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Insights & News


by Graham Bond 27 Apr, 2017

Choosing the correct Ethical or Socially Responsible investments will depend on your own beliefs and values. A starting point is to use a screening process.This will help you to analyse which types of industries and companies they would like to either include or exclude.

There are primarily two types of screening, positive and negative.

Negative Screening

The process of Negative Screening excludes investments that you might consider undesirable. For example you might want to exclude some of the following:

  • The arms or defense industry
  • Nuclear power
  • The tobacco and/or alcohol production
  • Gambling
  • Genetic Engineering
  • Third World debt/exploitation
  • Animal Testing

Positive screening

Positive screening helps to identify the businesses that demonstrate the potential to offer good quality, long-term ethical investment opportunities. The positive screening process will help you to avoid businesses that could encounter problems as their day to day operations might not be sustainable in the long term. Positive Screening might include companies involved with

  • Projecting a positive business focus
  • Energy conservation
  • Promotion of Equal Opportunities
  • Renewable Energy
  • Pollution control

Shareholder Engagement

By employing active shareholder engagement it is possible for shareholders and fund managers to encourage a more corporate and social business approach.

It makes sense to consider investing into companies that have the foresight and willingness to adapt.

by Graham Bond 26 Apr, 2017

Anyone seeking evidence that investment decisions can be hard often needs to look no further than the front page news. China, oil, VW and Glencore are among the assets that have made the headlines in the past few months after suffering sudden, unexpected and dramatic changes in price.

Investors with exposure to those volatile assets might be licking their wounds and reconsidering their positions. This is because many investors have an investment strategy that relies on their (or someone else’s) forecasts about the future. In the simplest terms, their starting point is a blank sheet of paper, where they build a portfolio of assets they think will do better than the alternatives. Sometimes those decisions are right; sometimes they are wrong.

We have a different starting point. Our investment philosophy is based on things we know rather than things we don’t know. For example, we know that financial markets do a good job of setting prices, so we don’t try to second-guess them. Instead, we begin with the belief that investors will, on average and over time, receive a fair return for investing their money.

Our aim is to give our clients access to that long-term return through broadly diversified, low-cost portfolios of assets that aim to beat the market average. The portfolios do this by using information in market prices that tells us about a security’s characteristics and its expected future returns.

The decisions we make about what assets to hold are based on decades of academic research rather than short-term hunches. This means we can focus on meeting your long-term goals rather than becoming absorbed by short-term market movements.

Generally speaking, investment decisions are hard, but if, like us, you start with information you know is backed by decades of evidence and build an investment philosophy and strategy around it, we think you can improve your chances of being a successful investor.

by Graham Bond 26 Apr, 2017
This weeks video is by Dr Robert Waldinger of Harvard University. He is the current director of the longest running study about human happiness. Hope you enjoy it
by Graham Bond 26 Apr, 2017

It’s often said that retirement can seem as big a challenge as starting your first job. To enjoy a comfortable old age means doing some in-depth thinking well in advance, asking yourself what your goals are and how much money you want to have at your disposal when the time comes.

So how should you approach creating a robust financial plan?

A NEW SLANT ON MASLOW’S PYRAMID

Many people find it helpful to think in terms of Abraham Maslow’s famous Hierarchy of Needs. His pyramid diagram contained various levels of need that human motivations generally move through, starting with the physical requirements for human survival, and ending with mankind’s highest aspirations.

Adapting this approach to retirement planning was pioneered by US money guru, Mitch Anthony. Using this hierarchical approach in a personal finance context can be a useful aid in deciding how to work out how much retirement income you need.

SURVIVAL INCOME

This is the base of the pyramid and consists of the income you need to pay all your basic household expenses. In effect, it means drawing up a budget that covers all your likely regular bills and running costs.

SAFETY INCOME

The next layer up, this is the amount you might need to meet life’s unexpected events. Typically, this would include health and later-life care costs, loss of income and any emergency financial help you might want to give your family.

FREEDOM INCOME

This layer is all about assessing the likely cost of doing and enjoying all those things that you never had time to do before you retired. So if you’re planning a trip, a major purchase or want to indulge yourself in other ways, this is the amount you feel you’ll need.

TOPPING OFF THE PYRAMID

Many people add a gift layer representing money they want to pass onto children and grandchildren during their lifetime, and some add a dream layer, their ultimate ‘bucket list’, to the very top.

By viewing your finances in this way, you can gain a clear picture of how much you need to have saved by the time you reach retirement. With these amounts in mind, you can build up a comprehensive financial plan to help ensure that you can enjoy the sort of retirement you’ve always wanted.

by Graham Bond 25 Apr, 2017

When we talk about the way we invest you might hear us saying we believe prices are fair; that we believe in the power of markets; or that we believe there is information in stock market prices. These are different ways of saying largely the same thing—that we believe the market does a good job of incorporating information into prices.

For example, when a company reports its quarterly results to the market, there is often a near-instantaneous change in price as the market reassesses how the new information changes the company’s future earning capability.

To understand more deeply what is going on in the stock market we can think of how another market, the market for bets on English Premier League, operated this season.

You will undoubtedly have heard that Leicester City won the league, a remarkable feat considering they were close to relegation last season and started this season with some bookmakers offering odds of 5000-1 on them becoming champions. Bookmakers considered the event as likely as finding Elvis alive, with an implied probability of 0.02% (zero). One cheeky bookmaker scrawled “pigs might fly” on an optimistic punter’s betting slip.

As the season progressed, however, bookmakers quickly revised their odds every time new price-sensitive information came to light. That new information reflected not only Leicester’s (sometimes unlikely) results but also the results of their title challengers, which of course had significant effect on Leicester’s chances. By Christmas, the odds had fallen to 10-1 and by mid-March they were 10/11 odds-on favourites.

Stock Market prices are forward-looking in the same way betting odds are an expression of the likelihood of a future event occurring. Throughout the season, bookmakers were pricing and repricing their expectation of Leicester lifting the trophy in the same way a market does when it collectively arrives at a security’s price. Company results, competitor’s results and a seemingly infinite number of other outside influences combine to set expectations of future security returns.

Our investment approach harnesses this collective knowledge and enables us to build investment portfolios that put the power of the market to work for you.

Click this link for more information on  market efficiency and stock prices

by Graham Bond 25 Apr, 2017

An important part of the work we will do for you is to rebalance your investment and pension portfolios on a regular basis, where appropriate.

To rebalance a portfolio means to review and adjust the investments held within your portfolio. The aim is to bring it back into line with its stated objectives and to control the level of risk. Here is an example of how rebalancing works.

Let us consider an investor who has £200,000 to invest. In this example, for ease they will invest into two types of investments. The first is shares and the second is corporate bonds. Corporate bonds allow companies to raise money. The investor puts 50% into each type of investment.

Over the next year, the Shares portion increases in value by 20% and the Corporate Bond part falls in value by 10%.

At the end of this first year portfolio has increased by 5% and they now have:

Shares £120,000
Corporate Bonds £90,000
Total £210,000

The split of the investments has also changed. One part increased in value and the other has fallen. The investor now has 57% in Shares, and 43% in Corporate Bonds. This will increase the level of risk in the portfolio as the shares portion is bigger.

If they do nothing and the next year the Shares rise by 20% and the Corporate Bonds fall by 20%, now the position at end of year two is:

Shares £144,000
Corporate Bonds £72,000
Total £216,000

The portfolio overall is still going up, but the investment split is way out of line. Over two thirds of the portfolio is invested in shares.

If we rebalanced the investment portfolio after twelve months the following would happen. A rebalance would sell some of the shares and buy some of the corporate bonds. The split is now equal 50/50. At the start of year two £105,000 would be held in each investment. The process is repeated regularly so that the investment portfolio moves back to the recommended split.

This is only an example. In reality we would recommend more than two types of investments to be held in a portfolio. We might also include property, cash, overseas stocks and shares as well as overseas government and corporate bonds. We recommend clients rebalance their portfolios as it aims to:

  • Help control the level of risk within the portfolio.
  • Creates a more predictable return the longer the portfolio is held. This will help if you have specific goals and objectives, such as retirement.
  • Automatically take profits from good performing investments and creates a buy low sell high approach. Opposite to most investors.
by Graham Bond 25 Apr, 2017

Although the terms are familiar, there is a big difference between the types of service your Financial Planner will provide, compared to the work a financial adviser will carry out for you.

Financial Advice

Financial Advice relates to the specific task that your planner or advisor will carry out for you. Types of tasks might include arranging an Individual Savings Account or your pension. It addresses the specific needs you have now, not looking into the future. This type of advice can be provided by an independent financial adviser, or a restricted adviser. Restricted advisers can recommend one or a limited number of product providers.    Banks and Building Societies usually offer restricted advice.

Financial Planning

Financial Planning addresses your long term objectives, dreams hopes and desires for the future, and how you can achieve this. A good financial planner will help you develop a long term financial plan that is continually reviewed and adjusted according to your change in circumstances. The plan should show you what you need to do, to make sure your dreams and wishes come true.
Any long term   financial plan   should also include an analysis of your income and expenditure (not just now but in the future), your assets and liabilities, your thoughts and feeling about investing as well as your short medium and long term objectives.

A good financial planner should show you how to reduce risk. Whether to yourself, your family, your assets (for example investments, pensions, business and property.
A planner that offers a comprehensive service will work closely with their clients to help them live the life they want not just now, but in the future.
Addressing issues such as never running out of money and maintaining your standard of living in retirement. A cautious and prudent approach to managing your money is at the heart of any good financial plan.

Less than ten years to retirement

For some clients the service advisers carry out will be sufficient. However the closer you get to retirement, arguably you should have plans in place to ensure you finances are mapped out. If you feel that you need a financial plan, always contact your financial planner or adviser. They should be able to help, if not then find one that can help you.

We have developed our Lifestyle financial planning service over the last five years. It is specifically designed to help clients that are within ten years of retirement. If you would like to find out more about our service please contact us.

Consilium Asset Management provide   financial planning in Bristol .

by Graham Bond 20 Apr, 2017

In 2001 the Trustee Act 2000 came into force for trusts established under English Law. Trustees have a legal requirement to understand and take into account this legislation.

The act requires and imposes a Duty of Care on the trustees to legally ensure the trust arrangement is operated in a suitable way. It is especially important for trustees to ensure that the duties imposed upon them by law or the terms of the trust deed are carried out.

Failure to effectively administer the trust could create a breach of trust. If a breach of trust occurs the beneficiaries could opt to take legal advice against the trusteeship and seek financial compensation.

Typical breaches of Trust include:

  • Poor administration of the trust that results in financial loss to the trust and beneficiaries.
  • Unequal treatment of different classes of beneficiaries.
  • Making unsuitable investment decisions that could be challenged by the beneficiaries.

Responsibility of trustees

Trustee’s responsibilities fall into a number of categories:

1.Duty of Care. Trustees are required to act in the best interests of the beneficiaries and the trust arrangement.

2.Standard Investment Criteria. This places a responsibility on the trustees to ensure that the assets held within the trust are invested in a suitable and appropriate manner.

3.Delegation of duties. This power allows trustees to delegate certain tasks in relation to trusts. It does not absolve the trustees for their responsibilities, but might help with the operation of the trust.

Specific Trustees Duties

Under the Trustee Act 2000 the trustees have specific duties that they should ensure are carried out. These include:

  • Keeping records, Accounts and completing any required tax returns
  • Acting impartially and treating the beneficiaries fairly
  • Investing the assets of the trust in a prudent manner
  • Distributing the trust assets when required
  • Abiding by the terms of the trust
  • Paying tax on time
  • Ensuring assets within the trust are held in the name of the trust

The act replaced existing powers set out under the Trustee investment Act 1961 with a wider general power of investment. For trusts that do not have wide powers of investment the Trustee Act 2000 provided wider powers.

There are a number of exceptions from the Trustee Act 2000. These exceptions include trusts that are set up under Occupational Pension legislation, Authorised Unit Trusts and some trusts set up under the Charities Act 1993.

The requirements placed on trustees can be onerous and time consuming. We can help guide you through the complexities of the trustee act and help you comply with your trustee responsibilities.

by Graham Bond 18 Apr, 2017

April 2016 – changes to the taxation of dividends

From April 2016 the Dividend Tax Credit will be replaced by a new tax-free Dividend Allowance. This means that help with taxation on dividends might be necessary for some people.

The Dividend Allowance means that you won’t have to pay tax on the first £5,000 of your dividend income, regardless of what non-dividend income you have. The new allowance is available to anyone who has dividend income.

This means that in future, you’ll pay tax on any dividends you receive over £5,000 at the following rates:

  • 7.5% on dividend income within the basic rate band
  • 32.5% on dividend income within the higher rate band
  • 38.1% on dividend income within the additional rate band

This simpler system will mean that only those with significant dividend income will pay more tax. If you’re an investor with a modest income from shares, you’ll see either a tax cut or no change in the amount of tax you owe.

Generally, this means no change in tax for basic rate taxpayers with dividends below £5,000. Higher rate and additional rate taxpayers stand to gain though, as they will pay £1,250 and £1,530 less tax respectively on dividends up to the allowance.  Trustees of discretionary trusts  will be worse off. However, for many small business owners, who paid themselves largely in dividends, there could be an additional 7.5% to pay on a substantial portion of their income unless they alter the structure of their business.We would advise anyone affected to seek help with tax issues on dividends.

Without question, the new dividend taxation rules are simpler, but Investors who will be subject to the higher tax charge will need to plan carefully to avoid tax rises under the new rules. Doing nothing may not be the best course of action. Taxation of shares held in Pensions   and Isa's are unaffected.

The following tables give examples of the changes:

2015/2016 tax year

  Net dividend Tax credit Additional tax Dividends after all tax
Non-taxpayer £1,000 £111 £- £1,000
Basic rate taxpayer £1,000 £111 £- £1,000
Higher rate taxpayer £1,000 £111 £250 £750
Additional rate taxpayer £1,000 £111 £306 £694

*The additional tax payable is based on a nominal gross dividend, which is the net dividend plus the notional tax credit.

2016/2017 tax year

Every investor will have an annual tax-free dividend allowance of £5,000. The table below shows the amount of tax payable  on dividends in excess of the dividend allowance .

  Net dividend Tax credit Additional tax Dividends after all tax
Non-taxpayer £1,000 £- £- £1,000
Basic rate taxpayer £1,000 £- £75 £925
Higher rate taxpayer £1,000 £- £325 £675
Additional rate taxpayer £1,000 £- £381 £619

Help with Tax

The Government website gives  more information about  taxation on dividends .

If you would like help with tax issues and to discuss your own personal situation, please contact us on 01454 521311 or use our contact form.

by Graham Bond 18 Apr, 2017

Update as at April 2017.

All of the funds listed below have lifted fund suspensions

One of the initial impacts of the Brexit vote concerned UK commercial property funds.

The post-referendum uncertainty of Brexit, coupled with the health of some of the UK's retailers has led to a lack of confidence in the UK commercial property market. This has resulted in more investors withdrawing from UK property funds.

A consequence of the withdrawals is that a number of the UK’s most well-known property funds initially suspended trading and subsequently some have imposed different measures to stop clients temporarily withdrawing cash from the funds. As property is classed as an illiquid asset (meaning it can take time to sell easily, without drastically reducing the price of the asset) the fund managers have been forced into the situation of restricting the purchase and sale of the units within the funds. Some of the recent actions taken by fund managers include:

- Moving fund pricing to outflow (bid) basis. This reflects funds seeing greater outflows than inflows and allows managers to price their funds taking into account the costs associated with selling property.

- Increasing the frequency of the valuation of the underlying properties (usually moving from monthly to weekly).

- Applying a fair value pricing adjustment. This is a reduction in the price of the fund reflecting what is considered to be a fair assessment of current market conditions without a formal valuation taking place. - Applying a dilution levy. This is an adjustment to the price applied when a transaction is placed.

- Deferring or suspending transactions in their funds. The fund manager’s aim is to protect the interests of existing investors, so rest assured, investments held within the funds are safe but where a fund has suspended trading, units in the fund cannot currently be sold or bought. It is possible that when the funds reopen, the prices may be lower than before the suspension. Fund managers will seek to reopen their funds when possible, but this may not be for a number of months.

Here is a summary of the affected property funds and how they are currently dealing with the requests for encashments


Property funds which have suspended trading...

Aviva Investors Property Trust: From 5 July 2016 all dealing (buy and sell) in the fund has been suspended. Aviva has stated it will review the suspension on a daily basis and inform us when the fund is re-opened. This fund is available on the Zurich Intermediary Platform, Sterling ISA and Investment Account, and Sterling Bond and Zurich Pensions.

Henderson UK Property: From 5 July 2016 all dealing (buys and sells) in the fund have been suspended. Henderson has not stated how long the suspension will last but have said it will review the position at least every 28 days. This affects the PAIF fund and associated feeder funds. This fund is available on the Zurich Intermediary Platform, Sterling ISA and Investment Account and Sterling Bond and Zurich Pensions.

M&G Property Portfolio: From 5 July 2016 all dealing (buys and sells) in the fund have been suspended. M&G has not stated how long the suspension will last but have said it will review the position at least every 28 days. This affects the PAIF fund and associated feeder funds. This fund is available on the Zurich Intermediary Platform, Sterling ISA and Investment Account and Sterling Bond and Zurich Pensions.

Standard Life UK Real Estate: From 4 July 2016 all dealing (buys and sells) in the fund have been suspended. Standard Life has stated this will cease as soon as possible and will be formally reviewed every 28 days. This affects the PAIF fund and all associated feeder funds. This fund is available on the Zurich Intermediary Platform and Sterling Bond and Zurich Pension (currently named Ignis UK Property).

Threadneedle UK Property Fund: From 6 July all dealing (buys and sells) in the fund have been suspended. Columbia Threadneedle has not stated how long the suspension will last but is reviewing the position on an ongoing basis. This affects the PAIF fund and associated feeder funds. This fund is available on the Zurich Intermediary Platform and Sterling ISA and Investment Account.


Funds which remain open but are applying fair value pricing/dilution...

Aberdeen Property Fund: Aberdeen has lifted the temporary suspension of the fund which was in place from 5 July to 13 July. The fund is tradeable from 14 July 2016 but is applying a dilution levy (17% as at 14 July). This affects the PAIF fund and associated feeder funds. This fund is available on the Zurich Intermediary Platform. Please click  HERE  for more information on current pricing adjustments.

F&C UK Property Fund: This fund is currently open for trading. BMO Global Asset Management (which runs the fund) has applied a fair value pricing adjustment. As of 6 July this was 5%. This affects the PAIF and associated feeder funds. This fund is available on the Zurich Intermediary Platform. Please click  HERE  for more information on current pricing adjustments.

Kames Property Income Fund: The fund is currently open for trading. Kames has applied a fair value pricing adjustment. As at 7 July this adjustment is 10%. It has also currently waived its large deal provision that would normally apply to subscriptions, reflecting the fact it is not currently buying property. This fund is available on the Zurich Intermediary Platform.

Legal & General UK Property Fund: The fund is currently open for trading. Legal & General has applied a fair value pricing adjustment. As at 6 July this was 15%. It has also reduced the bid offer spread to 0% (from 7 July) reflecting the fact it is not currently buying property. This affects the PAIF and associated feeder funds. This fund is available on the Zurich Intermediary Platform.

We will keep you updated on the issue of property funds. However, if you have any queries please feel free to contact us.

More posts
by Graham Bond 27 Apr, 2017

Choosing the correct Ethical or Socially Responsible investments will depend on your own beliefs and values. A starting point is to use a screening process.This will help you to analyse which types of industries and companies they would like to either include or exclude.

There are primarily two types of screening, positive and negative.

Negative Screening

The process of Negative Screening excludes investments that you might consider undesirable. For example you might want to exclude some of the following:

  • The arms or defense industry
  • Nuclear power
  • The tobacco and/or alcohol production
  • Gambling
  • Genetic Engineering
  • Third World debt/exploitation
  • Animal Testing

Positive screening

Positive screening helps to identify the businesses that demonstrate the potential to offer good quality, long-term ethical investment opportunities. The positive screening process will help you to avoid businesses that could encounter problems as their day to day operations might not be sustainable in the long term. Positive Screening might include companies involved with

  • Projecting a positive business focus
  • Energy conservation
  • Promotion of Equal Opportunities
  • Renewable Energy
  • Pollution control

Shareholder Engagement

By employing active shareholder engagement it is possible for shareholders and fund managers to encourage a more corporate and social business approach.

It makes sense to consider investing into companies that have the foresight and willingness to adapt.

by Graham Bond 26 Apr, 2017

Anyone seeking evidence that investment decisions can be hard often needs to look no further than the front page news. China, oil, VW and Glencore are among the assets that have made the headlines in the past few months after suffering sudden, unexpected and dramatic changes in price.

Investors with exposure to those volatile assets might be licking their wounds and reconsidering their positions. This is because many investors have an investment strategy that relies on their (or someone else’s) forecasts about the future. In the simplest terms, their starting point is a blank sheet of paper, where they build a portfolio of assets they think will do better than the alternatives. Sometimes those decisions are right; sometimes they are wrong.

We have a different starting point. Our investment philosophy is based on things we know rather than things we don’t know. For example, we know that financial markets do a good job of setting prices, so we don’t try to second-guess them. Instead, we begin with the belief that investors will, on average and over time, receive a fair return for investing their money.

Our aim is to give our clients access to that long-term return through broadly diversified, low-cost portfolios of assets that aim to beat the market average. The portfolios do this by using information in market prices that tells us about a security’s characteristics and its expected future returns.

The decisions we make about what assets to hold are based on decades of academic research rather than short-term hunches. This means we can focus on meeting your long-term goals rather than becoming absorbed by short-term market movements.

Generally speaking, investment decisions are hard, but if, like us, you start with information you know is backed by decades of evidence and build an investment philosophy and strategy around it, we think you can improve your chances of being a successful investor.

by Graham Bond 26 Apr, 2017
This weeks video is by Dr Robert Waldinger of Harvard University. He is the current director of the longest running study about human happiness. Hope you enjoy it
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