55 - Slow Motion Wealth Destruction

In this latest pile of TRAP, the Trap Pack discuss

• Topical Titbits including conflicts of interest, Mind The Gap, why the bucket approach works, CTFs, Kathleen Gallagher on wealth managers fiddling with the graphs, UK and Irish budget forecasts/reactions, Keith Butten (Boosst) masterclass, new HL active savings site, four things clients value most from advisers
• Meat and Potatoes: Slow Motion Wealth Destruction
• Questions posted by our beloved TRAPist Adam Ellul www.linkedin.com/in/AdamEllul
• Culture Corner

Show links: http://tiny.cc/traplinks

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Transcript

Unknown: 0:06

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.

Nick Lincoln: 0:42

Yes, indeed, dear TRAPPIST, welcome back to what many people are calling episode 55 of the real advisor podcast, T, R, A, P, Trapp. My name is lick nincom. Joining me as ever in the digital studio of doom are the three other Horsemen of the Apocalypse and the ultra heart. Carl delabot widget and Alan the storyteller. Smith, Now, gentlemen, we have a show packed full of app, absolutely nothing. So let's start unpacking it straight away with some more high energy review reads, read out by my very good friend the right time rogue Mr. Andrew Hart,

Andy Hart: 1:16

thank you very much. Nicholas, the first review is from Hamish Monroe entitled fantastic five stars as a relatively new entrant and second career as the podcast is invaluable. Plenty, plenty of takeaways from every episode, and plenty of cutting through the proverbial rubbish. This profession gets embroiled in decades of stories, UPS, downs, jingles and close personal friends make it an engaging listen. Final review is entitled just what our profession needs. Five stars. As a seasoned financial advisor, I have to say the real advisor podcast is a gem. Having only listened to a couple of episodes, I was quick to share this with all our team of younger advisors and encourage them to listen on a regular basis. The topics are relevant, the messaging is spot on and just what our profession needs. Highly recommended. Mike Mullen Hughes back to you. Nick,

Alan Smith: 2:05

can I just say, Wow, lovely. Can I just say? One quick thing watch is, we really, really appreciate these reviews. These the reviews which go up on what Apple podcasts. Yeah, we and, as you know, because we all share them amongst ourselves, we also get, like, private messages, DMS and stuff on LinkedIn that are fantastic as well. And I encourage anyone who's just thinking of sending us a private message, could you please just post it on the Apple podcast platform, because it helps with our helps with our reach, and it helps the podcast in general. So just what I thought I'd

Andy Hart: 2:41

say that just to reiterate, just to just to reiterate the apple thing. If you don't have an Apple iPhone, you know, your partner might, your children might. So just get onto the apple podcast app platform and leave a review. It'd be great. Thank

Unknown: 2:55

you. Yeah, yeah,

Nick Lincoln: 2:55

absolutely fantastic. Really, we're getting loads of nice things said about us at the minute. I'm sure it'll revert to the mean at some stage, but it said it does give all four of us a shot in the arm. Okay, so episode 55 somehow made it through 54 episodes to date, and we're on to 55 and let's give 55 a timestamp with some topical tidbits. What's going on in this great thing of ours? Uh, Smithy, you're starting off,

Alan Smith: 3:22

I saw a an update of recent report created by Morningstar, and it's called, you know, mind, the gap this. This is an up. This is something they produce quite regularly, and it's what it does is it analyzes, in quite some detail the actual investment returns received. It's a bit different to the DALBAR one, which is a different one, which we can talk about separately, but this is one that tracks money flows in and out of mutual funds. It is in the US, but same rules would apply in the UK, Ireland and around the world, I'm sure, and what they indicate, and it's a number of different factors that arrive at it, but effectively, they say most retail investors underperform, not the market, but the funds that they invest in, by about 15% and why that is, is because People will move into funds often after they have experienced an uptick in their performance, and they'll move out if there's a temporary decline. So there's quite a lot of movement across different funds. So say you chose a particular fund, and it, you know, it showed you there on their marketing materials, it showed they've done 12% a year or something most investors, and it doesn't really determine whether they're advised or non advised, but a lot of investors will trail those returns simply do due to market timing. And what it says is those that are likely to actually receive the returns that the fund itself creates are those that tend to stick with the fund so. And so therefore it's another positive for those who effectively Buy and buy and hold, build your rolls, Royce engine, build your investment structure, investment portfolio. Sure, rebalance and do all those things, but don't be chopping and changing and moving from one fund to the other simply because maybe there's a period of underperformance, or there's been some super, super performance, and you're trying to sort of trim your your winnings, as you sometimes say so. And the other thing, sometimes these reports do get come in for some criticism from the usual suspects. We all know who they are. I would say Morningstar as a research house, really are one of the best variable. We've got some to me anyway. I've read a lot of the stuff that comes out of Morningstar, based in Chicago, and they just seem to be very robust with their research and with the analysis of markets. And so we've posted a link to this report. It is helpful to those who are advising clients. Carl, did you have a point?

Carl Widger: 6:02

Yeah, just so you mentioned the DALBAR study, which is kind of similar, as you say. But my favorite study on this topic was fidelity. Did a study many years ago at this stage, and I think it's kind of infamous now, at this stage within the financial planning profession. So they did a study on who the most successful investors were. So the most successful investors were those that were dead.

Alan Smith: 6:30

So that's right, you can't, yeah, you

Carl Widger: 6:33

can't, obviously do anything to your portfolio if you've passed away. And the second most successful bunch of investors were those who forgot about their plans, who forgot that they existed, and then by a distant third, was everybody else. So look, people can say what they want about these studies, if you just give no matter. This isn't about active or passive, or, you know what fund you're in, just leave. And I think that's the point about the Morning Star, isn't it, that it's like you actually got 15% less than than the fund returned. It's just leave the bloody thing alone in the long term. And the market has a hap has a habit of doing its thing. So it does, but it but shout out there. Alan,

Alan Smith: 7:19

yeah, I have to say, before we get bombarded with various people, that dead person's survey is is questionable. I think no one's been able to actually find the original source, as far as I can see. But it is talked about quite a lot, but there's no question. There is no question that you know, holding for the long term. But as I think this is a bit more subtle than people just moving out and moving to cash. This is, you know, they're still in the funds. They're still largely invested, but they're kind of chopping and changing the waiting for returns to have a three year performance track record something before they buy them. And similarly so, it's slightly more nuanced, and it does challenge the kind of, if you like, the discretionary portfolio managers, that kind of approach which does exactly that is sort of identity, tries to identify the good funds, God knows what, it's based upon past performance, and then moves the funds around. That is their kind of value proposition. Will chop and change, will buy and sell, depending on our view of future markets. So it questions that as a basic strategy. Lick nincom, yes.

Nick Lincoln: 8:21

Thank you, storyteller. And for those who watch you on YouTube, and if you happen to be an employee of Riverside, you've got this fantastic high tech platform. We used to record the podcast, but if one of us wants to speak, we actually have to hold up our fingers physically, like cretically, surely must be like a reaction button, the same way the Zoom has where you can just say, Listen, I want to go next. Anyway, that's by the by, I think the classic example of what you've just mentioned there Alan is the is the cathwood arc Fund, which, which, which had that just amazing performance. It really was amazing. But there are other charts showing funding flows going in just as the performance craters off a cliff. You know, people chasing past performance, people who went from what probably the vast amount money going to Kathy Woods bum was from other funds, people selling out of funds, looking at the performance and thinking, I want some of that going into it at just the wrong time, of course. And they'll probably, when we see the next iteration of those graphs, you'll see all the outflows will be right at the bottom of her of her plummet. So it's human beings, it's, it's, it's, it's never, never going to be resolved. Thank goodness for us. Okay, I think we can go on to the next topic, and that is, that is ultra okay.

Andy Hart: 9:30

So this one is from tax policy associates. This sounds dreadfully boring. This is a real deep dive about 32 ways Rachel Reeve could raise this 22 billion that she's talking about. If you're into sort of deep dive information, all about tax, then I recommend you check it out. It lays out all the current taxes and what they're bringing in, in terms of revenue in the UK, and then possible proposals that she can implement. There's a guy on Twitter, Dan needle is. Guys follow him. He's very, very outspoken about, yeah, got some good information. So, yeah, it's worth checking out what they've just put out in relation to this. He's got 169,000 followers on on x, so he knows his stuff. Yeah, that's it really, yeah. Check out the links and just

Alan Smith: 10:18

on, just on that subject, on the other award winning podcast and as the bulletproof entrepreneur. A few days ago, I spoke with Nimesh Shah, who's the CEO of Blick Rothenberg. He was one of the top tax advisors in the country, and he said, he said, lots of interesting things, I think a lot relevant to advisors. 22 billion is such. It's such an irrelevant sum in relation to the 800 billion that's raised every year, heading towards a trillion pounds, which is collected from taxpayers in the UK. It's a very, very small rounding error. And, yeah, it's quite interesting, where a lot of things he says, So do check it out. Good conversation.

Nick Lincoln: 11:01

That's it's not it's not the it's not the tax, it's not the money coming in. That's the problem. They've never had so much money coming in fact, they can't stop the money going out. That doesn't seem to be ever on the table until we go broke. And I said this budget is is, and all the budgets I've known in my time being an advisor, this is the one that's hanging the most over the voiceover and done with so we can move on how the land land's gonna lie. There's so much conjecture. People are, people are, yeah, people are more nervous, I think, now, than they have been for a long time with this budget. But it'll be what it will be. And Carl, later on, topical tips, you're gonna tell us about your Well, do you wanna do now? Car is that natural segue into your, your your appearance? Well, I'm not really, but

Carl Widger: 11:39

yeah, yeah. So we had our book.

Unknown: 11:45

I'm joking. You're never ready. I

Carl Widger: 11:50

wasn't ready for the radio interview either. But anyway, so I was on the patchet show talking about the kind of financial planning, pensions implications from the budget. So we had the greatest ever Irish giveaway budget. And it won't be surprising to lots of people that there's an election due here very shortly. However, however, to be fair, there was some long term stuff in the budget which, to be fair, the government should be commended for that. So the increase in the thresholds and the pensions was basically they put out a document on that prior to the budget. So that wasn't really in the budget, they introduced an increase of 65,000 euros on the income or on the inheritance tax thresholds which is to be welcomed. So now parent to child, it's about four. It's not about it is 400 grand prsas have remained unchanged, which is the pension product. We can put it via company as much as you want, in for an employee which is to be welcomed. There was chat that that might, might have been changed. Unfortunately, no change in the eggs attacks, which we will be discussing, that that's that's important for the the meat and potatoes discussion we're going to have later on. And then they brought in this mansions tax, which means the stamp duty for properties over one and a half million is going from 2% to so

Nick Lincoln: 13:28

going from what go from two to six,

Carl Widger: 13:30

yeah, but it's only on the amount over and above 1.5 graduation. And so it's not actually going to have the impact that people and it's definitely a kind of, I don't know, it's, you know, let's get the fat cats kind of thing, you know. And it's not going to have much of an impact, albeit, people are saying it is, but it's actually not really, in my view. Like, if you on a 2 million property, it's an extra 20 grand. You're not making a decision on buying a 2 million property on 20 grand. That's That's what I think. So

Andy Hart: 14:06

it's after tax money in 20 grand a year. I

Nick Lincoln: 14:08

mean, that might be your experience. Might feel differently.

Carl Widger: 14:12

It's not 20 grand a year. It's 20 grand once off

Alan Smith: 14:16

when you pay them buy it, or when you sell it. Yeah, when you buy it, when you buy it, was

Andy Hart: 14:22

an ongoing, it's an extra wealth tax.

Nick Lincoln: 14:25

That's, that's, that's, yeah, that's, that's, that's

Carl Widger: 14:28

gonna have very little impact on anybody is going to bring in very, very little. It's a total another political it's

Nick Lincoln: 14:36

signaling, it's signaling, yeah, by the way, section of your party? Yeah, I

Alan Smith: 14:43

listened to, I think we all did listen to your interview. Carl, very good. I thought it's very good. I'm still astounded by the fact that you guys have got this, effectively withdrawal tax, or whatever you call it, but it applies even if you don't take money out of your investments. Applies to everyone, like, like, we like capital gains tax we've got in the UK. But even if you just invest like, you're still getting hit by leave it alone. Yeah, it's like, just leave it long term. What is it 30 something percent or something? Well, it's just seems,

Carl Widger: 15:14

no, it's not. What is CGT is 33 exit tax is 41 and you must pay it on the gain in your investment after eight years, even if you do not withdraw the money, it's 41%

Alan Smith: 15:27

of the gain you've made, so nearly half the amount you've made, even though you haven't touched it. That seems Yes, yes, incredible.

Nick Lincoln: 15:38

Yeah, two screams in, but that's unbelievable, yeah,

Carl Widger: 15:42

and my argument is, you know that that's so if you go buy a bunch of individual shares, you're paying 33% and you only have to pay it when you take it out, and CGT dies with you. So you know, what they're encouraging people to do is to do investing all wrong. However, they're not actually encouraging anybody to do anything, because people are just, you know, they're just staying away from it, which is a topic we're going to discuss in more detail later on. It is if they have said it is on the agenda. So do be fair to I'm a political as you know, right? But this government have, they've done all the buying of votes through the great giveaway, right? We did 20 with the 25 billion surplus this year. And that's just politics, I guess, but they have done some longer term things. So I would have always said that budgets are introducing three and four year stuff at best, sometimes one and two year stuff, but, but this government have actually done some longer term thinking. And I hope then that the longer term thinking is extended. If they do get into government next year, you know, what they might look at is reducing this exit tax. And actually, when you do the numbers, you don't need the 41 to match the 33 you just need it to come some of the way there for it to make a significant difference.

Andy Hart: 17:01

How does it work? So I put an investment now eight years later, it's 100k 100,000 euro gain. How do then they take that money? Have I got to sell the funds and do it? Or the platform does it automatically? Or how does it

Carl Widger: 17:12

work? So if you're on a platform, you have to do it yourself. So you'll get kind of tax packs from the platform to tell you exactly how much you owe if you're doing it on an insured basis. So via an insurance company, the insurance company pays the tax, it just gets deducted, and it's paid directly to the revenue. Oh,

Andy Hart: 17:26

so it's easier that way. So you admit is doing this all the time with clients, or quite regularly, like, Well,

Carl Widger: 17:33

yeah, so obviously we've most of the business. Most of our business is actually on a platform, so we have to be, you know, these are items for discussion every year at our planning meetings. But

Alan Smith: 17:44

you have to sell refunds to meet the taxi. You got to meet the tax liability. Where you going to get the money. You got to sell the funds. Yeah?

Carl Widger: 17:53

Well, you have to sell the funds. That's what you Yeah, yeah. That's what people

Nick Lincoln: 17:58

do. Yeah, different, different to hear. That's for sure. I hope Rachel Reeves is not listening to this podcast

Unknown: 18:06

she usually does. Moving

Nick Lincoln: 18:08

on this, this, yeah, the meaty potatoes, this, this, this next topical tidbit is kind of again tied to that, and just the lack of the sort of apathy of UK stores.

Andy Hart: 18:22

Yeah, sorry, Nick, go on. No, no. You

Nick Lincoln: 18:24

started now. So you got one crack on. You

Andy Hart: 18:26

started so interesting.

Carl Widger: 18:27

Sounds you made there, yeah. What you doing? Oh, I heard that somewhere before.

Andy Hart: 18:38

Can we get back on the serious topic of lysis. Okay. Nices are a form of ICER, and you can only take them out when you're under 40. Anyway, in the Times this week they came out with their day is

Nick Lincoln: 18:50

my point next happening? Yes, point sorry, it's alright. Sorry, it's all right. So the meaty potatoes is about, is about how our UK public, Joe Public, are so disassociated from the stock market and investing and just don't really want to take any interest in their financial future. And there's an article about this bloody remember child trust funds and other dreadful invention plonks on the British public by Gordon Brown in 2005 they were stuck in microwave, because if your baby was born first of September, 2002 onwards, the government would give you a bung, or would give your child a bang of 250 quid. My son was born in that year, but before the first of September, so capricious policy, he didn't get a bung from the government. Anyway, this child, CTFs brought in 2005 they were scrapped in 2011 another disastrous waste of our money. But there are, there's, there's loads and loads of money, over a billion pounds in unclaimed children or child trust funds in the UK, because people have just, obviously just forgotten about them, have taken no interest. Imagine most of that money is sitting in cash like an ice you could put the money to investments if you. Wanted to. And there are 667,000 unclaimed CTF funds in the UK just somewhere. There's a policy document, there's a there's an email address that's been changed as a password being forgotten, and people just don't have any interest in just looking after financial affairs. And it's just endemic. I think, of the malaise of the UK investment. The UK population's investment approach. Go storytelling. Your digit was raised. I think it was

Alan Smith: 20:28

this reminds me. It reminds me of a quick story I went many, many years ago, when these things first came out. I went

Unknown: 20:42

grab yourself a drink, a very long drink. Story. Time with Alan Smith.

Alan Smith: 20:51

I did think it was a while since we had that drop, so I managed to shoehorn You just reminded me the subtle hint, yeah, no, come on, come on. I've got a story. It is a brief story. But funnily enough, you I didn't know you're going to mention that today, and I've been thinking about that over the weekend when I was posting something about which will become the meat potatoes later on. Exactly that these child trust funds. So in, when did he come out? When did they first get launched

Nick Lincoln: 21:21

again. They introduced in 2005 for children born first of September, 2002 onwards,

Alan Smith: 21:27

right? So I so these, they were up for a couple of years, and I remember I went to see some new clients. And these were so I went to their house, nice, big house up in Hampstead, or somewhere like that. Um, pretty well to do professionals. And they were telling me how old their children were. So I thought, oh, that means they'll have qualified, that both of their children would have qualified for these child trust fund things. So I mentioned it to them. I said, so did you get because if you well, you won't know Nick, because Luke missed out, or you missed out on behalf of him, but you actually got it wasn't. It was what happened was because my kids, at least one of them, qualified, and we got a, you get a certificate in the post. You get literally a piece of paper. That's what happened at the time in the post. And you were expected then to go to, there was a list of approved providers, and you had to go and then open an account. And it could have been a cash version, or it could have been a stocks and shares version, so kind of like ISIS, but, but the point was, there was so much friction, because you got this letter in the post and then you got the certificate, and you to get out and find a provider. And ridiculous. So anyway, I went to see these people. I remember sitting in their kitchen chatting through all, all sorts of different things. I said, Oh, and child Trust Fund. What did you do with it? Did you? Did you open an account and then, well, I don't know you're talking about. And they went through. And then the Mrs. The wife, went over to, you know, in every kitchen, most people have got these drawers full of bloody screwdrivers and bits and pieces and paperwork you never looked at absolutely, absolutely everyone's got one. And as this couple did as well. And so they she went rifling through this drawer full of all sorts of stuff and junk mail and pizza, you know, delivery notifications, all sorts of things. She goes, Oh, hang on there. I remember getting this

Nick Lincoln: 23:09

ages ago. Yeah, she

Alan Smith: 23:11

brings it out. She fishes through opens. And they're enough, sure enough, there was this child Trust Fund voucher, which she never opened so and I said, oh, you should have opened an account. And I think, I think they managed to do it. The point of this was, there was, and this was a, you know, serious, professional couple, you know, there were sensible people, and they have just so disengaged with it was another piece of friction in their busy lives, and had no one at the time or the energy to do this. And so it's, your point is well made. And to to think there's still a billion pounds of unclaimed amounts, complete waste of so many people's time, and it's one of the issues, that's

Nick Lincoln: 23:50

that,

Alan Smith: 23:51

yeah, that's

Nick Lincoln: 23:52

250 pounds certificate. I think how many hands I had to get through to get to the recipient? You know, the civil servants that devised the thing, yeah, the whole bureaucracy, you know, sending it out in the mail. I mean, it's just like, No, well,

Andy Hart: 24:04

additional 250 Yeah,

Alan Smith: 24:07

they did, some did, but this was the, this is the thing, if you're going to get the general public to engage, certainly at this kind of low level entry, you know, 250 quid open account, it has got to be frictionless. They've got to default. Just open the account, just get a government created account start in the first place, and then you've got to, you know, the idea you had to opt out if you don't want it, then you've got to, you know, have a bit of friction to opt out that they have for auto enrollment, for pensions. That's the strategy, not sending pieces of paper in the post and hoping someone's going to take a load of action anyway. That was it. Good point. Nick,

Nick Lincoln: 24:41

thank you very

Carl Widger: 24:43

the budget here just introduced the they're giving a double whammy on the children's allowance in November and December this year, and they're also paying a lump sum of, I think, 420 quid if you have a child born sometime soon. So it's like talking. Know, buying votes is like, we're going to have an election. We're not sure when. It'll probably be November, just when the first double whammy of the children's allowance is coming in, and we're going to cover this off by calling it a cost of living allowance. So yeah,

Andy Hart: 25:17

what to do with the money in Ireland? Or

Carl Widger: 25:19

literally, just like a slight.

Unknown: 25:21

Thank you. Thank you Google. Thank you meta,

Carl Widger: 25:25

but, uh, but I suppose the point is it's somewhere in between where that just lands money into people's accounts. And what you're talking about is, you know, you had to go and invest it, or whatever the solution is, somewhere in between the two, the two scenarios, I guess. But, just

Nick Lincoln: 25:41

Okay, thank you. Thanks. Thanks for the thoughts on that. And just just as everything we're talking about here, TRAPPIST, there's a link to it in the Google Doc, which is our master document with all the episode links, which is in the show notes. Now, Ultra, you can now go with your story.

Andy Hart: 25:57

Oh yeah, sorry for tuning in. Nick Yeah. So this is information came out by the time Sunday Times this week, 75 million has been paid in penalty charges people withdrawing money out of their license before the required time. You can only set up a licer under the age of 40, and the money needs to be used to buy a property, because it's to help you buy a house, if you don't use the money, you can access it, I think post age 60, and it is some win and wacky rules, so quite encouraging, though. What's happened is, this year's this last tax year, 75 million was paid. The previous year was 54 million. The previous year was 33 million. What I mean is the amount that's being paid as a penalty is increasing, which means, you know, lots of people have taken out these products, and it's not the end of the world. I worked it out roughly. If you put 100 quid into a to a lyser, it needs to go up, and they give you 25 as a bonus. Like 125 quid goes in. If you get about 6% return, then you get a 25% hit. You end up in the same place. So it's not the end of the world. It's a relatively minor point. But it looks like a lot of people have taken out these products, and the penalties are getting more and more. But nothing too exciting. Any questions they

Alan Smith: 27:11

suspended it during

Nick Lincoln: 27:12

covid whether, whether people are taking money out for for out of ignorance, or they just need the money. You know, some people won't even realize that. You know, they're gonna pay,

Andy Hart: 27:21

I'm gonna pay taxes. They just need the money. I don't quite know what they I mean. Just to give you some context, I set one up with 100 quid before I was 40, just to get, get it, you know, get it over the line. As it were, my 100 quid turned into 125 it's invested, obviously, correctly. Now it's got 150 quid in it. So I've just got it there if I want to, if I want to use it. But anyway,

Nick Lincoln: 27:43

that's that's absolutely fascinating.

Andy Hart: 27:46

Thank you for that nugget. Thank you. Keep it going. Keep it going. It's a cracker. Watch. Stop

Nick Lincoln: 27:52

laughing, stop talking.

Carl Widger: 27:56

What's this one? No, I'm all over the place. What is this?

Nick Lincoln: 27:59

Kathleen Gallagher, Oh, yeah.

Carl Widger: 28:01

So there's a lady called there's a lady called Katherine. Gallagher is kind of writing about markets and funds in the business post, and it's kind of a new thing that they're doing in the business post is really, really good. And she did an article basically calling out the various wealth managers and what they're comparing their various portfolios to, and then basically that they're picking particular dates to compare their portfolios to, whatever benchmark they've decided is the best one. So look, it's she was doing, like general market stuff as well, which I would think is less helpful, but she has written some really decent articles. And I would, I would encourage everybody, because this is the kind of stuff that we need in the in the mainstream media, which is basically, you know, calling out some of the questionable practice, shall we say, in terms of, you know, how funds are, you know, it's not morning star stuff. It's, it's deciding themselves what their benchmark is and what time frames they're going to compare themselves all this kind of stuff. Yeah, but it was, it was, it's really good that it's in the mainstream media business posters, yeah, it's, there's some really good stuff from there. So it's, you have to subscribe. But I would encourage anybody who's interested in in business and investing to get your subscription going. But fair play and well done. To Kathleen Gallagher, I would say,

Nick Lincoln: 29:31

good, good. Well, I'm going to read that. That's that's interesting. Thank you very much. De la voce, okay, storyteller, uh, close personal friend of the show, Keith button, what is he doing?

Alan Smith: 29:43

Yeah, close personal friend, legendary financial planner, Keith button, who, together with his son, Josh, runs an excellent financial planning company called Boost worth I think Double T, double O, double T, but Keith. Got in touch with me recently to say that he's launching a free complimentary series, masterclass series. He did this in 2020, to great success. And so he's he's going doing it again really well for everyone, really but particularly focused at relatively early stage financial planners. He's running it on Saturday mornings on the basis, I like that. That's that, yeah, it's a good time Saturday morning for most people, on the basis that some of these people in careers, they may not be able to get time off their bosses or whatever, you know, have them nose to the grindstone not working all day long or something, and so the so this sort of stuff can be done in your own time at the weekend. So posted a link to access it. Follow Keith on LinkedIn, great guy, very experienced. And I just love what Keith does, because he does, like we try to do, gives a lot back to the profession. He's got a lot of experience. He won't mind me saying, like me, he's got a few miles on the clock, and he's happy to share with lots of other people. So check out Keith's masterclass program, starting this coming Saturday morning.

Nick Lincoln: 31:19

Great stuff. As you were talking, and I was listening to you as well. I'm actually registered, listening to you as well, and but I'm actually registering for that event. So Keith, I should be, I should be going to your event on the 19th of October. Okay, we've done, yes, you've done your bit on the budget, Carl, and your appearance, your as a media mogul. So back to me. So Morningstar is gradually becoming more and more an impressive brand. It's, it's always been known for the fund, the fund analytics and all that kind of stuff. And it's, um, it's portfolio software, but it's solid. It's, it's getting more it's putting out more good content around the behavioral stuff. And Christine Benz is the lady who works for Morningstar. I can't remember exact title, but she's like a content she's director of content for Morningstar, and there's a very good article in it about online in which Christine Benz is talking about the bucket approach, and her discussions with advisors in the US about whether you're better off having buckets, you know, so the classic thing we have two years worth of withdrawals in short dated bonds or cash, and the rest of your money invested, or you just have a diversified portfolio like a 6040 or 8020 and just roll with the punches. And you know, depending how you slice and which time period you look at, you know, the 6040 can can look appealing, but again, of course, in 2022 it didn't look at all appealing because, because bonds of nearly all durations fell through the floor, and Christine Benz's view is the bucket approach works, and this is what I found really interesting. It's nothing to do with the maths. The bucket approach works because, according to her research with us, advisors, clients get it. They just understand the simplicity of the bucket approach. They know that if, when the markets have a temporary decline, within their portfolio, there is, whatever, you know, two to three to four years worth of withdrawals, not living expenses, but withdrawals, and I'll just clarify that in a minute. And they know, therefore, that cruise next year is going to happen. They know that they can put the grandchildren through university for the next three years, regardless of what happens to the markets, and it helps people stick to the plan. So that was my key takeaway from reading the article, that the bucket approach, anything that helps our clients stick to the plan is a good thing, right? And the bucket approach is so simple and so to me, it's always been intuitive, it makes sense, and it helps people do the right thing. And just to clarify my point there, often, when you read these articles, they often say, Well, you have a bucket to cover two years worth of living expenses. No, you don't. That's not right at all. You have two years. You have a bucket to cover however many years of expected income payments from that wrapper. If a client's got a living expense, so they've got a living expense of 60k a year that'll be coming from various different sources, a bunch of state pensions, maybe a bit of DB stuff. Maybe they've got rental property, and you might have a personal pension investor, but that that that pot, that cash pot, it's just for the shortfall in their overall expenses. There's not two years worth of living expenses that makes a massive difference to how much you're going to set aside. So a good a good article. There any thoughts on that? Folks can move on. Christine

Andy Hart: 34:07

Benz has just come out of the new book. Though, if you've seen it, probably a couple of you have how to retire, 20 lessons for a happy, successful and wealthy retirement. I've not yet read it, but I've heard good things for people that have so I'm sure it'll be a culture corner at some point down the line. But yeah, she's also written a book.

Nick Lincoln: 34:23

Just got the book. Andy,

Andy Hart: 34:26

no, I've heard good thing about it. Okay,

Nick Lincoln: 34:30

sorry, go on just,

Alan Smith: 34:31

just back to your your point shared with you. I won't mention it his name at this stage, but there was a message I got from a Trappist trap listener on LinkedIn the other day talking about exactly this, this idea of, you know, buckets and, or allocating funds and, or cash, I think, like you into detail, same message. It must be from the same chat, yeah, yeah. But his hit the firm that he works for. So, as he said, seem to be attempting to defy science, but in their their approach, the outsource to discretionary managers, and they've got this whole kind of retirement strat, income optimizing strategy, blah, blah, and he was looking for just a bit of a bit of feedback and guidance. And the only thing I could really say to back to the the oft repeated statement on this podcast, that it's an art as well as a science, and whether it's buckets, blended portfolios or whatever it is, not the spreadsheet doesn't decide the spreadsheet or the calculator, whatever. Can give you a framework. But this is the real value of the of the financial planning, the experienced financial planner, to be able to know the client situation and exactly as you were saying, Nick to understand all the other sources of income guaranteed, and otherwise they've got and create this artistic blend that resolves it. But I do like that point that behaviorally, clients get the bucket approach. They can, they can understand that quite, quite clearly. It's a good point that Christine makes.

Nick Lincoln: 35:59

Yeah, indeed. Okay, ultra

Andy Hart: 36:03

Well, it's morning star's show at the moment. This is the third morning star link. This one is called, Why do clients think advisors are valuable? Again, they've done quite a few extensive studies on this. The four main things investors value and advisors. Here they are, advice I can rely on. Obviously, that's a very wide remit, I suppose, helps me achieve my financial goals, keeps me on track. The fourth one I'm going to talk about is maximize maximizes my returns. Again, I think quite a few advisors shy away from this returns issue. I'm proud that, you know, I want to get the best return to my clients. Create wealth. Wealth is freedom. Freedom's opportunity. I know we don't want them to over focus on that and the other things are more important. The portfolio funds, the financial plan, what do you want to do? What's the reason behind the money? But getting a good return for your clients compared to all the other gut that's out there? I've got no problem with it. But they also, yes, they speak quite extensively about, you know, what investors value in the advisors they work with. So again, it's in the show notes, and they've got quite a nice little visual for it as well that sort of maps out all the different moving parts. Any questions?

Carl Widger: 37:13

No, I think that's a really well made point, and I've mentioned it a good few times before. You know, if that's what the investors what, if that's what our clients want, then, you know, you've got to be talking to them about exactly that topic. So I think really well made point and good supporting evidence, yeah, because

Andy Hart: 37:35

some people get so into lifestyle, financial planning that they just sort of poo poo the investment thing. I said, just put that aside. That's easy. We'll sort that out later on, but you do need to make it front and center times during the client relationship,

Carl Widger: 37:47

100% Guilty as charged. And it was our client advisory panel who said to us, or said directly to me, stop doing that. You need to talk about the investments. So yeah, it's a really well made point.

Alan Smith: 37:59

Just Just following up interesting interest, following up on that a little bit. Andy often will partially. A lot of people, I think, who embrace the Evidence Based Investing approach sort of shy away from it a bit and just talk about capturing market returns and speak a bit less about investment, trying to, you know, beat the market and what have you. But, and again, it's maybe the subject of a for another conversation later on, in more detail. But if you sort of track that through what I get, a lot of you know, when you get negative feedback about anything you might post online, etc, is, but why would I accept beneath market returns as guaranteed in terms of, you know, tracking index, you're just going to get the index return minus the costs. But the maths, when you work it out, determines that if you buy an in an index type fund, low cost index fund, over the long term, they tend to, pretty much always end up in the top quartile of all investment funds, which kind of goes against your initial thoughts or understanding. The reason for that is cause all the other active funds, buying and selling and trading will drop out, so probably over 10 years plus a typical Vanguard style fund ends up as being a top quartile fund. And so you can begin to create a very

Andy Hart: 39:14

strong narrative. Alanis is even stronger than that. The further you drag the time frame up, the higher up the rankings they become, right? If you drank it out of 100 years, index funds beat everybody. They're not top quarter, the top one, so yeah, over a 10 year period, they might be quartile. 20 year period, they're in the top 530, they're in the top two. Like, yeah, the longer you drank that time period out, the higher they climb up the ranking. Which? Pure math? Pure math. Yeah, exactly which

Carl Widger: 39:40

is, which is totally relevant. But then, if you talk to your clients, like talking to your clients, about 30 year returns, are even 20 year returns, you've lost, but

Alan Smith: 39:50

you could make, you could make a good if your clients aren't prepared to invest for a decade, then they're, they're not the right type of clients. This is always, I think. But I think you. You could be making a strong case for another thing is this is highly predictable. Your ability to select the fund, the the active fund, that will be top, top, even top quartile in 10 years. Good luck with that. You've got little and no chance there is. There is no evidence of consistency of our performance of the very of the one year, the top quarter of a one year, highly unlikely to be the same fund talk quarter after 10, whereas index funds will will end up there. We'll be so to say I'm superior

Andy Hart: 40:27

returns. Yes, superior returns of index fund and asset class investing is inevitable. It's just the time frame, you know, is sometimes I'm just saying correct in saying you're invested for 3040, 5060, years, it's going to your kids, your grandkids. But sometimes they don't want to hear don't want to hear that. So we have to play a short term game, but, but again, we're not, well,

Unknown: 40:47

shorter short term.

Alan Smith: 40:49

I'm just, I think I'm making a point that don't accept. When you get pushback, either from clients or from anyone else out there, you're just going to get sub market returns. Well, you're going to get above, just put above average, or it'd be interesting to see the mass and what the data says. I haven't seen it in terms of what is, what is above average returns, and what time period is probably as short as five years, maybe even less. So above average returns compared to the market, and then top quartile returns, when you push it further up. So in other words, you make a strong case for having excellent investment returns compared with all your other peers and all the other players in the marketplace, more proactive and positive about the investment strategy that you deploy, as opposed to just saying you guarantee to get mediocre returns.

Andy Hart: 41:36

And then here's, here's the other thing, everyone else that gets involved in terrible investments that blow up, that don't have any returns, massive, high fees. You know, we're comparing ourselves to the most purest returns ever, like an index with no costs. You know, we're stressed that we're point 751, percent dragging against the index long term. And then there's sharks out there that are just, you know, giving zero returns on terrible, you know, portfolios and investment funds. So sometimes we beat ourselves up, but we're still, you know, providing, you know, decent returns compared to, you know, yeah, the

Nick Lincoln: 42:12

FCA should change its warning. Shouldn't say short term past performance is no guarantee of future returns. Yes, because long term performance repeats, repeats, repeats, okay. And while the buttons are tearing their hair out, Keith and Josh, we will get the correct spelling of your brand. Boost is spelt, bravo, October, October, Sierra, Sierra, Tango,

Andy Hart: 42:33

Oscar,

Nick Lincoln: 42:34

Oscar. Thank you. That was it okay. Let's crack on. We're getting what are we at? Jesus wept. 42 minutes, right? Smithy adviser, conflicts of interest with no link to anything,

Alan Smith: 42:47

yeah. Well, this is an interesting one, wasn't it? We talked about this. So the Track Pack, particularly myself and my learned colleague, Mr. Andrew Hart, were front page news last week in in our trade magazine, new model advisors, city wire, new model advisor. And the story was around potential conflicts of interest and the backtracking that public information. They've they've written about this before. Andy and I are investors in timeline, which obviously is a piece of software for advisors, also runs investment portfolios, model portfolios for advisors. And you know the press, as is their want, saw an angle there and thought, well, hang on a minute and refer to us as gurus, if only they knew. And here we go,

Nick Lincoln: 43:50

gurus, Jesus, right? So,

Alan Smith: 43:53

so we're not on down that particular track that you know, we are people who influence. And to be fair, there was not one, but two, you know, mentions and links to the trap podcast and say, you know, a lot of people listen to the trap podcast, do you feel you've got a conflict of interest? So I spoke with the journalists who was really good, very fair. I think, in the end, I think overall, it ended up being a fairly balanced article, but it did throw up lots of other interesting conversations. Then they do refer to them in this article. You guys remember when platforms such as transact and nucleus were early days, a lot of advisors who adopted them. Some, I think, were gifted shares. Not, I wouldn't, I'm not, not necessarily gospel. Some certainly were given the opportunity to buy shares at launch at a sort of discounted price, and so this whole aspect of are the conflicts of interest, if you've got, if you've actually got your own personal money invested in something, platform, a service, a company that you actually use, and you speak highly of it publicly, you know is that an issue? There was? One commentator, Anthony Morrow, I think his name is, got the article in front of me. He said it. He summed it up to me, really, really well. I said, we've got bigger things to worry about. When you've got consolidators who build their in house discretionary service to take a margin on that portfolio, there's more conflicts of interest there some of these very large organizations that build their in house models that you know, the rest of the independent market would never, ever use. But it was an interesting one. I think overall, it was fair. Andy, you were mentioned a couple of times in detail. What are your thoughts of conflict of interest as they apply to you being a serial angel investor, of course,

Unknown: 45:39

hospital pass,

Andy Hart: 45:40

except that hospital drag me into this? No, I did read the article. It's been something that's been bubbling for a couple of weeks. I'm very aware of the conflicts of interest, and I need to give it the respect it deserves. I mean, our integrity is the only thing we got in this thing of ours. But I don't really have anything further to add. I mean, I work with lots of various different companies. I've used lots of various different

Nick Lincoln: 46:02

companies. My lawyer has advised me not to say anything.

Andy Hart: 46:05

It's a line that I need to straddle. But I think the article is very fair. Actually, she did mention the the beast of conflicts of interest, which, as you say, was the launching of the platforms I transact, the nucleus, where they had to disclose that to their clients, so that was dealt with in the correct way. And I'm again, knowing this situation from the inside. They weren't swayed by having a shareholder, and they still wanted to offer a decent service for their firm and their clients. But again, I can understand that there's a conflict there. So nothing further to add. Carl, over to you, my

Carl Widger: 46:43

friend. I don't have anything to add other than I was mentioned in the article. I have no such conflicts of interest at all. To be fair to you guys, right? I like the shareholding is teeny tiny. I don't think there's a conflict of interest, but I think it is worth saying that, you know, in as you just said, Andy, integrity is all we've got. So should we shy away from from such articles? Absolutely not. I think it's totally okay. And I thought, as Alan said earlier on, I thought the article was very balanced, to be fair, and very well researched to be fair.

Andy Hart: 47:22

So it was, yeah, it was a huge, huge promotion of trap as well, which is what was not intended. But we'll take that. I'm sure we'll get a few more listeners from it in a weird kind of way. One of the

Alan Smith: 47:33

things was just to me. Anyway, this is where this whole thing first bubbled up. You'll be, you'll remember, one of the biggest podcasters in the world, Stephen Bartlett. He got into trouble with Advertising Standards Authority because, turns out, I didn't know this, but he is a, you know, not a 0.03% but a 20% I believe, shareholder in Huell. He's also sits in the board of directors. Yeah, of Hue and is it Zoe one of the other things that he and he advertises them, you know, every week on his podcast, without disclosing and so that is a bit naughty, probably, to say that this is wonderful. It's a great product. I use it myself. Oh, by the way, what you don't know is, I own 20% of the company, and I'm a, you know,

Carl Widger: 48:18

I listen, I listen to his podcast all the time like and I was under no illusion whatsoever that he was involved with those companies. I think only someone who's very naive would think that he'd be doing that just out of the goodness of his heart. But anyway,

Alan Smith: 48:33

well, they might have, they might have been paying for it. Might be paying for advertisers, not that he actually owned a huge chunk of it, which is somewhat so maybe that's where the whole sort of story began to bubble up. And then they look for other other angles. There, there are. Yeah, it's hard to avoid conflicts of interest in in life in general, but I think if you're aware of them, at least if you do what's necessary, if you, if you're prepared to disclose them, where it where it appears, where it's relevant. No, the journalist was Vicki Bell, and she did a great job. She's a she's a great journalist, actually. And as you say, she took quite a while to put that article together. She did mention it to me before she published it. So that's what we want, more honest journalism. And because I think there's a fair more stories that they could they start digging deep. Could find across our sector, should they choose to so? But it was good, as you say, great advertisement for this podcast.

Carl Widger: 49:28

Careful now,

Nick Lincoln: 49:29

well done. Well done. It's nice to, nice to see that. Very nice to see that. And I'm a, you know, I'm a pretty vocal critic, critic of the legacy media, but that's, that's a shining example of it done. Well, okay, the final topical tip here. Oh, ultra nice.

Andy Hart: 49:43

Is back to me. We spoke about cash management services the other day, and I can't even not come across this before, but HL always lands down the biggest DIY platform in the UK. I think they've got this awesome offering called active savings, and they've got 10 billion quid already. In it. It's cash management. Basically, they pull the money between a whole host of different banks, like loads of them. So they, they're doing all the, you know, the plumbing and the heavy lifting in the back end. They're easy access. At the moment, it's 4.6 that's pretty awesome. Six months, 4.851 year, what? 4.7 so I think a lot more platforms are going to be getting on this bandwagon, because cash now is not useless, and it's paying about, you know, four and a half 5% so we're gonna see a lot more innovation in this space. So I think this is an example of cash management pulled against, sorry, the money's pulled. The

Nick Lincoln: 50:41

website, yeah. Is this a bit the

Alan Smith: 50:46

flag stove,

Andy Hart: 50:47

basically competing directly with flags, the ones that we know, yeah, yeah. See our latest rates, how it works, all the all the banks that they use, like it's, I think, and being HL, I think the tech will be awesome. Yeah, yeah. We

Nick Lincoln: 51:03

slick as anything. You'll be able to move money. And then I

Andy Hart: 51:07

think this is theirs for the taking, if they get this right, yeah. So, yeah, quite interesting innovation. Any questions? Card, I don't think you've seen this in Ireland quite yet. This type of pool, no money, cash,

Carl Widger: 51:21

but we need it badly. I'll talk about I'll talk about that probably in our end the meat and potatoes, because it's

Nick Lincoln: 51:30

cute. Carl's bi weekly rants about the state of the art bank. I

Carl Widger: 51:36

had two articles of the topic of tippets, and I said I'm taking them out. I'm just gonna be positive current today, there's going to be no fraud, no scandals, nothing for me today. I love it. You're

Alan Smith: 51:46

not going to upset anyone,

Nick Lincoln: 51:48

right? So TRAPPIST, thanks. We're at 5052 minutes. So I think we can, we can move on to the meat and potatoes of episode 55 and this is based around a LinkedIn post that storyteller put out in the last week or so, in which he referenced a Financial Times article about basically just a lack the lack of interaction between the British public and and the great companies of the UK, that the apathy around investing, the ignorance And the misconceptions that so many of Joe Public seem to hold, and which, if anything, have got worse over the last 30 years, since we had that privatization boom of the sort of 1980s and the tel Sid campaign. Anyway, storyteller, I don't take away all your thunder. Talk to us.

Alan Smith: 52:36

Thanks. Yeah, this. This was originally I looked at the Financial Times at the weekend. And despite, I think, our common misgivings about what we call the legacy press, I do think that ft does put up, particularly in the personal finance section and particularly in the weekend, ft does put out some pretty good articles and some decent journalism, and they reported a number of, I think I was gonna say startling facts. I think we all inherently know this stuff, but when you see it written in it's gonna say black and white, in pink and black. It is, it is. It is quite eye opening. I just quote a number of of the stats that they refer to. UK savers have over 430 billion held in cash amounts. So nearly half a trillion in cash. Just in the UK alone, 3 million people have more than 20,000 in cash. Isas 8.6 million have more than 10,000 in cash deposit accounts. When asked why, 20% were worried about losing money, 25% believe that investing is too complicated. Only 23% of people in the UK invest at all in the stock market, so less than a quarter less invest in the stock market, versus 61% in the US. And about half of people believe that financial advice is only for the wealthy. So I know that keeping cash cash balances healthy, and having rainy day money and emergency money is really important. But when you look at this data, I mean, one of the other stats that I think this actually came from the FCA was that was the original source that all of these people with the billions and billions kept on cash deposits, at least half of them based on the FCA interpretation of the data. When the survey people could afford to invest those in in the markets, they quote something else. Now they quoted the just as the past, past historical returns, a 1000 pound investment in the iShares, 100 so the FTSE, basically, which hasn't exactly been established for the last decade, but even 1000 pounds invested in the FTSE 10 years ago would now be worth 1851 pounds, compared to 1130 1137 pounds generated by the average cash ISA, not quite double, but heading towards that in a decade. And actually. Compared with the FTSE 100 which had you compared to maybe a global equity market, would be significantly different. So as I titled that LinkedIn post, it's that slow motion wealth destruction in real time. There's a fundamental issue at heart in the UK. I think it was a few people from Ireland also commented Carl to say, it's exactly the same over here. And I'm just I thought it was a good point, because this is the stuff we all try to do. We try to educate our clients. We try to sort of translate this information and explain that it's not about risk, and there's a different set of risks that you are exposing yourself to if you keep high cash balances. But seeing those numbers was actually quite startling, and the post got a lot of engagement from other people. So who wants to go next in terms of your actual thoughts on on the subject? I'll go

Carl Widger: 55:49

just to kind of segue into the Irish experience is even more salon, I would say, because at least there were some kind of deposit returns coming via the UK cash accounts, whereas here the pillar banks were, you know, giving the pillar banks, being Bank of Ireland and AIB, all the other banks left. So we're left with those two and permanent TSB, and there basically were not giving any returns at all, to the extent that their latest profit numbers that they announced during the summer, they admitted that basically, yes, we have some term deposit rates, but people aren't transferring over to them. So you have this general apathy to go and do stuff. Yeah, because they

Andy Hart: 56:34

were given zero returns. You know, incentives drive behavior. Did that not then have a knock on effect. People saying, Well, I'm getting bugger all returning my cash. What else can I do? Oh, is this thing called the stock market I'm going to invest? Or did it have, like, no impact? I

Carl Widger: 56:47

would say zero impact. And that's proven in the numbers. So the amount, that's

Andy Hart: 56:51

why it's telling even when it's most extreme, there's no change in behavior. So yeah, hence we have a fundamental problem, yeah, yeah.

Carl Widger: 56:58

So there's, there's a couple of reasons for that right. Number one is, you guys have no idea what the financial crisis did to Ireland, right? And we were just all loaded up with masses and masses and masses of debt. So there has been a massive cultural shift that if we have a financial crisis or recessions or whatever coming down, we're going to be in much better shape because people have gone don't think that that thing, you know, it's, it's very recent history. There's a number of people in business who were affected by it and will never make the mistakes again, me included. So I think that that's one, one of the reasons for it. And then another reason is, well, okay, I can access better returns in cash. So I'll get on to the investing piece in a sec, but I can via European banks, because we're all part of the EU right? But Jesus, if I haven't heard of the bank, if I don't know the name of the bank, I'm not going to do it so that that's kind of led to the money just sitting there. But I think we've a long road to go to educate people in terms of investing and investing for the long term. And I know my kids are interested in this, but they do not do anything about it in school at all, at all, at all. So this goes back to the curriculums at school, first and foremost, and and try and generate. And I know Alan, you've spoken about, you know, talking to your kids about, well, what do you use? You use, you know, you have an Apple iPhone. So, like, why don't we invest in Apple stuff like that is really, really good to get engagement and to look at kind of investing in over the long term. And of course, we have this massive problem here that the younger folks can't get on the property ladder. So if we can, you know, start this culture of investing, as opposed to the culture of saving, well, then that. But we need to take a very long term view on this right. That's a 1015, 20 years down the line. We would, of course, you know, see the the fruits of the labor, in terms of the education, if we could get people to invest, we don't have, you mentioned Elisa earlier on, Andy, I never actually heard of that. But, you know, we have nothing like that. But we did before it was called the ssia. You put in 200 quid and the government topped it up by 25% that's exactly, yeah, the whole country had an ssia. Now, you could have an investing one, or you could have a cash one, but I think the vast majority were investing ones. I was a broker consultant for an insurance company back in those days, and I was literally going around with wheelbarrows, like saying, Yeah, load them up there. Let's go and I and it did help people, but it was for us a particular period of time, and then it stopped, and we didn't go back. Probably financial crisis kind of put an end to a lot of that potentially reoccurring. But now, when we're awash with money, and the banks have so much money in on deposit, like we're talking, I would say the per per head numbers are. Are here in terms of cash being held that this is the time now to strike, and this is the time to introduce it. And I had advocated for something like this a couple of times pre budget. It didn't get much traction, because these are longer term measures, but this is the kind of stuff that we need to introduce. And, you know, I hearing about the Hargreeves Lansdown cash management tool, etc. These are the kind of innovations that we need. And unfortunately, the big problem we have here is, if there's very little innovation and very little competition, well, there's not much incentive for the people who are here at the moment to make any changes, because they're making shed loads of money. The pillar banks just call it straight. They're making absolutely tons and tons of money in terms of profits by not encouraging anybody to do anything at all. So yeah, we've lots to do. Obviously, the exit tax that we spoke about earlier on, that's also a big problem. So I think there's, there's really quick wins to have a really serious long term impact and make this a better country for everybody in the long term.

Andy Hart: 1:01:17

Okay, I'll throw in a couple of points. There's a lot of moving parts of this. Financial education is a is a real issue. But the thing is, financial information is abundant. Now, you know, YouTube, podcasts, blogs, is more than enough information. People is just not interested in it. People just don't care about money investing. They find it just too boring. Most people, those who are interested in it, there's loads of information they can find out about it. And the people that do find out about it, and they find out about investing, you know, they do get rich slowly. The interesting thing, auto enrolment for pensions, I think, has had a superb impact in the UK. So most people, by default, now become investors the moment they get their first job. And auto enrolment builds up wealth very slowly, in the background, and over time, people become more and more interested in this thing called their pension. You said about 23% of the people in the UK invest in the stock market. Alan, well, if they're invested in all time, enrollment, which must be more than 23% of adults, that doesn't quite make sense. Again, that's just people. I think, probably invest in this. Yeah,

Alan Smith: 1:02:23

I think that excludes auto enrollment.

Andy Hart: 1:02:27

Okay, it's directly investing in the stock market, outside of a pension. Yeah, all right, yeah. Not, not, not too much more to to add. As I say, if people are interested in this stuff, there's more than enough information for them to get their teeth into, be it podcasts, be it YouTube, be it blogs, be it books. The point about investing financial advice for the wealthy, I'm sort of in agreement with that the ongoing fees for financial advice is typically around 1500 2000 pounds a year. So you need to have a certain amount of wealth to fall into that bucket. I know there are different services that are a bit more light touch, bit more light touch, a bit more subscription based, but again, they struggle to scale. As we've spoken about a lot in the UK, sorry, as you spoke about a lot on this podcast. Nick, any final thoughts on this subject? It's

Nick Lincoln: 1:03:13

an ongoing tragedy, isn't it? I mean, I think Alan, you said the slow motion wealth destruction. I think that'll be the title of this episode, 55 just, I just scrolling down the comments under your LinkedIn article, storyteller, and because Carly mentioned, it's not taught in schools this kind of stuff. And absolutely it should be a couple of points there. I mean, this is not knocking the entire profession, but teachers are not generally the most financially. They're not interested in particularly they've, they've got defined benefit pensions. So it's, I don't think it's front of mind for them. And this Ian Battersby, batter B said in the comment, I did some work with the personal finance society last year, delivering sessions in schools. I gave up after one school kept counseling on me and kept pushing out the dates. I think it was three times. In the end, it was hard work trying to speak to the schools and trying to get something booked in. It's really not on top of their list of things to do, even when it's well intentioned and well qualified volunteers are given their time through they I couldn't convince them it was worth doing, which is a real bloody tragedy. The whole, the whole thing is this thing that we always talk about, it's this, this, this perception of is this confusion of risk with volatility, you know, and volatile markets means you're going to see yourself wiped out. Therefore, was everything stems from that. And when we stay in cash, because it's safe. And this, this, this misunderstanding, how terrible inflation is, how that's the real risk to people's real wealth in terms of purchasing power, which is all the money is purchasing power, right? If it loses its purchasing power, you might have a million quid in the bank, but if it can't buy you, jack shit, it is worthless. And it just stems from that. How we crack it, I do not know. And the fact that, you know, in the 1980s we had all the private I don't think you had the same thing in Ireland, car, but you know, correct me if I'm wrong. But in the UK, we had all these privatizations, the tel Sid campaign for BT, I still remember the adverts they were. That's good. And. And we did have large numbers of people going, now

Alan Smith: 1:05:04

you were like, younger live in those days. Could

Andy Hart: 1:05:08

you expand for the younger listeners? Nick, what this campaign was about? Well, it

Nick Lincoln: 1:05:11

would privatize in 85 Andrew, so you were four years old, far too young

Andy Hart: 1:05:15

for this. But explain what happened.

Nick Lincoln: 1:05:19

Well, the nationalized companies such as British Telecom, British Gas and so forth, were sold off, were sold back to the public, and at discounts, marked discounts to what the likely profits were going to be in the in the real world and Thatcher's government. And there were loads that were just advertising campaigns, probably run by Saatchi, and Saatchi who did the brilliant conservative parliamentary electoral campaigns in the 80s and and people just gotten, people just got hooked on it, and they did it.

Andy Hart: 1:05:48

Sorry. Nick did, did I just write off a subscription or write a check? Yeah,

Alan Smith: 1:05:54

yeah, anyone could have bought any shares. There were. It was, I remember it. It was

Andy Hart: 1:05:58

just lots of families all loaded up. Did they?

Nick Lincoln: 1:06:00

Yep, it was, you know, yeah,

Unknown: 1:06:04

okay, okay, yeah.

Nick Lincoln: 1:06:07

And it really, what

Alan Smith: 1:06:08

I've I've seen some stats. I can't remember the numbers, but had you have done that, that invested in the in the newly privatized is British Gas that I saw, and they've had various, what are they morphed into centricanos, old stock splits and stuff. You know, 100 quid invested in that would be worth quite a few 1000, you know, 20,000 or something. Don't quote me on that, but a lot, in other words, relative to what you might have done elsewhere. And I think that's, that's the point. And I did put that in the in the piece as well. I mean, maybe, just there isn't incentives enough from government. But underlying this is there are social issues there, around in the UK, Ireland and around the world, there's an increasing them and us. You know, the super rich get richer and richer if you own assets, proper assets, property and equities. Inflation is less, has less of an impact on you, doesn't have zero impact, but has less of an impact. And they tend to be, you know, the wealthier people, that's how they own their assets. And the rest of the people tend to do what we're talking about here. They may own their property, but they want to keep safe and keep money in cash, so that financial currency, yeah. Well, that gap widens. That gap widens over time. So, you know, you could, you can imagine that just, you know, more and more kind of social unrest, them and us, dissatisfaction, and so there, I do think there is almost, there's a strong argument from us, from government to one another, or a series of other kind of like the the marketing campaigns they did all those years ago, which brought so many people who had never invested in shares before in their life into being shareholders and equity owners and owners of businesses and companies, and in doing so, by allocating a small amount, by explaining to the mass population the difference between risk and short term volatility that if you are able to allocate, and I'm talking about 100 quid a month or something into savings plans allocated to equities over the next 1020, 30 years, you're most likely to do better off and explaining and articulating it,

Andy Hart: 1:08:16

but they don't know themselves. You have 111, area of the government saying, invest, it's amazing. And then you're going to get the person down that down the hallway saying your capital's at risk, and you're going to lose all your money, and they're going, oh, hold up. What's going on here? We're trying to promote it in the line this,

Nick Lincoln: 1:08:31

just to underline this. And this is not a political point, it's just a fact. And the previous administration were awful as well. There's not a single member of the cabinet that's ever worked in the private sector, but they're at the top of our government, and they've never worked in the private sector. It's like talking double dutch to them. They wouldn't have interesting

Andy Hart: 1:08:51

in the article that you've quoted Alan if they did mention a comparison of investing in 100% UK equities versus cash. Yeah. And then if we put a client at 100% UK equities, they'd have kittens. And it's like, okay, well, you're using that as a proxy.

Alan Smith: 1:09:08

Well, that's just, that's just an empty article to give you a comparison of what you might have, let's have a look at what you could have won. And I think that's the, I think you make the point. Well, Nick, because, and again, as I also mentioned, you know, if you can point fingers at who's to blame, there's this, and I'm not, we don't have the time or energy to go into this, because it comes up so regularly. But it's this huge, you know, monstrous compliance industry, regulatory industry, that just misses the effing point on the whole thing that just does not understand this and continues to smash it down even experienced, qualified professionals, and tells advisors up and down the country, you know, your clients are cautious investors, but you know, give them cash in boxes. It's just, it's heartbreaking when you see this all we could. Do us for and through our influence and speaking to other advisors is try to educate. You're not going to flip a switch and change people overnight, but if we can just make an impact and so that some other advisors sitting somewhere can have a healthy, positive conversation with their client and articulate the difference between short term volatility long term security. Biggest risk is running out of money. Biggest risk is erosion of your wealth, then we've done a good job. Obviously wishful thinking for me to hope that any government, let alone this one, would embark upon some sort of education for the masses. Not going to happen.

Andy Hart: 1:10:34

You need to change the risk warning. They need to change the risk one on the stock market. The risk in the stock market is not being in it. Yep,

Nick Lincoln: 1:10:41

yep. Okay, we're at 70 minutes. I mean, so I think the conclusion, and I'll just quickly finish on this as well, my final comment on this, the real tragedy is that compared to the 1980s it's never been easier or cheaper to own the great companies of the world. It's just sitting there basically, really, basically free, basically free. In the 1980s there were shocks left, right and center, and the charges were prohibitive on savings contracts, and now it's just there and we're not touching it. I think we all recognize the problem, and none of us have a solution, and I just can't see it not ever being the case, certainly in our professional the span of our professional lives. Okay, let's move on to the next section of the show because I can see Posty hauling the bulging sack of TRAPPIST questions up my driveway. If you want to leave a question for one or the trap pack to answer, please do so. You can find a link in the pinned tweet at advisor podcast. Also, there's a recurring link in the so called show notes, and we will get to your questions. We do them in chronological order, not an easy word for someone with a brain my size to say. And we will come to yours in good in good time. But let's see whose question we are answering today. Very nice envelope, quality Manila, and nice cartridge paper as well. This is from Adam. Now I'm going to butcher your surname, Eli E, Double L, U, L, E, L, Adam Elon and your LinkedIn profiles on there as well. So we'll put that in the so called show notes. Okay, this is Adam speaking. Now. Background, I'm a 21 year old just started my progression towards becoming a qualified financial advisor, so forgive me if this is a stupid question. No, no. Questions are stupid when you guys use voyant cash flow modeling. Do you consider the risks of potential tax rate increases in the future and the knock on effects it would have in regards to the plan as a whole? I know Ultra will have a thought on this. I will quickly go first. No, I mean, we, you know, in terms of the tax allowances within voyant or with any cash flow software, hopefully you could, you have scope to say how much they go up by each year, and I generally say half the rate of inflation. But in terms of actually building in plans, because CGT might go through the roof, or inheritance tax might be this, or pension tax free cash might be that, absolutely not you would drop you'll drive yourself insane, Adam. You can only plan with what we know to be the facts today. You have to make assumptions going forward and back to the art and science thing. Most of what we do really, is really informed in assumptions, but it really informed guesswork. But it's, that's as good as it gets. It's informed guesswork. So no, do not build plans around what how might happen to tax and so forth, because you're going to you're going to drive yourself do Lali, you're not going to help the clients. You're adding no value. Ultra,

Andy Hart: 1:13:19

I think you've nailed it. Nick, but it's quite an interesting question. Nick, the amount of hours that we've discussed voyant in rooms with other advisors, the this issue's not really been raised that frequently has it. Unlike you, I escalate my tax bands in the future, uh, below inflation. So I've been harsher to my clients, giving them less net money. So I'm being cautious from that point of view. But I don't, for example, if I believe, let's just say, for example, thought experiment, CDT was going to double in 10 years time. I don't factor that into the model. Firstly, because the system can't do it. Secondly, back to your point, Nick, I'd just be guessing out, you know, guessing blind. So no, don't overthink it. Use what voin set any of the known tax changes are set in voyant the escalation rate in the advanced settings. Just do it a little bit less than your inflation rate. And then you're being cautious to your clients. But it is a good question. It doesn't come up that much with advisors discussing it. Vaness Carnell, have got anything else to add?

Carl Widger: 1:14:25

No, I just say it is a good question. And Adam, at 21 to be delving into the weeds on violent like that is superb, my friend, keep doing what you're doing. Keep trying to learn it as best as you possibly can, and a superb career is ahead of you

Alan Smith: 1:14:45

all, I would say just for the Renaults, hang on. Yeah, go on. Go on. He's brought nice

Andy Hart: 1:14:51

to a gun fight, this guy,

Alan Smith: 1:14:55

first of all, other cash flow modeling software tools do exist. Okay? Void. Sure voids, very good other tools. But yeah, we, we have kind of vaguely talked about this in the past, in that there are so many variables that could change, tax is only one of them, health, I often think is another one, God forbid, divorce and multiple other things could happen to the variables will will inevitably happen the the plan that you agree. Nick Lincoln often says this, the plan agreed one thing for certain, it will be out of date almost the minute the meeting is over, is the point. The plan is designed as a map of the terrain. It's not a guarantee. Way this is how things will work out. But it's better to be approximately right than totally wrong, or to be without any guidance or map at all. So good question. Adam, wish you all the best of luck your future career. Absolutely.

Andy Hart: 1:15:51

Yeah, the planning trumps the plan and and

Nick Lincoln: 1:15:53

just to, just to, just to clarify, as we have mentioned once a few times, I don't have any shares in void. I can't comment upon Mr. Hart's position or Mr. Witch position, but I have no shares.

Carl Widger: 1:16:05

Okay, neither do I. Just for anybody that might be interested out there.

Andy Hart: 1:16:11

What's the journalist name? Alan, just to clarify things.

Nick Lincoln: 1:16:14

Victoria Bell,

Andy Hart: 1:16:15

I think. Victoria, okay, I don't own chairs in warning,

Unknown: 1:16:18

right?

Nick Lincoln: 1:16:19

Let's crack on with the final segment of the show, which is, of course, culture caller, and I'm going to go first on this one. So my one, it's not really, it's not related to this thing of ours, but it is around money, and it's a fascinating tale, and it's a short offer duration. So the book casino by Nicholas palegi is on sale on Kindle for 90 9p it was made into a fabulous film in the mid 1990s with Robert De Niro and Joe Pesci and an absolutely sizzling Sharon Stone. And it's a really good I read it years ago and lost the physical book, so I'm going to get that on Casino. Nicholas palegi is also the guy who wrote Goodfellas, which became the film of the same name as well. So you know that he and the Goodfellas might be my favorite film, but the book is almost as good as the film and Casino. The book will be as good as casinos. Have a nice 9p get a fascinating read into a world long gone focused around money and casinos and the skim and so forth. So it should be of interest to people who are involved in this thing of ours. Of ours. Of course, this thing of ours is shorthand for the mafia, so I'm getting myself into a hole here, right? Let's move on to the next one. That's

Carl Widger: 1:17:29

me Nicholas. I would like to recommend the Mel Robbins podcast and a particular the latest episode, which is billionaire life hacks. I just, I really like this podcast. She is very upbeat. She's very positive. And they're short and sharp. These episodes, she goes through kind of life hacks from billionaires that she talks about, Warren Buffett, Taylor Swift, LeBron, James, it's really good nick you'd, I don't think you'd enjoy it. I think this will be Marmite for people. I just enjoy listening

Unknown: 1:18:06

to,

Nick Lincoln: 1:18:06

who's LeBron Swift,

Carl Widger: 1:18:10

uh, moving swiftly along. Who's Max nameless.

Andy Hart: 1:18:14

Have you got a shake all the good life hacks, but we've got this to the podcast.

Carl Widger: 1:18:19

Uh, it's very short, like, I mean, Warren Buffett's one is, read, read, read. Taylor Swift says, you know, taking notes along the way. LeBron James is Sleep, sleep, sleep. So we don't already know,

Alan Smith: 1:18:36

no, but there's nothing that we don't Yeah, it's not one for you. Okay, I just stand by ready

Carl Widger: 1:18:43

to tear apart and

Andy Hart: 1:18:50

above your station mate. So mine is the Chris Williamson podcast again, Derek Sivers, who set up CD. Baby sold. It's quite a good thinker. It's called the unstoppable power of reframing, reframing your experiences a couple of hours long, and I'm going to finally mention it's totally unrelated to this thing of ours, but monsters on Netflix. I finished it at the weekend. It's a pretty brutal series, so yeah, check that out as well.

Carl Widger: 1:19:19

Is that the Menendez brothers, brothers,

Andy Hart: 1:19:22

yeah, it's brutal, brutal. I've I'm three

Carl Widger: 1:19:25

episodes in that it is brutal, scary. And, yeah,

Andy Hart: 1:19:29

it's not, it's

Nick Lincoln: 1:19:30

not. What was that? Was that other series that your father recommended, Carl, that you we shouldn't watch.

Andy Hart: 1:19:37

It's on Apple TV, apparently. Yeah. Oh. Over

Carl Widger: 1:19:43

to you. Yeah,

Alan Smith: 1:19:47

yeah. And Derek simmers is fabulous if you've heard that podcast, but previous stuff that he's done, he's just quite like I thought he up your street, Nick there, so, but he's very kind of under. Status. He's

Nick Lincoln: 1:20:00

one of these guys who no one ever challenges him. He just talks and he says things I think he will push back. It's just, it's like a lot of it's bullshit, I think, sorry, there you go.

Unknown: 1:20:11

Okay, okay.

Alan Smith: 1:20:14

My suggestion this time around is a podcast called Business Made Simple. Originally, this whole thing set up was the guy called Donald Miller. Don't know if anyone's come across Donald Miller, he's got this whole again, could be conversation for another time. This whole kind of podcast and book and series called Story brand. Building your story brand. This is an offshoot from this business made simple podcast, so it's not specifically related to this thing of ours financial planning, but it's, it is related to anyone running a small business, and it's very focused on marketing and growing your business. And the podcast that they had the interview recently was a guy called Marcus Sheridan. Now, I read Marcus Sheridan's book quite some time ago, one of the real elevators on content creation. Wrote a book some years ago. They ask you answer, and of course, obviously, he's appearing and he's doing the podcast circuit because he's got the latest and updated version of it, which incorporates all new technologies and AI, etc, but it's a 30 minute listen or watch. And really good, you know, half a dozen practical ideas that you can implement in terms of, you know, growing your business, marketing and innovation. So link, as always, in the show what I did, like covid. I know I'm gonna leave you to put you in charge, but I tell you, I'll tell you the one, the one idea is, and I'm going to leave this because you probably know already Andy, but he talks about the big five. Get into the big five. You want to, if you want to create content, write about the Big Five, or make a video about the big five. And it's nothing to do with going in Safari. Boom, boom, right. Let's do this. Finish it. Okay,

Nick Lincoln: 1:21:58

on that, on that, on that group again. Then on that note, I think we have reached a wrap for this episode. 82 minutes in, we're still friends just about so thank you, Dick TRAPPIST for your time and for your input on the show. Do rate us to leave a review on iTunes or however you do it within the APO and the apple and the Apple world, that'll be great. Six out of five stars. Like and subscribe to our YouTube channel. We seriously are not that far now from 1000 subscribers, which still blows my mind, really, but so until the next time from the Track Pack it is Adios, take care out of there, folks, and we will see you in a couple of weeks time. Goodbye. Bye, bye,

Carl Widger: 1:22:36

bye, descended into chaos. That

Nick Lincoln: 1:22:44

was all right. That was good. I.