TRAP: The Real Adviser Podcast

54 - Breaking Bad (News)

• Episode 54

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In this latest pile of TRAP, the Trap Pack discuss

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Music, welcome to the real advisor podcast, T, R, A, P, trap. Please 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 yes,

Nick Lincoln:

indeed, dear trappers, welcome back to what many people are calling the second attempt to record episode 54 of the real advisor podcast, tr AP trap. My name is lick nincom, joining me as ever in the digital studio of doom, of the three other Horsemen of the Apocalypse. Carl della vocci, the voice width Alan, the storyteller, Smith and and the ultra heart. Now, gentlemen, we have a show packed full of app salutely Nothing, so let's start packing it yet again with some high energy review reads, read out by my good friend, Mr. Andrew Hart, who didn't pause, stutter or stumble, first time round.

Andy Hart:

Thank you very much. Nicholas, okay, my first review is from tiny wings, entitled must for financial planners. Five stars. Great podcast, guys and the episode 48 section on how pension members, advisors and clients are blindsided by the wording given and the adherence to the answers given by the tick box methodology of a risk profiling questionnaire. Final reviews from Brooks Jr entitled A positive for the profession, five stars, great show. Gents, having graduate, graduated via one of the well known advisor academies, I started my advice January, September 2021 I've always heavily focused on understanding the hopes and dreams of my clients. But whilst learning on the job, there have been many times where I've second guessed myself. So this podcast has been absolute gold for me, and ticks every box given that advisors and retail listeners, investors listen to this, I think having these guys discuss topics openly with balanced views is a real positive for the profession, thanks to the commitment delivering high quality, high value content for us all to consume. Keep it up. Dean Brooks, back to you. Nicholas,

Nick Lincoln:

thank you Andrew and thank you TRAPPIST for those lovely reviews. They give us a shot in the arm, and we love them to keep coming in and do keep sending them in, because I think it does alter the algorithm in the interweb or something, and it just makes our podcast more high profile and more visible to people searching for quality financial services related content by practicing real financial advisors. Okay, let's put a topical timestamp on this episode with some topical tidbits, starting off with some housekeeping dull but I did tell the TRAPPIST this. So the show, the so called show notes, we put out this great content with with loads of links each episode, too many links, I think, for many podcast apps, which truncate the links so they haven't always been propagating through to all the various podcast apps. So now, in place of that, we have one link in the so called show notes, which links to a Google document which will have all the so called show notes and all the links from Episode 53 onwards. And it'll be a working, live document. Over time, it'll become like a repository, a Wikipedia of the very best of financial services. I think it will supplant them the Magna Carta in terms of its importance. So that's just to let you know, and it makes the also makes the podcast look a bit neater on your phone. It doesn't ramble on, you've got to scroll down and scroll down, okay, Andrew, you've been to a former colony. How did it go?

Andy Hart:

Very well. Nicholas, very well. So last Tuesday, I hosted the our fourth live event in Cape Town, South Africa, sixth event in total, in the Alan gray VNA waterfront, whom both of Nick or lick and storyteller have been to Carl, is yet to grace the shores of Cape Town for hum. Sa, so it was a wonderful day. I've,

Carl Widger:

I've just to, just to clarify, I've yet to be invited. Yeah, sure. Continue. Andrew,

Andy Hart:

there's a long list, my friend, all the speakers bought the a game is about 250, people in the arena. So far, the score out of 10 is 9.03 which might be the highest we've ever had at hum, final couple of points. The organizers who helped me put it on are Rob McDonald, who quite a few of you have met, Pierre talilla And Carrie Bendle, and a massive thanks to two UK financial advisors who are also TRAPPIST, Mr. Warren chute and Mr. Paulworth. They flew out with me. So we I stayed with them for four or five days, so they had a strong old dose of me, not a strong old dose of them. But it was all good, all good spirits. All panned out. Well, nothing to complain. We had a final day in the vineyard that was amazing. But my final thank you is obviously to the get delegates, the people that turned up so we couldn't put on the show without. Out. You the people make the party and onwards to hum, Cape Town. 2025 back to you. Nicholas,

Nick Lincoln:

brilliant. Well done. Fell out. I'm glad it was a such a success. And it must be the season for conferences. We've got the sissy conference coming up in October in Manchester, Old Trafford, and Nick Murray has just had his annual shindig in in Manhattan. So I wanted to give a quick shout out to a good, close personal friend of the show, Ian Farah, who went to the Nick Murray conference, and while he was there, just having breakfast first thing in the morning. Yes, I'm sorry about the close personal friend Bell taking forever the media board is playing up, dear trapper. So bear with me. Ian Farah having breakfast, and an American guy comes over to him and says, Are you one of these trapped? Are you familiar with trapped? Do you involve a trap? And there you go. We have a Trappist in America. The guy's name is Phil stats. He wanted a shout out. He's the founder and an advisor at insight Advisor Group, which looks like quite a decent, quite decent setup. So Phil, thank you for your little video message giving us a Philip from Manhattan, great to see that you're picking up this. This, this trip that we put out there. Please do spread the word with your fellow Americans and the good people of Illinois and get trap going stateside. So there you go, Phil stats, and you have a nice time

Alan Smith:

on that. Just to correct one thing I was it was brilliant to get a message, and thanks to Ian for actually recording it on his phone, this video message and sending around to us, just to be a little bit pedantic, he's a Trappist. He referred to fellow Trappists as trappers. Trappers is a different thing altogether. This is the TRAPPIST community. Bit like the TRAPPIST, right? One other quick thing, whilst it was a bit

Nick Lincoln:

it was a private video. I don't think we need to reference the fact they made a mistake with it. No,

Alan Smith:

no, we're just clarifying this TRAPPIST and TRAPPIST, but we had, I had a sent to you as well. There was a message from a lady advisor in Singapore. She's coming back to the UK soon, and she, as well, was explaining that she was an avid listener. So it's great that we are going international now with carrying this message around the world. So thank you for everyone. I

Andy Hart:

bumped into, sorry. Final point, I bumped into load of Trappists in the hum coketown event. There was one guy listens to trap he's been in the business only a year. He's taken over his dad's business. I sent you boys a video, and then he obviously rocked up live in person. So it's amazing how these things work. You know, speaking in our empty rooms, being beamed around the world, and then real life stuff happens as a result of it. So it's, it's absolutely amazing, yeah, sorry I forgot about that. Very good. Very,

Nick Lincoln:

very good. Lovely. Okay, let's get on to some nitty gritty and storyteller, this Wow, gone enlighten us cash management platforms. I'm

Andy Hart:

just, I'm just before. Storyteller, sorry, it's following. Oh, you

Nick Lincoln:

are sorry. Sorry.

Andy Hart:

It's following on the

Alan Smith:

salute. Shambles,

Andy Hart:

there's a link show now. Absolute shambles, super link. It's a Nick Murray podcast on YouTube. Nick Murray does few and far between of these types of interviews, but he's on with a guy called David banson, who's a super fan

Nick Lincoln:

August bank,

Andy Hart:

but you look at an August bank, he sort of bangs on for about 15 minutes before the interview gets started, which is somewhat interesting, but I'd probably nod on from that. So there's a Lincoln cycle show notes. It's entitled, trust comes from trustworthiness. David banson and Nick Murray. Back to you, storyteller,

Alan Smith:

yeah, I watched that. It's it's a great I love the way Nick Murray communicates. It's just slow, paced, intentional, you know, quite quiet, really.

Carl Widger:

Did he stand the note?

Alan Smith:

He did. Well, there's new to me. New to me. Anyway, you should, you should, you should watch it or listen to it. He did say something new, which was around, kind of the idea of prospecting for new clients he had. I mean, I think I've read that before somewhere, but I've forgotten about it. About this kind of, probably one of his newsletters formula that he's got. It's always useful to be reminded again, Mr. Widget, Mr. Noel,

Carl Widger:

being facetious and being facetious talking on conferences before you, you jump on like you had to like different different things work for different people, I guess. Yeah, we saw the pictures from the Nick Murray Conference, which, as you said, Andy before, is as bland as you can get it. At the same time, the future proof conference was happening in Huntington's beach, I think kind of looking pretty amazing, to be fair. So yeah, it's

Andy Hart:

amazing. Maybe we're gonna get, maybe we were gonna get a group of us to go to future proof next year. A few people that went too good mentioned an interest. So, yeah, right, we could get probably about 10 of us out there. So watch this space. TRAPPIST, we might have an announcement.

Carl Widger:

Exactly. Sorry for the interruption. Alan, continue, my friend. Look

Alan Smith:

forward to it. Try. App tour 25 that's got a good ring to it, right? We're

Nick Lincoln:

10 minutes in, and we're like, four points down. The topical tidbits, just

Alan Smith:

saying, I got a message to share with you guys from I won't mention his name right now, but again, another avid listener asking what our thoughts or views were on these cash management platforms. I think we're all familiar with them. There's a few names a lot of advisors seem to like and to use, and he was expressing some I gotta put a concern maybe. He said he's attempted to do some robust diligence on these trust structures that operate behind the scenes of these platforms. And he said it was always a bit of waffle and flannel didn't really get into the the heart of the questions. He was trying to ascertain. It wasn't 100% clear. And I just thought it was interesting, because they do seem to be very popular. I can, you know, fully disclose, we don't use them at our firm where, where cash is required to be held on deposit. Often, we often find it where there's somebody has sold a business, and they've got lot of cash, and they've got a big tax bill to pay probably a year away. So it's a year to 18 months of cash deposits. They can't take any risks with it, and they'd rather get a return on it. We've always recommended national savings as being the most secure place. Ns and I secure base. It pays over 4% right now. It's as secure as he as it gets, backed by the UK treasury, UK Government. And, you know, I just when I've looked at some of the rates available as well elsewhere in these cash platforms, once they take their bite of the cherry, I understand also some advisors charge on it as well, you know, 25 basis points or something for accessing it. So, net, net, you're not, I don't think an awful lot better off than just going to an NS and I type of account. Just wonder what you guys did or used. I don't think you use the cash platform. So in talking the UK Andy, Nick, Nick, what are your thoughts? Yeah, I'm not gonna

Nick Lincoln:

mention brand name. I did look at a couple of them last year, just, just sort of kicking the tires very, very loosely. I wasn't totally comfortable with it, with their structure, as you said, but I just also, I don't know, I don't think I want to be involved as a cash manager for my clients. I think there's Google for that. It's just a just search the rate and over to you. All of a sudden, you're struggling this thing. Are you giving advice then or not? Is this a regulated activity in a sense, because if you're pointing them towards it, and this is thing about giving steers to people, isn't aren't they? You know, we get that. I think we all do it to a degree. You give you might say, well, if I was in your shoes, I might go with XYZ. You don't put it in right? You know, you're just talking, I think you know, you could be talking significant sums of money here. And what's the upside? It does go wrong, nothing at all. And you're going to take 15 basis but 25 basis points, as you'll read for if you take any fee at all, I just so I kind of, I kind of walked away from it. So that was my Name, which I just didn't understand quite how it worked. And I got a very small brain, so that's probably on me, rather than the brands involved. But I didn't just take it any further. Yeah,

Andy Hart:

I'll just close this up. I'm happy to mention brand names. I think insignis are the biggest, and flagstone, sorry, insignisa, or a name I'm aware of, and flagstone, I believe, might be the biggest. Again, I've got that maybe got the wrong I don't know the space well enough. I just want to try and remove extra layers between my clients and their cash. So if I can take a small haircut and get, not maybe the best performing rate on the market, but at least they're directly, you know, accessing the financial institution. Then I'll, I'll sort of take that, yeah, there. I think they are quite convoluted. Ns, and I, I'm a big fan of, I do have a chunk of cash on transact platform. They're paying high rates, and I'm just a bit more comfortable with them doing stuff in the background. I don't want there to be a massive blow up with one of these companies, which then exactly what be one day. Yeah, the

Carl Widger:

security, I think, of the provider, is really, really, really important.

Andy Hart:

There's lots of, actually, there's lots of layers of the onion, and we're as strong as the weakest link, the usual sort of, yeah. And for tread, very carefully, you know, my clients pay me to help them avoid this sort of stuff. I'm not saying what advisors are doing using these platforms at the moment, is anything untoward, and they've obviously done their own due diligence, but personally, for me, again, it's another layer that I could do without. So yeah, I generally use them at the moment. Very

Alan Smith:

diplomatic there. Andrew, makes sense. The upside to me is potentially, is there, but it's marginal, and the downside is catastrophic. It's one of these bets that, in my opinion, isn't worth it. And the same to me goes for cash funds. It's kind of treasury type funds you can buy

Andy Hart:

where you can money market funds. They're a bit sketchy. Yeah, they're sketchy

Carl Widger:

you're operating in. Yeah, it's different. No,

Alan Smith:

I'm just talking about UK mark. I don't know the Irish market at all, but in the

Carl Widger:

UK, institutional investor can get very low deposit rates here. So it's kind of, we have to be looking at maybe money market funds, maybe it's looking at buying. Direct government bonds, that kind of stuff. So it is a thing here. We certainly don't have the perfect solution, but it is something that we're trying to work on here. So it is something we're looking into.

Nick Lincoln:

Okay, as you might recall, the last I think, was the episode 53 we were talking about the what if there is around the upcoming budget, and I had a client who needed to get a million quid of readies from their portfolios, and we were deciding which pot to access pension, Gia or ISA. I had the meeting with the clients, and I gave them my advice, which for them, I think is the best thing is to access the GIA. And the next question they put, they said, Well, where do we put this million quid? And I said, Well, between you me and the fence post, I would probably just look at this thing called nsni, because you can put a million quid in their direct the direct saver thing, and it's paying, yeah, 4% I think, and it's obviously underwritten by you, me and Uncle Tom Cobley, it's the one it won't go bust.

Andy Hart:

I'm probably gonna be slightly out with the numbers. But I remember when I was speaking to the NS and I people, I think a couple can have if they utilize all the pots, somewhere close to 12 million with NS and I in total. But again, I might be slightly out with the numbers. But yeah,

Nick Lincoln:

yeah, I'm nearly there now, so I've got to look at other providers. Okay, you and let's now move on to me. Oh, me, me and I can talk. Okay, very quickly, the state pension is going to go up by 460 quid a year next year, to 11,960 quid. Let's call it 12 grand from April 2025, and in this article in money marketing, it said that will mean that 340,000 pensioners. That's a significant number. 340,000 pensioners are going to start paying tax for the first time, and a lot of those will be paying tax just through their state pension. They won't have any other income. They'll have a state pension plus SERP, so they can be paying that. They could be on 12 a half 13 grand of state pension. Andy, your fingers raised.

Andy Hart:

Do they have the facility via the state pension to take the tax? I don't think they do. Thank you,

Nick Lincoln:

Andy, thank you. You may continue with my point if you want to, the state pension is paid gross. Of course, it's paid gross. So suddenly, a whole cadre of pensioners, most of whom, I'm guessing, if state pension there is, there any income, might not be the most technically enabled people in the world and have never had a government gateway account will be paying, will be getting a gross income on which tax is due. So we interested to see how that is going to pan out, because it's good, it could be a right show. Obviously, we've got budgets coming up, and maybe they'll bring in a special allowance for who knows what they're going to do, but it's the first time when people just on a state pension. An awful lot of them are going to be liable for tax, and they won't even know it. There you go. Okay, any thoughts on that? No, okay. Watch the apple tart debacle, Apple tax debacle.

Carl Widger:

Yeah, you couldn't make this up, right? So this, this is a case that's going on for a decade where the EU were bringing Apple to court to say that you owe Ireland's tax. Ireland, we're talking about 14 billion euros in tax, and Ireland going, No, they don't. They don't. So Ireland, we're siding with Apple. The EU have said, No, we've decided, once and for all, you got to pay it. So now Ireland have to take, have to take the money that they didn't want from Apple. So look much bigger story, much bigger picture. Here is what happens to Ireland and the cozy corporation tax we've done for all these massive multinationals who run their profits through Ireland. It drives me insane, because we have an obsession with these multinationals, instead of actually, why don't we support our own so when they have all these job announcements here, they're all supported, paid for by the Irish government, whereas little old Mr. And Mrs. SME get no support at all. Anyway, I also thought it was interesting that the week after the ruling from the EU, some very senior person from Apple was over going the infrastructure is terrible for people around our cork office, so you need to build roads and whatever. And I just thought, you know, like, come on, Ireland, time to grow up. A multinational coming across here, we're siding with them so they don't have to pay us 14 billion in tax. Then when that we do? When they are told by the EU they have to pay 14 billion in tax. They start telling us what to do with the 14 billion in tax on by the way, the budget next week, lo and behold, lots of the 14 billion will be used to buy lots of different votes, whereas it should go into large infrastructure projects anyway. Rant over car

Nick Lincoln:

probably continue. You can get, you can get the odd motorway built to Cork, but nothing else. Hang

Carl Widger:

on, but we have the motorway built cork, but, but our infrastructure isn't bad, but, like, there's a few key ones that we should absolutely do, like, when you get a when you've got boys fly into Shannon or Dublin, you can't get a train. Into town, like, come on, the airport, you go, that's what we should be spending. Is brilliant. But like, you're stuck there. You have to, there's no, there's very little bus

Alan Smith:

up. That's

Carl Widger:

I have done, yeah, once is it

Alan Smith:

just, just a thought on that? Because every big US tech company has their European headquarters in Ireland, whether it's Amazon meta, you name it, so is, there's going to be a continual windfall of billions heading your way. Because, yeah, we

Carl Widger:

don't have a one off for Apple, and we don't, yeah, but, like, there's lots of reasons for, clearly, the corporation tax cozy deals, right? Which are, which are being, which are being diluted. Those those benefits, they're being, they're not gone, but they're diluted. We're English speaking, right? We have a very educated workforce, but, but I just hate the fact that we pander and pander and pander and pander and I'm like, can we please start looking after our own? Yeah, I'm just saying we're in a position. This is not money. Yeah,

Alan Smith:

it's gonna, there's gonna be

Andy Hart:

many more of these. How much he's coming? You get 100 billion,

Alan Smith:

the wealthiest country in Europe by the age by the year end. No,

Carl Widger:

I don't think there's more cases coming through, is it not? I could be wrong in that, but, but, um, but the corporation tax ain't gonna stop just because of this, because it's, it's gonna take, it'll take an awful lot for them to move their headquarters. But I just thought, yeah, sorry, no, it's

Nick Lincoln:

okay. But your, your corporation tax that Apple Pay in Ireland is the same corporation tax that Mrs. Mrs. Mr. Mrs. O'Reilly and their startup limited company pay, right? You mean the rates of percentages, is

Andy Hart:

it 12? I

Carl Widger:

think, I actually think I'm not brilliant on multinational tax rules, right? I'll be honest, your strong point, no, but, uh, but I think it has been increased recently, actually. So to be fair, but 12% wasn't it

Alan Smith:

called, yeah, the ultra crepidarian would come in. He's an expert on Irish Corporation.

Carl Widger:

No, that's, that's your you. That's for normal companies. I do think the multinationals have to pay a little bit extra as of recently. Do not, do not take me apart in social media. If that's incorrect, I have

Nick Lincoln:

I'm confused. Are you saying you don't want apple to pay the 14 billion, or they should pay it. And should always have been,

Carl Widger:

oh, they should have paid it. And what were we doing? Saying, Oh, we don't want it like we should have went, Oh, well, the court is the court. Let the court decide, instead of kind of, you know, saying, Oh, no, companies are

Nick Lincoln:

very fluid, and we can. We've got another hour this show by the end, if you want to. You know that the list of great European tech startup successes over the last 20 years stands at precisely zero, as far as I can tell. And there is a reason for that. This

Andy Hart:

is just a total random offshoot, but there was a court case. Again, I'm not gonna be 100% right between Apple and Samsung, I think. And the one that lost had to pay the other one a billion dollars. And then the one that lost sent the billion dollars to them in coins. So when lorry arrived, because it didn't stipulate how the money is paid, so um, Apple might pay Ireland in that coin that must

Alan Smith:

be in a pro the

Carl Widger:

money escrow account for the last five years. So Apple this, this won't do. This won't dent their accounts at all. This is, like, you know, it's a rounding out, a bit of a problem. But yeah, for Apple, yeah, yeah. Okay. Anyway, my big, my big point, just to be clear, is, hello, Ireland, can we look after ourselves? Please? Never mind these multinationals that will serve us best in the long term.

Andy Hart:

I think the money coming

Nick Lincoln:

in, you haven't got any tax and you haven't got any

Andy Hart:

employment from a massive benefit. You got a massive budget surplus at the moment, first time in years

Carl Widger:

which we do not need to accentuate any further. I'm not saying push them away. I am saying, please support indigenous Irish business, not just the startups. 98% of the businesses in Ireland are SMEs. 70% of the employees in Ireland are employed by SMEs. Please, please, Christ, please look after the SMEs. I'll talk about something else where they're not going to look after the SMEs. They're going to look after the civil servants in a second. Wow. United in Kingdom and Ireland

Nick Lincoln:

are becoming interchangeable in many ways, not many of them good, sadly. And talking of that, actually, hangover from the last ridiculous government, I think national conscription, national service, has gone down the pan with with Rishi Sunak, but also has the British isa idea. The last episode we recorded do TRAPPIST, Episode 53 feels like ages ago. We had to record it way ahead of the show going out. And then as soon as we recorded it, the announcement came, the British Isa was being scrapped by the new administration, and credit to them for doing it. So Goodbye and good riddance to that. And what a ridiculous What a ridiculous idea. It was, okay. Oh, in the weeds now with Ultra.

Andy Hart:

Yeah, I'll try and keep this brief. This is a CGT strategy that I've heard from other financial advisors. I won't mention their names for obvious reasons, but I'll just share it with the Trappists you may wish to employ it. So if you have, let's say, very simple. A unit trust portfolio that has got X 100,000 pounds worth of gains before the budget comes out at the end of October, let's say, five to 10 days before the budget, you crystallize and you crystallize that gain at, keep it simple, 20% if there's no change in the budget, you then repurchase back the same units, and you almost trip yourself up with the bed and breakfast 30 day rule. If there is a change in the budget and the CGT goes up, then obviously you stick and crystallize your gain of 20% if there is no change and you repurchase back the same units, you're back in the same position you were. So you trip yourself up with the with the 30 day rule. That's a strategy that I know quite a few advisors are potentially going to implement. The the caveats are obviously CDT rates changing. That's that. That's not the issue. The issue is, is she going to meddle and fiddle with the bed and breakfast 30 day rule? I think the chances of that are low. The chance of CGT and going up are high. Advisors who are listening to this understand what I'm trying to say. So that's it really. Any questions on that, Nick or Alan,

Alan Smith:

are you saying, if you, if you died, that if you trip yourself up kind of half so almost intentionally on the bed and breakfast, you are exactly seeing the original position, so you haven't seen you okay? You saying you haven't triggered a crystallization, a CGT event?

Andy Hart:

No, if you buy back the same units within 30 days. So if it's just so they just assume that it hasn't

Alan Smith:

happened. Effectively, they say, is it active?

Andy Hart:

You buy the exact same unit straight back after the budget, if it's going to be 20% and you say, the same units?

Alan Smith:

Do you literally have to have it? It's got, like, 1754 units of XYZ, five you

Andy Hart:

need to buy the same units, the same exact same purchase. You're tripping yourself up

Alan Smith:

on the markets would have moved in that time period. Is

Andy Hart:

a secondary issue. But yes, the market movement Well, thing maybe meddling and fiddling with the 30 day rule, and then, obviously, potentially down, try to do that across an entire client. Ones are liable for.

Alan Smith:

CGT is just

Andy Hart:

client that's pre if you got one client get pregnant with an enormous amount of gains, you might you decide you and the client. Yeah. Caveat, etc. Usually trying to work around the 30 day rule. And not true. I

Alan Smith:

get yourself up with it this way. This one. You're tripping yourself up with it potentially. But if the rate goes up, you execute. And just say, I've got to take the 20.

Andy Hart:

If rate goes up, you stay where you are, yeah, crystallize the gain at a lower number, the rate stays the same. You repurchase back the same units to trip yourself up with the bed and breakfast rule. Yeah, breakfast rule gets switched. You've got another problem. The market has got to be people who are planning to sell the funds

Alan Smith:

in the in well, in a relatively short if you mean, you're triggered CGT, unless you crystallize funds, right?

Andy Hart:

It depends. It depends. Anyway,

Nick Lincoln:

Jesus, okay, are we done? Yes, okay. Thank God. We can put capital gains tax behind this. And move on to a brand new topic, from storyteller, capital gains tax.

Alan Smith:

I thought this is quite a good one, actually, that Well, you guys, this is, this is core to this, you know, some aspects of proper financial planning and adding value. I So, yeah, we just drew by these other two Philistines who don't understand this stuff. There was just a follow up to this, which was an interesting article. Model portfolio services have got increasingly more popular. Carl, we listened to your corporate bloody Irish tax season for about half an hour. So pay attention for two minutes

Andy Hart:

complaining about receiving billions of dollars. He's reading a magazine. Now, what's your reading? Explore. What

Alan Smith:

is that

Nick Lincoln:

still going right?

Alan Smith:

Right? No model. Portfolio services have become increasingly popular. This is where it is, a little bit in the weeds. Again, if you outsource to a model portfolio service which buys a lot of individual funds and they do automatic rebalancing, then you're going to trigger a capital gains tax charge, kind of by default. If you outsource to a what you call it like a fund of funds, like a Vanguard life strategy, for example, is a is also a multi asset portfolio, fund type thing, but they're all kind of in house, part of a fund, so they do their automatic rebalancing, no CGT. So I mean, over the years, I don't if you guys have come across when we picked up portfolios from traditional, some traditional disc. Discretionary portfolio managers. They would be rebalancing left, right and center, triggering capital gains tax all over the place, and then we would raise this as an issue. And they were investments. We're portfolio managers, we're not tax advisors. And so they just did it, executed it, issued a tax certificate, client paid a tax, and it was all unnecessary. Didn't need to be done. So the point of what I'm saying, Yeah, a little bit more very focused time, all the time that would happen

Carl Widger:

to do it on the rebalance unnecessary clients

Andy Hart:

didn't really know. They just

Carl Widger:

said, oh, there's some tax to pay in your

Alan Smith:

portfolio this year. He's a tax certificate. We would go, Well, hang on a minute. You didn't have to pay all they shouldn't. It wasn't legal or illegal not to rebalance at this time, or to pay a bit more attention to the rebalancing process and maybe sell down funds that had, you know, underperformed being a bit more specific around the rebalancing process or any sort of fund switch type thing. But yeah, that happened very, very often. So it remains the case. If you're outsourcing to model portfolios, you do have to pay attention. The point being here, and is more being fiddly, is that you have got, obviously, your ISA and pension wrappers. This doesn't apply. So rebalancing, you know, knock yourself out, go ahead. But anything in GIA type accounts or other accounts, you probably do need to pay a bit more attention. CGT, historically, you know, when we had higher, higher allowances and reason reasonable tax rates. It wasn't so much of an issue. Now got negligible allowances and possibly much higher tax rates. So it's another thing to pay attention to in this, and the last thing when I'm wrapping up model portfolio, services and tax and relating it to other alternatives which are out there, was a report recently which confirmed that HMRC has agreed that VAT is not applicable to be charged on model portfolio services. So that's a plus for anyone who is using those so no additional 20% and it's so therefore it's creating broader daylight between model portfolios, advisor type portfolios, the ones that we build in house, etc, and and creating daylight between those and those, again, traditional discretionary fund managers, who tend to charge 20% on their portfolios. So there's this. There's quite a big impact that that will apply now for anyone who's using and outsourcing to the, you know, the usual suspects that we've talked about in the past. Andrew,

Andy Hart:

couple of points on that. So obviously, any portfolios outside rappers need to be flagged for no automatic rebalancing. You know, a lot of thinking needs to be done before we pull the trigger on that. The session point you mentioned, you've got two points, the MPs now no longer charging VAT, and DFMS no longer charging VAT both Alan, no

Alan Smith:

specifically what are defined as model portfolio services, the run, as opposed to a discretionary services for, you know, traditional discretionary portfolio, buying and selling. And they still charge funds. They have to charge that? Yeah, they're still charging whatever it is the clients of those firms are paying whatever their fees are, possibly not getting as much attention paid to detail on the CGT planning around rebalancing and paying 20% VAT on top, just

Andy Hart:

on the rebalancing, because Nick looks quite confused about it. So this is happening pretty much to today. There's large asset managers that, you know, Nick, they'll do a I'm

Nick Lincoln:

just amazed. I'm just amazed that it goes on, especially when if CGT rates 45% because,

Andy Hart:

yeah, so the investment team will make a decision that they're going to move portfolio of five to three different funds. They literally just pull the trigger. Pensions ISIS immediately happens, and then the GIA happens as well. And the advisor of that client says, I'm sorry, our investment team's made a decision here on the old rules. You've got a four and a half grand tax bill that you've got to declare at the end of the year. On the new rules. You've got, who knows, 10 grand, 12 and a half grand. Why have you done that? And they're going to say, ah, because our investment team and their strategic thinking have now done a tactical change, you know, bsbs, Bs, terms of

Alan Smith:

business. They'll just say, this is what we do. We manage on a beat, on regular basis, whatever it

Unknown:

might be. Sorry,

Nick Lincoln:

Nick, we only charge 3% on the switched funds, and when you charge an ongoing fee of 1% a year, yes, and,

Carl Widger:

and, and, unfortunately, does

Nick Lincoln:

that posh boy here some nasty rumors that we're viewed as nothing more than a bunch of cheap Grifters. I'll have you know we're not cheap, posh. There we go, perennial,

Unknown:

perennial. Your Money, our future posh event, doing that well

Nick Lincoln:

that is that will be a thing. There's more.

Andy Hart:

Okay, thank you for jingle. Pass us all Nick, that's fine. We are

Nick Lincoln:

35 minutes in. I. And we still got loads to go. So what voice tell about J, pension, F, SFT.

Carl Widger:

SFT, very quickly. Budget is next week. As I alluded to before, they kind of leak this stuff out. They haven't decided to leak this out. The minister come out and said, This is what we're doing next week. So the SFT standard fund threshold is going to increase. Is going to get to 2.8 million by 2029 it's currently at 2 million. It's actually 2.1 5 million. But anyway, a real civil servant jobby here because they've decided not to increase the lump sums coming from it. They just had to solve their problems for their friends in the civil servants service whose defined benefit schemes were being calculated as over the SFT. Right back to my point earlier, that will you just look after the people who are running the bloody businesses in Ireland? Please. They're the biggest employer by a mile.

Nick Lincoln:

Welcome to your new world. Welcome to our world. Yeah,

Carl Widger:

relief is only a million quid, so give us a break. Increase the tax, the lump sum that's coming out of these pensions, please. I It is to be welcomed a little bit like the 14 billion. But come on, not

Nick Lincoln:

not to look up. I mean, there's a in the which is the equivalent of you, of your SRT, really, and labor when it when the previous government got rid of it. So we're going to bring it back. We're going to bring it back. Blah blah. Now, they quietly dropped it, but there's still parts of me dreading Rachel, we've sit getting up on the 30th of October and saying we're bringing back the lifetime allowance, but we're going to bring in a carving for the NHS because of the last time announced was dropped nominally was because doctors and dentists and surgeons were just leaving the NHS and drove so they didn't want to pay the tax on the excess and the labor and the NHS. It's, it's, it's a very similar relationship.

Carl Widger:

Similar, yeah, okay,

Nick Lincoln:

this is a good one. Yeah. I looked at the link. I looked at this one storyteller, the other comments and the LinkedIn thing about another risk profiler, shit show, yeah,

Alan Smith:

as I've described, this was, this was an article which originally appeared in The Telegraph last week in their Money Makeover section. And then the journalist Ruby Hinchcliffe

Andy Hart:

posted, I was personal friend. Yeah,

Alan Smith:

I guess so journalists go, she's a guru. I speak to her now and again. She's, she's one of the good ones. And she posted on LinkedIn saying, you know, any, any comments, and that the headline of the article is, and I quote, this is from the reader. Reader's questions, I've paid 11,000 pounds in fees for 1600 pension growth. Is this normal? So that was the thing. So the issue question was about fees. And just say, you know, these fees must be outrageous to pay 7000 pounds in fees and only had 116 100 pounds in growth. But if you open the article and read it, there's more here than initially meets the eye. The fees quoted, and I think it's in the order, I can't remember exactly. It's about 1.6% annualized fee, kind of all in for everything, which isn't outrageous. It's roughly ballpark market, I think, for investment, if you got, if he's getting, you know, proper financial planning advice, because he has gone through an intermediary advisor. If he's getting an investment portfolio, it sits on a custody, custody or a platform, so that's what he's paying. So I didn't think that was sort of way, way, way out of line. But then you sort of dig into the article, and you read that this guy, who's, I think he's recently retired. He's 64, years old. He set this up a couple of years ago with his advisor, and he's currently sitting in his portfolio of 52% government bonds. Now, it wouldn't have helped him in terms of his timing, because I think he invested just at the time when there was, they sort of had an almighty crash in terms of the gilts as an investment in, certainly UK Government guilt, or actually around the world. So he would have taken a haircut on that, for sure. So Tommy wasn't ideal, but it just, it just smacked of one of these situations where he said, I'm about to go into retirement. He would have been asked about is, are you a cautious, balanced, aggressive, adventurous, all these crazy words that people use, and they plugged them into a cautious portfolio, which is more than half invested for somebody who's in the early 60s with a reasonable expectation of up to three decades of future life to support No wonder he hasn't gone very far with his investment portfolio. Meantime, equity markets have raged away, not saying he should be 100% equities in his situation, but a proper planner would have allocated that properly. So it's more as I say, the fees are not unreasonable overall. It's the investment approach, the risk profiler, the a client expressing that they're fairly cautious because they're just going to retirement and arriving at this situation, which is sub optimal to say. Be the least. Andrew, couple

Andy Hart:

of points on this. Well, all financial advisors, at a certain point in their client relationship will be charging fees, be it percentage or agreed, and at a certain point they'll be temporarily, you know, underwater, there'll be temporary declines. So we're all guilty of charging at times when a client is temporarily losing money. We know long term the market's up 75% of the time and down 25% of times. That's one point based on the numbers you mentioned. Is this client has got around 700,000 if he's paying those fees at 1.6 my final statement really is when you combine an investing illiterate financial advisor with an investing illiterate client, the result is a multi asset, low returning mess, but very compliant and truly arse covering, you know. Thank you, regulation. There's 1000s of clients out there in this situation, gray hair equals low returning portfolios. This needs to change. Yeah,

Carl Widger:

yeah, yeah. Brilliant, brilliant, love it. Andy,

Nick Lincoln:

okay, our work is never done, as we all say continually to each other and to the world, and sometimes that feels like you're screaming into the void. Podcasts as a source of CPD, so I subscribe to various financial advice related podcasts. Some are good, some are less so. And one of them that I do subscribe to, I don't listen to every episode. I don't listen to many episodes, just the financial advisor one. But interestingly, in the notes for the latest episode, it said, This qualifies this listen. Listening to this podcast qualifies as. CPD, now this is interesting. I don't know. I mean, obviously it's got to be unstructured, because you can't very you can't be tested on it, and what you learn, there's no there's no sort of accountability, what have you. But I mean, I listen to loads of enough stuff through my years, I think would get me my 21 years of unstructured just to listening to to podcasts. I don't know quite how. I don't know if people practice when you listen to this and you put it down as unstructured CPD. There's

Andy Hart:

a bit of a Freudian slip. Then you said 21 years. You mean 21 hours? Yeah,

Nick Lincoln:

exactly. There was fraud. It feels like 21 years, but thank you, my friend. Yeah, absolute fraud and slip, 21 hours. Sorry, of of, is it 21 of structured track or whatever? So if you're listening to stuff as podcasts, you may be able to get it by your compliance officer. This is CPD, in which case, happy days for those of us that consume reasonable amounts of it. Nick,

Alan Smith:

you were appointed as the compliance officer for trap. Weren't you initially when we set up? So could you get this approved for CPD for all the lists? Yes, thanks. Yeah, yeah, yeah, just

Nick Lincoln:

tick this box here. Yeah, done, done,

Alan Smith:

well done, mate, well done, and

Nick Lincoln:

your compliance for the years, complete. Mr. Smith, done, okay, what is it? Don't

Carl Widger:

know what to call it. Anyway, I purposely have not put a link to them in the show notes, because I don't want to be drawing any body's attention to this firm. But Troy, from Moneda, I'm going to call him capital, has emailed me three times in the last 10 days to say, Come on. Are you not interested in guaranteed returns of between 4.3% and 10% per annum. I'm not Troy, because I wouldn't believe it, unfortunately and you can now stop emailing me. Our work is never done. As you just said, it's amazing. I think you might have put this up on social media somewhere. Nick and somebody came back and went, important to note that this firm is not regulated by the FCA. David Hahn, yeah, said that, yeah, yeah. And look, there's just so many of these firms out there. Our work will never be done. And it's, you know, unfortunately, a battle we're going to keep on having to fight with our clients receiving these kind of emails all of the time, and I could see, if I didn't know any different, how that might be actually very attractive, and you might go down a rabbit hole with this firm or any other firm. So yeah, I just thought I'd point it out. But, uh, Troy, don't stop emailing me.

Nick Lincoln:

Well done, fella. Well, I know that we had a chat about this with me online about if they're offering guaranteed returns are between 4.3 to 10% Why would we never go for the 4.3 if the 10% is guaranteed, I have the 10 please. 20. I want some of that as well.

Andy Hart:

Yeah, when it's guaranteed, there should ever be a range.

Unknown:

Yeah,

Carl Widger:

I literally read the email, because I kept one of them. It's in my junk now, right? So, but I'm gonna go, I'm gonna go

Nick Lincoln:

for the 4.3 because that'd be lower risk, yeah? But

Andy Hart:

it's guaranteed. The arrangements guaranteed. There's one number,

Alan Smith:

yeah, this one

Carl Widger:

on Tuesday or Wednesday to talk through how we can help you grow your wealth. He's assuming he's paying. Get a big assumption there anyway and deliver guaranteed fixed returns of between 4.3% and 10%

Alan Smith:

guaranteed fixed returns. That sounds very appealing. That's ticking all the boxes. Yeah, yeah, exactly. Well, the bottom line, with all these things,

Nick Lincoln:

if someone's offering a 10% guaranteed return and thinking, Well, why aren't you keeping it to yourself, if it's so great, why are you punting this out there? You know, you keep it to yourself and make billions. Okay, we're at crikey three quarters of an hour. We've got one last topical tidbit, TRAPPIST, and this is from storyteller. I

Alan Smith:

just wanted to round up this episode's topical tidbits on just I think this is just sort of anecdotal storytelling, but just really positive. During the course of the last week, I attended various events. The initial one was run by good friend of the trackpack, Dave Ferguson, at the CEO of seql, brilliant presentation. They've written, they've just produced a new paper. The whole thing is called, gradually, then suddenly, talking about tech innovation across the sector, a lot of what they're doing. I've posted a link to that paper in our show notes, if anyone wants to go directly to it, download it. It is a good read. I left that and went to an event held by the founder of close personal friend previously mentioned on here, forensic, who are doing these, the democratizing Lombard, lending, borrowing against your portfolio, again. CGT, planning, more and more interesting if you need more money, sort of short term anyway, there was a fabulous event held by him and his colleagues, and it was a bunch of other kind of tech entrepreneur people in the room. A bunch of conversations with them. Really, really exciting. I went along and also met up with Nikki previously mentioned, Nikki Seville from woven advice, who's also doing some good, good stuff. And a couple of days later, I showed up at the timeline event. So Abraham and his colleagues were hosting an event there. And as I said, it was just a series of really positive, optimistic conversations with a whole bunch of people. You know, some are working for these organizations, some are customers and clients of them, and it was a real sense of optimism in all the various places that I went and really positive conversations. It just feels that I've been running, as you know, been running this company 20 years. Always try to innovate and try to capture new ideas, new technology. And another one worth mentioning before I forget as well, and they were out at Future Proof is the guys from the AI company, Saturn, Saturn, yeah, Saturn AI, who are also I spoke with, I spoke with them again during the course of the last week, and they just got a whole new set of tools, which are being rolled out, literally, I think, this week, next week. So all of a sudden, just to summarize, you know, Dave Ferguson's paper, gradually, then suddenly, you know, they're waiting 20 years for this, and it seems that this is arrived, and the stuff, and a lot of this stuff all speaks to each other. And it's just there's a kind of, there's a new sense of optimism for people who are embracing this stuff. The point being here, if it just makes all of our lives simpler easier, all connected, less issues, less complexity and less cost, it enables us to deliver better quality services to a wider audience of our clients. So I just wanted to say that be optimistic and be positive about the future because of all these innovations that are coming down the line. Andy, I'm

Andy Hart:

going to steal one of your quotes here, which is a rarity. I've never been to a bad tech presentation. That's what you told me years ago, which is, right, always looks fantastic when they're presenting their new tools, absolutely implemented into the business. This is a different story. So last week, you only went to 14 events. How many events you got this week? I've

Alan Smith:

just I've got 12 this week. What else? What else can I do? What else can I do? So that's good, but that's but that's the point. No, but it is. It is. I've been to so many of these events over the years and promised, but there's almost like the difference in in time. If you speak to some of these unnamed tech providers, to ifas in the past, they would say, you'd ask, Well, what about this? It'd be great if we could have x. And they say, yeah, that's on our roadmap. Right right now. Where we're speaking in September, they'd say that would be q2 next year. And you go, Oh, okay, fine. And then q2 would roll around. They say, Well, we haven't quite done it's more like by the end of the year, and it's like months, and in some cases, years, and sometimes this stuff never happened. The sense of urgency, the speed that I'm embracing now. So I would just say something, is this available? That's that's available now, or this is coming, literally, by November, that would say guaranteed, for sure on the delivering so the speed at which things are changing is fast. Yeah,

Carl Widger:

I think Alan part, part of that is, I share your optimism, by the way, and I've had some of those discussions as well. I really think we're on the the cusp of something great. Of I think as well as you know, all the systems talking to each other, it will make us slicker and make us look better, and, you know, just make us look more professional. After all, that's what we're trying to do. But I think part of the reason for this is the incumbents are. And are gonna, actually, some of them are going to be left behind, because that's what you're talking about. Oh, yeah, we look at it in q4 next year or whatever, right? We now have disruptors, yeah, who are, who are coming in and going, this works? Yeah, here's here we are. We're ready. Let's

Andy Hart:

implement a

Alan Smith:

lot quicker. Some of the incumbents call it's just, it's literally impossible for them to change because of the kind of legacy technology that I built the entire world, the entire platforms are based on, unless they scrap it and start again. I mean, I'm no expert, but I've had a few chats with people who can know about stuff. They just doing it even best

Carl Widger:

will in the world. They couldn't Yeah,

Alan Smith:

just Yeah, it's good. All good, good stuff. Yes, US ridiculous. Moving on hockey.

Nick Lincoln:

Docky, good, good one to end on there. Adam, thank you for that. Okay, so we're at 51 minutes. Christ on a bike. Let's move on to the meat and potatoes of episode 54 of the award winning real advisor podcast, and this one is about breaking bad news. Breaking Bad news to clients. If you are a real financial advisor, you need to be, and you will find yourself having to break bad news, perhaps more often than you like, because we're here to tell the truth, and it's not always pleasant voice. You had an experience of that recently as a real financial advisor, talk to the dear TRAPPIST about your experience.

Carl Widger:

Yeah, I we chatted about this privately, and I kind of just told you the story. I'm gonna probably skirt around some of the details, if that's okay. But part of our our contract with you that I might have mentioned before. You know, one of them is, we will tell you the truth about your money. And I know when I was setting up and started my business, I would have been probably, number one, afraid to tell people the truth about their money. And number two, secondly, thinking about myself, I would have been afraid of not being able to get business out of that person if I told them the truth about their money, but I do think is really, really important, because I had a husband and wife, um, this only happened in the last week or two, who I've known for a good while, but they haven't really ever engaged, and he's got a fairly serious, significant job that's really well paid but has probably not controlled, is spending much over the last couple of decades and is now mid to late 50s, and is what right? When can we retire? We're probably, I'm probably looking at maybe a year or 18 months do the financial plan, and unfortunately, that's not going to be possible. And I would say this serious and well paid job is also highly pressurized. And I'd say he's coming to the end of his tether. And he, number one, didn't like the news, but his wife was devastated with the news. And look, sometimes we just gotta front up and just tell them. And I probably reflecting back on the relationship I was in and I was out, kind of thing with these, with these folks, I probably should have been way stronger with my message, although I delivered my message back then, right? I should have probably been much, much stronger, and then, you know, that's that's reflecting on that one and happy to kind of tease that one out and talk it through. But last year, had a a husband and wife team who ran a business together, sold their business and made probably just about enough to see themselves through, but maybe a little bit of consulting work or something like that over a period of time would have just added that little bit of layer of comfort that they would have needed. But what did they do? They wanted to, well, one of the parties of the husband and wife team, wanted to go back and invest in another small kind of business that could have gone great, but it was going to lock the money up or whatever. And I was very strong last year, right? And this is what I wished I was much stronger with the previous couple I spoke about, and I went, that will be a terrible idea. And if you want to do that, I'm not sure that we're the right fit for you. And he didn't do business, and he got a bit cross with me, and perhaps called me a few names or whatever, right? And I just went, look, it's, we're just not for you. Let's just be professional about it and just walk away from each other. So look, I just, I just thought, because I set out in the in the first story, I said, because I set my stall out probably 10 or 12 years ago with these people, and I was a little bit softly, softly, and I was trying, you know, over a long period of time to, you know, be more firm with with them, and tell them the truth about their money. Because I set my stall out poorly at the start. It made it difficult. From my message to land at all. And I would just encourage you know, I know that there's tons and tons of younger advisors. Most of the reviews we read out are from younger advisors saying, Wow, this is great. So look, if I could just say one thing to the younger advisors, if, if they're not going to listen to you, if it just feels off from the off. Just don't go there, because it's just going to cause it actually does the client no favors, right? So for always about the client number one, it does the client no favors if they're not going to listen to you, but it certainly does you and your firm, hopefully that you're going to build it does you no favors as well. So I just thought I put it out there as a topic for discussion, because I've had a few challenges in the last couple of weeks. And, you know, as I I've been very honest with you guys about them. It ain't all, it ain't all plain sailing. Guys, you know, running a business is difficult, and this financial planning game, talking about people and their life savings and their goals and their dreams and their aspirations, absolutely, not all very straightforward,

Nick Lincoln:

absolutely, absolutely, who was I'm happy to go next on this, because I've got quite strong feelings about this particular subject. I think, I think if you're not breaking bad news on a fairly regular basis. Are you throughout the year, you're probably not doing the job that we that I think you should be doing, that we we all confess to be doing. As real financial planners, people come to us and they want to be told the truth, okay? Specifically, they want to. They want the answers to the eternal question, are we going to be okay. And I think a lot of advisors who profess to doing cash flow modeling pay it lip service, and they're not in a position to tell their clients the truth about their money because they don't do the cash flow. And without the cash flow, you can't tell clients good news or bad news. You want to be able to break great news to clients, but you have to be there also to tell them the bad news, to tell them the truth, so at least they can do something about it. Out of control, spending is a horrible one, isn't it? Because, just like you know, you're an adult, you're talking to adult adults, maybe typically older than news people who have achieved some success in life. But as soon as you think there's a spending pattern is that control, you've got to tell them the way, that's pretty nice, and say, Listen, you know, we engaged on this basis you're spending at that basis, your pots are going to run out unless something changes here. So, you know, let's, let's just review this and in a year's time see how things go. But you the moment you think the spending is out of control, there are always one off expenses, right? There's always going to be the extension, there's always going to be the replacement car. There's going to be a special on the boat. Was gonna be discussion about but, but if that becomes a set in habit that actually those, those sort of a gratuitous expenditure, become part of the regular expenditure, you've just got to you're doing them a favor. You're doing you're treating them as human beings. You're you're speaking to them the way you would want to be spoken to. You might not want to hear it, but you've got to get it out there early on. Nick,

Carl Widger:

yeah, and I just jump in on that particular Just on that point, because I have tried to deliver that news in two ways right. Number one is the way you just said there, which is Mr. And Mrs. Client, you're spending too much this. You're going to run out of money. If you can reframe this slightly, I think the message will land much, much better, okay? Or it'll maybe be taken on board. So what I will say in that scenario is, I'll go, this is not a budgeting service. What I'm going to do is I'm going to take what your your lifestyle expenses are, and I'm going to put them into the plan, and I'm going to tell you if you're going to have enough money to see you out or otherwise. So by by, by reframing just very slightly to you're spending too much. To this is not a budgeting service. I'm just going to put the real, the real spend in and tell you when you're going to run out of money, if at all. I think that very subtle change will help any financial planner deliver they overspend discussion with clients, because it can be a real difficult

Andy Hart:

I think you're I think you're right there, Carl, and

Alan Smith:

by the way, it's not binary. It shouldn't necessarily be. You're going to run out of money. You're spending too much. Are you positioning it like this is a collaborative process. Let's work together to run through some of the options. There's always options you could, if you, if you literally cannot spend any less well. Some of the plans could also could change. Do you want to, you know, what is the investment portfolio? Is there an opportunity to get a higher rate of return longer term, or be it that might come with a little bit more volatility? Are there plans to, you know, gift assets to children that might need to be curtailed, any number of different variables. And I think the idea of working collaboratively with your client. See, how can we solve this challenge 100% that we've got rather than but at some point you might exhaust all. If there's no, we're not going to change that. Not going to do this, or at some point that comes, you have to, yeah, you have to sort of stick to the plan. And just say, we can't probably help you any further than this. But Nick, you want to carry, I'll

Nick Lincoln:

just, I'll just close my mind the moment hand over to Ultra. I

Carl Widger:

mean, sorry, sorry. Nick, no, no, it's

Nick Lincoln:

quite great. It's got to, otherwise it becomes a monolog. So thank you for the interjection. I would say that, and I just want to have this back then, if you're not breaking bad news, you're not, probably not probably not doing the job. You're not doing the job properly. You're not doing the job well enough, most of the time, you'll be giving good news. But you can't just be giving good news without something's coming across a case where you're giving break bad news to somebody. Okay? But the fact is, if you're doing proper financial advice, if you're building a bespoke, meaningful cash flow that's really aligned a couple's goals and aspirations with their money, then you are the one person in this world who can tell them the truth about their money. Yes, it's based on a whole range of assumptions and what have you. But there are many financial advisors who just want to shuffle bits of paper, look at projections from pension companies and so forth, and just charge their take their clip and then and push away, and they'll never answer the question, because they're not in a position to answer the question. And if it's not lying, but it's lying by a mission, it's lying by admission. Our job is to tell people the truth about their money and to answer the one key question, and that will involve Breaking Bad news. And if you're a younger advisor, suck it up. It's part of the job. As I said, the great thing about breaking bad news is, most of the time you're delivering great news, sometimes you've got to deliver the bad news, right, right? Ultra

Andy Hart:

Awesome. Great points. So far, I got a few points to throw in the mix Carl was alluding to earlier on. It's a sort of trait I look for in clients. Is their teachability? Certainly in the early stages you're discussing various points, are they open to these new ideas? Are they just pushing back immediately? So teachability is a trait that I look for in clients subtly the other points, yeah, we're here to deliver the unvarnished truth. At times it can appear like tough financial love. When I was putting some notes together for this earlier today, the two key words that came to me were competence and confidence. When we first start out in this business, clients can dictate the direction of travel how we're going to provide advice. The more competent you become, obviously, then leads to more confidence. So now most of us have shrunk our circular competence, and we know the right thing for clients. So yeah, we're now we deliver, you know, radical cat can radical candor delivered with, you know, kindness, let's say, and also we deal with Andy

Carl Widger:

just on that point, before you go on to the next one, like the younger advisors who buy into that will thank themselves in the future, I promise you. And it's hard to do when you're when you're when you're setting out. So just just to say that, no,

Andy Hart:

thank you, mate, thank you. You know, I've often said to clients along the years. You know, I don't want to be a co pilot to a financial sinking ship. The main thing is running out of money. And Nick has alluded to you can only tell someone if they're potentially going to run out of money or not if you've done a financial forecast with all the caveats of anything can happen. We've got loads of financial levers to pull. Obviously, the experts know that we've built hundreds of 1000s of plans of real clients, year in, year out. Also, wealthy people are often surrounded by yes people, you know, successful business people, yes, yes, yes, yes, yes, yes. We come along, go, No, you can't do that. That's wrong. That's bad. Change that. What you're doing here, some people take to that, and some people push back against that. I found the sort of smarter, wiser business people over the years, they take to that sort of no person. I'm happy to be people's, believe it or not, I'm a no person, and when I come into their lives, sorry,

Nick Lincoln:

you're spot on. You're spot on with that. I mean, we are really. We break bad news from the get go, don't we, you know, Mr. Klein, Mr. Mr. Prospect. Well, you know, what's your economic prognostications? How do you review what's happening with the markets? Well, we don't. Well, how do you time the markets? We don't. How do you pick your active fund managers? Well, we don't. Everything they want. We're taking yes to we say,

Andy Hart:

yeah, yeah. I say that, if you actually end up becoming a client of mine, you've heard no sort of, you know, 25 times along the way. So if you actually are at the end of that no ladder, you're here forever, because a lot of people fall by the wayside along the way. And the other thing is, yeah, wealthy individuals, it can be isolating, like they can't talk to their mates, they can't talk to their family, so speaking to us is quite a rarity, so only if you're quite young and financially successful. You know the sort of challenges of middle class millionaires, let's say so. Yeah, it's quite an interesting subject. My final point on my situation, most of the clients I take on now, I'm pretty sure I'm not really going to run out of money, just sort of the level I am the clients I take on, but I've got a historical client bank that there's a few people that are quite close to the line

Unknown:

took repertoire in Andy. He knows about everything, and he can't be told anything. His name is Andrew Hart. Andrew Hart,

Andy Hart:

yeah, my final point. Is, I'm sure there's lots of people listening to this who are, who are a certain point in their career, that the new clients they take on probably wealthy and unlikely to run out of money, but they've got a historical client, Bank of clients that are close to the line. But we feel an obligation to look after these people, because they, you know, came with us when we started our businesses, you know, originally, so they're the clients that we have to have a, you know, a louder word in their ear. Anyway, that's my final point.

Alan Smith:

I'll tell you one thing about this. Maybe this gone. Then Nick, go. Go. Was my turn. Now. Thanks there's one. There's one thing about this, this group, the four of us in our private WhatsApp chat, there's some radical panda going on in there. I can tell you, there's, there's no beating about the bush in that particular group, telling the truth really, really important to me and my company and colleagues, so much so that it's one of our five core values, five C's, which includes collaboration, creativity and candor, and actually, it works both externally and internally. Telling the truth to your colleagues as well, even when you've got a point you disagree with. I think it's really important. There's books written on this subject. There's so many businesses that struggle because people aren't prepared to confront leaders, colleagues or anything else. They've got a different view, different different opinion, but they think, just keep it to myself. I don't need to add any aggro in my life. I just think it's really important we do our best in my business to try to always tell the truth. Do it professionally, do it politely, but tell the truth to each other. And of course, that applies to our relationships with clients. When we when I knew we're going to talk about this, I sort of reflected back on where we'd had challenges with clients, and some have worked by telling the truth and some haven't. It was a client we were speaking with a few years ago who was exactly in that thing, absolutely on track to run out of money relatively early, and would not stop his spending habits. Used to bring his wife into the meetings, and all of a sudden she stopped appearing. And there's a dilemma there as well for us as the family, does the couple? Does the other half know that they are heading for financial catastrophe 10 years from now, if they carry on like this, and it was really awkward, and to the extent that we had a kind of, just a fight, a meeting, saying we can't, in all you know, good conscious, carry on and advise you. We're telling you you're getting for a slow motion car crash every year, we engage, we update. And by the way, this was in the back of fantastic investment markets and investment returns. Had you gone through, which could have done, at any time, a real, significant market correction, which is, you know, not only possible, but not only probable, but guaranteed, it would have been much, much worse. So I was constantly thinking, this is a real problem for us. And we said, at one point it was a kind of ultimatum, we are going to have to resign from managing your account. We call all sorts of alternatives and solutions and things in terms of how he could, you know, manage the situation, and at the point of us just stepping away so we can't carry on, he said, No, fine. And it took that for him to change his spending habits. It was a lot of extra expense in terms of, you know, quite expensive holidays, changing cars quite more regularly they needed to do. And he's still a client now, and he's pretty much back on track. Yeah, he downgraded his lifestyle. Moved to

Carl Widger:

North Watford. He wasn't

Alan Smith:

ready to compromise on that, that sort of lifestyle. I don't know who would Oh, and yet the other one, which didn't work out so well, which other example of telling the truth was 2020, we all cast our minds back to that markets absolutely fall off a cliff. One particular client comes and says that one that you alluded to a minute ago. Nick, what are you guys doing about it? What are you doing about it? And we said nothing. It will recover. It's in the plan keep going. And it just didn't like it. It just, you know, we did our best to you know, you constantly, you repeat yourself, you look back, should, were we not strong enough when we took the client on? And you think, well, there's not a lot more that we could have done initially,

Andy Hart:

in our early days, it wasn't teachable. It wasn't

Alan Smith:

wanted action and activity. Just, do you know, do something I said we are doing, and it was just, and eventually, he just sent an email say, I'm sorry. I found another advisor. I won't mention the name, well known national actively trading manager that send out weekly portfolio update. It's about worrying, you know, what the dollar is going to do, and the yen trade and all that sort of stuff. So he was, you know, intellectually satisfied with that, because somebody appeared to be doing something. And we lost that battles in his life. Yeah, we lost that battle. I regretted that, because he was a good guy, good client, good family. And I know, and it's, this is a bold statement. I know he'd be worse off long term, 10 years, 20 years down the line, knowing

Carl Widger:

he's worse off now, yeah, if he stayed with you for the last four years, you wouldn't you don't have to wait 10. You

Nick Lincoln:

lost that battle something, but you're going to win the war by sticking, pleading to you, cleaving to your beliefs. Got

Alan Smith:

to and it would have been easy for us to say, look, okay, well, you know, to keep the client, keep the fee. We can say we'll move you to a discretionary manager. They'll take they'll up, give you daily updates if you want them portfolio. But we can't, you know, you've got ideals, you've got values, you've got what you believe in, you've got your north and you've got to stick to a principle, stick to it through thick and thin, and you will lose clients as a result, and you can't win them all, yeah, but they tend to be replaced quite quickly as well. Someone comes and,

Andy Hart:

sorry, I was at a barbecue barbecue once, and a guy there, I know he's got a few quid, he come up to me and said, Andy, I want to have a meeting with you. I've had five philanthrovisors, and they've all been terrible. I'm thinking as if I'm going to be the freaking red flag. Yeah, all five of them have been terrible. Not his name.

Nick Lincoln:

Thank God you told me before I wasted

Andy Hart:

much time with you. Yeah, that's the best thing you could ever say to me in the opening line next year's

Carl Widger:

barbecue I had, I had Andy Hart as my advisor. Jesus. He isn't a clue what he's doing. Oh, he's awful, but you could it's just

Alan Smith:

my seventh financial advisor. Yeah. Look, you've kind of mentioned it before. Andy, we act. One of our roles is accountability coach, both in terms of encouraging people to save money, invest, stick to the program and all that. And that's what we are called to do for these people, and it is easier to give people what they want as opposed to what they need. So you stick to your guns. You act as the accountability coach. It is referenced in detail Nick I think you might be mentioning it later. But the book that I mentioned before, David Baker and his book, he talks about order takers versus truth tellers. Are you an order taker or are you a truth teller? And he said, truth telling takes courage, and not everyone's got it, but if you've got courage and you tell the truth, you will lose some of the battles, but you will always win the war, and you'll have integrity. And you look yourself in the mirror, you say, I'm doing the right thing by my clients, by myself, by my firm. So I rest my case, you're Mitch.

Carl Widger:

Mitch, Mitch, Anthony's phrase, our job is to hold our clients feet to the fire of their best intentions.

Nick Lincoln:

Okay, very good, very good. We gave that damn good thrashing, that meat and potatoes, and I hope, dear TRAPPIST, you and you enjoyed that as much as I did listening to the Mr. Trap pack. Okay, Tempus is fugitting at a rapid click. It's 73 minutes in, and we haven't even yet got to TRAPPIST questions. But luckily, I can see posters at the front door, and she's hauling the bulging sack of TRAPPIST questions up my driveway. You can leave a question via the link in the pinned tweet. Also, there will be a link to that in the so called show notes, and we're getting through them gradually, but we've still got quite a few to go. So let's see who the first one is from. Let me open up this letter here. This is from Darren F. Now Darren F, I don't know if you wanted to remain anonymous or not, but sadly, you also put your LinkedIn profile in there, so I know your name is Darren Ford, and as I want to put the LinkedIn link in the so called show notes, it's out there in the public domain. Hi, guys. I'm a newly qualified IFA, I know you're all pro global equities, but wanted to hear your thoughts on shifting client monies into mainly dividend paying funds when they're close to retirement, and whether you think this could be beneficial for particular clients, slash circumstances, right? Della vocci has turned off his camera and his microphone, so he's just gone out. Sorry for cigarette. Probably I'm happy to run off with this one initially. I think, I think I think historically, it's a it's a good question. Darren from especially if you're new to the profession, that would have been the way to do it. That's probably the way you're taught to do it in textbooks. I guess I would avoid clients in income class, in retirement going to income based funds, if only because dividends are lumpy. They're irregular and and it's your fault if the dividend is not at least as much as it was the previous quarter, six months ago, I go for a total return, a total return kind of approach, if. And this is that. This is the reason why. And this, whilst the penny dropped on this, it became bloody obvious, if you've got 100 pounds in a stock and it announces a 5% dividend, it pays out five. Five pounds, the dividend, the share price, drops by that equivalent amount immediately. So your shares are now worth 95 pounds. So once, just take the five pounds, not

Andy Hart:

it's not that cut and dry, but no, it's that cut and dry. It's not it's that cut and dry. Okay, otherwise, people gain the system. It is absolutely that cut you're smart, and I'm right and should relate you realize I'm right.

Nick Lincoln:

Okay, right? Andy, okay, then go and go and go and work on that and be a millionaire and work the edges. It's absolutely that cut and dry, the share price drops by the amount of the dividend. So why not just take a slice of the total value of the share portfolio? You know, accumulation units work out. What's the sustainable withdrawal rate? Obviously, there is no such thing as a 4% withdrawal rate, because that seems we're all exactly the same, and we'll have exactly the same life. So we don't know. Again, with the cash flow coming back to the meat and potatoes part of this program. If you're doing the cash flow for everybody, you work out a sustainable rate of income across a client's income across the class portfolios, rather, and you take that rate, but you take it as a total return thing. That's how I would approach it. Guys, your thoughts,

Andy Hart:

I agree with you. Top return the just to answer his question directly, I think, I think there's a couple of points here. I'm maybe assuming. He's assuming, because that client is now in retirement, therefore they need income to fund their lifestyle. So therefore we need to create income in the investment portfolio, which we do in a slightly different way. I've done a bit of background research to this question. Actually, there is a well known fund manager that has a high income dividend global equity portfolio, the yield at the moment is 2.97 let's just round up and say three. I think our 100% global equity portfolio is around one, 1.2 1.3 so the discrepancy is high in terms of percentage, but in terms of overall return, nothing really to shout about. I know you can get, obviously high dividend paying funds that are probably paying five, six, and individual stocks that are paying 678, you know, pick a big number. But no in terms of managing the cash flow for the client, I'm happy with total returns for various different reasons. That's it. Over to you. Alan,

Alan Smith:

yeah, I think this has become, this is a bit old fashioned. This, this idea of investing in dividend paying stocks to generate an income, and what are you going to live on? The natural income, the yield that are that is provided that's sort of, that's the horse before the cart. Let's just say, whatever income I get, then I'll have to live according to that. This has been largely superseded by people doing real financial planning, where you sit down with a client, you work at what their lifestyle looks like, what their income requirements are, then you optimize for that across all asset classes as appropriate, and you keep a healthy cash buffer to fund your known expenses for the next, whatever, year, two years, three years, etc. It's getting into the weeds. It sounds like, as a new advisor, he's, I don't know, he's read a test textbook or been told by a senior or someone else. I mean, honestly, in the 1980s or 90s, it should be get talked about quite a lot, and not, you know. And it still is talked about. And it's like a Warren Buffett, isn't it? Isn't it? It's kind of value stocks Gen income, generated, etc, but it's, that's, that's a slightly different um, conversation, no, this. The answer, according to us, is, by is expect, look for total return in terms of capital growth and or income, and then work out what your client needs. Build a model, build a plan, apply your cash buffer allowance, and you know, deliver the client. Client needs when they need it. So hope that answers the question,

Nick Lincoln:

yeah. Carl, anything to

Carl Widger:

add? I shocked that it took three goals to answer the question financial planning is a process. And you plan each year, how much do you need in the short term for cash, and you draw that out of your portfolios. For me, as you know, it's first three years, then it's three to kind of eight, nine years, and then it's longer term. It's 100% equities. So you can decide where you're going to pull the money out of, and what parts you're going to pull the money out of it's financial planning. You don't need dividend income, and that goes back to this 4% and the guardrails. And it's all a lot of all shite.

Andy Hart:

It works on a spreadsheet, on real life. Yeah, it's

Carl Widger:

a lot of crap. I'm sorry. It is financial planning. And take decide, you know in advance and what you need for the next two or three years. That's where you get your income from noggins,

Nick Lincoln:

1994 Opus. I mean, it's essential reading if you're dealing with human beings. But

Carl Widger:

it's not, it's not it's not a, it's not a, it's not an old fashioned or a stupid question from whoever the our listener. Because this still prevails in

Alan Smith:

our business, saying he's he's been somewhere Exactly. It's legacy thinking from a different era. There's no

Andy Hart:

such thing as a stupid question, only stupid person.

Carl Widger:

Yeah, right. Good cliche there. Andrew,

Nick Lincoln:

yeah. That's okay. I'm tempted to play the Andy Ultra one again, but I don't do Okay, so let's so there you go, Darren F known on LinkedIn as Darren Ford. Hope that answered your question, and I hope you enjoy this mighty profession, this thing of ours that you've entered. Once you're in, you can't get out. Okay, let's move on to culture corner.

Alan Smith:

Quick one. Nick's close personal friend Josh Brown, who runs a podcast for advisors in the US called the compound. Believe it's called compound and friends, something like that. He runs about 20 podcasts. Yeah, he does, but he is, he did, as is being mentioned already on this conversation, he's very much part of the future proof festival in California, and as part of that, I saw he interviewed. We've also mentioned this guy before, Peter maluk, creative wealth planning in Kansas City. It's a great interview. I never tire of hearing Peter malouk. He's very modest, very humble. He is at his firm is at over $300 billion in assets under management, so like nearly double the size of St James's place in this country. And they're an independent fee based use low cost index. I believe they're a big dimensional user as well, but that's what they do. So, you know, don't tell me you can't scale financial

Carl Widger:

financial planning,

Alan Smith:

financial Yeah, they have. They have done something like 37% compound annual growth for the last decade. I think it's just extraordinary what he says. And it just seems, you know, quite a humble guy, quite down to earth. And he just explains a lot of how he's done it. He talks about, you know, the metrics that he tracks. He doesn't really like, as, I don't really love AUM as a measure, because he was just making the point about helping families. We just want to help more and more, more and more families. But AUM is a measure that the industry focuses on. But it was, it was, it's 37 minutes long, well worth listening to or watching um, because he's full of little gems. And there's wisdom for all of us. Whether you're new to the business or you've been doing this stuff for decades, it's excellent, I would suggest.

Nick Lincoln:

Thank you. Okay, yep. Love Peter maloo, as does a long time. Listen to the show and friend of ours, Sam slomer, so Sam, if you listen to this, there's your Peter maluk reference for the episode 54 of track, okay? Me, yes, referring back to a book that storyteller mentioned earlier, David Baker's secret trade craft of elite advisors. It's not, it's not directly written to financial advice advisory people or financial advisory firms, but the lessons you read from the book can be easily used in building a really good financial advisory process. And as Alan mentioned earlier, you want to be the person that tells the truth. You do not want to be an order taker in this business. And if you get nothing else from this book, get that but he writes in a very, very direct, pithy style. He's American, but he's got some of the Brett Davidson, in him and in the way he writes. So I was just to get the secret trade craft of elite advisors, and then I've got two quick very quickly, Rory Sutherland, who is, of course, a close personal friend of the show his podcast, he had Samson's head of marketing in Europe, a guy called Benjamin Braun on his show recently, and it's really, really interesting interview. Benjamin brawn not like your typical high ranking C suite executive. He's very just Yeah, makes sense. He's entertaining. And this is how good he was as a speaker and how he was listening to Rory didn't dominate him in terms of how much time Rory was speaking for. So listen to that. There's link to that so called show notes. Okay,

Andy Hart:

you okay. This is my book recommendation. This is from Robert Greene. I listened to this book, originally called the laws of human nature, but I bought it online the other day, and it's a slight tweak to the title, the concise laws of human nature. So the book is actually half the size. This is like the size of an iPhone. I quite like these books. I've gone back to physical books, and the smaller the better. So if anyone is listening to this, we've got any recommendations for small books that are physical, concise color red. Yes, we've got a great set of crayons with it. Yeah. Please do let me know

Alan Smith:

I think your four year old twins have got some books, some small books you could read as well. It's brilliant. I

Andy Hart:

love these books. They're just like, so handy anyway,

Nick Lincoln:

on ones, isn't it? Show your work? Are they all quite six? Yeah, dinky, yeah. Anyone

Andy Hart:

got any recommendation for basics books? Let me know.

Nick Lincoln:

Thank you. Carl, IKEA wardrobe. Yes, sorry. Go on, almost embarrassed

Carl Widger:

to say that I've only just finished the psychology of money by Morgan Housel, here's the thing, right? I don't know what bias got into my head that I decided I didn't like Morgan Housel, I would like to publicly apologize to Morgan Housel. Yeah, the book is absolutely superb, so good, in fact, that I bought a few hard copies to give to clients. If you haven't like me, and you're embarrassing yourself like me, that you haven't read it yet, and you're in financial planning, then you need to go and get it, please. It's superb. It's

Andy Hart:

brilliant. Yes, 20 chances, which is great, 20 amazing stories. Yeah, it's really good. Actually,

Alan Smith:

it would be fair to say that Morgan Housel is a close personal friend of Andy and I isn't that, right? We five almost. That's another. That's a whole other story.

Andy Hart:

We'll move on from that story. Yeah,

Nick Lincoln:

yeah. I think close and personal. I think actually, friend is pushing on all three counts. But, uh, counts. But there you go. He's a very well regarded writer. I'm not totally it looks a bit like, for those who don't know, if you never see Andy Kaufman and Morgan Housel in the same room at the same time, he looks like LAFCO off taxi. There you go. And that's, that's who Morgan Housel resembles. Okay, dear Trappist. That is now Andy. I will do my closing Spiel now. So do you want to talk over me halfway through? Want to talk over me halfway through it? That's okay, great stuff. That's a wrap for this episode. Dear Travis, thank you for your precious time and input to the show. Please do leave a rating on iTunes or whatever app you can that lets you leave a rating. Six out of five stars is a minimum. You know it also like and subscribe to our YouTube channel. That way, you'll get an annoying notification on your device of choice whenever a fresh part of trap drops out of the sluice. But until the next episode TRAPPIST, it's adios. Take care out there, and we'll see you on the other side. Goodbye, goodbye.

Unknown:

Bye, y'all. How All right, what's that book?

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