May 28, 2008 | posted by Christopher Jones-Warner in Insight, Investment | comments (0) |

Financial centres rise on the back of the empire that creates them. They also tend to fall as their empire wanes. London hasn’t, however. It straddles time zones; Sterling had become a globally recognised currency and English became the language of commerce.

 As the empire declined, London’s primacy in areas such as insurance, foreign exchange and commodity trading transferred to other areas such as derivatives trading, hedge fund management, wealth fund management, as well as M&A, legal services and compliance.

Simon Culhane, the Securities & Investment Institute’s CEO, was able to cite figures at its recent Annual Conference, identifying London as the world’s premiere financial centre. But the figures had shown some decline on the position the year before. Other financial centres are catching up and reflect the growing financial power of the East; Singapore, for example, being the world’s fastest growing private banking centre.

London’s position is not unassailable so conference delegates might have been pleased to hear the Economic Secretary to the Treasury, Kitty Ussher MP, declare that “for London to remain the world’s leading financial centre, we need to work together” and that she would be “the City’s champion in government”.

A fundamental reason for the City’s rise to global prominence, however, is its traditional independence from government, to the extent that, in the past, while countries might be at war with Great Britain, they still obtained funding from the City. Such activity, while militarily wanting, helped establish the foundation of trust in the City from which we benefit still.

London is now a global phenomenon and while a dialogue with government is welcome, its aims should be to both ensure its independence from government and to retain its competitiveness.

May 19, 2008 | posted by Christopher Jones-Warner in Insight, Investment | comments (0) |

London is arguably the world’s premiere financial capital and yet most UK citizens are financially unplanned. There is a lack of buy-in from those outside the square mile. The regulator is attempting to redress this through its Retail Distribution Review by creating a simpler regulatory landscape in which financial advisers will consider the whole of market on behalf of their clients without the conflict of interest arising from which provider will pay them the most commission.This should be reassuring for consumers but could be less so for those who would be financial advisers.

The regulator is also suggesting that there should be a step change in the professional standards and qualifications required of advisers. Those in the industry without the requisite qualifications might prefer to be grand-fathered in to the new regime but this option may not be open to them; the regulator is considering imposing the full entry via examination route.

Is a one-off set of exams imposed on an experienced practitioner the most effective way to raise standards? It is certain to impose strains on their business and home life and as our business is all about relationships this is unlikely to be ideal. Examinations also are not noted for delivering long-term changes in behaviour.

Something that could, however, would be a more rigorous CPD regime where practitioners would be assessed for their weakness and take on an appropriate programme of remedial CPD. This would form part of their business life, open them to new practices, and could promote business opportunities for them. Also, the longer term nature of CPD would be more likely to encourage a more enduring improvement in standards.

The financial advice industry needs to rise to this challenge, however, by delivering rigorous CPD. The pledge signed between the Chartered Insurance Institute, Institute of Financial Planning, Securities & Investment Institute and the Chartered Institute of Bankers in Scotland, to form a single, independent professional standards board for advisers, makes this possible.

By embracing a structured programme of CPD that supplements their skills, behaviour and knowledge, advisers can establish themselves as the trusted professionals they deserve to be, reflected by an increased uptake in the financial planning they offer, from consumers.

May 8, 2008 | posted by Christopher Jones-Warner in Insight, Investment | comments (0) |

The most important reason for including hedge funds within a balanced investment portfolio is to diversify effectively. Perfect in the current market environment but investors will need to prepare themselves for hedge fund casualties as the start-ups which benefitted from the market bull run of 2003-7 find it more difficult to cope with a bear market.So it will be vital for we in the financial services industry to know what we are putting into our clients’ portfolios.

But at a fascinating lecture on hedge funds at the Raymond James Investment Services annual conference recently from Professor Harry Kat of the Cass Business School, we learned that every hedge fund follows its own strategy and that even funds classified by the same strategy tend to produce completely different returns. That is, if we can rely on the returns as presented. Professor Kat went on to say that the data collected in commercial hedge fund databases is not audited or independently verified. His own researchers have to spend time taking out errors to analyse performance effectively.

So, can we be sure what we are putting into client portfolios?It can also be easy to regard hedge funds as an asset class, particularly when APCIMS allocates a 5% weighting to hedge funds in its balanced and growth portfolios. But hedge funds follow particular strategies and it is incumbent on us as advisers to know what the strategy is and how it sits in our portfolios and whether the funds are following that strategy. But poor quality performance data is not all for Professor Kat alluded to the “marketing materials (which) are often highly suggestive, emphasising the good and wonderful while ignoring the less attractive elements of hedge funds”. Caveat emptor!