Fancy having some fun whilst helping charities?
Last years winners, Dobson & Hodge Ltd, are challenging local businesses to come and compete at the 2017 tournament with the winners supported charities benefiting from funds raised. With more teams expected and a bigger tournament – come along and see if you can take the trophy from our grasp.
Warren Buffet is generally seen as a very astute investor but his investment philosophy is relatively simple and a quote attributed to him is perhaps something many should heed – “The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient”.
Until relatively recently, the FTSE 100 had peaked in December 1999 and whilst it nearly breached 7000 points intra-day, its closing high stood at 6930 on the eve of the new millennium.
Since then, there have seen significant investment market headwinds – the dotcom bubble burst, the ‘second gulf war’ took place, the credit crunch arrived and the ‘great recession’ in 2008 soon followed and as a result, investment returns have been heavily dependent on their timing and whether you bought on a low or a high.
Investing is a long term process which involves stepping out from the security of cash and holding an asset which can go up and down in value with the aim that the risk taken will result in higher rewards – whether it be gilts (Government debt), Property (residential or commercial), bonds (corporate debt), or equities (company shares) – no investment is ultimately guaranteed and at the time an investment is made, there is no way of confidently knowing whether you are buying at a good or bad time.
Investment markets are fluid – absorbing huge amounts of information and converting that into an expectation which in turn drives investment values however sentiment will result in excessive highs (bubbles) and lows.
Those who invested at the ‘bottom of the market’ only know that with hindsight – likewise the same also applies to those who invested at the top and whilst both may have made ‘the right’ investment decision, external factors no one can ultimately influence will have an impact – however, the longer the investment is held the less important the timing generally becomes.
A very simple investment philosophy is to buy low and sell high – doing so returns a profit – and yet, time and again people will speak to us about a ‘no fail’ investment they are seeking our views on – often something which sounds too good to be true which has recently made lots of money and they want to get a piece of the action.
When things then don’t go to plan, they often panic, sell and regret investing in the first place.
Essentially, buying high and selling low.
Investing requires conviction and a belief and, in our view, completely differs from speculation. Speculating is taking a punt and trying to second guess something. It’s not an approach we feel will predictably build financial wealth.
Investing on the other hand is stepping away from the security of cash and seeking greater longer term returns due to the fundamental nature of financial markets – risk should be rewarded (as, if it isn’t, why would capital markets take the risk).
If an investment is sensible and appropriate but the markets turn against the investor – it doesn’t mean that the investment is no longer sensible and appropriate – it is more likely that short term noise is drowning out the fundamentals of investments and it is also reasonably likely that, given time, things will revert to type – the danger is that, by then, some may have ditched their investment and destroyed some of their capital in the process – potentially being one of those who have transferred their wealth to the likes of Warren Buffet.
As investment advisers, we take significant steps to ensure any investment risk taken is appropriate – both in terms of being able to take the risk and the risk levels being appropriate for the individual.
By managing the risk and ensuring the client has a pragmatic view of the investment process, we aim to ensure that clients don’t buy high and sell low and that, over time, they are the beneficiaries of our patience and that their wealth, as a result, benefits.
We don’t profess to know which way markets are heading and whether now is a good time to invest; what we do understand, however, is that ensuring any risk being taken is appropriate and that, given time, good investments will typically behave as expected even if, initially, things work against the investor.
So the next time patience wears thin, consider seeking advice before selling an investment as it might be that the investment is perfectly acceptable and suitable, and that you are running the risk of buying high and selling low.
Auto Enrolment has been heavily discussed for a number of years. There have been a number of TV campaigns raising awareness and imploring individuals not to ignore it and yet despite this, there is still much confusion.
Auto Enrolment is steeped in regulation, obligations and statute and is supported by a proactive regulator which frequently writes out to companies warning them of their duties and yet there is a lack of understanding as to who it applies to and what they have to do.
The confusion seemingly surrounds both ‘who’ and ‘what’ however in simple terms, the ‘who’ is ‘any business who has workers’ but even those with no employees still have things to attend to.
The ‘what’, however, is where the real confusion lies ….. given that it may be either nothing, something or everything!
Which of these will depend on the structure of the business and the age and/or earnings of the workforce.
Even if a business is exempt and has to do nothing, they still have to report to the regulator they have to do nothing (therefore in reality, those who have to do nothing still have to do something – albeit it’s a one off notification)!
For those that have to do everything, this involves (briefly!) setting up a pension scheme, assessing their workforce, enrolling those who are eligible automatically into a pension scheme, communicating with their workforce (perhaps twice!), telling the regulator they’ve done this and then continually assessing their workforce and dealing with leavers/joiners/opt in and opt outs (amongst other things) over the coming years.
These duties therefore generally need to become ingrained in their business processes.
For those who have to do something, they may find that the only thing they don’t need to do is set a pension scheme up – pretty much everything else still applies.
In practice, therefore, Companies may think that because they only have a couple of employees who earn below the Automatic Enrolment threshold of £10,000 per annum they don’t have to do anything. In fact, they are subject to precisely the same regulation and duties as companies who have employees earning above this threshold and therefore doing nothing is not an option.
Once their start date is reached, the Regulator will be waiting to receive confirmation as to what they have done.
Doing something is therefore their only option.
As we are now dealing with smaller businesses we are finding that many misconceptions are held which means that companies are in danger of doing too little too late – perhaps even missing their start date.
Our guidance is clear – if you think it doesn’t apply, check with someone who knows – in a 5 minute phone call we can quickly sort companies into the ‘nothing, something and everything’ categories so that, rather than being blissfully unaware, they are in an informed position ready to face the regulation about to apply to them.
As Independent Financial Advisers (IFAs) we work for our clients and whilst this may be a strange way to start a post, cast your mind back before 2012 when advisers were typically paid for their advice by the providers (through commission) and were therefore seen as agents of that firm, rather than the client.
The term Independent Financial Adviser is a regulated term and therefore the Financial Conduct Authority (FCA) restrict its use to firms who are indeed independent and who are also regulated. Regulated advisers need to achieve specific qualifications and are subject to ongoing FCA scrutiny. Advice firms are liable for the advice they give and where issues arise, the client has the protection of the Financial Ombudsman Service (FOS). Furthermore,where products are used, they will typically fall under the Financial Services Compensation Scheme (FSCS).
The multitude of abbreviations above mean that if a client receives bad advice, they can take it up with the firm and if still unsatisfied, the Ombudsman. If a provider ‘fails’ and losses are incurred, the client may take the same route of recourse whilst also benefiting from the protection offered by the FSCS.
Why does this matter? Well, these are things investors perhaps take for granted but don’t consider whether, when speaking to an ‘adviser’ whether that adviser is indeed authorised to give advice (the FCA keeps a register of all regulated advisers), whether the investment is regulated and whether it benefits from FSCS.
Someone purporting to be an adviser may be anything but and a client could hand over their hard earned savings / pensions or investments to someone who has no qualifications, no regulatory footprint and who is due to earn a significant amount of commission from the proposed deal.
When someone offers an investment with seemingly good investment returns – perhaps guaranteed – the key thing to do is stop and ask whether it sounds too good to be true and also whether the person is a qualified and regulated. The more ‘niche’ it appears, the more questions should be asked.
Paul Stocks at our firm was recently interviewed for a recent article in Professional Adviser (see here) concerning Car Parking Spaces as an investment and it is interesting to note that the views of Dobson and Hodge align to those of other professional financial advisers – typically that the lack of transparency, likely risk and the question of whether such an approach is even necessary for investors ring alarm bells.
Unfortunately, however, not everyone seeks the opinion of an adviser – instead being happy to rely on glossy brochures and promises of 8% per annum guaranteed returns. In our view, investing is such an area should come with a significant (w)health warning and we would encourage investors to seek the opinion of a suitably qualified independent individual before parting with their ‘cash’!