Looking to invest in an ISA – make sure you do before the 5th of April

ISAs – Individual Savings Account are a flexible way of investing up to £11,280 (for the current tax year 2012/2013), as well as being able to invest in an ISA this year, you can also transfer money held in some or all of your money held in a previous tax year Cash ISA, transferring them into Stocks and Shares.

It is worth bearing in mind that a stocks and shares ISA is a medium to long-term investment, and that the value of your investment can go up or down.

ISA’s are an easy way to earn more interest on your savings, without having to pay any tax. However each year the amount you can invest into an ISA changes. The ISA allowance runs each year from the 6th of April until the 5th of April. For the 2012/13 tax year the total annual ISA allowance is £11,280 of which £5,640 can be saved in a Cash ISA.

This cut off date for investing in an ISA is non-negotiable, if you do not invest in this time frame then you will not be able to roll your investment. Also if you draw on any of your ISA investment, then you will not be able to pay it back in, so for example if you pay £3,500 into your ISA and then draw it out then you will only be able to add an extra £2,140 for the rest of the tax year. There is no limit to the amount of ISA’s you can have, so if you wanted to open a new one every year this would be possible, but you can only have one Cash ISA and one investment ISA each year.

It is also possible to transfer both your current year’s ISAs and previous tax years ISAs from one provider to another, so ensure that your savings remain profitable. If you take out more than one ISA per tax year, then the second will not be eligible for tax relief.

If you would like more information about how to invest into an ISA, or if you would like to get more out of your ISA, then call one of our team, we are Independent Financial Advisors, so we will be able to get you the best deal from across the market place.

Make sure you use your ISA allowance
Money is not necessarily tied up in an ISA
The Big thing about ISA’s
ISAs futures and past

What is an ISA? How to invest in an ISA…

An ISA, is an Individual Savings Account, they were introduced in April 1999, to replace the old-style tax free savings. An ISA is basically a tax-free account into which you can put either your cash or shares.

Enable Independent, IFA’s in Bishop’s Stortford, realise how important it is to make sure our customers are getting the best out of their money, and it’s at this time of year when the current 2012/2013 tax year runs out on April 5th.

The 2012/2013 year allowance is £11,280, and is made up from the money you add, not from the interest or growth earned. An ISA can be split in a few ways, for example you could put a maximum of £5,640 into a cash ISA and the rest could be added to a stocks and shares ISA.

To find out more about the 2012/2013 ISA allowance, then contact Enable Independent, we will be able to give you advice on how to add funds into an ISA before the 5th of April deadline. Or to find out more about the difference between a Cash ISA and a Stocks and Shares ISA please read these ISA related articles: 

Make sure you use your ISA allowance
Money is not necessarily tied up in an ISA
The Big thing about ISA’s
ISAs futures and past

Government gives boost to housing market with Help to Buy scheme…

Enable Independent IFA’s in Bishop’s Stortford were delighted to see that George Osborne is committed to boosting the housing market within the UK.

We have seen that one of the main stumbling points for people accessing the best rates of mortgage has been managing to save up the 25% LTV mortgages, that many high street lenders are offering. First-time buyers have tended to get into a money trap, where they are paying, in some cases higher rates of rent than they would pay to buy a home within the area they need to live.

The housing market in most areas in the UK, with the exception of the home counties and London, have largely remained stagnant over the past few years, with some home prices going down, that has been mainly due to the lack of first-time buyers being able to get onto the housing market.

However under the new budget, the Government have pledged over £130 billion worth of mortgage lending to not only first-time buyers wanting to by a new home, but to everyone, including those people who want to move up into a larger property, worth up to £600,000.

The details of the scheme will be revealed later this year, but it is believed that the borrower will need to find 5% of the deposit and then the government will pay a further 20%, interest free for the first five years of the loan.

Osborne stated: “Deposits for a mortgage have put ownership beyond the majority of consumers. Not only is this a blow to home ownership aspirations, it’s a blow to social mobility.”

If you are looking at either moving up or moving into your first time home and would like to find out more about the new Help to Buy scheme then why not give one of our Independent Mortgage advisors a call. Unlike high street banks we can choose a mortgage from across the whole market place, giving you the best deals.

Good news as UK unemployment continues to fall

In further encouraging economic news, the Office for National Statistics (ONS) announced in mid February that UK unemployment fell again between October and December 2012, by 14,000 to 2.5 million, and that the number of people in employment rose to its highest level ever recorded.

The unemployment rate in the UK now stands at 7.8%, a reduction of 0.1% from the previously reported quarter. The number of people now in employment was 29.7m, an increase of 154,000. 73% of these were in full-time employment and 27% were in part-time positions. This data indicates that over 580,000 more people are in employment than a year earlier.

Unfortunately, youth unemployment (those aged between 16-24) continued to rise, by 17,000 to 974,000, which represents a rate of 20.8%, up from the previously reported 20.5% in the three months to November 2012.

Martina Milburn of the Prince’s Trust, a charity founded by Prince Charles and dedicated to getting youth into employment, commented: “It is alarming to see that youth unemployment is back on the rise. It’s now four years since the start of the recession and many young people have been left with nothing but a four year gap on their CV.”

Whilst confounding economists, the positive overall employment figures belie the still moribund economy and the fact that average earnings growth, at 1.4% pa, still remains below the CPI inflation rate of 2.7%. Commenting on this, the ONS said: “there continues to be a cut in the real value of pay.”

The Work and Pensions Secretary, Ian Duncan Smith, had this to say on the latest positive figures: “Economically inactive people who are not available for work, that’s now at the lowest level since the early nineties. “No-one is saying this is easy, but if you were in France or Spain or Greece... at these figures and say I wish I was in that position.”

Issued by: Enable Independent Financial Life Planners 25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 - Fax: 01279 657339

Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Services Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE.

ONS revises UK economy up for 2012

Adding further bullish sentiment, the Office for National Statistics (ONS) announced in late February that the UK economy grew by 0.2% in 2012. This is a modest improvement from their previous estimate of zero growth. However, they left their Q4 (2012) assessment at -0.3%, which is unchanged from their previous estimate.

The revised annual figures reflect an improvement of 0.1% in the contraction of Q1 and an improvement from 0.9% growth in Q3 to 1.0%, with the benefits seen from the London Olympics being the main factor here, as all ticket sales were statistically deemed to have taken place in Q3.

Whilst the final Q4 figures disappointingly remained at -0.3%, there were some interesting differences in the performance of various business sectors.

The construction sector had their output revised upwards to 0.9% from the previous estimate of 0.3%, whilst the production sector had their performance adjusted down from a contraction of 1.8% to 1.9% and the service sector, which is responsible for 75% of the UK economy, saw their performance revised down to a contraction of 0.1%.

At the same time the ONS announced expenditure figures for Q4 2012, with consumer spending up 0.2%, but imports down 1.2% and exports down 1.5%. Business investment was also reported to have fallen by 0.4%. Commenting on this report, the Director General of the British Chambers of Commerce, John Longworth, said: “These figures, coupled with the recent downgrade of the UK’s credit rating, confirm that action must be taken quickly to get the economy growing again.

“The Chancellor should seize the opportunity in next month’s Budget to be radical, and introduce measures that create an environment of enterprise, stimulate export growth, kick-start infrastructure projects and create a structure of business finance which supports growing companies.”

As alluded to by Mr Longworth, Moody’s, the rating agency, downgraded the UK from its long-standing AAA rating one notch to AA1, stating that growth in the UK would “remain sluggish over the next few years.”

New Deputy Governor appointed at the Bank of England

The Bank of England has announced that Andrew Bailey, currently Managing Director of the Prudential Business Unit at the Financial Services Authority, has been appointed as Deputy Governor of the Bank of England, with effect from April 1st. This will be the first time that the Bank will have three concurrent Deputy Governors.

 At the same time, he will be appointed Chief Executive of the Bank’s new Prudential Regulation Authority (PRA), which will replace the current system of regulation. The PRA’s brief will be to ensure that financial institutions in the UK, including banks, maintain ‘prudential regulation’ and do not take on excessive risk. He moved from his previous post at the Bank of England, where he was Chief Cashier - and as such his signature adorned our bank notes in circulation - to the Financial Services Authority, in 2011, where he was responsible for transferring the then FSA’s supervisory powers to the Bank.

George Osborne, the Chancellor of the Exchequer, commenting on his appointment said: “Andrew Bailey   the right skills and experience to lead the Prudential Regulation Authority as it moves into the new era of judgement judgement-led supervision. “Putting the Bank of England in charge of prudential regulation is at the heart of the government’s reforms to regulation of financial services.”

The current Governor of the Bank, Sir Mervyn King added: “We have a big job ahead to ensure the UK has a stable financial system...able to support activity in the economy and the needs of the public. There have been important and painful lessons from the financial crisis and we must ensure the UK has a successful system of financial regulation.”


Issued by: Enable Independent Financial Life Planners 25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 - Fax: 01279 657339

Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Services Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE.

New Model Advisor: Matt Baker of Enable Independent

Enable Independent were recently spot lighted in the New Model Advisor:

Matt Baker and his fellow directors at Enable Independent are confident they have a sound strategy for growth, targeting the mid-market mass affluent through referrals and acquisition plans.

Matt Baker, director of Enable Independent, is building an advice business aimed squarely at the mass affluent market.

Formerly a semi-professional cornet player, Baker is happy to play his own tune in the mid-market and disagrees with those who insist IFAs have to target high-net-worth clients to survive.

Based in the centre of Bishops Stortford, Enable started life as County Independent Advisers. It was set up in 2000 by Mike Cooke, who is now a director at Enable. Initially the firm had an introducer relationship with a large local estate agent, Intercounty, which was bought by another firm in 2007, ending the link. Cooke then renamed his business Enable to differentiate it from Intercounty.

Joining forces

Baker joined Enable in 2007, having previously been a tied adviser with Openwork. Cooke had been referring a lot of clients to Baker, so they decided to join forces and set up what they call a wealth management arm of Enable (it still operates a large mortgage advice arm). 

The following year they merged with former New Model Adviser^® cover star KMD Financial Management, run by Kevin Deamer. Deamer wanted to set up KMD Private Wealth Management with a focus on his top 60 or so clients, and was looking for a good home for his remaining 4,000 clients. Enable was looking for more mass affluent clients, so was happy to take these from Deamer.

Once the process was complete, the two firms demerged and went their separate ways.

‘We had initially wanted Kevin to remain as a shareholder and as an influence, so we could benefit from his expertise in running a directly authorised wealth management firm and he was happy to do that,’ says Baker. 

‘Eventually, as we developed as a management team, having learned from Kevin along the way, we decided to gain full control and move the business forward. So we bought Kevin out about 18 months ago. He is still a friend and we respect his opinion. 

‘Soon after, Paull Hazell became a director, and thus all shareholders and directors worked within the business full-time, which we felt was important. That was simply how it developed as we grew in confidence.’

Growth strategy

Baker says that, although slightly convoluted, the KMD merger was a pivotal step in the growth of the business. ‘Looking back, some things could have been smoother, but overall that was the best thing we ever did and we all benefited,’ he says. 

‘It happened just as the credit crunch came. The mortgage side had a terrible time from 2008, and the merger was a shot in the arm for us. We learned some valuable things about running a business from Kevin, and how to develop a service and investment proposition. But we won’t end up where he is. We are more mass market.’

Since 2008, Enable has worked at turning the 4,000 names and addresses obtained from KMD into regular fee-paying clients, and succeeded with around 200 of them. It is now moving on to focus on finding new clients from other sources.

‘We focused on getting clients onto Nucleus, our core wrap, and started to deliver a service proposition,’ says Baker. ‘The key to [converting those clients] was developing the proposition. To convince clients, you have to be convinced yourself.’

Investment philosophy

‘We now have a well-developed investment philosophy and service proposition, with Nucleus as the platform of choice. Also at the core is cashflow planning using Voyant.’

The firm uses Ascentric for some clients for whom Nucleus is not appropriate, and Baker believes this is sufficient for Enable to remain independent. ‘As long as you analyse the marketplace and ensure the [wrap] you are using is competitively priced and has all the functionality, you are independent. If you have ultimate choice where it ends up, I don’t see anything wrong with using one wrap provider [for most clients]. Our clients generally have between £200,000 and £500,000 to invest and Nucleus works well for them.’

Baker says he is aware of the Financial Services Authority’s concerns over the potential for conflict of interest from adviser-owned platforms. Nucleus is 51% owned by advisers but Baker believes the wrap may change how advisers stakes are distributed.

‘I believe the FSA has said recently it might have a problem with the way it has been possible for IFA firms to increase their share ownership by putting more funds under management with a wrap. I think [it may say] it is fine to own shares in your wrap provider but those should be in Nucleus as a group rather than dependent on your funds under management on the platform.

‘Nucleus is owned by the IFAs and the more funds you have on it, the bigger your slice. So I think Nucleus will change that because it is transparent. That is one thing we like about it. ‘I don’t believe there is a conflict of interest in owning shares and being able to shape the development of a platform, as long as you consider the client’s circumstances fully and don’t put their assets onto Nucleus because it benefits you. If the FSA states that it wants things done a certain way, I am fully behind that.’

Nucleus chief executive David Ferguson says a future change could be to soften the relationship between accrued revenue and share ownership but he has no immediate plans. ‘We have looked at different models, I’m never going to say never. Any change that occurs would reflect that,’ he says.

Enable sets minimum charges for new clients to ensure profitability. For its full service, the minimum yearly fee is £1,500. Baker says: ‘We have thought about charging [existing clients] more to bring them up to £1,500 and we are getting to the point.’

Tempering passive evangelism with active picks

Enable runs five model portfolios that use a blend of passive and active investments. These are put together by a committee that meets every quarter, using data from Financial Express Analytics and Citywire fund manager ratings for the active part.

‘In the past, we have been evangelical about passive management,’ says Baker. ‘A lot of the evidence is heading towards the passive approach in terms of lower cost and avoiding the potential underperformance and higher charges of an active fund.

‘We still educate clients to expect the market return and that asset allocation is the biggest factor affecting investment performance. But we have developed that idea. For example, in the developed equity markets, like the UK and US, it is much harder for an active manager to differentiate themselves, but that is not necessarily true in emerging markets. Also looking at fixed interest funds, the cost of active management is not so great, so we have introduced a few active elements in the model portfolios, such as strategic bond funds.’

Dimensional core

For the core passive part of portfolios, the firm likes Dimensional funds because of the small cap and value tilts. However, Hazell says: ‘We are not totally blinkered. We like their approach but they don’t do everything, and where there are gaps we will look elsewhere. 

‘Until recently, we used Dimensional’s Emerging Markets Core Equity fund. But, looking deeper, the total expense ratios [TERs] between that and the rebated cost of First State Global Emerging Markets Leaders are within a couple of basis points. If you look at the history, there is little question that First State does a better job producing returns in that sector, so we replaced Dimensional with that fund.

‘The fundamental approach with the models hasn’t changed. The thrust is still passive but there are one or two areas where there is evidence that an active tilt can add value.’

Not a fan of ETFs

The fund previously tried using exchange traded funds (ETFs), especially for access to commodities, but, Hazell says: ‘ETFs can make rebalancing complicated, particularly when you have a minimum trade size. They weren’t adding enough to warrant the added complication. 

‘For a core portfolio, if there is a need to rebalance or if there are regular premiums to be paid, it is difficult to reflect that when you have lots of ETFs. Besides, many equity funds have exposure to commodities one way or another already.

‘The advantage of passive is, although it’s not particularly clever, it does what we set it out to do,’ says Hazell. ‘Clients will know in advance what the best and worst case scenarios will be over time, so they can be disappointed but never surprised.’

Attracting new clients

Baker believes the best way to obtain new clients is through referrals from existing clients and from the mortgage advice side of the business, which has about 2,500 clients. 

‘We see them as introducers and educate them on what we are looking for and how to get them across. We are trying to identify ways of marketing to their clients better.’

Enable has two solid professional connection relationships, has just reached agreement with a third and organises presentations to try to build more.

It is also developing its online visibility. ‘We pay a marketing company on a retainer to improve our Google ranking and handle our social networking, and that has yielded a few clients,’ says Baker.

Matt Baker:

Curriculum Vitae

CAREER

• 2007-present Enable Independent, director
• 2005-2007 Openwork (Paul Baker Associates), financial adviser
• 2002-2005 Clerical Medical, broker consultant
• 1998-2001 Scottish Equitable, broker consultant

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

• FPC 1, 2 & 3
• J04, J05, AF3, R02, R03
• CF6
• GR1

Optimistic about equities

A commonly cited disadvantage of passive investments is they tie success closely to that of the markets. Baker says: ‘What is going to happen? If it was a client asking, I would say: "I have no idea." 

‘But I am an optimist. We play a game here every year: everyone puts down what they think the FTSE will be at the end of the year, and I am nearly always the most optimistic – but I have never been right. 

‘However, I have more concerns now about clients who have the majority of their funds held in fixed interest than clients in equities. I think there is mileage in equities this year.’

Total expense ratios on Enable’s portfolios are between 1.68% and 1.81%, all inclusive. The fee is 1% ongoing.

Enable’s benchmarks are composed of indices weighted according to the sector weighting within its model portfolios. The benchmark for the model 5 portfolio (see below) includes the FTSE All-Share and MSCI UK Small Cap indices to reflect its UK equities weighting and the BoA Merrill Lynch Euro-Sterling index to reflect its fixed interest weighting.

Baker says he is target-oriented and highly motivated to succeed. By the age of 22, he was an accomplished musician and moved to Yorkshire to play for the Black Dyke brass band. 

‘It is world famous in its circle, and I was the principal cornet player for six years,’ he says. ‘We toured and recorded; we had a brilliant time. We played with pop stars, such as Elton John (pictured below), Peter Gabriel, Jules Holland, The Beautiful South, and had some fantastic experiences.

‘I followed my passion for a number of years. Then I thought I had to have one eye on my long term so I started with Scottish Equitable as a trainee consultant in Yorkshire, balancing the two for a while. But then, as I approached my 30th birthday, I had to make a long-term decision and focus on financial advice.’

Baker is optimistic about the future for mid-market IFAs. He says the profit of the firm ‘stood still’ for a while between 2009 and 2011 while it focused on developing its proposition. ‘Now we are starting to grow,’ he says. ‘Our primary targets are to grow funds under advice and turnover by at least 10% a year. But we don’t want costs to go up. Profit is the most important figure.’

He plans to make acquisitions and wants to recruit advisers who have their own clients and who want to either retire or stay in the business.

Despite working hard, Baker finds time to teach cornet and play with the Redbridge Brass band. ‘I am a firm believer that you have one life, and have to live it. I love my holidays and my hobbies,’ he says.

‘I have played cornet to a high level as I have always been motivated to be as successful as I could at what I do. Now this is my priority, working hard at making a successful business. That translates to earnings – to earn enough to live my life and do everything I want to do. It is about having an objective and once I have achieved that, set another objective. 

‘I always want to improve what I am doing, that is being put into work now. I have mucked about for enough years.’

If Enable was a musician, what style of music would it play over the next 10 years? ‘A good word would be bravura, which means with skill, virtuosity and style,’ says Baker. ‘The future is clear: we have the price, the proposition and the relationships, and we want to expand.’

Five top tips

• Keep your clients’ best interests at the centre of everything you do. Without our clients we don’t have a business.
• Have a business plan, which has been discussed and agreed with all the interested parties, and stick to it.
• Develop a client proposition in which you truly believe.
• Do everything you can to stay positive, and get out of your comfort zone often.
• Surround yourself with good people and give them a say. 

If you would like to arrange a meeting to discuss any of your financial needs, plans or investments then why not give one of our team a call on 01279 755950 or email Matt Baker @:matt@enableflp.co.uk