ISAs Archives | Oliver Asset Management

World Market Capitalisation

July 23, 2013

Viewing the world map by relative market capitalisation illustrates the importance of building a globally diversified portfolio and avoiding a home market bias.

This cartogram, produced by Dimensional Fund Advisors, depicts the world not according to land mass, but by the size of each country’s stock market relative to the world’s total market value (free-float adjusted).

Population, gross domestic product, exports, and other economic measures may influence where people invest. But the map offers a different way to view the universe of equity investment opportunities. If markets are efficient, global capital will migrate to destinations offering the most attractive risk-adjusted expected returns. Therefore, the relative size and growth of markets may help in assessing the political, economic, and financial forces at work in countries.

The cartogram brings into sharp relief the investible opportunity of each country relative to the world. It avoids distortions that may be created or implied by attention to economic or fundamental statistics, such as population, consumption, trade balances or GDP.

By focusing on an investment metric rather than on economic reports, the chart further reinforces the need for a disciplined, strategic approach to global asset allocation. Of course, the investment world is in motion, and these proportions will change over time as capital flows to markets offering the most attractive returns.

Golf, Psychology & Andy Murray

July 9, 2013

OK, I’ve not blogged in a while and to ease myself back into the fray, a little light piece for openers.

We recently had a networking golf day at my own club Craigielaw and as part of the fun we had a sports psychologist talk to the group before playing our round.

He talked about the winning mind set displayed by top sports people and to help us perform better during our game of golf, he asked us to use the acronym WIN (What’s Important Now) as a way of focusing not on what had gone before or was to come, but the now.

The chat after the game was how much better people had played and that they attributed this in part to the WIN idea.

Our overall winner from the day was an ex-Liverpool and Scotland footballer who, despite advancing years, still has that mental edge and desire to win.

He scored over 50 Stableford points (yes over 50!) and had we been able to randomly drug test him, would probably tested positive for several banned horse steroids and supplements.

He knows who he is and the handicap committee has him firmly in their sights…

Anyway, the link to top performance and mental attitude is clear.

As so to our Andy.

I wonder how many times Andy Murray’s name has been mentioned around the collective water coolers of the UK?

An incredible result (only spoiled for me by Alex Salmond’s shameless posturing with the Saltire…) and an amazing display on mental control and desire to win which he’s carried with him all through his career.

He also showed patience beyond his years in dealing with quite simply some of the most fatuous interview questions ever posed.

During one sledgehammer attempt to subtly link a visiting Sir Alex Ferguson to his difficult semi-final encounter with Verdasco, the interviewer suggested he may be due the hairdryer treatment from Ivan Lendl after his performance.

“…But I pulled back a two sets deficit to win the game and wouldn’t deserve the hairdryer” was his succinct putdown.

It does seem the BBC still hankers after the golden era when Fred Perry was in his pomp and gentlemen quite rightly wore long trousers on court.

If you’ve tuned in to find some clever link between my ramblings and the current machinations in Financial Services, prepare for disappointment.

Roland Oliver

8^th July 2013

Guest Blog: The Mindful Way of Doing Business

May 17, 2013

Introduction

This week we are delighted to post an inspirational guest blog by Martin Stepek – award winning and critically acclaimed poet and writer and current CEO of the Scottish Family Business Association.

www.martinstepek.com
www.twitter.com/martinstepek

The Mindful Way of Doing Business

So what does a contemplative practice developed 2500 years ago by the Buddha have to do with your business? Surprisingly a lot actually, and even more importantly, in some of the key areas of your working – and personal – life.

Tree of Half Life Mindfulness is the technique of trying to catch each moment in its entirety, without the usual inner commentary or opinion we all tend to have. So it could be just reading an email calmly and carefully, without prejudging its overall contents because of a) who the sender is, or b) our opinion halfway through the message. Or it might be becoming aware of tiredness or irritation inside our mind during an important meeting (and let’s face it if it’s not an important meeting why are you having one?)

Mindfulness also refers to the more formal practice of sitting, eyes closed but alert, and focusing clearly but lightly on the breath or on a particular thought or emotion.

We can practice mindfulness literally anywhere or while doing any activity. It’s the ultimate portable gadget. I do it while waiting for a train, while doing the ironing or the washing up, even when I first wake up before I’m out of bed.

But why should you be doing it? And believe me you should!

Mindfulness helps us in two ways; one the prevention of negative stuff, the other the cultivation of positive stuff. I use stuff deliberately as there’s a whole range of things that mindfulness concerns and affects.

Let’s look at the negatives. I don’t know anyone in business who isn’t sometimes affected by stress, 24/7 work, tiredness, frustration, niggles, irritation or anger, down to the really serious stuff of chronic anxiety, clinical depression or a sense that the work you do is shallow, unfulfilling, meaningless… and that somehow you’re missing out on the important things in life. Mindfulness deals with all this… yes it’s “stuff” isn’t it? I’ll show evidence in a moment but let’s look at the positives now.

Mindfulness develops our sense of calm focus, clarity of thinking, creativity and compassion. It enables us to remain clear-minded under pressure, make decisions more wisely, and get home at the end of the day still capable of having a true relationship. How practical is this in running a business, in living a full life? I’d argue that apart from cash flow this good “stuff” is the most important set of features a business must have to succeed.

And the evidence? There are now over 2500 scientific journal articles on these effects, from the world’s leading universities; Oxford (has a mindfulness centre), Harvard, Yale, UCLA. Glasgow University has done ground-breaking research on mindfulness, and Aberdeen University offers an MSc. The internet is awash with papers, books, podcasts, interviews and lectures. Check them out.

I’ve been practicing since 1998, teaching it since 2004, to businesses, charities, social enterprises, schools, even Shotts Prison. I teach a free drop-in class on Tuesday evenings at 6.30-7.30pm at the University of West of Scotland in my home town of Hamilton. Mindfulness has helped me lead a national business support organisation, publish an award-winning reflection on my father as a Soviet labour camp victim, and much more beside, while still hopefully being a happy, contented and loving father, husband and friend.

As I said, you really should try it!

www.martinstepek.com

www.twitter.com/martinstepek

Changing the Weather

May 13, 2013

That’s it.

I’ve had about as much as I can stand of the Scottish Spring weather. Grey, overcast, wet, windy, freezing, sunny, & generally miserable.

With damp patches.

No amount of positive mental attitude will change the weather but a wee bit of planning might change where the weather I’m exposed to comes from…

It’s been very noticeable of late that the new enquires we have been getting are less concerned with the true nitty-gritty of what my pension/ISA/savings actually are but much more around the use of lifetime cash flow modelling to show me what’s going to happen.

The term peace of mind is often used in conversations with new clients and it’s very interesting that successful, well paid business men & women drive on without a real understanding of what their numbers actually might mean for them.

In other words, they have no peace of mind but rather a nagging doubt that it might not just be enough.

Using a complex powerful cash flow modelling tool like Voyant provides the framework to allow a little dreaming to take place and it’s a tremendous feeling to see people starting believe they might just be there financially or with a bit of further guidance they can get the life they want.

clear skies Our job is then to become custodian of the wealth, provide sensible investment strategies and use the tax advantages of various “wrappers” to keep the clients in the style to which they’d like to become accustomed!

Malcolm Stewart will be expanding on the details on how, what and why lifetime cash flow modelling is so powerful in his next blog.

In the meantime, as I write the temperature in Sacramento, California is a sunny 33c.

Call me to arrange your retirement in a country and climate of your choosing.

Roland Oliver

Know your customer

April 22, 2013

Rewarding your customer for long and valued custom must make sense.

An acknowledgement that you have appreciated them sticking with you and by way of thanks, a gift or reward that is appropriate and makes the customer feel good about dealing with your business would be a good thing to do.

I will, however, briefly tell a short story to demonstrate that while the principle might be strong, if the delivery is wrong it will seem like big business going through the motions.

My client, a vibrant, cheerful and energetic 84 year old widow told me today that her 59 years gold card membership with a certain motoring organisation had been rewarded recently by the offer of a Gold Membership.

She was naturally delighted and was soon checking through the many new benefits she was entitled to as a result of her loyalty…

She could now drive abroad and it would be covered. She could nominate a 17 year old relative to drive her car. And so on.

And the good news was that her renewal premium this year would only be £198.

It was £178 last year but look at all the benefits you can enjoy.

She may be 84 but daft she isn’t and could spot the flaws in her prestigious Gold Membership reward.

In fairness, one short, sharp phone call later, she was still a Gold Member but for £100 – I still think after all this time they could have called time on the fee – but a gesture never the less I suppose.

Rewarding clients is the right and proper thing to do, but best to check its something relevant and will be appreciated by them.

Roland Oliver

Budget 2013

March 22, 2013

George Osborne revealed his mid-term budget on Wednesday 20^th. Here is our summary of the most relevant points for your future financial planning:

Inheritance tax – As mentioned in our blog recently, the amount of an estate that can be passed to the next generation tax free will remain at £325,000 until April 2018 (anything above being taxed at 40%). Another 5,000 estates are expected to become taxpaying estates by this time. If this is you, careful use of allowances today can reduce your bill.

State pension – this will rise by 2.5% to £110.15 per week. The Basic State pension and State Second Pension will be combined in April 2016 to a flat £144 per week (in today’s money). This should make it easier to plan for the future.

Pension drawdown – From Tuesday 26^th March capped income drawdown rates will rise from 100% to 120% of GAD. While this could be useful for those of you that need more income, please be aware there is no guarantee your pension fund can sustain this. GAD is also set to be overhauled which should lead to good news in the future.

Capital gains tax allowance – the amount of gains that you can make on disposal of assets before having to pay tax increases to £10,900 for 2013/14. The rate remains at 18% for non and basic rate taxpayers, 28% for higher rate taxpayers.

ISA (tax free savings vehicle) – The stocks and shares ISA allowance will be £11,520 and the cash ISA allowance will be £5,760 in 2013/14. Please contact us for details of how you could use these depending on your circumstances. If you are yet to use your £11,280 allowance for 2012/13 contact us ASAP!

Income Tax – The personal allowance, currently £8,105, will increase to £9,440 in April this year and then £10,000 in April 2014.

Pension allowances will be cut next year – Personal annual contribution allowance down from £50,000 to £40,000 and lifetime allowance down to £1.25m.

Abusive tax avoidance – The Government will publish a report on how it will tackle tax avoidance and evasion this week. Needless to say, any tax mitigation strategies recommended by OAM are not abusive and are a key part of good financial planning.

That concludes our non-exhaustive list of points to be taken from Wednesday’s budget. The above points are based solely on our understanding of intended HMRC rules and should not be used to influence planning decisions on their own.

If you are a current client and require any clarification on how the above might affect you then please get in touch.

If you are not, then we would be happy to give you a second opinion on any aspect of your planning. There’s never been a better time to contact us.

Malcolm Stewart

Saving for your Children’s future – what to do with the Christmas money?

December 7, 2012

Well it’s that time of year again when everything is all about the card writing, gift giving, turkey cooking and arguing over the TV scheduling post Christmas lunch!

I love Christmas and am particularly enjoying seeing it again through a child’s eyes now my little one is getting older and can appreciate it more.

We’ve not quite reached the stage where she is writing a list for Santa but we have our own list of gifts we know she will enjoy and appreciate on Christmas morning. Of course aside from the presents this time of year many children are in the fortunate position of being gifted money from parents, family and friends and this inevitably leads to making a decision on the best use of these funds.

Will it go to into a child’s deposit account for a purchase in the coming New Year, or be saved for the longer term through an existing Child Trust Fund or more recently introduced Junior ISA?

Savings accounts

Most banks and building societies offer special accounts aimed at children. Many will use marketing gimmicks to attract them but the key concern should be getting the best possible savings rate, so shop around, compare offers online and in branch and then you can make an informed decision.

You should be aware that interest is payable at parents’ income tax rate on any interest earned above £100 in these accounts.

National Savings

National Savings children’s bonus bonds are only available to those aged under 16 although they must be bought on their behalf by adults. They pay a fixed rate of interest and can be held until the child reaches 21. To get the best return, the Bonds must be held for five years to qualify for a bonus.

They are tax-free and so can be particularly good value for any young people who are taxpayers. They are sold in units of £25 and a child can have up to £3,000-worth of the current issue of bonds. Get the children’s bonus bond booklet NSA769 from post offices for further information.

Child Trust Funds

Child Trust Funds were stopped at the beginning of 2011 but when running the scheme meant all children born after 31 August 2002 received a voucher worth between £50 and £500 (depending on when they were born and how well-off their parents were) from the Government to open a child trust fund account. Although the vouchers are no longer issued there many under 9s who will have a Child Trust Fund in their name which may have been neglected since it was initially opened.

This is a fantastic method of saving for the future so if you started one some time back but it’s not been topped up for a while it could be a good idea to get some regular savings going in the New Year or make a lump sum commitment with some of the Christmas money coming your kids way this month.

The annual limit which can be invested into an existing Child Trust Fund is now £3,600 and given the tax advantages it makes sense to make use of this vehicle if you have one opened but haven’t looked at it for a while.

Junior ISA’s

These were introduced on 1^st November 2011 and started in essence to replace the Child Trust Fund Scheme.

These ISA’s are available to eligible children under the age of 16 who did not qualify for the Child Trust Fund. Parents, family and friends can contribute up to £3,600 in the tax year (based on current limits) and this can be done on a regular or one off basis. The money in the account can only be taken by the child once they reach 18.

There are many ISA’s out there and plenty of online independent comparison sites to help with the decision and we would of course be more than happy to provide some guidance if this is something you are thinking of.

Winston Churchill said “Saving is a very fine thing. Especially when your parents have done it for you”, so if you haven’t already started to put something aside for future years or you’re thinking about encouraging your children to take an interest in their own regular savings and want more advice please do not hesitate to get in touch.

We’ll be picking up on some useful ideas to teach children about money in our December Newsletter so watch out for it coming in if you are regular recipient. If you’re not already on the mailing list but want to hear more about this and other topics through 2013 then please follow the Newsletter link at the top of the page and sign up.

If I’m not blogging again before our Christmas break I’d like to take the opportunity to wish all our readers a very Merry Christmas and a prosperous 2013.

Claire Armstrong

Are you delivering what you promise?

October 26, 2012

As a nation we don’t half like talking about the weather, I think today so far at least 10 people have commented to me on how miserable and wet it is.

It’s a hot topic of conversation all up and down the country all year round, its either too hot or too cold, awffy windy or just doesn’t stop raining. I’ve heard more than once lately someone comment on the fact that “it was an awfully disappointing summer and now they’re saying it’s going to be a harsh winter!” The general consensus is the seasons are all over the place and although we have an expectation of what each should bring in terms of the elements, experiencing temperatures in excess of 25 degrees in March and bitter cold and floods in August is just not how it’s supposed to be.

For me, Autumn is the best time of the year, the season that delivers, does exactly what it says on the tin, rustic colours on the trees, a crispness in the air, blue skies and pale autumn sun with the first frosts round about now. It’s the season of mists and mellow fruitfulness and all that and I just love it, it never disappoints.

So where am I going with this? Well the idea of something delivering and doing exactly what is promised seems quite pertinent in our industry just now. With the Retail Distribution Review (RDR) deadline fast approaching every firm is in the process of reassessing its internal processes, Adviser qualifications, the client experience, the services on offer and how these are paid for.

From day one for this business it has been crucial for us to have a defined process and to offer a service that is valuable to all our clients. Over the last 18 months we have given much thought and discussion to how this process can continually be improved and how we can communicate clearly to all our clients each of the stages along the way. This applies to all contact from the initial discovery and fact finding to research and implementation right through to following up once the initial business is completed and then carrying out ongoing reviews at the agreed time period.

We take great pride in delivering what we promise and use the Expert Team and a robust back office system to keep track of where in the process all our clients are at any given time and to ensure reviews happen as and when required. We like to think we are delivering what we promised at the outset and that our clients know what to expect, they value the service available and develop a long and personal relationship with us.

Just last weekend one of our longer standing clients passed away and on the Monday morning his daughter contacted me to inform us of what had happened.

She noted that one of the first things the family discussed over that weekend was that it would be important to let us know as soon as they could as they valued our relationship and knew we would be able to assist with the next steps for the family in terms of support and also advice on what is to happen with the existing investments and pensions.

This contact meant a lot to us and to me personally, as it was a clear demonstration that we are important to these clients, we weren’t an afterthought or the last people to be contacted we were one of the first and that is a strong testament to our relationship with our clients and how they look to us for reassurance and guidance on many matters

With the coming RDR deadline all Advisers should be investing in higher qualifications, better services and more transparent charges so clients now shouldn’t be afraid to ask their Adviser exactly what advice they offer, how their process works, how well qualified they are and how they plan to charge for their services. All of these points should be easily answered if they are ready for the post RDR world and all firms should be able to deliver what they promise from the outset.

We are ready for business post RDR and will continue to offer our existing and new clients the best possible service at all times. We are committed to providing expert advice with a clear charging structure and know that our Wealth Management service can help in terms of providing guidance to all our clients that the financial steps they are taking are right for their current stage in life and will help them achieve future goals.

If you would like to hear more about our service or would appreciate a second opinion on your existing advice or arrangements we would be delighted to hear from you.

Dr Claire Armstrong

Can Your Planning Withstand a Major Loss Event?

October 1, 2012

Scenario

Meet John, 56, and his wife Janet, 54. John runs ABC Ltd, a company which provides high quality examples in many business settings. Janet is a civil servant.

They have 3 children: Jill, Jenny and Johnny. They will all have flown the nest by the time John is 62. At this time John and Janet plan to travel and spend more for six years. Following this they plan to downsize their house.

They have various investments in the stock market, including John’s pension, although Janet is lucky enough to have a final salary pension. They like to take a medium-high level of risk with their investments.

Assuming the economy and the stock market proceeds at a general average over the remaining period of their lives they will be in good shape, with no deficit at any stage.

Modelling a major loss

Once the media start focussing on other things it’s easy to forget that there is still a substantial chance that Greece or many others may drop out of the Euro, triggering a mechanism that will essentially send confidence back to levels seen earlier in the year, or worse. I won’t get into too much speculation on that because a major loss can come from anywhere when we least expect it.

So is your financial planning robust enough for a tornado to tear through Canary Wharf?

John and Janet would like to know, and we can help them run one of many scenarios.

Let’s say our disaster event creates the following effect: a 3 year loss of -35%, -25% and -20%. This occurs when John is age 60 (in 4 years).

Each investment in the stock market that John and Janet have has been modelled as close to reality as possible in terms of asset allocation, and based on statistics from Novia Market Assumptions.

Each of these investments will be automatically affected by our loss simulation above.

So what do we find out?

Figure 1

Figure 2

In the cash flow chart we can see a period of red setting in from age 77, unlikely the status quo base plan chart from above.

The effect is more strongly seen in the liquid assets charts, with usable funds running out at age 76.

In the base plan the growth rate was 6-7%. Once we factor in that this major loss will occur, we see that 9.06% growth is required on these assets from the start of the plan, or 10.57% is required once the major loss has occurred, to ensure once again that there will be no shortfall.

So what does this mean? Well, for John and Janet, they would likely have to downsize again at age 77 to free up more liquid assets.

What would it mean for you?

Get in touch for a comprehensive look at your planning.

Malcolm Stewart

Multiple Income Streams

September 24, 2012

How do we get clients over the often held view that pensions are “rubbish”?

A by-product of the product lead sales approach, is to focus on the “thing” not the outcome – “I’ve ruthlessly and with malice aforethought, researched the market and have selected Split Pea & General as having the best pension product for you…”

Even writing this leaves me stone cold, imagine it from your client’s point of view.

We’re totally committed to cash flow modelling as the correct approach when visually demonstrating financial planning to clients here. The more we use the cash flow models with clients, the more obvious it becomes that once you demonstrate that a pension is just an income with a different name, all the scales fall away.

People get the picture pretty quickly when they can “see” what a pension can do for them and get the tax advantages too.

Rather than focus on the swamp that pension income options can be, we tend to talk about Multiple Income Streams that are required when you decide not to work anymore (not retire) and how to put these building blocks in place.

We have found that having the client’s focus more on how much they need by way of fund or income when they stop working, tends to work better.

We set out a program in which the clients use all the tax wrappers (Pension, ISA, OEICS,Bonds etc) in an appropriate time and manner for them and this ensures that the we are able to use the Multiple Income Streams to create the tax optimised replacement for income in retirement (there, I’ve said it!)

We don’t dumb-down the detail but once we’ve established the high ground its an easier conversation. We also work hard in not overloading on tech talk or jargon when discussing the nuts and bolts.

A form of Plain English if you will and it’s always good to ask a client to briefly explain back to you what you’ve discussed and find that a good understanding have been established.

If not, I would always go back and cover the areas of difficulty again.

It’s never to patronise, but more for my peace-of-mind that I’ve been able to get the information required across to the clients in order they can make the correct decisions for them about the advice being offered.

We also use our cash flow software to demonstrate the way income will be delivered to them and the likely tax treatment.

It pulls together the concept of the Multiple Income Stream theory and the notion of a controlled replacement for income once you stop working.

You might even think pensions aren’t so bad after all.

None of this is new, earth-shattering or dangerous thinking, but then again providing sound financial advice doesn’t have to be complicated.

Roland Oliver