2013-06-18T18:54:17-04:00 Roland Cross http://www.huffingtonpost.co.uk/author/index.php?author=roland-cross Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Roland Cross Good old fashioned elbow grease. tag:www.huffingtonpost.com,2013:/theblog//3.3250566 2013-05-10T04:09:33-04:00 2013-05-10T05:18:54-04:00

Roland Cross http://www.huffingtonpost.com/roland-cross/
Given the generational shift from final salary to defined contribution pensions and the increasingly urgent need to get the nation saving to provide a half decent pension pot, let alone enough to enjoy retirement, it's in the interests of the financial services industry for punters to understand the value and cost of financial advice, or what a product actually is.

From the consumer's perspective trying to fathom the cost of a particular fund, what's actually disclosed or not, even before assessing the cost of advice and other ancillary charges is virtually impossible!

I fully support Daniel Godfrey, chief executive, IMA's call to a broad range of stakeholders to build a simple, accessible solution and develop a methodology that makes costs totally transparent to everyone.

However, as his recent article in This is Money explains, there are many hurdles to overcome. Daniel talks in good faith about players within the industry working together, but the issue that strikes me is whether the whole industry really wants to be transparent or would prefer to continue its obfuscation. Let's face it, there is a lot of self interest in allowing the current system to be maintained rather than demystifying the whole process.

I sincerely hope that I'm wrong and that the financial services industry follows the lead of certain players to ensure that disclosure improves and costs fall. But if the point of all this transparency and clarity, forced by the regulator, was to expose the profits being made and hence drive down costs, then I fear the end consumer will be sadly disappointed, as it appears that the cake is still the same size it's just sliced differently.

Clean share classes aren't available to all. Investors going direct are not, in all cases, receiving the lowest or even standard management fees on funds. An unintended consequence of the FCA's ban on rebates is that platforms are likely to demand lower management costs to gain a competitive advantage. Sounds good, but the funds that can afford to play will be those that have size and hence economies of scale. If smaller funds are then ignored this potentially reduces investors' investment universe significantly, discriminating against the smaller more nimble, and often better performing investment houses - not good for the consumer.

Without doubt the behaviour of the industry is changing but there seems to be more dragging and kicking than willing participants - and will the consumer really benefit? Financial advisers have a major role to play in providing high quality advice to clients and the RDR changes have undoubtedly improved professional standards. But helping them to explain the full cost of their advice and the financial products the customer invests in is essential, otherwise we will all be poorer. Let's face it, without planning and saving for the future we risk a life of all work and no retirement. Not a pleasant thought!]]> tag:www.huffingtonpost.com,2012:/theblog//3.1651578 2012-07-05T12:28:41-04:00 2012-09-04T05:12:15-04:00

Roland Cross http://www.huffingtonpost.com/roland-cross/ Cheap shots aimed at the Bank of England by Barclays and government minsters past and present dishing their usual bile of erroneous facts were topped off by trite questioning by MPs from the Treasury Select Committee, more interested in their own posturing than the welfare of the City and the UK's standing in the financial world. The combination, has led commentators to question the essence on which the City built its reputation - that of trust.
Was it only me that found it bizarre to read reports that during the Treasury Select Committee hearing with Bob Diamond, politicians were tweeting and texting thoughts and availability for media interviews rather than concentrating on getting to the bottom of events concerning the Libor rate fixing? The questioning lacked bite, insight and understanding of the issues required to get to the truth and exposed the weakness of the committee. Bob Diamond obviously didn't help; he answered the questions but added little that wasn't already known.
Barclays Bank shareholders have suffered huge losses since Bob Diamond took the reins in 2005 while he lined his pockets to tune of £120 million, plus another possible £20 million for loss of office. Both he and other staff were rewarded handsomely with bonuses that lacked alignment to shareholder returns. The Times reported that 'taking into account dividend payouts and share price, a pound invested in Barclays at the end of 2005 is now worth 29 p - a figure disclosed in an embarrassing graph buried in the back of the bank's annual report. In the same period, the FTSE 100 index as a whole would have grown to £1.08 over five years. And a pound invested in one of Barclays' rivals, HSBC, would be worth a relatively respectable 78.2p.'
It is often said that regulation is not the issue, it's enforcement that matters. Protecting the City of London's reputation is surely at the heart of regulators' and the Bank of England's objective, but both appear to fallen short in their duties.
The essence of capitalism, and the risks taken to make a profit, are held in equilibrium by striking the balance between risk and reward, or fear and greed, as ultimately wrong decisions could cause the destruction of capital. In the case of the banks, the equilibrium disappeared as they were deemed 'too big to fail' and hence the appetite for risk increased. Banks should have been allowed to fail; as far from managing risk effectively, they have been allowed to spiral out of control.
At present we seem no closer to getting to the bottom of what happened and the key issue of what and who contributed to the widespread abuse of Libor is largely being ignored. The witch hunt of Bob Diamond has taken the heat, temporarily, off the other market players, but until this issue is addressed and self interest by politicians put to one side, the only winners will be financial centres in New York and the Far East grinning like Cheshire cats at the UK's ability to self harm. The City of London's long standing reputation urgently needs the truth to be known so its integrity is restored. The Bank of England needs an injection of integrity, as much as the rest of the banking industry, as surely it will be the 'old lady' who will restore order and reputation. Waiting for politicians certainly isn't an option.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1541868 2012-05-24T08:10:54-04:00 2012-07-24T05:12:07-04:00

Roland Cross http://www.huffingtonpost.com/roland-cross/
A panel of financial services experts spanning, wealth managers, private client stock brokers, wrap providers, an active manager and award winning financial journalist proffered very distinct views.

Colin McLean, SVM Asset Management, disagreed with the assertion that this was a world of lower returns and less risk, with a strong view that with equity markets cheap and the US economy starting to recover, there was still a clear role for performance-focused managers.

But are investors more risk adverse that they used to be? Bryan Johnston, Brewin Dolphin felt that the biggest risk was "being in the wrong asset class at the wrong time." What investors want is long term performance not observations about short term performance and to this end Bryan believes that we have the investing opportunity of the decade in equities.

Merryn Somerset Webb, editor, MoneyWeek, was concerned about how investors can identify who the good managers are: "There are a few very good active managers, but you can't know who is good until they've done the job. For an investor, that might be too late and uncertain returns bring more concern about fees." She also strongly felt that charging structures needs to be clearer and lower.

All the panellists agreed that RDR should help bring in greater transparency, and that financial education at an early age would be very beneficial, with Colin adding that he'd like to see more professional bodies taking an interest in financial education. He cited the CFA as an example for others to follow.

But the key aspect, and assistance that RDR will provide, is that investors need risk management or put another way, 'anxiety management' to stop mistakes such as selling out at the wrong time. Too much risk profiling, currently a tenet of 'suitability' under RDR may not add value - but most people want the same thing; security and making a profit.

In Merryn's view: "Everyone has the same risk profile," and "40 year old women across the nation would all have the same financial goals at heart."

She pointed to the range of websites springing up 'replicating financial advice' and suggested that for most people, this might be all they require. Conversely, David Ferguson, Nucleus Financial Group, thought that "a dearth of advice for the mass market is the big risk."


Outlining the current disparity between the number of passive investments in the UK compared to the US and elsewhere, David pointed to the fact that passive funds are unpopular among advisers in the UK because they carry no sales commission.

He added that while fees are falling across all financial services companies, over the last 30-40 years there had been "an enormous collusion against the customer." The reason for this was that there had been no real competition to challenge high fees.

The sheer amount of financial services products available in the UK was also raised as an issue, with David pointing out that the market was grossly oversupplied. With regulatory costs high and unlikely to fall, fund managers and wealth managers will see lower margins. The consequence - a shrinking industry, which will be good for the survivors.

An interesting consensus among the panel was who will win as a result of current volatility, namely boutique managers and passive funds. Colin McLean said that 'it's easier for smaller funds to perform better due to liquidity issues and the alignment of interests between investors and manager ,who has usually has his/her own money in the fund.'

Passive investments, such as ETFs might not be the industry panacea however, according to Colin McLean who countered that some products which look simple, like ETFs, can carry "very great risks". In Merryn's view however the bigger risk to investors was the current lack of transparency from more traditional investments; "[Investment companies] can't tell investors how much the investment will cost."

Perhaps then it will be market forces which, combined with increasing client awareness, ultimately bring down the costs of investing to the UK investor? In Merryn's words, "everyone will have to take a bit less so that the investor can take a bit more."


Roland Cross

Ps. At last year's event I noted that at the end that we were 'left with another sobering thought - is there another imminent financial crisis - the eurozone?' Wind forward 12 months, has anything changed?]]> tag:www.huffingtonpost.com,2012:/theblog//3.1403186 2012-04-04T12:55:03-04:00 2012-06-04T05:12:02-04:00

Roland Cross http://www.huffingtonpost.com/roland-cross/
London, where we are based, will be transformed into a rolling carnival gyrating across the capital as millions of visitors converge, drawn by the colour and excitement of the Games, to experience the plethora of events being hosted. Meeting spots for the various "Nation Houses" will provide the backdrop for countries to showcase their national culture. Somerset House, is becoming Casa Brasil, with the promise of creating a cultural programme capturing Brazil's vibrant arts and cultural scene, showcasing the best of Brasil in the heart of London - Copacabana in the capital - bring it on!

As excitement for the Games builds to a crescendo, the impact of an additional 8.8 million additional visitors on businesses operating in and around London is slowly becoming a reality and potential nightmare scenario.

Many businesses have buried their heads, insisting its 'business as usual' and in true British fashion can't see what all the fuss is about! According to research by the British Council for Offices only 1 in 10 workers will be allowed to work from home during the Olympics and many businesses simply can't grasp the enormous impact the Games will have on our current working lives.

At Broadgate Mainland, Account Director, Emma Murphy, has firsthand experience of managing PR in the Olympics having looked after Visa's Sydney Olympic sponsorship campaign, and she has long been advocating that we are Olympic fit. Our disaster recovery plan has been adapted to manage not just the three weeks that the Olympics is officially on, but also the build-up and Paralympics that follow. The London Media Centre opens on 9th July 2012, and a week later athletes and dignitaries start to arrive. The disruption is not confined to three weeks.

While the extent of disruption and delay predicted at major transport locations is hard to believe - I certainly don't want to be waiting an hour just to get onto a platform at London Bridge - we have to be prepared just in case. My worry is that we have an excellent 'fit for business' Olympic plan, but then the internet and broadband infrastructure fails to cope with everyone working from home.

What is guaranteed is that we all intend to make the most of the experience the Olympics brings, having got our act together first to minimise the impact on our client's and business. If you haven't started planning take a peep at the London 2012 Games - Preparing your business paper, it is an eye opener!! ]]>