The reality is that there is something that most people can do which involves a re-arrangement rather than spending money which you do not have. The first essential is that everyone who pays tax with any money in a building Society should have the first £5,340 invested via a cash ISA in order to obtain  tax-free interest, it maybe a bit late for you to benefit much in the current tax year but it will stand you in good stead for the new tax year and if you have sufficient capital to invest you can make one contribution now and a further £5,340 after 6 April. I suggest you find an account giving you instant access so that the account can be used like an ordinary Building Society account but with tax-free interest.

If you normally make a contribution to a stocks and shares ISA you may feel that you are unable to commit to the investment this year. However, there is still something you could do, have you any existing investments in shares or collectives which have not been doing well? they may even be in a loss situation. Why not take the opportunity to transfer the investment into a stocks and shares ISA for this year. You can keep the same investment but it will be treated as a disposal for CGT purposes, so by making this transaction you have benefited in a number of ways, you may have created a loss for capital gains purposes which can be carried forward to set against future gains and your investment can now grow in a CGT free environment.

On the subject of CGT many articles will be suggesting that you take advantage of your annual allowance for CGT purposes before the end of the tax year. In the current climate it may be that your gains are few and far between but you should consider your losses, why not make some sales and  create losses which can be carried forward against future gains – as and when the economy recovers.

If you are currently investing in a self invested personal pension, you may feel unable to make a contribution, but it is possible to make an in specie contribution which means that you can transfer in an asset rather than cash. You could consider transferring in a shareholding on which you have made a loss, the loss can be carried forward for CGT purposes and you will receive tax relief without having  to find cash for the purpose.

I recently had a meeting with a client when he said “he now realised why independent financial advice was different”… the reason was that I was telling him NOT to invest more into his pension arrangement, no one had ever said that to him before because they had always been trying to sell him a product rather than give him advice. His family circumstances were such that he could not afford to put any more into his pension and I showed him that it was unlikely that he would be able to save more for some considerable time. The key element to the advice was that he continued making the contributions at a level he could afford and that he kept the situation under regular review in particular the performance of the funds he was using.

In the current economic environment, there are many people of working age who will not be able to afford to increase contributions to savings schemes or pension arrangements, this is a reality but working within this reality, it is even more important to squeeze every last drop of performance out of the existing investments and keep costs to a minimum.

In periods of austerity it is very important to take care or protect that which we do have, so at this time I would recommend checking your insurance policies to make sure that your house, contents, car and liabilities are all comprehensively covered. It is worth an increased premium to give you the comfort that if there was a catastrophe you and your family could recover quickly.

This is also a time to check your personal life  and income protection cover. If you have dependants you should check to make sure that there is sufficient life assurance in place so that on your death your mortgage would be paid off . Your family will appreciate a mortgage free roof over their heads. An additional lump sum to help them through the period of bereavement could also be a tremendous help particularly at a time when finding employment is difficult.

This does not have to be an expensive exercise just think about some additional cover for say the next 5 years while the economic situation may be dire. £100,000 of cover for 5 years for a man aged 40 next birthday is a mere £7.12 per month. If you are a parent or grandparent you may like to consider paying a premium of this level to make sure that your family is protected in the event of a family catastrophe such as the death of the main breadwinner.

During March and April we will be running a number of Breakfast Seminars to inform Employers of their duties and to help them deal with yet another complexity in their already busy lives.

The Seminars will be held in central Bristol and if you would like to come along please contact Charlotte@nichollstevens.com or on Tel 0117 9290456 to book a place

So, how can I possibly wish you a “Happy New Year” against such a background. Well, I am bold enough to say it because I think against this background we need to think about what really makes us happy……so, we can no longer do as much shopping for those “little extras” but did we really need them? What we need to do is to look around us at the things which do make us happy such as our family, our hobbies and interests, our home or garden. It may just be meeting up with a friend for a pint or a coffee. We need to concentrate on the here and now, we have very little control over the future, that is in the hands of the politicians, need I say more.

When looking to 2012 and beyond we need to be realistic and I am going to take this as my theme for the articles for this year – “Putting realism into your financial planning”

So, how do you look realistically at your financial plans on 2 January, 2012? I am giving you a day off to recover from the hangover. First you need to look at the current situation and see if there is likely to be much change. I think not, interest rates are low and will continue to be so, inflation is high and may fall slightly but is likely to remain with us through the next 12 months, the world stock markets will remain volatile  because of the uncertainty amongst investors.

So, how should you position yourself? if you are still in the workplace, then I think it is important to keep a large emergency fund in cash in case you lose your job, I would recommend the equivalent of 12 months’ earnings. If you are in employment and part of your salary package includes benefits,such as life, health and income protection insurance, you should think carefully about how vulnerable your family would be if you lost that benefit and perhaps consider putting some personal cover in place, you can always cancel this in the future. You will see below that I talk about those in retirement pruning their various subscriptions, if you are still employed a thorough look at your bank statement may show up the gym membership or similar  which is not being regularly used. Why not consider cutting out these costs now rather than waiting until you are forced to do so.

If you are retired, you should also take stock, in your case it will be difficult to increase your income so you need to concentrate on expenditure.The big question you need to answer is whether your costs will increase in the next 12 months, I think they will. My recommendation is that you should spend the early part of the year looking at your costs and seeing if it is possible to obtain your various insurances and utility supplies at a cheaper rate. I know that most readers of websites are very “clued up” but do remember that it you are over age 65 there are many offers available for the retired. Many of my clients are retired and when I look through their bank statements, I frequently find subscriptions being paid for periodicals or clubs which are now no longer really needed and cutting out these costs  this may be a good start on economising.

OVERVIEW

Welcome to the New Year. From an investing point of view is 2012 likely to look much different to 2011?  I think not, there are three possible economic scenarios for the world economies;

(a)     some recovery – I think that is doubtful,

(b)     a disaster, that would be likely to happen as a result of a disorderly breakup of the Euro resulting in a collapse of the European Banking system which in turns drags down the world economies, this could happen but the current signs are that the ECB is making some sensible moves and

(c)      what I saw named in a resent article as “more crab like activities”

My money is on the third scenario, I think that the investment scene in 2012 will be very similar to the one we have just lived through in 2011.

UK

It seems likely that the economy in 2012 will be fairly stagnant, in the UK we still have one of the highest levels of debt within the major economies and it will take time for us to recover, growth in 2012 is likely to be between 1% – 1.5%. However, we may see a fall in inflation but this will be gradual. Finally there seems little likelihood of the Banks increasing lending in fact  mortgage lending may well fall further resulting in continued stagnation in the housing market. How then should you invest against this gloomy background?  Despite my prediction for the market it is still possible to identify companies with good balance sheets and cash flow and a strong dividend return. It is likely that earnings from companies such as these will be arising from worldwide trading activities. We are recommending that clients access these companies via UK equity income funds.

US

The outlook for the US appears fairly positive. The US went into recession earlier and quicker that the UK and there are now some real signs of improvement. The recently released payrolls data showed an improvement and the employment figures in December jumped by 200,000 jobs. The Americans will now be looking forward to an election in November of this year and this removes some of the current political uncertainty.

EUROPE

In Europe we are likely to see continued uncertainty with the continued conflict between the two sets of economies with different growth rates, productivity and work ethics. Interest rates and inflation are likely to be low in Europe with even the possibility of deflation The big question is will the Euro break up? However, against this background some Companies are still in good shape but because of the risk aversion of the investor the share prices of such companies are currently low and good value for money. The problem is how to access such companies and we would recommend entry via Global equity income funds rather than specific European funds.

EMERGING MARKETS

The values of shares in the emerging markets have fallen in some cases more than shares in the developed countries because of the perceived risks. However, there are still very good long-term prospects for the emerging markets because of the large populations of young people with the consequent increase in consumer demand. In the short-term the prospects for China are better than India. India is suffering from very high levels of inflation resulting from high food prices, whereas in China inflation is coming down and the growth rate in the coming year is likely to be 6%/7%. So, we are still very positive about investments in Emerging Market funds for long-term investors.

January 2012

I started this year with an article on Financial Planning and I intend to end the year in the same vein.

One of the essences of a financial plan is to set targets and to make assumptions as to how you may reach those targets. In making the assumptions the client and the adviser need to make decisions on interest rates, will they rise or fall, inflation, long-term growth of the economy and house prices.  All this is difficult and sometimes we feel as if we need a crystal ball.  However, the essential element is that this is discussed between the client and the adviser and when added into an asset allocation which takes into account the client’s attitude to risk, should give a more realistic outcome than the key facts documents produced by Insurance Companies under the direction of the FSA.

Many clients become dis-satisfied with financial products because they have un-realistic ideas of the returns they may receive. They fail to understand that it is not possible to obtain 10%per annum after charges and inflation – you may think I am joking but this is the expectation of some people and when faced by realistic figures actually throw in the towel and say it is not worth doing at all.

If you are to have a financial plan, you need an asset allocation with which you feel comfortable. If you look at the table below you will see that by increasing the risk you can increase the expected return. Although the difference looks small, the compounding effect over time does mean that the higher risk portfolio will considerably out-perform but there will be times when the value of the portfolio will fall.

The other key facet of an asset allocation strategy is that it is regularly reviewed and rebalance. It may be difficult for a client to contemplate selling some equity holding when the market is roaring ahead to buy boring fixed interest securities but in the long run when the bull market has run its course, the rebalancing will have reduced risk.

Do talk to us if you want to know more about drawing up an asset allocation for your portfolio

The Government propose to abolish this facility with effect from 6 April 2012. This will mean that if you have been using a personal pension policy to receive these rebate payments, these contributions will cease. Your pension fund will continue to be invested by your chosen Insurance Company and hopefully will grow  in value over the years.

 The benefits  from such a personal pension will be available at any time between age 55 and age 75. In the past the benefits which had been created by the Government rebates, were known as “Protected Rights” and if you were married you were obliged to use your pension fund to purchase a retirement income which continued  at a rate of 50% to your spouse should you die first. This rule will be abolished from 6 April 2012, so even if you are married at the time that you take the benefits you will not be forced to buy a retirement income which continues to your spouse.

If you have a policy which you have used for contracting out and are confused about the changes, do please get in touch.

1 November sees the introduction of the Junior ISA which it is estimated could benefit six million youngsters who will be eligible for the account immediately. The attraction of the scheme is that anyone can save for a child be it a parent, grandparent, Aunt, Uncle, God-parent or friend. With the increasing cost of further education, children will be in great need of financial help in their late teens and early twenties.

Investing into a Junior ISA will be an easy way of helping to build up a fund. Investments can be made on a regular monthly payment or a once off amount.

What are the details?

Junior ISAs will replace Child Trust Funds and will launch on 1 November 2011

• All UK resident children under the age of 18 who do not have a Child Trust Fund (CTF) will be eligible for Junior ISAs
• Any income or gains will be tax-efficient
• Both cash and stocks and shares Junior ISAs will be available. Children will be able to hold up to one cash and one stocks and shares Junior ISA at a time (two accounts in total)
• There will be an overarching contribution limit of £3,600 per year which will be indexed by CPI from 6 April 2013 onwards
• Accounts will be owned by the child and funds will be locked in until the child turns 18.
• Junior ISA accounts will by default become adult ISAs on maturity • There will be no government contributions or matched payments into accounts
• There will be no stakeholder Junior ISA account Getting more information At the beginning of November we will have details of the schemes which are available and will be able to give you the necessary recommendation to suit the needs of you and the child. If you want further information on a suitable scheme please contact us.

The change will particularly affect people born between 6 January 1954 and 5 September 1954 and will be of assistance to some 33,000 women who otherwise would have had to wait a full two extra years before drawing their state pension.

The increase in the state pension age is of concern to many people who have low savings and have to rely on the state pension to meet their basic needs.

Investors who have a pension drawdown scheme which is due to be reviewed in the next few months will be in for a shock if they are taking maximum drawdown. The amount they are able to withdraw is likely to be considerably reduced for the following reasons.

(a) the reduction in the maximum withdrawal from 120% to 100% of the Government Actuaries rate (GAD)

(b) the introduction of new Government Actuarial Tables

(c) Lower gilt rates, the GAD rate is now based on a 2.75% return on gilts down from 4.25% yield earlier this year

(d) recent falls in fund values following the falls in the world stockmarkets

In most cases there will be little which can be done to reduce the hardship of the reduced income but for some investors a change to flexible drawdown or scheme pension may provide a higher level of income

The apps – one for Android phones and another for iPhones – aim to help as many people as possible enjoy the Wow! Gorillas trail and get more involved in the project.

TheAndroid mobile phone app enables people to see the locations of the gorilla sculptures on a Google map and click the icons to view information about each of the 60 gorillas on the trail.

It also includes an Augmented Reality view of the gorilla’s locations so you can view their direction and distance overlaid on the device camera; take photos of the gorillas and upload them to a free photo sharing server, and tick off each Wow! Gorilla sculpture from a list as the trail is completed. The app is free to download and available via the Android Marketplace at https://market.android.com/details?id=com.mubaloo.bristolgorillaar

The iPhone app, which is also called ‘Wow Gorillas’, also allows users to see the 60 gorilla locations on a map, find out more about each gorilla sculpture, take photos and upload them to facebook, and tick off the gorillas as they are found. The app, which has been developed by local zoo supporter, Jason Trask, is also free to download from the iPhone App Store at http://itunes.apple.com/gb/app/wow!-gorillas/id453299756?mt=8.

Everyone who ticks off all 60 gorillas using either of the two apps will be eligible for one half price voucher to visit the zoo.

The Zoo is also launching a photo competition on Facebook, inviting members of the public to upload their best photo of a Wow! Gorilla and be in with a chance of winning a selection of prizes.

The photo competition runs from tomorrow (Tuesday, August 9) until Sunday, September 4

He added: “Visit www.facebook.com/WowGorillas today and become involved in one of the city’s most pioneering and interactive art events!”

To enter the competition, visit the Facebook page, upload a photo of your favourite Wow! Gorillas sculpture with a caption explaining why it is your favourite.

You can then share and get your Facebook friends to vote for your photo. After the closing date of September 4, the 10 photos with the most votes will form a short list, with the top three winners being chosen by a panel consisting of members from Bristol Zoo, Wild In Art as well as representatives from the prize sponsors.

1^st prize: The Bristol Zoo Package. A range of unique experiences to the value of £500.

2^nd prize: Overnight stay, dinner, bed & breakfast for two people at the Holiday Inn Bristol City Centre, including Champagne on arrival, donated by Holiday Inn Bristol City Centre.

3^rd prize: A two night weekend stay for two people at the Bristol Marriott Hotel City Centre, including breakfast, donated by Bristol Marriott Hotel City Centre.

4^th prize: £100 gift card to spend at The Mall Cribbs Causeway, donated by The Mall Cribbs Causeway.

“The Facebook competition will give all Wow! Gorillas fans the opportunity to showcase their favourite Wow! Gorillas sculpture, share it with their friends and family and have an opportunity to win some great prizes.”

For more information about Wow! Gorillas, visit the Bristol Zoo website at www.bristolzoo.org.uk/wow-gorillas  or call 0117 9747 300

Last week was the worst week for global equity markets since the depth of the financial crisis. The FTSE100 saw a drop of 10 percent – the worst since November 2008. Clients are understandably concerned. However we think it is important to put the facts into perspective.

The first question to answer is “What has caused this loss of confidence in equity markets?”  The answer is well known but worth repeating.  The underlying concerns are that the Eurozone debt crisis is spreading and that a weak US economy will damage growth prospects and potentially lead to the much dreaded Double Dip.  In particular investors are concerned that there does not appear to be a political will to resolve these problems.  Investors’ rush to gold is an indication of their all-time loss of faith in Governments.

It is important to put the fears and figures into perspective.  If we look at the pattern of recovery from any of the previous recessions it has not been a continuous upward line, there have been dips along the way, so the current situation is not unusual.  Although the press record huge   losses on their front pages, it is worth remembering that the FTSE 100 is still trading 33 percent above its 2009 lows.

Many clients need income and it is worth remembering that the net yield on the FTSE 100 is 4.4 percent.  You would need to get 5.5 percent from a Building Society account to match this and with the current low interest rates we know that this is impossible.

Although there are serious concerns about the reduced credit rating of the US there are some positive economic indicators – in July the US payroll reported the creation of 117,000 new jobs across all sectors and of US Companies recently declaring their earnings, 70 percent have beaten their earnings expectations.

How should clients react to this situation?

Most clients have well spread portfolios with a cash emergency fund so our advice is to sit tight. We never recommend clients to sell in a falling market because there are costs involved and it is very difficult to go back into the market at the right time.  This view is supported by research carried out by Fidelity which shows that if you were invested in the All Share index for the last 15 years you would have seen cumulative growth of 168 percent or 6.8 percent per annum but if you had pulled out and missed the best 10 days in the market the total return would have fallen to 2.5 percent per annum.

If you do have concerns do please ring or email us.

August 2011 Carole Nicholls

(a) reduction in the lifetime allowance from £1.8m to £1,5m

(b) reduction in the annual allowance for tax relief to £50,000

(c) removal of the requirement to purchase an annuity

(d) introduction of a new form of drawdown known as flexible drawdown

If you think that any of these changes may be important to you, do give us a ring or arrange a meeting

New clients often ask the question “Where did I go wrong” when reviewing their existing investments. Here are a few responses

“You followed the trend”

I frequently see portfolios which include technology funds or some other “theme” funds. Many clients simply follow the herd, having read an article with “this month’s hot tips”. There is nothing wrong with this, the problem arises because there is never a follow on article telling you when to sell.

“You were beguiled by the advertised level of growth or interest”

If the interest rate or investment return quoted in an advert is too good to be true – that is exactly what it is – it is not possible to get these higher rates without incurring some substantial extra risk

“You took out a product which was not suitable for your needs”

This most probably occurred because there was an over-zealous salesperson involved, whose interests were not wholly aligned to your own. By the time many clients read the small print, it is all too late. The moral here is always take time to read information on an investment before committing yourself and ask lots of questions.

“You thought it was possible to make a quick return”

Investment is not gambling, one investment is not going to make your fortune, what will serve you in the long run is a well diversified portfolio which matches your risk profile

“You took too much risk and came out of the market at the wrong time”

Many clients do not properly understand the risks involved in the investments they purchase and that the value of their investments can fall dramatically. If they then exit the market, and return to cash they are very unlikely ever to make up the loss

“You did not regularly review your investments”

Many mis-selling situations would never have arisen, if clients and advisers had regularly reviewed investments. If you are looking at the portfolio regularly, it is easy to spot a fund which is under performing or a scheme which is no longer suitable for your needs. We will not now take on new clients who will not sign up to our review service because we believe that it is the ongoing reviewing of investments which will make the long term difference to performance.

We then made a stop outside the newly opened M-Shed for the Pyronaught boat, complete with spiderman gorilla, to give us a water show. The trip was finished off with a tour around the harbourside finishing at the Arnolfini, which is the location of our Gorilla the S-Express. Nicholls Stevens have sponsored a gorilla, painted by local artist SEPR, to celebrate our 25th anniversary in business.

The Gorillas are going up today and tomorrow all around Bristol. There is a walking tour taking in the Gorillas and we have some guides in the office for any clients who fancy taking in some of the art while they are in town.

For those clients who might be interested we are hosting our own gorilla walk on the 14th July. This will be an evening event starting at 6:30 and taking a short tour around the gorillas in the centre of Bristol. We will be taking in some local history and providing information on the artists. Please visit our events page for further information.

As advisers we are helping young people to think differently about saving their money for the future.

The article is attached – Download a week on state pension

We think it would be really good to get some comments from our clients.

 If you would  be prepared to give us a comment under the heading ‘What its like to be a client of Nicholls Stevens’ then please send us an e-mail using the contact form or send us a quote at the address below. Please include details of whether you wish your name to appear in print

Nicholls Stevens,   9 St Augustine’s Parade,   Bristol,  BS1 4UT