One piece of the financial jigsaw

JULY 26TH, 2011 By KATE
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Last week, I read extracts from a report by Saga that apparently some lawyers and financial advisers may be exploiting bereaved families by overcharging for probate.

Rather inevitably, the crux of the report was that consumers should think about using Saga’s own, cheaper, legal services arm instead.

These are indeed, worrying findings. Possibly more worrying though is that individuals are potentially making these decisions in isolation. At Xentum, we have always been strong advocates of holistic advice. More often than not, this requires us, as financial planners, to work alongside a client’s solicitor and accountant to deliver the best possible solution.

With the advent of the Legal Services Act, there will be an increasing number of quasi-legal providers to choose from – many of whom will compete solely on price. Whilst there may well be a place for a more streamlined and cost-effective service, this will bring with it the risk of focusing on one piece of the jigsaw at the expense of the rest.

The report also got me thinking about fees generally. Originally a solicitor by profession, I am no stranger to the varied methods of charging clients. Whichever way you charge, the common theme for the professions is that your time and expertise are your stock in trade.

Clients are often wary of charges levied on a time spent basis. Without an accurate estimate, these fees can prove to be uncertain and leave clients rather reluctant to pick up the phone when they need to. Fixed fees, on the other hand, can provide clients with certainty and promote a more flexible and informed relationship.

More recently, a number of the larger law firms have moved towards retainer arrangements whereby in return for an annual fee, the client is provided with access to an agreed level of service. Initial experience has shown that this has proved to be extremely helpful in strengthening client relationships and providing effective advice at an early stage.

It is interesting that law firms are adopting this approach. It is a principle we have enshrined in our client service since we founded Xentum. In return for an annual fee, our advice and expertise is made available to our clients as and when they require it. Our experience has taught us that this encourages clients to pick up the phone whenever they need to. This two-way dialogue not only gives our clients peace of mind, it also enables us to keep a check on the bigger picture and identify opportunities and issues at an early stage.

Whilst I deplore any professional overcharging for their services and would urge consumers to be savvy about charges, I would also be wary of making a decision on cost alone. The longer term value of professional advice and the nature and framework of the relationship may well prove to be equally important.

High drama on Italian markets

JULY 15TH, 2011 By DOMINIC
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Scene four of the Euro tragedy is now playing out with great drama on the financial stage in Italy. Against a back drop of massive debt and plummeting share price, industrialists and workers are now in revolt over the recent austerity measures announced by the country’s finance minister. The show is certainly over.

Despite rumblings for some time, Italy has largely stayed under the radar – no mean feat, considering it’s the third largest country in the euro zone. It’s only now that the fragility of its economy has been publicly recognised and the public are beginning to panic. For the first time, the Italians are tightening their belts with reports that this holiday loving nation are for the majority staying put this summer.

Business will be booming in the local lidos but this isn’t enough to shore up an ailing economy. The two key characters of this sorry tale; low productivity and massive public spending has time and again caused the demise of these Euro zone countries; Greece, Portugal and Ireland.

Even without the latest sniff of Italy’s financial uncertainty the past six months have been a challenge for UK investors; with just a 2.4% return on the ftse all share index, and almost negligible returns on bonds and inflation crippling cash savings the only really impressive returns have been for those prepared to take more risk in equities.

Psychologically investors focus on their losses and quickly forget their gains, so it’s important to be reminded that whatever tales of woe are playing out in the present, if you can take a longer view to your finances and use the experts to help you along the way the final scene doesn’t have to be so bleak.

Advising can be a risky business

JUNE 28TH, 2011 By DOMINIC
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I was not surprised to read about the Financial Services Authority (FSA) latest concerns that wealth management businesses are not always investing clients’ money appropriately.

Although it was only a small sample of independent operators and bank divisions investigated, the findings made uncomfortable reading.

The FSA had focused its attention on the suitability of client investments and found that a woefully high number had exposed their customers to higher risk investments that were not in line with the level of risk the clients were willing to take or would fulfil their financial aims.

It was a damning report which also highlighted shortfalls on the records kept about their clients, meaning firms didn’t always have a clear picture of their customers’ personal circumstances and financial objectives.

For me the report struck a chord on a number of different levels; firstly how dangerous complacency can be. It’s absolutely paramount that there is crystal clear understanding by the client on what constitutes; low, medium and high risk and what their financial objectives are.

Risk can be perceived differently from person to person. We often ask clients before they complete our risk profile questionnaire what they consider their risk banding to be and the outcome is often quite different. Equally, one size doesn’t fit all and this is where it’s crucial to really understand your clients’ financial objectives. Again, if potential investors are concerned it’s good to question how their risk profile is determined and how their circumstances are monitored on an ongoing basis. Wealth managers with a smaller client base are more likely to do this well.

The report also serves as a good reminder to investors to have a balanced portfolio of; equities, fixed interest, cash and property. Balance is not only imperative during tumultuous times but also ensures your investments are delivering what you need in the short, medium and long term.

On a positive note industry exposés such as this are always a good thing for consumers as they raise the bar and tighten procedures among firms who may not be as diligent as they should be.

Client was knocked for 7.5 (not 6!)

JUNE 24TH, 2011 By ADAM
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During my weekly cricket match on a Saturday, I bumped into the father of an old friend. The chap who I have known for a number of years is an IFA and has been for some considerable time. I often enjoy our conversations because it gives me an insight into the dark ages of financial advice, when “sale” was more important than advice.

Rather alarmingly, It seems the dark ages still exist as I am currently working on a case where one of our clients has been sold (not advised) an all singing all dancing investment bond with opaque guarantees, which I guess is important as he is 85! This guarantee came at a price, the salesmen who sold this policy charged 7.5% initial commission and decided to not take any ongoing fee and was never to be seen again. Unfortunately this is a fairly common occurrence and is a primary reason why many people lose their faith in financial services. I am sure I don’t have to tell you that a major bank was at the root of this sale.

I have been lucky with my career in financial services so far as I have worked for companies where integrity and ethics is very important. I have never been subjected to a sales culture within financial services and this is something that I do not wish to experience. The 14 exams I have done so far have improved my technical knowledge considerably and I am still learning this job every day but one thing I am not learning is integrity as I believe strongly that this is something you either have or don’t have. After all, it is people’s livelihoods that we are dealing with every day and trust is key to building the long term relationships we have with our clients at Xentum.

I am aspiring to be one of the new breed within the financial advice community that hopes that RDR (implemented at the end of next year) will draw a line under the murky past of financial services, although I suspect there will always be those that look after their own pockets before clients.

Could it be magic?

JUNE 13TH, 2011 By KATE
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I do not think I have stopped smiling since Friday night. Why, you might wonder? Along with 55,153 others, I was at the City of Manchester stadium watching Take That.

Having always been a huge fan, I knew it would be good but this tour was always going to be different – Robbie is back. There was always the potential for it to go horribly wrong. The documentaries that preceded the tour only served to highlight the risk of Robbie’s comeback. Would he stay the course? Would they all fall out? Would they be as good as we remembered?

The day in 2005 when they split is etched in my memory. Thankfully, I wasn’t one of the fans that needed to use the special helpline, which was perhaps taking it a step too far. Back then, I was a carefree student studying in Leeds and the prized possession of our house was a Take That video. In many ways, it feels like a different lifetime. On Friday night, however, watching the same routine that we wore out on our video it seemed like yesterday. Perhaps that’s one of the secrets of their success – for three hours, none of us felt any older.

Whilst I could happily dedicate an entire blog to the wonders of Take That – there is a more relevant point. Their comeback was a carefully managed strategy. We were not given Take That reunited. Only during the final part of the show did the original band come back together. The show opened with just four of them followed by what can only be described as an electrifying half hour of Robbie Williams. Now, there may be many reasons for this – egos probably high up the list. That said, they (or their management) are clearly familiar with risk management. Rather than put all their eggs in one basket by creating a fully reunited Take That, they managed to give the fans what they wanted whilst leaving their options open for the future. A clever and no doubt extremely profitable strategy all round.

How, you might wonder, can I link this into Xentum? Branding, possibly… We have both shown an affinity with black and silver – admittedly, this is clutching at straws. Risk and financial management, however, are just about plausible. As I said, they have clearly kept their options open and spread the risk of one part of the plan not performing (I dare say Robbie in this case). In terms of financial management – they appear to have decided that right now, the whole is greater than the sum of its parts. Inevitably, this is the case in many teams. Working together, our team at Xentum delivers holistic financial strategies which profit from each individual’s abilities. Our clients’ experience has proven that the value this adds is greater than they could achieve alone.

Perhaps then it’s not magic after all, just sound management.

Lifting the copier lid reveals a can of worms…

MAY 31ST, 2011 By DOMINIC
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A photocopier is a dull necessity in offices across the globe but in our office last week its presence became more than just a little significant.

Last week, Lisa exposed Esure’s spurious attitude to customer service and as a team we’ve become almost like an unofficial consumer therapy group sharing our various irritations and injustices we are dealt as consumers.

Enter the rep from the photocopier company.

Since we’re undergoing a major upgrade of our office systems it was time to review the small print of our photocopying contract which revealed we were paying for 10,000 copies a quarter. As a business we only copy a tenth of this figure effectively paying ten times more than we needed to. Claire diligently researched alternative suppliers, gave them our requirements and the resounding verdict was that we had been mis-sold the contract, we were paying over the odds and this one had slipped through the net.

After listening to his credible sales patter I began to question the finer details of the contract knowing full well we were being sold a solution totally inappropriate to our needs. I probed and disturbed and eventually the guy crumbled and I was aghast when he announced ‘my job is to make as much money as possible.” I knew it, but wasn’t quite prepared for his seemingly honest retort.

For me, it wasn’t about the money – it was the principle. It was another example of how there is often scant disregard for the customer and what they actually need. He was actually trying to increase the value of our contract and we blatantly didn’t require it.

This incident fuelled my passion for our business to be completely transparent, fair and ethical in its approach. We offer our clients real solutions to genuine requirements. Equally, if it’s not broken, we don’t fix it, and we certainly wouldn’t charge for our time to reach this conclusion.

There are rogues in every industry but sadly very few with the integrity to balance commerciality with conscience. Loyalty and trust seem to be diminishing qualities …..sadly, not just in the black and white world of photocopying.

Are you absolutely sure loyalty exists?

MAY 26TH, 2011 By LISA
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There is no such thing as customer loyalty where car insurance is concerned as I indeed found out to my utter disappointment this week. Having received a letter informing me that my premium would be renewed automatically, it was then I noticed that their costs had risen sharply by 30%!

I decided to do some homework and hit the price comparison websites. However, after a cursory look over these it became apparent that certain items were not actually covered on a like for like basis. With this in mind, I decided to check out my insurer’s own website and found that I could become a new customer and save myself over £200.00 – I was furious. My loyalty was essentially being rewarded with a vastly inflated annual bill. So with my new facts to hand I telephoned their renewals hotline. I pointed out to one of the call centre staff the injustice here but their only response was “This happens, I suggest you cancel, call back as a new customer and begin the process all over again.” At no time would they offer me this new rate. So much for customer loyalty!

So easily these companies get away with operating automatic renewals because we’re often far to busy to notice the rising costs. If we fail to do our homework, read the small print and research the alternatives, we are allowing ourselves to play into their hands.

I wanted to flag this issue as we constantly see this type of practice within our industry. We find case upon case where various investments have been taken out on the basis of lucrative returns but year on year percentage returns are depleted, yet annual fees gradually creep up. Here at Xentum we carry out exhaustive research to find the best options to suit your needs. We genuinely value long term relationships with our clients so much so that we have been passed on from one generation to the next.

Needless to say I have cancelled my car insurance. Did I mention their name?….Their slogan caused uproar in Parliament recently during PMQ’s.

A City United

MAY 17TH, 2011 By KATE
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I was with some friends yesterday and we were discussing the week ahead. I mentioned that my first job of the week would be to write the blog. Over a bottle of wine and in between refereeing the ongoing sword fight between our little ones, we talked about the weekend’s football results. Even with my limited knowledge of football, I had managed to pick up that City had gone to Wembley and come home with a trophy for the first time in a lot of years – 35 I think. The same weekend, United secured the Premier League with the help of Wayne Rooney’s penalty conversion.

Re-reading that paragraph, I could almost convince myself and you that my knowledge of football goes beyond knowing about David Beckham’s latest hairstyle or fashion trend. Oddly enough, just having Googled David Beckham, I have discovered his hair has changed yet again and there are entire websites dedicated to his hair – one in particular where you can ‘try on’ any of his styles with the virtual hairstyling assistant.

I digress, however, from the point of my blog which is that my friends suggested that I write a blog about
Manchester’s weekend victories. This, in itself, could prove quite a challenge given my limited knowledge of football.

Not to be deterred, however, I thought I would spread the net a little wider (pardon the pun) and think about the more far reaching effect of the results for Manchester and the North West. The strength of the United brand is undeniable. It is rare to find someone who hasn’t heard of or doesn’t follow the fortunes of Manchester United. Love them or hate them, their global brand is as impressive as it must be profitable. I remember climbing the slopes of Mount Kilamanjaro and seeing a steady stream of United scarves and t-shirts streaming up the hillside worn by the local porters. I have another recollection of trading a United t-shirt for a silver box a tiny village in the Morroccan hills. In fact, it must be pretty rare to go on holiday and not see at least one Rooney shirt along the way. Retaining their place as the most successful Premier League club, United’s victory will help to keep Manchester in the spotlight and continue to provide opportunities to showcase its brand worldwide.

Some would argue that the investment by Manchester City’s Abu-Dhabi owners alone has single handedly boosted the North West economy. We certainly seem to have more millionaire footballers than ever gracing our bars and restaurants. What I noticed, however, as I read through the various articles was the consistent commentary on Mancini’s management style. “The correct blend of caution and daring” was how one paper described it. This struck a chord with a conversation I had last week with one of our discretionary investment managers. He compared good investment portfolios to good footballs teams. His analogy was that like football teams the solid defences/stocks go unnoticed but lay the foundation for the racier stocks/expensive superstars to take the glory in terms of performance. Like football I suppose, much of the hard work at Xentum is done in the background – the devil, as they say, is in the detail.

So there we go, football, business and investment planning all in one blog and it’s still only Monday. Perhaps I should spend more Sundays deliberating over what to write.

Beware of the tall, dark, Darcy of the finance world

MAY 5TH, 2011 By DOMINIC
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Bridget Jones lead character of Bridget Jones’s Diary fame would deride her ‘smug married’ friends while quietly wishing she had the safety and security of her own husband.

Whether it’s affairs of the heart, like in Bridget’s case, or financial affairs we can either be self satisfied with our lot or hanker for what seems is the unobtainable. Aside from human relationships, as a nation, bricks and mortar are really close to our hearts, capable of stirring the kind of emotions normally saved for our loved ones; passion, obsession and envy.

Darcy was Bridget’s saviour and in the world of personal finance the issue of pensions is the dull yet worthy equivalent. Of course nobody is as passionate about their personal pension as they are their property but it’s a long term companion you can’t afford to ignore, particularly if you’re a high earner and a member of a final salary scheme.

David our in house pensions expert has talked in detail about the complexities of the latest government tax reforms but during the past few weeks I’ve met many potential clients who are either completely unaware or are not exactly sure how it will affect them fiscally.

So who needs to be on the pensions radar? Long serving high earners in final salary scheme need to take heed.

In April 2012 the lifetime allowance limit will fall from £1.8million to £1.5million, meaning if your final salary scheme benefits exceed £1.5million it could mean higher tax costs after April 2012 (pension benefits in excess of the lifetime allowance at the point of taking benefits are subject to a 55% tax charge if taken as a lump sum).

Of course I’m quoting headline facts, but if you’re a consultant, doctor, dentist or high earning executive in the private sector this could really hurt. You need to question your financial planner on the implications it has for you.

Equally, if you fall into this camp and haven’t appointed an adviser then seriously think about getting one. It’s an incredibly complex subject and you need to get truly unbiased guidance by a chartered financier to steer you through the options. The key to effective tax planning will be to look at your pension provision as part of your whole investment portfolio.

Cherish your hard earned cash and don’t allow complacency to let it slip through your fingers.

Looking forward to the summer months

APRIL 26TH, 2011 By KATE
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Spring has sprung and summer looks like it might just be round the corner. The light evenings and warm sunny days are wonderful. I for one feel a much greater sense of freedom when the sun shines and when it’s still light enough after work to spend time outdoors. It seems like those extra hours of daylight extend the day just enough to be able to leave work behind and nurture the soul. With that in mind, I have signed up for a series of triathlons and plan to use the summer evenings putting some miles under my belt – in the pool and on the road.

We have always believed in promoting a strong work-life balance at Xentum and from the outset, we incorporated this belief into the operation of the business. For example, from the summer bank holiday in May until the August bank holiday, we operate on summer working hours. Work permitting, this allows the team to leave an hour earlier each day. Unsurprisingly, the general consensus in the office is that this is a positive and welcome change. What doesn’t change, however, is our obsession with client service and from a business point of view, our shift to summer hours has never affected the high level of service that we provide. It does, however, allow the team to enjoy some more time away from the office and the freedom to choose how to spend it.

When we’re not away from the office enjoying the sunshine, you may wonder what we will be doing? Well, we are only a few weeks into the new financial year so for our financial planning team, it’s very much business as usual. We have had an increasing number of introductions over the past few months and so we have plenty of new clients who need our help and advice to plan their financial strategies. At the same time, we continue to look after our existing clients and throughout the year, we undertake annual and bi-annual financial reviews.

We have also had a busy time working with our professional connections. Last week, we co-hosted the Share Race final and prize giving with the College of Law and Quilter. This was attended by six teams of students who spent a six month period managing a virtual portfolio of £100,000 in FTSE 100 shares. The winning team made over £7,000 whilst another team were awarded a prize for the best overall investment strategy. Having worked with the students over a six month period, it was incredibly satisfying to witness their level of commitment and the professionalism with which they approached the race.

The students learned a great deal from formulating their own strategies and regularly facing an investment panel to report their performance. Many of the students have found that the skills and commercial awareness they gained have helped them considerably in their interviews for training contracts. Whilst we often talk to students and trainees about the importance of commercial awareness, it can sometimes prove a little elusive. It is, therefore, particularly pleasing that the opportunity we provided has given them a real feel for it. It also serves to reiterate from an early stage the value of solicitors working alongside a mix of professionals for the greater good of the client.

The final of the Share Race last week also coincided with the final stepping stone for our Private Client Manager, Adam Carolan, to reach chartered financial planning status. As I have written here before, Adam has worked incredibly hard over the last few years to obtain the thirteen exams required to attain this professional status. Whilst we all await his results, he more than most may be glad to see the arrival of summer time working.