banks, will they ever learn?

In the Fools & Horses 1981 Christmas episode Del observes I’ve heard your line of patter my son. If they don’t know Adam Ant’s birthday or the Chelsea result it’s goodnight Vienna, innit”?

The PPI scandal has demonstrated the creative thinking around product design by various financial institutions and for that particular product, almost everyone has now said their goodnights.

It has seen PPI fines in the four years up to 2014 hitting some £42bn and in April this year word was out that the UK big four could be getting hit for another £19bn over the next 2 years.

Although banking sector PPI compensation payouts have been decreasing, what is of concern is that hybrids or variants of the same type of product are still being marketed.

The latest postal example hit my wife’s in-tray this week in the form of a letter from Nationwide introducing her to their super fantastic FlexPlus current account.

The account’s big selling point is in the form of a selection of non-negotiable ‘superb benefits’ such as Defaqto rated motor breakdown insurance, mobile phone insurance and world wide travel insurance.

There are a number of other benefits but of the 8 on show, 5 are insurance products.

And all for £10pm.

Nationwide’s web page reads: “FlexPlus gives you more than just interest. Choose FlexPlus for great banking features as well as a range of insurance policies and account benefits for you and your family. All for £10 a month.

Exclusions and limitations apply, so please read all the insurance policies and benefit details carefully”.

I can see nowhere on their website or in the letter to my wife a very simple statement along the lines of ‘before taking advantage of this “never been easier to switch offer” do check if you already have this type of cover elsewhere’?

Much of what is being offered could already be in place elsewhere, like via home and contents insurance, other bank accounts or credit cards and therefore being paid for twice, leading to consumer complication and confusion when submitting a claim. And of course more compensation claims.

Again I draw on Delboy’s wise words There’s gotta be a way! He who dares wins! There’s a million quids worth of gold out there – our gold. We can’t just say ‘bonjour’ to it”.

And that is the problem, banks cannot help themselves it seems. Why do bank accounts have to come with insurance as a way to attract customers? Surely some simple, reliable, old fashioned service could do the trick at much lower cost?

We’re in the money, are you paid enough?

You may have seen that BWD have recently released their Salary and Benefit Census and I am delighted to offer you a complimentary personal copy of the 2014/2015 report to download. 

It will be of interest to Financial Advisers, Planners, Paraplanners, Broker Consultants, Employee Benefit Consultants, Administrators and Compliance Specialists.

Now in its third year, it is established as a definitive reference source for salaries and benefits in UK financial services. The three sample points span pre and post RDR and so act as a valuable analysis of the impact of this pivotal piece of regulation, whilst also showing how the sector is reshaping itself for the future.

I hope you find the report useful. Our thanks go to BWD for making this available.

Any comments or questions you may have, please contact James Walker at BWD Search and Selection by e mail:

Setting the record straight, with John Warburton, Executive Director, Distribution, Prudential

We face a ‘new paradigm’ for financial planning and retirement provision, according to Prudential’s executive director, distribution, John Warburton, who believes George Osborne’s Budget announcements very much suit the insurance giant over the medium to long term.

“Our priority this year is to continue developing our product propositions even further in response to those [Budget] changes so that we can give advisers a wider range of flexible solutions that suit the post-April 2015 world.

“You shouldn’t see any major change in strategy or direction from Prudential to that which had already led to our strong performance – focusing on providing risk-managed solutions that give customers choice when it comes to them drawing their income for retirement.”

Warburton says the group has done this by focusing on its core assets – the Prudential brand, its financial strength and a multi-asset investment capability that holds risk management at its core.

“We have always based our product range around providing guarantees and longevity risk management. The new freedom and flexibility that the Budget introduced means our approach has never been more appropriate,” he adds.

Warburton foresees an escalating level of product innovation across the industry – due in part to the Budget but also in response to a growing demand for more flexible financial planning and at-retirement solutions.

He says the advent of the New ISA (or Nisa) together with drawdown products will become more attractive as demand from consumers and advisers grows, while the need for alternatives to annuities will drive innovation – both from Prudential and the broader industry.

Advisers can feel reassured they will receive the same level of dedicated support when navigating the inevitable industry changes that the Budget will spur, as they received during their RDR journey.

“We felt we were particularly successful at supporting advisers around the RDR and the feedback we have had echoes this. We invested a lot of time and effort in supporting them through that level of change and we would expect to deploy the same level of resources in this instance, leveraging our capabilities to help advisers.”

He says the extensive programme of training and information – available largely through its adviser extranet – ensures that from a technical perspective and through its scenario-based modelling tools, advisers should be suitably armed to face the changing distribution landscape. This is also underpinned by Prudential’s account management, business development and business consultancy services that are available to financial advisers.

Warburton stands by the company’s decision not to invest in its own fund platform, failing to see a viable business case at this point. Rather, he urges advisers to ‘watch this space’ for wider availability of Pru’s multi-asset investment propositions, as they are listed on more third party platforms over the second half of the year.

Warburton says the new world should be viewed as a broader opportunity set for an adviser rather than posing a threat.

“We are very bullish about the adviser market in general, witnessing a transfer of responsibility from the state and employers to the individual taking on a greater responsibility for their own long-term financial needs, and taking on more risk to their own personal balance sheets,” he adds.

Even against a backdrop of increased direct-to-consumer activity and a potentially more complex distribution landscape for advisers to wade through, Warburton feels strongly that a greater financial awareness will only help grow “the overall size of the advice market”.

“Our expectation is that, as levels of consumer understanding of the challenges they face rise, and their interest and awareness is piqued, what will really be needed and valued is full professional financial planning.”

Sam Shaw, Freelance Journalist

Take That!

Who’s been a naughty boy then?

Gary Barlow is the latest potential gong returnee joining an ever lengthening line of celebrity ‘victims’ being hung out to dry for ‘sins various’, all determined by a baying social media fuelled mob and on this occasion under the direction of one Margaret Hodge MP, that self proclaimed leader of the tax paying great and the good.

Yes, that same multi-millionaire former Labour minister Margaret Hodge, who faced questions in November 2010 over the limited tax paid by Stemcor, the steel trading company of which she is a shareholder and which was founded by her father and is run by her brother.

Analysis of Stemcor’s accounts by the Daily Telegraph in their edition of 10thNovember 2012 reported that the business paid tax of just £163,000 on revenues of more than £2.1billion in 2011.

There is a growing trend in UKplc for the so-called ‘vulnerable’ and dispossessed social minority to exert undemocratic control over the enfranchised majority. It would seem that to get your voice heard and action taken today you should belong to a minority group of some sort, preferably with questionable ethnic, religious or ethical agendas ideally funded with government grants.

What did Gary do?

He and other bandmates invested in 2012, it is alleged, at least £26 million in what was referred to as an ‘aggressive tax avoidance scheme’, putting money into two partnerships, run by Icebreaker Management, styled as music-industry investment schemes, according to reports.

Judge Bishopp, in a High Court ruling, declared that the partnerships set up by Icebreaker Management were to secure tax relief for members, and HMRC is now expected to demand repayment.

Take That’s lawyers insisted the band mates believed the investments were legitimate enterprises and that all four named paid “significant tax”.

Most wealthy individuals got to be just that with a little talent, some good luck and an awful lot of specialist professional support looking for the best ways to secure and grow their wealth, no matter how it was obtained.

Mr. Barlow is, I suspect, only guilty of taking financial advice to best invest his millions and avoidance, no matter how aggressive is not illegal.

Let’s keep an eye on FSCS defaults in the coming months if his financial adviser finds him or herself in the firing line from Mr. B’s legal team.

I think there are plenty of others who should be higher up the ‘Return your gong’ list; perhaps you would like to suggest some.

Shall we start with Sir Hector?

What goes around as they say………

Is property back on the agenda again?

In our opinion the commercial property market could well be poised for a period of growth.

“Giant pension fund piles into property as analysts say now is the time to snap up cheap exposure” is typical of recent headlines from the money and business pages of the national press. And they may have a point.  Property investors have seen their holdings fall on average 11.4% over the past five years (source Lipper), with some investors losing a quarter of their cash. This in turn is leading many to believe that the asset class is now undervalued and primed for recovery.

Why might your customers be interested?
For most people, the largest investment they make in the property market is in their own home. A fortunate few, branch out into ownership of rental properties, which has in many cases provided a healthy income stream and some potential for capital appreciation, but also brings with it landlord responsibilities and the anxiety of finding good quality tenants.  However, for those wishing to invest in property without the complications of buying and managing a rental property themselves, or wanting to diversify into non-residential buildings, property funds provide an alternative as they allow small investors to become part owners of many large properties.

With direct ‘bricks and mortar’ property funds, rental income can be relatively secure in comparison to other asset classes because of factors like long lease lengths (typically five years or more), less risk of default than residential properties and upward-only rent reviews, meaning that rental income often increases by at least inflation each year.  However a major downside of direct commercial property investment, is that property markets are highly illiquid compared to most other financial instruments such as equities or bonds, meaning that buying or selling a property can take a long time, and stressed conditions can make it difficult to sell a holding in the fund.  In addition the higher than average costs associated with buying property such as stamp duty, surveys and legal fees need to be paid and can affect the value of the fund, rental growth is not guaranteed and unpaid rent could affect the performance of the investment.

Alternatively indirect commercial property funds can buy shares in companies that invest in property and tend to be more liquid investments. The majority (over 80%) of these property companies are Real Estate Investment Trusts (REITs), and have greater tax benefits than other listed property companies. REIT companies don’t pay corporation tax on their assets, on the condition that 90% of profits are paid to shareholders as dividends.  REIT holders pay either 20% or 40% tax, on dividends because they’re classed as property-letting income.In contrast Property Investment Trusts, which pool money to buy property and property company shares are considered to be like any other company, so tax on dividends is only 10% for basic-rate payers and 32.5% for higher-rate payers.

Why now may be the time to invest?
Analysis of returns from 42 funds in the IMA Property Sector by shared equity mortgage provider Castle Trust showed the worst fund lost 26.6% over the period from mid-2007 to June 2009 and the Investment Property Databank Index lost 42% of its value. Since then there has been a gradual recovery but this has been below trend when compared to other asset classes.

Many analysts are commenting that these indicators show contrarian investors are poised to snap up property funds. Caisse, Canada’s largest pensions company, announced in January 2013 plans to buy C$10bn of global property over the next 18 months to boost returns.

UK commercial property prices fell in 2012. But Legal & General’s own property team believe that there are a number of drivers, particularly the attractive valuations available in the sector, that makes them more optimistic about returns in 2013 and beyond. They’ve taken the view that assets such as equities have already seen the benefits of loose monetary policy, and commercial property could be next, although conditions may remain challenging for certain sectors and asset types.

Standard Life recently commented that property could be the surprise profitable asset class of the next decade, predicting better returns from bricks and mortar than shares.  Rental yields currently sit at 6%, compared to the average FTSE 100 company which pays a dividend of 3.5% or 2% from a UK Government bond.

Cass Business School said Caisse’s plans to up property exposure were typical of pension funds looking for income in non-core assets such as property.  With its predictable long-term, and usually inflation-linked, income streams, and attractive premiums to compensate the investor for their illiquid nature, property assets currently offer more attractive yields than bonds of a similar risk profile. Indeed, in the final quarter of 2012, property proved to be three times more popular than infrastructure debt as the pension scheme de-risking asset of choice. With gilts unlikely to rise by any meaningful extent anytime soon, there is good reason to believe that non-core property investment will continue to strike a chord with those UK pension schemes who want to de-risk and more efficiently match their assets to their liabilities.

So  – is it time to take a look at your clients property investments again?
Of course, as always, all the usual warnings and caveats apply, but we strongly believe that property is worthy of further consideration, and could retake its place in portfolios as a diversified income generating mainstay for some of your clients.

John Hart,
External Funds Director,

Legal & General

Investment Management Research Unit (IMRU).

Contact us.
For further information please contact your Legal & General representative. Alternatively call 0370 050 0614*
Lines are open from 9am to 5pm Monday to Friday.

*We may record and monitor calls. Call charges will vary.

Cows will teach you a lot about human behaviour



You can learn a lot from animals, particularly their character, moods, idiosyncrasies, and the way they respond to the world especially in a group.

Cows are great studies of human behaviour.

Growing up on a dairy farm was a great study in all sorts of behaviours, I just didn’t know it at the time. When you spend a lot of time with cows [and a dairy farm has you do that] you get to know most of the herd pretty well.

You see them twice a day everyday of the year. We milked for town supply so every day was the same routine. 4 o’clock in the morning, when your alarm would go off to get up and going, and 4 o’clock in the afternoon when milking would be starting.

We, like the cows, had an inbuilt clock that had us heading for the milking shed, almost on autopilot.

You’d get to know the cows and their personalities. Those that were docile and amiable, those with a sense of frivolity, those that were loners and those who were leaders.

Twice a day, every day for most of their adult life, they would enter the yard at the cowshed with the other 250 odd cows and go through exactly the same process. Being intelligent animals and quick to learn, they knew all about what milking entailed.

72 was not a pretty cow, not by Friesian standards. She didn’t have that handsome black and white coat that is so synonymous with Friesians, and most of the rest of the herd. Hers was a muddy brindle and black colour.

Perhaps it was professional jealousy, perhaps she was bullied by the others, perhaps she had no friends, but there was one consistent thing you could count on—her belligerent attitude.

Her demeanour, her stance, behaviour, attitude when milking; she just disliked the world and was happy that everyone should know. When milking, she would stand with her head down, ears back tail swishing vigorously, trying to catch any poor unsuspecting human who wasn’t watching, across the face.

And she would kick four or five times like clockwork. Once when you washed her, once when you started her [ready for milking], once when you put the milking cups on and once when you took them off. Often for good measure she’d kick them off in the midst of milking as well.

You knew and would watch out for her. Only if you were particularly tired or not concentrating would you get caught. In the middle of winter, with a substantial frost on the ground and wet hands, your fingers felt like tender little numb stubs on the end of your hands. Collecting a hoof right across your fingers would hurt, a lot, and remind you that you should have been paying more attention.

Why was 72 always like that? I never studied cow psychology but she just didn’t like the world. So, what for many cows was merely a routine part of life was for her a constant reminder of her need to rage against bovine oppression.

I’ve met clients like 72.

You can look at their situation and in a few minutes sum up the numbers and work out the issues. Financially everything should be working well, but it’s not. And the reasons are clear.

The challenge is getting acceptance that the numbers are telling a story and that what is required is not a new and sexy investment program, nor an app for their smart phone. What is required is to acknowledge that there is little or no connection between money coming into the household and what’s going out. Cashflow.

It’s as plain as day, but goes totally unrecognised.

And this behaviour may be decades old. Just like 72 that’s the way it is. More to the point that’s the view from where they stand and it’s normal.

So apart from stating the ‘bleeding’ obvious—what is the resolution?

In the face of facts they will state the need to invest, get better rates, get a salary increase. The reality is they need to watch what goes out of the house. Actually take some notice and manage it better. When we’ve helped them do that successfully, then and only then will they have the platform on which to build everything else. Failure to that will build a house of cards that will fall over, as it often has several times before. Until then it will be another year of the same old outcome.

So why do people choose to ignore that facts and do the same things over and over and expect a different result?

I don’t know, I never studied cow psychology.

Rex Wood Director

Iridium Financial Services

Sydney, Australia

Iridium Financial Services works exclusively with people between 40 and 50 who have been earning pretty good money, but realise that their net worth doesn’t reflect the amount of money they’ve earned or the hard work they’ve put in over the last 20 years or so.
They feel like they’re falling behind and want to catch up, before it’s too late

It’s about the “Money, money, money”


How to build a super-profitable advisory firm

We recently noticed some very interesting tweets on “How to build a super-profitable advisory firm” and after reading and digesting them we felt it was worth a conversation with the “Tweet” source- a forward thinking accountancy firm, the WOW Company.

As accountants, they’ve worked with hundreds of small businesses over the years, from start-up to £5m turnover and with this in mind we asked them to share their thoughts and experiences with the community, we are sure you will find this an interesting and informative read.


“We’re constantly fascinated by the difference between those that make it big and those that just tick along, so we thought we’d find out what separates these two groups and share with you the things you need to be thinking about if you’re serious about building a super-profitable advisory firm.

Get cash in quicker

Some quick tips to get your cash in quicker (particularly relevant post RDR):

  • Ask for deposits – Do not start work on a project until you have been paid a deposit. If the client is not willing to work in this way, walk away. They will only be a nightmare further down the line.
  • Staged payments – Don’t leave a massive payment to be made at the end, split the project up into its key milestones and look to invoice regularly throughout.
  • Reduce your payment terms to ‘by return’ – If you give 30 days credit, you cannot start asking for the money for 30 days. This is crazy – it is the banks that should be lending to businesses right now, not you! Change your payment terms on invoices to ‘by return’ and you’re then able to ask for the money sooner.
  • Be upfront – State your terms in your ‘terms of engagement’ document. It won’t stop clients trying to negotiate, but at least you can start the discussion on your terms, not theirs.
  • Retain leverage – Don’t e-mail over the final report or complete the pension transfer until they have paid for it. Once the project is completed, you’ve got no leverage.
  • Have a system for getting cash in – Review your debtors at least once a week and allocate time to make phone calls to get the cash in. If you’re not comfortable doing it, find someone that is.

Really get to grips with the numbers

Unless you really understand the important numbers in your business, you’ve got no chance of increasing your profit. And we’re not just talking about understanding your accounts here. There are everyday numbers within your business that will be crucial guides to how you are doing. We help our clients set up dashboards for their businesses, to ensure you are regularly reviewing the numbers that are important to you.

Every business is different, so we’re offering 30-minute telephone reviews for any small business who needs help setting up their dashboard. Get in touch if you’d like to arrange this (no charge for this initial chat).

Prioritise sales & marketing

We’re Accountants, so we’re not going to start dispensing marketing advice. However, when we did our research, we noticed that the clients that make the most profit mentioned that a key turning point for them in their growth journey was when they decided to prioritise sales and marketing. We spotted a number of common traits amongst the top performing advisory firms. They all had the following:

  • An individual responsible for sales and marketing (it didn’t fall in between 2 directors).
  • Allocated time to complete sales activity, e.g. every Tuesday & Thursday, or the first 2 hours of each day.
  • Targets for generating opportunities, e.g. number of meetings required per week.
  • Kept track of the key stats, e.g. where the client heard about them, number of meetings, value of assignment, conversion rate, final project value.
  • A plan – Not ‘War & Peace’, but a simple one page plan that showed them what they were going to do this month to generate clients.

Do you prioritise sales and marketing in your business?

Make your projects more profitable

It’s one of the biggest challenges that advisory firms face: Delivering great client service, whilst still making a profit. We see so many firms walking the tightrope between keeping the client happy and ensuring that the scope of the job doesn’t creep beyond the original boundaries – how many times have you said yes to the question “Can you also help me with this?” but then not charged for this additional help? The reality is that there is no simple answer to solving this challenge, but there are lots of little things that you can do to help you achieve more profitable assignments.

Much will depend on how you are doing things at the moment, so get in touch to discuss how you can create more profitable projects. We’ll happily spend 30 minutes on the phone chatting through a few ideas that we have up our sleeve.

Get out of the day-to-day

This is easier said than done, but unless you step away from the coal face, you’ve got no chance of generating sustainable profits. We noticed that the top performing clients we surveyed were masters at delegating and building teams around them that could do the work. The founders were brave when it came to recruiting (they did it early) and were constantly looking ahead to help plan what resource they’d need, including investing early in apprentice paraplanners and training them up for the future.

If you feel that you’ve not got the right team around you to delegate to, then you need to do something about it…. and fast. You’re also going to have to get really good at letting go of the day-to-day tasks, to allow you to concentrate on the bigger picture.

If you’d like to build a super-profitable advisory firm and are looking for an accountant to help you get there, get in touch via

Peter Czapp;