Some words of wisdom for the nervous investor!

The following is a refresher of an e-mail I sent on 27th March 2018 when markets were, as now, lurching all over the place. I have added a chart at the end to give some additional weight to the comments below.

‘I am a great fan of a man called Nick Murray, a Financial Adviser in the US, and what follows are a few of his beliefs around investing. I subscribe to these views 100%!

I thought you might these pearls of wisdom reassuring while markets seem to be going through a turbulent period.   

I believe that the great long-term risk of stocks is not owning them

On July 8, 1932, the intra-day low of the Dow Jones Industrial Average was 40. On October 14, 1996, the Dow closed over 6000. The intervening period was the worst in human history: Depression, WWII, Cold War etc. However anecdotally, I infer from these data three things. The right time to buy stocks is now (as long as you have the money); the right time to sell them is never (unless you need the money); the great risk is not owning them. Incidentally the Dow Jones, even after recent setbacks, sits at around 25,000. That was in 2018, the Dow is currently at over 33,000.

I believe that everything you need to know about the movement of stock prices can be summed up in eight words: the downs are temporary; the ups are permanent.

I never mistake fluctuation for loss. Share prices go down all the time – 25% or so on an average of every five years (albeit not lately) – but since they never stay down, it turns out not to matter. Markets fluctuate but do not create losses. Only people can create permanent loss by mistaking a temporary decline for a permanent decline, and panicking out. No panic, no sell. No sell, no lose. The enemy of investment success is not ignorance, it’s fear. So, it’s my faith, not my knowledge that saves the investor’s financial life.

I process the experience which most people describe as a ‘Bear Market’ in two different words; BIG SALE!

Since all declines are temporary, I regard all major generalised equity price declines as an opportunity to stock up on some more truly safe investments before the sale ends.

I don’t believe in individual stocks, I believe in managed portfolios of stocks

I can break a pencil; I cannot break 50 pencils tied together. That’s diversification. Thus, one stock can go to zero but stocks as an asset class can’t go to zero.

I believe that dollar-cost averaging (making regular investments over a long-period of time) will make the dumbest person in the world wealthy. Hey, look at me; it already has! 

The more ‘knowledge’ you have the more you try to outsmart the market, and the worse you do. The more you see the market as long-term inevitable/short-term unknowable, the more you’re inclined to just dollar-cost average and the better you do. Dollar-cost averaging rewards ignorance with wealth.

I love volatility

Volatility can’t hurt me because I am immune to panic. And, it can help me in a couple of ways. First, in an efficient market, higher volatility means (and is the price of) higher returns. Second, higher volatility when I’m dollar-cost averaging means even higher returns. Higher returns are good. Trust me on this.

I’m not afraid of being in the next 25% downtick. I’m afraid of missing the next 100% uptick!

And I’ve noticed that I have no ability whatever to time the markets. Still, I have found a way to machine the risk of missing the next 100% uptick down to zero. It’s called staying fully invested all the bloody time. Works for me.

I believe that prior to retirement, people should own as close to 100% equities as they can emotionally stand. Then, after retirement, I believe they should own as close to 100% equities as they can emotionally stand.

If it follows that stocks will always rise (eventually), then the above has to be true. Whether your emotions can stand it is perhaps a different matter. Many would happily sacrifice some of those higher returns for a good night’s sleep.’

That was the missive from 27th March 2018, the following chart shows what has happened to the FTSE 100 and S&P 500 since! This includes the falls we have seen since the beginning of the year, owing to the situation in Ukraine, rising inflation and threats of higher interest rates.

The big dip in April 20 was COVID of course.

I hope this chart provides further evidence, if any were needed, that all we need do to ensure we don’t make losses when markets become unsettled, is precisely nothing!  

This doesn’t mean markets won’t go lower from here, they may well do, but as long as we don’t panic we are unlikely to suffer any real long-term damage.

If you have any concerns about market gyrations over the coming weeks and months, just come back to this and every time you get an attack of the jitters (we all do, even me); keep rereading it

As always, if you have any concerns about your own financial arrangements and whether you are truly making the most of your money, please do not hesitate to call me.

With kind regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Performance/Volatility Update

Just as I was beginning to think spring had finally arrived after a pretty gloomy winter, I awoke this morning to snow flurries and freezing temperatures; let’s hope spring for real is not too far away.

As you will doubtless be aware, markets have been battling a number of headwinds over the past few months, the ending of the pandemic (maybe we are not quite there yet), rising commodity prices (in particular gas and oil) and of course the war in Ukraine.

As the world returns to some sort of normality, following the dark days of the pandemic, businesses that had benefitted from lockdowns (Netflix, Amazon, Apple and Peleton, for example) are coming off their all-time highs and industries that had suffered, are doing rather better. The problem is that many companies had effectively mothballed factories and workforces and the sudden increase in demand for their goods and services has led to rising inflation, which has only been exacerbated by increasing commodity prices. Supply chains that were effectively broken by different countries locking down at different times have also yet to be repaired – look at China right now, back in lockdown. Central banks, as they always do, have turned to increasing interest rates to try to exert control over this inflation and this too has put pressure on financial markets. Higher interest rates in corporate world means higher borrowing costs, leaving less for investment etc.

Not all markets have been affected equally, and this is why I wanted to shed some light on what has been going on with your investments with Clearwater.

Over the longer term, US markets have consistently outperformed UK markets, largely because most of the ‘new’ industries, technology in particular, are based there. Conversely, the UK market and certainly the FTSE 100 is made up of more traditional, dare I say, ‘old’ industries, such as oil, mining and banking etc. Since early January therefore, owing predominantly to rising oil and gas prices, the FTSE 100 has (quite unusually) been outperforming the main US Indices (Dow Jones, Nasdaq and S&P 500).

This unusual occurrence has coincided with Clearwater and our investment advisers, EBI increasing our exposure to the US as part of the move to the ESG range of portfolios. Most Transact clients have now made the transition and Standard Life clients are being invited to make the same change right now.

To give you an example of how things are changing/have changed within the portfolios, EBI Portfolio Vital 60 contained US exposure of 30.77% and UK exposure of 26.79%. The equivalent ESG screened Vantage Earth Portfolio 60 has US exposure of 50.07% and UK exposure of just 6.98%. This means our new portfolios are much more sensitive to movements in US markets than the UK.

The following charts will demonstrate why EBI have been keen to make these changes and also why, because of the unusual global economic backdrop, there was a period after Christmas where this worked against us.

This first chart shows the FTSE 100 vs S&P 500 over 5 years. The outperformance of the US, largely because of the rise of the tech giants, is clear to see.

This next chart looks at the same 2 indices over the past 12 months and the picture is the same, The US has outperformed the UK, although there was a coming together around the turn of the year.

BUT! The next chart focuses on the Year to Date and here we can see a slightly different picture. Since the beginning of Jan, the US markets have fallen whilst the UK has remained buoyed by its concentration in industries that have benefitted from the commodity boom; think of Royal Dutch Shell and BP etc.

When we look at just the last month however, we start to see a return to what I would call, ‘normal service’ being resumed. Since the end of Feb, the US has been back firmly in the driving seat once again and it is probably only a matter of time before the lines in the chart above cross over – no guarantees of course.

As progress towards a cease fire in Ukraine continues to be made, albeit falteringly, markets have calmed down somewhat and many of the losses (on paper only, of course) have been recovered. I don’t know whether this heralds a return to more normal markets (just a misspoken word by Biden, Putin, Zelensky, Johnson or any of the other many protagonists, could shake things up once again), but let’s hope so.

Please also remember, there will always be something affecting markets but as long-term investors we can generally relax and ignore short-term volatility, it only hurts us if we sell!   

Regardless of investment markets, I am sure we all hope for a peaceful resolution and an end to the suffering in Ukraine, as soon as possible.  

I hope the above is helpful but, as always, if you would like to discuss this or any other finance related matter, please do not hesitate to contact me.  

With kind regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Russia and Ukraine – Brief Update

Well, this has all happened remarkably quickly and despite US and UK intelligence making it clear that this was what Putin intended to do, I don’t think many rational people really thought he would actually go ahead with it. The main reason being that the risks to his country economically and more importantly (to him anyway), his domestic reputation and his legacy, are so great.

The United Nations have made it clear, ‘He must fail, and he must be seen to fail.’ Faced with this level of international resolve, it seems remarkable that he believes he can win the long game. His success in annexing Crimea in 2014, is one thing but invading a sovereign nation, is something completely different and he may have bitten of more than he can chew this time.

I received the following update from Scottish Widows this afternoon and although it doesn’t really add anything that I haven’t covered in previous missives, I thought you might like to hear it from someone else – in case you thought it was just me.

“Ukraine: Focussing on the Long-Term, Despite Market Uncertainty

In a televised speech at 05:55 Moscow time (02:55 GMT) on Thursday 24th February, the president of Russia, Vladimir Putin, announced a "military operation" in Ukraine's eastern Donbas region, with reports of tanks and troops pouring into Ukraine along its eastern, southern and northern borders.

This marked the start of a Russian invasion of Ukraine and represents a significant and serious event for European and global relations. Aside from the tragic human consequences of the unfolding events, the news of Russia's invasion of Ukraine has other wide-reaching effects, with the volatility in financial markets one of the immediate and visible impacts for investors globally.

The first day of the invasion saw equity market declines globally, with the FTSE 100 Index of largest UK stocks down almost 4% and the DAX index of the top 40 stocks in Germany falling by a similar amount. The Russian MOEX Index dropped by over 30%. Crude oil markets also reacted, with the price of Brent crude - a commonly used benchmark of oil prices globally - rising above US$100 for the first time in over seven years.

In early trading on Friday 25th February, several equity markets had rebounded somewhat, with the FTSE 100 and the DAX 40 Indices both up by around 3.0%.

Volatile times

Over the past few months, in the runup to Russia's invasion, volatility had already returned as a feature of investment markets. Worries included the trajectory of global economic growth and the pressure on major central banks to raise interest rates to curb inflationary pressures. The uncertainty caused by the start of hostilities in the Ukraine has added to this bout of market turbulence.

While the catalyst for current market reaction is clearly very different from some of the more recent and sizable market shocks - such as the Covid-19 pandemic or the global financial crisis - there is the potential for these to be considered when looking for likely comparisons. It's worth recalling the sharp market falls in shares and bonds across the world in March of 2020, as the Covid-19 pandemic unfolded, amid the initiation of lockdowns and the shuttering of industries in many countries globally. We have since seen markets and economic growth stage robust recoveries, even though the pandemic is not over. To put it into context, global equity markets (as measured by the MSCI World Index) posted an incredibly strong return of around 23% in sterling terms over 2021, and similarly robust returns in 2019 and 2020 calendar years.

Multi-asset investing

In our view, market shocks highlight the important role of diversified multi-asset portfolios, where bonds, equities and other asset classes can complement each other. Many studies have shown that by having diversified portfolios you invariably spread risk, without reducing potential returns. In part, multi-asset portfolios are designed to benefit from the basic premise that different asset classes tend to perform in different ways in a variety of market conditions. For example, it may be the case that when there are losses in one asset these may be offset with gains in another. Shorter-term volatility in investment markets can seem sudden and even worrying, but for longer-term investors we believe it is important to avoid knee-jerk reactions and remember the benefits of having a diversified portfolio that looks to the long term.”

I hope the above is helpful but, as always, if you would like to discuss this or any other finance related matter, please do not hesitate to contact me.  

With kind regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Russia and Ukraine

Anyone that watched Putin’s rambling address to his security council last night could not help be worried that such a man appears to be holding the rest of world to ransom at the moment. I hope the following will help put what is going on into a wider context:

Rising tensions over Russia and Ukraine have taken over as the dominant factor driving day to day movements in markets. Yesterday, Russia recognised the breakaway regions of Donetsk and Luhansk in the Donbas region of Ukraine and plans to send "peacekeeping" forces to the area. These areas were already controlled by pro-Russia militias, so this could be seen as confirming the status quo. On the other hand, it will be seen as provocative by Ukraine and its allies. Sanctions will be forthcoming, as evidenced by Boris Johnson’s statement at lunchtime, but for now not on the scale that the US, UK and EU have threatened if it became a full invasion. 

Putin’s actions yesterday caused a drop in equity markets and a rally in US Treasury bonds yesterday afternoon, which continued in the Asian session overnight. The biggest damage (so far) has been in Russia's own equity market with the MOEX index down 17% over yesterday and today (as at 7am GMT). The Ruble has also dropped, meaning the MOEX is down over 20% in Dollar terms. Perhaps this demonstrates that the damage to the Russian economy may be worse than the damage done to the rest of the world. 

An invasion of Ukraine would most likely see oil and gas prices continue to rise and the stock market to fall further. How far and how deep would depend to some extent on how far it goes. It seems unlikely that NATO forces would get involved directly in any fighting. Russia may settle for what it did yesterday, recognising the pro-Russia separatist regions of Donetsk and Luhansk and putting Russian troops on the ground in this Russian speaking region. This would be symbolic but would, as has been said earlier, do little more than recognise the status quo. While this region has a very high ethnic Russian population, a much larger part of Southern and Eastern Ukraine has a majority of Russian speaking population.

Russia's main concern has been the expansion of NATO into what it sees as its sphere of influence, but it has also been keen to support ethnic Russians in Ukraine. This may be the excuse for a full invasion which would be the biggest war in Europe since 1945.

These are dark times and when trying to understand the implications, we tend to look for historic comparisons. There is nothing that compares directly but we have looked at the Cuban Missile crisis of 1962 for US/Russia tensions and the Iraq invasion of Kuwait for oil supply disruption to try and tried to put this into some historic context.

Firstly, we would stress that a de-escalation of the tensions around Ukraine would be best for all parties and diplomacy may yet bring that to the fore. Secondly, today’s circumstances are very different - the Cuban missile crisis threatened a direct confrontation between two major Nuclear powers and the destruction of life as we know it. President Biden has made it clear that direct fighting between the US and Russia is unthinkable and that US forces will not fight in Ukraine. It would result in sanctions which could see Russian oil and gas supplies cut off which is why it is somewhat comparable to Kuwait, which threatened disruption in supply of oil from the gulf.

The Cuban missile crisis took place between 16th October and 20th November 1962. This was after a sustained rally through the 50s when the S&P peaked in 1961, then corrected 27% in what was known as the Kennedy slide - bottoming in June, it started to recover 14%. It declined again but only fell 6% in the early days of the crisis before bouncing back. By September 1963, it was making a new high passing the 1961 peak. The market was helped by JFK who agreed to tax cuts and reduced margin requirements.

The invasion of Kuwait came on the 2nd August 1990. Over the following weeks the oil price rose over 80% and the S&P fell 17%. The S&P gradually recovered only dropping a little ahead of Operation Desert Storm, which when successful saw the oil price fall back, and the S&P recover by the end of 1991. At that time, it was 17% above the level pre the invasion. All of this occurred despite a recession in the US from July 1990 to March 1991. Interest rates were cut from 8% to 4% to fight the recession.

Clearly the time to buy was mid-crisis when it looked bleakest. If you traded out, you probably would have congratulated yourself but would probably not have bought back until the market had bounced. Trading short-term moves is nearly always dangerous. 

Rate cuts on the scale of 1991 are not possible but despite higher energy and agricultural prices, the Federal Reserve would probably be reluctant to raise rates as fast as is already priced into markets. The European economy would be hardest hit being dependent on Russian gas. However, European markets reflect this risk to some extent already. It should also be noted that while the oil price has risen steeply, the futures curve implies that the oil price is still expected to fall back later this year and into next year. 

We all hope that the Russians see the potential economic damage and that the diplomats find a way through the present crisis as they did in 1962.

What I am essentially saying is that it is usually unwise to try and ‘time’ markets when these things happen, and they do happen with some frequency over an investing lifetime. As with the examples above, history shows us that sitting tight has ALWAYS been the best strategy in the past, trying to time when to come out and just as importantly, when to go back in, is devilishly difficult; those that have done it successfully have probably just been lucky.  As an example, following the news last night, a betting man would probably have expected the FTSE 100 to heavily fall this morning but at time of typing (14:50), it is actually up 0.23%.

This current bout of geopolitical tension will eventually pass, just like the Cuban Missile Crisis, just like the Gulf War and just like COVID, we just have to be patient.

As always, if you would like to discuss this or any other finance related matter, please do not hesitate to contact me.  

With kind regards,

Yours sincerely 

Graham Ponting CFP Chartered MCSI

Managing Partner

It’s That Time of the Year Again!

As we approach the end of the 2021/22 tax-year, thoughts inevitably turn to end of year tax planning and any unused allowances (ISA, Pensions etc.) that may be available.

The ISA allowance for 2021/22 is £20,000 and if you have not made a subscription (or perhaps you have only made a part subscription), there is still time to use this allowance if you have the funds available.

Since 6th April 2016, in addition to the subscription, it has been possible to top-up ISAs by any amounts withdrawn during the tax-year, including any charges deducted. This means that even if you have not made a subscription this year but have ISAs from previous years, your personal ISA Allowance may be more than £20,000 because of charges deducted during the year. If you made a subscription at the beginning of the tax-year, you may still have a residual allowance left because of these deductions which can be utilised by 5th April 2022.

If you have a Standard Life Wrap Account, the scope for top-up (in addition to any unused subscription) does not apply, unless you take physical withdrawals from your ISA. This is because Standard Life deduct ISA charges from the cash held in your Portfolio and not from the ISA itself.

If you have a Transact Wrap Account and you would like to know your personal ISA allowance for the remainder of the 2021/22 tax year, you can access this information on the Transact website. From your home page, select reports and from the drop-down menu, select ISA Subscriptions.

If you would like to use the balance of your allowance before 5th April, please ensure you advise us of your intentions before the end of March; we will be very pleased to assist.

Just for information, the ISA Allowance for 2022/23 is likely to remain £20,000 each, so £40,000 per couple.

Capital Gains Tax (CGT)   

Currently, rates for CGT are 10% for Basic Rate Taxpayers and 20% for Higher Rate Taxpayers, where property assets are concerned (excluding the main residence) the rates are 18% and 28% respectively. There is an allowance each year (currently) of £12,300 before CGT becomes payable.

Income Tax rates of course, are 20%,40% and 45%, so quite a bit higher than taxes on capital gains!

It might be sensible to at least consider using this year’s CGT allowance before the end of the Tax Year. If you do wish to look into this, please do let us know and we will try to assist.

If you have a General Investment Account (GIA) with us worth more than £250k, we will be contacting you individually over the course of the next couple of weeks or so.   

Many of our clients will not need to take any action, as most assets are held within ISAs and Pensions, where CGT does not apply.

As always, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Recent Market Volatility 2

A very short missive this time.

I completely neglected to mention in my previous round robin on market volatility that these market setbacks, as they occur from time to time, do provide excellent ‘buy in’ points. If we accept the wisdom that markets always recover (which I hope we all do), then it must make sense to buy on the dips.

If you are currently sitting on a lot of cash that is not needed in the short-term and is probably earning only a pittance in interest, then investing in a balanced, highly diversified portfolio could be a good way of trying to overcome the higher levels of inflation we are currently saddled with. It could make even more sense now that the investments are available at something of a discount!

Markets could still go lower of course, and that is why it is only sensible to commit funds that can remain undisturbed for say, 5 years or so.  

If this is something you would like to have a chat about, please do not hesitate to get in touch.  

With kind regards,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Recent Market Volatility

Firstly, a very Happy New Year to you all, I do hope you had a less constrained and consequently more enjoyable Christmas and New Year break than last year.

As January draws to end, I just thought I would write a few lines of comment on the volatility we have seen in markets since the beginning of the year.

To give you an idea of what has been going on I have included some charts below. I have used the S&P 500 Index in the US to demonstrate, as it has been one of the worst affected markets.

This first chart takes a look at what has happened to the S&P 500 Index since 1st January 2022, up until the close of business last night:

These are quite sharp falls and inevitably this has taken the shine off some the rapid recovery we have since the worst days of the pandemic; so what has been going on?

Well, there are a number of headwinds battering the markets at present and when we look at these, recent market falls become a little more understandable. I will summarise the key factors below:

Firstly, we have been experiencing a significant uptick in inflation across the world, as global economies emerge from the pandemic. As an example, that you have probably spotted in the news, the latest CPI figure for the UK is 5.4% per annum, set against a Bank of England target of just 2.0% per annum. Higher inflation was perhaps inevitable, as supply chains that were wound down during the pandemic take time to spool up; not only are supply chains struggling but consumers are sitting on significant levels of cash (money they haven’t been able to spend over the past 2 years), which is now being deployed in the economy, creating the classic ‘too much money chasing too few goods scenario.’

It is not necessarily inflation in itself that is having an impact on the markets, it is more the expectation that the way central banks will attempt to combat it will be through the use of higher interest rates and a reduction in market support through quantitative easing (QE). This potentially makes it more expensive for firms to service their borrowing and restricts their ability to expand, all at a time when they are trying to get back on their feet following the pandemic. Some of the volatility, particularly in US markets, has been caused by concern over what the US Federal Reserve might announce regarding interest rates and a reduction in QE, at their meeting later in the week. The expectation is that an interest rate rise will be announced in March and the tapering of the reduction in QE will be accelerated, and markets don’t like this.  

In addition, President Putin has amassed what looks suspiciously like an invasion force on Ukraine’s lawn and this is causing a great deal of global tension. Assuming he does invade, what will the response be from NATO and how will this affect stock markets? It seems unlikely that troops will be sent in, the response is more likely to be coordinated sanctions and the question then becomes, what will Russia’s reaction to these sanctions be? Will it weaponise its gas supplies, restricting or even cutting off supplies to Europe? This uncertainty is weighing on markets but as the resolution of these tensions is unlikely to involve global conflict, it is questionable by how much.   

Finally, we have a significant sell-off in tech markets (almost all major tech companies are listed in the US) as earning expectations fall, as we emerge from the pandemic. As an example, the rate of increase in subscriptions for both Netflix and Peleton did not meet 3rd Quarter expectations (not by much) and their share prices fell immediately by approx. 20%! It could be argued however, that this 20% fall is just some of the froth being wiped off the top of valuations, following amazing years for both of these companies – can’t go to the cinema, I’ll sign up to Netflix – can’t go the gym, I’ll subscribe to Peleton; the pandemic wasn’t bad for everyone!

Having looked at the causes behind the volatility, how worried should we be and what does the future hold? The short answer (as it always is), is I don’t know and neither does anyone else! A longer answer involves looking at these falls in a longer-term context. The following chart shows the S&P over the past 12 months:

The recent sell-off is clearly significant but it is not catastrophic and it certainly does not constitute a crash (yet), when looked at over a 12 month period.

If we look over a full 5 years, just to make sure we include the major falls that occurred early in the pandemic, recently volatility is put into its proper perspective, see below:

Falls of this type are not unprecedented, we have seem them before and we will see them again; over even longer time periods these corrections can be described as part of the normal market cycle.

The advice, as always during these periods of uncertainty, is to sit tight if you can and ride out the storm, markets have always recovered from even the biggest crashes but sometimes we have to be patient. The most important thing to remember is that falls in your portfolio are not ‘real’ unless you sell, if you can hang on, you are likely to lose nothing and hopefully earn a decent, inflation beating return.

I hope I have been able to provide a little bit of reassurance, but if you are concerned and you feel that a chat would be helpful, please do not hesitate to call, there is nothing I like more than speaking with my lovely clients!

Rest assured, further Round Robin e-mails will follow, as things develop.     

Wishing you and all those you care about, all the very best for the rest of 2022.

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Festive Greetings!!!

Adam, Kim and I would like to take this opportunity to thank you for your continued support and of course to wish you and your family a very Merry Christmas and a Happy New Year!

Who could have imagined at around Christmas time in 2019 what was soon to follow? A global pandemic that in some way or another has affected all of us and those we hold dear. It has taken many good people far sooner than they had a right to expect and, as a result, it has altered the way those left behind prioritise what’s important in life; a brutal way to learn such an important lesson. I do hope we remember what we have learned when COVID in all its mutations and variants finally abates, and we are no longer smiling at people in supermarkets from behind face coverings (it is amazing how you can still recognise a smile, just from the eyes).   

2021 has been another difficult year for everyone and yet all my wonderful clients and indeed family and friends have continued to face the challenges of living in the middle of a pandemic with good humour and pragmatism!

As with quite a number of years now, in lieu of sending individual Christmas cards, we have again decided to make a donation to a worthy cause.

One of my longest standing (well over 30 years) and lovely clients is currently undergoing treatment for breast cancer and in support of her and in memory of all those we have lost to this disease; our donation will be to Breast Cancer UK.

Cancer of course, is not a disease that affects the sufferer only, husbands, wives, children and extended family are all along for the difficult and emotionally draining ride. The more we can do to get on top of this illness in all its forms, the better.

I am sure you will approve of my decision to support this important charity.

I do hope 2022 brings you all you would wish for and, of course, an end to COVID.

With very best Christmas wishes,

Yours sincerely

Graham Ponting CFP Chartered MCSI

Managing Partner

Don’t save it all for a rainy day!

I was reflecting on the recent death of the brilliantly funny Sean Lock and was watching a few clips of him at his best, including the show just after the news broke about Jimmy Carr and the tax avoidance scheme with which he was involved.

Lock’s line was: "We all like to put a bit of money away for a rainy-day Jimmy, but I think you are more prepared than Noah."

It reminded me of many clients I have worked with over the years who have managed their money extraordinarily well and are therefore very well prepared for those ‘rainy-days’, when they come along. The problem is that, as in the case of Sean Lock’s joke aimed at Jimmy Carr, many are possibly almost too well prepared, and they may have achieved this state of excessive financial security at the expense of enjoying life along the way.

After all, how many rainy days are there going to be beyond the age of say, 75?  

As a wealth manager I think I am only doing half of my job if I just look after people’s money and help to make them more cash. They may gain comfort from becoming wealthier, which they can perceive as being happier, but few people are actually truly happy just by having even more money and looking at a bigger number on a piece of paper – well, unless they are Mr Burns from the Simpsons perhaps.

As a Financial Planner I try to explore with clients what they really want from life, discuss their hopes, dreams and aspirations for them and their family and then help them plan their finances to achieve as much of it as possible. Yes, that will involve managing the money, but it will be to achieve what the clients want, and not just to maximise returns.

I believe financial wellbeing is achieved when we help a client to live a life full of meaning and purpose, fully exploring with them what will bring them real happiness and a sense of fulfilment in their lives. Not just being able to buy the latest shiny thing or nicest car (even though that can be great fun too), but real, long-lasting self-worth.

That will be different for every single client, for some it may even be to carry on working for as long as they can; I have been amazed over the years by the number of people who, when informed they can comfortably afford to retire, decide not to! It’s usually because they are no longer working just for the monthly pay-check but because their job gives them a sense of purpose and a great deal of satisfaction. Let’s be clear, I have also had plenty of clients who can’t wait to get off the treadmill too!   

Once we truly understand each client, and what makes them tick, then we can help them attain as much of that as possible and help them manage their finances and give them the freedom and permission to enjoy life.

It’s all about balance of course, some of our clients are only just starting on the wealth creation journey and the idea of ever having too much seems but a distant dream. However, it can be difficult to identify when on the journey you have saved enough for all the rainy days that are ever likely to come along and you can relax a little.     

True financial planning should be about making clients lives richer, not just their bank balance and I really hope that’s what or clients would say we help them achieve.

I hope you found the above of interest but please do not hesitate to contact me if you have any concerns or questions relating to anything in this e-mail or indeed any other finance related matter. 

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Yesterday’s Budget

I listened to yesterday’s Budget with more than a degree of trepidation, after all this was the first real opportunity for the Chancellor to have a crack at balancing the heavily unbalanced books following the Covid pandemic!

Adding to my state of high anxiety was the fact that over the past few weeks there has been talk of Sunak attacking tax relief on pension contributions (again), of removing the ‘indefensibly generous’ tax-free status of pension death benefits and of bringing Capital Gains Tax into line with Income Tax. Imagine my surprise and relief then when none of these issues were even mentioned!

Make no mistake this was a big Budget, with £75bn of giveaways over the next five years, and yet the chancellor was still able to pay down debt.

Some of this was funded by previously announced policies, such as the new health and social care levy, and the downgrading of the state pension from a triple to a double lock.

A lot of this money, around £35bn a year, comes from improved economic forecasts which have given the chancellor an enormous amount of wriggle room.

Those upgraded forecasts have delivered even more than usual for the Exchequer, because of the Chancellor’s decision to freeze income tax allowances at the last Budget.

This means of course, that almost everyone in the country should be on high alert for fiscal drag because wage increases will result in workers paying much more income tax.

On a positive note, fiscal drag clearly elevates the case for tax planning and bolsters the value of tax shelters such as ISAs and Pensions.

As previously mentioned, savers and investors can breathe a sigh of relief over some of the things that didn’t happen in the Budget. There was no rise in CGT, and no cut to the CGT allowance. Pension tax relief and Inheritance tax remain unscathed too.

Some of the Chancellor’s policies however, notably the rise in the national minimum wage, will clearly add fuel to the inflationary fire.

The Chancellor also took time during his Budget speech to reference the Bank of England’s inflation target, and that will only crank up pressure on the MPC to raise rates when they meet next week. Interest rates are often used as something a blunt instrument in combating runaway inflation but many of the inflationary pressures we are facing relate to supply side cost increases and I struggle to see how increasing interest rates is likely to help.

I hope you found the above of interest but please do not hesitate to contact me if you have any concerns or questions relating to anything in this e-mail or indeed any other finance related matter. 

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner