Well, we enter the new world of retail financial services this month with some trepidation and also some excitement. Like most so called ‘seismic changes’ I suspect that that it won’t be as bad as many firms suspect but there will certainly be casualties, but there will also be huge opportunities.

However, whilst I deplore some of the unnecessarily bureaucratic aspects of the new rules (do regulators and civil servants even understand about what it takes to run a business?) there is no doubt in my mind that the main thrust of these changes is for the better; consumers will be better informed and advisery businesses better managed and that cannot be a bad outcome.

Watching the recent demise of Jessops, Comet and HMV  I cannot help recall the words of one very sage corporate recovery specialist talking to BBC Radio 4 Today programme recently and spelling out his theory that an economic recovery really cannot take place until a lot of the dead wood is chopped out and that there are many businesses that are being kept alive because the banks don’t want to write off their loans and overdrafts by pushing them into liquidation or administration, with the consequent effects of house foreclosures, offered as security, (in the SME sector particularly)  putting yet more unwanted and unsellable residential property on the market. House prices are still way over valued in my opinion and we need re-alignment soon or the market will remain sluggish. Residential lending figures are better so there is some sign that the sector is ‘on the move’ again, albeit slowly.

The other area of property investing which seems to be in need of attention is commercial retail. Landlords are going to have to seriously consider reducing rents at review points and not just having upward only reviews, this is commercially perverse, when business is bad prices are usually reduced to stimulate sales but in this sector there is a practice of “upward only” reviews and this isn‘t sustainable in times like the present. We are at serious risk of seeing the demise of the ‘High Street’ or it just finishing up as a line of fast food outlets and charity shops, not that there’s any wrong with fast-food outlets and charity shops per se, but no one wants to see them to the exclusion of all else; an exaggeration I admit but look around you…

This afternoon Barack Obama is publicly sworn in as the next president of the USA, he’ll need all the intelligence, vision, statecraft and all the good luck he can muster to deal with the myriad of problems in his ‘in-tray’; problems which affect not just the USA but the world as a whole and we should wish him well. Notwithstanding the rise of the BRIC countries, the USA is still a huge engine for growth in the world and we need a sustainable recovery there to assist us in our road back to fiscal recovery.

I wish everyone a happy new year, I hope it brings you all you wish for.

This is my final blog of the year, and what a year! Where did it go? It is certainly true that the older you get the quicker time seems to pass; this time last year I was preparing to leave to spend Christmas in New Zealand, and as the tied old cliché goes “it only seems like 5 minutes ago”

As you may have read in my last missive, we have spent most of the last three months finalising our preparations for the new world of fees replacing commission on investment business from January 1^st so I won’t tread that path again in this blog, merely to say we have had to take some tough decisions but we feel that we are as well prepared as anyone.

The country and the western world in general continues to suffer widespread economic sluggishness; even that normal powerhouse Germany, recently warned of a slowdown and it seems that 2013 will be unlikely to herald any great recovery. However, once the recovery begins I believe that we will see the usual short term surge in stock market values.

The other issue that confronts the UK is inflation. At the moment it appears to running ahead of Bank of England (BoE) targets and in fact some sectors of the population, most notably pensioners are probably suffering higher rates of real inflation due to the areas in which they spend a disproportionate amount of their income, predominantly food and household utilities where prices continue to rise. Of course, the normal way of combatting inflation is a gradual rise if interest rates but at the moment that course of action appears to be out of the question as the BoE continues to support a base rate of 0.5% as their preferred method of economic management; whilst it certainly helps business and mortgage holders to have lower rates, it seems that the mortgage savings are not being spend in the High St., people are opting to reduce their debt level, which is good for the economy in the long term but not helpful to the retail sector right now.

The Chancellor, George Osborne, has had his fair share of ‘stick’ but you cannot deny that he’s a shrewd operator and his appointment of the new BoE Governor, someone from outside the UK was a masterstroke;  he earned great kudos (even a compliment from Ed Balls-words rarely heard) by persuading the Canadian central bank chief, Mark Carney, who was clearly the outstanding candidate, to accept the post. Carney is credited with navigating Canada through the 08/09 Global financial crisis with little or no structural damage to either their economy or their banking system.

The UK retail financial services sector, awaits the emergence of a new regulator early in 2013;  the Financial Conduct Authority (FCA) to replace FSA.  This is our  fourth regulator since 1987. First it was FIMBRA, then PIA, then FSA and now FCA. One day they’ll run out of acronyms!!

So, in closing I wish everyone a happy and peaceful Christmas and a healthy and prosperous 2013.

Best wishes

As we head inexorably towards January 1^st, a new year with a ‘brave new  world’  for retail financial services, most managers and business owners like myself,  have been working flat out to make the changes to their business necessary to cope with the enormous practical and philosophical alteration to the way we do business, otherwise known as the Retail Distribution Review (or RDR as it is being more colloquially referred to in the press)

For those of you blissfully unaware of what is happening, from January 1^st commission on investment products is being outlawed!!

The regulator has taken this decision because it believes (erroneously in my opinion) that commission creates  ”product bias”.  In 35 years I have seen little evidence of this because of no adviser worth his salt is going to recommend a pension to somebody who hasn’t got net relevant earnings or to make an ISA contribution where a pension contribution may be more beneficial from a tax point of view.  The various tax wrappers that we employ such as Pensions, ISAs and Bonds all have their place in proper, individual, personal financial planning and again when the level of commission offered on these products is broadly similar it is difficult to imagine an adviser recommending one of these tax wrappers over another for commission purposes.  It simply does not hold any water!

However, the regulator has been moving in this direction for some considerable period of time firstly with the advent of commission disclosure, then the necessity for us to offer fees to our clients to retain our independent status and now this.  It came as no surprise to me and indeed I had been predicting it for some time.  We as a business have spent thousands of man-hours over the last six months preparing and we believe we are as far forward as any other advisery business in the country and are ready to take on the challenges that face us.

The other significant aspect of RDR is the fact that all advisers, whatever their experience, have to reach a new level of qualifications by December 31^st or they are no longer allowed to practice.  I can think of no other profession where the baby of experience is thrown out with the examination bath water!  I apologise for that appalling tautology but this makes me quite angry.  Every one of my clients who I have spoken to are horrified that the regulator should discount experience over a simple academic qualification.  Whilst academic qualifications are important and I support the FSA’s drive to raise standards and believe these standards will become increasingly important, to tell an adviser with 35 years’ experience that they need to sit 4 or 5 exams in order to continue advising the clients who they have looked after (in my case some of them over 30 years) is clearly nonsensical and given that among my clients are many top professionals, Accountants, Barristers, Judges, Doctors, Surgeons and some very successful business men from pretty much every walk of life not one of them that I have talked to about this ( so far) can understand why the regulator would take this decision.  It seems the regulator would rather have them looked after by somebody with all the necessary qualifications but no experience; again I can think of no other professional walk of life where this would be tolerated.

However it is what it is; we are now working hard to ensure that all our advisers are properly qualified by the end of December.  It has been a difficult, tiring and immensely stressful period but after 25 years running the Alexander Beard Group I am not about to give up and walk away.  Unfortunately, some of my experienced and most excellent contemporaries have decided to do just that and the loss will be to the industry and to the advice given to the public.

However, ABG is blessed with a group of hard-working, committed individuals who will all be determined to ensure we move into this new era with a positive and robust attitude!

Having just returned from a three week trip to the USA (two weeks of which was for business reasons) and with the Olympics getting underway I felt that amid the darkening economic skies, a lighter tone was called for to open this U.S. centric Blog.

So, on this light note, I am continually amazed, amused and occasionally mildly aggravated by the inability of Brits and Yanks to talk the same language. For example:

Here in the UK it’s a Spring Onion; in the USA it’s a ‘Scallion’.

Courgettes are ‘Zucchinis’, Aubergines are ‘Eggplants’!

Crisps are ‘Chips’.

Most venues don’t know what brewing a pot of tea looks like!

When ordering food in a restaurant in the USA, one doesn’t ask the Server (btw, not waiter/waitress) if you can have a particular dish on the menu, you tell them that you’ll “take” that particular dish.

I’m not asked if I have “finished my meal?” the enquiry is usually in the form of “are you still working on that?” and if there’s anything left they look at you strangely if you don’t want it “to go” i.e. a doggy bag!

A side order is simply “a side” and when you’ve got through all that you don’t ask for your bill you ask for the ‘check’, which is also what the Americans call a cheque!

A’ Lift’ is an ‘Elevator’ and the ground floor is the 1st Floor.

In the USA you board a train on ‘track 12’ not Platform 12,

In the UK, for example, you live in Flat 2, 32 Acacia Ave; in the USA it would be Acacia Ave, no 32; Appt. 2.

They don’t say” I’ll call you back”, they say “I’ll circle back with you”.

They thank us for “reaching out”, rather than thanking us “for calling”.

If I were to tell someone I’m going to be away from the office from, say, the 7th to the 14th, in the USA I’d have to say I’d be away “from the 7th through the 14th “.

And their children study “Math” (singular) whilst our study Maths (plural).

The 7th of August 2012 in the UK is abbreviated as 7/8/2012; in the USA its 8/7/2012 but on all their Customs and Immigration forms it’s shown our way round!

“Problems” are “issues” and “difficulties” are “challenges” and boy, how we’ve adopted those phrases over here, but they are a more positive use of words, albeit a little annoying sometimes, it does somehow reflect their overall attitude to business. It’s positive, rarely negative, upbeat, never gloomy with an overall “can do” attitude. Service levels in places like restaurants and hotels are extremely high, way better than ours, but the propensity for “have a nice day” and “you’re welcome” can grate a little when you’ve heard it 20 times that day!

However, most times I leave a meeting with a smile on my face…but let’s be quite clear, they did invent the phrase “going forward”.

On a more serious note, I learned a number of things from my trip which can be broadly summarised as follows:

1.  The business community are no fans of President Obama

2.  Mr Romney is looking more likely to force a close race in November but more so because of the disillusionment with Obama rather than any particularly strong qualities that he Romney has and the man’s ability to aggravate people seems as prevalent there as now it is here!

3.  The US economy is not growing as strongly as the press here might suggest and this may be insufficient to save Obama at the polls.

4.  The Government is still borrowing huge amounts of money and their national debt is astronomical.

However, despite these obvious uncertainties, the business community (or at least those that I come into contact with) are still positive and this is one of the USA’s great strengths; they always look forward, never back and believe that their economic problems can be solved by hard work and entrepreneurialism, they value service and straightforwardness in business and reward this with great loyalty. Whether Obama’s economic strategy of borrowing to stimulate the economy is correct only time will tell and as the old adage goes “if you have two economists in the room you’ll get three opinions”.

Just like any other part of the world though there are a myriad of differences, many good and bad aspects; it remains a fiercely patriotic country which I love to visit for both work and play and over the years have made many friends there and hope to return many times before I hang up my spurs!

Enjoy the Olympics and the rest of your summer!

I was never a fan of Mr. Brown as either Chancellor or Prime Minister, but he must be given enormous credit for one decision and that was to persuade Mr. Blair to drop the idea of Britain joining the Euro. I agree with the general consensus amongst political commentators and financial journalists that this will now never happen (or, at least, not in my lifetime).

As any first year Economics student knows, a sovereign nation must have control of its own interest rates both to control inflation and more importantly, right now when growth is so hard to come by, to be able to devalue its currency to make its exports more attractive; the Euro, therefore, was fatally flawed from Day 1 because the participant nations lost this ability. It clearly cannot survive in its current structure without some form of political or full fiscal union. What is certain, it seems, is that if Germany doesn’t yet again ride to the rescue it is difficult to see how Greece can survive without exiting the Eurozone. Even that will bring its own huge problems, so this really seems to be a no-win situation.

We must all be aware of the risk to the British economy of any Greek exit from the Euro. First of all, any debt held by British banks would be converted to a new Drachma which most experts believe would immediately devalue by at least 50%. This in itself wouldn’t push any British bank ‘over the edge’, but the losses will have to be sustained and the hole in their balance sheets will have to be filled, and even without the new capital requirements being imposed on them by the EC this will further restrict the banks’ ability to lend to small and medium sized businesses, who are currently bearing the brunt of the dearth of capital available for growth.

The challenge faced by the British Govt. is ‘many-fold’. In the U.K. alone, one of the reasons for the slow-down in High St. spending is the fact that many people are using the historically low interest rates to pay down debt, and therefore they are not spending. This is the result of the Bank of England artificially keeping interest rates low to encourage growth and weaken the £ Sterling, which helps exports (see above).

Overall, it seems like the Govt’s strategy of reducing the ‘deficit’ is correct because until we can get a balance of payments surplus and higher tax revenues we cannot start to make in-roads into the massive debt accumulated by previous Governments of both colours, and this is vital for the long term health of the country if we are not to burden our children and grandchildren with unnecessarily high taxes for decades to come! Unfortunately, the electorate can be fickle and, whatever they may be doing right for the long term, if Mr. Cameron and Mr. Osborne cannot demonstrate some ‘green shoots’ of recovery before the next election they may not be given another 5 years to pursue their strategy. However, it’s difficult to see what they can do with so many extraneous pressures over which they have little control.

However, on a positive note, our corporate clients seem to be surviving, indeed many are actually growing despite a hostile climate. The spirit of the entrepreneur is still alive and flourishing in Britain, and it is on this – more than anything – that we should pin our hopes for the future.

This particular question has no doubt been asked, cynically or otherwise, many many times over the years but I can think of no better example affecting our industry than a problem which is currently affecting thousands of people taking income from their pension funds.

Within the last 12 months we have seen the government reduce the maximum drawdown from 120% of the Government Actuarial Dept (GAD) annuity rates to 100% of the GAD thus reducing people’s maximum incomes at a stroke by at least 16.7%. Add to this the collapse in annuity returns resulting from so-called “quantitative easing” (to you and I – “printing money”) you find that many clients are seeing reductions at their tri-annual valuation dates of up to 50% in their income; a recent example of this was brought to my attention whereby one individual’s income fell from £40,000 per annum to £18,000 per annum. This is a man who has been self-employed all his life, worked hard, paid his taxes, saved, put money in his pension and not asked for a single thing from the state, no handouts, no support, nothing!

However, the state have suddenly told him that out of the £520,000 he has in his pension fund he can only take a maximum of £18,000 per annum. He is too young to buy an annuity and even in the current circumstances you wouldn’t recommend it anyway for somebody of his age. So what on earth are the government thinking of by penalising people like this guy, it beggars belief?

What else have they inadvertently done by this crass and thoughtless policy? Well this is just one man but this one man has £20,000 less to spend every year in an economy that has just gone into recession; for every one of him there must be thousands of others!

Remember politicians, this is all income, in other words spending power, that is lost to an economy that badly needs it, from an age group that is willing, able and prepared to spend money.

Hence the right hand of government not knowing what the left hand is doing or at least not talking to it in the first instance!