en-GB http://www.joslinrhodes.co.uk Joslin Rhodes are Independent Financial Advisers who provide unrivalled advice and support for our customers who are seeking mortgage advice, selling a house or who are looking for honest and trustworthy financial advice. Copyright 2012 Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/bagsy-i-get-the-65.html Good evening and welcome to the Nine Oclock News. The world is going to end and its all Kevin McClouds faultreportedly. You may be surprised by that headline as we normally like to start the program by reporting on a grisly murder or such like.  Ideally, a good hammer attack in some pretty middle class village, although anything that makes you feel like you could be next is good for us. Unfortunately, and surprisingly, nobody was murdered today, which caused us a bit of a problem. We tried very hard to find one, and in desperation the Producer even considered bringing one about however we talked him out of it. Were sure that lots of nice people did some good things today but as the media, we are unable to bring ourselves to report these to you for fear that you may go to bed in any state other than terrified for your life. On the economic front nothing of any significance happened. Again we tried very hard to find some bad news but despite the lack of murders, nothing untoward actually happened. We first thought of talking about how the FTSE had billions wiped off its value just to scare the living pants off everyone and to try and panic you into cashing in your investments so the price would go down a bit and give us more of a story tomorrow but we were very disappointed because it had only gone down by 20 points. We tried converting this into a percentage to see if it sounded any worse but it was only 0.0035%. We even got our graphics department to do a graph over a very short timescale and make the drop look more dramatic but it just looked silly. We then looked at the economic statistics released by the Government and its various agencies but again we could find nothing overly horrific within them. Some were up a bit and some were down a bit but we couldnt really run a story on that. We even thought about asking the Shadow Chancellor Ed Balls for a comment as we figured he would be happy to talk down the economy and he duly obliged. Fortunately however we remembered that he had the fiscal credibility of a 12 year old clutching a fiver in a sweet shop and asking him for comments on the recovery was a bit like asking Imelda Marcos to talk about money saving tips for the poor. Admittedly, she is much less annoying and always wears fabulous shoes but it wasnt felt that that was enough. So, in desperation we decided to fall back on our favourite technique..speculation. Back in the days before Grand Designs, factual TV programs and news bulletins were just that, a report on the facts of the situation. Then Kevin came along and showed us that if you provide a commentary and start guessing what might happen then it is a much better story thanwell the truth. He showed us that he could make every house build that ever appeared on the show follow a certain path. He would start off full of enthusiasm and be nice to their faces when he first met them but during the middle part of the show he would urge us to come back after each commercial break to see if it had fallen down, they had run out of money or endured a clinical physiological collapse due to the stress. They never did, but it made you want to watch just to see, and he always liked the house in the end so it was OK. Admittedly X Factor and the like have refined the techniques to stratospheric new levels but it was Kevin that showed us the way. Hence, in the absence of any true economic facts we sent an email out to a few companies and asked them to tell us what they thought might happen. Most of them replied with statements that pretty much agreed with the facts that we had already established. We did manage to get one self-proclaimed expert to spout on about some doom and gloom in return for mentioning his name on the telly. We think his sole source of research was the Daily Mail as he also proclaimed that Diana may have been killed by the KGB or was it an asylum seeker or benefit claimant?.we forget. In relation to the economy he said he thought 2012 might be a rocky road and that if German inflation gets out of hand then they may be less inclined to allow the ECB to bail out some of the weaker Eurozone countries. If this did happen then one or more of those countries could go bust, which could have an effect on some of the banks in France and Germany, which could cause a second credit crunch. This, in tandem with a collapse of economic confidence, could plunge the world (including the UK unless Mr. Cameron has totally caved in to the Tory right wingers and has pulled us out of that as well as the EU) into a deep depression and even a total collapse of the global economic system. Money would become worthless, society would break down and we will all be living in caves by the summer. Despite not having a shred of evidence, proof, or reasoned thought, we decided that this would have to suffice given that there had not been any murders so far today. Obviously we couldnt run it as news because it isnt true and in fact is just the opinion of one person so what we do is announce the headline and then after it add one of the following phrases; [Insert headline here]reportedly. Translation; some other news channel has actually done some good old fashioned journalism and come up with a story which we have pinched and are trying to claim as our own It was alleged today that. [Insert obviously not true headline here]. Translation; I hope the person who put their name to this has a good lawyer because our legal department couldnt make it fly so we put the blame on someone else. [Insert ridiculous headline here].it was warned today. Translation; as above, we just asked some bloke off the street to guess about some stuff and were peddling it as news when actually it has no more factual content or forensic rigour than some kooky celebrity telling cancer sufferers that their new self help Crystology book is a much more effective treatment than that old fashioned chemotherapy. Then when we lead into the main details we introduce the opinion giver as a respected analyst. This is what we call people who were so bad at actually doing the job that they like to critique upon that they just decided to start guessing in the media. Its a bit like cold reading, if you get one or two lucky guesses in there then nobody remembers the other ten that you got wildly wrong. It will normally do the trick because hopefully enough of you will panic and cash in some of your investments and start burying your money in the garden. This will push down share prices to a level (FTSE of 5,000 normally) when all the professional fund managers will start buying them because they are such good value. This will push the markets up (but obviously this will not get a mention on our program, even if there have been no hammer murders that day) to a higher level and then they will sell the shares back to the amateur investors who decide it is safe to come back into the market and start digging up the lawn. In the end we will relent and, like Kevin, tell you that everything is going to be alright after all despite us scaring you witless in the meantime. Remember that you may still be hammered to death by a maniac at any time though, so dont drop your guard. var addthis_config = {"data_track_clickback":true}; 2012-01-13 09:30:27 http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/bagsy-i-get-the-65.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/bagsy-i-get-the-65.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/banks-13/build-it-and-they-64.html As banks prepare to pay out billions of pounds in compensation to customers who were strong-armed or tricked into taking worthless Payment Protection Insurance (PPI) policies, it is hard to imagine how these practices were operated on such a large scale and over such a long period of time without anybody in the organisations involved standing up and saying erm...I don't think we should be doing this? It also begs questions as to what went on at the staff training sessions for these products. Wed like to imagine that if an audio recording of such a training session was unearthed, it may go a little like this: Somewhere in deepest Slough, circa 2007...... Instructor: Good morning ladies and gentlemen! Welcome to Globobankss PPI sales training program. Today youre going to learn some of the fundamentals of selling our main product, Payment Protection Insurance. Luckily for you we have arranged some live demonstrations by some of the most successful PPI salespeople of our generation. People like Ron The Hammer Sheldon and Margaret The Merciless Green are just some of the legends that we have assembled here today for your benefit. But firstly, lets start with the basics. Our PPI policy is an insurance plan which covers a customers loan payments in the event of them being made redundant or unable to work through sickness. They pay us a monthly premium for the privilege and in return they get a lovely warm fuzzy feeling of being protected. Trainee: So if theyre off work for a week with flu, it will cover their payments? Instructor: My god no! They need to be off work for at least a month, just to make sure that theyre really ill. The hope is that they might die before they put in a claim although some of them hang on just to spite us. Trainee: Oh, does it pay out automatically after the month? Instructor: [Belly Laugh] - Oh dear, the innocence of youth! No, we just start the claim process then and after another thirty days tell them that they weren't covered after all. In a way were doing them a favour although youd never think it the way those troublemakers at Watchdog go on although that Ann Robinson can be strangely alluring..........[wistful silence]. Trainee: Oh......aren't insurance policies normally underwritten at the start, so we know whether we can cover them or not? Instructor: Yes, but thats the beauty of this product, we underwrite it at the point of claim, saving the hassle of all those messy medical questions at the beginning. Trainee: So they could be paying for a policy that wont pay out? Do we give them their premiums back if it turns out that they were never covered? Instructor: [Sounding exasperated] - Not exactly no......look youre thinking about this far too hard and Im not sure youre cut out for this, Im just going to ask a couple of my colleagues to step into the room and perhaps you could go with them for erm....extra training. [Muffled radio conversation] - Security team to room three, code sigma four, cleansing required - [sound of door opening and heavy footsteps approaching]. Instructor: Ah gentleman, can you escort this trainee to the reprogramming facility. Trainee: Reprogramming what? Whats that? Ow youre hurting my arm, I'm not sure.... [sound of door slamming and a hushed silence descending on the room]. Instructor: OK, lets observe some real life sales action. On the other side of this glass is what looks like an ordinary branch and those people that you see queuing are real live customers. What they dont know is that this is actually an exhibition arena for some of the PPI legends of our generation. Its a bit like Field of Dreams but with insurance instead of baseball. Lets watch Sheldon deal with this young couple who look like first time buyers trying to get a mortgage. Now, can you see how hes automatically included the PPI payments into the loan and just given them one monthly repayment figure? Thats text book sales everybody, if they dont know its in there they cant ask you to take it out can they? What you probably didnt notice, and I wouldnt expect you to because it was done with Jedi magic, was how he rolled up all of the PPI payments for the 25 year mortgage term and then added them onto the loan as a lump sum. That means that we get 25 years of premiums upfront, they get to pay interest on them for the life of their mortgage and most importantly Sheldon has trebled his commission for the sale. Watch and learn my young Padowans, watch and learn. Oh hey-up the customers clocked it and hes asked if the PPI is mandatory, thats a bit of a schoolboy error from Sheldon and hes going to be a bit embarrassed when he watches this back. Lets see how he handles it.........woooah, world class skills there; did you see how he intimated that the mortgage may be declined if they didnt include it? I think hes showboating there a little by making the girl well up, but thats excellent work, hes used their fear about losing out on their first home to get a very good sale.....excellent recovery, it really is a privilege to watch a craftsman at work. Trainee: I couldnt help but notice that the customer was self-employed. I didnt think the policy would pay out for self-employed people? Instructor: [Crackling radio call] Can you send another security team to training room one please?... Trainee: No.....please dont....I need this job....[sound of a struggle...door slams]. Instructor: Now, does anybody else have any questions? [Stunned silence] Instructor: OK. Now lets watch Margaret the Merciless in operation here. Can you see how shes prowling up and down the queue of customers under the guise of doing customer feedback surveys? Shes actually hunting in a pack with Alan The Assassin McKenzie and theyll be trying to separate one of the punters away from the protection of the herd. I think shes got her eye on that old lady there but......ooohh fantastic teamwork, did you see how McKenzie distracted the husband whilst Margaret maneuvered herself between him and his wife. The old dear is completely bamboozled and doesn't know whether shes coming or going. By using the pincer movement Margaret has now got her signed up to a PPI policy and shes also upgraded her account to platinum status and sold her some boiler insurance. World class sales, its a joy to watch, it really is. But now for a word of caution. Working in the field can be a difficult life. Trying to maintain your cover and keep up the pretence that you are there to provide banking services for the customers benefit. It can be hard to live a lie for so long and for those with weaker minds, it can prove too much as we saw with the Smithson Incident back in 92. Smithson was one of our brightest stars, he smashed sales record after sales record and nobody saw it coming. He was operating out of Dorking branch under the cover of a Branch Manger when he went native. Warning bells started going off when he was approving loans for people who actually needed them, against the company policy of only granting them to people who could prove conclusively that they didnt, but it was only when he started employing enough cashiers to serve the customers without the need for queuing through their entire lunch hour that the extraction team was finally sent in. By the time they got there hed also signed off on a small business loan for a local company. A very messy business which shocked the team to the core. We managed to put it right by forcing the small business into liquidation and asset stripping it to repay our loan but the consequences could have been far reaching. Rumour has it that files were found in his drawer with plans to start opening the branch on Saturdays! Can you imagine! And on that bombshell it is time for you to collect your pens and application forms from the armoury and enter the field. Some of you will make it through, some of you will fall - [sound of Tina Turners Simply The Best starts to play through a loudspeaker] - some of you may even return as legends to live out your days in the theatre of dreams.........only time will tell. Good luck my friends and may the force be with you. var addthis_config = {"data_track_clickback":true}; 2011-11-17 12:18:16 http://www.joslinrhodes.co.uk/financial-adviser-blog/banks-13/build-it-and-they-64.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/banks-13/build-it-and-they-64.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/time-please-gentlemen-62.html For something that is so integral to everything that we do, we humans have never really got to grips with time. Mostly we curse its passage as one birthday rolls relentlessly into another. Conversely, there are occasions, as any seven year old trying to sleep on Christmas Eve will tell you, when it seems to have stopped altogether. We can even view it as some kind of physical presence as demonstrated when well-meaning friends attempt to soothe your broken heart by telling you that times a great healer. On such occasions you can always try cutting off one of their more useful limbs to see if they still maintain that sentiment. Not so clever and smug now, eh? Time is actually a dimension. It is the fourth one to be precise, after height, width and depth and seems to be universally misunderstood by most people who arent physicists. Lets consider a few little-known facts about time. Firstly, there is no such thing as the past or the future. Only the present exists. The past is merely a collection of memories stored by your brain and is therefore unique to the individual. The future is merely the brain attempting to create a storyboard by anticipating likely scenarios based on the situation as it is in the present, taking into account its memory of what happened when similar situations were encountered previously. As you are reading this, Kennedy is being shot, one of your ancestors is legging it from a Velociraptor, man is taking his first steps on Mars and Cliff has just celebrated his 200th birthday. Just because your brain categorises them into past or future events doesnt change the fact that they already exist in the fabric of time. The manner in which we envisage time is therefore a purely human concept. We imagine it like an arrow moving from the past, through the present and into the future when actually it doesnt happen like that at all. Times movement is dictated by the universes expansion or contraction. The said universe is currently still expanding from the Big Bang and it is this that stipulates the direction of time as we need to perceive it. Think of it like a vinyl record. If you happen to be under 25 then these are the thin round things that your dad has stashed in a box in the loft (no, not that box) which always made you wonder who Floyd was and why he was pink. Youll find them next to his Bullworker and once only attempted home brewing kit. Anyhow, the record player needle focusses on an extremely specific point, which we might imagine to be the present. However, you can lift the needle and reposition it at any point and the record will play that particular section. You can move it forwards and backwards whenever you like and it doesnt change the words in the song or the order of the verses on the record. Nor does it alter the fact that they have been played previously and are likely to be played again at some point. Newly educated as you may be about the fourth dimension through reading this particular blog (if youre still with us), you may be pondering what on earth all this has to do with anything financial. And ponder you might. The premise that we are lurching towards is that time also does funny things to your investments which can either make you happy or make you sad. The returns we get from our investments are directly proportional to the level of risk we take with the capital. Cash deposits offer the lowest level (allegedly) of risk and return, and the scale moves upwards from there, through fixed interest funds, corporate bonds, managed funds, property and stocks and shares all of which offer a progressively higher rate of return in exchange for greater risk to your capital in times of woe. The problem for most investors is working out where on the scale they feel comfortable. Human nature dictates that we want the returns associated with the higher risk things coupled with the capital security of the lower risk stuff. Which is a bit like asking for the cheap Ferrari or the low maintenance supermodel wife, they just dont exist. However, time can distort and even reverse this equation. That is because the length of time that you intend to hold your investment for, can either increase or decrease the risk associated with that particular asset. Think of it like this. One day you decide to buy the house next door and do a quick deal with Bob over a pint. You march home and announce to the disbelieving wife that you have purchased said house and intend to sell it on in a few weeks for a profit. Displeased is possibly a marginal understatement to describe her feelings towards you and if you listen carefully to the subtler points of her screaming rage, you may discern a thread indicating that she feels that it is a high risk investment strategy. Conversely, if you had instead announced that you intend to hold it for ten years and then sell it with a view to making a profit then the verbal lashing may not be so savage and it is possible that she may view it as a lower risk investment. So, by extending the time period you have decreased the risk of the investment. The same applies to equities. Viewed over the short term, especially in the current climate, they can appear volatile and risky however if you view almost any ten year period in history then equities are normally the most consistent producer. But how can time make an investment more risky? Well consider that you take a five year fixed rate bond at a rate of 4% (if youre lucky). Now, 4% is not particularly attractive when inflation is 5% as it guarantees you a 1% per annum loss in real terms. Over the lifetime of the bond that total loss is 5%. Consider though, if inflation and or interest rates rise whilst you hold the bond to say 7%, then your 4% interest looks even worse as your losses are now 3% per year which is a 15% loss in real terms over the five year term that you signed up for. Simply put, time has increased the risk of your fixed rate deposit account to the volatility of short term equity trading. Which is disheartening. As a crumb of comfort though, sooner or later the universe will start to contract and at this point the direction of time will reverse. You will then get to live your life backwards and any losses that you make with your investments in this lifetime will be profits in your reverse life. Admittedly, its not a recognised financial planning technique but if it gets you through the day....   var addthis_config = {"data_track_clickback":true}; 2011-10-14 12:59:25 http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/time-please-gentlemen-62.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/time-please-gentlemen-62.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/you-have-the-time-61.html When we make decisions about what to buy, it is normal to follow some kind of logical process to ensure that the selected product does the job that it is required to do.  Decisions such as what clothes to wear or car to buy involve a system of identifying what needs to be solved, looking at the available options and matching the best option to the situation.  It is this logic that ensures we dont wear wellies in summer or end up in predicaments like this;   Daddy, why is that policeman waving at you?What policeman? Oh, now I see him, yes well, ermIm sure he just wants to give me directions.  Ill just pull over.Ahem, good evening officer.Good evening wing commander.  Having a little trouble getting this one off the ground are we sir?Oh I didnt think I was going that fast?You were significantly over the speed limit sir, although that wasnt the only thing that drew my attention.Really, what else have I done? The cars just passed its MOT so I am sure its roadworthy.Yes, the car appears roadworthy enough.  Perhaps you may care to take another guess as to why I may have wanted to have a little chat with you.Erm.I really cant think officer.Perhaps if you looked on the roof sir and tell me if there appears to be anything out of the ordinary?The roof rack? On the roof rack sirOn the roof rack? Oh, the corpse.Yes sir.  The corpse lashed to the roof rack.That would be Mr Ridgwell but hes properly secured, I made sure of that.Yes sir Im sure you did and I have given you extra credit for tying the luminescent jacket around his protruding legs.  However my primary concern, being a policeman and all, was to how he ended up dead and attached to your roof, rather than whether the straps used to secure him were sufficiently robust.Oh, yes I see.  Well the back seat was full unfortunately.  No room, hence the old roof straps.The back seat is full is it? I have to ask, although every sinew of my being is begging me not to, what is on the back seat sir?Erm, its Mr Smithwick.And he would beDead also Im afraid.Of course.  Now again, I hesitate to ask, but are there any more dead people in your vehicle?No officer, thats all I could fit in.  I had to leave room for the children, Im taking them to school you see.The children?Yes, Im just dropping little Jonny off now.  Its his first day and he is a bit nervous.Well I am sure that sitting next to the decomposing Mr Smithwick on the journey will have settled his nerves.  In any event Im afraid that youre going to have come with me.  Do you have a lawyer? Id go for a good one if I were you sir.Oh, you think l killed them!!! Ha ha no thats not the case, Im an undertaker you see.An undertaker? In a yellow Toyota Prius?Yes, just bought it last week.  Its a beauty isnt it?Again, at the risk of asking a stupid question, why did you not buy a hearse if you were going to be a undertaker?A what?A hearse sir. Big black thing with space for a grieving widow in the back and a coffin in the rear.That sounds exactly the kind of thing I need.You dont say. So why didnt you buy one?Well I asked around for advice on the best car and Sad Mick in the pub said that his Toyota Prius was very fuel efficient so I went with that.Oh, well that makes perfect sense sir.  Why dont you just come down to the station with me and you can explain it all again to the sergeant. This mirrors an often-played out scenario when it comes to our pensions, and especially when choosing the options at retirement.  Logic can go out of the window and there is a tendency to rush out and buy the first thing that is put in front of us, which is often a very uncompetitive standard annuity from the pension provider.  Probably the same as Sad Micks. So if you have spent forty years grafting to build your pension pot, then it may be worthwhile to give it some thought before blundering in and ticking the first box on the form.  Unfortunately some people take more time deciding what to have for their tea than they spend researching their pension options.  There are too many such options to list here in detail but to give you an idea; in addition to standard annuities there are also impaired life annuities that can give you a higher income if you have health issues.  Purchased life annuities do the same job but provide you with a large part of your income without that pesky income tax.  Capped drawdown permits you to vary the level of income that you take from your pension and even allows it to continue growing whilst you are drawing it.  You can take the tax-free lump sum and leave the rest of the pension to grow, even adding to it if you want.  You can take the tax-free lump sum and pay some of it back into a new pension fund and claim tax relief on the contribution, even carrying forward any unused tax relief from previous years.  You can purchase a temporary annuity that you can change after five years or a capital protected annuity where you get your money back when you die.  Phased pensions can allow you to drip feed your fund into an annuity or drawdown and take your income in increasing installments.  You can also ensure that your remaining pension fund is left to your nearest and dearest when you slip off this mortal coil or you may even be able to use flexible drawdown which can allow you to access all of your pot as cash, and you dont even need to be dead.  Which is convenient. It is all the more important with pensions to do the research before you make your decision as annuities cannot be changed once purchased.  Once done, thats it; it is with you for life.  There is no point asking the questions six months later of what you could have had.  Not unless you want to be like the losing contestants on Bullseye as Jim Bowen forced them, with solemn cruelty, to see what they could have won, as the wondrous yet totally inappropriate prizes were paraded in front of the defeated couple, one of which was pondering why he had taken Sad Micks advice to partner up with Bong Eyed Bob who was apparently the best darts player in the world. Thanks Mick. var addthis_config = {"data_track_clickback":true}; 2011-09-09 13:03:45 http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/you-have-the-time-61.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/you-have-the-time-61.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/my-god-man-is-60.html Have you ever heard the phrase about someone being on the fiddle? Or how about being sold a pup? Both of these sayings stem from confidence tricks that are hundreds of years old. Despite originating in medieval times, the fundamentals behind them are still used today and examples can be seen in emails from Nigerian dictators needing to stash a few million of their ill-gotten gains in your ISA Super Saver account or pathetically poor phishing emails allegedly from your bank asking you to verify your account details by phoning a UK call centre and telling them your account number and password. Somebody should tell the tricksters behind these fake emails that it may be more realistic if they asked you to phone a Bangladeshi call centre otherwise its a bit of a giveaway. The fiddle con involved two grifters working together and armed with the cheapest violin that money could buy. One would dress shabbily and enter a bar or restaurant, with said instrument, and order the most expensive meal on the menu. When presented with the bill he would make up a story about losing his wallet. He would then claim that he could borrow some money from a friend and return later to settle what he owed. The savvy restaurant owner, figuring the tramp needed his violin to earn a living busking, would agree, on condition that the violin was left as collateral. Sometime later, his smartly dressed accomplice would enter the establishment and sit at the bar for a drink. During the course of conversation with the Landlord he would notice the violin, exclaim that it was a very rare model and offer a substantial sum to buy it. An agreement would be made for him to return later with the required funds and off he would skip. When the tramp returns to settle his bill and reclaim his violin, the Landlord sees an opportunity to make a handsome profit. He offers to buy the violin from the tramp for a sum significantly greater than it is worth. The tramp barters a bit and then reluctantly agrees to sell his worthless piece of driftwood for a small fortune. The smug Landlord thinks he has outwitted everybody and waits for the smartly dressed man to return. And waits, and waits. The second con, the Pig in a Poke, originated in medieval markets. At his stall the trickster would have on display several big fat juicy pigs. Tempted by the boars the punter would pay a not insubstantial price in return for his choice of pig. Animals of the time were transported in sacks called pokes (which actually came from the French word poque and was ultimately lengthened to poquetts and then colloquially to pockets to describe a small bag secured around the waist) and the chosen animal would be wrestled into the poke for the victim to carry home. During this process, and with some practiced sleight of hand, the bag would be switched for one containing a stray cat. Once home the hapless punter would let the cat out of the bag and be duly crestfallen. Sometimes small dogs were used instead of cats and this is where the phrase sold a pup comes from. The fundamentals behind these cons, and most others, is the mark (grifter speak for the person about to be gently relieved of his wealth) not understanding the value of what he is getting, or what he has to give in return for it. The icing on the cake for these cons is to add a bit of officialdom to provide some gravitas. That is why those fake emails from the bank or the taxman can catch people out, especially the older generation who still think it was the man from the gas board who knocked on the door and convinced them to change their tariff. Such a nice man he was. He had a clipboard and everything. Told me Id be better off with an online Direct Debit saver tariff or something.Yes, but you havent got the Internet Grandma, or a bank account. In fact you dont have a gas supply. There is one other example that has recently reared its head and from an unlikely source. We all trust pension companies about as much as we trust banks these days but this mistrust is normally focused on insurance companies that provide private pensions and not on company pension schemes. Final Salary company schemes, and in particular civil service schemes are renowned for their gold plating despite the Coalitions plans to downgrade it to more of a chrome spray job. These Final Salary schemes are very valuable because all of the liability rests with the employer or taxpayer. The employee can sit back, make their fixed contributions and be guaranteed a certain percentage of their salary at the end. If there is not enough money in the pot when retirement comes to fund such a pension then the company or taxpayer must make up the shortfall. Hence the reason why most companies have shut their schemes and the Government is trying to water down the taxpayers commitment. Benefits from such schemes are normally given as an income and an additional tax-free lump sum. Recently however, some schemes have been offering the facility for an enhanced lump sum, in return for sacrificing some of the income.  To a lot of people this can be an alluring offer, especially when it is referred to as an enhanced lump sum. Enhanced means better right? Well, yes it does, but by proxy that means that the income is worse. How much worse? Well that depends on the value of that which you must give up. Here comes the stray cat switch.. Most final salary scheme pensions are index-linked, which means that they rise each year with inflation, and include a spouses pension as standard. If you were to purchase an annuity (private pension) with the same benefits it would cost a 65 year old about 28,900 to buy 1,000 of gross annual pension. Admittedly, the fact that the lump sum is tax free whereas pension income is taxable gives it a certain advantage and for most people this is worth an additional 20%. However, even if you build that 20% in to the calculations, it is still invariably the case that the extra lump sum on offer is pitiful compared to the value of pension given up. So why is it offered? Well, just because you worked for the company for forty years doesnt mean that the pension trustees are going to play fair with you. They want you off their books as quickly as possible and a lump sum payment looks significantly better on their balance sheet than a liability to pay an ongoing income for someone who could live to 120 in their worst, and your best, case scenario. Now to call it a con is perhaps a bit mischievous as for people who are higher rate taxpayers or have no spouse then taking the extra lump sum may well work out in their favour. It does however include all the ingredients that a good trickster would be proud of, such as a complicated presentation of the options and numbers, no comparative value for the income you are being asked to sacrifice, a tempting offer of an enhanced lump sum and all this wrapped up in officialdom and preferably with a please reply within 14 days just to add a bit of pressure. A Scottish Power doorknocker would be proud. So, in order to see whether you are getting a good deal, first work out how much gross pension income you are being asked to sacrifice and multiply that figure by 29 if you are age 65 (use 34 for age 60 and 39 for 55). This will give you a rough guide to the amount of lump sum they should be offering you; if it was a market value trade. Now, compare this figure with the so-called lump sum enhancement on offer to confirm whether it is a big fat juicy pig in that bag or a scrawny cat.   var addthis_config = {"data_track_clickback":true}; 2011-08-12 16:41:08 http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/my-god-man-is-60.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/my-god-man-is-60.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/hi-son-whats-with-59.html No matter what the Oil of Olay people say, there is no way to hold back the ageing process. In fact, science actually tells us that we start dying from the moment that we are born. Mercifully, that particular ray of sunshine isnt used too much in the Happy New Baby! card industry but the simple truth is that our cells can only regenerate a limited number of times and every time they do, they arent quite as good as the time before. Even Cliff Richard is starting to look mid-forties now.   How we view ageing is something that we can do something about. In the western world growing old is portrayed as a bad thing with those over the age of 65 seen as unproductive at best and at worst a liability. They are something to be tolerated, not cherished for the value that they can contribute to society. In this respect, we are not the norm. If you look at cultures other than the UK and United States, age is seen as a positive attribute. People play an active part in family life for a lot longer and help to raise their Grandchildren and even Great Grandchildren, passing on their knowledge from one generation to the next. In Japan, age is synonymous with wisdom and even has its own celebration. They have a fully integrated care system, funded by the whole society that helps the elderly to continue to contribute to their community. On the rare occasion where an elderly person lives alone, their utilities such as gas, water and electricity are monitored so that if there is a sudden fall in consumption an alert can be raised. The best we can expect from our utility companies in the UK is that our decomposed remains are found by the Gas Meter Man. The thought of putting your parents into a care home would be the most unnatural thing in the world to most of the population on this earth. We however, do not have such scruples and the thought of our parents coming to live with us is quite frankly terrifying in most circumstances. We cant wait to pack our parents off to a care home at the first opportunity, mumbling something about it being for the best. Heres the shopping Son.Thanks Dad, but wheres the milk?Oh darn it, I must have forgotten.Right, thats it Im ringing the Council.Why Son?You need to go into a care home, youve obviously got dementia.What? I only forgot the milk? Ill go back and get some.No, its past that stage now Dad, we all knew this day would come eventually.But Im only 54 Son.Yes, its tragic Dad but youre obviously a danger to yourself, now come on pack your bags, Ive got the Estate Agent coming round at two oclock. So what we are left with is the age old conundrum (did you see what we did there?) of how to fund our care when we are too old to look after ourselves or when society decides that we are no longer productive, whichever comes sooner. Lets start with some basics. The average care home costs about 600 per week (30,000 per year) and that is before you need any specialist care. If you have assets worth more than 23,000, including your home, then the state will provide absolutely no financial assistance whatsoever. It is up to you to sell your assets in order to pay for your care. Now, for some reason we seem loathed to do this. The logic being that we want to pass our assets down to our children. Thats the same children whose reluctance to look after us has forced us into a care home in the first place but hey ho, each to his own. Perhaps as you gaze longingly out of the care home window, desperately hoping for Gerry Robinson to turn up, you may want to thank your lucky stars that youre not part of the Nomadic Ach Indian tribe of Paraguay. Due to their unrelenting travels they cannot carry the infirm for long so once you cant keep up you are either killed with an axe or buried alive. Not a particularly pleasant choice but apparently the buried alive thing carries more honour. Which is nice. Can I just show you something over here Dad?Whats that Son?Just come round this big rock here and Ill show you.But everyone else is going that way.Yes, well catch them up shortly, I just want to show you something important.Ok Son, where are we looking?Just down there Dad, thats right lean over the edge there........ It is a common topic of bar room chat about how to avoid care fees, with many myths perpetuated about gifting your house to your kids or donating it to charity and various other Looney Tunes ideas. The simple fact is, if you give your assets away or sell them under value then the local authority will treat you as if you still have them, even though you dont. There is one technique that has recently provided some reported success however. When your home is valued to check whether your assets exceed the 23,000 limit, the definition used is market value. This is the amount of money that somebody would be prepared to pay for your home on the open market. Lets say however that you gift or sell a 5% share in your property to your Son or Daughter or anyone else for that matter and retain 95% for yourself. You will also need to ask your Solicitor to change the form of ownership to Tenants in Common rather than Joint Ownership along the way. This is like drawing a white line down your house and sectioning it into two parts under separate ownership. Each party is still allowed free reign of the whole house, just in case you were pondering that the person with the 5% ownership would need to live in the cupboard under the stairs. That would be silly, wherever would you keep the hoover? Consequently, when the Council come along and try to sell your 95% of the house, its market value will be nil. That is because nobody wants to buy a house that someone else is entitled to live in, and no mortgage company would lend the money in any event. If that reduces your overall assets to less than 23,000 then you may be able to claim financial assistance with your care costs. You may want to remember this as a suggestion if your children ever ask you to pop into the garden so they can show you something round the back of the garage.... var addthis_config = {"data_track_clickback":true}; 2011-07-13 13:32:02 http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/hi-son-whats-with-59.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/hi-son-whats-with-59.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investment-income-11/no-mr-bond-i-58.html For several hundred years inventors and scientists have dreamed wistfully of creating a perpetual motion machine. The theory being that it is possible to design a machine that creates more energy than it uses, and therefore runs perpetually. Such attempts are normally characterised by a strange combination of rolling steel balls and spinning wheels cobbled together in a half baked attempt to harness gravity and convert it into useable energy. It is obvious that none of these hopeful inventors have ever been parents otherwise they would have known that the secret to guaranteeing perpetual motion is to simply put a toddler in a barber's chair. Just lashing a few chairs together and harnessing the energy created would make Sellafield seem about as productive as a windmill. If you could build such a machine (the perpetual motion one, not the child slavery barber chair) then you would also solve the world's energy crisis at a stroke and a Nobel prize would surely follow. But before you dash off to your shed with the kid's marbles, a colander and some four by two, its probably worth mentioning that it cant be done. If you do actually succeed then you will likely be ran out of town by villagers carrying pitchforks, convinced that you are in league with Lucifer. The 17th century mathematician Blaise Pascal spent an awful lot of time trying to create a perpetual motion machine, in between developing mathematical theories such as Pascals triangle, much to the dismay of maths students ever since. They should probably be a bit more grateful as he also invented the world's first mechanical calculator which probably made up for torturing their minds with a triangular array of the binomial coefficients in his self-titled triangle. Maybe. Despite the fruitless folly of his pursuit of perpetual energy, one of his attempted inventions turned into something that is still very popular today. He created a spinning wheel with a groove around its perimeter in which a ball-bearing could be spun in the opposite direction. The idea being that each would power the other and it would run forever. It didnt. Time after time the ball lost momentum, fell off the wheel and settled around its spindle, which just happened to have grooved notches in. The dejected Pascal consoled himself by trying to guess which of the notches the ball would eventually fall into; and roulette was born. The game is simple. A grid with 36 numbered squares is drawn out on a table and you bet your money on which corresponding number you think the ball will land in on the roulette wheel. Guess correctly and you win 35 times the amount of your stake. That means that statistically, for every 36 you bet, you will win 35; which is the definition of having the odds stacked against you. A bit like an argument with the wife; the longer that you keep going for, the more it will cost you in the long run. When it comes to a business model, the casino is no different to an insurance company. It is the art of calculating the odds of an event happening under a certain set of circumstances that dictates whether you make a profit or loss. Where it is different is that roulette is a game immersed in glitz and glamour and a tool of seduction for British Secret Agents whilst insurance is just plain dull. James Bond may not have had the same allure with the ladies if he invited them to spend his money by completing his home insurance form. There is one occasion when insurance isnt dull though. Thats the day that you need to claim. Immediately it becomes the single most exciting thing in your life and you become the king of the small print, desperately scouring the policy conditions hoping beyond all hope that your particular calamity is covered and finding out, invariably, that youre not covered for what you thought you were covered for. This scenario is inevitable as long as human nature dictates that when we purchase our policy we want it to be the cheapest possible and when we claim on the policy we want it to be the best. It is much like when the kleptomaniac married the police informant. It was never going to end well. The way we view insurance has also changed with the advent of price comparison websites. Now, we can compare quotes at the click of a button and price is everything. That is why they are called price comparison sites and not best policy comparison sites. Lets face it; who ever clicks on anything but the lowest premium? Consequently, in the modern world insurers are all desperate to provide the lowest quote in order to get to the top of the list. The problem is that no matter what price they charge, it doesnt change the likelihood of a claim happening. Whether you pay 100 or 1,000 for your premium wont change the underlying odds of whether you will die, crash your car or get burgled. The casinos had the same problem with roulette. No matter how good or bad the casino was, the profit level was dictated by the odds. For every 36 staked by the player the casino stood to make 1, which worked out about a 2.3% margin. And so they decided to change the odds by adding another number to the board. Meaning that for every 37 staked, the hapless punter would win 35. But, instead of adding the number 37, they added a zero. The reason being, that if you ask people how many numbers there are on a roulette table, most will say 36. In their mind, they then think of the odds being 1 in 36 instead of 1 in 37 (including the zero). This minor change doubled the Casinos profit margin to over 5%. Their spiritual brothers in the insurance industry do not have the luxury of changing the odds of an event happening that they have insured against. They cannot just add another number to the table. So if they need to reduce their price to ensure they are top of the best buy tables and they cannot reduce the odds of a claim being made, then the only place they have left to go is.....reduce the number of payouts made. And so the games begin, increasing the excess on motor policies which pretty much rules out any claim other than a total write-off. Tightening the definitions of health policy conditions. Did you know that cancer isnt cancer anymore? No, in order to claim you must have the right type of cancer, and a personal favourite, the flogging of Reviewable Rates on term life assurance policies. This is where the premium they quote, to get to the top of the tables, is only fixed for the first five years of your life insurance plan. After that they can increase it each year to whatever they like. So, when you get older, and more likely to claim, they increase the premiums to a level that is obviously unaffordable and you have no option but to cancel it. They get to keep the premiums you paid when you were young and healthy and you get left without any cover when you actually need it. Its a bit like the budget airlines that start off with a price so low that you wouldnt think a pigeon could fly to Spain for, yet by the time you have finished your journey you realise that you could have chartered Air Force One for what it actually cost you in luxurious add ons -like a seat...and the fuel. So, for all the benefits that comparison sites bring, maybe the 19th century architect William Ruskin was referring to insurance when he noted that There is nothing in this world that some man cannot make a little worse, and sell a little cheaper, and those who consider price only are this mans lawful prey. var addthis_config = {"data_track_clickback":true}; 2011-05-23 13:17:01 http://www.joslinrhodes.co.uk/financial-adviser-blog/investment-income-11/no-mr-bond-i-58.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investment-income-11/no-mr-bond-i-58.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/can-you-pass-the-57.html Theres not many people, Fred Goodwin aside, that have a good word to say about pensions these days. Ever since Robert Maxwell did a swan dive off his yacht there has been an inherent suspicion of pensions. Further tales of companies going to the wall and taking the pension down with them has made the subject about as welcome as a French kiss at a family reunion. Genghis Khan suffered a similar fate. By that we mean that he had a bit of a bad reputation, not that he lost his company pension. A bit of conquering here and there and the odd war crime made him the kind of individual that even Cherie Blair would think twice about defending. If Top Trumps ever do a Bad Men From History version then its a certainty that Genghis will be in there. To be fair to Genghis, he did have a rather tough upbringing. Well not bore you with the details but there were forced marriages, sibling rivalry, banishment, murder and a daring escape from certain death at the hands of a rival tribe. All of which built his reputation and he used this adeptly to unite the nomadic tribes of Asia. Genghis was extremely progressive for the twelfth century. Firstly he built a very successful army by railing against the convention that army generals should inherit their titles through their bloodline. Instead he came up with a simple concept where the most capable person was given the job. He made it illegal to prosecute somebody without sufficient evidence. He invented paper money as it was easier than lugging lots of metal coins around. He allowed religious freedom in every city that he conquered and his army consisted of Jews, Christians, Muslims, Buddhists, Taoists, Hindus and Animists all fighting together side by side. But what about the massacres and the Mongol hordes? Well admittedly, when he came to conquer a city he didnt exactly knock politely at the door but most were taken by siege rather than bloodshed. As his reputation and military might grew, most people gave up without a fight. After his death his sons took over and made a bit of a mess of things. Bitter infighting split the empire and it was some time until a descendent known as Tamerlane set about rebuilding it. This time however it was recreated through cruelty and brutality as demonstrated when, after a tax revolt in one of his conquered cities, Tamerlane massacred the entire 70,000 population, chopped off their heads and crowbarred the skulls into 28 towers. Just for good measure he then sowed salt into the surrounding farmlands so that nothing could ever grow there again. Admittedly, this was reinforcing a point that had perhaps been outlined adequately by the mass beheadings, but you have to admire his attention to detail. Over the years the stories and myths surrounding Tamerlane have become entwined with that of Genghis to create the caricature that we know today. The modern day caricature of Personal Pensions can be just as misleading. Personal Pensions are actually made up of several components. The most important of these is the actual pension bit, which provides very generous tax benefits. Think of it like a magic blanket that immediately increases the value of anything held under it by 20% (40% if you are a higher rate taxpayer) and then ensures that any growth that is achieved is also tax efficient. In return for these goodies, all is asked is that you do not access the money until you are age 55 and when you do, that you use 75% of the pot to provide yourself with a regular income. The remaining 25% you can do what you like with, tax free. So when people are heard to bemoan that their pension is rubbish, what they normally mean is that the investment funds that they chose, or were sold by the insurance company, have not performed very well.  That however, is not the fault of your pension no more than it is the fault of your garage if your car doesnt drive very fast. In the modern world you can hold pretty much any investment or asset under your pension blanket so theres no excuse for not reviewing and changing your underlying investments in the same way as you trade in your car for a more up to date model every few years. In fact if you are driving a different car to the one you had when you last chose or reviewed your pension funds then an alarm bell should be ringing. If the car in question at the time of your last pension review was a MK II Sierra then that deafening noise is an air raid siren. And so the benefits provided by the pension wrapper get tainted with the poor reputation of the underlying investment in the same way as Genghis is tainted by the sins of his great great grandson Tamerlane. Were it not for that then we would now be teaching the ways of Genghis and how he achieved religious harmony, a free labour market and a robust criminal justice system some 800 years ago. And for pensions, if we got over the myths and misdirection then we may be more minded to use the pension blanket for lots of wonderful things. For example if you are retiring and in receipt of a lump sum then you may decide to pull the pension blanket over a big portion of said lump sum and claim an additional 20% or 40% tax rebate on it, which could be quite a handsome amount. As long as you have had earnings in the last three years this can be achieved and you dont even need a pension lump sum; you can use your existing savings. You can even have it all back again as cash, including the enhancement, if you have an annual pension income of 20,000, including the state pension. Oh, and it reduces your potential inheritance tax liability which is a nicer legacy to leave than Tamerlane and his bag of salt did.   var addthis_config = {"data_track_clickback":true}; 2011-04-12 13:03:25 http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/can-you-pass-the-57.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/can-you-pass-the-57.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/fly-eddie-56.html Isaac Newton was a clever bloke. In addition to the whole I discovered gravity thing he also came up with the Laws of Motion, the third of which dictates that for each and every action there is an equal and opposite reaction. He was actually beaten to this discovery by another very clever man called Huang-ti Nei Ching who happened to be the Emperor of China about 4500 years ago. He observed that everything in the world seemed to have a reciprocal opposite; day and night, life and death, pleasure and pain, and came up with the concept of Ying and Yang. Think of it as the Teletubbies version of Newtons formulae. Much to the irritation of the people who work in marketing, the rule of Ying and Yang also applies to the products they are tasked with presenting in an appealing light. For every benefit there is a consequence, for every positive a negative. A vacuum cleans the floor faster than a sweeping brush but is noisy and uses hoover bags. Beer tastes nice but makes you fall over. Electricity is easier than burning candles but you are required to ring a moron in a call centre every six months and provide a meter reading so they know how much to miscalculate your bill by. Such negatives can make it hard to create a convincing case to potential customers as to why they should buy the product in question. It is even harder for those tasked with marketing a financial product because the benefits cannot be actively seen, touched or demonstrated. Imagine the first ever door-to-door salesman trying his hand at selling a new fangled product called Life Insurance. Knock on door Salesman: Hello Sir, I was wondering if I could interest you in some Life Insurance? Customer: Some what? Salesman: Some Life Insurance Sir. Its a new product where you pay us a regular premium and when you die we will give you a lump sum. Customer: Sorry, youve confused me a bit there. You want me to give you money every month on the promise that you will give it back to me after I am dead? Salesman: Errrm yes Sir. Customer: So you have found a way for me to take it into the afterlife? Salesman: No Sir we cant do that. Customer: I have to leave it here? Salesman: Errrm yes, but it will go to your family. Customer: And how do I know that you will give this money to my family, given that I will be dead. Salesman: Because we promise to.and we are an insurance company so our word is our bond. Customer: So let me get this right. I pay you some money every month for as long as I live and in order to see any benefit I need to be dead? Salesman: Yes Sir, youve got it, I knew wed get there in the end. Customer: How about you call round every week and I punch you in the face instead? Salesman: OK, well if I cant convince you on that how about a Savings plan? Customer: Aye, that sounds more promising, Ive been thinking of putting a few pennies aside. Salesman: Smashing, well I have just what you need. You give us some money and in a few years we will give you some money back. Customer: Great, how much will I get back? Salesman: Ermsome. Customer: Some?.... But it will definitely be more than I pay in? Salesman: Hopefully.. Customer: But if it isnt youll make up the difference will you? Salesman: Erm.no. Customer: You havent really thought this through have you son? Salesman: No Sir, it would appear not. And so the dejected salesman roamed the streets mulling over how the negative aspect of each product seemed to outweigh the positives in the eyes of the customer. And then the light bulb went on...what if he combined the two plans together so the positive of each product nullified the negative of the other? Invigorated, he skipped back to his prospective customer. Knock Knock Customer: You again, are you taking the mick? Salesman: Yes Sir but if you could just let me out of the headlock I have a new offer for you. Customer: Go on. Salesman: You pay a monthly premium and if you die we will give you a lump sum and if you dont youll get your money back. Customer: Sounds good. Do I still get to punch you in the face? And so Endowments were born, the financial services version of a cut and shut job which, for those of you who arent Watchdog viewers, is a scam where two cars that have been written off, have their good halves welded together to make what appears to be a normal car. A handsome profit is then made by selling it to some hapless soul who remains none the wiser until he slows down at the motorway junction and sees Grandma and little Jonny in what was the back of his car, sail past his offside window. Another relatively recent cut and shut creation in financial services is the Structured Product. Essentially, it is a Current Account bolted onto a Stocks and Shares fund and with a liberal dose of smoke and mirrors from the marketing department is pitched to you as enjoy all the returns of the stock market with a guarantee of your capital. All of which sounds wonderful although there are two teeny weeny mistakes in that sentence, in fact they are so small you may not of even noticed them at all. One is that they dont give you all the returns of the stock market and the other is that the capital is not guaranteed. If in doubt you can ask the investors who bought Keydata, Lifemark or Arch Cru products from the likes of Norwich and Peterborough Building Society and promptly lost all of their money. That is if you can get them to stop sobbing long enough. So beware the lure of any product that offers the best of both worlds and ask yourself whether it is in fact a hybrid of two products that on their own didnt stand up to scrutiny. Putting Eddie the Eagle on the Titanic wont make him jump any further and it will still sink.   var addthis_config = {"data_track_clickback":true}; 2011-03-18 14:02:12 http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/fly-eddie-56.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/fly-eddie-56.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/sellotape-photon-accelerator-please-55.html Light. The giver of life, beacon of all that is true in the world and as Einstein proved with the Special Theory of Relativity, the great yardstick by which all of physics must conform. This is because one of the fundamental rules of the cosmos is that nothing can travel faster than the speed of light.  If it ever does then the universe will be broken and we will cease to exist so its probably best not to try. In the world of insurance and investments the beacon of all that was true used to be With-profit funds. These were the main funds offered by the mutual insurers of the day and the principle was clear. The assets of the policyholders would be invested in good wholesome things and from the annual growth the running costs of the society would be paid with the remainder distributed to the policyholders. They were run with an ethos of fairness and the best interests of the policyholders underpinning every decision.  You might want to grab a tissue if youre starting to well up. Over the years however the mutuals disappeared and were replaced by Shareholder run entities and the policyholders were reclassified as customers. Suddenly there was another factor to be taken into account when deciding how much of the growth to distribute - profit. If someone proposed to you a system whereby you are obliged to hand over all of your money for something and just be given whatever change they deemed suitable, then you would suspect them to be mad. Or your divorce lawyer. Well, if you have an investment or a pension that invests in a demutualised With-profits fund then this works on exactly the same system. The returns declared to you on your statement are the net amount due to you, after they have deducted their charges and profit. Lets pretend that you rang the insurance company to find out what the growth of the fund was before they took their charges You: Ring Ring. Oh hi Ive just got my statement and I wanted to ask a couple of questions. IC: Certainly sir, how can we help? You: Well it says here that I got growth of 2% last year. IC: Yes Sir, its fantastic isnt it. You: Well, err no not really, but what I was wondering was how much did the fund actually make before you took your charges out? IC: Why would you want to know that? You: Oh, I was just curious. IC: Well, you neednt worry your pretty little head about things like that Sir. You:  But its my money and I really would like to know. IC: Errr, well discuss it when youre older. You: What? But Im 46. IC: Dont get smart with me young man, youre not too big for a clip you know. You: Look all I want to know is how much you charged me. IC: Right, thats it. Up to your room, if Ive told you once Ive told you a thousand times, I really dont know where you get it from, now go and have a long hard think about your attitude young man.. OK, you probably noticed that we took a little artistic liberty with that one and made it so absurd that it couldnt actually be true. Whos ever rang an insurance company and had the phone answered by a human being? So we find that something that we thought to be good and wholesome and true is actually, well not. The same can also be said for light that Einstein placed so much faith in. You see that also is not as innocent as it seems. If youre ever bored on a rainy Sunday afternoon take a sheet of paper and cut a vertical slit in it. Then take a torch and shine it through the paper and you will see a strip of light on the wall. Now, cut another slit in it the paper next to the first one and get a specialised Single Photon Firing Laser Torch. Boyes will have one, they sell everything else. Logic says that the photon will pass through one of the slits and make a single mark on the wall. Except it doesnt. It goes through both slits and makes two separate marks on the wall. Proof that the same object can be in two places at once, a bit like an MP when claiming expenses for their second home. Next, go back to Boyes and get a Subatomic Microscope (first aisle in between haberdashery and windscreen wiper blades) and place it near the paper so you can see the photon split into two when it passes. Try the experiment again and guess what? It will go through only one slit and make only one mark on the wall. Strange but true, it will perform different actions depending on whether it is being observed or not; again, a bit like an MP. The same principle applies to With-profits funds as some are happy to be watched and tend to act differently to those that dont. All must publish their dealings in document snappily called the Principles and Practices of Financial Management (PPFM). If you ever need a rule of thumb test to see if your With-profits fund is happy to be observed then try Googling the name of the insurance company followed by PPFM. If you find the document quickly and it is written in plain English then all may be good. If you need the detective skills of Columbo coupled with the patience and persistence of the Terminator to find it then you might want to make that phone call.  When you are no longer grounded, naturally.   var addthis_config = {"data_track_clickback":true}; 2011-02-15 11:05:59 http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/sellotape-photon-accelerator-please-55.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/sellotape-photon-accelerator-please-55.html#comments