Yellowtail Blog

Retirement planning seems to be one of the more difficult things we do when managing our personal lives.  This may be because retirement planning is so long range – peering far into the future is not something my brain was designed to do.

Our Government is very keen that we all take retirement planning very seriously, and so have provided a swath of information now accessible online.  On the Directgov website, they even show their caring, sharing side with a how retirement will feel article.

Retirement is a challenging new phase in life. While it ranks high on the scale of stressful life events, it also provides the opportunity to enjoy a new lease of life. You are likely to enjoy the freedom to develop new interests but on the other hand may feel lonely, isolated and bored at times. An important step is to plan your goals and work towards them.

With my retirement planning I am looking forward to enjoying a new lease of life!

The retirement planning approach they recommend is rare in our industry – but at Yellowtail it is the way we choose to work with all our clients.  We work to understand your goals and values and then create a plan to help you achieve them – to me there is nothing more rewarding than working with clients to help them achieve their retirement goals.

Now for a shameless plug –if you are looking for help with retirement planning read about the Yellowtail approach to retirement planning on the site, and then feel free to contact us to find out more

It’s tough out there for the banks and the building societies, not that I have a lot of sympathy for their self inflicted troubles, and there are increasing signs that they are resorting to underhand measures to shore up their balance sheets. In the last few days I have been called by several people concerned about changes being made by a number of banks and building societies to their savings accounts. In effect each has received a letter from their bank or building society telling them that the interest rate on their account is being reduced, and in some cases reduced by more than 80%.

The wording used by these institutions is somewhat interesting, take the following from Birmingham Midshires: Regardless of the balance in your account your rate will be fixed at 1.00% gross per annum, so no matter what happens to the bank of England base rate in the future your rate will remain the same. It then goes on to show that the last base rate move was down, from 5.25% to 5.00% per annum.

They write as though they are doing their savers a favour, reducing the interest rate from 3.66% to 1.00% - only now it is fixed in case the Bank of England base rate plummets from 5.00% to under 1%.

And the Nationwide are no better, closing certain accounts and reducing the interest rate to a paltry 0.3% (according to the letter received by one of our clients). This is from the building society that has based an entire advertising campaign on treating its customers fairly, no big hook rates to lure in new savers whilst excluding existing savers. In Nationwide’s case they simply reduce the interest rates for all savers, new and old.

So why are they doing this? Inertia perhaps? If there is a large slug of money that will not move from the old account to a better paying account, then the bank or building society suddenly finds itself sat on several millions where it only need pay a very low rate of interest, thus helping to boost profits. If it can do this enough times to enough accounts who knows exactly how much money will be stuck in accounts that pay a minimal amount of interest.

If you want to get an idea of just how frequently banks and building societies change accounts, take a look at their websites and look for closed accounts. This appears to be a business within a business, and must be quite lucrative overall otherwise why would they do it?

I was having a chat with one of our professional advisers earlier this week, and we talked about why we charged our clients fees instead of relying on commission as a means of payment. What I said was a revelation to him, commission (he thought) was simply a case of the product provider paying the fee rather than him dipping into his own pocket. He isn’t so niaive as to believe that he wasn’t really paying for it, but the amount of money involved was a real eye-opener.

In the same week as we introduce a new fee structure that relates solely to our advice and service proposition, I am starting a discussion on my personal blog around the whole subject of fees and commission. If you want to read it please go to  my own blog Random Thoughts from a Financial Planner.

Dennis Hall is mentioned in the Independent on Saturday in the Invest & Save section providing a wealth check to Lucy Minshall from London.

[She] may have left university far behind her, but the debts she racked up there still haunt her. “I’ve been working for two years, but I’m still trying to get over my student loan and overdraft,” she says “I just about survive on my salary but have nothing left to save for a rainy day. I can’t even begin to think about getting on the property ladder, and I had hoped to stop working when I have children.”

 
You can read the full article on The Independent website.

The hullabaloo about Mervyn’s letter and we are talking about an inflation rate of 3.3%!

I heard an interesting comment from an economist on the radio the gist being the reason we feel inflation is a lot higher than Government figures is because the goods we buy regularly are going up in price dramatically. With my gas guzzling car I do seem to fill up every week and notice the price of petrol! Prices of irregular purchases such as clothes are supposedly dropping.

For a dose of reality, or if you’re like me and aren’t going to be buying any new clothes for a while (I have a closet full of things that I’m not planning on growing out of) you may want to look-up your personal inflation rate on the National Statistics website.  Their neat calculator will give you a monthly estimate of your inflation rate based on the goods and services you buy. Turns out my inflation rate went up to over 20% annually in October 2007 but is now back to around 3%.

We have also been using this to analyse some of our clients spending before using the personal inflation figures in their financial plans. It makes for more accurate planning and can be quite revealing.

There’s nothing like a spot on national radio to help focus on the issues of the day.

Yesterday the inflation figures were announced alongside Mervyn King’s open letter to the Chancellor about why inflation has moved to 3.3% year on year in May, and what he proposed to do about it. My job was to put all this into words that the regular listener to any of the GCAP Media radio stations (Capital 95.8, Classic FM etc) would understand.

That’s not an easy task when talking in sound bite sized chunks. Added to which this isn’t inflation driven by exuberant consumerism, so the traditional cure of raising interest rates isn’t going to work that well. Looking through the numbers, the largest contributors to the increased inflation figure comes from rising prices for food and energy, which includes motoring costs. The prices of these are outside the control of the Bank of England, and raising interest rates is merely going to add to the worries of ordinary consumers who are beginning to buckle in larger numbers - I read also that the number of repossessions has risen significantly this year compared to last.

Here’s something I wrote a while ago to explain to a prospective client why we felt we were different to most other financial planners out there.

For as long as I can remember, financial advice has been paid for by commission, and that’s still the case today. So it is understandable that there can be a mental block when someone asks you to pay a fee for the advice.

People who come to us for advice like the idea that advice stands alone, real independence you might say. But for some; paying for advice without commission might be a leap of faith too far. Perhaps it would help if we used an analogy to explain our thinking? I turn to the world of golf to help me make my point:

It’s relatively easy to get started in golf and there’s an endless supply of self professed experts to tell you where you’re going wrong. But eventually you reach a plateau. Unable to improve your game any further you figure it’s time to spend some money.

You haven’t got unlimited time and money to throw at the problem so you narrow it down to a couple of options. The Golf Pro working in the shop will analyse your swing and give you some tips before recommending a new set of clubs, he won’t charge you anything which is good because the clubs are expensive enough right? The other option is to spend some time and money on having some individual tuition and lessons, but if you do that you still have to play with your existing clubs, you cannot afford the two.

In the end you decide that new clubs will give you the edge, and the few pointers that the pro gives you will be enough to improve your handicap once more. And so it goes on, each time you reach a plateau you buy newer and better equipment and get a couple of tips to improve your game.

But what if you had chosen the other option? You meet the Pro, the one who isn’t on a commission from the shop, and you sign up for some lessons. After watching you take a few swings with your old clubs the pro picks up a club and steps up to the tee. You watch in awe as ball after ball flies straight and true. It’s clearly not the equipment that’s the problem.

Having seen what’s possible you listen carefully as your coach deconstructs your swing and slowly shows you how to swing properly. Old habits linger and it takes practice, but eventually it begins to fall into place. You begin to understand why when you do x, y happens. Your game is better.

And in a similar way that’s what we do, after analysing your current financial position we coach and educate you toward the life you want - your ultimate game perhaps. We’re not here to sell you a set of new clubs; we’re here to help you build a game plan.

Dennis Hall is on the panel answering questions following the 2008 Budget announcement.

You can read the questions and Dennis’ answers on the AOL Money website.

A Wealth Check in the Independent features Dennis Hall providing advice to Gina who wants ‘to be debt-free by the time I turn 40′.

Gina Coldrick, 31, from Warrington says that her biggest financial goal is to be debt-free by the time she turns 40. But with a young daughter to support, and a restrictive salary, she is struggling to break even. “I am only making enough to cover bills,” she says. “I have found myself eating into my savings and using my credit card for extras.”

You can read the rest o f the article on the their website.

It has been an extremely busy January, I suspect a result of New Year Resolutions being put into action and keeping our telephones busier than usual. We also began the inevitable rush toward the end of one tax year and the beginning of another - no matter how much we reduce the level of last minute activity we’re unable to eliminate it completely.

It has been a busier start to the year in relation to our press activities, and a couple of Money Makeover in the Times have also garnered some new clients, as well as the attention of other publications keen to get our views. Yesterday we were asked for some comment about the quarter point cut in the bank base rate, which ended with the pithy comment that investors seemed more comfortable investing in Banksy than in the Bank!

Earlier in the week I had been one of the 500 or so people tightly squeezed into Bonhams New Bond Street showrooms for their first ever Urban Art Auction, which was a resounding success. Banksy, being the most well known urban artist, commanded the highest prices, and “lots” were routinely selling well above the estimates. I had tripped along to see if I could get my hands on a “Kate Moss” print in the style of Warhol’s Marilyn Monroe pictures, but the estimate of between £20,000 - £40,000 was easily eclipsed as it went on to sell for over £80,000 excluding commissions and artists royalties.

The art world it would seem is the place where fortunes are being spent, and for some, where fortunes are made. Banksy one assumes must be laughing all the way to the bank, so long as it’s not Northern Rock. But that’s another story.