Some previous pensions experience is essential and attention to detail, coupled with the ability to work well in a team environment.

The successful applicant will have experience of working within a Fee based environment on a time/cost basis with HNW Clients. In return you will receive a competitive remuneration package and a defined career path. Ref: 1999

In return on offer a competitive remuneration and study package. Study towards professional qualifications (Diploma in Financial Planning) is an essential requirement and is necessary to progress to the role of an experienced Adviser. Ref: 2079



Our client is a successful and respected firm of Chartered Accountants and Business Advisors, with over 25 offices across the UK and worldwide. They are looking to expand their UK Employee Benefits Consultancy service with the appointment of an experienced Employee Benefits / Corporate Pensions Consultant to their offices in the London office. Primarily based in London, working alongside the existing teams you will be responsible for developing the business throughout other regions, you will be servicing clients of the organisation as well as developing new business with large corporate clients.

Our Client a well respected firm of Asset Managers with a National network of Offices who manage in excess of £10 billion of funds on behalf of Clients

London & South £70,000 basic plus benefits

You must be Diploma Level 4 qualified, with specialist pension’s qualifications, and be experienced of developing and managing group pension schemes with c200 – 2000+ employees. Typically you should be generating a minimum of £250,000 in Fee revenue per annum. Ref: 1396


London, South Coast, Norwich, Leeds £75,000 plus benefits Our Client a National firm of Wealth Managers and Investment Advisers who give Fee based Independent financial advice to private clients need a number of exceptional individuals to service and further develop their Client proposition, based out of one of their UK offices. Ideally, you will be an experienced diploma qualified IFA already with a minimum of five years financial planning experience, covering all areas of Pensions & Investments and be familiar with operating a Wrap service. The successful applicant will be given on-going support and development to ensure they are giving their Clients the best advice.

Birmingham £40,000 plus bonus and benefits They now require an experienced Financial Planner for its specialist Wealth Management division. Successful applicants will be required to service a Wealthy portfolio of clients ranging from private individuals to Charities and trusts and professional connections You will be responsible for working with a sophisticated customer base, providing specialist advice on relevant financial products and services including full financial planning reviews and portfolio management. The successful applicant will have first hand knowledge of working within a Fee based environment on a time/cost basis with HNW Clients. In return you will receive a competitive remuneration package and a defined career path. Ref: 2077

FINANCIAL PLANNING MANAGER Reading £50,000 basic plus benefits

Our client is a successful and respected firm of Chartered Accountants and Business Advisors, with over 25 offices across the UK and worldwide. They are looking to expand their UK Wealth Management service with the appointment of an experienced Financial Planning Manager to their offices in Reading. You will be office based; working alongside the existing teams responsible for developing the business throughout each specialist area and you will be servicing clients of the organisation as well as developing new business with clients.

In return the successful applicants will be given an excellent opportunity to develop their career within this organization Ref: 1885

You must be a minimum Diploma Level 4 qualified, with specialist pension’s qualifications, and be experienced of developing Time Cost; Fee based business with High Net Worth Clients. Typically you should be generating a minimum of £250,000 in Fee revenue per annum. Ref: 2078



Our client is a successful and respected firm of Chartered Accountants and Business Advisors, with over 25 offices across the UK and worldwide. They are looking to expand their UK Employee Benefits Consultancy service with the appointment of an experienced Employee Benefits / Corporate Pensions Consultant to their offices in their Manchester/Leeds office. Primarily based in the North West, working alongside the existing teams you will be responsible for developing the business throughout the North East regions, you will be servicing clients of the organisation as well as developing new business with large corporate clients.

Our client who provide a truly independent range of financial services from investment and portfolio management, through to trust and estate planning are urgently seeking a compliance officer, to carry out compliance reviews in accordance with the risk based business quality monitoring programme.

North West/North East £50,000 basic plus benefits

Manchester c£30,000

Assess the quality of advice and adherence to business standards and regulatory FSA requirements and identify material risks to clients and the company Occasional file review required to determine whether the suitability of advice against business standards and regulatory requirements and identify material risks.

You must be Diploma Level 4 qualified, with specialist pension’s qualifications, and be experienced of developing and managing group pension schemes with c200 – 2000+ employees. Typically you should be generating a minimum of £250,000 in Fee revenue per annum. Ref: 2020

To provide effective feedback and direction of the remedial action required to manage or mitigate the material risks identified.



Our Client a well respected Financial Services group, require experienced individuals to research and resolve customer complaints within agreed compensation limits and negotiate solutions to the satisfaction of all parties concerned ensuring requirements of external regulators and internal standards are met.

A London based IFA is looking for a corporate administrator to work within the Employee Benefits administration Support Team, responding to customer enquiries and carrying out administration tasks in support of the sales process.

Investigate customer records produced by the sales forces to ensure that the advice given is in line with standards laid down by the Group and Regulator.

Identification of possible new business leads from the existing client bank and liaison with the client and/or Employee Benefit adviser to maximise the opportunity.

Bristol & Huddersfield c£32,000 plus benefits

Examine standards of remedial action undertaken as a result of reviews, when appropriate, to ensure that customers have not been disadvantaged or the Group put at risk. To effectively identity, control and escalate any perceived risks which may impact customers or the group Produce effective communications to internal and external customers in a clear and concise format, ensuring that any corrective action undertaken is appropriate. Ref: 2023

For further vacancies please visit:

April 2012

Thinkers.indd 60

You will be responsible for working with a sophisticated customer base, providing specialist advice on relevant financial products and services including full financial planning reviews and portfolio management.

Successful applicants will be fully diploma qualified. Ref: 2016

South Coast £70,000 plus bonus and benefits


Manchester, Bristol & London c£45-£50,000 plus bonus and benefits

Minimum 2 years experience of working in a regulated financial services environment CF1-4 or equivalent Ref: 2053

London c£32,000 plus benefits

Processing of group life & group pensions schemes, including checks to ensure that documentation is correct.

Obtaining new business illustrations and policy valuations for advisers where required. Typing of letters and reports, where required. Ensure all administration is completed in an effective manner to meet the firm’s record keeping and file quality requirements. CF1-4 or equivalent Knowledge of 1st Software Exchange is preferred Ref: 1397



27/03/2012 17:00

Visit our website at Senior Financial Planner - Accountancy Practice, Berkshire

Retail Business Development Manager - Nationwide

Basic to £80,000 plus benefits and bonuses

Basic up to £60,000 with OTE up to £100,000 plus bonus, car & benefits

We are currently working with a top tier professional services firm who are seeking a senior level Financial Planner for their Berkshire offices. You will be responsible for developing business from their two practices, advising genuinely HNW clients on a time-costed fee basis. The ideal candidate will be a well qualified, accomplished financial planner and will ideally have some professional practice experience. A generous package is on offer for the successful candidate.

An exciting opportunity has arisen to join a global Financial Services organisation within their niche retail distribution division. You will work closely with senior management in developing sales of selected products through Retail sales channels, through developing business relationships with key stakeholders and providing a portfolio of support services including, training, coaching and sales management. The ideal applicant must have national/strategic account management or retail/corporate sales experience within the life, pension’s or protection product area, as well as being massively sales focused.

Please contact James at: or on 01727 884 662

Please contact Gareth at: or on 0113 274 3000

IFA - Equity Participation - North West

Financial Planner - Northern England & Scotland

Basic £40,000 plus benefits and bonuses

Package up to £80,000 plus Car

This well established, reputable and profitable boutique IFA firm is looking for an experienced IFA to join them and share in their directors’ vision and passion to provide true independent fee based advice. Their business provides tailored financial planning and tax solutions for small to medium sized owner-managed businesses and private clients, and has links with a number of top tier accountancy practices as introducers. The firm has solid growth plans and is looking for an ambitious individual to help achieve them. You will be supported by leading back office technology, support staff and access to clients and professional introducers.

Our client is a top financial services group, looking to expand. A rare and new opportunity has arisen whereby you will contribute to the overall divisional performance by supporting and working proactively with the Financial Advisers on complex financial planning cases to provide advanced sales and technical support. Candidates must have a successful track record of delivering complex financial planning cases at the highest levels of wealth and complexity. The ideal candidate should be Chartered, possessing strong technical skills and the ability to build and maintain effective relationships with Financial Advisers & Area Sales Directors.

Please contact James at: or on 0113 274 3000

Please contact Trishla at: or on 0113 274 3000

Corporate Consultant - London

Retirement Consultant, Leading Financial Services Provider - South London Basic up to £32,500 plus benefits and bonuses

Basic to £85,000 plus benefits and excellent bonus structure

A leading financial services provider is currently looking to recruit a Retirement Consultant in their South London office. The role will largely focus on annuities and income drawdown markets. Additional responsibilities will also include developing business both internally and externally as well as general record keeping and administration. The ideal candidate will have completed QCF Level 4 in preparation for RDR and will also have a track record of success and proactivity preferably within an IFA background or similar.

The company, a leading and entrepreneurial professional services firm, offers advice to corporates including owner-managed businesses, large corporations and the public sector, as well as to Trustees. The role will have a new business focus and as such they are looking for a ‘hunter’ who can evidence writing high levels of business across DC/GPP/Group Risk. An understanding of DB issues and experience of dealing with Trustees is advantageous. Leads will be provided by the telesales team and you will also build relationships with other areas of the organisation to generate referral business. Diploma qualified is a prerequisite.

Please contact Danielle at: or on 01727 884 662

Please contact Zoe at: or on 0113 274 3000

Ground Floor, Mayesbrook House, Lawnswood Business Park, Redvers Close, Leeds LS16 6QY Telephone: 0113 274 3000 Fax: 0113 274 3031

Suite 4, Ground Floor, Breakspear Park, Hemel Hempstead, HP2 4TZ Telephone: 01727 884 662 Fax: 0113 274 3031

Business owner / entrepreneur THE COMPANY

A change in direction can be daunting especially when that change means a step into the self employed but taking hold of your financial future and becoming a leader of your own destiny need not be such a complicated transition when you have the support of the right network. Keillar Resourcing is working in conjunction with one of the UKÕ s leading IFA networks. With UK wide coverage and a brand name thatÕ s synonymous

with excellence you can be assured of the right levels of support along the way. Commission rates are high and you can decided on the right levels of support from a variety of choices and only pay for the support you decide to utilise and that means you donÕ t pay more than you have to. This RDR ready network can support you with everything from office to admin and might even supply the odd lead or two!


Maybe this is the right time to take hold of your own financial future? If you think it could be, then get in touch and we will tell you how this network could be just the ticket! THE PACKAGE

With excellent commission rates up to 90% the eventual level is entirely up to you. LOCATION

Genuinely national so wherever you want it to be.

To learn more about this exciting opportunity contact Paul Mullarkey on 0131 557 9668 or 07875 341758 for the inside scoop or email him on

keillar Resourcing operates as a recruitment agency

Thinkers.indd 61

April 2012

61 27/03/2012 17:00

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

the financial services e-learning specialists

Get your skills up to date the easy way

Wanted: Quality financial advisers ....Only those with Level 4 Qualifications need apply More and more large groups are demanding that candidates have already achieved at least Level 4 qualification. In fact, many haven’t even picked up a book yet. Without large numbers of qualified advisers the FS sector has a difficult future to say the least. The BWD Group, an established search & selection firm, have taken action to help with the launch of a new service - BWD development. • Advisers and others taking the Level 4 exams can now access e-learning programmes and on-line mock exams. • This allows candidates to learn at their own pace - at a time and place to suit them • They can take on-line assessments along the way and take up to five mock exams to make sure they are on track to pass the live examination

If you like the sound of this, go to where you can see a full demonstration of the service or call BWD development on 0845 850 9995 T 0845 850 9995 F 0113 274 3031 E

0800 689 9689 NATIONWIDE

BUSINESS DEVELOPMENT ASSOCIATES Nationwide - £Negotiable CEI Compliance have been expanding recently and now need an entrepreneurial Business Development Associate to sell consultancy services to financial institutions. May suit a part time position, return to work or other business type but must be able to generate own leads, understand the compliance offering and have a broad regulatory knowledge across many disciplines from investment banking to IFA and retail banking to M&A. Please contact Lee Werrell on

Ref: vac-36272

COMPLIANCE ASSOCIATES Nationwide - £Negotiable CEI Compliance are a nationwide consultancy that uses the associate model to deliver a fast, flexible, professional and efficient service to all manner of financial services firms from one man bands to multi-national institutions. We use specialist for specialist work such as G60 or T&C needs, but a lot of our work is involved around compliance aspects such as S166 Skilled Person's reports, operational risk and systems and controls work. You have the people skills, you have the regulatory knowledge, to leverage both of these on a change of career, why not consider working as a freelance consultant in the financial services industry focusing on all sectors such as banking, investment etc.. These are exciting times and everything is changing on the regulatory front....CEI is on the leading edge of the changes; why not join us? Contact Lee Werrell at with your CV in the first instance.


April 2012

Thinkers.indd 62

Ref: ceiass001

27/03/2012 17:00

Wealth Manager £100-150,000 + Bonus + Benefits

Ref: 2132

Boutique wealth management firm is now looking to promote further its bespoke tax and wealth management proposition to City clients. Currently they advise individuals with investable assets of over £1 million with six and seven figure incomes. You will be tasked with attracting new AUM that will then be managed in-house on a multi-asset basis. You must have experience of developing relationships with the wealthy and professional introducers. London based. Equity available.

Independent Wealth Manager To £60-80,000 + Bonus + Benefits

Ref: 240603

High profile national IFA Brokerage requires additional, holistic Independent Financial Planners in the Southern Home Counties. You must come from an established IFA background with a track record of successful production and client development. You will be assisted with an increasing number of qualified HNW client leads from within the Group with most coming from professional introducers.

Professional Practice IFA £70,000 + Bonus + Benefits

Ref: 150903

Our client is a top 12 National Accountancy Practices at the top end of the HNW Financial Planning/ Wealth Management sector. There is significant further scope to work directly with the Practice Partners based in London, Birmingham, and Bristol, developing relationships and advising their HNW clients in both personal & corporate areas. You should be able to demonstrate a strong production track record and proven relationship-building success in this arena.

IFA £60-80,000 + Bonus + Benefits

Ref: 5434

Niche wealth management firm with c£200 million under management requires a senior consultant to join the practice in London. Advising a wealthy client portfolio you will also service and develop external relationships with private banks, law firms and chartered accountants. In time you will also be expected to contribute to the strategic direction of the company. You must be familiar in all areas of investments (this being your specialist area) as well as sound knowledge of pensions and tax planning. Equity participation possible.

Fee Based IFA To £65-75,000 + Bonus + Benefits

Ref: 03232

International Risk Management Consultancy with a small wealth management offering is now looking to add to its London team. You will work with an existing portfolio of wealthy company executives (typically six figure earners) and advise them on all areas of pension, investment and IHT planning as necessary on a fee basis. You must have experience of advising demanding HNW individuals and possess the relevant professional qualifications.

For further information please contact Simon Charlton, Matthew Tatnell or Gareth Blades 60 Lombard Street, London EC3V 9EA 0207 464 8429

Thinkers.indd 63

April 2012

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Institute of Financial Planning THE PROFESSIONAL BODY FOR FINANCIAL PLANNERS AND PARAPLANNERS Post RDR, it will become even more important for advisers in the UK to align themselves with a relevant professional body or accredited body. Membership of the IFP offers you support and guidance whether you are a Financial Planner or Paraplanner. With a huge range of benefits, why not have a look at some of the ways in which we can help you? Support you through regulatory change Engage with a community of professionals Follow a structured career path Increase your personal and business potential Harmonise your goals with those of your clients Keep up to date with relevant issues and news

To find out more or join visit or contact us on 0117 9452470

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e n zi

Dates for your diary a m a g

APR - AUG 2012


Consultation period ends for Consultation Paper 12/3 (Regulated Fees and Levies: Rates Proposals 2012/13)


Tax year 2012/2013 begins


Consultation period ends for Consultation Paper CP12/3 (Independent and Restricted Advice) Summit of the Americas,

1415 Cartagena, Colombia 19

Consultation period ends for Consultation Paper CP12/6 (Regulating Bidding under the EU Emissions Trading Scheme) IMF/World Bank Spring Meetings,

2022 Washington DC, USA 22 26

International Congress on Energy and Politics, Antalya, Turkey Consultation period ends for Consultation Paper 12/2 (Amendments to the Listing, Prospectus, Disclosure and Transparency Rules)


European Business Summit, Brussels


Consultation period ends for Consultation Paper 12/1 (Large Exposures Regime)

JUNE Emerging Markets Investment

1920 Summit, Prague

Earth Summit 2012 (UN Conference

2022 on Sustainable Development), Rio de Janeiro, Brazil London 2012 Festival opens


Royal Henley Regatta

27 1


Cyprus assumes the EU Presidency until 31st December


Implementation of the Alternative Investment Fund Managers Directive US Pensions Summit,

2325 Chicago, Illinois 21

2012 Olympic Games opens



Final Report on Regulatory Fees and Levies (2012/13) to be published.


Consultation period ends for CP12/5 (Quarterly Consultation Paper No.32) European Pensions & Investments

1416 Summit 2012, Noordwijk aan Zee, Netherlands

IFA Calendar.indd 65

International Trade and Finance Association 22nd International Conference, Pisa, Italy



2012 Olympic Games closes


Republican Party presidential candidate to be formally conďŹ rmed Have we forgotten anything? Let us know about any forthcoming events you think ought to be in our listings. (Sorry, press and official events only.) Email us at:, and weâ&#x20AC;&#x2122;ll do the rest.

April 2012

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

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


IT’S FINDING THE RIGHT CALIBRE OF PERSONNEL THAT MAKES ALL THE DIFFERENCE, YOU KNOW. RICHARD HARVEY IS IMPRESSED. WELL, MOSTLY Sax Sells There are certain individuals in life who should exude confidence, maturity and judgement. For instance, you want the guy piloting your holiday jet to look as if he’s in command. Maybe with a touch of silver in his hair, gold stripes on his sleeve, and a lantern jaw. (Yes, I know there are women pilots nowadays, but you get my drift). The same applies to IFAs. Clients want financial advisers to look the part. A suit and tie are the basics. Nothing too ostentatious - Austin Reed is fine, Armani might make us think you’d take flash liberties with our hard-earned. Take Nigel, my IFA’s investment manager. He’s the polar opposite of Gordon Gecko, the very soul of sartorial sobriety whose personal appearance reflects the solid advice and sensible returns we all crave.

However, following our latest halfyearly review meeting, the conversation loosened up over lunch, and switched from finance to music. Whereupon he confessed that his real passion wasn’t stocks, shares, derivatives and all that investment stuff – what he really wanted to do was play jazz sax. Entirely coincidentally, so do I. So while I’d never place my faith in the investment judgement of a chap in jeans, anyone who’s learning Charlie Parker solos is fine by me. Particularly as they are every bit as complex and challenging as covered bond regimes, turquoise derivatives and unregulated collective investment schemes – whatever those might be?

Hard Times I couldn’t help experience a touch of schadenfreude at the financial calamity that has befallen Glasgow Rangers FC, that bastion of Scottish football. Not the fact that the club have had to call in administrators to sort out the towering debts, but rather that the players have had to take a 75% pay cut. Among them is a fabulously inept midfielder, the butt of unprecedented scorn from the fans of my favourite team prior to his transfer to Glasgow’s finest. (Apologies there to all Celtic fans.) Following the pay purge at Rangers, he now has to struggle by on a measly £5,250 a week. Makes your heart bleed, doesn’t it?

Mad Men It’s ISA time again, and here come the big budget advertising campaigns. But please, Halifax, spare us a repeat of the ‘ISA, ISA Baby’ TV commercial, featuring that daffy disc jockey-ette in a radio studio. I mean, what kind of a financial company would have hired that airhead in the first place? Apart from topping my list of All-Time Most Irritating Ads, is it really credible that investors – depressed as they are by returns barely keeping up with inflation - would buy an ISA from a wannabe Fearne Cotton?


April 2012

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Very good in its make up and content. Sets itself aside from other publications in the marketplace. Excellent. Thank you. Really refreshing. High quality e production i nwith some good thought provoking articles z and useful LOgOa information. Good useful content. Up-todateainfoK useable, very good and easily read. Very good m articles, relevant to my work. Very interesting, extremely useful. Very impressive read and lots of useful Sarticles nice to see it in “magazine” style format A N D SINN TS usual rather ANthan newspaper. A comprehensive ERS read. Very good layout and informative. Good content, appealing to the female reader as many publicationscrisiare very male driven and focused. s Thank you. AUquality magazine for IFA IFA’s. ’s. Good paper S A with good content which is plain talking. Good layout and easy to read. Not seen anything like this for IFA market. Really AZIL Worth reading. Interesting BRgood. content. Very professional and upmarket, exactly what is needed in the ifa community. Absolutely fantastic. Not cluttered by endless comparison tables. Punchy contemporary style.. More of the same in the monthsBRto please. A very readable AF TE R ITA INcome TS O RI E publication. It looksTHlike an interesting and enjoyable read that I would be happy to have delivered THE ERS V I C KKabout to the office - not something I could say ING BAN PORT E magazine manyThe financial publications! Great - look Rforward to subsequent editions. Brilliant! Very impressive the top IFAs CAL T and all interesting publication. Looked and felt like E T H IE S T M E N INV a proper magazine rather than other cheaper are talking about... looking publications. Breath of fresh air and topical get your free subscriptionI’m going get it instead of the in biteTosimply size chunks. fill out the form online at: professional adviser papers and financial adviser content/subscribe papers. Enjoyed the read. Keep up the good work! MA

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N E W S R E V I E W C O M M E N T A N A LY S I S Cover 10.indd 3

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Portfolio oomph If your clients are looking for potentially stronger performance in their portfolio, weigh up the new Schroder Small Cap Discovery Fund. Here’s why: • Packing a real punch for their size. Smaller companies in Asia (ex. Japan) and emerging markets have outperformed large companies over the last decade. • Heavyweight fund manager. Matthew Dobbs is AA rated by Citywire and by OBSR. He has proven his strength with the Schroder Asian Alpha Plus Fund, which has 1st quartile performance over six months, one, two and three years and since launch.1 • Powerful opportunities. Smaller companies are less heavily researched, providing rich, alpha-generating opportunities. Since 1969 Schroders has had a local presence in Asia with nine offices throughout the region. Find out more at

Schroder Small Cap Discovery Fund

* 0800 718 777 For professional advisers only. This material is not suitable for retail clients. Sources: 1 Lipper for Investment Management, bid to bid with net income reinvested, as at 29 February 2012. Source for ‘Schroders has more Citywire ratings’ and AA rating: Citywire, as at 29 February 2012. Source for OBSR rating: OBSR, as at 29 February 2012. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Emerging equity markets may be more volatile than markets of well established economies. Foreign currencies entail exchange risks. Schroders has expressed its own views and these may change. *Please note that phone calls may be recorded. Issued in March 2012 by Schroder Investments Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 2015527 England. Authorised and regulated by the Financial Services Authority. UK02658

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IFA April 2012  

For todays discerning financial professional