Meet the new boss: Andrew Bailey, FCA CEO

Meet the new boss: Andrew Bailey, FCA CEOHM Treasury have this week announced the appointment of Andrew Bailey as the new permanent chief executive of the Financial Conduct Authority (FCA).

His appointment in the top regulatory job comes around half a year after it was announced former FCA chief executive Martin Wheatley would be stepping down; a move believed by many to be driven by chancellor George Osborne.

Since September, the role has been filled on an interim basis by FCA director of supervision Tracey McDermott, who recently ruled herself out of the job on a permanent basis.

The new FCA CEO is currently the Deputy Governor for Prudential Regulation at the Bank of England and also Chief Executive Officer of the Prudential Regulation Authority.

He is expected to take up the new role with the FCA in July 2016.

Commenting on the appointment John Griffith-Jones, Chairman of the FCA said:

“I am delighted that Andrew has been appointed as the new Chief Executive.

“He brings unrivalled regulatory experience, a proven track record and an excellent reputation in the UK and internationally.

“Having been an FCA Board member since 2013 he has been fully engaged with all the regulatory issues that we have faced in recent years and in setting our strategy for the future.

“I look forward to working with Andrew. He has done a great job at the PRA and he will build on the work the FCA has done over the last three years as a strong, independent regulator.

“I would also like to thank Tracey McDermott for the excellent job she has been doing as the Acting CEO and for agreeing to remain in post until Andrew starts.”

Andrew Bailey’s appointment as the new head of the FCA is important because the regulator is UK’s most prominent financial consumer protection body.

The FCA is responsible for regulating the conduct of banks, insurance companies, mutual societies and financial advisers.

Current challenges for the FCA include addressing a perceived advice gap in the UK market; the inability for those people who want to work hard, do the right thing and get on in life but do not have significant wealth to get quality financial advice at a price they can afford.

The large cost burden of the Financial Services Compensation Scheme (FSCS) is another major regulatory challenge, as this cost of regulation is being passed on indirectly to consumers, making advice less affordable than it could be if fewer firms failed.

We look forward to seeing in which direction Andrew Bailey takes the FCA now and what impact his appointment will have on effective regulation for consumer protection.

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What’s the appeal of equity release?

What's the appeal of equity release?New figures published by the Equity Release Council have revealed that a record amount of housing wealth has been unlocked by the over 55s using drawdown lifetime mortgages.

The figures for the final quarter of 2015 have pushed equity release lending to a new high of £1.61bn.

Lending via drawdown mortgage products was a total of £271m between October and December 2015, the largest quarterly total since this type of lifetime mortgage first emerged in 2004.

According to the Equity Release Council, seven in ten new plans agreed in Q4 2015 were drawdown, up from 63% in the third quarter of last year.

More people are choosing to withdraw their housing wealth in stages to boost their retirement income as and when they need it.

Drawdown lending for the whole of 2015 was also the highest on record at £961m.

It pushed total equity release lending activity by Equity Release Council members to £1.61bn. This is up by 16% from £1.38bn in 2014.

Last year saw more than 22,500 new equity release plans agreed for the first time since 2008.

Commenting on the figures, Alex Edmans, Head of Retirement at Saga, said:

“The increase in people using drawdown lifetime mortgages is really positive. People seem to be growing more confident in this sector as they recognise that they can use the money tied up in their home to help them financially plan for later life.

“These latest figures suggest that people like being able to unlock cash from their home as and when they need it.

“This can be a smart move financially as people only have to pay interest on the funds they release, but they know that they can unlock more cash at a later date if they need to.

“However, equity release is not right for everyone.

“We always recommend getting thorough advice before taking out a plan, as well as speaking to family and friends so they know what you are thinking of doing.”

Here at Informed Choice we absolutely believe that advice is essential before taking out an equity release plan, as well as considering how it works as part of your overall financial planning in later life.

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Do you know how much you spend each year?

Do you know how much you spend each year?Do you know how much you spend each year?

Understanding your household expenditure is an important part of a Financial Plan.

When we engage with clients, we ask them to complete a detailed expenditure questionnaire.

The data from this forms a part of their Financial Plan, feeding into the lifetime cash flow forecast we prepare and present along with our recommendations.

The simple act of filling in an expenditure questionnaire, categorising different items of spending as you go, can prove both challenging and eye-opening for a lot of people.

New research from the bank Santander has found that people tend to underestimate their main household expenses by an average of £1,459 in the last year.

These main items of expenditure are council tax, utilities and TV, phone and broadband.

Collectively across the whole UK, that could mean we don’t know how much we spend by almost £39bn a year!

The research found that people estimate they spend an average of £2,528 a year on council tax, utilities and TV, phone and broadband.

In practice, they actually spend an average of £3,987, nearly 58% more than estimated.

TV, phone and broadband outgoings were the most significantly underestimated.

Getting your household spending under control starts with understanding what you spend, and of course why you spend it.

By examining expenditure as part of the Financial Planning process, we can help to bring some reality to what you spend and put it in context of what you want to achieve.

If you would like to see our expenditure questionnaire and start taking control over what you spend, email me at and I would be happy to send you a copy.

Read this next: How to save yourself from financial anxiety

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Scary investment markets, blowing an inheritance & making friends with dementia

Scary investment markets, blowing an inheritance & making friends with dementiaThis week the Informed Choice team have been talking about investment market fears and how to spend a large amount of money.

Despite a great deal of market volatility and losses on some markets, Edward Smith, Asset Allocation Strategist at Rathbones, believes that the poor start for equities this year has been driven by fear rather than economic fundamentals.

We asked you are you ready for an interest rate rise, with new research which found that nearly three quarters of homeowners are likely to see their mortgage payments increase if the base rate rises.

Martin joined the team at TWM Solicitors for a Dementia Friends information session recently, which he talks about in this blog.

What would you do with a £100,000 inheritance? If you’re like most people, you would save a lot of it and use it to repay debt.

During this period of equity market volatility, it’s worth remembering that it is time in the market which counts, not misguided attempts at market timing.

In our latest podcast episode this week, Martin talks about stock market volatility.

We have started producing short audio bulletins with the latest personal finance and investing news. Follow Informed Choice on AudioBoom to hear these when they are released.

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Podcast 062: Why investors need to hold their nerve

062: Why investors need to hold their nerve

Podcast 062: Why investors need to hold their nerveIn this episode of the Informed Choice Podcast, Martin talks about stock market volatility.

There is also a roundup of the latest personal finance and investing news.

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

Main topic

It’s been a pretty terrible start to the year for investors.

The FTSE 100 officially entered bear market territory, falling by 20% from its peak last year.

Investors are worried about a slowdown in China’s economy and the very low price of oil.

Why should you, as an investor, hold your nerve at a time like this?

Martin explains why volatility is a normal part of equity investing, how market timing can go horribly wrong, that diversified portfolios are not experiencing the massive falls being reported in newspapers, and how Financial Planners add substantial value to investment portfolios at times like these.

Useful links

So You’ve Been Publicly Shamed by Jon Ronson

The Buried Giant by Kauzo Ishiguro

Dementia Friendly information session

Share the orange video

The Client-Centred Adviser by John Dashfield

MPAF Podcast with Colin Gray, The Podcast Host

Help us spread the word!

If you enjoy the show, please subscribe in iTunes and write us a review!

Reviews really help us stand out from the crowd and reach more listeners.

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

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Time in the market counts, not market timing

Time in the market counts, not market timingAt times like this, when investors are losing their heads left, right and centre, it can be tempting to have a go at timing the market.

This involves attempting to sell before the equity markets hit the bottom, and then buy again before they start to rise.

In sounds good in theory. In practice, it doesn’t usually work out that way.

Instead, you could find yourself selling low and buying high.

Repeat that process enough times and you will soon run out of money to invest.

One big problem with attempting to time the market is that you can easily miss out on a few of the best days of returns.

Do this, and your overall long-term returns will be significantly worse.

According to Fidelity International, an investor who invested £1,000 in the FTSE All Share index 30 years ago but missed the best 10 days in the market since then would have achieved an annualised return of 7.09% and ended up with a total investment of £7,811.55.

That compares with an annualised return of 9.38% and investments worth £14,733.64 if they had stayed in the market the whole time – an opportunity loss of £6,922.09.

If the investor had missed the best 20 days, their annualised return would be 5.55%, which would have resulted in an even worse shortfall of £9,676.56.

According to Tom Stevenson, investment director for personal investing at Fidelity International:

“With the FTSE 100 recently falling 19% below the cyclical high of 7,122.74 reached last April, investors will be unsettled.

“However, it should be remembered that volatility is the price you pay for the long-term outperformance of equities over other asset classes. Corrections often provide investors with an opportunity to add to their portfolios at attractive prices.

“That said, our analysis shows the risks of trying to time the market and how expensive it can be when you get it wrong.  It’s difficult to predict the best time to be in and out of the market, especially as the best and worst days very often tend to be bunched together during periods of heightened volatility.

“It’s usually more prudent to stay fully invested through market cycles as missing even a handful of the best days in the market can seriously compromise your long-term returns. As the old stock market adage goes; time in the market matters more than timing the market.”

One area of value we add for our clients as Financial Planners is behavioural coaching.

When markets are especially volatile, we are there to coach our clients and keep them focused on their long-term investing objectives.

Because we know and can demonstrate the value of time in the market, and the futility of market timing, we are able to secure the best long-term results for our clients.

If you have been tempted to try a spot of market timing during the current bout of market volatility, why not give us a call and see if we can talk some sense into you?

Posted in Investments, News | 1 Comment

What would you do with a £100,000 inheritance?

What would you do with a £100,000 inheritance?Relying on an inheritance to realise your financial goals in life might not be the smartest strategy.

I wrote last year about how one in three working age people in Britain are banking on an inheritance to make everything alright in the future.

But what if you are the recipient of an inheritance?

What if you receive a £100,000 inheritance, to be more precise? What would you do with the money?

This might not be such an unrealistic prospect, as two out of three retirees expect to leave their children a financial inheritance with an average value of £101,818.

According to the latest research from SunLife, 87% of us would save more than half of it.

SunLife’s research also found that if we received £100,000 of inheritance, most of us would spend a significant chunk of the cash with more than three quarters of those questioned saying they would spend around £19,568 of the total amount.

Of that £20,000, 72% of people said they would go on holiday, 50% would make home improvements and 40% would buy a new car.

Around a third of those surveyed said they would use the money to repay some debt.

On average we would spend around a quarter of the inheritance paying off a mortgage and other debts.

Paying off debts with the proceeds from an inheritance or other windfall is usually a smart move.

In the current low interest rate environment, it can be difficult to receive a net return on savings which exceeds the cost of servicing debt.

Paying off expensive unsecured debt and also knocking down a portion of your outstanding mortgage can also result in peace of mind for the future, and reduces the drag on your ability to meet other financial goals in life.

What is really important when it comes to allocating an inheritance is making sure the money counts towards the future.

Spending or saving the money based on your agreed goals and objectives in your Financial Plan is one great way to avoid regrets once the money has gone.

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Becoming a Dementia Friend

Becoming a Dementia FriendOn Friday morning I accepted a kind invitation from TWM Solicitors to join them at their Guildford offices for a Dementia Friends information session.

The meeting was led by a Dementia Friends Champion, a volunteer who explained Dementia Friends is a social movement designed to improve understanding.

It is all about helping people living with dementia, and their families, live well with dementia.

Over the course of an hour, a room full of solicitors (and me!) were presented with the facts about dementia and how we can all better work with people living with dementia.

One of the most enlightening exercises – which I won’t reveal here in case it spoils the surprise for those who have not attended the Dementia Friends introductory session – brought home the fact that if you’ve met one person with dementia, you have only met one person living with dementia.

Dementia affects everyone very differently, so it is important we do not make assumptions about their capabilities.

Some of the first signs of dementia include short-term memory loss and language issues; forgetting or substituting words for things can be a sign, such as calling a dog a horse.

Dementia can often result in fear and embarrassment, with the stigma attached sometimes a reason for avoiding a proper diagnosis by visiting a GP.

Different types of dementia tend to progress differently.

Vascular dementia often has a step-like progression, while Alzheimer’s disease can progress more like a curve.

Understanding the type of dementia is important in understanding how it is likely to progress.

We were given an example of how there is much more to a person than their dementia.

The trainer and also the solicitor I was sitting with during the session recommended a book called Elizabeth is Missing by Emma Healey, which I’ve added to my Amazon wishlist and look forward to reading soon.

When working with people living with dementia, we were encouraged to use short sentences and ask closed questions.

We must be prepared to slow down, but not be patronising, and also be prepared for some confusion.

I finished the session by registering as a Dementia Friend.

A Dementia Friend learns a little bit more about what it’s like to live with dementia and then turns that understanding into action.

Part of that action for me is writing this blog post and sharing it on Social Media.

I will also be exploring how Informed Choice can become a Dementia Friendly Organisation in the future, as a growing number of our clients experience dementia, either personally or with a family member.

If you have the opportunity to attend a Dementia Friends information session, I highly recommend it and believe it is a valuable way to spend an hour.

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Are you ready for a rate rise?

Are you ready for a rate rise?It’s been nearly seven years now since the last rate rise by the Bank of England.

The latest forecasts from economists suggest we might need to wait until the start of 2017 before interest rates rise from their current level of 0.5%.

They will however need to rise at some point in the future.

When that eventually happens, will your household finances be ready for the rate rise?

Lender TSB has been speaking to homeowners across the UK to understand how prepared Britain is for the rate rise.

Their new report, ‘Getting Britain #ReadyForRateRise’, found that nearly three quarters (72%) of homeowners are likely to see their mortgage payments increase if the base rate rises.

One in five homeowners confessed to having “no idea” how even a small change to interest rates could have an impact on their monthly mortgage repayments.

TSB think that is worrying news for 56% of the home-owning population who say they are already struggling with household bills.

According to Ian Ramsden, Director of Mortgages at TSB:

“The statistics included in TSB’s report are fairly shocking and clearly there’s a lot of work to be done to help Britain’s homeowners understand how they can accommodate a rate rise. But there is no need to panic; a little bit of planning now can make a big difference in the future.

“Our report includes practical hints and tips to help people get to grips with the potential base rate changes that could occur this year.

“We don’t know when the Bank of England will change the base rate, but we do know preparing early and helping homeowners understand their options is the first step in helping Britain get #ReadyForRateRise.”

TSB shared some helpful tips with their research, including speaking to your mortgage lender early if you face financial difficulty, drawing up a monthly budget and getting any existing debts under control.

According to the research, many households would need to make some big changes in order to cope with an interest rate rise and subsequent higher mortgage repayments.

74% of those surveyed said they would budget and make spending cutbacks.

Reducing their supermarket shopping bill was top of the list for almost seven out of 10 people closely followed by eating out less (62%), limiting non-essential spending (62%) and taking cheaper holidays or not going away at all (61%).

Other responses included a switch to a cheaper mortgage (43%), prioritising debt repayments and paying the most important ones first (33%), seeking help from debt advice organisations (14%) and trying to borrowing some money from family or friends (12%).

With the possibility of a rate rise drawing ever closer, understanding how higher interest rates would affect your household budget is an important part of the Financial Planning process.

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Five reasons why investors should not be fearful

Five reasons why investors should not be fearfulIt’s been a difficult start to the year for investors, with concerns about the Chinese economy and a falling global oil price resulting in equity market falls.

As we explained last week, it’s important for investors to avoid panic at times like this.

Edward Smith, Asset Allocation Strategist at Rathbones, believes that the poor start for equities this year has been driven by fear rather than economic fundamentals.

According to Smith, there are five principle reasons why investors should keep the faith:

1 – This has been a financial correction, not an economic one: the probability of a recession in developed markets in the next four months currently implied by the macroeconomic data is very low.

An economic crash – in the West or China – appears unlikely. We expected markets to become volatile as the US started to raise rates. And they have, but we reiterate that policy tightening is not a problem while a healthy gap between growth and interest rates (or the return on capital and the cost of capital) remains.

2 – Economic data continue to surprise to the upside in Europe and Japan.

Across the Western hemisphere non-manufacturing PMIs are firmly in positive territory.

Six of eight developed market services PMIs are above 55, up from three last quarter. This is far from an Armageddon scenario.

Disappointing US manufacturing ISM data should be taken in context: the sector accounts for just 15% of GDP; services is the main driver of Western economies and in the US that ISM is at a healthy 55.3.

3 – Recently, markets have become obsessed with Chinese data and stock market performance. We think this focus is misguided.

China’s equity market is notoriously fickle, driven as it is by retail investors.

Granted, China’s leaders bungled attempts to support the stock market; the now-abandoned ‘circuit-breakers’ arguably making the falls worse, and stoked fear in investors.

Still, only a small proportion of households dabble in the stock market, which should prevent any market crash from contaminating the real economy.

There is no correlation between consumption spending and stock market returns, financial interlinkages are small and companies are not reliant on equity market capital to the same degree as Western counterparts.

4 – China is moving from an economy led by manufacturing and construction to one being driven by services and private enterprises.

These segments of the economy make up more than half of China’s output and continue to grow strongly.

The old, heavily industrial China is in a severe slump, one that is likely to get worse before it gets better as policymakers accelerate restructuring in 2016.

Remember, the overall rate of growth in the economy has already halved over the last five years and the world has not fallen apart.

The January trade data release shows the volume of Chinese exports increased in December, helped by the currency devaluation since August.

Importantly, there were also signs of improving domestic demand: import volumes grew by approximately 7% in 2015. Further evidence that the turmoil of the markets in no way reflects the economic trends.

5 – The falling renminbi frightened investors further, but, again, this is about poor communication by the People’s Bank of China (the central bank) rather than an indication of panic.

In December it said it was moving toward abandoning ties to the dollar in favour of a trade-weighted float. It seems that they are actioning that plan much quicker than first indicated.

This month, the central bank’s chief economist confirmed this was the case.

If the policy change had been set out more plainly in advance, the market would probably have been much more sanguine – it’s eminently sensible, after all! This is far more another dollar appreciation story than a renminbi depreciation story.

The Chinese central bank is spending foreign exchange reserves in record amounts to stop its currency from falling too quickly against the dollar, not engage in ‘competitive devaluation’. Progress towards a free floating renminbi is part of making China a market-based economy.

Edward Smith said:

“We remain vigilant for signs of deterioration in China.

“We’d escalate the probability of a ‘hard landing’ but only if we see a combination of a marked deterioration in service-sector PMI and other related data; if private sector profit growth starts to recede; if there’s further acceleration of capital outflows, and there is banking sector trouble.

“Nations and their economies tend to be stable when they are authoritarian, consolidated and closed; or democratic, stable and open.

“Turbulence tends to occur in-between these two states. China is just now emerging from the former and we should expect turbulence to continue for many years.

“As long-term investors, we need to assess what are just bumps in the road and what represent a material deterioration of economic conditions.”

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