This blog has moved

After a long and happy association with Blogger (since February 2006), we have today launched our new website at www.icl-ifa.co.uk, using the Wordpress system.

As a result, our blog is now fully integrated within the new site and we will be posting all future blogs over there.

We will keep this blog open as an archive for the 822 blogs posted here over the past three years.

Market numbers: Friday 20th November 2009

The FTSE 100 index of leading UK company shares finished the week at 5,251.41, down 16.29 points or 0.31% on the day and down 44.97 points (-0.85%) over the week.

The index has risen from 4,434.20 since the start of 2009, a rise of 817.21 points or 18.43%. Over a year the FTSE 100 has risen from 3,875.00 (1,376.41 points or 35.52%).

£1 is currently worth $1.650 US or €1.1099 Euros.

Brent Crude Oil Future is currently priced at $77.55/barrel. Gold is $1,140.00/ounce and Silver is $18.18/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 1.5% for the year to October 2009.

Asking questions about Europe

Informed Choice chartered financial planner Martin Bamford posed a question to John Greenwood, chief economist at Invesco Perpetual, during a recent Investment Intelligence webinar:

Paul Burden

Martin Bamford of Informed Choice Ltd asks: ‘In continental Europe, there seems to be a mix of different economies at different stages of recovery or recession. How does that mix work and what impact does that have on the eurozone in general?'

John Greenwood

Well there are a couple of things to say on that. First of all, if you take the core countries like Germany, France and Italy, Europe's indebtedness was much less than the Anglo-Saxon economies, Spain and Ireland etc. Therefore, they don't have these balance sheet repair problems and can start to see consumer and business spending picking up. They don't have the problems to address that we have. However, Europe, on a whole, tends to grow rather slowly and I do not think that we should expect a strong boost in growth. That's the first part.

The second part really involves the economics of a monetary union. Europe is a monetary union and what you tend to see in a monetary union is an equalising of incomes over long periods of time. Think about the United States, in the immediate post-war years, states like Missouri, Alabama and Louisiana were much, much poorer than the northeast or California. What's happened in recent years, because wages are lower, a lot of money has gone into those areas.

That is exactly what we are seeing with Spain, Portugal, Ireland and Greece etc - the peripheral countries - where rates of pay are much lower. One of the problems of a monetary union, as it gets bigger and bigger, is that you do tend to get this movement of money to the peripheries or to the areas where wages are much lower. That is why we see a more exaggerated business cycle in countries like Spain and Ireland.

Gone in a flash

The UK savings market continues to be rather dynamic, against a backdrop of a static Bank Rate at 0.5%.

Today we were informed that National Savings & Investments have pulled their 1 and 2-year Guaranteed Growth Bonds and Guaranteed Income Bonds from sale with immediate effect. This is the result of a higher than anticipated take up of these market leading savings rates.

The 3-year and 5-year Issues remain on sale to customers with attractive rates. However, after the recent turnaround in inflation, savers should be cautious about fixing their savings rates for too long.

Fixing for a year or two is probably a reasonable thing to do when the rates on offer are attractive. If you fix for three or five years then you might find yourself locked into rates which are quickly overtaken when the Bank Rate is moved up in the medium term.

What this should tell savers is the importance of shopping around to find a competitive rate and then taking advantage of it quickly when it is discovered. The best deals will not hang around for long, particularly when they are backed by HM Treasury.

The NS&I deals received a lot of positive press when they became available, so they were bound to be popular. The speed of the withdrawal suggests that their popularity surprised even the forecasters at NS&I. At least it sets the bar for other banks to offer an equally competitive deal over 1 or 2 years if they want to bring in some much needed cash.

Japan: A new dawn for the land of the rising sun?

In a new guest post for BrilliantWithMoney, Tom Stevenson from Fidelity International explores the reasons why it might be wrong for investors to simply write off Japan.

Tom joined Fidelity in 2008 as Head of Corporate and Investment Communications. Tom has been a financial journalist for nearly 20 years, writing for the Investors Chronicle, The Independent and more recently the Daily Telegraph.

You can read the article in full at www.brilliantwithmoney.co.uk/2009/11/18/japan-dawn-land-rising-sun/

Inflation on the rise

The Consumer Prices Index (CPI) measure of price inflation has risen to 1.5% in October, up from 1.1% in September. It remains below the official Government target of 2.0%.

This is the first time we have seen CPI rise since February.

At the same time, the Retail Prices Index (RPI), a measure of inflation that includes mortgage and housing costs, rose to -0.8% from -1.4%. It remains in negative territory over the past twelve months.

These moderate increases in inflation have been mostly attributed to the fact that fuel prices fell by less than they did in the same period last year. The cost of second-hand cars also contributed to the rises.

The news came as no surprise to the markets as analysts had already predicted a short term spike in inflation. They also expect them to slide back in the medium term.

Inflation is also expected to go up once the VAT cut is reversed in January.

Because it could be you!

Informed Choice chartered financial planner Martin Bamford shared some tips with winners of big Lottery prizes recently, in an article in Professional Adviser.

Referring specifically to the recent £45.5 million EuroMillions win by Les Scadding and his wife Samantha Peachey-Scadding from Caerleon, South Wales, Martin had the following advice:

This is clearly a life changing event for Les and Samantha. I have no doubt that they will be on the receiving end of plenty of well meaning advice from family, friends, professional advisers touting their services and, sadly, a few crooks as well. It is important that they take things slowly, don’t rush into any major decisions and ensure they are doing things for the right reason, rather than to line the pockets of others.

We all have different objectives in life. Suddenly winning a massive amount of money should not fundamentally change these objectives although it does open up a whole new world of possibilities. They should do their best to live the rest of their lives in line with their own values rather than how they believe the wealthy live.

We tend to see only one version of the super wealthy in the public eye; those with flashy lifestyles – driving expensive cars, living in massive properties and spending a disproportionate amount of time on foreign holidays. In reality, most rich people live quiet and unassuming lifestyles. If lottery winners believe all of the hype about what being rich involves, they will quickly fritter away even this substantial amount of cash.

A good plan of action would be to work with a professional qualified financial planner on a fixed project fee basis, so there is no motivation for the adviser to recommend a commission paying investment solution. Paying a fixed fee will ensure there is no potential for bias with the advice. The lottery organisers will want to parachute in their own financial adviser, but these winners are at liberty to shop around and find an adviser better suited to their own needs.

Suddenly being on the receiving end of a substantial amount of money can place a great deal of strain on even the most secure relationships. As well as their own marriage, they will need to pay particular attention to the relationships they have with their family. It would make sense to establish firm ground rules now in terms of the money, how it will be used during their lifetime and what any future inheritance might look like.

For any future lottery winners, possibly the best advice would be to keep their identity secret. Going public on a big win can bring with it unwanted attention and problems. Confidentiality can give lottery winners some much needed breathing space and allow them to make important decisions in their own time.

You can read the Professional Adviser article in full here.

Confidence in Chartered Financial Planners

Some new research from the Chartered Insurance Institute (CII) has found that the majority of consumers say they would have more trust in advice from a Chartered professional than one who is not Chartered.

The report also found that:

-People rank Chartered status at number one for confidence in professionalism

-Three out of four consumers recognise a Chartered title for people giving financial advice

-The majority of MPs agree that more Chartered professionals would result in higher levels of public trust in professionalism

-The majority of consumers believe that they can expect greater professionalism from a Chartered professional

Informed Choice became the 99th firm of Chartered Financial Planners in December 2007. Within the firm we have a number of individual Chartered Financial Planner title holders.

As a firm of Chartered Financial Planners we have satisfied rigorous criteria relating to professional qualifications and ethical good practice. This means you can be confident that you are dealing with one of the UK’s leading firms that is wholly committed to providing you with the best possible advice, service and support.

It is reassuring to see from this research that our current and prospective clients are recognising the value of seeking professional and independent financial advice from a firm of Chartered Financial Planners.

Market numbers: 13th November 2009

The FTSE 100 index of leading UK company shares finished the week at 5,296.38, up 19.88 points or +0.38% on the day and up 153.66 points (+2.99%) over the week.

The index has risen from 4,434.20 since the start of 2009, a rise of 862.18 points or 19.44%. Over a year the FTSE 100 has risen from 4,169.20 (1,127.18 points or 27.04%).

£1 is currently worth $1.668 US or €1.1189 Euros.

Brent Crude Oil Future is currently priced at $76.37/barrel. Gold is $1,107.50/ounce and Silver is $17.32/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 1.1% for the year to September 2009.

If it seems too good to be true...

There is a simple rule when it comes to investing money. If it seems too good to be true, it usually is.

Sadly, some investors will continue to ignore this fact of life and risk everything chasing larger than plausible returns.

Last week we heard how the Serious Fraud Office had raided the offices of an investment fund in Surrey, after questions were raised by investors about a missing £20 million of their money.

The fund in question was apparently offering a 20% a year guaranteed return.

In the current low inflation, low interest rate environment, a guaranteed 5% a year return should be enough to raise suspicions. Even when times are good, 20% a year, every year, is not a realistic prospect.

It seems that only overseas investors, particularly British nationals and other expatriates resident in Majorca, were caught up in this alleged fraud. The fund also had investors based in France, the USA and the UK.

If someone is offering you guaranteed investment returns of any type, get suspicious and try to push greed to one side for a moment whilst you seriously question the likelihood that it is the real deal. It probably is not.