I am often asked when I think that we will come out of recession and return to the ‘good old days’ prior to banking crisis’ and alike. Do I think the economic world is better or worse for the recession? My simple answer is ‘neither, it’s just different!’ I think that the current economy and its somewhat marginal growth will continue for some years to come and that this is ‘as good at it gets’ for the foreseeable future. I hope I am wrong, but if not, managing expectations and working within the confines of what we can influence is always a good place to start.
Noting the above, that does not mean that profit from investments cannot be achieved and we are all very aware that investment markets have changed significantly following the volatility of recent years. This has seen (possibly) differing questions being asked, such as ‘Are Gilts riskier than Equities (Shares)?’
It seems to make sense that there would be shorter-term periods when equity markets are less risky than the long-run would suggest. I also think this is what some commentators are driving at when they ask ‘are gilts riskier than equities?’ I think they are suggesting equity markets are less risky than normal at the same time that gilts are more risky than normal. However, the notion of prospective riskiness is closely tied to notions of current value. If equity markets are over-priced there is an increase in the associated level of prospective risk and vice versa.
Considering this further, it is really very difficult to quantify just how risky equity markets are or when they might be more or less risky than usual. It is this uncertainty that goes right to the heart of ‘riskiness’.
The question gives rise to the notion that investors have a choice, either investing in equities or, alternatively, going for gilts. This is a false choice and one that relies too much on market forecasts. The sensible approach is to maintain holdings of both equity and gilts for diversification. Confidence is high that gilts will go up in value in the event that equities go down in value. In a similar way, there is confidence that equities will go up in value when gilts go down in value. Choosing one area over the other is to put yourself at risk of trying to forecast returns, and this may not be a sensible tactic.
Diversification remains the Key
We have, over the years, advocated asset allocation and diversification of funds (within all investment arenas, such as pensions, ISAs, Investments, Trusts, OEICs & Unit Trusts) to ensure that opportunities for investment growth and income are achieved. We will continue to achieve this with our clients (Individuals/SMEs/Charitable Trust) and enquirer’s needs. Any financial/investment planning should be based on your objectives and attitude to investment risk. An Investment Risk Schedule can be found on the Chapters Financial website here.
No individual advice has been provided during the content of this Blog and Chapters Financial Limited can help you with your investment planning, in all its many formats, into the future, continuing to provide the independent financial advice (IFA) into 2013 and beyond.
Past performance is not a guarantee of future performance. Fund values can fall as well as rise.
Keith Churchouse, FPFS, Chartered Financial Planner, ISO22222 Personal Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Services Authority, number 402899
Wednesday 24 October 2012
Tuesday 2 October 2012
Who said regulation would reduce??
I am not sure that I have ever known a quarters time period (the one coming at the end of 2012) when so much regulation and legislation comes into being in the UK retail financial services world. I have nearly lost track of all of the changes and I have summarised these headlines below for your consideration. Some of these changes may not have a direct impact on your circumstances, but it is always interesting how changes work their way through the various systems and manifest themselves later down the line.
This is not an exhaustive list, but gives an indicative feel of some of the differences we will experience in the near future.
Workplace Pensions / Auto-Enrolment start in October 2012
The first wave of large UK businesses are now enroling for Workplace Pensions (sometimes called Auto-Enrolment), with ‘Staging Dates’ declared for all employers, starting with the largest companies and working through to the smallest over the coming four years or so.
With Workplace Pensions now implemented at the start of October 2012, knowing what is required for your business and planning what resources (both time and contributions) need to be deployed should be a priority in making sure that your business is ready to meet the requirements of this new legislation. The Pensions Regulators website is very helpful in detailing these staging dates as they are known, and there is a link to this detail from our website, www.chaptersfinancial.com.
Equalisation of Annuity/Insurance rates between the sexes in late December 2012
In March 2011, there was much press about a European Law being passed (now called Test-Achats European Court Ruling) about abandoning the differential between male and female rates for insurance (and alike) risks/terms. My understanding is that their ruling (and I am not a lawyer) is based on the argument that the current gender based regime is discriminatory because there is overlap between men and women in the ages at which most people die. Obviously, there are opposing views to this argument and its subsequent studies and the European Court would rule accordingly on 01 March 2011, which has now been confirmed.
The now confirmed ruling is due to take effect in December (21st) of 2012 and the hullabaloo that kicked off all those months ago soon died down because its real effects would not be felt until months later. Time has now passed and those months are now turning into weeks, with I am sure much media ‘verbage’ to commence in the very near future.
End of Commission Sales for Financial Advice from end December 2012
The Financial Services Authority's (FSA) Retail Distribution Review (or RDR for short) has been many months and years in the planning and will be implemented at the very end of 2012.
Consumers need to be aware that these regulation changes and their effects on the delivery of UK retail financial services to the public will be significant. The FSA has started a process of raising the profile of the changes and we have also started to see the press joining in the process. I have no doubt that there will be much page space allocated to the topic over the autumn and winter months of 2012. It is important that those seeking financial advice know what these changes mean for them and the choices they will be provided into the future.
The FSA has produced a consumer information document as a guide to the changes and to start the process of educating those seeking financial advice of what to expect in the future. This can be found at the following web-link here: http://www.fsa.gov.uk/static/pubs/consumer_info/rdr-consumer-guide.pdf
Change of the Financial Services Authority (FSA) to the Financial Conduct Authority (FCA) from January 2013
I am sure we will see a lot more publicity of this change as it gets closer. In June 2010 the Government announced new regulatory arrangements for the future. These include the creation of the Financial Conduct Authority (or FCA for short), which plans to apply a new approach to consumer protection, building on existing changes already instigated, but taking them still further. The changes will see the Financial Policy Committee (FPC), within the Bank of England, being responsible for protecting the stability of the financial system as a whole and macro-prudential regulation. The Prudential Regulation Authority (PRA) as it will become known, will be a subsidiary of the Bank of England, with the responsibility of supervising deposit takers, insurers and a small number of significant investment firms.
The Financial Conduct Authority (FCA) will be responsible for regulating conduct in retail and wholesale markets, supervising the trading infrastructure that supports those markets.
I am sure we will hear much more on this subject in the coming weeks as the changes come to fruition.
Summary
Change usually generates opportunity and I am sure that this will be the case for some of the points and changes noted above. We live in interesting times and we will continue to work with you and changes in legislation to meet our clients and enquirers requirements. No individual advice has been provided during the content of this Blog and Chapters Financial Limited can help you with your financial planning, in all its many formats, into the future, continuing to provide the independent financial advice enjoyed by our clients since 2004.
We look forward to working with you into 2013 and beyond.
Chapters Financial is not responsible for the content of external webpages.
Keith Churchouse, FPFS, Chartered Financial Planner, ISO22222 Personal Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Services Authority, number 402899.
This is not an exhaustive list, but gives an indicative feel of some of the differences we will experience in the near future.
Workplace Pensions / Auto-Enrolment start in October 2012
The first wave of large UK businesses are now enroling for Workplace Pensions (sometimes called Auto-Enrolment), with ‘Staging Dates’ declared for all employers, starting with the largest companies and working through to the smallest over the coming four years or so.
With Workplace Pensions now implemented at the start of October 2012, knowing what is required for your business and planning what resources (both time and contributions) need to be deployed should be a priority in making sure that your business is ready to meet the requirements of this new legislation. The Pensions Regulators website is very helpful in detailing these staging dates as they are known, and there is a link to this detail from our website, www.chaptersfinancial.com.
Equalisation of Annuity/Insurance rates between the sexes in late December 2012
In March 2011, there was much press about a European Law being passed (now called Test-Achats European Court Ruling) about abandoning the differential between male and female rates for insurance (and alike) risks/terms. My understanding is that their ruling (and I am not a lawyer) is based on the argument that the current gender based regime is discriminatory because there is overlap between men and women in the ages at which most people die. Obviously, there are opposing views to this argument and its subsequent studies and the European Court would rule accordingly on 01 March 2011, which has now been confirmed.
The now confirmed ruling is due to take effect in December (21st) of 2012 and the hullabaloo that kicked off all those months ago soon died down because its real effects would not be felt until months later. Time has now passed and those months are now turning into weeks, with I am sure much media ‘verbage’ to commence in the very near future.
End of Commission Sales for Financial Advice from end December 2012
The Financial Services Authority's (FSA) Retail Distribution Review (or RDR for short) has been many months and years in the planning and will be implemented at the very end of 2012.
Consumers need to be aware that these regulation changes and their effects on the delivery of UK retail financial services to the public will be significant. The FSA has started a process of raising the profile of the changes and we have also started to see the press joining in the process. I have no doubt that there will be much page space allocated to the topic over the autumn and winter months of 2012. It is important that those seeking financial advice know what these changes mean for them and the choices they will be provided into the future.
The FSA has produced a consumer information document as a guide to the changes and to start the process of educating those seeking financial advice of what to expect in the future. This can be found at the following web-link here: http://www.fsa.gov.uk/static/pubs/consumer_info/rdr-consumer-guide.pdf
Change of the Financial Services Authority (FSA) to the Financial Conduct Authority (FCA) from January 2013
I am sure we will see a lot more publicity of this change as it gets closer. In June 2010 the Government announced new regulatory arrangements for the future. These include the creation of the Financial Conduct Authority (or FCA for short), which plans to apply a new approach to consumer protection, building on existing changes already instigated, but taking them still further. The changes will see the Financial Policy Committee (FPC), within the Bank of England, being responsible for protecting the stability of the financial system as a whole and macro-prudential regulation. The Prudential Regulation Authority (PRA) as it will become known, will be a subsidiary of the Bank of England, with the responsibility of supervising deposit takers, insurers and a small number of significant investment firms.
The Financial Conduct Authority (FCA) will be responsible for regulating conduct in retail and wholesale markets, supervising the trading infrastructure that supports those markets.
I am sure we will hear much more on this subject in the coming weeks as the changes come to fruition.
Summary
Change usually generates opportunity and I am sure that this will be the case for some of the points and changes noted above. We live in interesting times and we will continue to work with you and changes in legislation to meet our clients and enquirers requirements. No individual advice has been provided during the content of this Blog and Chapters Financial Limited can help you with your financial planning, in all its many formats, into the future, continuing to provide the independent financial advice enjoyed by our clients since 2004.
We look forward to working with you into 2013 and beyond.
Chapters Financial is not responsible for the content of external webpages.
Keith Churchouse, FPFS, Chartered Financial Planner, ISO22222 Personal Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Services Authority, number 402899.
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