News

January 2012 Update

22nd January, 2012

News for the start of 2012

EIS and VCT

In the UK the Chancellor's Autumn Statement contained few surprises, the main exception being changes in the rules affecting Enterprise Investment Schemes (‘EIS') and their collective investment variant, the Venture Capital Trust (‘VCT').

EIS were introduced in 1994 and VCTs in 1995, both with the intention of encouraging investment in small companies by offering tax concessions. EIS invest in single companies which satisfy certain criteria and VCTs in portfolios of qualifying businesses. Up to £500,000 can be invested annually via EIS, and £200,000 via VCTs; and both schemes offer up-front income tax relief of 30%. In addition, EIS provide exemption from capital gains tax if held for at least three years, and VCTs for five years.

The first change announced in the Chancellor's statement is that the investment limit for EIS is to be increased to £1 million p.a.. The second is that restrictions on the size of companies in which the schemes can invest are being relaxed to include companies with assets up to £15 million and up to 250 employees.

The major surprise in the Autumn statement is that a new ‘Seed EIS' (‘SEIS') is to be introduced to encourage investment in start-up businesses. A major accountancy firm described as "astonishing" the fact that SEIS will provide 50% income tax relief in the tax year 2012/13 on investments up to £100,000 even if investors' own tax rate is lower than 50%. In addition, if the investment is made from gains made from the sale of other assets in the same tax year, these gains will be exempt from capital gains tax.

As a result, every £1 invested in SEIS will cost the investor only 50p. In fact, the total relief will amount to 78% if gains are reinvested and account is taken of the 28% saving in CGT.

However, the benefits of SEIS could be outweighed by the very high risk of investing in start-ups, and the difficulty in conducting due diligence suggests that it is unlikely that SEIS will be available as a retail product. Investment is likely to be confined to entrepreneurs' friends and families.

Pensions and tax

It had been suggested that the UK Chancellor might withdraw some of the tax benefits of pension saving, notably the availability of tax-free cash (usually 25% of the value of the fund) and higher rate tax relief on contributions. In the event these fears proved unfounded, but they serve as a reminder to higher rate taxpayers to take advantage of the current concessions while they last.

There were, however, other developments on the pensions front.

The State pension age is to be increased from 66 to 67 from 2026, eight years sooner than originally planned. This may cause some people to consider working longer or saving more, but one benefit is that retirees who have not yet accrued their maximum benefit entitlement will have a chance to top-up their National Insurance contributions. We understand this will also apply in the Isle of Man.

In the UK firms with fewer than 50 employees which do not have a comparable staff pension scheme in place will be required to introduce NEST (the National Employment Savings Trust) and the operative date had been set at April 2014. However, recognising the financial burden that compulsory contributions will place on such firms, the Government has announced that the operative date is to be deferred until May 2015. Larger employers are already instructing financial advisers to provide staff briefings and advice.

We see IOM government giving consideration to NEST or similar at some point in the next few years as pressure continues to be applied to Manx budgets and as people are expected to save more for their own retirements rather than falling back on the state.

On the tax front, the annual UK capital gains tax allowance has been frozen at its present level of £10,600 for 2012/13. Finally and as an aside, we see the IOM review on the taxation of investments being a way by which the tax office may be able to apply capital gains tax in all but name. Watch this space.

Junior ISAs

In the UK, Junior ISAs have been available since November 2011, when they replaced Child Trust Funds. Family and friends can contribute up to £3,600 a year into either cash or stock and shares accounts, and from April 2013 the annual investment limit will increase in line with the consumer price index.

Accounts can be established for any UK resident under the age of 18, but no withdrawals can be made before the child's 18^th birthday, except in the case of terminal illness or death. When the age of 18 is reached, the Junior ISA will be converted automatically into an adult ISA.

Any method of encouraging children and young people to save, and being introduced to the concept of credit being the last rather than first resort, is to be welcomed. The lack of such options being available locally is something we hope IOM government will consider.

Deferring annuity purchase

The income available to purchasers of retirement annuities has fallen by around 20% over the past three years and now stands at historically low levels. Consequently, many retirees are asking whether it would make sense to delay annuity purchase until rates might improve

There is a good chance that the yield on gilt-edged securities, which are the main influence on annuity rates, will rise from current levels in the foreseeable future. It is also a given that annuity rates will rise with increasing age, as also will the likelihood of declining health qualifying the annuitant for the improved rates available from an enhanced or impaired life annuities.

However, it's not a one-way bet. Every year's deferral is a year's annuity income lost. And with every passing year, the period between payments starting and the reaper coming to call gets shorter.

The answer is likely to be different for each individual, but a good way for investors with larger pension pots to hedge their bets would be to phase annuity purchases over a number of years.

January 2012

Wishing you a very merry Christmas and a Happy New year

26th December, 2011

Our office, is now closed for Christmas, open 28th-30th December and closed over the New Year. We will be back at 9am on Tuesday 3rd January 2012.

We understand that Christmas and the New Year can be a time when people take a proper look at their finances and make personal finance resolutions for the year ahead.

If this sounds like you, please do get in touch whilst our office is closed and we can arrange a first meeting at our expense and with no obligation in January.

If you need to contact us urgently between now and  January 3rd, please email sharon@thorntonfs.com or call 01624 660220 and leave a message. We will be monitoring both when the office is closed and should be able to respond within a day or two.

We would like to take this opportunity to once again wish all of our clients, professional connections, suppliers and website visitors a very Merry Christmas and a Happy New Year

RDR update - and dreams of an idealist

22nd December, 2011

 How do you really put Financial Services in the Isle of Man on the map for the right reasons when faced with such dire headlines as only this week? I refer to the "Bank denies mis-selling" story - see; http://www.iomtoday.co.im/news/isle-of-man-news/bank_denies_mis_selling_1_4074609

"RDR" is a phrase that is causing much controversy and some fear in the UK amongst those involved in providing financial advice to consumers. Not since the first UK Financial Services Act (1986) has there been such a shake up of the system of providing financial advice to consumers. The UK's FSA has been disappointed with the results of its earlier legislation and practice on the topic and is now proposing wholesale changes that will take effect on 31 December 2012. In the mean time advisers are expected to get their houses in order in preparation for the new regime.

 The proposals are wide ranging and detailed. The FSA says it wishes to push through the changes to improve consumer confidence in products and services and to address poor standards amongst financial advisers. They believe the changes will raised standards of professionalism, improve clarity and reduce conflicts of interest that have plagued the industry. Their vision is to raise IFAs' game and to move them in to the circles of other fee paying professionals. The new rules will be in place for the start of 2011 with minimum qualifications to be achieved by 31^st December 2012 and in the Isle of Man only a year later.

For an industry that is already regarded as a lifestyle choice and populated by an increasingly aged group of people, it is clear that something must be done or else the availability of financial advice will reduce as more people leave the industry and large corporations switch to a product sales model. Add into the mix the fact that currently 70% of individuals do NOT seek financial advice.

Arresting the decline in numbers of advisers, I believe can be achieved through working with government - Departments of Economic Development (DED) and Education using public/private partnerships. Broadly my 'dream' involves a framework of a 'home-grown' financial services degree with core and satellite subjects offering vocational credits and recognition towards Chartered status from certain Professional Institutes, such the Chartered Insurance Institute. After all, in these austere times, wouldn't it make sense for the Isle of Man taxpayer to fund core subjects at higher education establishments locally, rather than non-core ones in the UK? - yes, that's controversial I know.

However, developing the plan a stage further forward thinking companies, including IFAs, Life companies (representing the largest proportion of private sector employment in the IOM), captive insurers and General insurance Broking firms, large and small, can see a less costly and risky way of bringing in new talent to a sector where grey men in suits are the norm, where at the moment there is a dearth of young talent taking these vocational qualifications. Such a scheme would go a long way towards ensuring the future succession plans of their business, increasing profitability, especially where you throw into the mix an apprenticeship type incentive, and you have potentially the biggest 'jobs opportunity' advert to appear in Isle of Man Newspapers ‘job vacancies' column. We all want the Isle of Man to succeed as a ‘Centre of Excellence' in one form or another; most of the infrastructure needed, including mentors, both private and public is already here for Financial Services which is a vital support for all the diverse industries DED are so keen to attract and retain.

To go back to RDR, advisers need to respond to the new environment now, not least because the Island's regulators will adopt the proposed changes and already have progress towards qualifications on their radar. UK providers changing systems to cope with RDR in time for 31^st December 2012 are hardly going to go out of their way to accommodate a minority market like the Isle of Man. Does this mean those with their heads stuck in the sand need to look for another role? We've heard it all before about having 30+ years ‘experience'; Because, how do you know what you don't know if you don't know what you don't know?

Sound financial advice will be important to all clients. In the current economic climate negative headlines like the ‘Isle of Man Bank Adviser sells terminal cancer patient annuity' are sadly, all too common and call into question impartiality and conflict of interest (with targets for bonuses?).  As circumstances and appetite for risk change as a result of external influences, all clients should regularly review their plans and financial goals, then go and employ the best adviser for the job. You can be sure Thornton Associates Ltd, as the Isle of Man's first firm of Chartered Financial Planners will be ready and able to help clients, both existing and new.

Sharon Sutton FPFS Chartered Financial Planner

Charitable Philanthropy

4th December, 2011

Planning for what you give

'Red Nose Day' was a few weeks ago, and with all the excesses of Christmas upon us, do you feel like giving to others less fortunate instead?

As a financial planner I find clients are now coming to expect that we can help them with their philanthropy. David Cameron's recent reference to 'building the big society' also has us thinking about a whole new range of projects in need of funding in an effort to work towards this common goal.

A report by think tank Policy Exchange highlights how advisers can play a role in facilitating philanthropy by setting up 'giving circles' which provide networks of charity contacts.

30 donors interviewed for the study said the process of identifying a charitable cause at grassroots level was one of the hardest parts of giving.

Stephen Hammersely, chief executive of the UK-wide Community Network Foundation, said high-net-worth clients were responsive to giving in times of economic turbulence.

'In times of uncertainty people are open to conversations about things that would normally not be talked about. There may be factories closing down, people being made redundant and people may feel more aware of the issues on their doorstep and their relative affluence and position compared to others,' he said.

He added that the downturn could actually catalyse more action than in comparatively well-off times.

'In times of difficulty people are possibly more prepared to think about giving and engaging in philanthropy than when times are really good and people get caught up in the froth of making money,' he added.

Hammersely said advisers were making increasing contact with community foundations and his organisation had seen the number of donors doubling over the past four years.

Mark Estcourt, managing director of London-based Cavendish Young, encourages philanthropy in his clients and uses it for tax planning.

'It is just another form of insuring that their assets are dealt with in a logical and tax-efficient way.'

It is possible to use financial planning to help clients use their wealth to change their lives, after all 'you can't take it with you'.

'As financial planners we have the ability to transform people's lives,' he said.'Good financial planning can help people achieve their goals of a dream holiday or have a more permanent impact. I don't think that any other profession does that.'

Cash flow modelling is critical to the basis of any financial plan but it could also include philanthropy and charitable giving with a significant level of information about clients' wealth and ambitions. Financial planning isn't about products; it's about budgeting, goal setting and eliminating debt - surely a message that is relevant to everybody.

In 2009 it was expected that UK charities missed out on £1.2 billion in donations because of tax-inefficient giving by donors.

New research from Unbiased.co.uk, the professional advice website, found that some simple changes to giving practices could help charities net over £1 billion a year in money that is currently being claimed by the taxman.

UK adults gave a total of £9.9 billion to charity in 2007/08. According to this research, these gifts could be boosted by nearly 12.5% if donors had made full use of the tax allowances available to them via Gift Aid which allows the charities to reclaim basic rate income tax relief on the money. It is a shame that such methodology is inaccessible here in the Isle of Man. However, here is a summary of those 'charitable' tax reliefs which are available;

RELIEF FOR CHARITABLE DONATIONS DEED OF COVENANT (not to be confused with the Educational Deed of Covenant)

Charitable donations made under a deed of covenant will be allowed as a deduction from total income in the tax year in which they are paid, provided the deed of covenant is:

• Irrevocable
• Not for consideration in money or money's worth
• For longer than three years

There are currently no minimum or maximum limits for the amounts allowable. A copy of the deed of covenant should be submitted to the Income Tax Division.

OTHER DONATIONS

Smaller or informal donations to a charity are allowable as a deduction from total income. The practice note sets out ways of getting tax relief for straight forward "annual" donations. Evidence of payments made must be provided.

Relief is restricted on charitable donations to those in excess of £100 and below £7,000

Charitable trusts can be set up and these should get favourable tax treatment if set up properly and all investment income of the charitable trust will be tax free.

Isle of Man trading companies can now get £15000 relief or if greater 1% of taxable income before loss relief and capital allowances.

Further details may be obtained on the Isle of Man Government Treasury Website, Practice Note 83/00 (http: //www.gov.im/treasury/incometax/technical/practice/PN83-00.xml); the rest of the practice note still stands including no relief for investment companies.

We are seeing a burgeoning market for philanthropy advice and there is a pent up demand for people to give more effectively. At the moment, the philanthropy advisor market is unregulated, and anyone can call themselves a ‘philanthropy advisor' without any formal training or experience.   We would therefore advocate taking professional advice from qualified Isle of Man professionals.

Sources; IOM Government Income Tax Division, PKF (IOM), Citywire.co.uk

Dealing with the prospect of Redundancy

19th November, 2011

The prospect of redundancy is becoming very real for more and more people, in light of worsening economic conditions and cutbacks in government and company spending.

Redundancy may occur for a number of reasons and with every redundancy comes a whole series of important decisions to make about your life, and how you (and maybe your family) will cope with losing your income.

Every redundancy is different because every person who experiences redundancy will have very different circumstances, goals and objectives. However, there are some common areas of concern that may need to be addressed.

Legal advice can ensure that you maximise the benefit of your redundancy package. Financial advice ensures that you structure your finances in the most effective way.

Proactive steps

The best planning for redundancy takes place long before the subject is even raised by your employer.

The two most valuable things you can do in anticipation of redundancy are to cut down on your expenditure and create an emergency savings fund.

Emergency fund

This will give you sufficient breathing space to assess all of your options and, if necessary, find new employment. We would recommend an emergency fund equivalent to three to six months' typical expenditure. This money needs to remain accessible in the event of a real financial emergency but not too easy to access, in case you are tempted to dip into the fund. A high interest bank account is often a sensible home for your emergency fund.

Unemployment cover

Before you all rush off to seek such a policy, it is usually only available when attached to another plan as a ‘bolt on' such as mortgage protection life cover and usually at outset of the policy. This needs to be done before impending redundancy or you won't be able to make a successful claim. Such plans typically cover the monthly repayment of your mortgage and only normally last for 12 months because the insurer usually expects the claimant to have secured replacement employment during this time. Involuntary redundancy is not covered, nor is being fired. Often there is a 30 or 60 days ‘wait-period' before paying a claim.

Redundancy payments

Assuming you have worked continuously for your employer for at least two years, you should be entitled to a redundancy payment. Statutory redundancy payment is not subject to income tax or National Insurance contributions. The amount of redundancy pay you receive will be covered in your contract of employment.

The first 30,000 of any payment on termination of a contract is tax-free as long as it is not in lieu of actual pay; eg for gardening leave.

Statutory redundancy pay

The total amount of redundancy pay you receive will depend on a number of factors, including how long you have been continuously employed, your age and your weekly pay.

In the Isle of Man the amount of a redundancy payment is one week's gross pay for each complete year for which the employee has been continuously employed. A week's pay is capped at a maximum of £480 a week. Refer to Isle of Man Employment Rights: a Summary which can be downloaded; http://www.gov.im/ded/employmentrights/rights.xml

Help from the state

Depending on your financial circumstances, you might qualify for help from the state when you are out of work. Your first port of call should be Job Centre, which will be able to tell you about your entitlement to payments or benefits. If you or your family/partner has over £13,000 you will not be entitled to receive the income-based component of jobseeker's allowance.

However, you could still qualify for the contribution-based jobseeker's allowance, assuming you have paid or been credited with class 1 national insurance contributions in the relevant tax years. This can provide up to £67.50 per week if you are aged 25 or over. It is £53.45 per week for under 25's.

Loss of protection benefits

Redundancy often results in the loss of valuable employee benefits previously provided by your employer as part of your remuneration package. These employee benefits might include death in service and private medical insurance.

Redundancy (like any life event) should serve as a prompt to evaluate your protection requirements, identify any shortfall in cover and put in place a suitable protection arrangement.

Make sure you shop around to identify the most competitive provider as the costs vary between the most and least expensive provider of these financial products. Also make sure the cover is eligible for Isle of Man residents.

As it can take a number of weeks to underwrite some forms of financial protection, particularly if you require substantial amounts of cover or have a complicated medical history, it is worth starting this process early when the topic of redundancy is first raised by your employer. This will put you in the position where you can put the new cover on risk as soon as existing benefits come to an end, therefore preventing any time gaps in your cover.

Pensions

Depending on your age at the time redundancy occurs, retirement is likely to be a serious consideration. As this is likely to be early retirement (or at least earlier than originally planned) you will need to look carefully at affordability. After all, you are younger so your pension benefits will have had less time to accumulate and will need to last for longer.

Early retirement prompted by redundancy is a good opportunity to re-evaluate your lifestyle and the associated living costs. Your pension might produce lower benefits than originally predicted, but this is all relative. Lower pension benefits are manageable when combined with a lower cost of living.

Dealing with debt

Debt is a drag on your ability to meet your other financial objectives. The global ‘credit crunch' has highlighted some of the risks of funding your lifestyle with unsecured debt. What starts off as cheap and easily accessible can quickly become expensive and in short supply.

There are two main types of debt - unsecured and secured.

Unsecured debt typically includes items such as credit cards, store cards, personal loans and overdrafts, is usually short-term and more expensive than secured debt.

Secured debt usually refers to your mortgage. It is secured because there is an asset (e.g. your house) guaranteeing the value of the debt.

Time for advice

As a result of the complex interplay between the different areas of your personal financial planning, it is important to seek professional independent financial advice to ensure you have considered all of your options and made the most suitable decision based on your personal circumstances.

It makes sense to seek advice at an early stage of the process as otherwise you could be in a panic to make important decisions ahead of tight deadlines that have been imposed. It can take time to request detailed information and conduct analysis ahead of providing advice to a client who is being made redundant.

Finding an adviser

The best way to find a good adviser is usually to ask your friends, family or colleagues for a recommendation or search for a local adviser online using one of the many internet search engines; e.g. www.unbiased.co.uk or www.findanadviser.org

Sources; www.gov.im  Martin Bamford; www.icl-ifa.co.uk

Supreme Court rejects Gaines-Cooper appeal

19th October, 2011

Supreme Court rejects Gaines-Cooper appeal

From United Kingdom Oct 19 2011 BY: Helen Burggraf, International Adviser

The UK Supreme Court today turned down Robert Gaines-Cooper's appeal against previous rulings that found him resident in the UK and thus liable to UK tax, ending a saga that dated back to 2006.

The vote upholding an earlier Court of Appeals decision was a 4 to 1, and came as the Government is preparing to issue, for the first time, a formal definition of what constitutes tax residency in Britain. This ruling is expected to come sometime towards the end of November or early December, according to tax industry sources.

At issue in the Gaines-Cooper case was whether Gaines-Cooper, a wealthy entrepreneur who moved to the Seychelles in 1976, was in fact still technically a UK resident. Although he was careful never to stay 91 days in the UK in any given year, a widely-accepted measure of residency, the Court of Appeals ruled in 2010 that his close connections with Britain even decades after he left showed that he was, in fact, still resident  - and thus liable for years of back taxes.

Not a surprise

Tax experts said the Supreme Court's ruling was not unexpected, and highlighted the hazards expatriate Britons may face when attempting to sever their tax obligations to the UK.

At the same time, the pending introduction of a statutory residence test for residency ultimately will reduce the importance of the Gaines-Cooper case, according to Gerry Brown, technical manager at Prudential, although "elements of the case...will prove of practical importance to advisers for many years to come".

Jason Collins, a partner at the McGrigors law firm, said the ruling was "a significant blow for taxpayers" that could "open the floodgates for HMRC to pursue thousands of British tax exiles for backdated tax".
 
"Tax exiles will urgently need to review their affairs in the light of this ruling," he added.
 
"Taxpayers will not be able to rely on following HMRC's guidance to the letter to comply with the law."
 
Collins noted that although Gaines-Cooper had sought to argue that HMRC's "settled practice was more benevolent than the guidance", and the Supreme Court had even "accepted that HMRC would be bound if that were the case", Gaines-Cooper had been unable to provide sufficient evidence to prove it.

Ronnie Ludwig, a partner in the private wealth group at accountancy firm Saffery Champness, said the decision demonstrated that "first and foremost, that when HMRC put out any guidance booklets, they have to be treated as just that - guidance, not a point of law you can rely on".

He noted that an information booklet at the centre of the Gaines-Cooper saga, known as the IR20 booklet, had been "a very widely used and influential reference document".

Consequently, taxpayers "would be well advised not to put their faith completely in any current or future guidance document published by the tax authorities", Ludwig said. 

What to do if you missed the tax deadline

12th October, 2011

As we are all aware, 6^th October was the date by which an individual's personal tax return must be filed with the Income Tax Division ("ITD") for the year preceding 5^th April 2011. Sharon Sutton, a Chartered Financial Adviser at Thornton Associates, talks to Barry Hennedy, a Chartered Tax Adviser at Taxmann Limited, on the importance of this date in the tax calendar.

What happens if the tax return is not filed by the due date?

There are a number of important points here.  Firstly, you may be liable to a penalty of £100.  Secondly, you should still file the return as soon as possible after the deadline because the closer you get to 31^st October the greater the risk you will receive a default assessment.

What happens if I receive a default assessment?

A default assessment is an assessment raised by ITD which is an estimate of your liability.  It is important to realise that this does not excuse you from the requirement to complete and file the income tax return.  Also, you should pay what you believe to be your true liability because interest may arise if it proves to be higher than the default assessment. 

What if I think my liability is less than the default assessment?

You should still pay what you believe to be your liability and you can request ITD to postpone collection of the balance but they may only agree to this if the outstanding tax return has been completed and filed.

So it's still important to complete and file the return?

Absolutely, for many reasons.  Firstly it is your legal responsibility to complete the tax return not your agent, who may be your accountant.  It is you who will be prosecuted not your agent.  Secondly, if the return is not filed with ITD by the following 6^th April, you will receive an additional penalty of £200.  Finally, it is possible for the default assessment to become final and conclusive, in which case it may not be revised even if your true liability is less, which could have serious consequences.  For example you may lose your entitlement to deductions and other reliefs.

Any other reasons?

Plenty.  If you are a subcontractor then outstanding tax returns may affect your ability to get a subcontractors certificate.  As a business it may be difficult to get government contracts because your tax affairs are not up to date. Finally if you are seeking a loan the lender may want confirmation that your tax affairs are up to date because they want comfort that there are no liabilities which have not been taken into account.

Can the return be filed online?

Yes.  It is possible to manage all your tax affairs online including filing your tax return, certain other returns and receiving assessments and notices from ITD and reviewing previous returns and assessments. You can also pay any outstanding liabilities online.  You should consider online filing as an alternative.  Register and enrol at www.gov.im/onlineservices

Any other points?

You shouldn't delay filing your return just because you are missing some figures, for example you may not have received an interest paid certificate.  You can estimate the figure on your return but you must be careful to tick the box to show that it is a provisional amount.  This is equally important with income.  If you do not then you may be making an inaccurate return and could be liable to interest and penalties.

We are very happy to provide any information we can to assist with the completion of your tax return.  The earlier you get the information the sooner the return can be done.

Global Investment Markets; not a place for the faint hearted

24th August, 2011

Global investment markets are not for the faint hearted at the moment.

It is likely more stable conditions will return in due course -when the politicians come back from holiday in September and face up to their issues. Of course volatility is affecting even the best quality holdings as prices are forced downwards by indiscriminate sellers who need liquidity. We've seen it happening before not so very long ago.

I like this comment by Alan McIntosh, Cheviot CIO, on the latest market conditions. 

"Market update - reading the mood music

The recent rally in markets evaporated yesterday on further disappointing economic data. The US Philly Fed survey, which measures business conditions, fell to its lowest in two years, when the US was last in recession. Bear in mind, however, that this survey was conducted while the US was suffering the paralysis of negotiations over the debt ceiling and may be unduly pessimistic. Nevertheless, if the US does go back into recession later this year or early next, much of the blame rests firmly with the ineptitude of the politicians. In Europe, things are not much better. The Merkel / Sarkozy meeting gave us precisely nothing other than the prospect of a financial transactions tax. As they return to the beach, the ECB is left on its own to put out the fires in euro land. Banks were particularly hard hit yesterday. They are seen as a proxy for the woes of sovereigns. Markets are registering the seeming inability of the authorities to grasp the issues facing their economies.

Stockmarkets, if not pricing in outright recession in the US and Europe, are certainly factoring in much slower economic growth next year (and therefore lower corporate profits). Gilts and US treasuries continue to see lower yields, with investors willing to accept substantially negative real yields for "safety". One can't help but feel, however, that this will end in tears, since the finances of the UK and US are hardly solid.

Defensive shares are holding up comparatively well, offering solid cash flows and dependable yields. The trailing yield on the All-share index is now 65% higher than that of a 10-year gilt. On any sensible assessment of value, that is surely wrong. Nevertheless, investors are extremely risk averse at present and you would be forgiven for thinking that the mood music was closer to Mozart's Requiem than Beethoven's Ode to Joy."

 Last week banking shares suffered the steepest losses on the FTSE 100, on mounting concerns over the eurozone's debt crisis. Resources stocks also dominated the loser board, amid fears that weak global growth will sap demand. Meanwhile, the yield, or implied interest rate, on benchmark US 10-year treasury notes fell 12 basis points to 2.05%, after touching a record low of 1.98% in an investor flight to safety. Similarly, gold prices jumped 1.7% to $1,819 an ounce, after hitting yet another record high at $1,826.

‘The gold market is telling us that we are potentially heading towards a second and perhaps more damaging economic crisis,' warned Ross Norman of bullion brokers Sharps Pixley.

You could be forgiven for thinking ‘lets buy gold', but.... buy gold at its highest point in years? This is very much like all those people who purchased property at the height of the boom or all those people who got on the dot.com bandwagon at its high point. It can't be said for certain you're wrong but buying an asset as it screams towards a ‘peak' should be considered with caution.

Surely it makes more sense to look out for those so many now undervalued companies that were cheap before and are now at below bargain basement levels. FTSE 100 at a one year low seems more right to buy shares now -  if you are in it for the long term.

If the Euro fails then it could be that gold was a good idea, but if as seems more likely, we bump along the bottom for a while and the Euro survives, then buying and holding gold could cost you dear. Companies as a whole are very profitable; it's just the lack of clarity going forward that causes young men to panic.

The moral; have enough money to do with in life what you want to do (for the short to medium term). For the rest; have a diversified, risk-rated, managed and monitored portfolio - and pick a team you know to be qualified, licensed and above all that you trust to provide that service for you.

Inflation in the Isle of Man; up, up, up, down and up again!

6th July, 2011

The Island's inflation rate fell for the first time in almost a year last month, but as expected the relief was short-lived with an increase again in June.

The annual rate of inflation given by the Retail Price Index fell from 6.7 per cent in April to 6.3 per cent in May but went back up again in June to 6.4%.

According to figures from the Treasury, the rate has been steadily rising since late 2010.

And the data shows air travellers are facing huge hikes - fares have risen on average by almost 22 per cent, whilst sea travel has risen by just over seven per cent.

Inflation rates in Britain (our main trading partner) are at their highest among developed countries and rising, and pressure is again on the Bank of England  to raise the Base Rate of interest from its current 0.5% although the decision last month was to leave it unchanged. Can the Base Rate remain at the historic low of 0.5% much longer? 

The main problem with inflation in the Isle of Man is that most of ours is imported. We have to bring in all the fuel to power our cars, heat houses and run our power stations to say nothing of clothing, food; in fact we are net importers of just about everything.

Savers continue to have difficult choices to make about exposing some of their money to investment risk or accepting an erosion in purchasing power.

Cash is most widely known for being subject to inflation risk where over time, its purchasing power is typically eroded by the rising cost of goods and services.

Keeping your money in cash can also result in ‘shortfall risk', which is the risk of failing to achieve your financial objectives. Over time, cash typically produces the lowest returns of any major asset class. This is the result of the relative security of cash compared to, say, company shares.

Don't forget ‘Corporate risk' which is the danger that the bank or building society looking after your cash savings will get into financial difficulties and be unable to meet their obligations. In the IOM, individual savers are protected by the Depositors Compensation Scheme (DCS) which mitigates this risk, up to a maximum limit of £50,000 per saver per institution - but not necessarily within an immediate time-frame.

FSA Approves CII as an Accredited Body

7th June, 2011

Fay Goddard, CEO of the Personal Finance Society today wrote to all members to advise that the CII has been provisionally approved by the FSA as an Accredited Body ahead of the implementation of the RDR. The Personal Finance Society (PFS) is part of the CII Group, so PFS members will continue to benefit from the reputation, backing and financial security of the world's leading professional organisation for insurance and financial services.

The CII has almost a century of experience as a professional body, having received its original royal charter from the Privy Council in 1912. Its mission remains unchanged by maintaining the professional competence, ethical and technical standards of the profession in order to secure the trust and confidence of the public. Globally renowned for its market leading training and qualifications for the financial planning and insurance sectors Goddard strongly believe that PFS membership can continue to enhance the reputation of those committed to adhering to the highest professional standards.

She says the PFS provides a wide range of valuable benefits to members including a nationwide programme of high quality Continuing Professional Development. The PFS regional support network is invaluable for many of our 29,000 plus members and our innovative tool has already lightened the gap fill workload for thousands of members. Very soon those members requiring a Statement of Professional Standing (SPS) will be able to add this, at no extra cost, to the range of other benefits they enjoy as part of their existing membership.

She said 'Rest assured that your professional body membership matters more than ever to your clients and recent research by JP Morgan found that consumers placed considerable importance on membership of a reputable professional body; in fact it was the third most important driver that would make them willing to pay an adviser.'

Full details about the requirements to obtain an SPS and the process for PFS members to submit their application will follow shortly.

5 Financial Products to Avoid

31st May, 2011

Do you want to sort out your finances? To help you avoid some of the pitfalls in getting from A to B Sharon Sutton, MD and Chartered Financial Planner at Thornton Associates Ltd describes where you should not start.

Some financial products leave you wondering why they were designed in the first place.
Here are five that you should probably avoid, without a very good reason. They are in no particular order.

1 - Structured Investment Products

You might be familiar with these if you have had any dealings with your bank during the past twelve months; they try to offer you an alternative to the historically low interest rate on cash you are currently receiving either directly or through financial advisers. If you are retired, you are most likely to be their target market. They offer to 'guarantee' your capital but provide investment returns, typically as a percentage of stockmarket returns usually over a three to six year period.

Healthy levels of commission paid to the 'adviser' is probably their only attractive feature; it isn't going to benefit you, the investor. If the stockmarket falls, you get your original capital back, assuming the financial institution providing the guarantee is able to meet their liabilities at the end of the term - this is called the counterparty risk and is usually hidden away in the small print. If the stockmarket rises, your returns are likely to be capped, so you don't benefit from the entire increase.

Comparing these products is made challenging by their differing features. They also tend to have a limited shelf life, with the products sold in 'tranches' until the allocation runs out and a new product is designed.

Sometimes their use can be justified but then it should be as only a small proportion of a client's overall portfolio, and essentially it should be tradeable daily on a secondary market. Most are not.

2 - Equity release

Most applicable to the Baby boomers - Our ageing population usually has limited pension provision and often consider the value in their properties to be their pension. Equity release products are effectively mortgages for older people, offering the ability to access cash from your home at the time you need it most.

Most of these products are expensive and inflexible and in our view should only ever really be considered as a last resort for people in need of cash in retirement.

The two main types to consider are - ones where the interest charges on the mortgage 'roll up' and ones where part or all of the property value is sold to the equity release provider.

With the former, you are paying interest charges on interest charges. The compound effect of this can make it an incredibly expensive proposition, particularly if you live for longer than expected. With the latter, you are unlikely to receive anywhere near the true value of your property. A typical value paid is 40-60% of the property value. The limited choice of providers is another downside.

The inflexibility of these plans makes them difficult to deal with should your circumstances change during retirement. They can also result in little or no value being left to pass on to your beneficiaries when you die.

3 - Payment Protection Insurance

Payment Protection Insurance (PPI) has been often sold alongside mortgages, personal loans and credit cards. It aims to offer you some financial protection should you lose your job and be unable to keep up payments on your debts. The reality when you come to make a claim can be very different from what you expect. There has just been a court ruling against banks selling PPI, so check if you think you have been miss-sold too as you may very well have a valid claim

There are clear rules about how PPI should be sold with loans, but research from Which? has found over one million mis-sold policies in the UK. PPI is not compulsory when taking out a loan. Some sales advisers will lead their customers into believing this is the case to make a sale and earn their commission.

PPI is an extremely expensive product and the claims records of providers should not give you much confidence that any claim would be met, particularly if you are self-employed where additional exclusions often exist.

As an absolute minimum you should shop around to find the best deal. The PPI policy on offer from the same provider as your loan or credit card is unlikely to be the most competitive. You should also read and re-read the small print to check for exclusions and make sure that the policy will actually cover you given your personal circumstances.

4 -Savings Plans sold as (International) 'Pensions'

These are made to look like pensions with all sorts of confusing references like 'enhanced allocation' and 'initial' and 'accumulation' units. These can hide large amounts of commission paid to the Financial/Bank Adviser. There can be limited fund choices, no value in surrendering or stopping the plan in the first 3 to 5 years coinciding with the 'clawback' period of commission paid to your adviser. This does not allow much of your cash to be invested 'without strings attached'. NB. it should be noted pension schemes are also inaccessible until you reach your selected retirement age.

Often there is no disclosure of commission. The illustrations do not show the full effect of the charges on your hard earned funds, often sold in the Middle and Far East markets where regulation is not as rigorous. Beware if no comparison is made with other (better value) savings options available across a very wide market.

Because they are not real pension schemes there is no tax relief available on contributions; a valuable benefit to forfeit if you are paying income tax at 20%; tax rates may increase with government seeking to drive up revenues although stayed at 20% for this tax year (2011/12). Those selling such contracts would argue correctly that income drawn from pensions is taxable in retirement whereas the proceeds from a savings plan is not (currently); in both cases funds roll-up free from tax. The outcome of the current consultative document on the 'taxation of investment products' may change the tax treatment of savings plans but not pensions.

5 - Any financial product you do not properly understand

If you can't fully understand the mechanics of a financial product within five minutes of receiving an explanation from a competent financial expert, you should probably walk away. The best financial products are usually the simplest.

Complexity is sometimes built into financial products to make them more alluring to investors who feel they are accessing something particularly special that is going to make them lots of money. The reality may be hiding a multitude of sins and risks, e.g. a 'Professional or Experienced Investor Fund' - in case there is any doubt, even when bought through a life office; the underlying assets remain the same. The clue is in the title.

Difficult to understand financial products are those most likely to give you grief in the future. There is no need for complexity in your financial planning. Simple works and has been proven to work for centuries. Complex comes and goes depending on market conditions. Today's complex fad could be tomorrow's mis-selling scandal.

Congratulations if you have made the decision to make a start on/review your financial planning.
But ensure your adviser is well qualified and impartial.

Sharon Sutton is a Chartered Financial Planner at Thornton Associates Ltd and a member of the Financial Planners and Insurance Brokers Association committee, and local Chartered Insurance Institute council member

Sources; Informed Choice's Martin Bamford and Brilliantwithmoney.co.uk, DeutscheBank Private Wealth Management, Royal London 360.

Space talk marks new Presidency for Chartered Insurance Institute

12th May, 2011

The Isle of Man Insurance & Financial Services Institute (The local branch of the CII and Personal Finance Society, PFS) recently hosted a talk on ‘Ensuring Space' by Tim Wakeman, Executive Vice President of Aon International Space Brokers.  The talk followed the Institute's Annual General Meeting during which Sharon Sutton of Thornton Associates became the new President of CII. 

Sharon Sutton, who is preceded by Nick Boon of Gough & Co., will take up the presidency for a year, which involves assuming responsibility for a number of CII events and activities.  Sharon commented, "I am excited about taking on this new role for the year ahead.  As a Chartered Financial Planner, being President gives me an opportunity to pass on my experience and knowledge in the sector.  The CII local council is made up of a motivated group of industry professionals and we will continue to drive up awareness of the relevance of the CII and its extended family (Financial Service, General, Captive Insurers, Life Companies etc.), supporting our members to increase and maintain their professional standards. We very much embrace the challenges ahead to lead the financial services community towards higher levels of professionalism through a wide programme of activities.  We believe professionalism means ethical and behavioural standards, interpersonal and business skills and technical knowledge. This will lead to the ultimate benefit of the profession and consumer alike."

The event's speaker, Tim Wakeman is a space insurance broker responsible for the placement and servicing of insurance programs for a large number of customers.  He has 28 years of experience in the industry and has worked in the field of space risk for over 10 years.  Tim gave an introduction to the space insurance industry and talked about its capacity and future trends.  He commented: "Space is an area that has appeal to most people.  However, many don't realise the lengthy assessment of risk that goes on behind each satellite launch and space mission.  The Isle of Man has shown focused attention on its space industry and promoted itself as a centre of excellence.   A great deal of the work that is done here contributes to space development on a global scale."

Sharon continued: "It is a pleasure to have someone of Tim's calibre speaking on a subject that many of us know little about.  However, space has been a relevant topic in the Isle of Man recently and we can all gain from some more in depth knowledge on the subject. His presentation highlighted the importance of the UK insurance markets being, globally, the largest player in insuring space"

The Isle of Man CII hosts regular industry events, training seminars and social activities for its members.  For more information visit http://www.cii.co.uk/cii/localandglobal.aspx

photo; Sharon Sutton (Thornton Associates), Tim Wakeman (Aon International Space Brokers) and Nick Boon (Gough Advocates)

Dispelling 5 Myths about Financial Advisers and Financial Planning

8th May, 2011

You can tough it out alone; Some people have the time, ability and drive to manage all their finances, others don't. Either way, professional advisers can provide great insight and judgment in countless instances, and not necessarily at exorbitant cost. But common misconceptions about financial planners prevent many from seeking their counsel. This article is to help you avoid these traps so you get the most value from your adviser. 

Myth 1 - Having a financial planner means I don't need to learn anything about investing.
If you take nothing else away from this article, understand that whether or not you have an adviser, the most important thing you can do is educate yourself. Having a basic understanding of investing will ensure you understand what your adviser is doing with your money, and allow you to ask the tough questions.

Imagine this scenario: you sit down for a review of your personal finances and your new adviser starts with a lecture about asset allocation and diversification and how they are recommending a certain hot new investment. If you understand the terminology you can ask questions like:

• Why are you recommending this?
• How am I more diversified when I already own similar funds?
• What is the TER (total expense ratio) of this new fund?
•  What commission do you receive if you sell me this?

By asking the right questions you'll understand your portfolio better and also protect yourself from agreeing to something you don't need or is inappropriate.

Myth 2 - A planner or adviser only gives me advice on investing.
Picking the right investments is certainly an important aspect of your personal finances, but it's not the only part. Financial planning takes into account all the varied financial aspects of a person's life: taxes, insurance, retirement, budgeting, estate planning, liquidity requirements and other life goals. It considers the various and sometimes conflicting financial aspects of our lives and develops strategies and objectives to make everything work together. For example, what good is it to pick all the right investments but then see most of the return swallowed up in taxes? It's a full-time job just to keep up with all the laws relating to investment income and taxation. With the aid of a financial planner who considers your individual situation, you'll be able to minimize the amount of taxes you pay (legally of course) and have a stronger bottom line in the end.

Myth 3 - By law all financial planners are required to be registered with a government agency.
Actually, financial planners are not required to be individually registered, whereas financial advisers firms are. Before deciding on an adviser, you can always look up the person's details with their registered professional body such as www.findanadviser.org or the licensed company on www.fsc.gov.im  . Check to see if there are any complaints or if disciplinary action has been taken against them. You should also find out how long the person has been in the profession.

Myth 4 - Certification letters after the person's name mean nothing.
If you are looking for an adviser, give extra credit to those who have designations such as the Chartered Financial Planner APFS or FPFS  or Certified Financial Planner (CFP)  or Chartered MCSI or FCSI. To attain these levels, an adviser must put in hundreds of hours of studying in order to pass grueling exams. Furthermore, members are required to undergo background checks, agree to a code of ethics and do continuing education to keep the certification. Qualifications are no guarantee of performance but it's a good indication of commitment to the profession. The new minimum ‘level 4' qualification post 2013 which advisers should be aiming for is Dip PFS.  For your information Cert PFS or FPC  is the ‘old' level 3 benchmark; least said, soonest mended. To learn more see http://www.which.co.uk/money/tax/guides/choosing-a-financial-adviser/ifa-qualifications/

Myth 5 - Only wealthy people need a financial planner.
Last but not least, this myth is extraordinarily widespread. Financial planning is about helping people of all income levels achieve short, medium and long-term financial goals. Many assume you need to be wealthy to get professional help. For as little as a few hundred pounds you can have a portfolio assessment done by a fee-based financial planner. This breed of planner only takes compensation from the client and receives no compensation in the form of commissions (which can run into thousands) from selling certain products unless agreed by way of ‘offset'.

Conclusion
Some people are confident enough to make these vital decisions on their own. Others need a helping hand. If you do choose to deal with a planner, keep on educating yourself, understand there is more to managing your portfolio than just picking hot stocks, do the homework in terms of both background checks and certifications and don't think that you can't afford advice just because your portfolio isn't seven figures. Financial planners aren't a guarantee or magic solution but they can be of help in many circumstances.

Sources; www.investopedia.com

Sharon Sutton is MD and Chartered Financial Planner at Thornton Associates Ltd who are licensed by the Financial Supervision Commission of the Isle of Man and Registered with the Insurance and Pensions Authority in respect of General Business

See www.thorntonfs.com or follow Sharon on twitter @sharonsutton99

Long Term Care; Worried about running out of money before you run out of life?

7th May, 2011

We pride ourselves as being members of a caring society and many of us are now turning our thoughts as to how best to fund care for close family members in old age.

The majority of us are keen to put off such thoughts however it becomes even more of a challenge when the day is upon us and we have not thought about the expense involved. Many elderly people face selling their house because they don't have the money to get the care they need.  This article talks about how you begin to think about such an expense and the options available to you.

 At Thornton Associates we often work closely with individuals to help them to manage and protect their wealth in later life and a study by Sun Life Financial of Canada's Sense Check at 60 study suggest that very few people (around 1 in 4) are putting these plans in place for later life. This study looked at people with between £100,000 and £500,000 in pensions and savings; the sort of people we typically work with here at Thornton Associates.

 Whilst we can make a big difference to the financial position of elderly clients by assisting with proper budgeting and clear succession planning, the biggest impact a financial planner can make to their client is earlier in life, with proper planning for later life and the peace of mind that can bring.

This is against a backdrop of a more complex environment for retirement planning with increased regulation, innumerable changes in legislation, to say nothing of rising inflation (6% IOM RPI as we go to press) and continuingly low interest rates for savers.

Clearly, proper planning for later life is more important today than ever before. We can see that as the increasing numbers of baby boomers retire, contrasting markedly with a decreasing working population with little job security, our society will come under increasing pressures as a result of an ageing population since we know that a large amount of government budget pays for the associated social care costs of looking after the aged. Also consider the impact of the recent global financial crisis on investment values to say nothing of the indebtedness of our governments, not only in paying back the debt, but actually meeting the interest payments of those debts.

The Daily Mail reported in early November that more than 20,000 pensioners in the UK were forced to sell their homes last year to pay for care fees and estimate that over the past five years, the cost of care fees have escalated by more than 20%.

The Association of British Insurers (ABI) states in a recent report "The costs involved can be daunting. The average cost of care in a residential home in the UK is approaching £25,000 a year. In a nursing home, if nursing care is also required, this cost rises to nearly £39,000 a year.  Even receiving long term care in your own home can be expensive. Every week around 300,000 households receive nearly four million hours of home help, and people in England spend an estimated £420 million a year on privately paid home care services."

Seeking professional independent financial advice from a suitably qualified and experienced financial planner before you retire can put you in a much stronger financial position ahead of later life but if you're already there, all is not lost and you should still seek advice from an adviser with a relevant Later Life qualifications who can provide specialist advice on areas such asImpaired life annuities, equity releases and immediate care plans.

The Sense Check at 60 concludes ‘To successfully manage funds in retirement people need to deal with 5 key risks: the risk of living too long; the corrosive impact of inflation; the need to maintain exposure to higher risk investments; the risk of withdrawing too much income and the prospect of requiring long term care later in life. The ‘baby boomer' generation is reaching retirement. Millions of Britons will retire over the next 10 years. It is important they make informed decisions and plan their retirement well if they are to enjoy the benefits of the longest retirement of any generation.'

A private consultation to discuss any issues arising from the above or matters of other financial concern may be arranged by contacting Sharon Sutton, Chartered Financial Planner, Thornton Associates Ltd; www.thorntonfs.com

 Sources; Informed Choice Ltd, The Daily Mail, ABI, Sense Check at 60

Boiler Room Scams - preying on pride

28th March, 2011

A phonecall today prompted me to update and republish this article. If you're contacted out of the blue purporting to offer some wonderful investment opportunity, for goodness sake, get advice locally from a licensed qualified adviser

Boiler room scams continue unabated, and Iocal residents continue to be victimised.    The Isle of Man Constabulary recently recorded the second £1million loss suffered by a victim of this crime.

The following is a generic typology of the modus operandii employed by boiler room fraudsters, which may assist the finance industry in recognising potential victims.

A 'boiler room' is a bogus stockbroking company, usually based overseas, which cold-calls investors and pressures them into buying worthless or bogus shares, or even old shares they might have with the promise of participation in a hostile takeover bid for the shares they already own. This latter case had pressurised the individual concerned into signing a 'non-disclosure agreement' (NCD) which prevented him from feeling able to seek advice earlier - they were actually preying on his pride. This horror story meant £50,000 had already been sent with a further £50,000 promised and he had only contacted us to check the bank weren't acting strangely in refusing to send a second sum to an international escrow account!

Historically, older people with previous experience of investments or share dealing are targeted.  Typical local losses average around £40,000, but are increasing rapidly and when you see the extent to which these criminals will go to with false websites and bogus due diligence you will see how easy it can be to be lulled into a false sense of security.

In the current economic climate, boiler rooms are starting to target high net worth victims or those who are not experienced investors, the latter initially being asked for smaller sums of money to invest.   Many victims participate seeking to supplement their pensions with interest rates remaining a record lows.

Those operating the boiler rooms have developed new strategies to target investors, such as a promise to recover monies lost to the original boiler room, or to purchase these worthless or bogus shares, once an up-front fee has been paid.  In addition, investors are being encouraged to sell previously highly regarded 'blue chip' company shares, such as banks and financial institutions and to invest in green or new technology shares marketed by the boiler rooms, or even to take out loans to fund new investments, like warrants, possibly even in company shares they already own.

The fraudsters are usually well spoken and knowledgeable.  They are also very persistent and may groom their victims for several years beforehand.  They might call their victim several times with offers of research, discounts on stocks in small overseas companies, or shares in a firm that is about to float. They warn them to guard the information jealously as otherwise they may miss out.  Boiler rooms make their money in one of two ways: by simply taking money and walking away, or selling "shares" at vastly inflated prices and with exorbitant dealing charges.

Most victims purchase their "shares" by telegraphic transfer, with smaller amounts being paid by same day money transfer (Western Union, Moneygram etc).   Where banks are utilised, it is evident in most cases that the victim has not sent money by this method before.   Fraudsters also coach the victim in what to say to bank staff if challenged over transferring large sums of money.    Generally, most payments are made to accounts in Spain and the USA but other jurisdictions, particularly in the Far East eg Hong Kong, also feature prominently.   There are no known cases where the victim has sent money to the same country that the "broker" or "shares" purport to be in.    

If the investor has access to the Internet, they may be directed to websites to monitor the share's impressive performance, not realising the entire site is controlled by fraudsters.   Soaring share prices often induce the investor to increase their holding.   Often, when the investor attempts to sell their holding, the fraudster encourages them to reinvest their "profits" in another red hot share, and then introduces a minimum investment sum which is greater than the profit figure, so if the investor wishes to participate they are required to send more money.

If the investor insists on selling, they will then realise their shares are "restricted" - it sometimes states this on the share certificate, if the investor has one.   The fraudster will demand fees upfront to de-restrict the shares and once the investor has paid these fees the fraudster disappears.   It is during the selling process that victims usually realise they have been scammed.   Intelligence suggests most boiler rooms operate from virtual office accommodation using virtual telephone numbers etc which are untraceable.

The IOM FSC Financial Crimes Unit kindly requests that any person identified as a boiler room scam victim or potential victim, be furnished with a copy of this Advisory Notice and advised to seek independent financial advice.   In blatant cases of deception, victims should be encouraged to consider reporting the matter to police.

Victims of boiler room scams are not likely to see their money again, mainly due to the length of time which elapses between them investing and realising they have been defrauded.

Stocks and shares and other such investments should only ever be purchased from locally licensed stockbrokers, and not from strangers who cold-call them at home. If in doubt consult an impartial and well qualified financial adviser; someone who is responsible (and insured) for the advice given. Please do note that if you are cold called, this is against the rules. Do not use a firm or individual who is not authorised in the Isle of Man or the UK; you're just asking for trouble.

Financial Planning Talk Hailed a Success!

16th March, 2011

THE first in a series of free financial planning talks was held on the 9th March at the Claremont Hotel in Douglas.

A spokesman said the talk was well-attended by individuals from all walks of life.

The initiative, organised by TLC Business Solutions and Thornton Associates and supported by the Department of Economic Development, began back in November when an inaugural session was held.

Back by popular demand the talk was led by managing director of TLC Sue Gee and managing director of Thornton Associates Sharon Sutton and followed the same format as the first, covering a range of topics and advice from budget management to wills.

Sue Gee said: "When we held the first free talk back in November the feedback was so positive that we recognised a need to hold the same event again.

"We also learned that people wanted to hear more about specific topics such as wills, money/debt management and pensions.

"With the support of the DED we have organised a series of talks over the next month to address these topics.

"These talks are intended to encourage individuals of normal financial means to engage in structured and effective planning of their own finances.

"This is a topic Sharon and I feel strongly about and believe it is something everyone should be thinking about."

Sharon Sutton, who will also be presenting at the free talk on pensions, added: "You only have one life, and you need to plan it.

"That means facing your fears and living the best life that you can without running out of money at any stage of it.

"These talks are so important to getting that point across and we really hope to see everyone at the next one."

The following free talks are planned for March and April from 5.15pm at The Claremont Hotel:

March16: Wills - Sally Bolton, Corlett Bolton & Co
March 22: Money and debt management - Andrea Tabb, Office of Fair Trading
April 6: Pensions - Sharon Sutton, Thornton Associates

To reserve a free place for any of the talks call Janet on 664789.

Financial Planning Invite

Make sure you're getting the right advice

25th February, 2011

Make sure you're getting the right advice

Financial advisers are already subject to tighter regulations following the latest version of the Financial Supervisions Commission's (FSC) rule book

From end 2012 the Financial Services Authority (FSA) in the UK will require all independent financial advisers (IFAs) to shun commission payments from product providers and rely on fees paid by investors instead and the Isle of Man is likely to follow suit in some way shortly thereafter. The fundamental changes followed an FSA investigation; as outlined in the FSA's Retail Distribtion Review (RD) Feedback statement issued in November 2008, found that commission payments by insurers, banks and other financial institutions often distorted advice. The FSA's RDR will also require other changes, such as higher professional qualifications for advisers from end 2013.

To ensure you are receiving the best advice, here are 10 tips to help you;

1. Hello, stranger! If you are contacted by a financial adviser you dealt with in the past but who has not been in touch for more than a year, you might ask why he or she is so keen to do business now. Much of it will be for good reasons but investors should think about why they suddenly hear from any adviser out of the blue and why haven't they heard from them for many years?
2. What's it going to cost? The amount you pay will depend on your particular needs, however an adviser should be able to provide an estimate of possible costs based on the work to be performed. As part of your financial planning agreement, the financial planner should clearly tell you in writing how they will be paid for the services to be provided. Don't be afraid to ask whether this is in the form of commission or fees.
3. Don't be lazy; apparently simple solutions can prove very expensive. Beware 'nicely wrapped packages' which purport to solve all problems; for example, an investment bond may look like a convenient one-stop product which offers easy, simple administration, access to managed funds and can even solve your tax problems and income requirements. An investment bond, however, can be a poor product proffered by an insurance company with little investment expertise, which is not tax efficient (for the onshore version) and can pay the salesperson up to 7 per cent commission.
4. Refuse to be rushed. If your adviser says he or she needs an answer now, then perhaps the answer should be "no, thank you". A good tip is that investors should take due diligence. They should take time before buying products. Have a long term strategy and then think how buying products will meet those long term needs.
5. Require regular advice - and full disclosure. It's not unreasonable to expect a financial adviser to review your investments and pensions on an ongoing basis and, if so, tell you what incentives he or she is receiving from product providers. For example, a typical trail commission would equal 0.5 per cent of the value of your investments What service are they providing to justify their fees?
6. What about my existing plans? Ensure your adviser is prepared to look at your existing plans in addition to any new monies to make sure any advice being given is taking into account your entire financial situation and needs. However, also beware changes to portfolios that could incur tax charges or other charges unnecessarily without receiving a written 'reasons why letter' first.
7. What qualifications does your adviser have? You may wish to ask your financial planner if they have a specialized qualification in a particular area that they are advising on, i.e. pensions or long term care. Ask them what steps they take to keep their qualifications up to date with changes and developments in the financial planning field. Whilst exams are no guarantee against bad financial advice, investors may ask advisers whether they have obtained the qualifications which will be required by the FSA after 2012, and the FSC after 2013 (possibly) - or are on track to obtain them.
8. Beware obfuscation. If you don't understand what your adviser is saying, tell him or her to try again in plain English. Jargon can obscure some nasty surprises.
9. If it looks too good to be true, it probably isn't true. Beware of high allocation products which may look impressive but could be concealing the initial commission. All that happens is the charge is ultimately taken out of the contract over a number of years and back end penalties will apply. Investors should look for a transparent charging structure.
10. Remember that 'free' financial advice can prove very expensive; you generally get what you pay for. Commission-driven advice is by definition not independent. So, if an individual is looking for independent advice, they should be prepared to pay a fee for it. You can avoid commission altogether and opt for time or project charged advice from a highly qualified fee-only adviser.

Sources: Ian Cowie Your Money, http://www.fsa.gov.uk/ http://www.fsa.gov.uk/pages/About/What/rdr/index.shtmlhttp://www.fsa.gov.uk/pages/Library/Communication/PR/2008/139.shtml

http://www.financialplanning.org.uk/pdfs/10Questi.pdf

Sharon Sutton is Managing Director of Thornton Associates Ltd who are Licensed by the Financial Supervision Commission of the Isle of Man. Registered with the Insurance & Pensions Authority in Respect of General Business

Isle of Man Budget 2011

22nd February, 2011

Viewpoint: Sharon Sutton, Managing Director, Thornton Associates

The main areas of interest I see affecting the Isle of Man from this 2011's budget from a financial planner's perspective are as follows;

The removal of tax relief of up to £5500 per annum on Educational Deeds of Covenant, and reallocation to student awards is unsurprising but may be the difference to some parents agreeing to fund their offspring through University - or refusing.

Tax relief on Mortgages reduced to £7,500 per person per annum, or a maximum of £15,000 per married couple effectively increases the cost of buying a house for many borrowers.

It will be interesting to see the finer details on proposals to introduce Income tax relief through a Rent A Room Relief scheme. The UK version applies if you let furnished rooms in your house where part of the letting income is not taxed. This applies regardless of whether you own or rent the property.

Removal of Tax relief on Class 4 National Insurance Contributions which will apparently save IOM Government £1M on tax relief given to those who are self employed. Surely this puts more than a few over the threshold whereby a limited company becomes attractive and so saves national insurance contributions.

Rapid ageing has huge implications for society generally in areas such as providing state pensions and healthcare. It also has a massive impact on individuals, who need to save enough for a retirement that in many cases will last nearly as long as their working years. But retirement is changing. Early retirement has become almost a quaint notion and each year fewer people give up work in a single step at age 65.

So we move onto further stages of the Pensions bill in the Keys dealing with the Hymans recommendations for Public Sector Pensions; target implementation early 2012. As a few will note; this is just the first necessary step to move towards bridging the inevitable gap in affordability. Look out for the next step which will be to move to 'career average earnings' from a workforce having just been awarded a further pay increase of zero.

These are just a few of the issues I see. Financial planners and accountants should be the first line of advice for clients to help them make the most of tax reliefs. Getting the message through about planning ahead, seeking advice from regulated, qualified and experienced members of our community can make a tremendous difference to both our residents quality of life and Government bottom line.

Sharon Sutton is Managing Director of Thornton Associates Ltd who are Licensed by the Financial Supervision Commission of the Isle of Man. Registered with the Insurance & Pensions Authority in Respect of General Business

2 further Appointments!

3rd January, 2011

We are delighted to announce the arrival of Kate Brown to the Thornton team. Kate joined us in September having worked in the investments team at AXA for a number of years. Kate will be assisting both Sharon and Jo Dugdale and you will no doubt talk to her very soon.

We are also pleased to welcome Jo Johnson, a Chartered Insurance Brokers with over 20 years experience to Thornton. Jo will be heading up our new General Insurance Division. This is a new departure for Thornton Associates and one which we are very excited about. It will allow us to offer our clients a full holistic financial plan including covering all of our client's risks. If you require any assistance with your personal insurance, such as for your home and car or commercial insurance, such as professional indemnity cover, Jo would be delighted to hear from you. She can contacted at the usual office number or direct at jojohnson@thorntonfs.com and by telephone on 07624 308407.

What does 2011 have in store for the Isle of Man?

31st December, 2010

There are two main areas of change I see affecting the Isle of Man in 2011 from a financial planner's perspective; the first being the Department of Social Care Current Service Delivery plan through to end 2011, which makes reference to more engagement with the private sector. Financial planners, advocates and accountants are often the first line of advice for clients so we look forward to more consultation on making a difference. Getting the message through about planning ahead, seeking advice from regulated, qualified and experienced members of our community can make a tremendous difference to both our residents quality of life and Government bottom line.

The second area relates to pension changes. At one end of the spectrum dramatic changes to the State Pension system are proposed by the UK Government. Increasing State Retirement Age to 66 in 2020 affects anyone under 56 now increasing their working life and savings requirement, with a further increase to 68 promised. A proposed standard pension for everyone of £140 per week will remove means testing and encourage saving. Expect Isle of Man Government to follow suit with some or all of these measures since much of the proposition is designed to reduce administration costs, abolishing S2P(SERPS) reducing state liabilities, a key theme of CoMin.

At the other end of the spectrum, recent changes in the IOM QROPS (50c) legislation is expected to position IOM firmly as the international pension place of choice.

We also move onto further stages of the Pensions bill in the Keys dealing with implementation of the Hymans recommendations for Public Sector Pensions; target implementation early 2012.

These issues will be ever more in the public eye as we go through the year in the Isle of Man approaching a general election in September 2011 tempered by the still raw cuts in VAT revenues.

Sharon Sutton is Managing Director of Thornton Associates Ltd who are Licensed by the Financial Supervision Commission of the Isle of Man. Registered with the Insurance & Pensions Authority in Respect of General Business

Is now the time to Invest?

30th December, 2010

They say time heals pain and so the financial crisis of 2008 seems more and more distant. Markets have been in a buoyant mood and recently the FTSE 100 crossed the 6000 barrier, up some 8% year to date. The cost of government borrowing, as measured by the gilts market, continues to fall with 10 year gilts yielding a miserly 2.94 %, close to the year lows.

The new UK government has nailed its colours firmly to the mast of fiscal rectitude and has spelled out the deepest cuts in public spending for a generation. The hope is that private investment will step in as the public purse steps out.

There are precedents; remember the early Thatcher years were characterised by severe spending cuts leading to strong growth in the mid 1980s? The early Clinton presidency also paved the way for growth in the mid 1990s by bringing Federal deficits down.

Nevertheless, there are risks. Followers of Keynes would argue that, whilst the budget should balance in the medium term, too much fiscal contraction too soon risks taking demand out of the economy while it is still weak, pushing it back into recession.

The Bank of England, put on notice by the new Chancellor, will provide more monetary stimulus if the economy slows but the Monetary Policy Committee (MPC) is divided on this issue with some arguing consistently for near-term interest rate rises with the prospect of rising inflation.

The pound has resumed its decline against other world currencies; clearly a weak pound remains a key plank in the UK recovery. It is becoming evident that a Euro rate of 1.20 is just enough to provoke members of the MPC to go public in efforts to talk the pound down. Whilst it makes our holidays more expensive, a weaker pound also makes our exports cheaper and raises overseas earnings in Sterling terms.

Often overlooked is that of all major markets, the UK has the highest exposure to overseas earnings; optimism remains that UK international blue-chips are well placed.

Another reason to be optimistic is that valuations do continue to look good; results have generally been favourable, dividends are high and dividend growth is back on the agenda. In fact many dividend yields are higher than their respective bond yields and underscores the fact that equity owners are being paid reasonably (compared to cash and bonds) whilst the economy gets back on its feet. This could be paving the way for some modest multiple expansion.

The "Euro" economy remains at risk from the very tight policy framework adopted by the ECB and the strength of the Euro is a significant headwind for the weaker Euro economies such as Ireland and Spain.

Elsewhere, in Emerging countries growth remains strong, although redirection of their priorities from export led growth to domestic consumption would likely help the rest of the world. A strong indicator to watch out for would be an international agreement on global trade and a revaluation of the currencies belonging to the exporting nations; chief among these, China.

Clearly risks remain as does our view that the best way to insure assets against volatility is diversification through seeking advice from a licensed, reputable and well qualified adviser.

As Mark Twain said, '"History never repeats itself, at best it sometimes rhymes."

Sharon Sutton is MD and Chartered Financial Planner at Thornton Associates Ltd who are licensed by the Financial Supervision Commission of the Isle of Man and Registered with the Insurance and Pensions Authority in respect of General Business

New appointments at Thornton Associates

16th December, 2010

Thornton Associates are pleased to announce two appointments. Gemma Sutton has taken up a new role after returning from maternity leave and Jo Dugdale has joined the company from Barclays after nine months covering Gemma's old post.

Gemma Sutton is Manx born and attended Castle Rushen High School. Her career began with a short spell as an Investment Dealer for a fund manager following which she moved to Canada Life International (CLI) completing an ILM Level 2 qualification in Team Leading. Gemma spent 6 years at CLI working as a team leader in the Investment Department before joining Thornton Associates Ltd as a Personal Assistant in May 2006. Since then Gemma has implemented many new systems processes and procedural changes at Thornton to ensure a streamlined workflow of the business.

After taking a year out on maternity leave, Gemma returned to Thornton Associates in April 2010 where she took up a new position of Office Manager. Since her return to work she has overseen the introduction of a new Back Office Administration system which has resulted in a greater service offering to existing and new clients. She is currently studying the ILM Level 3 Certificate in First Line Management.

Gemma commented: "It's great to be back in the office. The company was very supportive throughout my maternity period and my colleagues have welcomed me back with smiles and new challenges."

Jo Dugdale also Manx born, attended St Ninians High School before continuing her studies at Manchester Metropolitan University to study a BA Honours degree in Financial Services. Jo has worked in a variety of roles in her career and has 10 years experience in Financial Services, initially working for Bank of Bermuda (IOM) Ltd as a Global Custody administrator, Chase De Vere Investments in Bath as a Team Leader providing support to financial advisers, where she passed the Financial Planning Certificate in 2003. Most recently Jo worked for Barclays Wealth as Corporate Lending Team Leader prior to joining Thornton Associates Ltd in May 2009.

Jo accepted an offer to join Thornton Associates on a permanent basis following a nine month contract covering Gemma's maternity leave. Since joining the team she has upgraded her FPC to Cert PFS by taking and passing the CF2 paper and has taken on the position of Financial Planner. Jo is currently studying for her Diploma in Financial Planning and recently sat JO6: Investment Principles, Markets & Environments and AF4 Advanced Diploma, Investment Planning.

Jo commented: "I am thrilled to be able to continue working for Thornton Associates. It is both a challenge and a great opportunity to work for the only chartered financial planners on the Island."

Managing Director Sharon Sutton commented on the appointments: "We are delighted that both Gemma and Jo have chosen to further their careers with us and also to continue their studies. As the Island's only Chartered Financial Planners it is essential we attract and retain such talented, ethical and committed personnel who live and breathe our ethos of 'giving advice, not selling products' and who understand the importance of obtaining professional qualifications in a regulated business. This of course applies to both the advice and the processes and in our view the ILM and CII qualifications provide the most relevant platforms for immediate benefit to our clients"

Financial Planning Seminar hailed a success

9th December, 2010

PRESS RELEASE: 17^th November 2010

Financial Planning for Everyone

Dozens of people attended a free financial planning talk at the Claremont hotel recently. The event, hosted by TLC Business Solutions and Thornton Associates and supported by the Department of Economic Development, was hailed as a great success by attendees.

The talk was led by Sue Gee, Managing Director of TLC, and Sharon Sutton, Managing Director of Thornton Associates, and was intended to encourage individuals of normal financial means to engage in structured and effective planning of their own finances. A range of advice was offered, from the suggestion that everyone should consider having a will regardless of their situation to the argument that getting a bank loan and purchasing goods outright is often better than using hire purchase agreements.

The talk broadly covered seven points that are key to planning your own future in the short, medium and long term. They were as follows:

1. Make your own monthly budget

2. Prioritize clearing debt, even over saving

3. Make a long term plan, such as a pension

4. Work out if you could be paying less tax

5. Review your mortgage frequently

6. Make a will

7. Undertake research and seek out help (much of it is available free)

During the talk, Sharon commented: "You only have one life, and you need to plan it. That means facing your fears and living the best life that you can without running out of money at any stage of it." Sharon then went on to explain the uncertain nature of state financial provision in the future, and the many pressures on the modern household's budget. Many of the potential areas for improvement highlighted by Sharon and Sue clearly resonated with audience. For example, in an impromptu survey carried out amongst the audience it was made apparent that less than half of the people in the room had made a will.

Sue's call to action at the end of the talk was clear: "If you haven't stopped and put a stake in the ground then tomorrow is the time to do it. It's your plan and only you can drive it... in the future there will be much more reliance on ourselves individually because the help that we've had in the past and which is available now might not be there in such abundance in the future."

Sue and Sharon are both passionate about the subject, as they feel that in today's economic climate is even more important that individuals are empowered to support themselves. They will be continuing their campaign to get Manx residents thinking about financial planning in the near future and are considering holding future events along with similar, free content.

PHOTO CAPTION:

Photo of Sue Gee and Sharon Sutton with Steven Beevers from the Isle of Man Government Department of Economic Development.

ThorntonFS and TLC to run Free Financial Planning Seminar

15th October, 2010

How IMPORTANT is financial planning?

Speaking to Sue Gee, Managing Director of TLC Business Solutions, the Islands leading Training Company and Sharon Sutton, Managing Director of Thornton Associates, the only firm of Chartered Financial Planners on the Island, they believe financial planning is absolutely vital for everyone, whatever their financial circumstances. They say that what we do today will absolutely impact on what we have in the future.

With this in mind Sue and Sharon will be delivering a talk on the 15^th November at the Claremont Hotel on Douglas Promenade to educate and help some of the island's population understand what steps they can take in order to take control of their finances. The talk will be free of charge and open to absolutely anyone. Sue says 'It is a myth that only affluent, high net worth or rich people need to plan financially for the future. In fact it's probably more important for those of us who have less disposal income or who have a daily balancing act with money - we need to make this money work harder, find a way not to carry debt, save for the future etc, as otherwise we won't have a pot of gold to help out in later life, unless we plan to make one.'

Sharon goes on to say 'yes, it's a well known saying; "Don't run out of money before you run out of life". It is estimated that up to 70% of the population do not seek financial advice and that's for a variety of reasons such as they think they can't afford it, or it is not for them and the state will provide for them when they retire. Sadly, whilst there is likely to be some form of state provision in the foreseeable future, it is most unlikely to keep us all in the manner we would like to become accustomed to! I see clients from all walks of life. Nobody ever has exactly the same circumstances although what we have in common is that we all face greater challenges in such a tough and uncertain economic climate and a responsibility to live up to them for the sakes of our families and our community.'

The Department of Economic Development are fully supporting this talk, as they also believe that the better educated people are about their financial circumstances can only be a bonus for the island. Sue continues to say 'The subject of financial planning or money management (if you prefer that term) has to be a key issue for all individuals because we know that Government funding is becoming tighter year on year and therefore we need to be planning how we can fund our later life'. As Sharon explains 'UK projected statistics indicate that in 2031, 700 women out of 1000 will live to beyond age 90. This compares to actual statistics in 1971 when only 100 women out of 1000 reached 90+. For men the statistics are projected to be 500 versus only 30 in 1971. This means we need to fund for those extra years or indeed work longer'.

The aim of this one hour talk is to give people the opportunity to learn the key facts of financial planning, simple things that they can review, why, how, when, by whom and so forth - sometimes it is the small informed decisions that make the difference. We only live once and our aim has to be to build, manage and protect our wealth. For this we need to find a way to cover our monthly costs, protect our family against death, accident or illness and save for short term goals, for the future and old age to name just a few key areas that we look at when talking about financial planning.

Sue says, 'I honestly had no idea what the term financial planning meant when I turned 30. Like most people I lived for today and just tried not to get into debt. Fortunately I entered the finance industry which helped educate me, and I now spend a percentage of my time training others in this subject. This talk is a way for Sharon and I to offer those that do not have access to this training, that chance! We'd like to open the eyes of everyone to the fact that with a little bit of knowledge such as; what questions to ask, who to seek help from, what areas to look at and why, what a massive difference it can make today and in the future.'

This talk is open to anybody over the age of 18. Sue & Sharon go on to explain that they are not selling anything, they are not being paid and it is their way of offering help, guidance and understanding to those that have an interest in taking control of their finances and gaining more understanding of financial planning.

The talk will be at The Claremont Hotel, Loch Promenade, Douglas on Monday 15^th November at 5.45pm finishing at 6.45. There is NO COST to attend. Spaces are limited so you need to reserve a space by calling Janet at TLC Business Solutions on 664789. It is on a first come first serve basis and only those booked will gain access as we expect this talk to be fully subscribed. The good news is if they are overwhelmed with those wishing to attend they hope to deliver this talk as many times as to accommodate those wishing to learn more. Sue and Sharon's final comment 'don't miss this opportunity for whatever reason. Taking one hour out of your life today may be the most important thing you have done for your future.'

The Importance of Planning For a Different Future

3rd October, 2010

Click on the link to read: http://www.moneymedia.co.im/online/aug2010/#/14/

Bootle warns 'Bond Bloodbath'

23rd September, 2010

Well respected Independent City economist Roger Bootle has warned gilts are not a safe bet in the present environment, despite record low yields.

Speaking at the PFS conference this week attended by Thornton Associates MD, Sharon Sutton, the Capital Economics managing director said: "The ten-year gilt yields is currently 2.75%. Bonds at this level are extremely risky as they will eventually rise causing a bond bloodbath." He also said "Anyone saying that holding gilts are 'no risk' is complete lunacy. He says soaring inflation fears are unfounded and UK CPI will likely 'collapse' by 2013, even going as far as negative.

He expects inflation to fall "below 0%" within three years, and dismisses recent reports interest rates could soar to 8% by next year. Whilst the low interest rates will certainly help exsiting lenders, it will not help new borrowers since the base rate in no way reflects the mortgage rates on offer which are significantly higher. To demonstrate that he puts his money where his mouth is, in anticipation of a further decline in British property values, he sold his house some years ago and is still renting.

"If anyone thinks interest rates will rise to 8% next year they can see me about it. I will offer it to them as a both ways bet! It's not going to happen."

Bootle says UK official interest rates will remain at their current level of 0.5% for another four years. He said he forecast last year they would remain low for 5 years - so on that basis there's another 4 to go and forecasts UK unemployment will rise to 10% by 2012 putting further pressure on consumer spending and the housing market.

He also warned of a break-up of the eurozone, with either the strongest member Germany, or one of the weakest members Greece, being forced out as their economies continue to diverge from those of other states.

"In real terms, consumption in Germany has been flat at 5% for 11 years. In the UK and the US it has risen 25% in that time. Germany is strong in exports but does little spending. This puts a real strain on the eurozone with a long period of Eurowobbles."

He said he thought there was a real risk of things getting really nasty in the world economy with the imbalance of trading relationships especially between China and the US. "Countries and regions who have also been 'exporting like the clappers' are Asia, oil producing countries, the Germans, Swiss and Norway in Europe".

However, he ended his speech on an upbeat note, saying he expects to see a "much better economy and a much brighter future" for the UK in the next few years provided the USA and China don't start a trade war with each other, Asian exchange rates went up and were offset by increasing domestic demand from the aforementioned countries and regions.

IOM taxation of investment products update

18th September, 2010

Isle of Man Treasury have recently released their response to the consultation document which can be found here http://www.gov.im/treasury/incometax/ConsultationDetail.gov?id=126

Top 10 useless financial products Which? experts name the products you don’t need

11th August, 2010

People could be wasting thousands of pounds on financial products they simply don't need, according to consumer champion Which? Money Quarterly magazine.

Experts who worked on the title, which are currently available at newsagents nationwide, have identified ten financial products that are usually useless - and which could leave you seriously out of pocket. Here is an outline to whet your appetite should you wish to run to the shops to buy it.

1. Mobile phone insurance

Mobile phone insurance can cost up to £100 a year, with mobile phone operators typically offering the worst deals. Before shelling out for specialist mobile phone insurance, find out whether your phone is covered under your home contents insurance policy. Many people don't realise their handset is protected in this way and, as a result, end up wasting more cash by ‘double insuring' their phones.

If your phone isn't already included on your home insurance policy, adding this cover should be straightforward - and probably more affordable than buying insurance separately.

2. Payment protection insurance (PPI)

PPI has been the subject of a prolonged mis-selling scandal. Not only have thousands of consumers been sold PPI without even being asked if they want it; others - for instance, self-employed people or those with pre-existing medical conditions - have been sold payment protection insurance although there is little chance it would cover them in the event they needed to claim.

What's more, PPI is expensive. Adding payment protection insurance to a £7,500 personal loan, to be repaid over five years, could cost an extra £2,000 - £3,000.

Which? experts recommend that consumers choose income protection insurance as an alternative to PPI. Meanwhile, if you have been mis-sold PPI, you can reclaim your premiums online using our free tool.

3. Extended warranties

Extended warranties are generally too expensive to ever be worthwhile. They are usually offered on big ticket items such as electrical goods - but extended warranties can cost up to half as much as the item they are intended to cover!

It makes much more sense to ensure your purchases are covered under your home insurance policy.

4. Secured loans

Taking out a secured loan is risky because, if you fail to meet your repayments, you could lose your home.

In addition, although the interest rates on offer from secured lending companies tend to look low, secured loans can end up being very expensive. This is because the interest rates on secured loans are often variable, and the loans usually extend over long periods of up to 25 years.

Unsecured loans - or personal loans - are a better option for borrowers because they pose less risk to your property and come with fixed rates of interest.

5. Debt management plans

Debt management plans can cost thousands of pounds in the long term - but if you are struggling financially you could get free help with managing your debts from a charity such as National Debtline, the Consumer Credit Counselling Service or Citizens Advice. Read the Which? Dealing with debt guide for more information.

6. Structured products

Which? experts believe structured products are confusing, complex and costly. Perhaps more importantly, they are not as safe as they seem.

Some people who had bought structured products backed by Lehman Brothers lost their money when the bank collapsed in 2008.

Check out the Which? Structured products advice guide for further information on why you should avoid these investments.

7. ID fraud insurance

Many people are worried about identity fraud - but ID fraud insurance, which can cost around £70 a year, may be bad value for money.

Most losses you might incur as a result of identity fraud will be covered by your bank or credit card provider, so you may want to think twice about paying for a policy.

8. Store cards

The interest rates charged on store cards are massively uncompetitive in comparison with the market's leading credit card deals.

While you could borrow interest-free using a 0%-on-purchases card, maintaining an average balance of £1,000 on a store card charging 29.9% APR would cost you nearly £300 in interest over a year.

9. With-profits funds

Investing in with-profits funds may mean you are charged high fees, and some with-profits funds have performed very badly over the last few years.

If you'd invested £5000 a year in a full-cost with-profits endowment during the past decade, you could actually have lost money - ending up with as little as £4,982!

Putting your money in a stocks and shares Isa is a better option, according to Which? Money experts. You can read more about these in our Stocks and shares Isas advice guide.

10. Packaged bank accounts

Finally, we think you should steer clear of packaged bank accounts. These current accounts come with benefits such as travel insurance and breakdown cover, but can cost up to £300 a year - and unless you use all of the extras offered by a packaged deal, it is unlikely you'll get good value for money.

It usually makes more sense to opt for a Which? Best Rate current account and then purchase any additional products you need separately.

NSI pulls inflation linked savings product

20th July, 2010

NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.

Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain's banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.

Both the Fixed Interest Savings Certificates and Index-linked Savings Certificates have been withdrawn. The rates paid on NS&I's Direct Saver and Income Bonds have been cut by 0.25%.

Boost for banks and building societies

The government must balance the need to help people save, while preventing NS&I from taking too much money that would otherwise be put with Britain's banks and building societies. The Treasury sets a target for NS&I each year, and the institution has now met this year's aim of balancing the funds coming into NS&I with the funds leaving it.

'NS&I sales volumes in recent months across all three products have far exceeded those either anticipated or required by NS&I,' it stated today.

Andrew Hagger of Moneynet.co.uk, said it was a victory for banks and building societies, but another loss for savers: 'By removing these certificates from sale and cutting rates on remaining accounts NS&I will enable the banks to improve their balance sheets, but there's nothing positive in today's announcement for the man on the street.

Jane Platt, NS&I's chief executive, said: 'NS&I is extremely mindful of its responsibilities given its unique place at the heart of the UK savings sector. We continue to follow a policy of acting transparently and balancing the interests of our savers, the taxpayer and the stability of the wider financial services market.'

Although inflation has dipped for the last two months, a basic rate tax payer still needs to find a savings account paying 4%, and a higher rate tax payer 5.33%, in order to stop their savings pot effectively eroding away, according to Moneyfacts.

Sales stopped already

Direct sales of Savings Certificates from NS&I and those from Post Office counters have been stopped. NS&I said postal applications received today will be honoured, but all postal applications received after midnight will be returned to the customer. The new rates on Direct Saver and Income Bonds have now come into effect.

Eurozone crisis could hit structured products

7th July, 2010

Unstable structures?

Structured products such as guaranteed equity bonds could be hit by the fall-out from the eurozone crisis was the conclusion of Money Observer's Heather Connon in an article this week.

The collapse of US investment bank Lehman Brothers showed that an alarming number of structured products were making promises which were literally too good to be true. Now, the industry's fight to prove that it can offer low-risk, high-return products is being undermined again by the turbulence in Europe.

Will the latest concerns over the health of the banking sector spell the end for structured products?

While the name may not be familiar, the products almost certainly will be. More than £42 billion is invested in these products, which are promoted by virtually every bank and building society as a way of getting equity-type returns without the risk.

Their names sound reassuring - Target, Protected and Guaranteed are typical words - and their offering sounds simple enough: you get a certain percentage of the rise in the FTSE 100 or a similar type of index, which can be as low as 10 per cent or as high as 200 per cent. If the index falls, however, you will get all, or most, of your money back.

Yet the structure behind these products is far more complicated - a complexity which explains why so few investors and advisers were aware of how risky they were. Exposure to the underlying asset class is often achieved through a derivative product issued by an investment bank. The guarantees are also usually achieved through a financial product issued by an investment bank.

As the collapse of Lehman Brothers in 2008 showed, a derivative is only as good as the bank which stands behind it. Thousands of investors lost out last year as companies such as ARC Capital & Income, NDFA and DRL, all of which used Lehmans as counterparty, went bust. Then Keydata, which supplied structured products to many banks and building societies, collapsed amid a Serious Fraud Office investigation.

These disasters sparked a rather belated investigation into the structured products industry by the Financial Services Authority. As well as paving the way for investors who had lost money to make claims under the Financial Services Compensation Scheme, the regulator wrote to the biggest promoters of these plans telling them to review their sales and marketing procedures. The FSA is still investigating the area and is expected to announce its findings by the end of the year.

Structured product providers reacted by insisting they should not all be tarnished by the Lehman connection, citing a range of reasons that they were different: they use only top-rated banks as counterparties; they spread the risk among a number of different banks; they use government bonds to back their promise; their products are conservatively managed and so on.

Their protestations have had little impact: in Money Observer's own, admittedly unscientific, survey of financial advisers, none would recommend structured products. While they cited a variety of reasons, one was constant: it is impossible to assess the credit risk in these products without carrying out far more analysis and investigation than financial advisers are willing, or usually qualified, to carry out.

Perhaps because of the failure of that campaign - or possibly because they fear a bigger crackdown by regulators - the industry has gone to ground. Leading players such as Barclays and Morgan Stanley refused to be interviewed by Money Observer and even the UK Structured Products Association, the trade body set up to promote the industry, struggled to come up with a response to our questions.

That is extremely worrying because, while Lehman's collapse may be fading into history, credit risk remains a major issue - in fact, it could soon be thrust back to the top of investors' worries. The Greek crisis has turned the spotlight on to the financial health of Europe's banks again. There are constant rumours about which banks are dangerously exposed to the debt of the Greek government, or to that of Spain and Portugal, which are in almost as parlous a financial position.

Investors were particularly nervous ahead of the publication of the results of a 'stress-test' of Europe's banks, being carried out under the auspices of the European Central Bank. The impact of a sovereign debt crisis is likely to be one of the key variables which banking regulators will be testing for.

Martin Bamford, managing director of Informed Choice and a chartered financial planner, warns: 'The eurozone crisis could trigger further bank collapses which could undermine the backing of some structured products in the UK. The trouble is, it is close to impossible to understand where the financial protection actually rests with a structured product.'

Tim Cockerill, head of collective investment research at Ashcourt Rowan, agrees. 'It is clear there are significant stresses in the [European] banking system. Counterparty risk is a big issue. Recent experience has shown that [a bank] can be rated highly but the reality is different.'

Robert Lockie, a partner in Bloomsbury Financial Planning, says: 'I have not got the time, and I suspect most advisers do not, to go and dig into the detail of the operations of the guaranteeing banks and to ferret out the potential liabilities which might be lurking there. A lot of derivative instruments are not on the balance sheet anyway.

'And your bank may have no derivative exposure but it may have lent to other banks which do. And you have to monitor changes in the future. Is it worth doing all that for a £50,000 investment in a structured product?'

The fact that guarantees underwritten by banks can be unexpectedly flimsy is not the only - or even the major - reason for avoiding structured products. There are plenty of other drawbacks too.

It is impossible to work out what your investment will be worth. The products promise a return of, say, 50 per cent of the gain on the FTSE 100 between two dates but, apart from the impossibility of forecasting what that gain will be, different providers calculate the gains in different ways. And, for much of the past five years, there has been no gain so investors will have had to fall back on the guarantee that they will get just get their money back - so why lock yourself in and pay the costs of these products to get a return worse than a building society?

'It is an extra layer of complextity which does not have much practical benefit,' says Lockie. 'If you want a return half as as much as the FTSE 100, just invest half your portfolio in it.'

Of course, anyone buying a unit or investment trust is also buying blind as no-one can predict how they will perform. But it is easy to buy and sell these trusts; with structured products, investors are locked in for a fixed term and could face big losses if they try to get out before the product matures. And, while some products lock in returns as they go along, others can be severely affected by a sudden stock market crash just before they mature.

'They are sold by banks and building societies - that tells you all you need to know,' says Mark Dampier, head of research at Hargreaves Lansdown. Indeed, many of the mis-selling scandals of recent years - like precipice bonds, endowment mortgages and payment protection insurance - have been products which are sold mainly by banks and building societies.

'I have never seen anything I particularly wanted to buy which has a fixed investment term - I want something I will be able to roll over, ' added Dampier.

He also points out that structured products generally pay no income during their term. 'A dividend is a massive part of investment returns, if you take the dividend away, you take away a big chunk of these returns.'

While charges are rarely spelled out in detail, the complex structures and expensive guarantees mean they are an expensive way to invest. The lack of transparency about these costs is indicative of how complicated they are.

'My over-riding view is that, the simpler and more transparent a product is, the better,' said Cockerill. 'That way, you do not risk unpleasant surprises.'

The Investment Management Association has complained that these products carry far fewer restrictions about the way they are sold, and how they can be marketed, than unit trusts - yet they have been shown to be far riskier.

The irony is that, when the measures outlined in the Retail Distribution Review, which governs how advisers must behave, come into effect in 2012, advisers will have to consider structured products for their clients.

'Our view here is that we can take a view generally as a firm that we will not use them, giving reasons,' says Lockie. 'If a client wants them we will have to tell them to go elsewhere.'

The view of local Chartered Financial Planners; Thornton Associates Managing Director Sharon Sutton is that 'Sometimes their use can be justified but then it should be as only a small proportion of a client's overall portfolio, and essentially it should be tradeable daily on a secondary market. Most are not.'

Insurance Giant Uses Isle of Man Firm for Advice

22nd June, 2010

AEGON has produced a comprehensive range of online support material, helping advisers understand the requirement for change ahead of the retail distribution review and how to plan for the future success of their business.

The new 'How to' zone of AEGON's Business Brain website includes videos and interactive presentations highlighting the seven different elements of business planning: business vision, goals, finding opportunities, exploiting opportunities, what should an action plan look like, measurement and keeping it going.
The support material also includes valuable information helping advisers identify where they want their business to be in the future, and how to get there by putting together a comprehensive action plan.

The new 'how to' zone looks at the key reasons why advisers fail to plan and suggests solutions to overcome these obstacles. It then goes on to outline the support available, including the seven steps of pulling together a business plan.

John Joe McGinley, Business Consultancy Manager, Strategic Accounts said;

"Every adviser business from time to time should take a look at its current structure, vision and operating model, especially in light of the changes brought about by the retail distribution review. We have worked with a number of advisers to develop a practical range of web based support material to help them develop their business proposition and identify the remuneration strategy they can adopt when the retail distribution review comes into force.
"In the past we have helped advisers understand the theory behind the importance of businesses putting in place a thorough business plan and we will continue to do so. However we have now taken this one step further by introducing practical support material, taking advisers through each step of the process."
Sharon Sutton from Thornton Associates, the Isle of Man's only Chartered Financial Planners, who worked with AEGON in developing the material said:


"AEGON has launched a very comprehensive range of online support material which is useful for any adviser who is looking to revisit or develop their business model. The 'how to' zone provides practical step by step guides, ensuring that all businesses, regardless of where they are on the planning cycle can benefit."

Advisers can view and download the material at: http://businessbrain.aegonse.co.uk/how_to_zone/index.html

The best returns are made when it feels uncomfortable to be investing

15th June, 2010

How can Greece, a country that accounts for only 2% of Eurozone GDP, cause such trauma? According to a recent FT article, European companies have written off EUR 300bn in debt over the past year because of late payments, more than Greece's total outstanding debt, without causing a ripple in the markets. How can such a "fly" - a tiny country that owes less than even one company, A.I.G. - create such a major financial crater?

The situation in the Eurozone is of course a concern and many threats to economic stability and a smooth recovery remain, but we are still reasonably relaxed about equity market valuations and are placing stall on the continuing levels of improving corporate sector data coming through. Governments do deserve credit for their on-going judgement in finding appropriate solutions to problems that continue to emerge from what were unprecedented events and so their responses have had to be adaptable.

Looking beyond short term concerns, the global economy's recovery is gathering pace, while headwinds from monetary tightening are still some way off for the developed economies so expect improvement in the values of growth assets.

Conditions are still unsettled, but they have been for the past two years or so and we have come to learn that if you are managing a long term portfolio then you have to look beyond this and ride through the periods of volatility whilst always keeping a close focus on whether the landscape has actually changed. Look to be opportunistic rather than panic because it is a fact of investment life that the best returns are made when it feels uncomfortable to be investing.

Given the extent to which markets have come off recently (FTSE down 15% over the past few weeks), our client portfolio valuations reveal significantly better figures which show how they are operated in terms of care, patience, judgement and the backbone that the level of diversification in the strategy employed brings to the overall result. So we are in pretty good shape and it certainly could be looking a lot worse. Damage has also been limited by a commitment to the US where dollar strength has offset underlying falls.

New monies added today would most likely be allocated to more diverse asset classes and investment vehicles - each one playing a differing role and bringing a different slant to the overall mix. Equity weighting decisions are controlled by the use of less volatile asset classes where funds are put to work, particular regard being given to the real risk strategy as carefully determined by a clients tolerance.

So, if you are a long term investor and want to have a financial planner that understands your risk profile, tax planning opportunities, and how that fits into your plan not run out of money before you run out of life then contact us at Thornton Associates Ltd, the Isle of Man's first firm of Chartered Financial Planners.

INVESTORS SHOULD STAY CALM AND CARRY ON

19th May, 2010

RECENT stock market volatility has been lucrative for City traders who make millions betting on market swings, but it isn't much fun for ordinary investors.

With the FTSE 100 plunging 10 per cent due to the Greek crisis, then rebounding 5 per cent in a single day after the £650 billion eurozone bail-out by the casino of Europe (the ECB), people have seen the value of their pensions and investments swing dramatically.

We can expect plenty more volatility as markets battle to recover in an age of austerity. So how to survive?

Stay calm

Most investors should keep calm and carry on, says Martin Bamford, chartered financial planner at independent financial adviser (IFA) Informed Choice. "Many people are investing for the long term, say five, 10, 20 or even 30 years to provide income in retirement," he says.

"Over such a long period current stock market woes will one day seem like a blip. We have been through a tough time but things should improve. Most investors can do nothing except grit their teeth and stick with it."

He advises not to sell investments now as it will crystallise losses, and adds: "We saw after the eurozone bail-out how quickly share prices can bounce back. So be patient and give your investments time to recover their lost value."

Take the long view

If you are going to invest in stocks and shares volatility is a fact of life, says Gavin Haynes, managing director at IFA Whitechurch Securities. He adds: "You should ignore the day-to-day uncertainty and concentrate on the underlying value of the stocks and funds you are investing in.

If you choose your investments carefully, you should still make money from investing in equities in the long run."

When investing new money, you can reduce the risk by drip-feeding smaller regular amounts rather than throwing in all your money in one go. "It is upsetting to invest a large lump sum only to see the value of your investment instantly fall 10 per cent," he says.

"But if you invest a regular monthly amount you actually benefit if share prices fall, as you get more stock for your money provided prices have bounced back by the time you cash in your investments."

Keep your nerve

If you can't take current volatility, perhaps you should avoid stocks and shares altogether, suggests Mark Dampier, head of research at Hargreaves Lansdown. "Investing is all about improving the quality of your life but that won't happen if you're scared to death about what will happen to your money," he says.

Even lower risk stock market funds, such as those in the "cautious managed" sector, are still risky. The average cautious managed fund is down 2 per cent over the past three years, according to trustnet.com, yet rose 17 per cent over the past year.

The drawback is that if you shun the stock market returns elsewhere are much lower, says Dampier, adding: "Many savings accounts are paying less than 1 per cent which isn't much use to anybody. In the longer run stocks and shares should give you a better return than cash, despite the risks. Although if you are investing for less than five years you should probably stick to cash."

Corporate bond funds could be a good halfway house between cash and shares. They invest in IOUs issued by companies to raise money and pay a steady rate of interest with the possibility of capital growth.

Recent performance has been disappointing, with the average UK bond fund returning just 11 per cent over the past three years, but the M&G Strategic Corporate Bond returned an impressive 36 per cent.

"Corporate bonds should help shield you from volatility but they aren't without their dangers," says Dampier. "They won't look so attractive if inflation returns because they pay a fixed rate of interest."

Despite recent volatility, he is optimistic about future stock market returns, adding: "I'm quite bullish at the moment. I still think the FTSE 100 could rise over 6,000 this year, up from about 5,300 currently. Volatility can work in your favour as well as against you."

Look for absolute returns

A type of investment called "absolute return" funds aim to shield investors from volatility by trying to deliver a positive return of between 7 per cent and 10 per cent a year, regardless of whether markets are rising or falling.

They work a little like hedge funds, using complex derivatives to bet against falling stocks and cash in when prices drop, as well as investing in stocks they expect to go up.

Dampier says: "Managers of absolute return funds have massive freedom to decide when and how to invest so performance can be variable. You have to have a lot of faith in the manager. I would recommend Philip Gibbs of Jupiter Absolute Return. I also like Standard Life Global Absolute Return Strategies which has delivered positive returns with low volatility during the recent market."

Absolute return funds have delivered steady returns throughout the credit crunch and recession, although they underperformed in last year's stock market rally. The other drawback is that charges can be up to 20 per cent of any profits they make, eating into your returns.

Ian Hudson, principal at IFA Hudson Green & Associates, recommends another steady investment fund, Axa Distribution, launched in 1975 and managed by Jim Stride for the past 25 years.

Just over half the fund is invested in stocks and shares, mostly quality blue-chip companies paying good dividends, with the remainder in Government gilts. It avoided the worst of the autumn 2008 crash and grew 13 per cent last year.

Hudson says: "Axa Distribution is relatively low risk, has a competitive annual charge of 1 per cent and you can either draw dividend income or reinvest it for the future. It ticks all the boxes

House View

At Thornton Associates, Chartered Financial Planners, we believe in a diversified investment asset, risk assessed approach to provide a real client-focussed ongoing service that helps clients, whether you are a private individual, trustee or small business owner, to get what you want; helping you identify, achieve and maintain your desired lifestyle without ever running out of money. That is what we, as financial planners do best, and when interest rates have fallen off a cliff, clients require our help more than ever. it is worth remembering that risk to capital is not the only risk to consider

posted by Sharon Sutton

Greece; who holds all the debt?

29th April, 2010

With foreigners holding c. 80% of Greek debt, many countries face direct exposure NOT just contagion risk - BIS Q3 data shows (all quoted in US$)

• FRANCE                   $75 bn (some highly exposed banks)
• SWITZERLAND         $63 bn
• GERMANY                $43 bn
• US                           $16 bn
• PORTUGAL               $10 bn

Another source (FBR) gives slightly different numbers ;

Greece Exposure - French Banks were estimated to have the greatest exposure to Greece, followed by Switzerland and Germany (BIS data as at 3Q09).

This explains the weakness in French names. With c. E200bn Greek loans outstanding owned outside of Greece, fair assumption is that French would own about E30bn, Germany E20bn. This is outside of the direct holding in Greek banks .Credit Agricole owns 91% of Emporiki Bank (TEMP GA) with total loans outstanding in excess of E20bn. In terms of exposure to Greek Gov't debt (BIS Data), France holds 24.9% of total, Germany 14.3% and rest of Europe 18.8%, Switzerland 21.1%, Britain 4.1%.

A current synopsis on the Greek crisis;

• Greek debt crisis is a result of poor fiscal management, hence this has to be rectified to avoid throwing good money after bad
• Greeks need to sign off on 3-year program to consolidate the budget and agree to outside monitoring (EU/IMF), giving up 'fiscal independence' until credibility is restored
• Current market rates on Greek debt and rating downgrades have made it impossible for Greece to muddle through on its own: choice is between aid or default
• Fiscal crisis has major implications for the European banking sector: European banks find themselves with large exposure to Greek government debt and Greek banks
• Currently they can use Greek government bonds to draw funds from the ECB on repo basis, i.e. they can pass on default risk onto ECB balance sheet
• If Greece defaults, European banks will face write down losses, but ECB as well. Substantial damage to the EMU system
• EU leaders will attempt to avoid a default by expediting an enlarged aid program (to be increased from €30bn to €120bn)
• Bank and insurance exposure to Greece:
• French and German banks have biggest exposure to Greece (about €80bn to the government and another €120bn to banks and private borrowers).
• Potentially biggest individual banks: Commerzbank, BNP. Credit Agricole and SocGen partially own Greek banks. But Landesbanken and Sparkassen should have a far bigger combined share. Hypo RE is apparently involved with €10bn. Investment in GGBs was popular with bank treasurers because of slightly higher yields and the ability to use them as collateral to draw cheap liquidity from the ECB at the same time. Risks of rising Greek debt burden were overlooked (‘Europe's sub-prime problem?)
• In France Insurance companies hold €20bn in Greek government bonds.
• After French and German banks, UK banks have 3rd largest exposure. Banks from the 3 countries hold about a third of Greek government debt.
• Knock-on effect on other countries:
• If Greece reschedules its debt, the crisis may move on to Portugal, Spain, Ireland. German banks have €240bn exposure to Spain, again with strong involvement of German public banks. German and UK banks are the biggest creditors to Irish banks.

Exclusivity of Corporate Chartered Status

24th April, 2010

As holders of corporate Chartered Financial Planners status (and personally holding a Chartered title), we clearly recognise the value of technical capability, continuing development, standards and ethical practice - the cornerstones of professionalism.

Research conducted on behalf of the CII by YouGov has already confirmed that ‘Chartered' enjoys the strongest recognition among consumers in terms of titles they would associate with professionalism. Corporate Chartered status can enhance your standing with new and potential customers and other professional firms.

As an important differentiator in a competitive market, it can deliver tangible business benefits. In recent research among existing Chartered Financial Planners, we found the responses to questions regarding the value of Chartered status were overwhelmingly positive:

• 85% of Chartered Financial Planners said Chartered status improved their standing with professional connections
• 84% said the same regarding prospective customers
• 79% said the same regarding potential new staff
• 60% of Chartered Financial Planners said Chartered status helped win new business
• 53% said the same regarding increased referrals.

And this remains an exclusive club - in the UK there are less than 300 firms of Chartered Financial Planners. You can see a full listing at www.cii.co.uk/chartereddirectory

Thornton Associates remain the sole holders of Chartered status in either the Isle of Man, Jersey or Guernsey and Sharon Sutton remains the sole Chartered Financial Planner in the Isle of Man

Launch of Financial Planners & Insurance Brokers Association

19th April, 2010

A new financial association was launched on Tuesday 13th April at the Claremont Hotel.

The Financial Planners and Insurance Brokers Assocation (FPIBA) has been formed with several aims in mind: to provide a forum for discussion of matters of common interest to members; to act as a representative body for the members with government and regulators when needed; and to encourage the ongoing achievement of high standards and ethical business conduct.

At the launch, the formation and election of officers and committee members was finalised:

Chairman - Stewart Murphy (Westwinds Financial), Deputy Chairman - Kevin Wood (Conister Bank), Secretary - Dave Smart (Blackfords and Treasurer - Steve Costain (Costain Insurance Consultants).

The additional Committee members are: Jonathan Corlett (CTH), Tim Rattray (Rossborough Insurance), Sharon Sutton (Thornton Associates), Simon Pickering (CFS Consultants), Gerald Chase (Financial Options) and Nigel Gregg (MAC Financial).

The FPIBA will hold regular meetings with both the FSC & IPA to discuss contemporary issues, and offer a collective response to regulatory matters and consultation documents.

FPIBA representatives have already been invited by Paul Heckles, Head of Enforcement at the FSC, to join the Joint Anti Money Laundering Advisory Group (JAMLAG).

They met at the beginning of April and unanimously approved inviting the FPIBA to future meeting and join the consultation process of replacing the Criminal Justice (Money Laundering) code 2008.

They are already part of the consultative group dealing with the taxation of investment for Isle of Man residents put together by the Tax Office, been consulted as an interested party on the Reciprocal Health Agreement, and other governmental bodies.

The FSC and IPA have expressed their satisfaction that the body has been formed.

See http://www.isleofman.com/News/article.aspx?article=25545&area=4

Shhhh....Don't mention the word 'Pension'

23rd March, 2010

Don't mention the 'P' word!

Sharon Sutton, Chartered Financial Planner at independent financial advisers, Thornton Associates Ltd writes:
There is no standard answer to 'how much do I need to save for retirement?

There are general pension-saving 'rules of thumb' often floated around, but the scale of your retirement funding challenge depends entirely on your own, individual circumstances.

Try following these basic steps to figure out how much you should save personally:

1. Calculate how much income you need when you retire.
   This means look at your spending today and consider which items will change or remain the same when you retire.
   You might stop spending money on some things but start spending money on others. For example by the time you reach retirement age you might have paid off your mortgage, but you might plan to start spending more money on travel, property maintenance and if you pay for healthcare you will find private medical premiums will substantially increase.
2. Next consider the income (and where it will come from) in retirement. Your pension might not be the only income you have, so factor in income from property rental or investments as well. Don't forget the State pension(s), as this makes an important contribution to overall levels of income in retirement.
3. You can convert your pension income requirement into a target capital sum by dividing it by a reasonable annuity rate. Look these up on the annuity tables supplied by the FSA; see http://www.fsa.gov.uk/tables
   For example, if you need income of £20,000 a year and you can get an annuity rate of 5.4%, you need a pension fund of just over £370,000. Don't forget factor in income tax and any tax-free cash payment you plan to take from your pension fund for capital expenditure, such as mortgage repayment or buying a motor home.
4. When you know how big your pension fund needs to be, you can start looking at projections to work out how much your contributions need to be between now and retirement. Investment growth will help you reach your goal, so use a compound interest calculator (see; http://www.thisismoney.co.uk/pension-pot-calculator) to tell you how much you need to pay into a pension.
   You must keep these calculations under regular review because your set of assumptions made today are likely to look very different next year or in a decade.
   There is a general rule of thumb, where if you divide your current age by two and put this percentage of your salary into a pension.
   So, if you are 30 when you start saving for retirement, you need to save 15% of your salary to ensure a financially comfortable retirement. If you wait until you are 50 before you starting saving for retirement, you will need to save a quarter of your salary to stand a chance of avoiding a retirement in poverty.

Sources; Cazalet consulting and Informed Choice Ltd.

CII Student of the year award for Sharon Sutton

2nd March, 2010

CII Student of the year award for Sharon Sutton


pictured above: Sue Gee, President CII IOM & Sharon Sutton

Sharon Sutton was awarded the Glyn Gilbert award for Academic Excellence by  Sue Gee, President of the Isle of Man Insurance & Financial Services Institute (CII local branch) at their recent annual dinner.

Sharon obtained Chartered Financial Planner status for herself and her company in 2009 and was delighted to receive the award on behalf of Thornton Associates and her family whom have been so supportive throughout. Husband Julian, step son Dave & daughter in law Gemma were there to see the award made, along with staff and friends

See http://tinyurl.com/ygzmpv6

Seven Saves in 2010

17th February, 2010

Seven Saves in 2010

During such tough economic times and with a more challenging Isle of Man local budget just announced, it is understandable that so many people stick their heads in the sand when it comes to their money.
See http://bit.ly/axSutw

By applying few simple financial resolutions, you can transform your personal finances getting to the end of 2010 in a much healthier financial position.

Here are seven saves for 2010.

1 - Make your own budget
It surprises me how many people have simply no idea how much money they spend each month - or where the money goes. This is the roadmap to working out where you want to get to. Working out and sticking to a monthly budget is all about spending less than you earn. If you achieve this, month on month, you will be in a better financial position at the end of 2010 than you were at the start. By deciding in advance where you will spend your money, you should make it easier to avoid the temptation to spend on frivolous/unnecessary items. Review it on a regular basis so you can compare where you planned to spend your money with where you actually spent it.

2 - Avoid being 'in the red'
Short term debt (credit cards, store cards, overdrafts, etc) are expensive. Debt is a drag on your ability to meet other financial goals and an emotional drag on your attitude towards money and personal finances. Make clearing short-term debt a priority before starting to save towards other plans. Prioritise debt over savings. Don't take on more short-term debt. I like the idea of setting and marking a "free-from-debt" day on your calendar. If you do, make sure you achieve it.

3 - Plan for the future
Starting a pension should be a big priority for many people in 2010. We constantly hear that we will need to save more and work for longer. This has a lot to do with us living longer (if you want to see that in graph form see fig.1) and lower interest rates (which broadly determine annuity rates) which means you need a larger pot of money to generate income to live off. You cannot rely on the State for a sustainable level of income in retirement so this means you need to use a pension or other investment vehicle to create your own sources of income for later life; if you ever want to stop work that is.

4 - Pay less tax Nobody wants to pay tax but it is the social responsibility of those who earn to pay it. However, many of us fail to take the simple steps that enable us to pay less tax and maximise our tax allowances.
The steps you can take to pay less tax include making tax relieved contributions into pensions either personally or via an employer arranged scheme where by sacrificing salary by paying directly into such a scheme, not only do you receive income tax relief at source, but also get National Insurance Contribution savings for both you and your employer - who in turn may consider adding their NI saving into your pension as a further incentive/enhancement.
A trip to your financial planner may help you arrange this and identify further opportunities to save paying tax on your investments - and ensure you find out all relevant social/state benefits and allowances are being claimed/assessed for. We don't have ISA's and Child trust funds in the Isle of Man so it is important you plan using the tools available.

5 - Make a will
If you don't have a Will, you must make one. You can write your own Will but there are some major risks involved with a DIY approach, so meet with an advocate to get this organised. If you die without a Will, i.e. ‘Intestate', your estate will not be distributed according to your wishes; in many cases where remarriages have occurred, the family structure can be more complex (it is worth pointing out here that marriage voids existing wills unless made in contemplation of the marriage). So don't risk dying ‘Intestate'. Anyone making a will, especially with any connection to the UK should consider the tax consequences of making it (or transferring ownership of assets when you are alive for that matter), not only to you personally, but to your beneficiaries. Ensure you obtain financial advice in this area to avoid giving you or your loved ones an unwelcome tax bill.
At the same time give some thought to family financial protection, particularly what would happen to your family from a financial perspective if you were to die, lose your income or contract a critical illness such as cancer- we all know someone whose life has been affected by cancer. It is possible to insure against most risks but you need to quantify them first. If you have existing life assurance plans, review them to make sure they remain competitive and appropriately structured. For example you might discover that the cover you have in place is now redundant or that you are paying over the odds for the level of cover you have.

6 - Always shop around
Always shop around. The Internet makes it quick and easy to compare prices on just about any product or service.
These days you can use the Internet on your mobile phone handset to compare prices when you are physically in the store about to make a purchasing decision. This can be useful if you need some ammunition to haggle with the shop assistant before parting with your cash.
However, do consider the benefits of shopping ‘local'; you're keeping someone in a job who supports the same economy in which we all participate. They may be collecting VAT for our economy and are unlikely to have the same buying power whilst having to pay for heat, light, rent and salaries. I would also question whether Amazon would turn up with a loan washing machine when ours broke 3 weeks ago like the MEA did (thank you).

7 - Meet with an Independent Financial Adviser
During 2010 carry out a comprehensive review of your personal finances with an impartial Financial Planning professional who has access to the tools and knowledge needed to improve your current and future position. Most IFA's offer a free initial consultation with no obligation so they can identify areas that they can help you with and you can grill them about their qualifications, experiences and charges.


Figure 1; actual and forecast showing the number of people per 1000 living beyond age 90 in the UK

Sharon Sutton is a Chartered Financial Planner at Thornton Associates Ltd; www.thorntonfs.com
She is a member of the IOM CII local council, the Personal Finance Society & a committe member of the FPIBA
Sources; www.brilliantwithmoney.co.uk www.courts.im http://cazalet-consulting.com/
Follow Sharon on twitter; http://twitter.com/sharonsutton99

Consultation on proposed taxation of IOM residents via investments

18th January, 2010

TAXATION OF INVESTMENT PRODUCTS A CONSULTATION DOCUMENT

Since the beginning of the year the Treasury has been working with representatives from private sector professions to review the taxation of investment products.

As a result of the review, the Income Tax Division, on behalf of Treasury, has today published a consultation document outlining proposals for the introduction of a new taxation regime for certain investment products in the Isle of Man.

The document aims to generate debate and gather views to assist the drafting of new legislation.

It is primarily concerned with the taxation of insurance bonds and roll-up funds. There is currently a lack of certainty as to the taxation treatment of these products and the proposed new regime aims to remove this uncertainty by:

• defining which products will be subject to income tax and which will fall outside the charge
• defining when and how an income tax charge will be raised.

Those wishing to submit their views on the proposals are invited to do so by 29 January 2010.

The consultation document is available on the Income Tax Division website at:

http://www.gov.im/treasury/incometax/consultations.gov

Sharon Sutton, MD and Chartered Financial Planner is a committee member of the Financial Planners and Insurance Brokers Association and as such part of the consultative process in communicating with the Government, regulators and other professional bodies. Updates to follow.