How to make your pension pot last?

November 24th, 2015

It is a question that will be on many people’s minds as they approach retirement particularly with greater pension freedoms giving increased flexibility on how to use their pension savings.

With greater flexibility comes greater responsibility to make sure that their hard saved pension pot sees them out! Do they invest their monies and live off the proceeds, withdraw capital sums to supplement their state pension (and if they are lucky final salary pensions) or do they opt for total income security in retirement by opting for an index linked annuity.

There are a large number of variables that need to be factored into these decisions which are discussed in an excellent recent academic paper published by the Cass Business School called Pension pots and how to survive them.

The factors include what we know now such as the value of pensions, investments and property but there are also many variables that we don’t know such as future investment returns, house price inflation, annuity rates and life expectancy.

To help navigate these variables you need the help of a Chartered Financial Planner who can help  build a bespoke retirement plan from which you will better understand the risks involved and which will be regularly reviewed alongside investment advice and strategies to minimise tax.

Not about Index vs Active Funds any more!

October 23rd, 2015

On the back of increasing index fund sales in the Sunday Times on 18 October 2015 Ian Cowie talked about there being a “power struggle” between those promoting index funds and those that believe active funds are better.

In my view this is a distraction away from a more fundamental question that needs answering – “Do adviser’s that promote investment management as their USP (i.e. choosing the best shares or funds in advance and timing the markets) add value?”

Based on my initial research comparing the performance of a static asset allocation fund (market cap weighted with a home bias using very low cost index funds) with the after charges performance of an index of leading discretionary investment managers the answer to this question is a resounding NO over the longer term.

The comparison I made was on a risk adjusted basis, back tested over 5, 7, 8 and 10 years and points to the static asset allocation funds not only beating the comparable discretionary investment management index but being in the top 25%! Armed with this information, the question that should be asked of discretionary investment managers is “What am I paying for?”

My message is not that advisers are a waste of money but, that clients when choosing one, should look behind the veneer/conventional wisdom (often promoted by the money media) for the things that advisers do which really makes a big difference to clients meeting their goals and having a successful investment experience namely:

  • Creating a financial plan which supports a clients short, medium and long term goals i.e. the horse (financial plan) comes before the cart (investing) every time
  • Helping clients keep on track e.g. investment success is about sticking to the financial plan and adopting simple investment planning principles
  • Simple investment planning principles including:
    • choosing the right asset classes consistent with a clients risk tolerance and financial planning goals
    • explaining and managing the risks of the chosen investment strategy
    • choosing the right funds that closely match the asset classes and keep fund costs to an absolute minimum
    • rebalancing to maintain the risk of the chosen investment strategy but only when the benefits of doing so out way the costs
  • Helping clients minimise tax and reducing platform costs which increase the returns a client will receive

Dont believe what you read in the money pages!

June 2nd, 2013

If there was a prize for the worst article in the money press then the one recently by Richard Evans in the Telegraph “Pension savers could double their tax free cash” would be a strong contender – click here to view.

It is money journalism of the worst kind sowing the seeds of a “financial planning opportunity” where no such opportunity exists in the real world.  And along the way it confuses their readership – I know this because one of my largest clients drew my attention to this article and wants to discuss it at their forthcoming annual review meeting.

Creating a headline that suggests the availability of 60% tax free cash through combining what is today’s tax free cash with tax free cash that will build up over the next 20 years may be good journalism but any financial adviser worth their salt will know that this is just plain silly.

For this “opportunity” to have any validity the following would need to hold true.

  • The husband and wife (both aged 55) do not need to draw from their pensions to cover their outgoings until age 75
  • The wife works until age 75 earning at least £24,188 per annum – nowhere in the article does it mention that the wife needs to work until age 75 earning at this level

And a further prize would go to Vince Smith-Hughes of Prudential for providing the highly theoretical calculations and another to Merryn Somerset Webb who thought the article worthy of support in this week’s Money Week!

And Vince “Financial Planning options like these do not serve as yet another reminder of the value of financial advice while preparing for retirement” but simply serve to illustrate that the press are in the entertainment business and not really interested in whether their articles are anchored in the real world or that they confuse their readers.

If there are lessons in all of this it is don’t believe what you read in the money pages and nothing beats good real world financial planning advice which can be found here.

Investment Planning – Head not Heart

May 2nd, 2013

From the excellent article “You Have to Be in Gold” by Weston Wellington Vice President of Dimensional Fund Advisors

All of us could benefit by examining our inclination to invest with our hearts rather than our heads— especially when it comes to gold.

  • “We are living in a world of money printing. … That is why I have to recommend gold again. … Once gold surpasses $1,800 an ounce, it will run to the low-to-mid $2,000s.”

Quotation attributed to Felix Zuelauf, Zuelauf Asset Management. “Here’s What’s Cooking for 2013,” Barron’s, January 21, 2013.

  • “Investors can choose between artificially priced financial assets or real assets like oil and gold, or to be really safe, cash. … My first recommendation is GLD—the SPDR Gold Trust.”

Quotation attributed to Bill Gross, PIMCO. “Stirring Things Up,” Barron’s, February 2, 2013.

  • “I am recommending gold, as I have done for many years. I will continue to do so until the gold price hits the blow-off stage, which is nowhere in sight. … The environment for gold couldn’t be better. … Gold could go to $5,000 or even $10,000.”

Quotation attributed to Fred Hickey, The High-Tech Strategist. “Stirring Things Up,” Barron’s, February 2, 2013.

Each January, a group of prominent investment professionals gather in New York as members of the Barron’s Roundtable to trade quips, stock ideas, and the outlook for markets and economic trends worldwide. Barron’s—a weekly financial newspaper with a small but devoted following of professional and do-it-yourself investors—publishes a transcript of their remarks over three successive issues. The quotations above are excerpts from this year’s panel discussion, and to the best of our knowledge they represent the only occasion that three of the nine participants have highlighted gold-related investments among their choices for capital appreciation during the year ahead.

Although the year is far from over, it’s off to a rough start for gold enthusiasts. A sharp selloff in mid-April sent bullion prices to $1,395 on April 15, down 15.7% for the year to date and 26.4% below the peak of $1,895 reached in early September 2011. (Prices are based on the London afternoon fix.) For the 10-year period ending March 31, 2013, gold enthusiasts have a more positive story to tell: The annualized return for gold spot prices was 16.83%, compared to annualized total returns of 8.53% for the S&P 500 Index, 10.19% for the MSCI EAFE Index, 17.41% for the MSCI Emerging Markets Index, and 2.34% for the S&P Goldman Sachs Commodity Index.

Taking a somewhat longer view, for the 40-year period ending March 31, 2013, gold performed in line with many widely followed fixed income benchmarks, while lagging behind most equity indices. We find it ironic that the return on gold over the past four decades is essentially indistinguishable from five-year US Treasury notes, often scorned by gold advocates as “certificates of confiscation.”

Gold vs. Benchmarks, 1973–2013*


Annualized Return (%)

Growth of $1

Dimensional Large Cap Value Index



Dimensional US Small Cap Index



S&P 500 Index



MSCI EAFE Index (gross div.)



Barclays US Credit Index



S&P Goldman Sachs Commodity Index



Barclays US Government Bond Index



Five-Year US Treasury Notes



Gold Spot Price



One-Month US Treasury Bills



Consumer Price Index



*40-year period ending March 31, 2013.

Considering the volatility of gold prices, even a 40-year period is too short to provide conclusive evidence regarding gold’s expected return. And the issue is further clouded by shifts through time in the legality of gold ownership and its changing role in various monetary systems worldwide. In his book The Golden Constant, published in 1977, University of California, Berkeley Professor Roy Jastram examined the behavior of gold in England and America over a 400-year-plus period—and suggested that the long-run real return of gold was close to zero. Even with centuries of data to study, however, he couched his conclusions in cautious language.

When we last commented on gold in February 2012 (“Who Has the Midas Touch?”), the mysterious metal was changing hands at $1,770 per ounce. We directed readers’ attention to the Berkshire Hathaway 2011 annual report, which presented an engaging discussion by Chairman Warren Buffett on the long-term appeal of gold—or, in his view, the lack of it. Since that time, the role of gold in a portfolio has provoked vigorous debate in the investment community, with thoughtful, articulate, and successful investors lining up on both sides of the issue, including at least three billionaire hedge fund managers making the case for gold.

Some might argue that gold’s price behavior will never succumb to rational analysis. For those seeking to try, a recently updated paper by Claude Erb and Campbell Harvey offers a useful framework for discussion without necessarily resolving the debate. Along the way, it provides the reader with a few nuggets of historical interest, including a comparison of military pay between US Army captains of today and Roman centurions under Emperor Augustus. (Apparently, little has changed over 2,000 years.)

The authors cite a number of reasons advanced in support of gold ownership, including a hedge against inflation, a safe haven in times of stress, an alternative to assets with low real returns, and its “under-owned” status across investor portfolios. Although the inflation hedge argument is likely the most frequently cited attraction for gold investors, the authors find little evidence that gold has been an effective hedge against unexpected inflation. They go on to poke holes in the assertion that gold qualifies as a genuinely safe haven or presents an appealing alternative in a world characterized by low real yields.

The most interesting argument, they believe, is the claim that gold is under-owned in investor portfolios and that a small shift in investors’ allocation strategy could lead to a significant rise in the real price of gold. Putting aside for a moment the ambiguity of the “under-owned” statement (all the world’s gold is already owned by somebody), the authors suggest it is plausible that individuals or central banks could choose to have greater exposure to gold. If they are insensitive to prices, this choice could cause the real price of gold to rise, particularly if gold producers are unwilling or unable to increase production. (On that note, it’s also conceivable that a significant real price increase would encourage development of electrochemical extraction of the estimated 8 million tons of gold contained in the world’s oceans, dwarfing the existing gold supply.)

The “gold is under-owned” argument has been advanced by a number of thoughtful investors, and only time will tell if such a shift in allocation strategy takes place with the consequences they expect. While acknowledging the bullish implications for gold prices under this scenario, the authors point out that gold prices relative to the current inflation rate are roughly double their long-run average since the inception of gold futures trading in 1975. They suggest $800 per ounce is a suitable target when applying this metric. Which is more plausible—that prices will gravitate closer to their historical average or that a new world order is emerging that calls for a sharply different valuation approach? No one can be sure; hence, the title of their paper, “The Golden Dilemma.”

What should investors make of all this? In our view, long-run investment results for any individual reflect the combination of available capital market returns and the investor’s behavior and temperament. As Warren Buffett has observed, excitement and expenses are the enemy of every investor, and all of us could benefit by examining our inclination to invest with our hearts rather than our heads. The decision to own gold often is motivated by an emotional response to current events, leading to abrupt shifts in asset allocation strategy and a failure to achieve capital market rates of return there for the taking. If adopting a permanent 5% allocation to gold encourages investors to maintain a buy-and-hold strategy for the remaining 95% of their portfolio, perhaps that is the most sensible solution for some. Many other investors undoubtedly will be just as content to stock their portfolios with securities offering interest and dividends—and let gold fulfill their innate human desire for rare and beautiful objects of adornment.

Tower Hill Associates view is holding gold or any asset class for that matter as an emotional response to current events is no way for clients to have a successful investment experience. Instead we offer an Investment Philosophy which focuses on achieving the clients’ financial objectives using low cost well diversified investment strategies and minimising tax.

Investment Planning – Media and Market Noise

March 20th, 2013

For the everyday investor it is the bigger picture that matters and not media and market noise. Markets are moving constantly as news and information is built into prices. Sentiment is buffeted one way, then the other. Millions of participants make buy and sell decisions based on news or their own individual requirements.

The job of media and market analysts frequently boils down to creating plausible narratives around often disconnected events so that it all appears seamless. Then the next day, they start all over again. For a broker or journalist, whose horizons are in minutes, this approach to markets makes sense. But for investors with long-term horizons, second and third guessing money decisions based on the news of the day is unlikely to deliver sound results.

A better approach is to work with a trusted advisor in building a diversified portfolio of assets supported by a client centred investment philosophy tailored for your needs and risk appetite. The portfolio is set and rebalanced to match your requirements and not according to what is happening in the markets. Tactical asset allocation can sound tempting, but there is always a risk that the news overtakes you. Then you are left having to change everything all over again.

As a wise man once said, running inside a moving bus won’t get you to your destination any quicker!


Investment Planning – Seeing the wood for the trees

March 5th, 2013

I was looking at the total return performance of the IMA UK All Companies Sector and found that the average fund has grown by 307.64% over 20 years. Despite the fact that this performance is flattered by survivorship bias (the performance of funds that have closed down or merged have been removed) it was beaten handsomely by the FTSE ALL SHARE Total Return index which stood at 369.91%.

In addition this average is bolstered by the better performing index trackers within the sector average calculation.  This leaves plenty of extra performance headroom for a low cost FTSE ALL SHARE tracker (charges/ tracking error of say 0.25% per annum) to significantly beat the average and at the same time this additional performance would have been achieved with less risk along the way.

Seeing the wood for the trees in the active vs tracker debate is recognising that there is no mechanism for consistently selecting the winners of tomorrow never mind in 20 years’ time today. You can of course try and there are plenty of active managers supported by their slick marketing departments who will make you feel that they are the ones to beat the market!

Alternatively you can “play the percentage game” (a bit boring I would agree!) and buy a tracker fund in the full knowledge that you have better odds of beating the sector average than an active fund and with potentially less risk too!

I know which one I would choose which is why it forms the basis of my investment philosophy I use in client portfolios.

Investment Planning – Bad News Sells!

August 22nd, 2012

Bad news sells. It sells because fear is a more powerful emotion than greed. Newspaper editors know that, which is why the front pages are often so depressing. But sometimes you need to dig inside the paper for a more balanced view.

Also working closely with a chartered financial planner who has an investment philosophy which is client centred and focused on achieving a clients financial goals also helps clients see the investment journey in a much more balanced less fearful way.

The bad news has been dominant in global markets in recent years, starting with the banking crisis of 2008 and more recently the sovereign debt crisis focused on Europe.

But other things have been happening. And any investor wanting an antidote for the grimmer headlines might like to reflect on the following recent news snippets:

  1. US stocks rose for a sixth week, giving the S&P-500 its longest rally since January 2011, as economic reports beat forecasts and Germany backed the ECB’S bond-buying plan. – Bloomberg, Aug 18, 2012.
  2. US consumer sentiment improved in early August to the highest in three months as sales at retailers and low mortgage rates spurred Americans to boost their buying plans, a survey shows. – Reuters, Aug 17, 2012.
  3. Germany’s Finance Ministry says the nation’s tax income was nearly 9% higher in July from a year earlier – helped by recent wage increases and underling the continuing strength of the economy. – The Associated Press, Aug 20, 2012.
  4. Sweden’s centre-right prime minister has backed a cut in corporate tax for his Nordic state as it defies the gloom of the euro zone. – Reuters, Aug 18, 2012
  5. UK jobless claims unexpectedly fell in July and a wider measure of unemployment dropped to its lowest in a year as the Olympic Games created jobs, showing the labour market’s resilience. – Bloomberg, Aug 15, 2012
  6. Australia is the new safe haven. Robust tax revenues and restrained government spending have put this ‘AAA’-rated nation on investors’ radars. Government 10-year bonds have returned 17% so far this year. – WSJ, Aug 14, 2012.
  7. Japan has offered its strongest indication yet it sees a way out of deflation next year, after being mired in a corrosive mix of falling prices and weak economic growth for much of the past two decades. – Reuters, Aug 17, 2012
  8. Norway’s sovereign wealth fund – the largest in the world – is planning to take on more risk as it seeks to exploit its role as a strategic investor. – The Financial Times, Aug 20, 2012

Now, none of these headlines are news to the markets. And pointing them out this way does not constitute a forecast. But it is worth reflecting on the fact that the economic and financial news is not all bad at the moment.

Sometimes, as citizens, consumers and investors, we can become overwhelmed by negative headlines and can end up making counter-productive decisions about our lives based on historical events that we have no influence over.

The fact is markets quickly incorporate news, good or bad. And for every person who capitulates and sells stocks based on news, someone else with a less negative view and/or a longer-term horizon is on the other side of the trade buying.

Maybe the best approach is to start reading the newspaper from the back page.


Investment Planning – Embracing Imperfection

January 3rd, 2012

New Year’s resolutions often involve making promises to ourselves we can never keep. But instead of tilting at windmills, we can often generate better results by merely resolving to be less dumb in certain areas. And money is a good place to start.

One human tendency is to judge the effectiveness of our investment planning and retirement planning strategies by looking at performances on one, two or three-year horizons. We do this because we are wired to be more sensitive to short-term losses than to long-term gains.

This is why much of the financial services industry and media encourage a short-term focus for an audience with a long-term horizon. This is akin to looking through the wrong end of a telescope. The thing you should be focusing on looks even further away.

The result of this short-term mindset is that investors end up following the herd and seeking safety when opportunities are plentiful and seeking risk when opportunities are few. The less dumb thing is maintain a level of discipline amid the noise and this is where a Chartered Financial Planner can help.

Another human tendency — and one allied to our in-built loss aversion — is to be suckers for the supposedly ‘free’ or discounted offer. Like Homer Simpson, a zero price tag makes us fall for pitches that sell us stuff that is neither necessary nor good for us.

In the world of investment, it’s this tendency that makes people gravitate to strategies that headline high returns without mentioning the risk or that conveniently bury fees, commissions and other costs. Regret lies on the other side of those decisions.

A less dumb thing is to focus on return and risk. They’re related. Focusing exclusively on return can lead to rude awakenings when risk shows up. Focusing exclusively on risk can lead to disappointment when returns are delivered. Tower Hill Associates Investment Philosophy keeps clients focused on the elements that lead to long term investment success.

A third tendency among humans is to succumb to what behavioural scientists call “hindsight bias”. Essentially, this is our habit of viewing events as more predictable than they really were. Call it the “I saw it coming” syndrome.

There is a fair bit of this around at the moment, with plenty of “experts” saying the sovereign risk crisis was completely predictable. This is strange, because the overwhelming consensus among institutional investors a year ago was that fixed income would underperform in 2011. The crisis may have been predictable, but the market reaction wasn’t.

The consequence of hindsight bias for investors is they tend to be forever rewriting history and forever seeking to interpret performance based on what they know now rather than what they knew a year or more before.

A less dumb thing is to accept there will always be a level of uncertainty. The future is unknowable. And all we can do as investors is to ensure the risks we take are related to an expected return, that we diversify around those risks as much as possible and that we exercise a level of discipline amid the noise.

It’s a way of embracing your imperfection and it’s a New Year’s resolution you have a chance of sticking to.

Thank you to Jim Parker Vice President of Dimensional Fund Advisors for this blog copy – my sentiments entirely!


Investment Planning – “When Cash Beats a Portfolio”

September 24th, 2011

I am pleased to have been included in Matthew Vincent’s Serious Money piece “When Cash Beats a Portfolio” in Saturday’s FT on 24 September 2011.

In order that they can make informed investment decisions,  clients should as a matter of course be receiving all relevant information from their investment advisor,  not just that part of the information the advisor wants them to hear.

I am all for clients having well diversified portfolios that are closely tailored to their attitude to risk and their financial objectives.  Such portfolios should not however be over engineered (largely to impress) and over priced to such an extent that their purpose of adding value (i.e. a high probability of significantly beating cash returns over the longer term) is likely to be defeated.

Is there any financial advisor out there that would pay over 2% per annum for a well diversified, risk benchmarked portfolio never mind one that has a less than 50% chance of beating cash over the longer term? If as I suspect the answer is “no” then I don’t see why clients should be “advised” (read “sold”) into such portfolios.

My model is to act as a fiduciary/trusted advisor through my independent financial planning service and, unlike some advisors, I will not take on clients unless I feel that I can add significant value after taking account of my fees.

Charging Fees for Financial Planning Advice

September 4th, 2011

I rarely respond to articles in the trade press but felt compelled to add my views to an excellent article by Nic Cicutti: Selling the concept of charging fees that was in Breaking News in Money Marketing on 2 September 2011.

He starts “Whenever I speak to IFAs about what it will be like to enter the new post-commission world after 2012, they either exude great confidence about the prospect or they tell me it will never work. The key stumbling block is one of persuading clients who, in almost any other circumstance, would have no objection whatsoever to paying a fee for someone’s services that they should do so for an IFA’s advice.” My experience does differ from many of the responses to Nic’s article that clients will not pay a fee for independent financial planning advice.

I started my independent fee based advisory practice in 2006 from scratch with most of my clients finding me via the internet or through word of mouth. During this time, my clients never seem to have had a problem with me charging fees and indeed most of them have signed up precisely because I was fee based!

I am the first to admit that I am not the best salesman in the world but I have nevertheless built up a successful business. I think that the key for me has been being able to explain to clients where the real value in a client adviser relationship lies and having a clear on-going service proposition such as my independent financial planning service.

Also acting as the clients most trusted adviser is much more credible when remuneration doesn’t come from product sales (commission) but from fees agreed in advance with the client alongside being a chartered financial planner.

Investment Planning – Living with Volatilty

August 10th, 2011
The current renewed volatility in financial markets is reviving unwelcome feelings among many investors—feelings of anxiety, fear and a sense of powerlessness. These are completely natural responses. Acting on those emotions, though, can end up doing us more harm than good. Our investment planning service is built on evidence from leading financial academics and where a financial advisor can add real value can be viewed here. Here are a few points individual investors can keep in mind to make living with this volatility more bearable.
  • Remember that markets are unpredictable and do not always react the way the experts predict they will. The recent downgrade by Standard & Poor’s of the US government’s credit rating, following protracted and painful negotiations on extending its debt ceiling, actually led to a strengthening in Treasury bonds.
  • Quitting the equity market at a time like this is like running away from a sale. While prices have been discounted to reflect higher risk, that’s another way of saying expected returns are higher. And while the media headlines proclaim that “investors are dumping stocks”, remember someone is buying them. Those people are often the long-term investors.
  • Market recoveries can come just as quickly and just as violently as the prior correction. For instance, in March 2009—when market sentiment was last this bad—the S&P 500 turned and put in seven consecutive of months of gains totalling almost 80 percent. This is not to predict that a similarly vertically shaped recovery is in the cards this time, but it is a reminder of the dangers for long-term investors of turning paper losses into real ones and paying for the risk without waiting around for the recovery.
  • Never forget the power of diversification. While equity markets have had a rocky time in 2011, fixed interest markets have flourished—making the overall losses to balanced fund investors a little more bearable. Diversification spreads risk and can lessen the bumps in the road.
  • Markets and economies are different things. The world economy is forever changing, and new forces are replacing old ones. As the IMF noted recently, while advanced economies seek to repair public and financial balance sheets, emerging market economies are thriving. A globally diversified portfolio takes account of these shifts.
  • Nothing lasts forever. Just as smart investors temper their enthusiasm in booms, they keep a reserve of optimism during busts. And just as loading up on risk when prices are high can leave you exposed to a correction, dumping risk altogether when prices are low means you can miss the turn when it comes. As always in life, moderation is a good policy.

The market volatility is worrisome, no doubt. The feelings being generated are completely understandable. But through discipline, diversification, and understanding how markets work, the ride can be made bearable. At some point, value will re-emerge, risk appetites will re-awaken, and for those who acknowledged their emotions without acting on them, relief will replace anxiety.

Where to find a good independent financial advisor?

June 5th, 2011

I would actively encourage anyone looking for a good independent financial advisor to have a look at the new VouchedFor site.

All the advisors on the site work on a fee basis where the client is informed at the proposal stage what advice, added value and ongoing service is provided and the costs involved so the client can make an informed decision.

The advisors listed tend to be better qualified (i.e. level 4, CFP or Chartered Financial Planner) and are “VouchedFor” by their clients hence the site name i.e. there are client reviews!

I have to declare an interest in the site as I am one of the advisors featured. You can view my VouchedFor financial advisor profile here although if you don’t like the look of me you can always select another adviser from the site!

Financial Planning – Portfolio Tax Mitigation

February 7th, 2011

How can investors with an investment and ISA portfolio increase their after tax returns without changing the asset allocation of their overall portfolio?

Good investment advice is essential but the tax planning and portfolio structuring advice outlined below will increase after tax returns for many clients.

  1. Use ISAs to invest in risk diversifying bond funds before investing in equity funds
  2. Use Capital Gains Tax allowance’s every year
  3. Allocate the lowest yielding funds to the higher rate tax payer
  4. Manage one family portfolio rather than separate portfolios to better take advantage of differing personal tax rates and to utilise all available capital gains tax allowances. This reduces dealing costs too!

The extent to which after tax returns are increased varies but this is one win amongst many for Tower Hill Associates’ clients signing up for the Independent Financial Planning Service.

Financial Planning Service – Client Charges

November 11th, 2010

Client charges can have a significant cost drag on a portfolio’s overall performance. Traditionally, the charges have been broken down into component parts, making cost comparisons between different providers difficult.

I feel that it would be much fairer if all firms whose services include investment management (i.e. not just individual funds but discretionary investment managers and financial advisors/planners) were required to disclose their Total Expense Ratio (TER).

TER measures the headwind that has to be overcome and includes the annual management charge and certain fixed costs but excludes dealing charges. As a benchmark, the average active equity fund has a TER of a little below 1.7%. Tower Hill Associates’ comprehensive financial planning service (including portfolio funds, all product charges and platform costs) comes in at less than 1.6% for most clients and much lower still for larger investment portfolios.

If your current financial advisor offers a comprehensive personal service focused on helping you achieve your goals supported by a client centred investment process for a TER of around 1.6% there is little reason to look elsewhere.

Investment Advice – Not the Ryanair of asset management

November 8th, 2010

A new sheriff has just walked into town in the form of Terry Smith of Fundsmith so the “broken” fund management industry better watch out!  He wants to build “the Ryanair of asset management” through the launch of a low cost low trading equity fund investing in around 20 global shares.

But the analogy to Ryanair doesn’t really stack up as it is not low cost – 1% per annum for a concentrated mainly buy and hold portfolio is expensive and whilst air fares vary in price I don’t suppose they vary as much as 10 or 25 times which would be the case if £100,000 or £250,000 was invested instead of £10,000. It is the same flight at the end of the day!

And all this focus on cost which I accept is a drag on performance disguises the real reason why the fund management industry is “broken” – most fund managers sell the conventional wisdom that stock picking or market timing is where most value is added when academic evidence overwhelmingly points to it being strategic asset allocation (the mix between equities, bonds, property and cash) see investment philosophy.

My financial planning and investment planning service concentrates on where most of the value lies in strategic asset allocation using low cost index tracking funds.

Great Investment Planning Videos

November 7th, 2010

I would like to thank Vanguard for allowing me to use two of their investment fundamentals videos on my site. These short videos are by two great investment gurus Charles Ellis and Burton Malkiel and can be viewed here.

As well as discussing what good financial planning and investment planning looks like, they also discuss how a financial advisor can add considerable value.

Financial Planning – No Punting Needed!

October 17th, 2010

What is wrong with the suggestion floated in the quality press over the weekend that it may be sensible for the “squeezed middle” to try to maximise the returns on their savings, whatever the risks involved, in order to afford to fund their children’s university costs. We should “take a punt” with a very small proportion of our wealth by investing in high risk funds that might double in value over the next 5 or 10 years.


There is a far superior alternative – taking independent financial planning advice. Financial planning is about helping clients achieve their financial objectives and if done properly should put clients firmly in the driving seat rather than bad advisers/conventional wisdom press enjoying or exploiting a clients/readers ignorance!

It makes very little sense – doubling your money on a very small proportion of high risk funds (if it happens) does not double your money overall and will make little or no difference on the total returns of a well diversified portfolio which should in any case contain a very small proportion of high risk funds. Good investment planning advice need not involve punting.

Tower Hill Tweets!

September 21st, 2010

You can now follow advice, information and updates from Tower Hill Associates via twitter.

Finding a top Financial Advisor is never made easy!

September 2nd, 2010

If the Find an Adviser site from the leading financial advisor professional body the Personal Finance Society is intended to help a meaningful number of consumers find the most professionally qualified financial advisors in the UK then I would question whether it has been successful.

I have received only 3 leads from the site in the last 12 months despite having a Chartered priority listing.  Of possibly more concern was that those potential clients were not looking for financial planning advice and the level of services offered by a Chartered Financial Planner.

This leads me to believe that the site is not only generating insufficient unique visitors each month but the visitors finding the site are unlikely to require the services of a Chartered Financial Planner.

I fully endorse Mike Fosberry’s comments in the latest edition of the Personal Finance Society magazine Financial Solutions, that 2000 Chartered Financial Planners is a heck of an achievement and one that needs broadcasting from the rooftops. However before reaching for the loud hailers I just wonder whether we should be looking closer to home by making the find an adviser site “fit for purpose”.

Might I suggest that currently a more fitting strap line for the site would be “for financial advice you can trust but can’t find!”

Financial Planning – Have we reached the tipping point?

July 26th, 2010

How valuable are the investment tips we find in the weekend money sections? Can these experts skilfully predict the future and at the same time are they sufficiently altruistic to share their secrets with millions of newspaper readers? I hope readers realise that these tips are of little or no value although they are an interesting read which I guess is why personal finance news editors like to include them in their papers.

I hope everyone is going to give the tip “buy distressed property in America with a yen funded mortgage” a wide berth in favour of independent financial planning advice from a Chartered Financial Planner.

Perhaps not as interesting but what can be more valuable than working with an independent financial planner that is “sitting on your side of the table” helping you achieve you financial objectives. A hot tip indeed!

Retirement Planning – New Rules Treat Pensioners as Grown Ups!

July 18th, 2010

It is about time that the Government of the day treated pensioners as grown ups so the announcement last week of more flexible rules surrounding how pension funds must be used in retirement is great news for investors.  This includes allowing those that can show that they will never need state benefits to be able to draw unlimited taxable lump sums and for those over 75 that have chosen not to buy an annuity the tax on the fund on death reduces from 82% to 55%. Consulting an expert in retirement planning is more important than ever and to ensure that your critical capital lasts financial planning advice should be sought from a Chartered Financial Planner.

Investment Planning – The ETF Tax Sting

July 18th, 2010

Exchange Traded Funds (ETFs) are a low cost and increasingly popular way of investing in the markets but potentially come with a tax sting unless they have reporting or distributor status. Gains are subject to income tax which for a higher rate tax payer means paying 40% or even 50% tax rather than the new maximum capital gains tax rate of 28%.  Before investing better to seek independent advice from a financial advisor or investment advisor who understands ETFs

Investment Management – How Important is a Star Fund Manager

July 13th, 2010

The star fund manager is a marketing department construction supporting conventional wisdom that there are individuals out there that can skilfully and consistently out smart the markets. And a star fund manager today is not necessarily going to be one tomorrow.

Whilst it is an easier sell promoting the star fund manager I think a client is far better served if their adviser focuses on helping them achieve their financial objectives and concentrates on successful investment planning with the focus on asset allocation, diversification and keeping investment costs as low as possible.

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February 5th, 2010

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  • How to make your pension pot last? November 24, 2015 It is a question that will be on many people’s minds as they approach retirement particularly with greater pension freedoms giving increased flexibility on how to use their pension savings.

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