Monthly Archives: June 2016

So it’s “leave” …
June 2016

Brexit 3The UK woke up the morning after the referendum to a vote to leave the EU, the Prime Minister is set to leave office in October and the markets are suffering a bout of jitters. We all knew that these were possibilities. To some this was a good day, to others it was not. But we are where we are and we need to look forward to where we go from here.   Click here to read more.

As always, please get in touch with us if you would like to discuss this article.

Brexit
24 June 2016

brexit2We issued an article earlier this week prior to the UK’s referendum vote. The result is now known and with all markets reacting, we want to emphasise the points that we made in our earlier article.

Nothing that we said in our earlier article has changed this morning.

The market risks may seem material, but they are mitigated by the ownership of robustly structured, well-diversified portfolios.

The key is to stay calm in the face of market uncertainty. ‘This too shall pass’ as the investment sage John Bogle has said many times before at other seemingly concerning times.

At times like this, it is easy to become overly concerned about near-term events, such as the outcome of this referendum.

Your life as an investor will inevitably be punctuated by an ongoing series of near-term events, making life continually uncomfortable, unless you view them in context. Below we reiterate a few thoughts that might be helpful.

Remember:

  • The value of your portfolio simply tells you how much money you would have if you liquidated your portfolio today, which you have no intention of doing. You only make actual losses if you sell assets. If you don’t sell them, they remain in your portfolio to deliver future returns.
  • Your portfolio has a well-thought-out structure – as we explored previously and as outlined below – that has been designed to provide you with the best chance of a favourable long-term investment experience. Stick with it if your financial objectives have not changed.
  • Some assets will be doing well at times and others less so. No-one knows which asset(s) it will be at any point in time. Markets work well enough to make jumping from one asset class to another a dangerous gambling strategy.
  • Your adviser cannot control what markets do, nor can fund managers. Markets will do what they do.

Try not to worry too much about the consequences on your portfolio as you are well-positioned to weather any storms.

For further detail about the portfolio structure please read our article in full here.

You may also be interested in reading Bank of England Governor Mark Carney’s statement issued this morning which can be found here.

Please do contact us if you have any specific questions which relate to your own circumstances.

This article is for general information only, and is not intended to be advice to any specific person. No reader should take any action based on the content of the publication without first obtaining personal advice from us or their own financial advisers.

The value of investments and any income taken from them can go down as well as up.  Exchange rates may cause the value of underlying investments to fall as well as rise. You may not get back the value of your original investment.

Past performance is not indicative of future results and no representation is made that any stated results will be replicated.

Any reference to taxation is based on our understanding of the current position, which may change in the future.   The actual taxation may be affected by individual circumstances.

The FCA does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. The newsletter represents our understanding of law and HM Revenue & Customs practice All rights reserved.

 

What will you get for £168?
June 2016

Recent research has revealed how much it costs to make sure your wishes are met on death

Do you have a will? If you have, is it up to date?

If you do not have a will, then your estate will be distributed under the laws of intestacy, which differ between England & Wales, Northern Ireland and Scotland. In some cases intestacy produces the ‘right’ results, but in others it can achieve the exact opposite and create unnecessary inheritance tax liabilities.

If you do have a will, then you escape the intestacy issues, but you – or more accurately, your executors – may face other problems if the will is not up to date. In theory a will can be amended after death by way of a deed of variation, but in practice this will not always be possible. If one person gains from a proposed change, another inevitably loses and they need to agree. Unsurprisingly, not every family member is always willing to forgo all or part of their inheritance.

Pen-signing-willPutting off making or revising a will can be a false economy. Just how false has been underlined by some recent research from the Legal Services Board. This revealed that the average cost of a standard will was £168 and that even a complex will had an average cost of only £38 more. The costs involved in sorting out an estate with no will or a ‘wrong’ will are usually considerably higher – if anything can be done.

One word of advice before you make or revise your will: talk to us first. Your will is usually a key part of inheritance tax planning, so this needs to be reviewed before visiting the will provider.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax and trust advice.

Watch the dividend
June 2016

Dividend growth is slowing in the UKПечать

Shortly after the end of each quarter, Capita, one of the UK’s largest share registrars, publishes a dividend monitor. This gives a useful snapshot of the dividend payments from UK-listed companies over the previous three months. The latest edition, covering the first quarter of 2016, makes interesting reading if you are an investor in UK equity income funds:

  • Year-on-year dividends rose 6.4%, but this was largely due to some generous special (one-off) dividend payments. Strip these out and underlying dividends grew by just 1.3%, pretty much in line with RPI inflation.
  • The small positive growth in dividends was entirely due to the weakness of sterling against the US dollar, which Capita reckons accounted for £350m of the quarter’s £14,200m in dividend payments.  Many of the FTSE 100’s largest companies, such as Shell, HSBC and Astra Zeneca, use the dollar as their accounting (and dividend) currency.
  • During the first three months of 2016 dividend cuts of £2,700m were announced, but most of these will not bite until later in the year.
  • The top five dividend payers in the UK accounted for 53% of the total dividends paid in the first quarter.
  • Following its takeover of BG Group, Shell will deliver over £10bn of dividends in 2016 – nearly 13% of the total payout projected by Capita.

The concentration of dividend payments, currency volatility and dividend cuts from major companies (eg Tesco, Rolls Royce) is making life hard for managers of UK equity income funds. If you have holdings in this popular sector, it makes sense to review them now.

The value of your investment can do down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Inflation picks up – just a little
June 2016

The March inflation number was the highest since December 2014

Inflation picks up chart

UK inflation picked up in March, reaching the dizzy heights of 0.5% on the Consumer Price Index (CPI) and 1.6% on the Retail Prices Index (RPI – which is no longer an official statistic, despite being widely used by government). The CPI figure is still well short of the Bank of England’s central target of 2.0% which, as the graph shows, was last seen in December 2013.

Last year the CPI spent more time at or below zero than in positive territory, so the March 2016 number looks to be significant.  Taken in isolation, this is less likely. Naturally enough, annual inflation statistics look across a 12-month period. In March this was a problem because of the timing of Easter, which was early. As a result, the March 2016 inflation data included the Easter bump in air fares, which rose by 22.9% between February and March 2016. There was no such jump in 2015 because Easter fell at a different point in April. In the next couple of months the process will unwind.

However, there are other straws in the wind which suggest inflation could pick up. National Statistics’ data show that while the price of goods fell by 1.6% in the year to March, the cost of services rose by 2.8%. Sterling’s recent Brexit-inspired fall and the recovery in oil prices could both push up goods inflation, while the arrival of the National Living Wage may have a similar effect on services.

The message is that if you are investing, inflation cannot be ignored, even at current levels.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

The outcome of the referendum and your portfolio
June 2016

Brexit signpostWith the UK’s referendum vote on whether or not to remain in the EU almost upon us, please click here to learn more about the impact that BREXIT could potentially have on client portfolios.  The market risks may seem material, but they are mitigated by the ownership of robustly structured, well-diversified portfolios.  The key is to stay calm in the face of market uncertainty. ‘This too shall pass’ as the investment sage John Bogle has said many times before at other seemingly concerning times.