Retail distribution ban on CoCo bonds

Retail distribution ban on CoCo bondsThe Financial Conduct Authority has added CoCo bonds to the list of investments banned for distribution to retail investors.

In a new Policy Statement, the financial services regulator has made permanent a temporary ban on their distribution first introduced in October last year.

CoCos are fixed income investments with clauses written in allowing issuers to convert them to equity. They can also contain other complex terms and conditions.

Making the ban on distribution to retail investors permanent, the FCA said CoCos were “generally not suited to the needs of ordinary retail investors”.

The FCA has also banned the distribution of collective investment funds which invest “wholly or predominantly in CoCos” to retail investors.

Commenting on the temporary ban last autumn, the FCA said at the time:

“In a low interest rate environment many investors might be tempted by CoCos offering high headline returns. However, they are complex and can be highly risky, and the FCA has used its new powers to ensure that CoCos are not inappropriately made available to the mass retail market while still allowing access for experienced investors.”

It’s positive to see the regulator clamping down on the sale of risky investments like these to retail investors, who often cannot fully understand or tolerate the risks involved.

The sale of CoCos is now restricted to sophisticated investors, who can better evaluate and understand the risks involved, and high net worth investors, who can afford to absorb any losses from these instruments.

We believe that the vast majority of retail investors are perfectly well served by traditional mainstream investments.

The need to invest using esoteric, high risk and complex schemes (such as CoCos) is often driven by a desire for the adviser to look clever or for the investor to break the unbreakable link between risk and reward.

If your adviser has previously recommended CoCos, or indeed a fund which invests in CoCos, you should ask them to review the suitability of their advice in light of their new retail distribution ban from the FCA.

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Maintaining Perspective

Maintaining PerspectiveI am typing this blog with one hand. Why?

Because on Saturday morning whilst out on a long ride training for the forthcoming UK Ironman I hit some loose gravel, crashed my bike and broke my collar bone.

My immediate thought on getting to my feet and feeling my shoulder was that, with only five weeks to go, the chance of me getting to the start line is nigh on impossible.

So that is 25 weeks of hard work, grueling training sessions and sacrifices for nothing.

Sacrifices not only by me but from my wife who supported my training whilst looking after our, soon to be, one year old son.

There have even been a few occasions when I have threatened to quit when the training volume mixed with work and family commitments seemed to be too much. However, with support from friends and family I kept going.

Before my crash, I was feeling good about my training and even looking forward to the event.

Frustration is not even close to how I was feeling sitting in A&E and seeing the x-ray confirming the damage.

However, since then I have come to realise a few things that have put it into a bit of perspective for me.

Firstly, in training I have cycled and swam further than I have before and, in so doing, have broken psychological barriers previously limiting my beliefs.

Secondly, I have learned success is the next door neighbour to failure; if we truly challenge ourselves we must be prepared to fail once in a while.

Finally, and most importantly, I got to walk away from the accident.

Not long before crashing I passed a tree with a bouquet of flowers at the base spelling out ‘Dad’.

Of course it is just an Ironman.

I chose to enter it and chose each day to do the training. Nobody made me do it and the world will keep on turning regardless of whether I completed it or not but life does have bumps in the road (literal and metaphorical) which do have more emotional, physical and financial consequences.

These consequences can be much harder to gain perspective over but with time and support answers can be found.

Whilst they can’t always be predicted they can be planned for and the consequences at least reduced if not entirely removed.

Some questions to ask yourself to ensure your world isn’t turned upside down include:

• What is the financial consequence for me and my family if I lose my income, or my partner loses theirs?

• If I die am I confident my wealth will be distributed as I would wish it to be?

• How will our debts be paid if one of us dies or can’t work?

• If I have an accident so severe that I lose mental capacity will my family be able to make decisions on my behalf (don’t assume they can!)

• Do we have enough money readily available to help cover short term costs?

• Do I know what benefits my company will pay on my death or after an accident? More importantly on death, does my partner know and do I know for them?

• Who can be contacted to help sort the finances out (think Financial Planner) and are their details easily available?

• Who will look after our children if we both die?

If you would like help planning for your future and minimising the effects of bumps in your road, please do get in touch.

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Giving children a helping hand onto the property ladder

Giving children a helping hand onto the property ladderA goal we often hear from our clients when constructing their Financial Plans is giving children a helping hand onto the property ladder.

Buying your first home is an expensive business.

Soaring property prices in recent decades have resulted in homes which are unaffordable for many, without financial support from generous parents.

This often means adult children are forced to rent rather than buy, until the bank of mum and dad kindly steps in.

New research in the form of the Halifax Generation Rent Report has found a wide disconnect between prospective first-time buyers and their parents with regards to their perception of the first-time buyer market.

According to the research, just 12% of parents believe it is ‘virtually impossible for first-time buyers to obtain a mortgage’.

This rises to 21% of prospective first-time buyers.

The Generation Rent Report contains data from interviews with over 40,000 20-45 year olds built up over five years, and over 4,000 parents of 20-45 year olds over the last four years.

In recent years, the report shown parents and Generation Renters were both more pessimistic about the first-time buyer market; 21% of parents and 29% of prospective first-time buyers said it was virtually impossible three years ago in 2012.

However, with improving economic conditions and an increasing number of first-time buyers since then, both parents and prospective first-time buyers have become more optimistic.

But more than a fifth of Generation Renters still believe it’s virtually impossible to get onto the property latter.

First-time buyers moving back in with Mum and Dad is a growing issue. In 2015, 28% of parents said their children moved back to their family home, up from 24% in 2012.

The report found that direct parental contributions towards the costs of a mortgage have remained steady.

A parental contribution towards a deposit stayed the single largest type of contribution. The only increase in the last four years has been those helping with the actual costs of moving house.

If you’re thinking about giving your children a helping hand onto the property ladder, it’s important to factor this generosity into your Financial Plan.

Consider the impact it might have on your own lifestyle in retirement before parting with the cash.

You should also think about any inheritance tax implications of making the gift, and indeed whether to structure it as a gift or investment.

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No deflation this month

No deflation this monthThe UK has avoided another month of deflation, with the news that price inflation turned positive in the year to May.

Price inflation as measured by Consumer Prices Index (CPI), rose to 0.1% in May.

It was -0.1% in April, the first period of deflation since 1960.

This time around, the biggest contribution to the inflation was transport, most notably air fares, according to the Office for National Statistics (ONS).

According to the ONS:

“Last month CPI turned negative, mainly because of falling transport fares due to the timing of Easter. This month, that fall has been reversed.”

They added that falling food and fuel costs of the past year eased in May, which helped to push up price inflation.

Food and fuel prices pulled inflation down by 0.5% in May, compared to 0.7% in April.

Core inflation, which excludes some of the more volatile goods and services included in the Consumer Prices Index measure of price inflation, was 0.9% in May, up slightly from 0.8% in April.

We remain in a very low inflation environment, which suggests interest rates will remain lower for longer.

Another bout of deflation cannot be ruled out entirely; if oil prices took another tumble, we could experience more deflation later this year.

Economists are predicting inflation will continue to languish at around zero for the rest of this summer, before rising back towards the Bank of England inflation target of 2% starting this autumn.

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How much will you spend on attending weddings this year?

How much will you spend on attending weddings this year?Wedding season is nearly upon us.

Becky and I spent some time on Saturday afternoon choosing wedding rings ahead of our own nuptials in August.

And yesterday afternoon we met up with friends and talked about their own wedding plans for next year, with their wedding taking place in Romania.

Some new research from American Express has found that UK wedding guests will spend an average of £640 per wedding they attend this year. This is up from £470 last year.

More than a third (36%) of UK adults are planning to attend one or more weddings this year, according to the research.

The biggest expense for wedding guests is accommodation at an average of £114. This is closely followed by presents (£112) and purchasing a new outfit (£105).

It was interesting to read in the survey results how wedding guests are finding ways to reduce costs.

Around half of wedding guests use offers such as hotel deals (52%) or retail sales (48%) to make it easier on their wallet, while a quarter (25%) save up or dip into savings (23%).

However, almost a third (30%) of guests will turn down invitations and miss out on seeing friends and family tie the knot this year as the cost is too steep. This is worth noting if you are planning a wedding and want to ensure it is well attended by those you love; consider how much attending as a guest will cost them!

Couples can help guests keep expenditure down by choosing a local venue (the majority of guests (63%) will turn down a wedding abroad due to cost alone), planning an inexpensive stag or hen do, or telling their guests not to purchase gifts.

Despite these ideas for reducing costs, more than a fifth (21%) of couples to be admit they don’t consider the cost for guests when planning their nuptials.

How much will you spend on attending weddings this year?

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Week in review: Friday 12th June 2015

Week in reviewCall this a heatwave?!

The Informed Choice team arrived at Sundial House this morning, ready for what has been billed as the hottest day of the year to date, to be greeted by a torrential rain shower.

We hope it’s a little drier where you are today.

This week we’ve been writing about investing in a connected world, investor fears about a Grexit, why the government doesn’t trust you with your pension pot, and how much you can expect to pay to take money out of your pension.

In the latest Informed Choice Podcast, Martin talks about silver splitters, retirement as a worst case scenario and the importance of Lasting Powers of Attorney.


Investing in a connected worldInvesting in a connected world

Martin writes about opportunities for investors in an increasingly connected world, based on a briefing by Jupiter fund manager Steve Davies.

Grexit, Brexit & investor fearsGrexit, Brexit and investors fear

We know that fear often drives investment markets. With Greece still on the brink of being unceremoniously dumped out of the eurozone, are investors worried right now, and what could Britain leaving the European Union mean for investment markets?

Government doesn't trust pension pot ownersGovernment doesn’t trust pension pot owners

It’s your pension pot and the government has introduced ‘freedom’ to access it from age 55, so why don’t they trust you to make smart decisions with your money? Nick explains.

How much to access your pension pot?How much to access your pension pot?

If you take money out of your pension pot, you need to understand how much it will cost. Exit charges, facilitation charges, advice charges and taxation soon add up.


ICP027 - Silver splitters, retirement as worst case scenario & Lasting Powers of AttorneyICP027 – Silver splitters, retirement as a worst case scenario and Lasting Powers of Attorney

In our latest weekly podcast episode, Martin talks about the rising divorce rate for pensioners. He also explains why retirement should been seen as a worst case scenario and describes the importance of Lasting Powers of Attorney.


Only one in four ‘absolute return’ funds hit the target

Martin comments in The Telegraph about the failure of most absolute return funds to deliver an absolute return for investors.

Ready-made portfolios risky and expensive, advisers warn

Martin joins other advisers in warning about the risks and costs of ready-made investment portfolios, in this article from Fundweb.

UCIS scams shake my optimism

In his latest column for Money Marketing magazine, Nick suggests a solution to continued scams surrounding Unregulated Collective Investment Schemes.

Cover story: The future for equity income looks bright

In another Fundweb article, Martin shares his views on the outlook for the UK Equity Income sector and why the British business community is likely to prosper under a Conservative government.

Home truths: housing market or stock market

Martin comments for The Telegraph in this article about the merits of withdrawing money from your pension pot to invest in the property market.

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ICP027 – Silver splitters, retirement as worst case scenario & Lasting Powers of Attorney

ICP027 - Silver splitters, retirement as worst case scenario & Lasting Powers of AttorneyThis week in episode 27 of the Informed Choice Podcast, Martin talks silver splitters, retirement as a worst case scenario, and the importance of Lasting Powers of Attorney.

Subscribe in iTunes | Click to listen now | Right click to download episode

Here are links to everything covered in episode 27 of the Informed Choice Podcast:

P&G Surrey Youth Games

Extended Thinking marketing consultancy

Yuki Ito cellist

Cranleigh Arts Centre

52 Financial Planners book

Stuffocation by James Wallman (book)

Mystery Show podcast

Start Up podcast

Marketing Protection & Finance Podcast

Divorce rate for OAPs doubles in just a decade (article)

Suzy Miller alternative divorce guide

The Four Hour Work Week by Tim Ferris (book)

Lasting Powers of Attorney article

Money Marketing Financial Services Awards 2015

If you listen to this podcast, please take one minute to leave an honest review on iTunes.
Reviews from listeners are so important to help others find the podcast, and we also really want your feedback so we know which elements of the show you enjoy and what we can improve. To leave a review, simply visit

Martin will read out reviews at the end of each future episode, so please make sure you leave a note of your real name, so you get a mention.

If you have a personal finance or investment question you would like Martin to answer on the podcast, you can leave a voicemail for the show by following the link at We’ll answer your question in a future episode and send you a gift to say thank you for taking part.

Subscribe in iTunes | Click to listen now | Right click to download episode

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How much to access your pension pot?

How much to access your pension pot?If you have a pension pot and want to access your money how much should it cost you?

Your Pension Pot

The value of your pension pot should be…the value of your pension pot.

Seems like an odd thing for me to say but some pension pots have exit penalties.

Your pension pot provider might say it is worth £500,000 but when you want to take the benefits, or transfer to another provider they say it is only worth £468,000.

This usually applies only to really old pension pots and the Association of British Insurers have said recently that nearly nine out of ten pots don’t have such exit penalties.

Watch out if yours does.

Facilitation Fees

The market for what is described as Flexi Access Drawdown is slowly evolving with different pension providers moving at different speeds to deliver this option.

There is a good deal of extra administration involved in a provider paying out a series of payments from your pension pot so expect in many instances to pay a fee for the facility.

Somewhere in the order of £150-£250 is probably about the going rate much more than that sounds expensive, much less sounds like a bargain.

Advice Fees

If you don’t want to take advice you don’t have to (unless you have a defined benefits or safeguarded rights plan – for example a guaranteed annuity rate on your pension pot).

If your pension pot provider is telling you that you have to take advice then they are likely to be wrong.

The government has said it is your money and the pension pot provider should be helping you do this not obstructing you.

If they are being obstructive it is usually because they are fearful that you are going to take all your pension pot, spend it and then complain later that the pension pot provider should have stopped you doing something foolish. This is of course rubbish.

You are an adult and you know full well that if you take all of your pension pot and blow it that is your fault not theirs!!

If you do want the protection that impartial, independent professional advice brings, one of the jobs of the adviser is to educate you not to do something really silly with your money.

Expect to pay for these professional services and they are not cheap. But they are valuable and offer you a lot of protection (yes, I know you would expect me to say that!).


The cynic in me understands that pensions freedom and choice changes are about raising the tax take.

The government will love you to bits if you take all of your pension pot now and pay a hefty chunk of income tax on that money.

A smarter move might be to take the tax free cash and the rest of your pension pot in stages to keep tax down to the minimum.

So be aware of exit charges, facilitation charges, advice charges and taxation. Do you still want to take your pension pot?

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Government doesn’t trust pension pot owners

Government doesn't trust pension pot ownersI like the word “disingenuous”.

I particularly like it when applied to politicians; they are after all famous for saying things that word describes perfectly.

Take for example the freedom and choice in pensions introduced from April this year.

Pension pot owners, age 55 or over, are able to take as much, or as little, as they wish from their pension pots.

They can take the money all in one go or in a series of payments.

For some pension pot owners the all in one go approach makes sense for others making sure they have enough left for the future should be the goal.

The government claims that they “trust” the public to use their pension pots wisely. Their behaviour on the other hand smacks of being disingenuous.

If we trust the pension pot owner why create Pension Wise the service paid for by the financial services sector to deliver guidance (from The Citizens Advice Bureaux or The Pensions Advisory Service) to those pension pot owners?

Why create the second line of defence requiring pension pot providers to check with clients trying to access their money that they have taken guidance or advice before doing so?

If we truly trust people to spend their own money, why create such a complex and confusing environment for the consumer?

Many pension pot owners are complaining that providers are being obstructive and insisting that they take advice before they will release their pension cash.

Product providers on the other hand are claiming that they are fearful of releasing cash just in case they face a future claim when the pension pot owner runs out of money.

It is time for the new Minister of State, Department for Work and Pensions Ros Altmann to write her first “Dear CEO” letter.

She should, today, write to each pension pot provider and, in simple and direct language, tell them that pension pot owners, if they so wish, can take their pension pot without guidance or advice and that there will be no comeback on the pension pot providers if they later run out of money.

The government either trusts pension pot owners or they don’t. Which is it?

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Grexit, Brexit & investor fears

Grexit, Brexit & investor fearsInvestors are a funny bunch.

That’s not a criticism of individual investors, but investors collectively, who often allow fear to drive their decisions rather than rational thinking.

Right now much of the fear experienced by investors is being driven by concerns about a possible ‘Grexit’.

If you’re unfamiliar with the term, Grexit is short for Greek exit, specifically from the eurozone and/or European Union.

The latest on this is that Greek officials have submitted a new reform proposal to their creditors, who are apparently unimpressed. Talks continue.

As a result of this fear, the FTSE 100 index of leading UK company shares fell to a three-month low at close of trading yesterday.

The FTSE 100 fell 36.24 points to 6,753.80, its lowest level since 13th March. This was a broad-based sell-off of stocks, with no particular sector faring especially worse than others.

The impact of Greece leaving the eurozone remains unclear.

Some believe a Grexit could destroy the eurozone. Alexis Tsipras, Greek prime minister, has said that a Grexit would be the beginning of the end for the currency union.

Several European politicians however have argued that a Grexit would be containable, especially as banks across Europe have relatively low exposure to Greek debt.

Possibly the bigger issue following a Grexit would be which nation falls next; Portugal and Spain still look vulnerable.

But what about Brexit, a British exit from the European Union?

Unlike Greece (in so many ways, but especially this one), Britain is not a member of the single currency. Our departure from the European project would have less of an impact as a result.

It’s still early days for the Brexit story. Credit ratings agency Moody’s has already said that an early referendum on the UK’s EU membership could put Britain’s sovereign rating at risk.

They have identified a 2016 referendum as potentially hazardous for the UK, arguing that it reduces the time available for negotiations with the EU on “the reforms and repatriation of powers sought by the UK Government”.

Moody’s have also said the move “would have negative implications for the UK’s growth prospects and – in the absence of an alternative trade arrangement with the EU that at least partly replicates the current access to the EU’s single market – would likely put pressure on the UK’s sovereign rating”.

We expect markets to remain jittery in the short-term as Grexit fears are realised, resolved or deferred.

In the medium-term, as the outcome of the UK referendum on EU membership becomes clearer, we could see another bout of investor fear.

Our advice to clients will remain the same; stick to your long-term investment strategy and try your best to ignore the short-term fears which drive volatility into markets. Focus on what matters.

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