Where did 2013 go?

Our busiest months of the trading year are April/May and November. This has always been the case throughout my nearly 30 years in financial services. Many can understand the April/May date because of the end of the tax year (05^th April) and all this involves, including pension and ISA contributions. The November uplift is usually a surprise and this is because many finalise their financial planning at the end of the year before the festive season starts. Almost a final catch up before the year closes. From an economic viewpoint, it has been a significant year.

With the FTSE100 starting the year at 5,897 points (approx.), my open year prediction was that we would end the year with a starting digit of 7,XXX?. It looks like I might have to temper this prediction. (Past performance is not a guarantee of future performance). The FTSE100 is not an indicator of the health of the economy though and there are many other important and relevant economic factors to consider, examples of which might be: 

•  Foreign investment money stoking a possibly overheating London Property market is filtering through to the rest of the UK.
• The Government’s funding initiative of the 'HomeBuy' scheme, generating greater flexibility for usually First Time Buyers (FTB) to enter the property market. With recent reports that the average FTB was entering the property market in their 30's, action had to be taken.
• Cash deposit yields falling ever further with now confirmed low rates (through ‘Forward Guidance’) from the dynamic Canadian Banker that heads the Bank of England (BoE). Bank Base Rate has remained at 0.5% pa throughout the year to date. 
• Some banks and lenders being more approachable for SME/ Small Business finance.
• Growing Building/ construction starts ups helping with the stubbornly high unemployment data (October 2013 2.47M), which is starting to show falls (possibly quicker than Mr Carney thought).
• Largest number of Initial Public Offerings (IPO’s) since the start of the recession on London.
• Inflation (Consumer Prices Index/CPI) remaining above the current BoE target of 2.00% pa, at 2.20% (October 2013)   

Be under no illusion, our economic market has changed and I believe is in the final throws of shaking off the shackles of recession. This is a changed beast and is going to move forward, I think quicker than many of us expect. As you have seen in our previous November Blog, we have also seen the implementation of the Retail Distribution Review (RDR) in 2013 which, for some, has been a welcome change to the delivery of financial advice to the public in the UK. 

I hope, like Chapters Financial Limited, that you found 2013 a positive year for your financial planning. The flow of economics points to 2014 being a positive year, although I am sure there will be volatility along the way, and a positive outcome is not guaranteed. However, taking high quality financial planning advice throughout the year is worthwhile to ensure that you make the best of the economic climate, whatever it transpires to be. 

If you would like to receive further information with regards to your own individual situation and circumstances, then please contact the team, either in Guildford or Woking.

Keith Churchouse FPFS
Director
ISO22222 Personal Financial Planner
Chartered Financial Planner

The continuing conundrum for savers / 'Forward Guidance'

The new economic tool deployed by the new Governor of the Bank of England, Mr Mark Carney, in August 2013 was heralded as the opportunity to manage economic, and to some extent financial, expectations into the future. 'Forward Guidance' as it is known, provides all those affected by the economy with the opportunity to know how the Bank of England predicts the future, and more importantly, what they plan to do if these expectations are met.

As we have seen, Forward Guidance has linked the Bank Base Rate (currently 0.5%) to UK unemployment levels (currently 7.8%) with the plan that Base Rates will remain at their current level until the unemployment level falls below 7.0% (Subject to anything unexpected happening, which it can). With this plan in mind, the Governor does not expect the target of 7.00% being reached for around 3 years, and therefore does not expect Bank Base Rates to move either in this time.

This new direction provides the benefit of certainty for some (such as businesses and mortgage borrowers as examples), but also provides the negative certainty of continuing low returns for savers.

Many savers have seen returns falling in recent times, with Premium Bond returns also falling from August 2013 onwards. Many are resigned to this situation, sensibly using their tax efficient ISA allowances where possible to reduce the tax take on any gross savings earned.

Against this backdrop, some clients and enquirers are reviewing their attitude to investment risk, where appropriate, and applying this review to their future investment decisions. As an example, UK Dividend returns have remained relatively firm over the last year and these have typically been between 3.00-4.00% gross pa (Not guaranteed, past performance is not a guarantee of future performance). Obviously, by moving into this investment area, the risk to the capital invested increases significantly, with the value of funds varying daily. This volatility (and overall investment risk) is detailed on our Investment Risk Scale further here (Link). However, if an investor is prepared and able to accept this level of investment risk, this investment alternative may be suitable in some investment cases. It should be noted that diversifying any investment is usually worthwhile and we have noted that committing smaller sums initially may be worthwhile to get used to the chosen investment medium before committing larger sums.

Each investment plan and recommendation is different and individual to the Client. To consider your circumstances with regard to savings and investments, you should take individual financial advice. No individual advice is provided in the content of this Blog. The team at Chapters Financial can help you with your planning and look forward to working with you.

Keith Churchouse FPFS
Director
ISO22222 Certified Financial Planner
Chartered Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.