My colleague Catherine McEwing, who heads up Morningstar’s European individual software business, recently had some advice to investment professionals looking to use social media as a means of communication in their every-day business. Though not directly aimed at financial advisers, I think she has some very good advice for anyone looking to increase their presence in social media channels. I know this isn’t something at the top of everyone’s mind but it is undeniable that social media will be a factor in business in the future. If you’re curious about how, or interested in exploring your options, have a quick read – Advice: integrating social media and IR – by Catherine McEwing.
Mark Loosmore, e-commerce and technology consultant, discusses technology solutions for IFAs with Dennis Hall, Managing director at Yellowtail Financial Planning and Anastasia Georgiou, Product Manager for Adviser Workstation at Morningstar. To view the full interview click on the thumbnail.
For many investors, the road to retirement is longer and more fraught with obstacles than ever before. Are your clients saving enough? Are there expectations realistic?
Almost every day I find myself ‘banging on’ about the impact that improved longevity has had (or should have had) on how we go about saving and investing for retirement. Given that relatively few start
actively investing for this stage of their lives much before the age of 30 (I suspect that most who join their first employer’s company pension schemes do so passively, i.e. take years to switch out of the default fund), many of us face the prospect of spending just as long in retirement as we did saving for it. It’s this stark reality that has leant itself to the creation of aggressive portfolios for retirees, with high stakes in equities and aided by the boom of ETF choices, among others. But the retirement phase of your investing career is so fraught with complexities that it seems paramount that investors seek professional advice—long before they reach this life stage.
Among some of these afore-mentioned complexities is the erosion of purchasing power over time, difficult-to-forecast healthcare costs, the nuances of inheritance tax, and so on. And among the pitfalls we have overzealous withdrawal rates, unrealistic returns expectations, unrealistic expectations of income needs in retirement, and inefficient sequence of withdrawals from retirement accounts.
I have no doubt that I’m preaching to the converted here so I’d be interested to hear your own thoughts on what constitute some of the main barriers to effective retiree investment plans, as well as what you see as the most lethal—or least recognised—pitfalls.
Join Morningstar and BrightTalk for a series of discussions about Closed-end funds in today’s investment landscape. Morningstar’s Jackie Beard and Tom Treanor will discuss the expected rise in investment trust popularity as RDR approaches and ways these investment products can add value for your clients. For a complete lineup of the panels, or to register, please click here.
Morningstar and BrightTalk are teaming up for another online investor summit – this time the topic is Emerging Markets. Morningstar’s Robin Johnson, CFA and Senior Investment Consultant, will be discussing the diversification attributes of emerging market debt. Several other leaders in asset management will also weigh in on their areas of expertise – from emerging market property investing to opportunities the future may bring for the sector. For more information or to register for one of the various discussions click here.
At a recent investing conference in London, I had the opportunity to speak to Roger Bootle—one of The City’s best known economists, with a long resumé of high profile positions including Chief Economist at HSBC and a member of former Chancellor Kenneth Clarke’s panel of economic forecasters known as the “Wise Men”. Bootle is currently Managing Director of Capital Economics and a Specialist Adviser to the UK Treasury. So who better than Bootle to quiz about the outlook for investors in austerity Britain, debt-riddled Europe and diverging developed and developing markets?
In a nutshell, and true to form, Bootle’s response to my question about the outlook for the developed economies was “pretty grim, actually.” Given the weakness of the consumer in the US and Europe, a strong revival would need to be fuelled by exports, but this requires economies in the emerging markets to first expand domestic demand and adjust their exchange rates. Closer to home, Bootle believes the eurozone is in “fundamental crisis” and that not only could one or two peripheral countries default on their debt but we could also see a couple of departures from the single currency club.
And the possibility of continued turmoil in the eurozone isn’t the only risk that Bootle sees investors facing. Deflation? A live risk. Gold? Potentially very risky.
So what are the main items that investors need to be aware of going forward? “Investors need to protect themselves against a very long period of very low returns–cash and bond instruments will give very little. That also of course means that those investors who are trying to construct a portfolio to fund retirement and thinking about annuities have to be really very worried about that.”
But Bootle’s not all doom and gloom. While bond yields look set to remain at very low levels, for the long-term investor Bootle believes equities are reasonably valued in Europe and particularly in the UK. While the short-term outlook is highly uncertain, a longer-term approach should deliver reasonable returns from the world of equities.
Watch the full interview on Morningstar.co.uk. http://www.morningstar.co.uk/uk/news/article.aspx?lang=en-GB&articleid=93403&categoryid=658
Morningstar and Investment Trends would like to invite you to share your views on the platforms and business tools you use and other aspects of how you run your business.
This anonymous survey is open to all financial advisers, paraplanners and adviser group or network managers, and the results are used by industry regulators, leading platforms and planning software providers to help them improve their offerings to you and your clients.
In thanks for your time in completing the survey, you can elect to receive any or all of the following benefits:
- Entry to the draw for one of **two 16GB Apple iPads WiFi + 3G valued at** **£**529 each**.
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If you would like to participate, please click here to complete the survey.
Depending on your answers, the survey should take between 15 and 25 minutes to complete. We’d appreciate it if you could complete your entry by 6pm on Friday, 12th of November.
It appears that model portfolios and IFAs who use them are the latest targets of the independent vs. tied debate which continues to gain momentum as 2013 approaches. If advisers can’t use model portfolios and remain independent what’s next? Will they have to build their own investment products?
Fay Goddard, chief executive of the Personal Finance Society (PFS), said there is a grey area concerning the use of models and she warned that IFAs who use them could jeopardize their independent status. The Citywire article can be found here. Whether she really believes this or just thinks it’s an angle the FSA is considering is not entirely clear but the article does beg the question: If model portfolios, constructed by independent investment professionals are not independent, what is independent?
Supporters of models (and sanity) were lauded by Holly Mackay from the Platforum who posted “a restricted rant” in response to the article. I think Holly makes some great points while advancing the debate. There seems to be a lot of fear mongering and emotion in the online forums recently so Holly’s response was a breath of fresh air.
This issue will continue to be debated, as will every other facet of the advice industry, from here to eternity – or at least until 2013 – whichever comes first. Using model portfolios to deliver a consistent, quality (and yes, independent) advice process has proven itself. I speak with advisers every single day who are able to provide better quality advice to more people than they could otherwise do on their own. I don’t see anything wrong with an adviser recognizing where their strengths are and outsourcing areas where they are not experts. The ultimate measuring stick is the client’s experience of course so the onus still lies on the adviser to deliver the process and provide the advice. Model portfolios can increase the quality of that process (investment selection by experts) and make it easier for an adviser to deliver the service.
Not all models are created equal though and they are certainly not a one-size fits all solution. Any adviser worth his salt knows this and it’s patronizing to use this as an argument against the independence of models. This is why our Adviser solutions can accommodate “home grown” models, 3rd party models and bespoke portfolios. Independent advice can stem from a model, or use a model as part of its process (a means to an asset allocation end) but there are other links to the chain that seem to be missing from the discussion. An independent adviser needs access to the whole-of-market as well in the event the models do not provide a complete solution for a client’s needs. Research and analytical tools are needed to dissect existing portfolios and consider products for niche investing. Independent, qualitative investment analysis provides a valuable second opinion or the needed conviction when it comes time to make an investment decision. And tools are needed to deliver a transparent, consistent service to the client while monitoring the progress of their portfolios.
Independent advice is not dead and it is not going to disappear. How independent advice is provided will continue to be tweaked though. The demands on advisers will grow and independent advisers will be held to a higher standard but I see this as a good thing for the end user – the client.
Aviva’s September report into the European pension gap made for some pretty gloomy reading—just what we need as the dark nights are drawing in—but is the situation really as bad as reported?
The claims that not only are the British suffering from the largest pension deficit in Europe but also that we need to save on average £10,000 per year to retire comfortably hit headlines hard. But this £10,000 figure is based on an income replacement rate of 70%, and though there are doubtless those who want to spend their retirement years on back-to-back cruises wearing Hermés and Dior, there are many of us who might have slightly less extravagant plans for old age.
The idea that we need to aim for 70% of our annual working income per year of retirement is clearly a ballpark figure, and little research can be successfully carried out without making at least some generalisations, but each to their own: not only will some of us be very ‘comfortable’ on something closer to 50%, we may also want to fill many of our retirement years doing something productive that not only entertains but also pays. One of my grandmothers was an accomplished artist and with time on her hands managed to produce numerous paintings that attracted buyers—they weren’t selling for millions but the extra funds helped cover the costs of occasional luxuries.
Taking the idea of working in retirement one step further, the idea of pushing back the national retirement age has been met with uproar in certain areas, but what’s the problem? We’re living longer these days so working longer doesn’t mean a shorter retirement: you could still find yourself with a good three decades of ‘free time’ even if you retire at 70.
I don’t know about you, but I get itchy feet if I don’t do anything for much more than a few days, let alone a third of a lifetime. And talk of 70-year-olds being too old to be able to do their job successfully seems overblown, not to mention ageist. My remaining grandmother is soon to become a nonagenarian (allegedly—no one’s known her exact age since she started celebrating her 30th on an annual basis around 59 years ago) and though she might not be able to outrun you, she’ll certainly outwit you. 20 years ago she could probably have done both, while whipping up some potato dauphinoise, knocking back a whisky, and completing the crossword in her head.
Times are changing, yes, but that’s because we’ve changed. To me it’s a logical next step that we update our pension system to cater for our updated lives.
I’m back from beautiful South Wales and the 2010 IFP Conference, just in time to make way for a few more American golf enthusiasts. So what was taken from the conference this year? For me it was a focus on ways advisers will be successful in a rapidly changing industry. Interestingly enough, conversations usually started and ended with process.
Charlie Ellis and Mark Tibergien started the 2
nd day with challenges to advisers. Mr. Ellis posed a compelling argument that advisers should be more focused on risk management than playing a loser’s game of trying to beat the market. A nearly impossible feat given the players in the game (institutional investors) and human nature (emotion).
Mr. Tibergien challenged advisers to grow their businesses efficiently by implementing smart, scalable processes. As an advice firm grows, people and process (technology for example) are keys to ensuring a profitable future.
It was incredibly refreshing to hear a business focused discussion about ways to succeed as opposed to the many ways the FSA is supposedly trying to ruin the advice business. Whether you believe that or not (contrary to what some Lib Dems think) we can all agree IFAs have a critical place in the future of personal finance in the UK.
I was also fortunate to hear Tim Hale speak about business practice and advice process, but from a much different angle – defending yourself in a court of law. He also stressed the need for a robust, consistent investment process and the lack of this as one of the most common weaknesses of an IFA firm. Without a sound process, the tactical operations of a firm will struggle as well – fund selection, use of asset classes and portfolio construction.
If you’ve read any of my posts before you probably know why I’m taking note of these presentations. I’ve had the process conversation many times with our clients so it was fantastic to hear different approaches and opinions. I even wrote about earlier this month! Every single presentation I attended at the IFP Conference reiterated the need for a good process with technology as the delivery mechanism so we are very excited to be in position to provide a key piece of this to the IFA community. For help implementing a process send me an email or if you have something to share, please do so in the comments below.