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M A G A Z I N E

A DEDICATED ISSUE ON THE FISCAL FUTURE

FinancialFocus

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ISSUE #9 | OCTOBER-NOVEMBER 2012The exclusive magazine for Lansdown Place Financial Management

FINANCIAL FORECASTS

EXPERTS JUDGE OUR ECONOMIC FUTURE

GROWTH FUNDS WHAT ARE THE GUARANTEES

PROTECT THE THRONEFAMILY AND BUSINESS PROTECTION

HIGHLAND FLINGTHE INVESCO PERPETUAL ADVENTURE

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Letter From The Editor

OCTOBER 2012 1Financial Advice: Independent & Impartial

the EditorThese are frugal times. With the country still feeling the effects of a double-

dip recession, now more than ever, people are looking for more efficient ways to manage and invest their money. While recent statistics have suggested that the UK economy is recovering, it will take more robust rates of growth to fully close the gap. Other reports have not been so optimistic, suggesting that the UK economy will remain stagnant for the foreseeable future. Who would have thought that, when the economy plummeted back in 2008, we’d still be experience the aftershocks four years later.

As such, instead of bringing you the usual mix of cars, food, travel and products, we have decided to dedicate this issue solely to finance, providing an essential primer for the year ahead. We’re covering the economic situation as thoroughly and impartially as possible, with advice from leading experts and companies on such topics as: the current investment climate; the global economy and the effect of the sovereign debt crisis; behavioural finance; how to fund a comfortable retirement; pension advice; flexible drawdown; and the outlook for the rest of the year.

We will also be looking at the Invesco Perpetual Highland Adventure Race, which the team from Lansdown Place took part in earlier this month. This annual charity race involves a mix of cycling, hiking and canoeing across Scotland. We will see how the team did in its effort to be crowned the winner of this important event, which raises money for The Mitchemp Trust.

Until next time,

Laith Al-Kaisy

Lansdown Place is a trading style of Lansdown Place Financial Management Ltd which is authorised and regulated by the Financial Services Authority. Our Financial Services Authority Registration Number is 126762. Lansdown Place Magazine is funded solely through the kind support of advertisers. The views ex-pressed in this publication are not necessarily those of the publisher. The publisher cannot accept responsibility for any errors or omissions relating to advertising or editorial. The publisher reserves the right to change or amend any competitions or prizes offered. No part of this publication may be reproduced without prior written consent from the publisher. No responsibility is taken for unsolicited materials or the return of these materials whilst in transit.

Laith Al-Kaisy Editor

Andrew Hobson Art Director

Peter Robinson Director

Adam Wood Digital Director

[email protected]

[email protected]

[email protected]

[email protected]

Letter from


JUNE 2012 1Financial Advice: Independent & Impartial

the EditorHello, good evening and welcome. Doesn’t really have the same impact on paper, does it? Since I last wrote to you, much has been happening in the world. For starters, we hit a double-dip recession. Further west, American is gearing up for its next presidential election. Oh, and of course, the Olympic Games are about to begin.

It was four years ago when all these things were last upon us. In fact, I remember watching Obama’s inauguration like it was yesterday. It was fascinating, but not for the reasons you may think. As Americans welcomed their messianic premier with the biggest celebrations in presidential history, a grim subtext was unravelling just 300 miles away on Wall Street. While Obama took his oath in front of an irrepressibly convivial crowd of two million, the Dow plummeted by 4% – its lowest ever reading for inauguration day. Irony doesn’t get more acerbic than that.

So, this issue, we make sure to cover the global economic situation as thoroughly and impartially as possible, not least with BlackRock’s insightful market overview. Also, I discuss the economic future with Gerald Celente, a trends forecaster whose predictions are yet to be wrong.

We didn’t forget the Olympic Games either, which, for the first time since 1948, finally arrive back in London. We celebrate the start of the Games with a look back at some of its most memorable moments. Speaking of memorable moments, the team here pooled together to recount their most beautiful places to wake-up, and Graeme Morpeth takes a look at small ship cruises, with a tour aboard Caledonian Sky.

Continuing our entertaining look at legal matters, Wards reveal the world’s most bizarre divorce settlements, including one man who acquired his ex-wife’s pet goat. No kidding... I’d also like to take this opportunity to welcome our new writer, Bristol’s favourite sartorial stylist, David Minn’s. In his first column, David asks the question: ‘Do I still have it?’

And finally, of course, Peter Robinson speaks with the broadcasting legend Sir David Frost – a man who defines the term ‘national treasure’. Peter turns the tables on the world’s most famous interviewer; a tête-à-tête on Frost’s past, present and future, plus his thoughts on the media, journalistic integrity, and the current socio-political landscape.

Until next time, enjoy.

Laith Al-KaisyLaith Al-Kaisy Editor-in-Chief

Lansdown Place is a trading style of Lansdown Place Financial Management Ltd which is authorised and regulated by the Financial Services Authority. Our Financial Services Authority Registration Number is 126762. Lansdown Place Magazine is funded solely through the kind support of advertisers. The views ex-pressed in this publication are not necessarily those of the publisher. The publisher cannot accept responsibility for any errors or omissions relating to advertising or editorial. The publisher reserves the right to change or amend any competitions or prizes offered. No part of this publication may be reproduced without prior written consent from the publisher. No responsibility is taken for unsolicited materials or the return of these materials whilst in transit.

Lansdown PlaceGMM Publishing

1st FloorPrudential Buildings

11-19 Wine StreetBristol, BS1 2PH

T: +44 (0)117 3702 471E: [email protected]

www.gmmpublishing.com




Adam Wood Digital Director

[email protected]

[email protected]

[email protected]

[email protected]

Letter from


MARCH 2012 1Financial Advice: Independent & Impartial

the EditorIt was T. S. Eliot who said that “April is the cruellest month.” He was, of course, speaking ironically of springtime – how rebirth and rejuvenation is met by bleakness and uncertainty. Am I applying Eliot’s modernist musings to a precarious 2012? Well, as we head into the first season of the new year, one can’t help but reflect on these unsteady yet exciting times: austerity measures are tightening, but elbow patches are back in; there’s risk of a double-dip, but we’ve got an exclusive interview with Donald Trump. See, the world has a way of balancing everything out.

So, yes, Donald Trump, one of the world’s most famous entrepreneurs, builder of hotels, not-so-secret fan of wrestling, star of The (American) Apprentice, and friend to the stars. PJR takes time out in New York to meet the man himself – in Trump Tower no less.

Yet again, I failed to go jaunting with the team. It’s a hard life for them, publishing: stylin’ and profilin’, limousine ridin’, jet flyin’, wheelin’ and dealin’, sons of guns. Next time, I’ll get my act together. This issue, however, the focus is Flims – a place so good, so under wraps, that you’ve probably never heard of it. But trust me, you really should’ve. Speaking of travel, I sit down with John Kennedy. No, not the assassinated president, but the Aussie entrepreneur who, after years in the travel industry, became an ambassador for Noble Caledonia, providing folk with unique, luxury cruises aboard small ships.

Getting down to the nitty-gritty, Huw Thomas, our fiscal shaman, gives his remedial insight on holistic finance. As he points out, there’s nothing esoteric about it – just sound financial planning. TLT gives us an offbeat yet practical look at pensions, and Wards lets loose on the unusual clauses found in wills.

We haven’t forgotten the indulgence, don’t worry. Resident road warrior Graeme Morpeth takes the BMW Series-6 Coupe 640 for a test drive (no thanks to Hartwell Jag for messing-up; many thanks to Dick Lovett for not), and Emma Hare meets the Managing Director of Cartier UK, the enviably

named Francois Le Troquer, to discuss 165 years of jewelling. Also, PJR visits Style Advisor David Minns to get measured for a new suit, and we take a look at Crombie’s newest collection for women.

See, spring isn’t looking so bad after all.

Laith Al-KaisyLaith Al-Kaisy Editor-in-Chief

Lansdown Place is a trading style of Lansdown Place Financial Management Ltd which is authorised and regulated by the Financial Services Authority. Our Financial Services Authority Registration Number is 126762. Lansdown Place Magazine is designed by Andrew Hobson Design. All rights reserved. Lansdown Place Magazine is funded solely through the kind support of advertisers. The views expressed in this publication are not necessarily those of the publisher. The publisher cannot accept responsibility for any errors or omissions relating to advertising or editorial. The publisher reserves the right to change or amend any competitions or prizes offered. No part of this publication may be reproduced without prior written consent from the publisher. No responsibility is taken for unsolicited materials or the return of these materials whilst in transit.

GMM Publishing1st Floor, Prudential Buildings

11-19 Wine Street, Bristol, BS1 2PHT: +44 (0)117 3702 471

E: [email protected]

Lansdown PlaceLansdown Place2 Oakfield Road

Clifton, Bristol, BS8 2ALT: +44 (0) 845 30 50 222

www.lansdownplace.co.uk




Adam Wood Director

Dan Wall Client Services

James Billett Photographer

[email protected]

[email protected]

[email protected]

[email protected]

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[email protected]

Letter from

EdLetter_v3.indd 1 07/03/2012 15:12EdLetter_v2.indd 1 20/06/2012 11:50:57EdLetter_v2.indd 1 07/11/2012 16:06

A gainst a backdrop of slowing global growth and discouraging news, one feature stands out more than any as a hopeful sign of better prospects ahead. The leading Wall Street indices, such as the S&P Composite Index and the Dow Jones Industrials, have not only risen to new highs for this year but also to new post-financial crisis highs. This is in spite of plenty of profit warnings, which reflects the slowdown so evident throughout the global economy and should come as no surprise. The surprise instead is the extent of the slowdown throughout the global economy, especially in view all the effort on the part of the central banks that has gone into sustaining the economic recovery.

It would be wrong to heap all the blame for this loss of ‘economic momentum’ on the eurozone but the sovereign debt crisis has had much to do with it. Aside from the directly adverse impact of the eurozone’s economic stagnation on global trade, the destabilising influence of the debt crisis on financial markets has also inhibited global growth. Certainly sentiment has been affected but, as we also know from Mr Draghi, President of the European Central Bank (ECB), the crisis has reduced the effectiveness of monetary policy, which has added to the uncertainty as well. All of that is more than enough to discourage investment

growthBrewin Dolphin’s Chief Strategist, Mike Lenhoff, on the state of the global economy and the effect of the sovereign debt crisis

and employment. Mr Bernanke, the Chairman of the

US Federal Reserve, has made a very similar point in referring to how the financial crisis of 2008 and the recession that followed has weakened the channels through which US monetary policy takes effect. But he has not stopped there. Mr Bernanke also pointed a finger at the uncertainties created by the eurozone sovereign debt crisis. So too has the Governor of the Bank of England with his more graphic description of the ‘black cloud of uncertainty’.

The upshot, no matter where one looks, be it in and among the major developed or developing economies, is that the growth of corporate profitability has been rapidly slowing. Despite this, equity markets are holding up reasonably well. Moreover, in focusing on the broad investment background and the outlook for say some six to twelve months down the road, there are three reasons for thinking they will continue to do so.

First, while the eurozone remains a long way from resolving its difficulties and achieving debt sustainability, progress is being made. The ECB has now introduced a new initiative, which it has labelled Outright Monetary Transactions, OMTs for short. It aims to support sovereign bond markets and in the process help to improve the effectiveness of monetary policy. A

major obstacle to its implementation has now been removed by Germany’s Constitutional Court which ruled favourably on the legality of the European Stability Mechanism (ESM), a key agent in the programme for helping to bring down yields.

This support should be beneficial for the eurozone. However, it should also be beneficial for global growth when you consider that the sovereign debt crisis has put at risk the stability of the financial system by weakening the financial position of the commercial banks. The latter has had much to do with the weakening of the normal channels through which central bank policy takes effect. It was Mr Draghi himself who said the system needed repairing. If it is widely perceived that the ECB can now do this, and there is reason to believe it is – indeed, bond yields for Spain and Italy, for example, have fallen a long way already, even before implementation of the new initiative – then the financial position of the banks should improve. Not only should the destabilising influence of the crisis diminish but subduing it should also foster an environment less fraught with uncertainty and hence more conduce to growth. This would be positive for equity markets and provide less reason for the flight to safety that has pushed yields in the quality in government bond markets

Mike Lenhoff DPS Advertorial.indd 1 28/09/2012 17:43:41

The Exclusive Magazine For Lansdown Place

2 OCTOBER 2012 www.lansdownplace.co.uk

Contents

This issue

Lansdown Place is printed on FSC-certified grade paper. Please recycle this magazine when you have finished reading it.

04 An inconvenient Truth with M&G06 The Highland Challenge12 Investment Risk14 Doctor Feelgood with James Scrimshaw16 Flexible Future with Liverpool Victoria

18 Growth with Brewin Dolphin20 Financial Future with AXA24 Dividend Growth with Invesco.26 Cruise Control, leadership with William Montgomery.

Contents_v1.indd 2 07/11/2012 14:51

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A sizeable proportion of market movements are based on human emotion rather than the fundamental attributes of an investment. Behavioural fi nance recognises this inconvenient truth at the heart of investment, turning the spotlight on the factors driving investor behaviour and using them to make positive investment decisions.

It is not enough to understand how we feel as individual investors; we need to understand how the wider investment community feels, and identify the factors driving the markets. Behavioural fi nance recognises the emotions involved in making investment decisions under conditions of euphoria or panic, and enables astute investors to profi t from this behaviour.

Mob mentality Many investors base the price they are willing to pay

for an asset on their perception of its immediate potential, focusing on short-term news-fl ow and forecasts. However, these factors distract from the fundamentals, preventing the investor from viewing the investment as a long-term asset. Decisions are based on individual investors’ perceptions of risk and reward, which are, in turn, often dictated by broader sentiment-led trends of fear and greed.

It is worth noting that an approach based on behavioural fi nance is not the same as a contrarian approach. Behavioural fi nance is not about going against the crowd. Instead, it helps the investor assess the extent to which the crowd’s emotion has moved prices inappropriately and then to use this information in the decision-making process.

Windows of opportunity Human behaviour can infl uence markets over both the

short and the long term. For example, the Dubai debt crisis of 2009 was short and sharp, while the European sovereign debt crisis has yet to conclude. Looking further back in time, the effects of the dot-com boom and bust can still be felt.

A notable episode of behavioural fi nance at play came in 2011 when an earthquake and tsunami hit Japan. While it could be expected that Japanese equity markets would fall

Facing an Inconvenient

Investors are sometimes described as their own worst enemies – but this maxim is closer to the mark

than we might realise. Dave Fishwick, Head of Macro and Equities Investment, and Fund Manager Eric Lonergan, both of M&G’s Multi Asset team, explain behavioural � nance.

Facing an InconvenientFacing an Inconvenient

Truth

‘A sizeable proportion of market movements are based on human emotion rather than the fundamental attributes of an investment.’

M&G Facing the truth.indd 52 07/11/2012 14:52

Inconvenient Truth


Inconvenient Truth


after the disaster, European equity markets dropped equally sharply – even though investors had little information on the likely impact of such a far-fl ung event on, for instance, German companies. Such episodes can offer investors a window of opportunity.

The courage of your convictions The principles behind behavioural fi nance sound

straightforward enough, but how can they be used to construct and manage an investment portfolio?

One approach is to be objective and investigate scientifi cally how much one is being paid to invest in a particular asset. By comparing the yield provided by, say, a government bond to that of a company share, an investor can objectively evaluate the relative attractiveness of each asset. However, this process has to be disciplined; the investor cannot then be swayed by the sentiment surrounding each asset (everybody may be buying government bonds at the moment, believing company shares to be too risky). This approach requires investors to have the fortitude to stick to their strategy. Not every investor is comfortable following behavioural fi nance techniques. It can be challenging to take decisions that appear to fl y in the face of ‘normal’ investor behaviour.

Nevertheless, the principles of behavioural fi nance can be harnessed by any investor willing to accept that a sizeable proportion of market movements can be attributed to noise rather than hard fact. They can provide a valuable reality check, forcing investors to examine their decisions.

Ultimately, behavioural fi nance does not seek to ignore the human factor. Rather, it seeks to recognise it, acknowledge its important infl uence, and then strip it out of the analytical process in order to make successful investment decisions.

Equity: Shares of ownership in a company. Equity investors have a claim on a company’s assets and pro� ts (the latter in the form of dividends), but only a� er its debts have been paid.

Bond: A loan, usually taken out by a government or company, which normally pays a � xed rate of interest over a given time period, at the end of which the loan is repaid.

Yield: This refers to the interest received from a bond and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.

Contrarian: An investor who does the opposite of what most investors are doing at any particular time.

We are unable to give fi nancial advice. If you are unsure about the suitability of your investment, speak to your fi nancial adviser. The views expressed in this document should not be taken as a recommendation, advice or forecast. Prices may fl uctuate and you may not get back your original investment. For further information on M&G Investments, visit mandg.co.uk

This Financial Promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Services Authority and provides investment products. The registered offi ce is Laurence Pountney Hill, London EC4R 0HH. Registered in England No. 90776

Key Investment Terms

M&G Facing the truth.indd 53 07/11/2012 14:53


12 SEPTEMBER 2012 www.lansdownplace.co.uk

HighlandThe

HighlandHighland Challeng

e

The Invesco Perpetual Highland Race is held annually in September to raise money for the Mitchemp Trust. The Race is a team event, consisting of up to six participants. Just like last year, the team from Lansdown Place Financial Management cycled, hiked and canoed 60 miles, from east to west Scotland, in an e� ort to take � rst place

www.lansdownplace.co.uk06 OCTOBER 2012


Highland Challenge.indd 12 07/11/2012 14:54

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following tracks and the burn, the teams make their way towards Lochan Meall an t-Suidhe until it joins the standard ascent on the west side of Ben Nevis up to the summit. The teams then descend to Fort Williams on the west coast to complete the race, which is estimated to take anywhere between 4 and 8 hours to reach the fi nish line. Certainly not for the fainthearted!

Steve Brice, Senior Consultant at Lansdown Place Corporate Benefi ts, explains more:

“What a weekend it was. The weather could not have been better – hardly a drop of rain all the time we were racing. It was pleasant, but not boiling hot, with a breeze to keep us cool – especially when the going got really tough. I say ‘breeze’, it was a 15mph headwind when we were canoeing, which didn’t help at all.

Our time last year was 14 hours and 47 minutes (from memory), and we came sixteenth. I am pleased to say that our time this year was 13 hours and 17 minutes! That was good enough to see us take eighth place in the league table – and a very credible result,

too, we thought. Yet we can’t help but feel a little disheartened. You see, there was a plot-twist during the cycling: we, as well as three other teams, ended up taking a wrong turn on the course. On this part of the course, the signage was a little suspect, to say the least, and had we not taken this detour, our time would have been 12 hours and 47 minutes. That would have been quick enough to secure third place overall!

Sadly, I think that this will be my last year taking part in the challenge, but I am sure that Lansdown Place will fi nd other unsuspecting employees to take part in future. However, I like to take this opportunity to thank everyone who supported us by way of sponsorship, and to those who donated raffl e prizes (I believe winners have been notifi ed by Joe Cooper under separate cover). A special

Williams on the west coast to complete the race, which is estimated to take anywhere between 4 and 8 hours to reach the fi nish line. Certainly not for the fainthearted!

Place Corporate Benefi ts, explains more:

not have been better – hardly a drop of rain all the time we were racing. It was pleasant, but not boiling hot, with a breeze to keep us cool – especially when the going got really tough. I say ‘breeze’, it was a

didn’t help at all.

(from memory), and we came sixteenth. I am pleased to say that our time this year was 13 hours and 17 minutes! That was good enough to see us take eighth place in the league table – and a very credible result, take eighth place in the league table – and a very credible result,

too, we thought. Yet we can’t help but feel a little

take eighth place in the league table – and a very credible result,

Bolt’ed

Take my breath away

Day One: 36 miles mountain biking over rugged terrain, cycling from Inverness Castle on the east coast to Fort Augustus, covering varied terrains from good tarmac to off-roading, which will challenge the teams’ cycling abilities. This leg of the race usually takes

anything between 4 and 8 hours. Canoeing along the Caledonian Canal is next. From Fort Augustus, it is a 700 metre walk (or run!) for each team to pick up their canoe. Teams will then travel along the Great Glen, including paddling along the canal and the full length of Loch Oich to the Great Glen Water Park, covering 9 miles. The estimated time to complete this section of the race 2 to 4 hours. Breaking up the race is overnight camping. Though staying in tents, the teams are treated to a little luxury – toilets, showers and a bar – as well as access to a medical clinic and sports massage therapists.

Day Two is the big one: hiking Ben Nevis, the highest point in the UK, at 4,409 feet. 13 miles,

08 OCTOBER 2012

highest point in the UK, at 4,409 feet. 13 miles,

On me head


Highland Race

OCTOBER 2012 Financial Advice: Inde-

mention has to go to the team at Lexus, who kindly donated our support vehicle.”

The CharityThe Mitchemp Trust is a registered youth

development charity, which works with vulnerable young people aged 11 to 14 years old from across Wiltshire. The vision of the Mitchemp Trust is to give young people the hope and confi dence to meet challenges in their lives. Trust and motivation is built via experience and adventure.

The trust was established in 1992 by David Hempleman-Adams and Major Richard Mitchell, both well known for their record breaking Arctic, Antarctic and mountain climbing expeditions. They agreed that early experiences in challenging themselves, through the outdoors, had shown that they could achieve more than they thought. This idea led to the realisation that many young people, for a variety of reasons, often do not have the opportunity to start the ‘believe – achieve’ process and make the most of their lives.

The Mitchemp Trust’s fl agship programme is the Youth Adventure programme, which is designed to challenge and inspire young people, helping them develop their self esteem and confi dence. The course emphasises the importance of team work, communication, social skills and learning about taking responsibility. These are the essential building blocks to help young people grow into individuals who are able to make a positive contribution in the future. <<

For further details visit www.mitchemptrust.org.uk and www.highlandrace.co.uk

development charity, which works with vulnerable young people aged 11 to 14 years old from across Wiltshire. The vision of the Mitchemp Trust is to give young people the hope and confi dence to meet

Hempleman-Adams and Major Richard Mitchell,

They agreed that early experiences in challenging

people, for a variety of reasons, often do not have

social skills and learning about taking responsibility.

Camel On

highlandrace.co.uk

OCTOBER 2012 Financial Advice: Inde-

Lexus Team Wagon




8th place


Basic Toilets

“Thank you to everyone that helped us raise over £3000 this year.”

“We couldn’t of done it without you.”


At Brewin Dolphin, we don’t have anyone telling us what to do. We’re independently owned, and have none of the restrictions that can be associated with the big banks. Our investment managers are free to search the whole of the marketto find the most suitable investments for their clients. So if you’re looking for impartial, expert investment advice, make Brewin Dolphin your choice. You’ll find that the first thing we earn is your trust.

Some companies are allowed to choose from all the investment options out there.

Some companies aren’t allowed to choose from all the investment options out there.

There, that should help you choose.

The value of your investment may fall and you may get back less than you invested.

0207 246 1000 brewin.co.uk/250 follow us on Twitter @BrewinDolphin Brewin Dolphin is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority No.124444

Untitled-1 1 31/10/2012 16:25AD_MP.indd 1 07/11/2012 15:15


Investing in the current environment, though, presents a number of challenges. The choice of retail investment options is mind-blowing, with new ways and routes to invest seemingly springing up every day.

Online stock brokerage services provide an easy way to purchase everything from shares in FTSE100 companies to derivatives and CFDs to buying an index through ETFs. The thrill of watching the daily price swings is attractive to some, and a small portfolio of handpicked shares can, in the right circumstances, produce stellar returns. Stock broker charges and their often limited research capabilities also increase the risk of lower total returns.

Other investors prefer the relative safety of open-ended collective investment funds such as unit trusts and open ended investment companies (OEICs) that also provide access to real assets, but have large professional fund management teams making the daily buy-sell decisions. From low cost passive funds to more expensive, high-octane UCITSIII absolute return funds, there are literally thousands of retail collectives to choose from, most with daily liquidity.

Another big consideration is whether to appoint an adviser, and if so, whether the adviser should have discretionary powers or maintain a consulting advisory relationship and include the investor in changes to investment strategy or assets. A good adviser comes with years of experience and specialist knowledge, while taking liability for the advice. However, advice comes at an

additional cost, so regular assessment of the value added should be undertaken to see if a change or removal of this ‘outsourced specialist’ is warranted.

Before appointing an adviser, it is essential to check technical qualifi cations and FSA permissions. Even today, many so-called ‘investment advisers’ or ‘wealth managers’ are trading off the back of tick-box qualifi cations from decades ago. Entrusting your cash with a safe pair of hands might sound obvious, but many people fail to properly investigate the qualifi cations of a potential adviser. Finding a chartered fi nancial planner is a good starting point in this respect.

Regardless of your chosen route to investing, understanding and taking into account the risk of your chosen assets is essential.

Systematic and non-systematic riskUnsystematic risk can be thought of as the risk

generated by factors specifi c to the stock or share, such as a poor management team, changes to regulation or other event-driven risks. By investing in a number of different companies, this ‘specifi c risk’ can be signifi cantly diversifi ed away. Increasing the number of holdings reduces risk only so far. Studies have shown that there is little to no additional benefi t in holding more than 35 companies in different sectors.

Systematic risk, often called ‘market risk’, is deemed undiversifi able as it pertains to the fi nancial system as a whole. Sentiment will drive markets up or down as measured by changes to an index. The change in price to an individual equity on any given day will, in part, be a refl ection of these market fl uctuations. Professional investors measure market risk using beta (β) – a share with a beta of 1.0 is expected to move exactly in line with the market.

Risk Adjusted Performance MeasuresConsidering outright performance in isolation is a

Risky

BusinessCash deposits currently provide poor value for money and with in� ation hovering at 3%, many people are quite rightly assessing their actual need for instant access cash, and allocating more capital to purchase ‘real assets’ that have a � ghting chance of keeping up. Ed Holder explains more.


Investment Risk.indd 38 07/11/2012 14:56

Risky Business


common but dangerous behaviour. Provide most novice investors with a list of investments with the attaching performance figures for each, and ask them to select their top-ten picks. Most would select the investments that have performed the best over the previous one, three or five years, without taking care to analyse and assess the varying aspects of risk taken to achieve those returns.

Risk adjusted measures factor in both the performance and the relative risk of an investment to give a more useful value with which to make buying decisions. The share of a company that marginally outperformed over the past three years, but whose management team took huge gambles to deliver profits, is unlikely to be able to continue to outperform. Conversely, an investment that has marginally lower risk characteristics than its sector average but delivers consistently high returns indicates a sustainable process, and is perhaps a safer bet.

‘Sharpe Ratio’ shows the excess return per unit of risk associated with the excess return. The benchmark used is the ‘risk free’ rate of return. The higher the ratio, the better the risk adjusted performance – a useful ratio for investors comparing the relative returns of an asset over cash.

Another useful ratio when looking at investment funds is the ‘Information Ratio’ (IR) which factors in the outperformance of a portfolio and the tracking error (how ‘off-piste’ the manager skied from the benchmark). A high IR indicates the manager used the information about markets to identify prices anomalies better than his peers.

Quantifying and understanding ‘total risk’A measure commonly used to quantify the volatility of

returns an investment is the standard deviation (SD) of its returns around its ‘mean’ or expected return. SD gives us a feel for the ‘total risk’ of an investment (systematic risk plus non-systematic risk equals total risk).

If an investment behaves ‘as expected’ producing returns, year on year, close to the average return of the investment, then we consider this ‘low risk’. Conversely, if the returns fluctuate widely around the average return the investment can be considered as ‘higher risk’.

If a given investment has a high expected return, then it usually carries a higher than average degree of risk rendering it inappropriate for people wanting to take a cautious stance. By the same token, if two potential investments have the same expected return, but one is half as volatile, then this ‘lower risk’ investment is perhaps more attractive.

If your time horizon is short for a given investment and the standard deviation value is high, then the risk of having to crystallise a loss at the point of encashment is elevated.

Reducing Investment RiskThere are broadly three ways to reduce the total risk of

a portfolio:

1. Hedging out the risk2. Simply buy only ‘low risk assets’3. Diversify the portfolio holdings (different assets, sectors, geographies etc.)

Hedging usually involves using financial instruments such as derivatives to take opposing positions on actual assets within the portfolio that increase in value if the values fall. For example, a degree of hedged protection can be achieved for a portfolio of FTSE100 equities by buying a FTSE100 ‘put option’. However purchasing and dealing in derivatives is a complex and potentially expensive business and is perhaps not suitable for a non-professional or retail investor without professional advice.

Purchasing low risk assets inherently means expecting low returns, so unsurprisingly, this route is not always attractive to the investor.

Diversification allows the investor to hold a portfolio of risk assets with desirable expected return characteristics while reducing the overall risk to less than the average risk of the individual investments/securities. Diversification works best if the investor can identify stocks or shares that negatively correlate, i.e. they move in opposite directions under the same market conditions. Therefore only ‘non-systematic’ risk can be effectively removed through diversification of assets.

Finding two assets that negatively correlate in the ever converging global economy is no mean feat.

In conclusion, a good advisory firm can assist in assessing the risk of a current portfolio and advise on restructuring, or simply provide expert knowledge on how best to invest new capital for the best risk-adjusted returns. Technically minded advisory firms can also carefully introduce alternative strategies and assets such as venture capital, derivatives, hedge funds and commodities.

Risk is only one factor that needs to be carefully considered when swapping your hard earned cash for real assets. Investors of course need to equally consider inflation, taxation, charges, timing, holding structure, access requirements, inheritance, reliefs and allowances to name but a few other important influencing factors.

Understanding the known risk characteristics and the expected returns of potential investments, investors can assess if a given security is suitable for their needs and is likely to perform as required. Knowing the likely maximum potential for loss over a given timeframe before you buy an asset should help avoid nasty surprises. Equally, knowing the likely possible upside of an investment gives valuable insight as to whether an investment objective is possible to be hit.

Considering risk adjusted return measures further narrows down the selection process by weeding out securities that carry unnecessary amounts of risk relative to others available.

Investment Risk.indd 39 07/11/2012 14:57



I’ll start by being honest: I can’t profess to give you the true meaning of life. The very question doesn’t make sense to me. Meaning? Why does it have to have one at all? Are we not just here? We humans are a funny bunch, always looking and searching for something else. It is part of what makes us who we are; a remarkable species that has done remarkable things.

Whatever faith I may or may not have, one thing I know is I’m far more comfortable talking to my patients about things I’ve seen, smelt and touched; people I’ve helped and listened to; and things I’ve done.

In my 17 years treating a hundred patients a week as a chiropractor in Bristol, I have learnt a thing or two about the human body and human behaviour, and how we respond to our environment, otherwise known as our day-to-day lives.

The overriding factor, which becomes apparent each day I work, is how remarkable the human body is. Okay, admittedly on a Monday morning, after a weekend with friends and family, it’s not the fi rst thing I think of. In fact, sometimes I wish the human body was a bit more remarkable, so that Mr Smith’s groin strain would heal naturally, without me having to administer a huge blob of ultrasound gel.

As a chiropractor, I spend my time trying to diagnose, treat and prevent people’s pain, and then encourage a healthy lifestyle. The two most important words to me are ‘prevent’ and ‘health’. Most of you reading this article will feel good at the moment. A small amount of you will have a headache, others some back pain, others a cold or infection, and sadly some may have a more serious illness.

Some of what we suffer from is out of our control. Genetics do have a large, yet unquantifi able, part to play in our health. How do we avoid catching a cold? (Answers on a postcard please!) Some of it is just bad luck. A lot, however, is completely under our control. The problem we face is how to live our lives with the right balance of health and fun.

Two years ago, I suffered from deep vein thrombosis in my left calf. I initially thought ‘calf strain’, but ultrasound did nothing. The next day, the pain was worse. The day after that, I was limping. Then, on the Thursday, my busiest day of the week, with thirty patients to see, it was killing me. I looked down and – boom! – it hit me. I couldn’t believe it: it was swollen and discoloured, and I knew exactly what I had. The wife drove me down to A&E, I had the tests and – yes – I, a 38-year-old, relatively fi t health practitioner, had a DVT.

Important headlines of DVT: fi rst two weeks, 1:100 chance of dying from embolism/travelling clots. After injections, the risk went down to 1:1000. Still way too much for me! The internet became my nemesis: every time I Googled something simple – like ‘How long until a clot heals’ – a blog would come up, with someone declaring that their entire family died from a tiny clot. And they were younger and fi tter than me. Basically, I was doomed.

Once I got over the paranoia and stopped Googling anything vaguely health-related and just got on with life, the clot healed slowly.

Now here is the confession: it was all my fault. I was very dehydrated. I remember my urine was luminous the week before. I went out that Friday night, had a lot of drinks with my old mates, and smoked my usual fi ve ‘social’ cigarettes. The next day, I woke up, had a fry-up and watched eight hours of Six Nations rugby slumped on the sofa. I was as immobile as on a long haul fl ight. Totally dehydrated and having smoked; perfect ingredients for a clot. And boy, did I feel like one!

As a chiropractor and a human being, my revised philosophy of life is simple: balance. Balance in your diet; well-thought-out work stations; getting your blood pressure and cholesterol checked by your GP; knowing your health before it shouts at you; exercising for 30 minutes, at least three times a week; offl oading your worries to friends, your partner, spouse or counsellor; turning the phone off; cutting the smoking down or ideally stopping; having days without alcohol; drinking plenty of water. The list is endless.

I don’t believe in extremes. I’ve met some dull people who go too far the other way. We need to be naughty, lazy, gluttonous, gregarious, hardworking and downright irresponsible at times. Life is for living – but try to have a strategy. 80-20 sounds about right to me. What’s right for you?

James Scrimshaw is a doctor of chiropractic, who specialises in the diagnosis and conservative management of spinal and peripheral joint conditions. at the House Clincs - www.thehouseclinics.co.uk

Health insurance is a valuable resource. It not only manages your sickness, but better acquaints you with your body. Insurance, if used proactively, can help pick up the signs of deteriorating health, before your body even gives the symptoms. With a little forward planning, you can get the most out of life, whilst maintaining optimum health. And the key to good health is balance, as chiropractor James Scrimshaw explains.

Two years ago, I suffered from deep vein thrombosis in

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The introduction of Flexible Drawdown (FDD) as an option for people in retirement means individuals now have greater scope than ever with their retirement income planning options. Working with their fi nancial adviser, they can look at retirement in a whole new way.

Historically, the traditional image of ‘retirement’ was being called into the boardroom on your sixtieth birthday and being given a carriage clock and a glass of warm champagne by your boss. Over ten years ago, I read a report from the McKinsey organisation that challenged this assumption. It talked about retirement being a journey that could potentially last years, rather than a single one-off event. It’s something that has stuck in my mind throughout the intervening years.

It’s taken a long time, but with the recent introduction of a new pension option called Flexible Drawdown (FDD) we can safely say that the idea of a long and rewarding retirement journey can now become a realistic prospect. What’s more, the future for people now approaching their retirement years has suddenly become much brighter.

Over recent months, I have had conversations with a lot of fi nancial advisers and other professionals in the pensions industry about the potential of Flexible Drawdown. Reactions have been varied, but over time I have seen more and more people move from an initial position of scepticism to one of acceptance and in some cases (the enlightened ones) to a feeling of optimism – and I’m also hearing a lot of very positive stories about how individual clients have benefi ted from FDD.

Those who are now more positive can see the opportunities which Flexible Drawdown provides from a more holistic perspective. Assuming clients can meet the £20,000 minimum income access requirements – based mainly around the level of pension in payment from other sources such as an occupational scheme and state benefi ts, then FDD offers so much in terms of tax, income death benefi t planning opportunities.

It effectively creates an open framework within which clients and advisers can plan income strategies to meet aspirations and requirements – both at outset as an overarching plan, and then on an annual basis to take into

account changing circumstances and needs.This was brought home to me at a recent meeting

where an adviser who had previously been sceptical about the opportunities around FDD had a near Damascene conversion as he suddenly started realising the positive implications for many of his clients who will be reaching their planned retirement age in the near future. We looked at the circumstances of several clients who would have previously been handcuffed by the income restrictions around ordinary Income Drawdown, but now were in a position to take their income planning to a new level of fl exibility.

So fi nally, all those years on from the McKinsey report, I believe that the Finance Act and in particular the birth of Flexible Drawdown has provided a real opportunity for advisers to guide clients through the retirement journey without detours or cul-de-sacs en route – carriage clock unnecessary – much more exciting prospects where the champagne will be served at the right temperature – possibly on a beach in the Caribbean!

For further information, please contact your advisor at Lansdown Place: 0845 30 50 222

Flexible

FutureBy RayChinn

LV.indd 34 07/11/2012 14:59

Why just recommend a guaranteed incomerate when you can recommend thehighest unit-linked guaranteedlifetime income rate?

SecureAdvantage™

LifetimeIncome Plan

Secure Advantage™ offers the highestunit-linked guaranteed lifetime income

rates on the market. Your clients can takeadvantage of the highest rates and you alsohave the benefit of access to our sales and

service teams, who are specialists in unit-linkedinvestments with guarantees.

Compare our income rates now atwww.axa-secureadvantage.com or call us

on 0800 358 0510.

For Financial Advisers only. Not to be distributed to, or relied upon by, investors.

The Lifetime Income Plans guarantee your client an income for life; they do not guarantee thecapital invested, which can go up or down based on the performance of the underlying investments.The guaranteed lifetime income rate is based on the age of the client (or the younger of the clientand their spouse/civil partner in the case of the Joint Benefit option) when income starts. We takea charge from the Plan for providing the Lifetime Income guarantee. The date and source of the

comparison to support the claim are available at www.axa-secureadvantage.com. The guarantees providedby this Plan are provided only by AXA Life Europe. If AXA Life Europe were to become insolvent, the benefitsfrom the Plan could be affected. AXA Life Europe is authorised and regulated by the Central Bank of Ireland.

Registered office: Wolfe Tone House, Wolfe Tone Street, Dublin 1, Ireland (no. 410727). Member of the AXA Group.

Untitled-1 1 31/10/2012 16:27AD_MP.indd 1 07/11/2012 15:20












Mike Lenhoff DPS Advertorial.indd 1 28/09/2012 17:43:41Brewin Dolphin.indd 12 07/11/2012 15:00

Growth on the Horizon











Mike Lenhoff DPS Advertorial.indd 1 28/09/2012 17:43:41

on the horizon

to record lows. A second reason for being hopeful is

that, in contrast to the fiscal austerity of Europe, government policy on spending and taxation is, by and large, supportive of growth outside of Europe, and so are central bank policies. Of the major central banks, the US Federal Reserve has indicated in no uncertain terms its commitment and readiness to provide additional stimulus as needed to support the economy and ensure steady improvement in the labour market. To that end, the Fed has recently announced additional stimulus. The risk for the US economy, and global trade, is the so-called ‘fiscal cliff’ of spending cuts and tax increases due to take effect at the start of 2013. That is, unless Congress is able to agree on postponing it all, at least temporarily. We think this is likely and while it will not resolve what has proven to be an intractable policy issue, postponement at least avoids what could be another recession at a time when the unemployment rate remains uncomfortably high and consumer confidence uncomfortably low.

Third, in looking at the developing world, the key is China, where the authorities are committed to stabilising growth ahead of the transfer of authority to the country’s new leadership next year. It is easy to forget that the target for China’s growth rate for 2012 was lowered

to 7.5 percent and that policy aims to stabilise the economy rather than to stimulate it.

That said, China’s leaders are determined to hand over an economy that is not heading for the rocks. To this end the policy response to the slowdown has been mixed with the authorities more ready to support domestic demand with fiscal stimulus than through monetary policy. The country’s major economic planning commission has just given the go ahead for a number of big infrastructure projects. The expenditure will be huge, though not quite up to the size of the gargantuan stimulus undertaken in the post-Lehman days. Even so, the projects are labour intensive, which means they should make a difference and help lessen the risk of hard landing. If it needs to, the central bank

has scope to take out insurance with more cuts in reserve requirement ratios and/or in interest rates and is very likely to do this.

In returning to the starting point, the bottom line is that global economic growth should pick up modestly in 2013 and help raise, albeit equally modestly, expectations for corporate earnings. Equity markets are not at levels associated with hard times but at levels that anticipate hopeful prospects. Wall Street owes its resilience as much to the central bank’s support for the economy as to anything else. It might even be said that equity markets are taking on board the significance of the collective force of monetary policies by the major central banks that, in one way or another, are geared towards financial stability and the eventual reflation of aggregate demand. The ‘look ahead’ by equity markets exists here in the UK too. This is less obvious with the FTSE 100, the leading index of the big international companies, than it is with the FTSE 250, the index of mid-sized companies, an index far more allied to the growth of the UK. Yet the latter has reached a new high of the year. Not bad going considering the UK economy is still in recession!

The value of investments can fall and you may get back less than you invested.

“Global economicgrowth should

pick up modestlyin 2013”

Mike Lenhoff DPS Advertorial.indd 2 28/09/2012 17:43:41Brewin Dolphin.indd 13 07/11/2012 15:00



If you’re within 10 years of retirement, you’ll want to ensure that your savings are working as hard as they can now, so that you will have the income you want in the future. At the same time, you may want to protect the retirement income that you can create from the savings you have already built up, because falls in the investment markets could happen at any time. If the markets fell at the moment you wanted to retire, the income you would receive from your savings could be less than you expected.

Traditionally, pension funds are converted into a lifetime annuity on retirement, to provide a guaranteed income that will last a lifetime. However, people are living longer, and the rates offered by annuity providers have been falling. One of the reasons for this is to compensate for the fact they now need to pay out income for a longer period of time. Currently, annuity rates are around 45% of what they were 15 years ago – and they

may be even lower in the future. Current annuity rates are not a reliable indicator

of future annuity rates. As life expectancy continues to increase, many more people will have a retirement that lasts 25 years or more. Today, there is nearly a 50% chance that at least one person in a couple aged 65 will live until aged 89, and a 25% chance that one of them will live to the age of 93. While this is great news for all of us, it does present a challenge to ensure that you have sufficient income to fund the lifestyle you want throughout your retirement, no matter how long it may last.

But what are your pre-retirement investment options?

There are three main investment strategies that you could follow at this point, which are summarised in the table below.

Securing your

Financial Future

“He tumbled to the floor, and his mate

promptly tripped over him. As they lay sprawled in a heap, the pursuing

police apprehended them”

Retirement on the horizon? Your investment choices in the few years before you retire are crucial. It’s essential to secure your future retirement income as soon as possible, as Ellis Axton explains.

1 William Burrows Annuities, – Annuity rates, gilt yields and FTSE 100 since 1990 www.williamburrows.com/charts/annuity10k.aspx?period=1900. Current annuity rates are not a reliable indicator of future annuity rates.

(Figures calculated by AXA Life Europe using mortality tables PCMA00 and PCFA00 provided by the Institute and Faculty of Actuaries.)

Axa Securing your future_v1.indd 30 07/11/2012 15:00

FINANCIAL FUTURE


We will concentrate on the third option, and explain how the AXA Secure Advantage Retirement Solution – Lifetime Income Plan could help you prepare for the retirement you want in the future.

The previous table is not meant to represent a comparative analysis of all products and features available with these types of products. It does not represent advice and you should always consult a fi nancial adviser when considering if this Plan or any other retirement product is suitable for your specifi c needs.

A guaranteed income for life, however the market performs?The Secure Advantage Retirement Solution – Lifetime

Income Plan is available to customers aged between 45 and 75 years old, with an existing pension Plan valued at a minimum of £25,000.

Your funds remain invested in a range of assets, so if your investments perform well, your income could increase over time. However, if the value of your investments were to fall, the amount of income you receive is protected and won’t go down. This is unless you take any partial transfers, lump-sum payments or additional withdrawals from your Plan.If you choose to delay taking an income from the Plan, you

will also benefi t from our deferral bonus feature to boost your future income payments.

While the Plan guarantees an income for life, it does not guarantee that the money you invest in the Plan will be protected. This is because the value of the Plan will rise and fall depending on the performance of the underlying investments. If you were to transfer your Plan, you could get back less than you invested. The guarantees are provided at an additional charge, which will reduce the growth potential

of your investments.The Secure Advantage Retirement Solution – Lifetime Income Plan gives you the security of knowing the minimum amount of income you can expect in the future for the rest of your life (provided you don’t make any transfers or additional withdrawals from the Plan).

This is because when you start taking income, the notional amount used to calculate your payments (called the Benefi t Base) will always be the higher of: the amount of money you invested in the Plan, reduced to take account of any transfers, lump sum payments or additional withdrawals; the deferral bonus amount; or the highest Plan value on any business day before the anniversary of the day you started the Plan, reduced to take account of any transfers, lump sum payments or additional withdrawals.

Key terms to knowBenefi t Base is the notional amount used to calculate your guaranteed income payments. The Benefi t Base is not a commitment on our part to a minimum full surrender value. It is used only to calculate your guaranteed income paymentsDeferral bonus amount is the sum of your payments into the Plan, increased by a 2% simple interest rate every year you delay taking an income from your Plan. It will stop when you start taking an income, or make a transfer or additional withdrawal, or 20 years after you start the Plan. It is only used to calculate your guaranteed income payments and is not actually added to your payments into the Plan.

Taking an exampleA 58-year-old customer invests £100,000 in the Lifetime Income Plan, and delays taking an income until age 65. What happens if the investments perform well for the next seven years?

The guaranteed annual income rate is 4.5% if it is taken between the ages of 65-69. The guaranteed annual income rate varies depending on the age

of the customer when they start taking income.






In the following hypothetical example, as the markets performed well, the Plan value on each anniversary date is higher than the amount originally invested, and the deferral bonus amount. Therefore the new Plan value will be ‘locked in’ on each anniversary as the new Benefi t Base. This will be used to calculate the guaranteed income amount. When the customer is ready to start taking an income, the amount of income they will receive each year is the equivalent of 6.0% of their original investment.

What happens if the value of the investments

falls over the next 7 years?In the hypothetical example below, the Benefi t Base

will be based on the deferral bonus amount, as it is higher than the Plan value and the amount originally invested. As a result, even though the value of the Plan has fallen, the amount we guarantee to pay will increase during the deferral period. When the customer is ready to start taking income, the amount of income they will receive each year is the equivalent of 5.1% of their original investment.

The Guaranteed Annual Income Rate is 4.5% if it is

to transfer David’s £200,000 pension fund into the Secure Advantage Retirement Solution – Lifetime Income Plan. They choose to set up the Plan on a joint benefi t basis at an additional charge. They don’t want to take any income until they are aged 65, and therefore benefi t from the 2% simple interest deferral bonus each year.

From the day they start the Plan, they know that the minimum guaranteed income they can expect from the Plan when they retire at age 65 is £10,260 p.a. This is the equivalent of 5.1% of their original investment.

However, as their retirement fund remains invested in the markets, if their investments perform well this future income could increase above this fi gure, and will be reviewed annually. If at any point their guaranteed income is higher than the maximum limit set by the Government Actuary’s Department, we would add notional reserve units to their Plan to make sure they can receive their income in full.

Before they start to take income from the Plan, they have the fl exibility to take any tax-free lump sum they are entitled to from the Plan. This would reduce their benefi t base, guaranteed income payments and death benefi t proportionately. As they set up their Plan on a joint benefi t basis, the guaranteed income payments would continue for the rest of David’s and Jane’s lives, without reduction (unless any transfers or additional withdrawals are made)

David and Jane also have the fl exibility to transfer their fund at any time to another pension arrangement or buy an annuity with their pension, should their circumstances change. As the investment value of the Plan isn’t guaranteed (it’s the income which is guaranteed), they may get back less than they invested as the Plan value goes up and down in

Case Study: David and Jane

David is 58 and married to Jane, also aged 58. They are both looking to retire at age 65.

David’s existing £200,000 pension fund makes up a large proportion of their overall retirement savings. They are anxious to protect the future pension income they will create from the savings they have already built up, but like many other couples, they need to continue to have the potential to grow their savings over the next seven years before they retire, as their fund is not suffi cient to meet their future income requirements.

They have three investment strategies to consider:

• Keep their pension fund invested and try to grow their retirement fund if their investments perform well, but face the risk their investments lose value; or

• Select less risky assets to try and protect their existing investment, but potentially reduce their exposure to any future market growth; or

• Guarantee a future level of income from their existing investments today, but remain invested to benefi t from market growth, potentially increasing their future guaranteed income.

After discussions with their fi nancial adviser, they choose



FINANCIAL FUTURE

Financial Advice: Independent & Impartial OCTOBER 2012 23

FINANCIAL FUTURE

Financial Advice: Independent & ImpartialFinancial Advice: Independent & ImpartialFinancial Advice: Independent & Impartial

line with the value of the underlying investments. Surrender charges may also apply. If they transfer their entire Plan, the Plan and the guaranteed income payments will end. <<

Please note the tables are hypothetical examples and are in no way what we think future fund performance will be. They also assume that no partial transfers, Additional Withdrawals or a tax-free lump sum have been taken. The information is provided only to show how the features of the Secure Advantage™ Retirement Solution – Lifetime Income Plan work. It is not a projection of likely or possible benefi ts and it in no way constitutes advice or a recommendation of any sort.AXA Life Europe Limited is authorised and regulated by the Central Bank of Ireland, and subject to limited regulation by the fi nancial Services Authority. Details about the extent of our regulation by the Financial Services Authority are available from us on request.Registered Offi ce: Wolfe Tone House, Wolfe Tone Street, Dublin 1, Ireland (No. 410727). Member of the AXA Group.

WHAT ARE THE RISKS ASSOCIATED WITH THE SECURE ADVANTAGE™ RETIREMENT SOLUTION – LIFETIME INCOME PLAN?For a complete description of the risks associated with this Plan you should refer to the Plan Key FeaturesDocument. The main risks associated

Key considerations when transferring your pension fund:

• Your existing pension arrangement, or buying an annuity with your pension may provide you with a higher long-term income

• Your existing pension arrangement may offer guarantees and protection that other plans cannot match

• If you were to transfer your fund away from this plan in the future, you could receive a lower income, if you subsequently buy an annuity with your pension, or you could get back less than you would have under an existing arrangement. This may happen if investment returns have been poor, if you have been taking an unsustainable level of income from the plan, or if annuity rates had worsened over time.

with this Plan are set out below. Your Plan is termed “guaranteed” because AXA Life Europe will continueto pay the Guaranteed Income Amount for life, regardless of the value remaining on the Plan (note that transfers or Additional Withdrawals will result in a proportional reduction in the amount of income paid). You should be aware that the guarantees provided under the Plan are provided solely by AXA Life Europe. The only circumstances in which the guarantees would not be available would be if AXA Life Europe were to become insolvent. If this were to happen, the benefi ts from the Plan might be affected. You can fi nd out more about this in the Plan Key Features Document. Whilst a lifetime income is guaranteed from the Secure Advantage™ Retirement Solution – Lifetime Income Plan, the value of your Plan is not. If you transfer all or part of your Plan you may get back less than you invested as your Plan Value can go down as well as up in line with the performance of the underlying investments and there may be Charges payable for making a transfer orAdditional Withdrawal. This will reduce the Guaranteed Income Amount and Death Benefi t that you will receive.The Charges deducted in order to provide the guarantees and manage the Plan will reduce your Plan Value and will impact potential growth.

CHARGES ASSOCIATED WITH THE SECURE ADVANTAGE™ RETIREMENT SOLUTION – LIFETIME INCOME PLANThe Charges associated with thisPlan include: n A charge applied for managingyour Plan; n Fund Management Charges forthe Fund you invest in; n A charge for providing theGuaranteed Income Amount and Death Benefi t;n A Surrender Charge may be applied for all transfers and Additional Withdrawals out of the Plan withinthe fi rst 5 years; n Fees or Commission paid to your

fi nancial adviser. For further details, please see the Plan Terms and Conditions and Key Features Document which your fi nancial adviser will be able to provide. Full details of the specifi c Charges are alsooutlined in your Personal Illustration and Plan Schedule.AXA


Conventional stock market logic has tended to suggest that in bull markets, investors chase soaring share prices; in bear markets, they look for large-cap stocks with attractive yields. But using the state of the economy as a barometer to measure the attractiveness of investing in dividend-paying stocks is, we believe, an oversimplifi ed and rather short-term strategy.In our view, investing in high-quality dividend-paying stocks can offer an attractive long-term investment opportunity. Moreover, we believe that uncovering stocks with the potential for dividend growth is key to delivering sustainable returns throughout the economic cycle.In our view, the case for dividends as a component of total return remains paramount – in all economic conditions – and there are a number of good, logical reasons for this.Dividend growth is generally a good and reliable indicator of corporate health. A clear dividend distribution strategy typically shows the presence of a disciplined, consistent and long-term approach by company management. It provides transparency and accountability, and, most importantly, it is tangible evidence of a company’s self-belief.However, it is important for investors to bear in mind that focusing solely on dividend yield – calculated by dividing the share price by the dividend per share – rather than dividend growth potential, can be a dangerous strategy. This is because a dividend yield can appear high (albeit temporarily) when a

company becomes distressed. The combination of a falling share price and a historical dividend payment can, for many, create an oh-so-attractive illusion.

Global growth

The advantage of having a global strategy in place when it comes to equity income investing is that it can open up more opportunities within the various sectors; it can also, therefore, offer greater diversity in terms of the income stream itself.There is a world of choice when it comes to dividend-paying stocks across the globe – from companies with high and sustainable dividends to companies with low and fast-growing dividends.Here at Invesco Perpetual, we try to identify companies with the potential to offer a combination of an attractive, sustainable and growing dividend yield, alongside the equally important potential for capital growth.But while these kinds of companies undoubtedly exist, our experience shows that it takes exhaustive research and a bottom-up approach to stock picking – where we use detailed analysis of companies to identify attractive stocks, attaching less importance to the economies and industries in which they operate – to be sure that they are bought at the right price. We look for companies with strong fi nancial characteristics, strong franchises


24 SEPTEMBER 2012 www.lansdownplace.co.uk

Dividend growth on a Dividend growth on a Dividend growth on a

GlobalGlobalscale

Equity income investing is not just about earning income; it’s also about reinvesting the income received and then letting the power of compounding drive total return. Invesco Perpetual fund managers Paul Boyne and Doug McGraw tap into the company’s expertise to complement their own 30-plus years of joint experience as global equity investors.

company becomes distressed. The combination of a falling

Invesco_v2.indd 10 07/11/2012 15:02

or brands, and a management which is focused on disciplined capital allocation and returning cash to shareholders.We believe that only businesses which can generate a return on capital above their cost of capital throughout the economic cycle – or those that we feel have the ability to do so in future – are worthy of investment. These companies will usually demonstrate a share of their respective markets, strong pricing power, and a sustainable ability to generate free cash fl ow.In order to try to ensure that we buy the right companies at the right price, we spend hundreds of hours every month analysing and modelling the fundamental value of potential stocks. Only those businesses that we conclude offer a signifi cant premium to our estimate of their fair value will ever be included in our portfolios.

Bottom-up approach

All of which raises an excellent question: how do we defi ne fair value? Our investment approach is to undertake detailed analysis of companies’ fundamentals to identify those that we believe offer the best risk-adjusted upside opportunities.We do not rely on country or sector weightings. Both country and sector exposures are a result of our bottom-up stock selection process. The portfolio refl ects the most attractive risk-adjusted share price upside opportunities that we have identifi ed through our research process. In the same way that we approach income investing as more than just a ‘yield maximisation’ strategy, so we apply qualitative analysis – the research we carry out on economies and businesses which focuses mainly on ‘hard’ actual data and statistics – to stock price valuation measures in order to come to our investment conclusions. In other words, we seek to invest in high-quality businesses at attractive share prices which have the potential to increase, rather than just looking for companies that

are, apparently, ‘going cheap’.Our analysis is exhaustive, and it focuses on valuation measures relative to a company’s peers as well as relative to its history to achieve as full a picture as we can get. It is only by doing this that we can possibly draw a conclusion about whether an investee represents good value, and that means that we painstakingly scrutinise businesses for their ability to deliver sustainable returns on capital (today or in the future), looking also for strong and stable profi t margins, attractive cash fl ow and disciplined management teams.Timing, as they say, is everything. So, when we are fi nally ready to invest in any company that meets our exacting criteria, we make the actual investment only when we feel that the time is right and the market has underestimated their value. <<

BIOGRAPHY:Income investing forms the foundation upon which the Invesco Perpetual business has been built. The Global Equity Income team is a key part of this unrivalled franchise. Fund managers Paul Boyne and Doug McGraw tap into the company’s expertise to complement their own 30-plus years of joint experience as global equity investors.

Important informationThe value of investments and any income will fl uctuate (this may partly be the

result of exchange rate fl uctuations) and investors may not get back the full amount

invested. Past performance is not a guide to future returns.

Where Paul Boyne and Doug McGraw has expressed opinions, they are based on

current market conditions and are subject to change without notice. These opinions

may differ from those of other Invesco Perpetual investment professionals.

Invesco Perpetual is a business name of Invesco Asset Management Limited

Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH,

UK , Authorised and regulated by the Financial Services Authority

Dividend Growth

Financial Advice: Independent & Impartial

“We believe that uncovering stocks with the potential for dividend growth is the key to delivering sustainable returns throughout the economic cycle.”

hours every month analysing and modelling the fundamental

SEPTEMBER 2012 25

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Leadership has slowly crept into the public consciousness again. At a time when our politics, our businesses, and our individual lives are embroiled by the chaos theory of fi nance, solid leadership has never seemed more imperative for stability and survival. When things get messy, everybody takes the blame. Issues of austerity and security are relevant on every socio-economic level, from the food on our table to the national debt. Our problems are no longer hypothetical or inconceivable, they’ve arrived and they’re personal. This is why leadership mentor William Montgomery is more in demand than ever. The former GCHQ code-breaker and navigator of HMS Ark Royal is right when he claims that leadership impacts every single person – it’s in every facet of our lives, in every decision we make.

You may not have heard of William, but his work is globally renowned, helping some of the world’s most prominent companies, entrepreneurs and politicians. Leadership has been in William’s blood from a young age, when he was forced to fend for himself on streets of Liverpool; an alcoholic at the age of just 14. After leaving school with no qualifi cations, he joined the Royal Navy in 1978 – a move that, in his own words, “really saved my life”. And it was in the Royal Navy that his fascination with leadership was nurtured, setting the precedent for all that followed. He soon qualifi ed as a high-speed Morse code operator, but soon went on to train as a cryptologist at Bletchley Park and was stationed at GCHQ in Cheltenham as an Arabic linguistic. It wasn’t long before promotion came knocking, and William rose to offi cer rank, specialising in navigation and naval intelligence. He retired from service after 16 years in 1994, gained an MSc in Management at Sheffi eld, before going on to study Psychology at Harvard.

Cruise ControlLeadership a� ects every facet of our lives. Now more than ever, people are looking to unlock the skills needed to steer them through these tempestuous times. Daniel Bryan explains how William Montgomery has been helping companies – from sole traders to multinationals – to do just that.


Cruise V1.indd 54 07/11/2012 15:04

It was the late Steve Jobs of Apple who said “You are not going fi nd anyone who will give you more practical advice and ongoing support, resulting in measurable improvements to your personal and business life, than William Montgomery”. And it’s these “measured improvements” that separate William from the hundreds of two-a-penny pundits currently riding the leadership bandwagon, most of whom offer the same generic advice, with the same ineffectual results. So, what makes William’s work different? For starters, it was at Harvard where he crafted his ‘Ten Actions of Effective Leaders’, which now form the basis of his mentoring programme. So effective is his approach, in fact, that he was asked to be the principal advisor for David Cameron’s initiative to measure the UK’s happiness. His annual leadership cruise is the stuff of legend, too, attracting such guest speakers as Liverpool Football Club MD Ian Ayre, Yo Sushi’s Simon Woodroffe, and Admiral Sir George Zambellas. And it’s this year’s cruise that William is currently putting together to help a wider audience of people who are serious about making positive changes in their lives and their businesses. And though space is limited, anyone’s invited.

You’re probably thinking “Do people still go on cruises?” Well, you’d be forgiven for assuming that cruises went out of fashion when Love Boat went off the air, but nothing could be further from the truth. That’s not to say some cruises aren’t populated with your typical insufferable vacationers. You know the ones: amateur bores who spend their time recounting holidays past, complaining that it was too hot, the cabin was too small, the food was mediocre, and it wasn’t like England. It’s folk like that who inspired Agatha Christie’s Death on the Nile. These trips do indeed exist, but the point is, cruises don’t have to be P&O and OAP. Believe it or not, some cruises do actually provide the elusive ‘dream holiday’, with sophisticated company to boot. Queen Mary 2, the world-famous ship that will host William’s next mentoring programme, is one of them.

QM2 was built in the French port of Cherbourg and made her fi rst voyage in 2004. At the time, she was the largest passenger ship ever constructed, accommodating around 2600 people, as well as 1000 crew. Often described as the most fantastic ocean liner ever built, her every detail recalls the golden age of sea travel, as well as offering a modern and discerning luxury cruise experience. From bow to stern, Cunard’s fl agship liner offers extravagant accommodation, fi ne dining, thrilling entertainment and exceptional service. The activities on board refl ect the proclivities of the passengers: the daytime is highlighted with lectures by historians and journalists, as well as wine tasting sessions; whereas the evenings are appropriated by light music, bars and even a casino. Or for those who like to imbibe the spirit of the sea, just sit on the deck, read a book and contemplate the ever-changing seascape.

It’s not hard to see why William has chosen QM2 for his next leadership cruise. The voyage itself is enticing enough: leaving Southampton on December

15, and arriving in New York on December 22, the cruise is a perfect pre-Christmas getaway, and includes fl ights back to the UK. There’s plenty of opportunity to get some last-minute Christmas shopping done, as well as experience New York at its most enchanting time of year. For £2,500, each delegate on the mentoring programme can also bring a friend, colleague or partner, who can either take part in the course or simply relax for seven days. What’s more, because of the government’s new Growth Accelerator scheme (an initiative designed to aid businesses and help employers fund development opportunities for senior leaders and management) each delegate can get a £1,000 reduction off the price, providing they book before October 31. This means the cost of the mentoring cruise is actually a mere £1,500 for two people. Who said you can’t mix business and pleasure?

Don’t be fooled, though – there’s serious work to be done. Five group training sessions punctuate the voyage, all of which are grounded in William’s proven ‘Ten Actions’ theory: Learn Leadership; Take Responsibility; Enable Communication; Deliver Strategy; Encourage Creativity; Set Goals; Make Time; Understand Emotions; Inspire Motivation; and Manage Change. Complementing this is William’s one-to-one sessions, where he works to solve individual leadership confl icts or problems in a tailored and targeted way. Because of the highly-focused nature of the programme, space is limited to twenty delegates per trip – highly exclusive, but extremely personal.

Before taking the trip, everyone is invited to complete a personal profi le analysis, which provides both individuals and William with the necessary foundational information (such as strengths, limitations and behaviour) on which mentoring can be built. It’s very clever stuff. Each person is also asked to read one leadership-themed book and watch one leadership-themed fi lm from a list carefully selected by William. This isn’t essential, but provides an interesting basis for insight and debate, helping to aid learning and development. Personal growth doesn’t just stop upon arrival in New York either – beyond the programme, William keeps in touch with all delegates, creating individual action plans to help them stay focused and motivated in their search for excellence in leadership.

Times are changing. We can no longer rely on the prosperity and security of the past, and must be prepared to adapt to a changing social and economic world. But just because our surroundings are precarious, doesn’t mean we have to be too. Overcoming the odds is all about remaining headstrong and decisive – the hallmarks of any great leader. William doesn’t claim to impart some esoteric knowledge that’s kept guarded by the few who have made it to the top. The fi rst thing he will say is that all the knowledge and ability you need to succeed is already within you, waiting to be unlocked. Just as the Scottish novelist John Buchan once said “The task of leadership is not to put greatness into people, but to elicit it, for the greatness is there already”. «

For further details, visit: www.askten.co.uk

Leadership

OCTOBER 2012 27

Cruise Control

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www.invescoperpetual.co.uk/global

TAKE A LONGER VIEW

IN AN UNCERTAIN WORLD, OURGLOBAL EQUITYTEAM ISN’T.The last ten years have been anything but predictable for the world’s stock markets. But our 13-strong1 team of global and regional equity experts have more than held their own.

With an average of 20 years’ investment experience across the team1, they’re well versed in a wide range of global equity strategies.

And, with a wealth of resources and research capabilities supporting them, they’re encouraged to follow their convictions wherever the most promising opportunities arise.

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

To find out more, scan the code below with your smartphone or visit our site.

1Source: Invesco Perpetual as at 30 September 2012. Where Invesco Perpetual has expressed views and opinions, these may change. Further information on our products is available from us at Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH. Invesco Perpetual is a business name of Invesco Asset Management Limited. Authorised and regulated by the Financial Services Authority.

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