Understanding ETF’s

Making sure you have some idea of what is in your investment portfolio is always a good idea. Many managed portfolios include ETF’s.  In some ways, exchange-traded funds (ETFs) are similar to "ordinary" unit trusts. They are pooled collections of shares (or other assets such as bonds) that allow investors to buy a diversified portfolio with a single purchase. ETFs tend to be "tracker" funds, meaning that they automatically buy the holdings in a particular index in order to mimic its performance.

ETF’s however differ from conventional trackers because they are traded on the stock market like any other share. This means they can be bought and sold buy easily, and you always know the price. With unit trusts, you place your order but discover the price only when the transaction has gone through. You might think a fund traded on the stock market sounds like an investment trust. However, investment trusts issue a fixed number of shares, whereas ETF shares can be created and cancelled in response to demand. The practical effect of this is that they are very unlikely to trade at a discount or premium to the value of their holdings.

The funds come in two forms. The first type buys the actual shares or bonds found in the index that it aims to track. This kind is called "physically replicating" and is seen as safe, especially for the major indices such as the FTSE 100. The other kind uses complex financial instruments called "derivatives" to mimic the performance of the index concerned.  If you want to know more about the types of investment available or more about the investments made in your portfolio Enable’s Independent Financial Advisors can explain their pros and cons more fully.

Will new pension rules lead to less saving?

Behavioural economics, the study of how humans operate and make decisions based on psychological, cognitive and emotional factors, offer some interesting insights to the brave new world in pensions paved by George Osborne in March’s Budget.

 As of April 2015, at retirement age people will have the freedom and flexibility to take all the money accumulated in their pension and do with it as they wish – once the tax has been paid. At face value it might seem like a financial liberation and as a consequence of these freedoms, many believe we will all save more for the future. But the opposite outcome is quite probably more likely if we listen to behavioural economic theory it might mean that by focusing on large lump sums of money for retirement, we will feel less inclined to save.

Research from Goldstein, Hershfield & Benartzi (2014) sought to assess how middle-aged people would assess the adequacy of retirement savings when expressed in two different ways: as a lump sum and as equivalent regular monthly payments.  Goldstein, Hershfield & Benartzi predicted that the perceived adequacy of a pension would vary depending on how it was presented. They anticipated that savers at lower levels of accumulated funds would be more sensitive to changes in monthly sums than to changes in lump sums.

So whereas a £50,000 lump sum appears a satisfying amount for someone retiring, the same amount expressed in monthly annuity-style payments spread over an expected lifetime in retirement appears less satisfactory.  Interestingly, there is a tipping point when pension pots expressed as monthly amounts are viewed as having greater adequacy than their lump sum equivalent. In this study, the figure is around the £200,000 mark – which seems roughly the amount at which most people’s living costs are met when expressed as monthly amounts.

As a consequence of people appraising their pension pots as less adequate when presented in regular monthly amounts, become inclined to save more. Therefore, the benefits of increased saving are greater when pensions are presented as monthly amounts rather than a lump sum.  If you are trying to decide how much and what to do with your pension savings Enables IFA’s in Bishop’s Stortford can help you consider your options.

Wanting a Mortgage?

Enable's experienced Independent financial Advisors in Bishop’s Stortford can see why many lenders expect the proportion of mortgages approved to fall significantly in the third quarter of this year.

Tighter checks on borrowers as a result of the Mortgage Market Review and a tightening by some lenders on loan-to-income ratios on larger loans have been given in a recent Bank of England credit conditions survey were given as reasons for the fall in approvals in the next three months.

Lenders also expect more tightening on LTI ratios over the next three months, which will also have3 an effect although they also expect the availability of mortgage credit to fall only slightly.  The survey says: “Lenders again expected the approval rate to fall significantly in Q3. Some lenders noted that changes introduced as a result of the Mortgage Market Review might reduce approval rates somewhat. “In addition, some lenders suggested that a tightening in lending standards on large loans with high LTI ratios may also push down their approval rate a little.”

Mortgage Advice Bureau head of lending Brian Murphy says: “Wider availability of credit is a welcome sign that the mortgage market is returning to normal and it would be a travesty if this over-due pickup after years of stagnation is quashed by over-eager efforts to keep house prices in check.”

If you want to review your mortgage or are looking at taking out a mortgage Enable IFA’s are here to talk you through your options.

Your home could be at risk if you do not keep up the repayments.

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 Conduct 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

How is your Mortgage Brain?

Technology once again is working for all parties in the financial news this week it has been noted that UKMortgages, the application launched by Mortgage Brain, has been downloaded more than 81,000 times since launching in 2012. Consumers have accessed and used the mortgage search tool more than 826,000 times in that period. As a result of using the application, consumers have also viewed broker contact details more than 43,000 times. The application is available across the iPad, iPhone and Android platforms as well as on Windows 8 and Windows Phone devices.

Owned by six of the UK’s largest mortgage lenders Barclays, Lloyds, Nationwide, RBS, Santander and Virgin Money, Mortgage Brain was started as a mortgage- sourcing provider but has now evolved through organic development and acquisition to offer a range of mortgage software from mortgage client management software through sourcing and application submission and most recently the provision of apps for both advisers and consumers.

In a world where consumers increasingly run their lives digitally through mobile devices and smart phones, these apps it is a great place if you are a potential buyer to begin your homebuying experience. The app includes tools which enable you to work out how much you can borrow and how much monthly payments will be and it can help calculate if money can be saved by remortgaging as well as the impact of rates changing and overpayment. Enables Independent Financial Advisors know that when it comes to trying to find the right mortgage it’s still the case that many brains are better than one even if one is a high speed digital one!

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 Conduct 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

Government might offer equity release?

Earlier this month a report was launched for debate in the House of Lords calling on the Government to look at delivering its own alternative to equity release.  The report is called “The UK Equity Bank: Towards income security”, and has been put together by Cass Business School and the International Longevity Centre.  It suggests that the Government could come up with a system to exchange an income in retirement for a share in a homeowner’s property.

It would be a scheme aimed at delivering a simpler and cheaper alternative to other forms of equity release for homeowners aged 75-plus. It would mean that older people would be able to sell part of their home to the government in return for a guaranteed lifetime income. The scheme would initially be focused on those living on their own with small incomes who would be reluctant or perhaps unable to move and downsize.  On death the property would then of course need to be sold, the debt to the state would then be paid and the remainder passed to the person’s estate.

The report estimates that up to 80,000 homeowners might access it, compared to 19,000 that current use other forms of equity release each year.  In February, Pure Retirement became the first equity release loan provider to launch since 2010. If you are looking at ways of making sure you have sufficient funds for your retirement Enable's Independent Financial Advisors in Bishops Stortford are here to help.

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 Conduct 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 

Inflation is on the agenda again and again

Enable's Independent Financial Advisors know you have to feel like you can afford to save before it easy to have a savings or investment plan in place. At the beginning of the month The Bank of England’s Monetary Policy Committee once again voted to keep the base rate at 0.5 per this was for the 63rd consecutive month of record-low rates. But with many families struggling with the cost of things going up while wages do not keep pace something might have to change.

It would seem that according to a survey of 4,000 households that was conducted as part of the B of E’s latest quarterly report 58 per cent of households would actually prefer the central bank to keep inflation down through higher interest rates.  This is a significantly larger group that the just 14 per cent of households that preferred to keep interest rates low and accept higher inflation, despite 67 per cent of borrowers being on their lender’s standard variable rate.

The Bank is aiming to keep inflation at 2 per cent and says: “There is evidence of public support for the Bank’s objective of maintaining low and stable inflation remains strong.”

Back in February, there was much speculation but it seemed like rates would not be changed until spring next year - which would amount to six years of the central bank holding the benchmark rate to a record-low 0.5 per cent - although after Mark Carney’s more recent warning some commentators suggested rates could rise before the end of this year.


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 Conduct 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

Saving for studies...

Saving up for a member of your family to go to University requires a lot more planning than it used to with the rising costs of living and the rising cost of tuition fees.  There is much talk about studying abroad and more UK students have been taking up this option but it is not necessarily as straight forward as it might seem.

Most EU countries do have some type of scheme that provides loans and financial aid to students, but these are not usually open to students from other member states. The EU rules state that students from other member states are entitled to access universities for the same tuition fees as domestic students, but countries are not obliged to provide financial assistance on the same basis unless individuals have been living in the country for at least five years prior to beginning study.

In some European countries however, you can get support for example The Netherland have student loans that will cover the full cost of tuition and non-repayable grants are also available for those in part-time employment, and in Italy student loans are available to EU students on the same basis as they are to home students, although these are based on both merit and means-testing and don’t cover as broad a range of people as the loans system in the UK.

Students are usually allowed to work while studying, although finding jobs can be difficult. Some students choose instead to work during breaks in the UK to save up the funds necessary for their living costs while abroad. It’s difficult to know how to help as a parent or grandparent but if you want to talk through some saving for future studies Enable IFA’s in Bishop’s Stortford can help you think it through.

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 Conduct 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

Socially responsible investing...

More and more Enable IFA’s in Bishops Stortford listen to people who want to know what their investments are used for. Some funds are trying to take steps towards providing solutions for example the AXA Impact Investment Initiative, which launched last September.  It is one of relatively few socially-focused "funds of funds". A fund of funds is a portfolio of investment funds rather than direct investments in stocks, bonds or other financial instruments. "A fund of funds helps to pull together small pools of capital and make them large," said Lloyd Kurtz, faculty co-chair of the Moskowitz Prize for socially responsible investing at the University of California Berkeley.” 

But Kurtz said that while impact investing has expanded its role in the market, there have been a limited number of asset classes involved – particularly private equity, venture capital and hedge funds. "It's been difficult to have critical mass needed to have credible social investment offerings."
But according to Matt Christensen, global head of responsible investment for Paris- and London-based AXA Investment Managers, the fund is larger than most of its type, particularly among institutional investors.

The fund of funds however got a mention in a recent report on impact of investing by the Global Impact Investing Network and JP Morgan. Based on a survey of 125 impact investors, they identified a "lack of appropriate capital across the risk/return spectrum" and a "shortage of high quality investment opportunities with a track record". If you want to understand more about socially responsible investing it is wise to talk it through with and advisor so you can put things in perspective.

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 Conduct 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

The Pensions Act getting to grips with the detail

Enable's independent financial advisors in Bishops Stortford keep fully informed of changes to legislation that impact on financial planning. As some may or may not have noticed the Pensions Act 2014 received Royal Assent on the 14 May. The final regulations have still not been published, but there are some measures in the Act that will impact on pension advice and pension provision.

With the imminent arrival of auto-enrolment the big qualifying pension schemes, find that the Act sets out a framework to allow the Government to cap charges, and to ban active member discounts and commissions.  With the introduction of auto-enrolment it is likely that many people in this increasingly portfolio work place will end up with small pension pots all over the place as a result of moving jobs. To tackle this, the Act sets out the framework to allow the automatic transfer of pensions between auto-enrolment schemes.

The Act also means the Government and the FCA have to introduce rules for DC schemes and providers to publish detailed information on the charges that apply in a scheme. This should make it easier for advisers and employers to compare providers and to make the best decisions possible

The Act finally also sets out the framework for a single-tier state pension. With the increase in state pension age to 67 from 2036 and the ability for some to buy more state pension, this might mean many will need to revisit their retirement planning. If you want to talk through pension planning Enable IFA’s are here to help.






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 Conduct 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

Trying to come up with a blueprint for pensions guidance

There has been much in the press for a while about who is allowed to provide the guidance for people about pensions and many are saying that policymakers need to appreciate the low level of understanding that is out there about financial management particularly in this area. A recent survey of private pension savers near retirement age asked them to rate their own knowledge. Just 28 per cent knew they could take only 25 per cent of their pension tax-free.

Surely any guidance should ensure people have a minimum understanding of the key issues and that should include and understanding of the state pension, including information about when and how to take it.  There needs to be a clear understanding of the choice of how to use private pension saving and the key facts spelled out.  Good planning needs to be thoroughly understood, looking at income now and later and for family and care , it all really need to have been thought through.

Guidance needs to be impartial, which means it needs to not offer opinions, even though setting out the pros and cons of each option can run the risk of bias it is something IFAs are experienced at.
Of course it is possible to get best-practice kite-mark standard guidance delivered commercially.
If you are approaching your retirement and want some help understanding your options and choices delivered in an impartial manner that is exactly what Enables IFA’s in Bishop’s Stortford are trained to do.


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 Conduct 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

NatWest & Lloyds cap on loans over £500,000

Enable Independent Financial advisors are not surprised to note that NatWest has followed Lloyds Banking Group in capping mortgage income multiples to 4 x income where customers are borrowing more than £500,000. And from 6th June, the lender will also apply a maximum term of 30 years to loans worth more than £500,000.

Clearly this has been introduced to “address the inflationary pressures being seen in London” a spokesperson said: “NatWest Intermediary Solutions places a strong focus on affordability and already has measures in place to safeguard customers borrowing large amounts, for instance, reducing loan-to-values for larger loans. “This measure adds to those safeguards and is targeted particularly at customers interested in the upper end of the London market, where there has been the most inflationary pressure.” This follows on the heels of Lloyds last month announcing it was capping income multiples to four times income for borrowing above £500,000 as wages were not keeping pace with house price growth in London.

Without doubt this new policy will spread, mortgages from RBS Intermediary Partners and to RBS and NatWest mortgages for direct customers are set to change later this month.

There is still the option that the  Bank of England governor Mark Carney could be forced to intervene in the market and change the terms of Help to Buy. Striking the balance is clearly not easy and it is even harder to make individual choices along the way.  If you want to talk through your housing options with Enables IFAs we are here to help.

Your home will be at risk if you do not keep up your mortgage payments.

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 Conduct 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

Other ideas to ease the pressure on housing stock...

The housing situation in the south east continues to cause waves. Last year Housing Minister Mark Prisk even set up a working group to look at the possibilities of building more pre-fabricated houses. The idea is that this could enable thousands of flats and homes to be built at a fraction of the cost of more traditional properties, and so in theory ease the pressure on prices. These building could be modern, factory-built units that come complete with built-in kitchens and plumbing.

Or maybe the government need to do more for smaller developers. Large builders need bigger sites to make the returns demanded by shareholders. But in many other European countries, most properties are built on small sites, by smaller builders. Jan Crosby of s KPMG accountant, reports that 80% of homes in Austria are built on a smaller scale. If  such builders could be incentivised to build more, with the help of cheaper loans that might help. More people could also be encouraged to build their own homes, where significant savings can be made.

In the 1960s, the British government decided that a further generation of newtowns in the south-east of England was needed to relieve housing congestion in London, one of the outcomes was Milton Keynes. Never the less the government has announced plans for up to three new Garden Cities with the first in Ebbsfleet in North Kent. But while that may ease the housing shortage in that area, the provision of 15,000 new homes over a long period of time is unlikely to have a significant impact on property prices across the UK. Enables IFA’s of Bishops Stortford see it as a long term problem for house buyers unfortunately..


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 Conduct 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