|
October 2007
Welcome to the 10th edition of our Financial Connection
e-bulletin.
We hope that you enjoy these e-bulletins. If you have any queries,
or would like to discuss any of the issues raised with one of our
consultants, please call us on 0845 788 9933 and quote EM-4489.
Towry Law Company Brochures
We now have a range of corporate literature available to download from the
Towry Law website.
This information may be of interest if you are looking for a better
understanding of Towry Law and its activities. The following brochures are
available:
Towry Law resigns from AIFA
Towry Law has resigned from the Association of Independent Financial Advisers
(AIFA) citing fundamental disagreements with the organisation's stance on the
FSA's Retail Distribution Review discussion paper (RDR) and the future of the
advisory industry.
The RDR paper proposed a number of recommendations for "improving the
professionalism of the industry", notably changing from a commission bias to a
fee-based charging structure, improving adviser qualification levels and
increasing the capital adequacy requirements of less secure and higher risk
firms. AIFA has since called for a study into whether commissions influence
adviser recommendations.
Andrew Fisher, CEO, Towry Law, said:
"I believe that the RDR's recommendations are spot-on in terms of
enhancing the reputation of the industry and taking it into its next phase of
evolution.
AIFA's response is backward looking and demonstrates an organisation
struggling to come to terms with an industry that is seeking to change. We
deplore their insistence on maintaining the status quo which means advisers
continuing to earn more for doing less, with minimal qualifications."
Towry Law has published a Campaign Document detailing the major industry
changes that they consider should be introduced. These can be summarised as:
- Fees not commissions - the abolition of the payment of all initial and
trail commissions to financial advisers;
- Education not ignorance - the imposition of higher minimum
educational standards within the industry and firms to make clear the true
status of their advisers, many of whom are simply self employed agents;
- Integrity not stealth - the outlawing of "soft commissions" given by
product providers to financial advisers;
- Holistic not limited- a requirement that financial advisers
demonstrate their ability to offer holistic advice based upon the financial
objectives and requirements of the client;
- Independence not tied - more stringent tests before financial
advisers can use the 'independent' label, including not accepting financial
or non-financial support from, and not being significantly owned by, product
providers.
To read the Campaign Document, please click here:
Manifesto
Patrick Connolly
Marketing and PR Manager
ISA changes - April 2008
It has not been widely reported, but there are a number of important changes
to the ISA regulations that are due to come into force from 6th April 2008.
These include:
ISAs available indefinitely
ISAs are available indefinitely. There is no set date for them to end or be
reviewed.
New subscription limits
The annual subscription limit for an ISA will increase from £7,000 to £7,200.
Of this, the amount that can be invested into cash will rise from £3,000 to
£3,600.
E.g. An individual has an annual ISA allowance of £7,200. If they save £1,200
into a cash ISA at the beginning of the year, they have £6,000 of their ISA
allowance remaining. They could invest up to £2,400 more into the same cash ISA
or up to £6,000 in a stocks and shares ISA, with either the same or another
provider, or a combination of both.
Merging PEPs and TOISAs into ISAs
Personal Equity Plans (PEPs) will cease to exist, and will be re-designated
as stocks and shares ISAs.
TESSA-only ISAs (TOISAs) will cease to exist, and will be re-designated as
cash ISAs.
Removing mini/maxi ISAs
The distinction between mini and maxi ISAs will disappear, with accounts
being re-designated as 'cash accounts' or 'stocks and shares accounts'.
Individuals will have an overall annual subscription limit of £7,200, of which
up to £3,600 can be invested in a cash ISA.
Cash transfers to stocks and shares ISAs
It will be possible to transfer some or all of the money saved in cash ISAs
in previous tax years into stocks and shares ISAs, and this will not count
toward the annual subscription limit.
It will also be permitted to transfer money saved into a cash ISA in the
current year into a stocks and shares ISA
However, it will not be possible to transfer from a stocks and shares ISA to
a cash ISA.
These changes are designed to "deliver certainty, simplicity and flexibility
for savers," and they go some way to achieving this. The consolidation of
existing products under one regime is a big positive. The increase in the annual
subscription limit is welcomed although, it could be argued, overdue.
The major negative is that, while transfers from cash to stocks and shares
ISAs will be allowable, the reverse transaction is not. This is likely to be
because individuals would be likely to benefit from greater tax advantages from
a tax-free cash investment than from an equity ISA investment.
Patrick Connolly
Marketing and PR Manager
Market Commentary
Investors in multi asset class funds should have had a positive twelve months, despite
the late summer trauma in financial markets. Many sectors have recouped much of
those losses already, and indeed some, such as Asian and Emerging Market equities,
have surpassed their July highs.
Increasing interest rates were putting pressure on asset prices, but the 0.5% cut
by the Federal Reserve, which is anticipated to be followed by other central banks,
has provided welcome relief to investors and this has been reflected in an increasing
appetite for risk and indeed led to rising asset prices in many sectors. However,
the reason for the Fed cutting rates has not necessarily gone away or been played
out yet, and the sub prime debacle could still claim further casualties, and even
push the US economy, and maybe the world, into recession. Therefore, although the
Dow Jones Industrials Index has just hit a new all time high, it is fair to say
that this is not against a universally positive backdrop.
A multi asset class approach does seem to be a sensible way to approach this uncertain
future, and is almost becoming a fashionable investment philosophy these days. Equities
do appear to be the most attractive of mainstream asset classes, and are performing
well at the moment, but equally, July and August was a good reminder as to why a
sensibly constructed portfolio will hold other assets too. In fact, it is worth
sounding a note of caution on the equity markets. Some areas do look overheated,
while reasonable valuation levels overall are dependent on the current high level
of corporate earnings being maintained, any kind of slowdown in global growth could
put a real dent in profits, and as a consequence current prices that may look reasonable
now, will start looking a whole lot more expensive.
The rising middle class in Asian and Emerging Markets, is one of the great investment
themes of our time, but it is not yet clear as to what extent they can drive the
global economy in the event of consumer slowdowns in the US and Japan. The US inventory
of unsold homes is now at an 18-year high, and consequently prices are falling rapidly.
Consumption tends to be affected about 5 months after house price falls, on average,
when people are less willing and less able to borrow. Much of recent US consumer
consumption was coming from mortgage equity withdrawal, 14% of all mortgages have
been used for this, on the assumption that house prices only go up (a not too dissimilar
story to the UK), and by folk who are often short of cash from other means.
Loan to value ratios are higher than during the 1990 crash, and, as we know, lightly
regulated lenders have been taking ludicrous risks (sub prime mortgages grew five
fold between 2001 and 2005), partially because they know they can sell the loans
on. Unfortunately easy credit is hard to resist and many must have knowingly taken
on unmanageable loans.
The point of all this is that with incomes growing slower than inflation, the lower
echelons of US consumers are under real pressure. How much of an effect this will
have on the global economy, and to what extent similar issues may emerge in other
countries, is impossible to forecast. What it is safe to say though, is that there
will be some sort of effect, and it is a serious ongoing risk. Recession looms large
for the US, and it is inconceivable that the impact of such an event will not reverberate
around the financial world. That is not to say that there will not be opportunities
to make money along the way rather to suggest that high returns, in the short term,
are less likely.
Commercial Property returns have at last slowed down to more sustainable levels.
The average property pension fund returned 3.1% over the last 12 months. This sector
is now consolidating and it is possible that it will experience some small negative
returns between now and the end of the year. This is not ideal of course, but is
actually quite a welcome consolidation from overly frothy levels and will be a better
base from which to build again. The sector has been excellent for investors over
the last few years, but does need to reach a point where it is competitively priced
versus other asset classes, and, encouragingly, this does not seem too far away
now. An economic recession in the UK would be a different matter, however, and would
put pressure on commercial property prices. However, the vast majority of rental
income streams should be maintained and, of course, there are other asset classes
that would be expected to perform far worse in recessionary times.
Andrew Wilson
Head of Investment
This Global Markets Commentary is solely for information purposes and is not intended
to be, and should not be construed as investment advice.
Whilst considerable care has been taken to ensure the information contained within
this commentary is accurate and up-to-date, no warranty is given as to the accuracy
or completeness of any information and no liability is accepted for any errors or
omissions in such information or any action taken on the basis of this information.
The opinions expressed are those of Towry Law Investment Management Limited on behalf
of Towry Law Financial Services Limited and are made in good faith, but are subject
to change without notice.
IMPORTANT NOTICE: Towry Law Financial Services Limited. Registered in England No.
607039. Towry Law Investment
Management Limited. Registered in England No.793636. Towry Law Trustee Company Limited.
Registered in England No. 1151146. Towry Law Pension Trustees Limited. Registered
in England No.781047. All of the above firms are authorised and regulated by the
Financial Services Authority. Towry Law Holdings Limited. Registered in England
No.4773122. Towry Law Nominees Limited. Registered in England No.2988101. Towry
Law Services Limited. Registered in England No. 5169111. The Registered Office of
all these companies is Towry Law House, Western Road, Bracknell, Berkshire, RG12
1TL. Telephone 01344 828000.
We may record telephone calls to protect both of us and for training purposes. We
may also monitor the content of email communications and by sending an email to
us or responding to an email from us you acknowledge and accept
that any such email
communications may be monitored. The information contained in this e-mail is intended
only for the individual or entity to whom it is addressed. It may contain privileged
and confidential information and if you are not an intended recipient you must not
print, copy, distribute or take any action in reliance on it. If you have received
this e-mail in error, please notify the sender by using the reply function, and
then delete the message from your computer. Although this message and any attachments
are believed to be free of any virus or other defect that might affect your computer
system into which it is received and opened, it is the responsibility of the recipient
to ensure that it is virus free, and no responsibility is accepted by Towry Law
for any loss or damage in any way arising from its use.
|
