Archive for the ‘For IFAs’ Category

03.24
2011

Yesterday’s Budget: what it means for you

Continuing on from the theme of our tax seminars last week, and in the interest of keeping you informed of changes and how the affect you, we thought we’d provide a summary of yesterday’s budget.

Budget Highlights

Individuals

  • Personal Allowance: The basic personal allowance for individuals, where available, will increase to £8,105 for the 2012/13 tax year (already set at £7,475 for the forthcoming 2011/12 tax year).
  • Capital Gains Tax (CGT): The annual CGT exemption will increase by £500 to £10,600 for 2011/12.
  • Enterprise Investment Schemes (EIS): Income tax relief for investment in EIS companies is to be increased from 20% to 30% from 6 April 2011.  Furthermore, the maximum amount that may be invested in one tax year is to be increased to £1,000,000 with effect from 6 April 2012 (currently £500,000).
  • Charitable giving will be further encouraged by simplifications to the Gift Aid scheme and, from 6 April 2012, by a reduction in the inheritance tax payable by estates where 10% or more is left to charity.
  • The inheritance tax nil rate band will be frozen at its current rate of £325,000 until April 2015.
  • The Approved (car) Mileage Allowance Payments (AMAPs) will increase by 5p to 45p per mile from 6 April 2011, for mileage up to 10,000 per year.  The rate will remain at 25p per mile for annual mileage over that level.
  • Continuing a regular theme from recent Budgets, further targeted reviews of tax avoidance are to be undertaken, and specific legislation introduced.  The Government’s views have been summarised in an important document published today entitled “Tackling Tax Avoidance”.

Source: flickr - vulture labs

Non-Domiciles

  • The Remittance Basis Charge (RBC), for resident, non-domiciled individuals who wish to be taxed on only foreign income and gains brought to the UK, will be increased to £50,000 for those resident here for twelve years or more.  The RBC will remain at £30,000 for those resident for at least seven years, but less than twelve.   This is expected to take effect from 6 April 2012, but will be confirmed following a consultation period to begin in June 2011.
  • A tax charge will no longer arise where a non-domiciled individual remits overseas income or gains for the purposes of commercial investment in a UK business.  This is again likely to take effect from 6 April 2012.
  • A consultation exercise is to be undertaken to consider the introduction of a statutory residence test for tax purposes, with a view to providing clarity for taxpayers.

Corporate

  • Entrepreneurs Relief: The lifetime CGT Entrepreneurs’ Relief limit will be increased from £5,000,000 to £10,000,000 with effect from 6 April 2011.
  • Corporation Tax: The main rate of corporation tax, currently 28%, will reduce to 26% with effect from April 2011, and then by 1% each year thereafter, down to 23% by 2014.  As previously announced, the small profits rate will reduce by 1% to 20% from April 2011.
  • Amalgamation of Tax and National Insurance: A further, and more detailed consultation is to be undertaken on the amalgamation of the tax and national insurance regimes.
  • To encourage businesses to use ultra low carbon cars, company car tax will be frozen from April 2013 for cars emitting less than 95g/km. Tax charges for vehicles emitting in excess of this will continue to rise by 1 percentage point from the same date.
  • Twenty-one new Enterprise Zones, with specific, detailed tax breaks available, are to be created.

 

The above lists are of course, far from exhaustive and based on the information so far available.  As ever, further details will only emerge over the coming weeks as the Finance Bill passes through Parliament, but we hope this is a useful starting point.  Please get in touch if you have any queries or would like additional information.

Posted by Fish on 03.24.2011

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03.18
2011

Investing in Turbulent Times

The world of investing has never been simple. In recent times we have had to deal with the banking crisis, European sovereign debt mountains (we preferred the wine lake!), quantitative easing and uprisings in North Africa and the Middle East. Just when things looked like they couldn’t get any worse, the terrible tragedy that has struck Japan and the nuclear disaster that is unfolding remind us that we should never tempt fate!

Source: flickr - M W Pinsent

So what is the honest investor to do? The truth is that there is no single investment strategy that is correct for all circumstances. Investors should be flexible and ready to embrace ‘active’ as well as ‘passive’ investment strategies, mix ‘buy and hold’ strategic positions with short-term ‘opportunistic’ investments. Most importantly, investors need to ensure diversification amongst asset classes in order to reduce risk. An investment portfolio requires continual review, analysis and adjustment and above all else, a calm approach. Understanding and mitigating tax is essential; HMRC offers reliefs and allowances that can significantly enhance investment returns, however careful planning is needed. You should also remember to “never let the tax tail wag the investment dog”.

 If you would like a free review of your investment strategy, why not talk to Fish Financial today?

 Note: the Financial Services Authority does not regulate trust or taxation advice.

Posted by Fish on 03.18.2011

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03.03
2011

Wiping the Slate

Followers of natural history may be familiar with the K-T boundary. Around 65.5m years ago some 75% of all species on earth disappeared. Amongst them were some of the largest and most highly specialised (not to mention successful) creatures ever to have existed - the dinosaurs. They had evolved over 160 million years to fill every conceivable biological niche and by comparison, our own antecedents were tiny creatures scurrying about in the dark and doing their best to avoid becoming someone else’s dinner!

Source: flickr - desdeaqui

The cause of the extinction? Well, current evidence suggests that a huge asteroid - so large that the top of it was still in outer space when the bottom struck the earth - was responsible. It was travelling at roughly 20 times the speed of a rifle bullet and released more than 1 billion times the energy of the bombs that destroyed Hiroshima and Nagasaki. Enough to ruin your whole day.

Since then our tiny ancestors have evolved into every type of mammal we see today from the dormouse to the blue whale (and of course, us) to fill once again, every biological niche.

And the relevance of all this? Well, two things:

  1. The UK Financial Services Industry may well come to look upon 31st December 2012 as its own K-T Boundary Extinction Level Event. A good number of highly specialised firms (large and small) are not going to survive the impact of the FSA’s Retail Distribution Review. They have evolved to thrive in the sales/commission driven world of the past 30 years and they lack the adaptability to survive in the new environment that is coming.
  2. Initially this will have a negative impact - first on the number of people qualified and authorised to give financial advice to the public and second on that very public who are faced with a more bewildering than ever array of financial decisions to make. The need for good quality advice has never been greater.

However, the K-T extinction event shows that where nature creates a vacuum something new will evolve to fill the gap. In this case, the FSA seems intent to wipe the slate clean. Many are taking this personally but it does begin to look and feel like an act of nature! There are already a number of great firms out there ready to take on the challenge. For those firms, their current and future clients, the future seems brighter than ever. For the rest? Maybe a footnote in the financial palaeontologist’s yearbook?

Posted by Clifford on 03.03.2011

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12.16
2010

The Bailout Package

We just received this as an email. We’re not sure who wrote it but we found it quite funny so thought we would share it with you via our blog.

It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that, Ladies and Gentlemen, is how the bailout package works.

Source: flickr- Randall Smith

Posted by Fish on 12.16.2010

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12.09
2010

Investment Matters: Hot Off the Press

We’ve just released our quarterly newsletter Investment Matters.

Here’s a snippet from the Market Overview:

The world remains a dark and dangerous place for the unwary investor in 2010. Many traditionally secure investment asset classes have continued to demonstrate levels of volatility that do not support their “secure” status and the need for continual vigilance has never been greater.

The big story of recent weeks has of course been the Irish Govern­ment bailout. The Butterfly Effect has ensured that the problems of this tiny nation of 4.5m people have rippled around world stock markets causing substantial sell-offs in Europe, the UK, America and further afield. The real fear is that what started in Greece and has spread to Ireland will not stop there. If Portugal or the much larger economies of Italy and Spain require a bailout the cost will be on an altogether different scale and maybe unaffordable even to the European economic superpowers?

In the meantime, another round of Quantitative Easing (Q.E.) from Mr Bernanke and the US Federal Reserve as they continue to try to spend their way out of the recession has buoyed up equity markets but achieved little else. Money intended for small businesses has been used instead to prop up bank balance sheets and buy shares and as a result equity markets remain somewhere near to their 12 month highs. As long as the European debt crisis can be held at arm’s length equity markets may continue to defy gravity. With QE propping up the markets and European Debt dragging them down, they begin to look like a driver with one foot on the accelerator and the other on the brake. They continue to steer the car and toot the horn as they career downhill and consequently the potential for an accident remains high.

To download our latest Investment Matters newsletter click here.

Posted by Fish on 12.09.2010

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11.01
2010

All That Glitters?

With so much talk of potential devaluation of major currencies through Quantitative Easing (QE), we need to find alternative investments that cannot be devalued by fiscal policies, and so have asked our new recruit to the Fish Investment Analyst Team for his views; Dean Morris is a Certified Financial Planner based in South Africa and we refer to him as our “Walking Encyclopaedia”; he admits to having read over 150 books on economics, tax, psychology, history, energy and geopolitics!

Q: Do you think Gold is undervalued, fair value, or overvalued ? 

Definitely undervalued. None of the major currencies have an intrinsic value as they once did when they were linked to a gold standard. As a result their ‘store of value’ is questionable because the supply of these currencies is adaptable to the needs of the monetary authorities. We are used to the hyper-inflation/devaluation stories of third world countries but the recent QE experiments in the US and UK demonstrates the flexibility and risks of printing presses.

I believe all “fiat” currencies, as they are called, are vastly overvalued compared to gold, and the investing public will be clamouring to get in to gold. Remember also that there are now 3 billion people in Asia who now have access to funds (unlike in the 1970s gold bull run) and these people don’t share the predominant western view that gold is an old relic. 

Source: flickr- Rodrigo Marin

Q: Do you prefer physical gold or a basket of gold mining stocks ?

Both. They are very different animals. Bullion itself will provide you with relatively safe storage of value (relative to ALL fiat currencies). The gold price can move 30% in a short space of time, so those investing in gold must be aware of such moves; individuals must be emotionally prepared to deal with that kind of volatility. Exchange Traded Funds (ETFs) are the most practical way to obtain exposure to physical gold but care must be taken to understand the different types of ETFs.

Gold stocks represent a proxy multiplier to gold. The largest input cost into a gold mine is energy, so when the gold price moves up and settles on a new average price, the additional revenue can far outrun the increase in input costs. However, they are stocks and subject to the same risks as other stocks.

Gold stocks chosen on an individual basis can lead to major loss of capital. Thus, unless you have both the time and inclination to investigate the fundamentals of individual stocks, a gold mining focused mutual fund is probably the safest option.

 
Q: How long do you think this bull market will go on for?

Another 5 years, minimum. Looking at the history of bull markets, they usually last for 17 to 25 years. This gold bull market started in 2000, so as of now (2010) we’re probably at or just over the halfway mark in time, and much lower in terms of returns. I believe the exponential stage of price rises still lies ahead.

 
Q: What price target would you place on gold and why ?

Higher, much higher, compared to all currencies. I’d say conservatively, US$4000/oz. Too much more Quantitative Easing along with the public becoming aware of the declining value of their ‘money’ and it could be multiples of where it is today.

Posted by Fish on 11.01.2010

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07.26
2010

Club Tropicana Drinks Are Free…

European Debt Crisis - Restoring confidence - is there such thing as a free drink?

Confidence in the European banking world has been a little shaky of late. The “Club Tropicana” countries of Portugal, Italy, Greece and Spain have been living the high life in recent years and it turns out that the party has been largely fuelled by loans from European banks. These banks are positively awash with exposure to southern European debt (private and sovereign) and the major European powers, it seems, will do almost anything to keep the party going for fear of what happens when the music stops.

Despite the reassuring words of Wham, the drinks at these parties very rarely turn out to be free (although rumour has it, Greece really did get in with just a smile!). The only real question is who ends up with the tab?

The latest effort to restore confidence was at best a compromise. Bank stress tests that are too weak reassure no one. But stress tests that are failed by everyone are hardly reassuring! In this sense, last weeks tests were probably pitched about right. Only seven of 91 banks tested missed the cut and none of them was a big name. So far so good.

The truth is that the stress tests were just not very stressful and as a result do not tell us too much about how they all will cope if the wind really does start to blow

The result is an extension for now, but we still feel that this represents a denial and postponement not a solution.  A double dip recession remains a distinct possibility.

We are therefore adding some sun cream to our earlier sticking plaster metaphor as there is a real danger that unwary investors could get burned. Factor 50 on standby!

Posted by David on 07.26.2010

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04.14
2010

A Brave New World…

What image should an IFA portray? What should a good website look like? What are blogs and tweets all about?

As a company, we spent a long time debating these issues and changing our minds along the way. Deciding what your brand is, and stands for, is the most important decision. We saw far too many companies with just their proprietor’s names or regal sounding names. We opted for Fish Financial -  ”contemporary without (hopefully) being too frivolous”.

www.fishfin.co.uk Clearly a website is the no.1 marketing tool these days (apart from us as individuals) but I don’t believe for an IFA that a website will ever be a ‘sales fulfilment’ tool to capture new clients who trawl the net. An IFA business is built on trust. It is essential to have the site as a credibility reinforcer because the first thing every person in the universe now does, after an initial contact, is click through from an email or look up the site having received a business card.

Fresh is a good word (in an industry with a dull reputation) that should refer to the name, brand and website. We decided to take out all the generic and technical product/industry information (stuff that you can find anywhere on the net). We have built a site around client case studies and testimonials that we hope potential clients can relate to.

We have taken on board some good advice from www.abusinessinnovation.com and www.topleftdesign.com and embarked on the new world of blogging and tweeting and I believe that is an important conduit – we are novices in this field but I do feel these are important and do provide colour and personality for any of us. In to the brave new world…

Posted by Ian on 04.14.2010

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04.08
2010

Financial Independence Day – Don’t Say The “R” Word!

No, not July 4th! But when is it? When do we reach our Financial Independence Day?

There are lots of variable factors that combine to mean that for each of us, this date will be different – but shouldn’t we all be planning for this day, and isn’t this what financial planning is all about?

Yes, we have to have confidence in the investment portfolios and strategies that we put together; without these, no financial plan can be realised. My point is that true financial planning starts much further back:

How much money do I need to do the things I want to do in life?

When will I have enough money to do the things I want to do in life?

What do I have to do differently now to achieve the lifestyle I want?

 If we don’t know the answers to these fundamental questions, what use is it knowing that company A charges 0.2% a year less than B?

If you have not already done so, sit down and work out when your Financial Independence Day will arrive. Better still, sit down with a qualified financial adviser who will ask those three big questions with you and help you to find the answers. Then, and only then, can you make fully informed decisions on how and where to invest your money.

And I didn’t mention retirement once……!

Posted by Clifford on 04.08.2010

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03.16
2010

The Wrap Rap

I have never quite got the hang of Rap Music. I have tried a number of times but, just when I think I am enjoying it, I realise that it is just the bit that has been sampled from an earlier track that I am enjoying and the rest of it is just an irritating noise!

Source: Flickr- Karin Elizabeth

For many IFA’s I get the feeling that “Wrap” is just the same. Just when they are getting to think that it has the answers, they realise that the bit they understand is the “product” or tax wrapper not the rest.

(more…)

Posted by Clifford on 03.16.2010

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