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In this latest pile of TRAP, the Trap Pack discuss
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Take part in the conversation! We want YOU to suggest topics and questions you’d like the Trap Pack to answer. The best way to do this is to ask them here.
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Music, welcome to the real advisor podcast, T, R, A, P, T, T, follow us and join in the conversation on Twitter at advisor podcast, where you can suggest ideas and themes you'd like the trap team to discuss. Also remember to like and subscribe to our YouTube channel and leave a six out of five star review on iTunes. Doing all this really, really helps us, which means we can do more to help you. Now, let's head over to the studio for the latest pile of trap.
Nick Lincoln:Yes, indeed, dear TRAPPIST, welcome back to what many people are calling episode 48 of the real advisor podcast. T up a Beat Trap. My name is lick nincom, and joining me as ever in the digital studio of doom are the three other Horsemen of the Apocalypse, Alan the storyteller, Smith and the ultra heart and Carl de la voce. Wieger. Now, before we plow on, just to let you know that Mr Mr Smith the storyteller has had some tech issues with his microphone, so he's going to do his very best for this episode, hopefully it comes through loud and clear in your ears at home listening via your transistor radios. Okay, Mr Hart, that any further ado. Let's get the show going with some more high energy. Review reads, please, my friend.
Andy Hart:Thank you very much. Chairman, okay, first review is entitled, brilliant, relevant content, five stars from Carly dunningham, always look forward to a new show coming out. Thanks guys for keeping me company on my commutes. Great content. And enjoyed the banter, and Thanks Carl for the Nordisk backpack recommendation. She says, One you up there. Next review is entitled, informative and funny five stars. When I first heard about trap, knowing Andy and Nick and having met Alan, I thought, Oh, my God, this will be a large dose of the ego has landed, and to a certain extent, the banter and sometimes arguments that spill over do lean in that direction, but it's humor, and that's the large part of the appeal that keeps me coming back the meat and potatoes and the other nuggets of wisdom and common sense are immensely valuable. Whether, whether you're a seasoned professional determined to keep learning, or a new trainee starting out in your journey, I learned something from every episode, and I recommend this podcast to every other advisor I meet. Keep up the great work. Gavin Johnson, back to you. Nicholas, great stuff.
Nick Lincoln:Thank you TRAPPIST for the reviews. They really do give us a shot in the arm. So please do keep on pumping out those six out of five star reviews on iTunes. Now let's give episode 48 a topical timestamp. And the day this episode comes out is the day of the general election, so we're not going to talk about that today. We'll probably have to talk about it in Episode 49 because we'll be dealing with the ramifications of it. But there is something else going on in the world, apparently, in that day Germany. Mr Hart,
Andy Hart:yeah, on a bit more of a cheery note. This is coming out on Thursday. England are playing on Saturday, 5pm against Switzerland. We got three more games to comfortably win, and then we're going to lift the trophy. It was excruciating the game the last 16, but we got through with a Hey Jude final minute goal followed by a cane header, all my bets were off. A draw in 90 minutes is never good for us gamblers. But yeah, that's it.
Carl Widger:It's been magnificent to see how the whole country has got behind the team,
Alan Smith:and especially the manager. They played. They played so well, though, to be fair, that's the most standing match. Been a against supporters, especially excruciating
Andy Hart:tournament.
Nick Lincoln:What's the phrase you've got to be in it to win it? Is that how it goes? Andy, I'm not really out with these things. Anyway,
Andy Hart:let's I'm not. No, we might be in the final by the next episode. Anyway, I need to get the dates, right? But, yeah, anyway, that's a good result. It was excruciating. But the videos online are very funny, seeing all the different England fans celebrating various different places, box Park and various other things. It's a yeah, all good. That's it,
Carl Widger:riots and stuff. Is it or no? Sorry. Go on.
Unknown:Just believe that final,
Nick Lincoln:moving on. So we we the trap pack assembled recently in southwest Ireland for a certain trap pack members. Big birthday, Carl, did you have a good time? We certainly did.
Carl Widger:I had the most wonderful time, and was very surprised that the trap pack arrived over. You got me 100% you got me. Smithy was always coming. And although I didn't tell you, I was very annoyed that the two of you weren't coming. He
Alan Smith:told me, privately, I have to get the whole thing going, those two of you came
Nick Lincoln:to. My kind of UK to my wedding. Not one of you so you can, buddy, shove that pain.
Andy Hart:Yeah, party at your house. Nick, I turned down the position of best man and someone else. There's no wedding.
Carl Widger:No, it was great and and obviously, TLP arrived along as well, and she added to the glamor of the occasion. But yeah, look, it was bright night. I was full of gratitude. I really was for a long period of time. Yeah, I had a festival of celebration. And yeah, and I'm going to be teetotal, I think, for a while to come. But, yeah, it was, it was absolutely brilliant. And thanks boys for making the effort.
Nick Lincoln:Yes. And in the, in the so called show notes, there's a link to a YouTube short showing the moment that myself and ultra arrived at the party. And it's very, it's just, it's just lovely. It's lovely.
Andy Hart:Your kids are amazing. And great host. It was, yeah, cracking that was brilliant, Irish
Alan Smith:hospitality. The it was, it lasted a week. Wasn't just one night, was it? Nick and I stayed and TLP, stayed a bit longer, and they had other commitments to get back to. But, yeah, really, wonderful, really. And we lucked out, or you lucked out with the weather as well, brilliant sunshine on the night and the next day. So, yeah,
Carl Widger:very good week. Yeah, yeah, yeah, amazing. Amazing. Anyway, onwards we go to the next
Nick Lincoln:next on the docket. We've got someone's put this in without any attribution. So I'm not gonna be honest who did that, because lead it off,
Andy Hart:who did it, but are we gonna discuss I
Alan Smith:put it? Yeah? Well, no, it was more the we are in this political transition, yeah. And inevitably you get media reports, yeah? Well, some are speculative. Some are, you know, highly expected things like the addition of VAT to school fees, private fees. There was a big report about potential removal of pension commencement lumps, some tax free cash, in other words, and as the usual hype and so advisors receive calls, emails, conversations from clients, saying, What should we do if this new government comes in, removes our tax free cash? You know, I'll be pretty pissed off. And if you don't, you know you're between a rock and a hard place, aren't you? Because if you do that and they don't remove it or multiple other things, the reason I raised it is because we are literally this week, the week this comes out. You know, 99% chances we speak on Monday that we've got a new government in place who are inevitably going to make a lot of changes which will affect the personal finance market. So my question to the to the group here is, how do you react when the client says, What shall we do about these potential changes. Nick,
Nick Lincoln:can I? Can I go first? I generally said, we do nothing. We just can't. We don't know what's going to happen. There was so we just do nothing. The labor have clarified so they're not going to remove the 25% tax free cash thing. They said that's, they're going to keep that if you whether you believe that or not, that's they have said that the only thing I think I'd be doing is with owners, owners of small businesses where they're paying 60k a year of their pensions as employer pension contributions. I might say you want to bring that forward if you can, because it won't hurt to get it in the pot any earlier. So why not do that? Because there's a chance they may bring in ni on employer pension contributions. God knows what else so. But now I don't you can't do it on what ifs you know you I just don't think that's a feasible way to go forward.
Carl Widger:I think what any good financial planner will be doing would be watching this space and basically having a look to see, is there a change of government, and then what kind of things, what kind of policies have? Has the new government said that they're going to introduce and be just be ahead of the curve here, be in touch with your clients, so that they're not sitting wondering. And just say, look, there is a change of government, if that is the case. And here are the policies, and we will be watching very closely as to what the affects for your personal finances might be, and we will be in touch in due course when we know that it's happening, but at least you're out there. You're being proactive, and you're basically telling your clients that you're gonna you're gonna be all over this, and that's your job for them.
Andy Hart:Yeah, it's very hard to plan around speculation, and the business risk is huge if you made a big decision with the client, but it depends on how integral potential change would affect a client. So general rule, similar to Nick not going to be playing around speculation, but if something was absolutely vital to a client, then obviously you need to discuss in a bit more detail, just to give you some the odds now of a labor majority are now 1.03 so if you put down 100 pounds, your profit is three. So it's, yeah, obviously anything, but it is almost guaranteed. Yeah, those odds are incredibly low. Yes, what's your what's your face? That's,
Nick Lincoln:that's amazing, yeah, but you put on, they go down 100 pounds, they are gonna win. They're gonna have a majority. So just, just like,
Andy Hart:generous, put down 100 pounds to win your three Yeah, to
Nick Lincoln:win whatever, 30 weeks. Yeah, absolutely,
Alan Smith:specifically, introduction of 20% VAT on private school fees. Would you recommend the client pre funds, even just one year or two years ahead of time to minimize or mitigate that additional 20% uplift on their costs? Just pay ahead.
Unknown:I I would do
Nick Lincoln:if you're really careful about it. You got to read the contract, you know. You got to make sure that if your kids expelled, what happens in that scenario? A lot of these schools actually are on the cusp of going under. Anyway, do you get your money back? If that happens, if you can get a sufficient discount, and
Unknown:you've discounted for a year ahead, yeah,
Nick Lincoln:given them one year, leaving that three or four, five years, I'd want some discounting it. Well, no money.
Alan Smith:I obviously, the longer, the longer the time out, the greatest risk is, like the classic kind of hedge bet. But one year, if he's, can I pay all by or, let's say, next two years, which seems within a time scale, you hope your child isn't going to get expelled and school won't go bust. That's a material saving again. It's a tricky one to advise on, because there are so many other variables. I
Andy Hart:think the key word there being advise Alan, I wouldn't advise on it. You can have a, you know, Frank, grown up conversation with a client. They're going to decide how to proceed. Obviously, we can sprinkle in the pros and cons and the things that we've come across with other advisors, but, or
Carl Widger:maybe, maybe you tell your clients to, you know, spread it out and pay monthly. Don't pay in a lump sum in advance, in case there's another change of government, because UK is had lots of changes over the last few years, lots of different people in charge. So there you go. There's just a counterpoint on that. Just
Alan Smith:another point on this. Anecdotally, I've heard we've possibly experienced a bit in my firm, but often you will get one of the reasons I'm against all this is because it is an attack on the core client base of us, which is affluent, aspirational, middle England, middle UK, middle Ireland. We generally as a real deal with billionaires as a clients for whom this, this is nothing. But so therefore, this is an immediate it has an immediate impact in terms of costs for average families. And what I'm hearing is school fees have been a lot of grandparents help out with school fees, the retired, the wealthy retirees, so there's more money coming huge potential pension pots now to help the parents, therefore the grandchildren and even parents as well. You know, dipping into pension funds or suspending or reducing pension contributions, for example, because there's only so far you can stretch the family budget so that does have an impact on advice businesses as well. Food for thought, yeah, when the
Andy Hart:facts change, will change our minds. That's all we all can wait for.
Nick Lincoln:On that note, I very carelessly segue in a new a new drop that I've crafted, we've crafted, rather as a Trap Team and trap pack or TRAPPIST, you might intuit that getting the trap pack to agree on anything is a labor of love. Normally, we had to be locked in a darkened room, and we come out two hours later, covered in ejaculate, vomit, blood, feces, and we might have agreed something or not. I took an unilateral decision, a unilateral decision, to get the first sponsor for our show, for our podcast show, and we've teamed up with a very famous discretionary fund management firm, posh DFM, and this is their first infomercial from posh DFM.
Unknown:Hello, I'm Quinton posh boy, and I pet another laughing girl, Bloomsbury. Yeah, it's quite Now listen here. Chance you need to give posh DFM all of your money. What that way it'll work as hard as possible for us and for you. Once a year, you'll be invited to a lunch at our Mayfair offices where you'll be talked at but one of our macro barfins, the lunch will never actually occur for reasons that are continually beyond our control. If we have your money, part, DFM will use it to make sure that you can put the children through private education and university. And with our fees, you will do it'll be our children. And so it's a win, win, as they say. Now, petronara, Oh girl, how about we slink off for a spot of nosh and knobby Quinton, how lovely. Let me just rebalance this portfolio. 5% initial fee on all fun suite click the little mousey thing. Oh,
Nick Lincoln:eight and a half 1000 pounds. Go for lunch and some fears.
Unknown:Op, I do adore your laugh. You so resemble a horse. Oh, Q, you naughty boy. Posh, DFM, your money. Our future, there we
Nick Lincoln:go. Thank you to posh DFM we look forward to hearing from regular content from you the BDMS Quinton, posh boy and Petra and a laughing girl Bloomsbury. So have we done school fees? Yep. Okay. Next, watch 12% Oh, my God, 12% this sounds another horror story.
Carl Widger:Jeepers. I was thinking,
Unknown:Where is this going?
Carl Widger:Yeah, wow, wow. Yeah, this, clearly I was unaware of that little interlude, yeah, this was an article in city wire, right? So I found it interesting, because this is a UK firm that were basically putting their clients into high risk bonds that defaulted. They were getting between 10 and 12% commish on said bonds, and they were also offering introducers up to between seven and 9% and it really rang true, because I was like, Wow, this happens in the UK as well. Because I've mentioned that solar 21 thing that happened in Ireland, but the difference in the UK is the fsfca came in and have banned the three directors from operating a firm again, and have find them, I would say, not nearly as handsomely as they should have, bearing in mind the amount of money that was involved. But all of the stuff I've been going on about conflicts of interest, introducers, fees, you know, other firms set up to kind of take some of the the introductory money, and all of that kind of stuff. Have a read of the article. It just goes to show this stuff still happens. It is our duty to make sure we save our clients from this kind of stuff happening. So I know I'm like a broken down record in this, but it is really, it is our duty. It is our duty. Andy,
Andy Hart:yeah, I totally agree. The thing that's petrifying about the article is they've only been banned from holding senior management roles, as in, they can still hang around in the industry and find loopholes to still advise clients about their money. Why don't they just ban them for life? It's just quite straightforward, I think. Anyway. So yeah, it's a yeah, very scary.
Carl Widger:Yeah, fair point, and maybe they'll become those introducers. But you know this, yeah, 10, 12% and paying introducers seven to 9% it is exactly what has been happening, what has previously happened here, but I just don't think that we come down on these people hard enough and fair point. Andy, yeah, maybe, maybe the FCA hasn't done enough there, but it
Andy Hart:said to just drive behavior. Yeah, yeah, yeah, yeah. 100%
Nick Lincoln:polished. The good news about that kind of story is that 30 years ago, that was commonplace, and now it stands out because it's so it sucks. It takes you back to 1994 kind of thing in a blink of an eye. Okay, there
Alan Smith:are, there are criminals everywhere, in every walk of life. There are sort of criminal solicitors, lawyers, accountants, financial advisors. They just, they exist in society. It's the human condition. And and it's, yeah, I think it's a good point, Nick, it's, it's that that's, that's why it's more newsworthy now, because it's quite unusual. But it's just, I mean, there, there are people there that will have lost money. I'm, I'm sure, whether they got bailed out by the FSCS, I don't know.
Carl Widger:But no, they have. I think that these high response have defaulted like if you I would urge everyone to actually read this article, because you will be flabbergasted by pot went on and the extent of it and all that kind of stuff. It's mad stuff. Mad, Mad, Mad. Okay, on
Nick Lincoln:a on a more positive note, moving on to the next thing on the agenda. So business banking for ifas, I think Ultra on the show has referenced he's had issues with his bank, and just the percent, I will mention the bank because the Santander, and just make it very, very difficult, endlessly requesting information about your business, where your money comes from, this kind of stuff. And on the IFA Forum, which I might have mentioned, tiny.cc/ifa forum now 546, members, there was a quite a really good chain about this, who to use for business banking. So IFA is out there looking if you've got issues with your bank, it would seem that Revolut NatWest, who I bank with, and Lloyds, are very good. There's also an offshoot of NatWest under NatWest umbrella, a new thing called Metal M, E, double T, L, E, which is just really clear. And lean limited companies and sole traders, only only two directors, no financing, no overdrafts. Everything's done by the app, and they want that kind of business. So if you're struggling with Santander, I think the gist with Santander seems to be that they offered free business banking for life eons ago, and now some some bean counter at Santander resents this and is making it really, really horrible.
Andy Hart:I don't think it's the free banking thing for life. Nick, I have various accounts of them, and I don't have any free banking with them, and they've made my life an absolute nightmare. This year. I know the source of wealth questionnaires that they're sending me, and it's just endless. And they're going through all all through your accounts, website, personal bank, net worth, state, they want absolutely everything for me and the threatening letters. You know, if you don't do it, by this time, we're going to basically cut your bank you know, going to stop your bank account. It's absolutely horrendous. The KYC has gone absolutely insane at Santander, obviously, because they were up to mischief years ago by doing who knows what. Now all the all the good people are getting absolutely hammered. I spoke to the guy that raised on the IFA forum, and again, we had a bit of a discussion around it. I think all the banks are going to be stepping up the KYC. Know your customer, and my accountant said the bane of his life now his is his clients requesting help filling in all of these additional accounted forms that we obviously pay the accountant for. So it's time out of his, her day, my day, paying for it. Santander a freaking nightmare. But the challenge I have is, do I shift off to Revolut now and then? Is Revolut gonna ask for the same bloody things? You know, six months in? So I've got two banks like breathing down my neck. I might as well stick with Santander once I've given them all the guff that they want. I mean, it's insane amount of detail they're going through. They went through every single page on my website. They rang me up and asked me questions about pages my website. It's insane. You said you have off you meet clients in this location, like, what's the link to there? And it's just like,
Nick Lincoln:Jesus, you love that. I would love it. I've got to account the credits I banked with NatWest since 1987 and with my business since 2008 and they are just brilliant. I've never, they never get in, but they never no issues, nothing whatsoever. Their online banking is very solid. So and the startup banks tied Metro and Starling, um, these sort of disruptor brands. They're very hot and cold. One minute they want iPhone business. The next they don't. At the moment, they're all quite cold. I think so. Um, revolute, NatWest, slash metal and Lloyds if you're looking to switch banks, seems to be the gist. Storyteller belong
Alan Smith:be long. I just, I'm just reading this. This is something that I saw recently. We've all seen dozens and dozens of so called Robo advice platforms come to market. Most haven't succeeded to the degree that they probably wish to. I saw something recently that I thought at least, at least there was some innovation with this. This the companies, is B, B, E, dash, long, lo N, g.co, is the website. So it is a place that you can go online and invest money. Got the usual fund options in terms of low cost, simple global equities, S, p5, 100, couple of other funds there, started by a couple of female FinTech founders, which in itself is quite unusual. What is interesting about this, and differs to the sort of me too, the dozens of others that exist is, first of all, and the clue is in the name be long, so it's sort of a word play both. So you'll be long to this community, but be long, go long with you. We're always talking about investing in equities is a long game. Invest for years, invest for decades, invest for multiple decades. If you're in that game of investing for long term, this might be of interest, because what they will do is they will lend you up to one times the value of your investments. You put 10 grand into it, they would lend you 10 grand so you're getting the growth on 20,000 pounds like that. All right, you've got a debt, to be sure, right now, it might be a little you know, if you assume that equities go up at whatever you want to assume 789, 10% a year, and that you are funding debt at, currently, I think it's 5% on their setup and hopefully, but that was going to go lower. I don't know if you get to a situation where you're, you know, you're investing for 20 years plus 30 years, and you're able to double the value of the money invested. Now, of course, of course, this is not advice, do your own research, etc, etc. But I thought, for some young people, as far as I'm aware, they don't apply, you know, margin calls or anything, because you've got the money with them, you've effectively got a 50% leveraged should you take the maximum loan? It is one way of getting a higher return. If you're investing for 30 years, take a little bit of a bump to the money that's invested, pay down some interest. Yeah, it perhaps what's the point of exploration. But I thought, I just thought it was, it was innovative. It was something quite new,
Carl Widger:madness, leveraging, leveraging. Equity investment absolute and other madness.
Alan Smith:You're investing for 3040, years. That's madness, because
Carl Widger:nobody does invest for 3040, years without any changes, because life has you mentioned you? No no. Hold on, hold on you. You mentioned young people, right? So it's gonna have to be young people if you're doing 3040, years. There's no chance a 20 year old is going to just seamlessly do this and not look at it for 30 or 40 years and leveraging any equity kind of investment. I've never seen it work out well. And it sounds like, as you mentioned, margin calls. It sounds like CFDs. I think it used to happen large scale here in the financial crisis, where, you know, the banks were giving out money for this, that and the other. They also gave money out for people to, you know, leverage their their equity investments. And a lot of the time it was into individual stocks and all that kind of stuff. And it went absolutely wiped people out. This
Alan Smith:is so first of all, you can't just, if you take, if you've got a loan, you can't take your money out. You can't just get access to and leave, you leave your loan going. You know, you've got a contract with this organization. It is like S p5, 100 is and funds like that.
Andy Hart:For everyone, it's turned around. The maximum you can invest. Alan, no, you can be okay. More than that,
Unknown:I think 1000
Andy Hart:that they're backed by octopus as well. Be interesting to see how this business model plays out. I mean, in your investing playpen, you should, uh, stick a few quid, and that's now I get. How you get on? Well,
Carl Widger:what happens if interest rates rise and, you know, there's a three year period of of minus returns in the stock market.
Alan Smith:But hang on, you're talking that. You're talking your opposite book of what you talk every other thing this is be belong you as long as you can continue to fund your debt, why do you care? What? Why do you leverage on buying a house? What if interest rates go up when you buy a house, you still sell the house? Do you
Carl Widger:at loss? No, but, but you need somewhere to live, correct? So that's why you leverage your house. But I cannot see how. So there's so many other things that can happen. If interest rates rise, yep, there's a recession, stock markets fall, or whatever, right? Then you might have a problem servicing your debt. I Sorry, you just said it's not advice and fair play for saying that right for me, this is advice. Don't do it. It's madness, absolute madness. Sorry, no,
Andy Hart:you heard it
Nick Lincoln:nice to have some
Alan Smith:belong, not to open in Limerick anytime soon,
Carl Widger:anywhere in Ireland, because I'd be very, I'd be very vociferous about it. This sounds like a crazy
Alan Smith:at least it was some innovation in a very time. Yeah, right, I'll
Andy Hart:give you that. Yeah, they call it a boost loan, don't they? Alan. It's quite interesting. Yeah, very carefully managed. It's all
Alan Smith:credit control, all the rest of it. Of course, things can go wrong, but things can go wrong so many other things in life. But there we go.
Nick Lincoln:What's next? Well, I bought my house in 2018 I borrowed some extra money from the building, started to invest. But you know that I kind of think I know what I kind of think I know I'm doing. And also I had a fixed rate, so I knew the mortgage rate was locked down for the period of investment as well. So, and that's that's worked out.
Andy Hart:Very good movie. Yours, Nick has been very fortunate.
Nick Lincoln:I'm very and I'm very grateful for the fact that I seem to know what I'm doing in this one instance. Okay, watch voice Vanguard 365, practice management. You tell us how good it is, and then storyteller can tell you how shit it is. And then
Carl Widger:swaddled, I would mentioned this before. So, yeah, no, we have. We have mentioned it before. But I this is kind of following on from the webinar that they did, which I thought was really, really good, and I mentioned this the last time, and they did fair play their marketing works day, because I registered for that, they sent me a kind of an email reminder have a look at the vanguard 365, platform. It's really, really good. And I just thought, you know, we get so many inquiries from younger financial planners starting their journey. And I would be trying. I would be lapping this stuff up. I really would. I'd be going through, they kind of set out modules, and you gotta, there's quizzes at the end of the modules, and all this kind of stuff. I think it's really, really, really top class stuff and younger planners considering, you know, starting their journey definitely, you know, soak this stuff in for sure.
Nick Lincoln:My my business year starts today, which means my CPD clock has reset today, so I've got to get my 35 hours over the next 12 months, and I will be leaning on the Vanguard 365 thing quite heavily, I think, in helping me get there for sure. Okie dokie Ultra, oh,
Andy Hart:this is news that LNG, one of the biggest asset managers in the UK, are going to be diverting. Workplace Pension monies into private equity and illiquid type investments. Yes, it's called the LNG private markets access fund. The LNG private markets access fund, they want to attract 500 million by the end of the year, and one to 2 billion by the end of next year, they're going to be having a slant towards UK companies. They or UK, yep, companies in various flavors, and they want to allocate about 30 to 35% of the funds value to UK companies. This is sort of the start of a somewhat trend moving more towards British companies, and also this private equity sort of play, which I'm not a fan of. I don't believe it's has any place in traditional, typical portfolios. You know, global equity funds do all the returns you want, and you understand them, and they're clean, they're liquid, etc, they're cheap. Yeah, this is a, not a good place for me, thinking clients should be parking their money. But any thoughts on this,
Nick Lincoln:I second, I second your thought, maybe LNG are trying to be in front of the curve here. You know that, because, as you say, that
Andy Hart:the big come in
Alan Smith:this has been, it seems to me that both government and the private equity industry has suddenly woken up to the fact that there's trillions of pounds in retail pension funds, and they've conjured up a story to say, Oh, we could have some of that. That's quite Yeah, that's quite attractive to us. I've looked at this quite a lot in the past, and I've yet to see any evidence that on a risk adjusted basis. Because, if you understand the lift a little, private equity funds use a lot of leverage, lots of kind of creative tactics to generate their returns, so that you got to build that into your your risk adjustment, if you like, versus buying long only public market funds and the costly there's all these brains, you know, brain surgeons running around, sort of with their PhDs in economics and everything else, doing all this kind of financial manipulation. They don't come cheap. So I'm trying to think, for you know that your average punter in a UK workplace pension scheme, with the additional cost, additional risk, additional leverage, what are they hoping to achieve? It just it's, yeah, I'll come on to that. I've got a I've got a point related to this will come, come on in a moment or two. But it's complexity. For the sake of complexity, I'm not sure it's going to meet the desired end goal. The desired end goal is to get more money into the UK economy, make it an investable economy, please.
Andy Hart:Again, there's a there's some further, there's some further information. In the article, it said the fund would unlock private market access. We all know that that's a sort of honey trap for the investing illiterate for 5.2 million members of the of modern defined contribution schemes, and would help to meet its Mansion House, compact pledge.
Unknown:That's the Mansion House.
Andy Hart:Yeah. Is it relation to 5% of assets in private equity? I
Alan Smith:mean, to do that, no member of a workplace pension has ever asked for this. That's the point, and it's their money.
Nick Lincoln:Oh, they're all asking for Alan, I know Bob, Bob down the
Unknown:scheme. Nick, if only I could get access to private market,
Andy Hart:UK, private, if I could get 5% of my portfolio in private equity, I could retire three years earlier. Said, no employee.
Alan Smith:It's I think we should keep our eye on this, because it seems like, you know, large and politicians are eyeing up this as a tasty opportunity for them, and we're here to put them this.
Andy Hart:This seems to be ticking two boxes, the diversion or transfer of money to private equity and more British focused assets. So, yeah, it's very relevant at the moment. I'm not saying it's right or wrong. I'm just saying it's
Unknown:very relevant. It's not, that's not how capitalism
Nick Lincoln:works. It's not how you know, let's see. Well, okay, visible hand. Let's see how the let's see if this, if this develops, I'm sure it will do okay. Smithy trap, Tough Mudder team,
Alan Smith:on the theme of Vanguard, mentioned by delawachi A moment ago, Vanguard run a thing called a Tough Mudder. Do you know what a tough mudder is? Nicholas, yes, yes, yeah,
Andy Hart:I've done one. Yes. Okay, absolutely killer. It was worse than the marathon for me,
Alan Smith:right? Vanguard run one, the apparently, hundreds and hundreds of companies enter it, lots of advisors, you know, financial services. One, it's on the 20th of September, and I had an idea that we'd enter a Trap Team to this potential services Tough Mudder. So first of all, I bring it. You're publicly enhancing it. We're kicking it around. We're building in public or not, as the case may be, Vanguard have asked us if we'd like to enter a team, and I'm thinking we. Probably should. So first of all, I put a call out to any TRAPPIST, anyone who's watching or listening to this, if you're up for this, if you're into this kind of madness, it's only 5k so it's a quick it's a quick one, but through barbed wire and mud and all sorts of shit. But
Andy Hart:advice, if you
Alan Smith:it's birthday. If you're interested in representing trap at the vanguard Tough Mudder and going for a few beers afterwards, then get in touch with Nick, because Nick's organizing the whole thing. Get Stuff Smithy. Is there
Nick Lincoln:limits to how big the team can be? But can be, because we, you know,
Unknown:cap it off if you get 100 but
Andy Hart:bloody wish. Nick, what do you mean? I mean inundated, and they're gonna be of like, 220s
Nick Lincoln:at 15? Is it 10? We
Alan Smith:get the first five applicants? Yeah. Nick, for doing it.
Nick Lincoln:I do it. I would like to do it, buddy, go to rack and ruin. But I'm in, I'm in tip top shape, so I'm
Unknown:up. Yeah, we'll do it.
Andy Hart:I'll be, I'll be preparing for it on the old chin up bar,
Carl Widger:the non playing Captain.
Alan Smith:All right, you'll be, you'll be there for it. So we might do it. So watch this space, because we'd like to enter a team in September and as part of our community work. Are we
Nick Lincoln:gonna make decision? Are the three other four of us going to do it all through the three of the four of us going to do
Carl Widger:this? I may have committed. I may have committed last week. You did. I may have, I may have, I'm
Nick Lincoln:gonna set it up on the Vanguard site today or tomorrow, and
Alan Smith:if anyone else wants to join us, I'd be part of the team. Please. Do
Carl Widger:we discuss all these things offline before
Alan Smith:last week? When you I think, I think posh DFM are entering a team as well. So and Quinton, yeah, they might
Nick Lincoln:bring their boss down, Tarquin. TARQUIN Birkin, who's the brother Rowley. He's the actual MD of posh DFM, but he's family in the pub, and after lunchtime, he's not good for anything. Okay, let's move the next unattributed item on the docket.
Alan Smith:Smithy, yeah, in response to these are all organizations that we love and support and respect, but dimensional fund advisors. It's funny these organizations have you know, they obviously, in many ways, they compete with each other in our in our business. I think they complement each other quite well. And it's funny that Vanguard's resources are called 335365, and dimensionals, I couldn't watch very random dimensionals are called dimensional 360 so dimensional have got this again, all available on the website and downloadable DFA 360 business strategy. So tons of things about practice management, how to run a successful probably aimed at the more mature business, as opposed to someone who's just entering into the business in the first place. But loads of practice management stuff you know, how to scale, how to grow, how to attract and retain talent. They've got a podcast on this very subject, the DFA practice management, and they do a lot of work on the and we might mention this before, but client communications, so you can get your nice, downloadable PDFs, documents, graphs, you know, PowerPoint presentations, things that you can use and you can some of them are branded dimensional, and some you can put your own branding on it yourself and free to use with clients. For client communication. I was looking at the other day. I thought, wow, this is a really, really useful resource point of the story. There's we have no shortage of helpful resources to help us build businesses, communicate with clients, do all the right things, and those both of us organizations, shout out to both of them. They do some excellent work. So do check out dimensional 360 business strategy material. Andrew,
Andy Hart:if you are a younger advisor and sort of quite into the investment side of this business, then it's definitely worth checking out the DFA dimensional fund advisors returns book. It used to be printed, published every single year around about, sort of March, April, I think it used to come out. Now it's a PDF. Do try and get your hands on that. It's history of investing. It's brilliant. It's the best book you're going to find on the data around investing. And if you're into that, then great. You might have a couple of clients that are but if not, check it out. Back to you. Nick,
Nick Lincoln:okay. Carl, voice, another voice, Ireland, a real voice, yes,
Carl Widger:yeah. I'm not really sure what this has got to do with this podcast. So Taylor Swift has hit Ireland over the last few days and has literally taken Ireland by storm. So. Packed out the Aviva Stadium, I think three nights in a row, there was literally people queuing up to be outside the stadium to listen to her music right to universal applause. Everybody has said, It has been an amazing show, and I just what I thought was like. So here's somebody who lots of people who say, Oh, I don't like the music or whatever, but here's someone with a whole lot of talent, but clearly knows how to market really well, and clearly, clearly, clearly works really, really hard, and has continues to do the work, knows our audience so well. And I just thought, you know what? That's what we're all trying to build. We're all trying to build a respected brand, but it doesn't come easily, and it's not something that, you know, we're asked so many times about, you know, is there, are there? Are there magic bullets here? Are there shortcuts you can take to to, you know, build in financial planning practices? There aren't. So look at the the absolute best case scenario is that Taylor Swift has made a billion out of her music alone, but she clearly is a brilliant marketeer. Has a, clearly a massive team of marketeers around her, but, but behind everything else is a massive, massive work ethic, and I think all the young folks could learn lots from that. And I'd also like to shout out to my daughter Emma, who went to see her last night and said it was literally the best night of her life. So there you go. Taylor Swift,
Andy Hart:a class act,
Alan Smith:agreed. Yeah, that tour, apparently is going to gross $3.5 billion you incredible numbers, and they're actually there was the FT did an article on it last week. From a economic viewpoint, you see little bumps in the local economies. In Dublin, yeah, London last weekend, Paris, various other places. Imagine all the people who are booking hotels, traveling tales accommodation, acting out the whole, the whole thing, the whole, the whole industry by her,
Carl Widger:apparently, Alan, she brought more to Dublin last weekend, just gone than St Patrick's Day festival does to Ireland. So that'll do she like to give you Wow. Like, how big is this, right? So she books out the Aviva Stadium. And for her merchandise, they book out the three arena, right, which holds 30,000 people. So that's where they so all the merchants go to had to queue up in the three arena, which holds 30, 35,000 people, I think, buy our merch there, and then you go to the Aviva Stadium. It's just absolutely incredible stuff.
Alan Smith:Yeah, the power of building a community that'll be us, that'll be trapped live in 2029
Andy Hart:or not 50, go
Carl Widger:get your beer. Go get your beer in the three arena, and then join us.
Nick Lincoln:Space will be a pic that'll be a wonky picnic table
Unknown:with a mug on it, one mug on it with the
Nick Lincoln:back with a broken hand. Okay, right. Moving on, moving perhaps back to financial services in a more direct way, but good point well made. Watch Debbie Condon's letter of authority guide. We've talked about it before and how I've talked about it really, really good guide. It was a PDF, so, um, if you haven't heard about this, it tells you every provider where to send the letters of authority to by email, whether they accept DocuSign or not. What you need to put in the letter of authority. Really good. Just give that away for free. Debbie Condon, who, of course, works attuitive support services, where the guide's going online now, so it's going to be an online totally up to date all the time guide to letters of authority, and she's charging just four pounds a month plus fat. So it's a bit of a no brainer. In between you and me, I think Debbie's underpricing it. I also think Debbie listened to this podcast, so it's no longer between you and me. There we go. So check out those. I'll put a link to that in the so called show notes.
Alan Smith:That's good. Wondering if do I mentioned a trap live, and I keep hearing from my team that is working really well, this outfit called pensions lab. Pension lab, I think Nicole, all to do with this LOA. The LOA kind of mystery, the thing that bogs the entire sector down, where they have automated this. I'm not sure how that interacts, or whether that, whether they have their own version of what Davey does, I don't know, but Ella ways used to be the bane of our life, and now they're relatively straightforward. So that's all good
Nick Lincoln:sign again, DocuSign has changed so much, yeah, made it so much less less painful. Okay, that's right.
Alan Smith:Linking the the that wasn't my point. Link in the we said a moments ago about, you know, private equity getting an institutional there was an office, there's a company called, are they called? Can't remember, but this
Nick Lincoln:is, but there are calm this. This is compelling, listening. This really is ifa.com but
Alan Smith:I was trying to think what it stands for, because it's not IFA the way that we know. So US financial advisor, but they are so they they're a huge Ria, I think you call it in the US, and they produce a volume of content. They've got blogs, articles, index fund, advisors. Index Fund, that's it. Not so ifa.com good domain name, and I think Robin Powell works with them, but they produce a really lot of data and information which is very interesting and very compelling, the latest one that came out. And again, recommend anyone who's interested in reading this stuff and applying it to their own sort of clients situation, go to ifa.com Subscribe for their blog, but they did an analysis. And, you know, we all deal with, like retail clients, families, all that sort of stuff. It's quite interesting looking at the institutional side, when you've got public sector things that public sector pension schemes, the that we've kind of alluded to before. And to give you a couple of examples of the amount of money that has got the Canadian pension fund, for example, which is huge, used to be about 200 people. It's now about two and a half 1000 people. And the net effect of that is that actually underperformed the market to the tune of about $100 billion
Nick Lincoln:I talked about last last episode. That was the point. That was the different article. But that was the thing I was talking I was an alien pension scheme that they went from index to back to back to active. They made the switch the switch the other way, which is hardly ever done, right? You did talk about, I
Alan Smith:think this is expanded on a bit more, because they also talk about, they talk about the number of people that get that are in the industry, and there's now 1000s, 1000s of them, net effect, you're worse off than but did you mention the Nevada pension fund, which was the alternative? No, because this is the funniest thing of all. So this all these other huge on with literally 1000s and 1000s of people all doing, you know, interesting things to try to get a good return for their you know, millions of pension investors. The Nevada State Pension Fund has got how many staff one? It's got one guy who just eyes index funds. And it's ironic, and he outperforms a lot of them. You just said, you know, it's works done
Andy Hart:every day. People worse returns. Yeah, yeah, people worse.
Alan Smith:It's an incredible link to the asker. It's a really good article which breaks down all this stuff, all the various the money wasted, and how to do it more simply. So take a leaf out of the Nevada pension funds book. That's it.
Nick Lincoln:Very good, very good, right? Crikey, 48 minutes in, and we've only just finished off the topical tidbit. So let's crack on to the meat and potatoes of the show. And this is an emotive subject, certainly motive for the four of us, because I think we're slightly out in a limb here, compared to a lot of people in this thing of ours risk profiling. Some of us in this group think it's the Well, I'll say. I certainly do think it is the biggest scandal of the last 30 years or so, the tick box mentality, the amount of money that has just been squandered or lost not picked up by retail investors because they were put into a certain type of portfolio because the ticks and boxes they didn't understand and were too embarrassed to say to their advisor, I don't really know what the hell this is. I've just gone for these. You know. Anyway, I'm not going to lead off on this. I could easily do it, as you can see. Storyteller, you're going to lead off on this. I do believe muted,
Andy Hart:it was all going so well. Jesus, wet,
Alan Smith:go. I'm in a different location. I'm struggling now.
Nick Lincoln:You're in a different world, yeah,
Andy Hart:world of pain. Come
Carl Widger:on, you're in Outer Mongolia. So
Alan Smith:this came across, sort of kick into my attention again. This is something that we all speak about quite a lot, but a gentleman by the name of Mark Fenton, or creepy contacted me via the by x Twitter online a couple of weeks ago, and he just sort of tagged me into a paper now, Mr Fenton agree. V is a professor of behavioral finance, and he had organizational finance, but basically, he's a sort of learned professor at a university, and he and his colleagues have written a paper. It's been out for a while, but it's first time I've seen it. It's the largest research study of its type ever done in the UK. There's lots of these things that come out in the US as we know. This is a UK based one, and they have obviously researched and analyzed 1000s of people and have identified the reasons as to why they've, you know, the various investment returns that they had received. And of course, what this paper does is confirm what we've all been saying for years is that short term volatility is not risk, and your behavior will generate your long term success in the investment markets. You know, pretty basic stuff, but it's like, whoa. Here's some. He said he's an academic who's actually saying this with proper, rigorous evidence and research research to support it. I think I shared it, I put on LinkedIn, and then Nick made a comment on it as. Well, and got a lot of support from the advisor community. And the more we think about it again, just to echo what Nick's just said, the more you think you think about the if you think about some of the scandals that have happened in the past, and even the thing that Carl was talking about, there's only a handful of people have actually been you know, and it's, it's terrible that they have, but it's not the entire nation. This is something which impacts every single retail investor, millions of people, millions of people actually around the world, but we focus on the UK and Ireland for the time. Yeah, millions of just normal people who and the people who advise them as well. And we include ourselves, because there's this is probably, you know, we're all part of this story, but we believe it? Well, it's very Yeah, it's clear that we've all been hoodwinked. Now some of us have understood this sooner than others. Some people are still embracing and, you know, drinking the Kool Aid, and some people are still asking their clients to fill out a risk profiling questionnaire that asks them how much pain they can live with before they start screaming and giving them that amount of pain, whether they like it or not, or need it or not, and it's ticking, and it's ticking all the compliance boxes, and you never get sort of criticized for it from a regulator or a compliance consultant. And those billions of pounds being made by the aforementioned regulators, compliance consultants, risk people, etc, and net, net, net, millions of families are going to be worse off financially, and therefore, in every other aspect of their life than they would have been had they understood it, and had their advisors understood this a bit better, and it is. I mean, in our private group, we all get very annoyed and angry about it, because it really is, is lethal, and it's caused so much damage to so many people. I know you've got a lot to say on this ultra what's your take? Yeah, I
Andy Hart:got a couple of points, and then obviously a few people can chip in. Yeah, it is a regulatory requirement. We need to get it done with our clients. But there's sort of Good, the Bad and the Ugly within it. My first question is risk profiling tools or risk surveys? What problem are they trying to fix? That's my first question someone that sort of creates it. Yeah, I believe there's four flavors of risk, loss of capital, very important inflation, very important volatility, which is what everyone focuses on. And then low returns. Low returns is the risk that nobody talks about, but this, this is the real risk when you're in the wrong portfolio, that you're going to get low returns over the years. So once you if you're in the wrong portfolio at, let's say, 35 and you're going to retire at 65 you've lost you've left a lot of money on the table. And the three sort of areas that they want to, want us to assess with our clients, the first area is attitude to risk. I don't really think it is attitude to risk. It's more like attitude to volatility, because again, the word risk needs to be unpacked. Next up, they say capacity for loss. Global equities don't lose money, so the guns are facing in the wrong direction, like, what loss are you talking about? You know, I've been looking after clients money for 16 years. Not one of my clients has ever lost any money. The portfolios they've been in have always produced returns.
Unknown:Andy, the old regret of Darren, Andy, he knows about everything, and he can't be told anything. His name is Andrew Hart, Andrew,
Andy Hart:again, the peddlers of risk surveys and compliance can't get the head around this capacity for loss. What loss are you talking about? In 16 years, none of my clients have ever had a loss. The next point they bring up is knowledge and experience. If we pander to people, they're never going to learn. You know, these three points are intellectually bankrupt. We've got to try and make clients better, investors and and coming out with three categories of cautious, balanced and adventurous. You know what maniac came up with? These horrendous names? I believe risk profilers are also misconception mirrors, what's the point in working with the professional filling in the questionnaire and ending up in a bad portfolio that you naturally would have ended up in when we're involved? So yeah, it's asset, misalig asset, misallocation on an astronomical scale, just a point in time. Remember March 2022, in the market. The market temporarily declined by minus 35% apparently, everybody's capacity for loss was triggered. What happened? Absolutely nothing. So the people that were banging on about capacity for loss being triggered, it got triggered. And what happened that they're taking no historical accountability? Oh, we got it wrong. You know, we got it wrong. You know, there's, there's never any mention of people the correct thing to do during market declines is not sell so that so they don't, you know, hammer home on the behavioral side of it. You know, why work with the professional if you're gonna end up in an amateurs portfolio? So, yeah, it's, I say it time and time again. The best portfolio is the one that the client will stick with that has the highest allocation to global equity. And over time, through their behavior, being patient and calm, I believe we can nudge them up the equity, the global equity scale, creating wealth. I've got no problem with creating wealth. It's almost like we're financial advisors, but we intentionally don't want to create great returns for our clients. You know, more money, more opportunity, more freedom. So a few points there. I believe most risk profilers are not very good. I've created my own one. I call it a personal investment profile. Clients fill it in. I have conversations with clients, and I also share my informed risk video with them. So that's my starter. Over to Carl Nick, you move I go,
Carl Widger:Yeah, I'm not anymore. They're, they're great points. And like, you can tell this, this gets Andy riled up, and he has, I think you've made some really, really fantastic points there. I'm just a little bit more commercial about it, because I have to be okay. So just let me try and explain there is an element of you have to be very mindful of central bank regulations here, compliance and yes, you do have to tick the boxes. So I'm not going to ever say that they're totally irrelevant or that we don't do them, because absolutely we do them for every single client. What I would say is it's like the answer to every question. It's if you do the financial plan properly, then that allows you to engage in constructive conversations with the clients. Because I think the financial plan, if you're, you know, talking to a 50 year old, and you're talking 3040, 50 year time horizons, and you can identify, well, what's the short term money requirement, what's the kind of zero to three years? What's the medium term, what's the long term, whatever, I think that allows, you know even the most. So our risk profile is zero to seven, right? I know this is all. You know. We wouldn't agree with this. But you know, if you come out at a three or a four, well, look, let's, let's actually dive in and talk about this a little bit more. So you identify what money is needed short term, and then what's needed after that. And then you talk about, well, let's look at the historical returns from whether it's 100% equity portfolio or it's an 8020 or a 6040 but let's look at those returns. And if you focus in, I think, on the lowest one year return and dimensional fairness, do great stuff on this, right? So you can say, Okay, well, if you were in an 8020 portfolio, the low so on your return is picking a figure of the top man, 38% in 2008 nine. But here's what the long term returns are. I think that's how you can bring the client along on the journey and do that education piece. Andy and I totally agree that, you know, why would you allow someone go into, as we would say, a sub optimal portfolio when they've got you, but your job is to bring them on the journey. And I would be a little bit less, maybe dogmatic, is the word about, you know, how we go about this? And obviously I have to be mindful of does there's a good few people have met as advising clients. So we have to kind of formulate our strategies and our steps of the stairs and how we go about doing this, yeah, of course. So so, um, so look, I agree with everything that you said, but I might just do it a little bit um, I might just be a little bit less kind of dogmatic, yeah, sorry for using that word again about it, but I agree,
Andy Hart:sure we have to work within, you know, the regulatory environment that we're all working in. I as a guesstimate. I think at least I probably I'd guesstimate that 90% of clients end up in a band between 60 and 80% global equities. My God, we have over complicated to get to that. That answer. I believe it. But yeah, I believe 90% of advised clients end up between 6070, and 80% global equities in that sort of slice. We've got them to fill in, you know, five different questionnaires built, tested out stochastic modeling system. It's insane just to get to a portfolio number,
Carl Widger:I'd say it's much, much less. Sorry for interrupting Andy, I'd say it's much, much less here. And I think one of the biggest in terms of the less inequities, and I think one of the one, yeah, I would I'm sorry. Now that's, I'm assuming that right? And I think one of the problems we have here is that people who come out of two or three out of seven, right? And we don't then have the conversations, they are sold these guaranteed tracker bonds. Now that's the crime, right? Okay, so sorry for interrupting.
Andy Hart:I think in the UK, I think there'd be there thereabouts, even like a balanced portfolio has between sort of 50 and. 75% in global equities. But yeah, anyone who fills them in is just going to end up with a whole chunk of fixed income, which may or may not be right. But again, we should try and make people better investors, rather than give them low returns long term over tunic
Nick Lincoln:some really, really good points and what is a surprisingly emotive subject, because it sounds very dry on on paper, it is. So it's so endemic this problem, I just it's difficult to know where to start. Really. Anna's point is very well made about you give these people a form, and then you design a portfolio that gives them just the amount of pain they think they can take. Well, they what kind of profession would ever do that to people? I can see it perhaps. If you like a robo advisor, or like an old school industrial kind of IFA just churning out products and you want something to cover your bad but if you've got an advisory relationship with people you like, as Andy has said very strongly, you don't pander to them. This condescending view these people are cretins and need if you put in a portfolio that somehow matches up to these questions they didn't even understand. No, we're here to educate people and to guide them through it and to talk them through I acquired a client last year, husband and wife. Husband, very talked about something 400 I'll go through again. Really bright guy, super sharp guy, delegator, high earner, time scarce. Perfect client. Perfect client, him and him, and him and his wife, perfect clients. He worked for a large communications company in the UK that sell mobile phones. He was in their money purchase scheme. He's 39 now, so he joined the scheme about when he was 2910 years ago, when he was 29 he's funneling away loads of money. He's a big earner, picking up the maximum company contribution from the employer as well. And all that time, he's been in a portfolio that caps equity exposure at 40% and it's criminal, for a start, he was 29 when he started. This is going into a plan he can't even access until he's 55 under legislation. Then now it's gonna be 57 for him. So who cares what it does? And I said, I said, Do you remember why you chose this pattern? He couldn't remember why. He couldn't how he was in it. He didn't even know. Why would he know? It's not his day job, but he's in this he must have filled out some, some risk assessment question there 10 years ago. He put in this dog, this dog fund, really, that has just barely No it's underperformed inflation over the time period. Underperformed inflation. That's how bad it is. This thing just, you know, we will know, over the last 10 years, we've pretty much had a really good bull market, and it's just like this. And I did the maths, there's hundreds of 1000s of pounds that he could have had more of in his pension fund, literally hundreds of 1000s of pounds. Now, this is not about people accreting money for its own sake, because we've always said those kind of people are sad and boring and never have enough. But what we want to do is give people choices. Money is about choices, right? And if you have choices, then life is easier for you. If you don't have money, other people tend to make choices about your life, and you don't tend to have control over it. If you have more money, you have more choice over your life. And that's really what we want. It's an enabler. And these bloody asks you to risk questionnaires just so you can say, I've ticked the compliance box and always I don't have people sleep at night. I do not know how people sleep at night with them. I think they're an outrage. And like Andy, I've got a very light one. I think there's four questions, just to make sure I'm not dealing with a moron. But
Andy Hart:that, and it's the discussion point, First Name, Surname, email address, and if your portfolio failed
Nick Lincoln:by 30% what would it be worth? It 500 grand? What would be worth? And just to make sure they're literate. Number, do you agree? I'm
Carl Widger:right. The financial
Nick Lincoln:plan drives the portfolio. No portfolio without a plan. You know, it's this whole thing. Is this like we and I ran a buoyant user group online thing last Friday, and it was still coming up, capacity for loss. How do you model it, this kind of thing? And I was thinking, Oh, God, what? Most people are investing because they have to. They can't afford not to invest. So actually, the least risky thing to do is invest in the great companies of the world, because if you're leaving money in low return assets or cash in a three decade retirement, you're going to get eaten alive. And that's almost a guaranteed return. That's a guaranteed outcome. So we're just trying to prevent that. The least risky thing you could do over a 345, decade saving and spending life is the great cup. Is the world. You know, words, words and
Alan Smith:framing are just so important, and we, we've allowed these people, organizations or whatever, to own the narrative. So, as has been mentioned before, risk is short term. You know, risk is not volatility, right? Risk is not being able to pay you grocery bills in the latter years. Correct 30 year retirement because you were 40% allocated to equities when you're 20. And a lot of real people will run into that problem because they filled in a questionnaire 30 years price risk is going back to your children and asking them if they can help for money. Okay, if you can help them, because your pension fund doesn't quite pay enough, because three decades previously, somebody didn't have the balls to have a conversation with you, have a grown up debate and explain to you the consequences of the benefits of doing this there.
Andy Hart:There is billions and billions and billions in default funds at work. Pays pensions. Back to your point, Nick your real life client example, that is what I call a six figure tick box. Had he ticked the right box at age 29 as you said, he would have been hundreds of 1000s of pounds better off. That's a six figure tick box to tick one box. It's insane. He got no help at that time. So now you've come into his life and obviously nudged him to invest in the right fund that work, which is going to create another load of six figures in the future, because he's invested in the right fund, because you've spoken to him like a grown up and explained that returns all come from global equities.
Alan Smith:But imagine, imagine if the tick box said, Do you want a high return fund or a lower return fund? Which one? Yeah, that's a starting point. So you go the hybrid language, and then the next thing you see, it's slightly more volatile. It goes up and down. Be not touching it for 20 years, but it's a little bit more volatile as you go through I'll give you the
Andy Hart:actual data on this. Yeah, the last 10 years 100% global equity fund versus a 20% global equity fund. If you started off with 10,000 pounds in the 100% global Lexis versus 20% versus 20% global etudes. If you started off with 10,000 pounds today, you'd have 25,000 pounds in your 100% global equity portfolio. In your 20% global equity portfolio, you have 13,000 the gain of 100% global equities is 15,000 from a starter. Of 10, the gain from 20% global equities is 3000 from a starter of 10, the returns are five times as much. That's real data from 100% global equities versus 20% global equities. There's real money that people are leaving on the table, and it requires no change of their behavior or lifestyle. They don't need to do anything or pay more money in it's a temperamental thing where they have to be calmer, having a higher allocation to global equities, the money is there, and you're right, creating money for the sake of it is no, is not cool, but then you have more freedom, more opportunity, and you can do stuff with it. So it's an absolute travesty.
Alan Smith:That's a great point. And you know what I think, the more I think about this is these tools and templates and regulations have been devised by institutions who are so far removed from the end customer, they think they're doing them a favor, because what you just call us some numbers there, and it just, you know, there's some numbers, and they are around the level you could, you know, you might expect if you were, you Know, an informed person in this sector.
Andy Hart:Oh, sorry, to
Alan Smith:the point of it is, the point of it is, is how that impacts on your life. So we are the ones who are in the inner circle of the family's life, and that's the point. So the people that created these questionnaires are not so we're seeing the impact of that between having three times the return, three times the amount. That is the difference between having, you know, an extra holiday, helping your grandchildren, paying the extra ba to your grandkids school fees, and being barely able to afford to live yourself. That's the real life impact for real families. Oh, sorry, these
Andy Hart:investing illiterates that create these things, as I mentioned, the 100% global equity portfolio versus the 20% global equity portfolio. The ridiculousness is they call the 100% global equity portfolio. They call that high risk. All it does is create wealth. They call this one low risk. It's totally Matt. In my world, that's high risk, the one that produces no returns, that's the real risk. Low returns. That's the problem. That's what I'm trying
Nick Lincoln:to fight. Yes, it's, it's semester. I do appreciate as well, if you work like Carl says, you know, he's got, he's got quite a big, a big team, and it's growing all the time. And if you're working, if you're an IFA, working within a firm, or your trap is listening to this, and you work within an IFA firm, you might be told what to do, but as much as you humanly can make the risk assessment question that if you have to use it just the starting point for an informed conversation, where you begin the process, and it's a never ending process, it never finishes. Of educating the clients about how markets work, most
Andy Hart:advisors follow the result verbatim. Yeah, exactly insane. And by
Alan Smith:the way, I think regardless of what's what sort of size you are as a business, it is reasonably because you got, you've got to have a framework to, you know, to follow these things. But it doesn't mean, and that's the key thing, that you've that the advisor, regardless of whether there's 135, 10, 1000 advisors in the company, has to then just say, right, you're a six out of 10. I'll give you a six out of 10. You've had zero value then through that conversation. So you need your framework, and now let's have a grown up conversation.
Carl Widger:It's the financial plan. The financial plan all the time. You know, I don't where the money should
Andy Hart:go. I don't have the data from other large asset managers or DFMS, but I have read the St James's place annual report. And as a big firm, close to 200 billion, I think the global equity allocation is around about 70% that is impressive, considering how large they are. I don't know what other asset managers and DFMS what their percentages are. Again, it's another term that is used by the used to trap the wealthy. Wealth preservation. Why on earth would you want to preserve your money? You want to grow it? But again, it's another honey trap. For the wealthy illiterates, wealth preservation,
Nick Lincoln:okay, I think, listen, we're at 70 minutes old. I think we've given that. I think we're all of a voice. And I hope people listening. They have the TRAPPIST out there. That's mate, for those of you who perhaps were doing it in a way that we think is not that great in terms of client outcomes. Just give it some thought, because it, it's, it's, it's just, it's just flat out and wrong. And also, you know, imagine it being parents and going to your children asking for money. It's, it's agony for the parents, but it's agony for the children. My parents have asked my brother and I for money because they're, they're running out, and we both said, No, you know, we said, you've just got to you tick that box 40 years ago. That's on your that's on your shoulders, not ours. So let's move on, because I can see coming up the drive is Guess who? Yes, you know who it is, Trappist. It's Posties. She's hauling the There we go. There's the front door, but she's hauling the the bulging sack of TRAPPIST questions sent in via the link in the so called show notes and or on the pinned tweet in x doesn't make any sense to us sentences, um, so please do submit your questions. We are getting through them one by one, and I'm going to open up this first one here in an absolute moment, if I can actually find what I'm looking for, which is there. Let's just get the older the letter opener out. There we go. This is from Catherine, who is retraining as an IFA. She's got her LinkedIn profile there, Catherine, and we'll put that in the so called show notes. And she says, My God, I'm not on Twitter. Okay, Catherine, point, point, mate. Love, love, love the podcast. If joining the industry makes me as funny as you guys, I'm in. You got you speak a lot about what people invest in equities, but less about the wrapper and why tax drives people to obtain advice. But that's what I see happening and a lot of leads that come in, will you cover pensions, IHT, or possibly even do an episode or two focusing on tax and how financial advice can be so powerful for many who wants to go,
Andy Hart:this is somewhat interesting, because we say to clients, we're not tax advisors as such, but we talk about tax all the time with our clients, so it's a bit of a weird gray area as financial advisors, yeah, tax is massively important, and it drives a shadow of our advice, guidance and planning in terms of to do an episode on it. Probably don't think we will, I don't know, sort
Alan Smith:of stuff we Yeah, but my take on this is our role is, is pretty fundamental tax planning. There are some more sophisticated requirements that people have got, complex situations, overseas, income, all that stuff. That is the remit. I don't know whether Catherine is retraining from accountancy. Hence her interest in the subject the key thing that we keep. So I had a
Nick Lincoln:look at that profile. Their profile, their profile on LinkedIn. She's, she was in, sorry, Catherine, Catherine, you were in, I believe, property management. Okay, did spend some time in an auditing function as
Alan Smith:well, right? It's, yeah, Andy calls it plumbing. It is integral to the what we come back to, and hence the name of this podcast, is planning. Is planning, there is investment, there is tax advice, there is consultations, there's all sorts of other things going on. But it's a kind of, it's, it's a, you know, it's kind of, it's an artistic endeavor in many ways, supported by some technical components that are required as and when we might do one on estate planning, maybe in the future inheritance stage. I
Carl Widger:don't think we should, okay. I don't think we should, because there's, there's lots of different people from different jurisdictions listening to this, and I don't think we could serve them all. We might actually end up confusing people. And I suppose the other thing that we all need to be careful of is that we don't cross that, that line of actually giving tax advice. We want to work with tax advisors. We obviously need to know and want to know the rules. That's very important. But we aren't tax advisors. At the end of
Andy Hart:the day, we say that Carl, we aren't Taxify massive, massive conversations we have for clients all around tax, all around tax. I'm sure it's very similar in Ireland. I know we're not tax advisors. If they wanted some really specific advice about closing down a limited company to find out what the tax position or something, obviously we would point them in a different direction. But we know a lot about tax, and obviously have lots of conversations with our clients about tax. I think it helps it with business owners ourselves and pay a load of tax here, there and everywhere.
Carl Widger:Yeah, I agree, I agree, and you're right, but there's no chance I'm going to be involved in a podcast that's given out
Andy Hart:taxes, real life work with clients
Nick Lincoln:and risk of speaking for the trap pack. I think the sort of unspoken ethos of this show is that we talk about the stuff that you can't easily Google, and tax stuff, you know, if you want tax stuff is out there, isn't it? And there are seminars left, right and the providers will give you know, we talk about it as part of the financial planning, but I think, I think Catherine, we're not, we're probably going to steer clear of going into the weeds on inheritance tax per se, mainly because I know nothing about it, right? Thank you. Thank you for your question. Please do submit them, but without any further ado, as we come to your
Alan Smith:your pay. Just won't be paying any either, based on what you just said.
Nick Lincoln:That's the upside of having parents live under the railway bridge. Now, you know, you know there's no deal with Spanish property taxes. Nobody's quite warm out there, so they're fine. We send them out to sleeping bags. What more do you want? We love them, right? Let's move on. Culture corner. Let's crack on. Hope this work. Fingers crossed. Okie dokie, I'm going to go first. And this is from the Financial Services recruitment podcast, or a catchy title like that one rolls off the tongue a link to it in the show notes and on there, the interviewee was Dave Robinson. You might know Dave Robinson, those of you who hang around LinkedIn, he's got a bit of a slight case of St James's placed arrangement syndrome. It's a very long episode, but from one hour 35 minutes in, you can hear Dave Robinson views on St James's place, and he doesn't hold back, and he says, quite lucid. It's interesting listening. And I quite enjoyed it. And if you guys have had the time to listen to that or not, no, okay? And definitely, yeah, I
Alan Smith:listen. You send a link to us from I didn't listen to the whole thing, but for one hour, 35 Yeah, and he does. He's got a real bee in his bonnet, isn't he? I don't know quite why, but yeah, and he articulates it very well, very clearly. But he's got, he's got a real issue with the largest wealth management firm in the UK. And, you know, we've talked about this in the past on this podcast. You know, they're certainly not perfect that organization, but I think there are, you know as to use Ultras, quote, the guns could be pointing in a different direction and and linking your our new sponsors to this podcast, posh. DFM, we've always, we've talked about a lot, again, privately, about some of these so called wealth managers, discretionary fund managers, that you know, at least to my knowledge and extraction, I've worked extraction. I've met quite a few SJP, wherever they are, partners, advisors. The ones I've met have been pretty good, actually very good, in some cases, you know, but very client focused. Do real financial planning. They might not have the best investment solutions at the moment, but compared to some of these other companies that I do see when we win business from them, you sort of lifted it on their investment portfolios. There is zero planning, there is just a load of cost. And I would be happy I pay be paying more attention to those people as being rent seekers in our industry, rather than Yeah, the SJP, SGP. Yeah. Perfect. But agrees, there's degrees, a bigger problem, is my opinion. But yes, I did listen to you. Look very he's very articulate. He's very sort of credible, Dave, when he when he explains his position. But yeah,
Nick Lincoln:there's other I do think did the DFM thing is except for posh DFM, who I think are just absolutely brilliant in every respect. Okay, I'm squeezing too, and I'm doing an ultra this week. Is Ade Edmondson, I'm doing my hatchet essays coming out tomorrow about aid. Edmondson, believe it or not, but it's an episode of Desert Island Discs from last year, I think. And it's just, if you like, you know, the young ones obviously be known for the young ones. Much of the young ones ever made to Ireland car, but it's a really good podcast, and about two thirds the way through, he talks about falling out with Rick mayo. They weren't really speaking when Rick Mayor died, which I didn't know about, but he was a pallbearer at Rick males funeral, and he just burst into tears. And if you listen to that, and you don't well up a little bit, it's well, you've got to be pretty cold. It's really, really good. And I just really liked him at the end of the podcast. There we go. There'll be a link to that in the so called show notes as well. Next one.
Andy Hart:Next one is me. This is a link to YouTube. Roger Federer, one of the greatest tennis players of all time, has done a commencement speech at Dartmouth University in America. It's amazing. It's amazing. Got a bit of a thing with Federer, I think he's six days younger than me. Obviously, he's far more successful, far wealthier.
Nick Lincoln:Is that obvious? Did we know that? Okay,
Andy Hart:you did know that? No, it's a great talk. I would check it out. I would check it out. I might be talking about it actually this year's humans under management conference. He mentions a lot of really, really things. Anyway, check it out, the show notes commencement address by Roger Federer. He's very nervous giving the speech, so, um, well,
Nick Lincoln:it's not, it's not his comfort zone. This is he's very much out of his comfort zone. His backhand is very similar to mine. I don't know if anyone's noticed that right next on the docket is me. Oh, straight in Nick
Carl Widger:you would love the happy place podcast by Fern cotton. You would really, really love it. It's, I listen to it a lot. I think she's really engaging, and sometimes it's nice to listen to other stuff. Anyway. This particular episode is an interview she did with a BBC broadcaster called Ashley John Baptiste. I never heard of him. Don't know who he is, but it's a really engaging episode, and I suppose now that I've hit the big 50, I've had a lot of reflection over the last 12. And I suppose my I did a LinkedIn post actually that went you guys are all very used to your stuff going viral, but for me, it definitely went viral. It was just about just being grateful for what you have. And if you listen to this podcast episode, this guy had it tough, really, really, really tough. And I think Gratitude is the attitude. So I would encourage everybody, number one, to be grateful for what you have, because if you're working in this absolutely amazing profession, you are one of the lucky ones. And number two, there are lots of people not nearly as well off, so be very grateful. Listen to the happy place with Fern cotton.
Nick Lincoln:Well, how lonely was that next
Alan Smith:very good Carl, back in the world of the cut and thrust of the commercial world, I think everyone, think all of us here, and everyone listening to this podcast is still is keen to evolve and grow ambitious, grow their business, grow their revenue, grow all those good things. Some of you will know that I've written books on marketing in the past. Drum roll, checkbooks, checkbooks. That was Ultra who invested. We've all we've all of us expect, well, well, maybe
Andy Hart:I stole that from Alan Sugar,
Carl Widger:yeah. Oh, that. That was instantaneous. Was on,
Unknown:I didn't give him notice.
Nick Lincoln:Yeah, yes, about as quick as getting a microphone that works. Yeah, there's
Alan Smith:other things I could I'm going to tell you later, unmitigated disaster. Anyway, there is a I don't I'm not sure if Ultra might, might know this. There's a series of three books. I just read the first or I read one of them. It's not the first one, but it's probably the best. It's called.com secrets by Russell Brunson. Come across this? So
Andy Hart:I've got the book? Yeah, I've not read it. Yeah,
Alan Smith:it just finally, after all these years, I just all the penny dropped. This is how you do modern digital marketing. This is just an end to ages, a playbook for how you how you do it through, you know, attracting an audience, building landing pages, email nurturing sequences, and it just lays it all out, just in really crisp, clear language. And I mean, looking around the sort of IFA community websites and things, I don't think many people nail this. You know, there's a lot of websites out there which is sort of, which are effectively brochure websites, the nice pictures on them and our page and a bit about the team or whatever. But there's no if you're really serious about growing your business, you need to create this sort of marketing engine, you know, which is based on science and evidence and the hope and check, you know, reviewing your data that comes through. So we are completely changing our website in the next few weeks. It's a really good book, and it's one of three. If you're interested in growing your company, check out.com secrets by Russell Brunson, I thank you.
Nick Lincoln:Very, very good, good culture corners there. And Carl, when you were doing topical tidbits, and you mentioned that that commission just got scanned on as it were. And you said, there and then, I think Alan said there are rogues in every profession. I'm currently reading a book that Ultras read tax topia. Really good about accountants and dodgy accountancy scams. And there, it's not just enough in this thing of ours that there are dodgy things going on, if you want to represent Yeah, and I'll probably give a review of tax taker when I finish it in the culture corner in the next episode or two, I think, gentlemen, are we done? We're looking at 83 minutes. We've somehow, we've somehow survived. So, dear TRAPPIST, we're going to call that a wrap for this episode. Thank you for your precious time and your input via the questions. Please do leave a six out of five star review on iTunes. It really does help us, and it helps with the algorithm. Likewise, if you go to our YouTube channel, which has now literally on the nail 800 subscribers, please like and subscribe to that. So every time we post a new episode, you'll get a little bell on your browser, by the way, you know what I mean.
Alan Smith:There is a early stage conversation about, when we get to 1000 subscribers on YouTube, we'll run a trap live, the live Q, a,
Carl Widger:yeah, there wasn't an early you put that update and nobody replied, okay,
Alan Smith:but as you as your natural leader, I'm just telling you that while before we get 2000 anyways, take us two years to get to 800 so we another year the oldest. You're not the natural leader, yeah, slightly different. He
Carl Widger:sounds like John Martin, coming from Dynamo Zagreb and a commentary game from
Nick Lincoln:Beirut, yeah. Okay, maybe we'll do that. We actually, yeah. What could go wrong? What could go wrong with our tech mastery that we have in this
Andy Hart:group? Right? Come on,
Nick Lincoln:okay, channel, but until the next time Trappists from the trap pack, it's adios and take care. Goodbye. Oh,
Carl Widger:that was a lot of fun. See end credits,
Andy Hart:Nick and credits coming out. Grab. Yeah, Smitty, Smitty. I hope it comes out like I got through all this, right?