41 - SJP et al: Big Brands, Big Challenges

TRAP LIVE IS HAPPENING ON 9th MAY 2024. BUY TICKETS HERE: www.therealadviserpodcast.com

In this latest pile of TRAP, the Trap Pack discuss

- Topical issues, including Artic Rambles, Bitcoin yawns, Irish Banks, double-dipping, British ISAs, good PR firms, Best Buy lists
- Meat and Potatoes: SJP: Big Brands, Big Challenges
- Questions posted by our beloved TRAPist Will Bennett: https://www.linkedin.com/in/will-bennett-dippfs-7a230792/
- Culture Corner

Links referred to in the show:

- NL - TRAP YouTube hits the Steve Harris mark. http://www.youtube.com/@adviserpodcast
https://youtu.be/WxnN05vOuSM?si=bz8T7Cng7tOZ5sTX
- AS - double dipping saga continues https://citywire.com/new-model-adviser/news/revealed-the-8-platforms-double-dipping-before-fca-s-deadline-today/a2437299 
- AH - Norwegian Oil Fund to diversify to PE 3-5% - the fund drags to the extent it’s under-exposed to global equities. NEXT, all funds and all investors do. https://www.ft.com/content/55837df7-876f-42cd-a920-02ff74970098 
- NL - Budget and British ISA! My LinkedIn piece: https://www.linkedin.com/posts/hattipnick_dear-worldnaacs-if-you-think-im-changing-activity-7171425884334182400-4tPp?utm_source=share&utm_medium=member_desktop
- CW: A good PR firm = priceless https://www.irishtimes.com/business/2024/02/29/goodbody-fined-1225m-by-central-bank-for-breach-of-market-abuse-laws/
- AS: 80/20 Principle - Richard Koch https://www.amazon.co.uk/80-20-Principle-Secret-Achieving/dp/1857883993 
https://pca.st/episode/512b566a-e063-4ffa-b4d1-b22f3d51ec7f 
- CW: John Collison & Charlie Munder podcast https://podcasts.apple.com/us/podcast/a-conversation-with-charlie-munger-john-collison/id1154105909?i=1000637534393
- NL: Tribes, by Seth Godin: https://www.goodreads.com/book/show/12262996-tribes
- AH - Morning Brew Daily Email https://www.morningbrew.com/daily 
- AH - The Billionaire, The Butler, and the Boyfriend - https://www.netflix.com/title/81306326

Take part in the conversation! We want YOU to suggest topics and questions you’d like the Trap Pack to answer. The best way to do this is to ask them here.

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Transcript

Unknown: 0:17

Welcome to The Real advisor podcast, te R A P trap. Please follow us and join in the conversation on Twitter at advisor podcast where you can suggest ideas and themes you'd like the track team to discuss. Also remember to like and subscribe to our YouTube channel and leave a six out of five star review on iTunes. Doing all this really really helps us which means we can do more to help you. Now let's head over to the studio for the latest pilot trap

Nick Lincoln: 0:51

yes indeed deer trap is welcome back to what many people are calling episode 41 of the real advisor podcast tee up eight Beat Trap. My name is Luke Lincoln and joining me as ever in the digital studio of doom are the three other Horsemen of the Apocalypse. Hello, Hello Andy Ultra Hart, Karl denovo che Witcher and Alan the storyteller Smith. Now gentlemen, we have a show packed full of app salutely nothing so let's start backing up straight away with some more energy review reads read up on my good friend. The Right Honourable Mr. Andrew Hart. Thank

Andy Hart: 1:28

you, Luke. We've got a couple of views today. The first up is from Mr. Pip 79 entitled clap trap five stars. I've been listening to half a dozen episodes of trap now and find it really helpful. So many opinions forthcoming from people in this profession, many of whom have never sat in front of a client for years or if ever, so it's great to hear the experiences and ideas from others who are actually at the coalface for change. Keep up the great work my favorite podcast also Thanks Alan for the recommendation on the Schultz headphones. Now I'm able to listen during my during my morning swim. It was tongue in cheek alchemy. My first comment then in a few months time, a clap for trap from Michael from spent time limited thanks for putting your name and firm. final review is from new wonder 57 entitled seven stars five stars. My favorite podcast I'm not an IFA, just a recently retired engineer. My son is and has just taken his final exams to become a Chartered Financial Planner. Unlike Nick, I love the banter of his taking innuendo and your searing honesty. Freshly highlight is called experts summary of active management in Episode 25. Keep up the great work Chris from Cheshire. Back to you, man

Carl Widger: 2:44

lovely man Chris. Well done Chris. Good

Nick Lincoln: 2:46

stuff. Good stuff. Thank you TRAPPIST for the reviews and thanks for using your name. You don't have to but it just engenders a sense of community. And please do leave a review on iTunes if you possibly can six out of five stars. That's all we ask. We're not needy, we're just grossly insecure. Okay, let's put a timestamp on episode 41 of the real advisor podcast with some topical tidbits. Mr. Smith, you're going somewhere cold, wet and miserable, not Scotland, where you go

Alan Smith: 3:10

further north. Yes. By the time this episode goes out, I shall be on my way to the Arctic Circle North Norway flying into Trump zone in north of Norway. And then spending the subsequent three days three and a half days trekking 80 kilometers across three countries Norway, Finland and Sweden within the Arctic Circle, so it's at that point I agreed to do this about a year ago. And this is a classic you know, in the bar chit chatting about this and that go this would be a grand idea wouldn't it boys it looks doable. And then it's a few days away from the actual at the moment of truth. So I hope I'll survive yeah, thanks that's how we'll be feeling in about four days from now. Yeah, it looks it looks quite tough actually. So it's a three different things so we'll be walking slash running one the walk in yeah walk Yeah. Although walking with you know, there's a bit of snow up there. That's the issue. It's walking with those. I think it's those tennis rackets on your shoes on your feet, you know those on your loafers. Then it's skiing one day now I've done a fair bit of skiing. I thought that'd be all right. But it's not nice downhill skiing. Cross country, so we're just walking around

Andy Hart: 4:43

the world, isn't it cross country skiing?

Nick Lincoln: 4:45

That'll be a body workout that I've

Alan Smith: 4:47

literally never done in my entire life before never strapped on those fees before but I'm sure it's one of those ones. It will be fine. How difficult can it be? Then one day cycling and then you know, cycling Sounds easy enough but it's on these facts? tire bikes across snow. I mean snow is just not the most conducive material to be cycling across. Anyway, it's one of these things I haven't spent a lot of time thinking about it but I've had to be looking at it more recently to work out all my kit that I need to bring. Anyway, I spent a fortune on Amazon the other day getting all the kit. So I do wonder why we do these things, Carl. It was was it last year but this time that you were did the you half marathon? Did you?

Carl Widger: 5:25

Yeah, it was actually yeah, it was this time. Yeah, and finish me forever. Anyway. You know the term FOMO Allen? Yeah, I

Andy Hart: 5:41

missing out Jomo Jomo,

Carl Widger: 5:43

you're not sending it to me. Anyway, have a blast. I'm sure you'll come back and go, I found the bar lads is

Andy Hart: 5:49

already on the way I was gonna say

Alan Smith: 5:50

there is a pub. We're all meeting in the pub in Toronto the night before. Before we set off, let's

Nick Lincoln: 5:57

finish up there if you've got any breaks. Yeah. Okay. So

Alan Smith: 6:00

that's, that was just a timestamp. I'll let you know how we get on the next episode. So

Nick Lincoln: 6:07

it'll be it'll be fun. You'll know it's gonna move on members. Watch Irish banks.

Carl Widger: 6:11

Yeah. So. So in Ireland, we basically have two kind of two and a half banks left, and they're all Irish. Oh, no, because the likes of KBC and Ulster Bank packed their tents and moved away. So we have very little competition, I would say we've bogger all competition with in the banking sector. And AIB Allied Irish Banks and Bank of Ireland. Both announced their results last week. And they returned. One point 9,000,000,002 point 1 billion in terms of profitability, which is obviously very good considering both of these banks needed to be bailed out back in the financial crisis by the Irish government. But anyway, the shareholders are very happy because they're sending back some dividends, staff less so because for some reason, they've decided not to pay full bonuses. But I suppose why it's relevant to us in the financial planning sphere is, they're making all this money because obviously, interest rates are going up. So they're obviously getting more in terms of people who owe the money. But they've decided in mostly not to increase the savings deposit rates, which is a little bit surprising. I think it's a little bit of a shocker, to be honest, and they're not getting too much grief, from what I can see in terms of media exposure, that kind of stuff. So, money market funds, you know, other European banks are beginning to see flows from the Irish banks to them, because they are offering reasonable deposit rates. So it will remain to be seen. i It's, I'm sure purely coincidental that neither of the big players, AIB and Bank of Ireland have increased their deposit rates. But anyway, yeah, it's just, I don't know. It just goes to show that competition in every single market is required. And when you don't have it, things can take a turn for the worse for the consumer.

Andy Hart: 8:19

End. You Yeah, UK banks are also pretty much published near record profits. But the stock market still doesn't like them. I think Barclays is trading at something like four and a half PE, so they're still sort of unloved on the stock market. But yeah, the spread on money is very high. At the moment, I think most banks have taken a spread of, you know, what they pay out to what they get back in about two and a half percent. So it's enormous on these enormous numbers. And obviously, we're closing down bank branches, getting rid of staff, so becoming more lean businesses. So yeah, I mean, it's the next 10 years. I've

Carl Widger: 8:50

probably been, I'm simplifying a complex business model, right. But but the spread is much bigger here in terms of, you know, the interest rates for depositors versus interest rates for the mortgage folks. I know more and more money is going to flow out to these money market funds and that kind of stuff. So they will have to react at some stage

Alan Smith: 9:15

called the other deposit takers. Did you have your building societies in Ireland? No, we have

Carl Widger: 9:23

not so does permanent TSP is kind of the half I refer to and other than that, you don't really have anything you have like credit unions. There are some European deposit takers coming into the market for sure. The problem you'll you'll you'll have with that is, if the consumer hasn't heard of x y Zed bank, they're inclined not to actually you know, entrust their money with a x y Zed bank, even though it might be triple A versus Irish banks are kind of double B rated. But look, it's just an interesting thing. And when you see these massive, massive profit figures And yet, you know, they're not rewarding savers. I just things are stuff i Yeah, that was a, that was a weird one. Anyway, we'll move on because he's got a little bit of a college and he's not feeling great. So we'll move on.

Andy Hart: 10:16

Interesting next month. So that's pretty

Nick Lincoln: 10:18

excited about the banking scene and talk about Bitcoin quickly,

Andy Hart: 10:21

equally as a horrendous subject for Nick. I'm just literally mentioning obviously, bitcoins making an all time high $70,000. And at the same time, gold has made an all time high. So again, that's kicking about. And when these things happen, obviously, certain people shout from the rooftops and try and distract our clients from what's important. But yeah, just a very brief point to note. Will Bitcoin hit 100,000? When will it who cares? Who cares? Who knows? And same of gold? The thing about Bitcoin is the ETFs in the US, I think they're now swallowed up 50 Sorry, 53 billion, they've now got these ETF funds. That will obviously hit 100 billion at some point the price is somewhat going to be linked to that you know, yada yada yada. So

Alan Smith: 11:01

the Black Rock ETF Bitcoin ETF is now the fastest growing ETF in history got from zero to 10 billion in a month or something three

Andy Hart: 11:12

weeks yeah

Unknown: 11:13

yeah and yeah

Alan Smith: 11:15

with that but yeah extraordinary it's interesting that when everything is hitting peaks Bitcoin peak gold P s&p Peak there's a lot of peaks being hit

Andy Hart: 11:25

and everyone is just so negative still about everything. You know, it's not as if you know, people are popping the champagne anyway, back to you boss. Hockey

Nick Lincoln: 11:35

Ducky, thank you. So next point, okay. Yes, Woe to you oh Earth and see for the devil sends the beast with wrath because he knows the time is short. Let him who are bollocks are bolted up. Let's see. That same understanding reckon the number of the beast because it is a human number. Its number is 666 which is the number of subscribers we have to our YouTube channel, dear trap is 666 subscribers. We are only 334 away from the magical mythical satanic 1000 So thanks for that there is a link to our YouTube channel. In the SoCal show notes I was channeling my inner Steve Harris there from the soul Number of the Beast and the album of the same name, which came out in 1982. Masterpiece drummer Clive burr sorry, guys, I

Alan Smith: 12:25

dangerous Horace is the ADRIAN Adrian Smith Iron Maiden. Yes. I mean, he's a close personal friend. I haven't seen him for a while. But I used to knock around with him. Back in the day walk around with him. Yeah. Yes. You probably

Carl Widger: 12:48

saw him in an airline

Alan Smith: 12:51

used to see him quite regularly. He's a he's a keen fisherman. He's a fisherman just in case you didn't know.

Nick Lincoln: 12:57

Adrian Smith of the two guitarists on this classic album. Okay. Voice you, you had you and the staff had an online course training course. Yeah,

Carl Widger: 13:08

just very quickly. So Nick Murray did four hour long course on prospecting. Right? So I just mentioned it, because Well, number one, everyone thought it was there was there was lots of really good stuff in there possibly too long. And maybe he makes it four hours to justify his the fee. But look, I just wanted to mention it. Because at the end of the day, we all need to be we can't hide from this thing called sales. And you know, getting proper training on it. And creating the right habits and being consistent with those habits really, really important. So just wanted to mention it really, really good. I think it kind of comes around once a year, you got to buy a license, and then you can kind of over a two day period, you can kind of log in whenever you want, and kind of do the course but it was definitely a good thing for us to do. So I would encourage anyone to look at this are similar stuff. But but you know, just you need you need to have if you have a team, there needs to be proper training that

Alan Smith: 14:13

you thought you were the biggest fan of Mr. Murray.

Carl Widger: 14:17

So I'm not right, because I'm not because I've read a lot of the books and I think there's an enormous amount of repetition. Now, hey, who's to say we're not repeating a lot of stuff and in the trap podcast, but so I don't love him maybe as much as Andy does. But this one I thought, you know, there is some really good stuff. He's he is consistent to be fair about prospecting and you know, being very regimented about who you're talking to talking to the right types of people. And we have, I suppose, some experienced financial advisors here in the team, but we've also some inexperienced, so I got everyone to kind of do it together, and then everyone to write their own notes, and then I'm compiling all the notes and we'll kind of share them out. So And so the fact that it was Nick Murray is possibly a little irrelevant. You know, proper sales training I think is really important.

Alan Smith: 15:10

Remember me, we all went for the famous lunch with the legendary mr. Murray. And he was it piped up to say, Tony Clark 810 o'clock and yeah, I've got a I got a question your question. And it's like being with your headmaster, because he you know, he's the kind of stern he's got all these rules that you have to adhere to. And we're all sitting there, there's a slot, this is what you've

Andy Hart: 15:31

got to wear. This is the room it's got to be, cannot be served. This will be all sitting there quietly. So here's the 21 minutes at the beginning.

Alan Smith: 15:41

So the clock and pipes up, Mr. Murray, I have a question. What did he say? Can I ask you how you've made a 50 year career out of saying the same thing repeatedly, year after year? You know, we always decided

Andy Hart: 15:54

brilliant, it was a compliment. It was a couple of

Alan Smith: 15:56

you said yeah, what was his answer? Because people still do stupid things that I've you know, got to keep on preaching the message on an ongoing basis, which I guess is why on this podcast, you're right call things will come up. From time to time, we should make no apology for saying talking about things that we've talked about in the past because they don't

Carl Widger: 16:15

really Yeah, the principles don't really change. And it's, they

Alan Smith: 16:19

don't you can tell about all every every week or every month, there's there's more news that hits the thing. Ah, so there's still a huge swathes of the population and people, advisors, whatever, still got this still on the journey towards learning. So forgive me for repeating I

Andy Hart: 16:33

got a one star on my Maven money podcast, the person said, he says the same thing just by global equities. When it's

Alan Smith: 16:41

time. Yeah, yeah, thank you. Okay. Okay. Yeah, this is probably an on the same sort of thing. It's, it's, uh, this is something that has been mentioned in the past, but I've noticed that it came up since we did the last episode is this concept of double dipping cash accounts. And it kind of relates to maybe the bank story you mentioned before, Kyle, and none of this was much of an issue until interest rates rocketed up in recent times. And we've got all these platforms in the UK, where there's now significant amounts of cash sitting in them. And some of these organizations are sort of well known for retaining a large proportion of what is ultimately client money and keeping it for themselves. But maybe to add insult to injury, the concept of double dipping being, they'll charge you a platform fee for the cash you've got on it, and they'll take a slice of the cash as well. And there's something not quite right about that, really, and the FCA had written last year, I believe, to all the seats at one of these famous DSC Oh, letters to CEOs of these platforms, saying that by the deadline, which was a couple of weeks ago, that was the end of February, the deadline is really what are you going to do about it? And so they've all kind of run last minute panicking. And as a bit of looking at the the reports and the trade press that I read recently, it's all there's still a lot of fudging going on and we'll we'll kind of waive the fee on the platform we won't charge you twice but we'll still take a big slice of the action and honestly we were you seek good practices worth mentioning I think Transact are the ones who've got this right they do charge a platform fee point 2.25 Or something depending on the assets but the pay last time I looked you guys might know better 4.8844186 The pain that taking a small fee so net net the client is significantly better off rather than paying you know 2% Or something when the company themselves US Treasury facility are taking four and a half 5% So I think more people could most of these platforms could learn from the likes of Transact they're just doing the right thing that's all we want and it's perhaps a theme that we'll talk about later in the meat potatoes is just be honest be transparent do the right thing by your customer is not your money mister missus platform charge the fee appropriately don't retain it. So this is you know, this is the the news and it's yet to really be crystal clear how all the platforms are dealing with it. But there's a bit of fudging going on to say the least thoughts and they just

Andy Hart: 19:15

just just following on. It's not too similar to what the banks have always done, take a margin of cash that they look after. But it just seems a bit more icky in the platform space. Most platforms earn millions, some are hundreds of millions a year. Some may equate to like Christ agrees it equates something again could be wrong about 40% of their net of the net profits every single year, the US Schwab and these characters again, I'm not saying to do anything wrong, they give the tech for free. They give the platform for fee, sorry for free, and they make their entire turnover from the slice on cash. You know, it's a little bit like you get a free Facebook account. Well, we're going to steal all your information and get a free platform but we're going to steal all your cash returns. Is it

Alan Smith: 19:59

worse access some of them it's a committee, which was the insist on having a minimum,

Andy Hart: 20:03

I think it's up to the ASHRAE. To decide, yeah, well, platform should deal with this. At the moment, it didn't used to be a problem when Cash used to return bugger all. Now cash returns, you know, a chunky amount. So that's why Yeah, you know, information has changed, therefore, you know, how this should play out, may have to change,

Carl Widger: 20:24

I suppose advisors need to, you know, be doing their own due diligence. And if stuff should be moved to another platform, because it would it would be better for our clients, then. That's what you have to do? Well,

Alan Smith: 20:35

there's a bigger question as to why there's a lot of cash sitting in these accounts, there could be reasons short term for liquidity needs, et cetera. But you know, these platforms exist for investing don't they're not for really holding rubbish.

Andy Hart: 20:47

Typically, a platform at any given time has 10% of their assets in cash Transact. It's an advisor led platform typically has 6% in cash, because the advisors are aggressive on investing money when it arrives, etc, etc. But yeah, typically 10% of platform assets. Interesting

Nick Lincoln: 21:03

thing on the average there and is that will maybe close on this is the Transact have said that the average cash position of 6%, because of the interest that they pay back covers their platform, get a free platform, the average client Transact is getting it for nothing. The average that's obviously skewed by averages can be misleading. But that's that's, that's amazing. Okay, so our Norwegian oil funds to heart.

Andy Hart: 21:28

I mean, I've been tasked for discussing this, but Alan brought it to light. But I've been quite vocal in talking about the Norwegian Oil Fund, Norwegian has got a sovereign wealth fund that looks after about 1.6 trillion of assets. And it underperformed the global equity portfolio because they're not 100% in global equities. And I think there's been a new article that's come out that said that they're going to apportion or direct some of this 1.6 trillion more to private equity. Obviously, it's good news for private equity, you know, in terms of what flavor private equity, you know, who knows what they're going to allocate about three to 5%, towards private equity? Why is this interesting to Elon?

Alan Smith: 22:04

It's interesting, because it's relevant, it's relevant to our path is right now it's relevant to our clients is relevant. It's another one of these classes that we talked about. It's really the whole meat potatoes about this. And I thought it was a really good episode, because I'm not sure they got trillions, they've got trillions and trillions. 1.6

Andy Hart: 22:22

trillion USD, they're the right sort of biggest single sovereign wealth fund in the world.

Alan Smith: 22:26

And I think one of the reasons that we brought this up is because we've all experienced situations with clients and wealthy clients and you know, got a few million quid it's invested. And then they add more, and they say, What else isn't secret? What else have you got? What and you say? Well, the same, the same, the same same? Because people want to do diversify into things much more interesting. The thing I don't know if we should post a link to it in the show notes there. There was an article written and I mentioned this before, this guy, Robin Wigglesworth, who's a journalist at the FT been on my other podcast before he's written a book called trillions. Really smart guy. And I like the way he writes in Alphaville, which is the free part of the Financial Times you don't need to subscribe all the content in Alphaville is free. So him and his team wrote this big breakdown on private equity because it's big news as something that is like the largest sovereign wealth fund in the world decides to allocate all of a sudden, that's a lot of money, they suddenly become the biggest private equity investor in the world overnight by allocating these sort of, and they've done a sort of deep dive breakdown on the history of private equity returns and where they've come from, and what the likely returns are going forward. And it doesn't make for great reading. And the other thing I sort of throw into the mix here, just another kind of related but unrelated, someone else that I know, was reporting on the Alberta, Alberta part of Canada, which is one of the I think it's one of the oil producing regions of Canada, which is a big, you know, oil production region of the world. They've had a, you know, it's a regional sovereign wealth, so not sovereign, but regional wealth fund for years. And they have compared the growth of that portfolio with the Norwegian one. There's some stuff that's been published recently, way, way way underperforms, the Norwegian fund going back the last 1020 years. Why? Because they were big into alternatives for many years. So I mean, the moral of the story is, you know, what, why why diversify? Why you're gonna do why don't just stick to what's always worked is the purpose. What are you trying to achieve here? Mr. Norwegian, or Ralph was? What's the guy's name?

Andy Hart: 24:26

Yeah, he's, he's got he's got a podcast that says really good,

Carl Widger: 24:30

really good call mentioned. Yeah, it is really good. They

Andy Hart: 24:33

basically invest 70 70% of the current fund is in global equities, and they've slightly underperformed the MSCI by about two or 3%, a year since it was launched. The reason why they're underperformance is as sole result of them being under under exposed to global equities. If the fun was 100% global equities, they would be almost the same return to the MSCI why would they now this around and allocate the chunk to semi illiquid asset class that they don't need is your What it's like to our clients, what's the point? This is

Alan Smith: 25:02

always working? What are we trying to achieve? You're trying to get out performance results. And if so, why? We're trying to make it what's what's what's, what's wrong with it another

Andy Hart: 25:10

hobby, you know, stick with this. It's going to work.

Alan Smith: 25:13

Interesting. All right. Moving on. Okay. Okay. So

Nick Lincoln: 25:16

we've had a spring budget of sorts didn't fill up spring in this country is perpetually grown down with them. But we had it last week and wasn't much in it. There's not much to give away. Really, we're being taxed at record, the highest level since 1948. We've got the highest proportion of national debt to GDP since the early 1960s. So all is rosy in socialist UK. But the chancellor this this week's Chancellor Mr. Hunt, threw out some things not much, really, but he did. Good grief. I mean, this British ICER is 5k where you can put money into British gilts bonds and and stocks in addition to the standard 20,000 pound Eisah what's a load of old crap this is and I did put a piece on LinkedIn about it and by my standards, it's gone. It's got quite a reaction. Just y'all got I mean, Baroness Altmann, this is one of her and that ilk. These the the ideas of these people is to reinvigorate the British stock market by giving Mrs. Miggins an extra 5k which has to go into the UK stock market effectively. And it's just so it's so firstly, every Mrs. Megan's put her 5k used up our extra allowance by the way, most people haven't got even 20k to put their ISIS let alone 25k. But assuming all the Mrs. Miggins put 5k into the British ice, it would make no difference. It's such a tiny, miniscule amount, it would make no difference. The reason people don't invest in the UK and it's mainly global equity investors who have pulled away from the UK over the last 20 years and UK institutional investors it's not an attractive place to list companies. They're way better places. How about we address the problem it's like you know someone's someone's got a wound on their arm and you're just putting another plaster over it now address the underlying cause address the wound, fix the bleeding staunch it it's it's about dog days of governments and coming out of just bad ideas because there's run out of ideas and intellectual you know, whatever energy this is unbelievably bad. Anyway, guys, you have any other views on that

Andy Hart: 27:12

channel? Premiere Pro the British eyes have just confirmed Yes, it's just

Nick Lincoln: 27:17

it's a 5000 pounds and nothing handled. I don't give a monkey's it's quite nice to have an extra rapper. But it's so emblematic of everything that's wrong with our politicians who are just tinkering, the Titanic is going underwater, and they are rearranging the bloody chairs and they do it. I think they're trolling us, but maybe they're not. They think this is genuinely a good idea. Hopefully it won't come to fruition because it's gonna go through it's going through a consultation period. That won't start until June. And the chances are we may even have had an election by then.

Andy Hart: 27:45

So this is this is a stillborn sods law, Nick, when this is introduced, the stock market might fly again, it won't be as a result of this British Eisah but sods law that might happen.

Alan Smith: 27:57

How are they going to determine the funds or companies

Andy Hart: 28:01

that hearty those who are listed below? UK funds? There'll be a designated list of allowable securities.

Unknown: 28:09

It's not that hard. It will take them a weekend. All right. footsie listed,

Nick Lincoln: 28:13

I mean, they said all these mining stocks are listed in the UK and have had zero employees.

Andy Hart: 28:18

They'll still qualify for it. Nick.

Nick Lincoln: 28:21

Citibank has 16,000 employees in the UK all paying tax is listed in America. So that won't be it's just it's so yeah, of course.

Andy Hart: 28:29

Of course. It's ridiculous.

Alan Smith: 28:31

Yeah, so yeah. The other sort of underlying fundamentals that if you look at the existing ICER allocation, there are huge I think last time, nearly 50% is held in cash. So

Andy Hart: 28:43

there's, there's bigger problems actually, you're right. If you

Alan Smith: 28:46

look at the existing the billions and billions that are held in existing ISIS and try to create a much more of a culture of ownership of this box and an equity, the

Andy Hart: 28:54

problem you've got there is you're trying to turn savers into investors, which

Alan Smith: 29:00

is what's wrong with that? No, no, yeah. So that's true thing is

Andy Hart: 29:04

education. Turning people from savers to investors is the hardest thing someone has to do financially. Obviously it's appropriate.

Alan Smith: 29:11

Right? Exactly. So but this idea is next rightly said is not going to help at all. So those who are already investors, and you've got to be pretty well off, too because we're the husband and wife you already put 40,000 away that day. Yeah, yeah. And now you can so there's no out of you know, after tax income there's not that many people could afford to do that nevertheless. So it's another it's a it is a break for wealthy investors who already invested in the stock market this is not going to suddenly turn those who have got their money sitting in cash ISIS oh my god array I can now invest in I'm now

Andy Hart: 29:41

going to become an investor

Alan Smith: 29:44

in mining companies and other organizations. And the last word on this I'll say You know, my

Andy Hart: 29:52

other half been investing. It will be an investing playpen for the wealthy. They'll just throw some darts at the board and just choose around Lola random companies. And that's what maybe there's maybe there's a bit of fun for lap small cap UK just for those that are reaching at a tax break on it.

Alan Smith: 30:08

Yeah, my wife is Swedish you. Are we calling this thing by the way? Is it the British ICER? The Beisa Dad's Army.

Unknown: 30:16

But the bison should

Nick Lincoln: 30:18

be good. The piece of the pie set is there to talk to prop up the toppling up.

Alan Smith: 30:24

In Swedish, your bleep this Beiser means shit. True story.

Nick Lincoln: 30:31

Well, the Swedes are on tour already and I approve. I approve. This

Unknown: 30:34

is my base Beisa.

Nick Lincoln: 30:36

Alright, I think we're all in agreement that Carl is kind of zoning out because that was a very UK centric piece. smithy Foley of Best Buys. And you miss call. It's priceless. I'm suffering with a cold. I am alive.

Carl Widger: 30:54

You are is priceless. Just about the

Andy Hart: 30:59

rugby cup. Let's talk about rugby. No, no, no, no, no.

Carl Widger: 31:04

I can talk about the rugby if you want. It was marvelous to see the minnows having their day at the weekend. And

Alan Smith: 31:09

really what it was I agree calm. Really, really charged now

Andy Hart: 31:12

and then got the bathroom from Italy. I've been having them beat Scotland. Obviously Scotland just nipped us we'd be on for the Grand Slam. And the final day. I mean, can you make it up at this had

Carl Widger: 31:25

that Yeah, yeah, it happened. Very, very close

Alan Smith: 31:29

it wide open. It makes it interesting. It's good. On and it's no one it but haha. right

Carl Widger: 31:34

call? I agree. Anyway. Yeah, good PR firm is priceless. So good buddy, who are a large stock broking firm in Ireland were fined by the central bank for let me just read this market abuse regulations, laws for contravening those laws, they were fined 1.7 million, which was reduced to 1.2 5 million or something like that, because they admitted it. So over a five year period, they didn't do what they should have been doing. And that was broken in the news on a particular day. And then there was no more about it at all. And I just went, Oh, my God. So here's this massive fine being doled out to a big firm. And there is no coverage in the media whatsoever about this. And I just thought kudos to that PR firm because they managed to absolutely bury the story. Because there have been other examples of central bank finds. Maybe they were bigger. But there was a lot of coverage and heads rolled and blah, blah, blah. So I just thought, it's kind of amazing how this works. And Ireland is so bloody small. You know, there's just my

Nick Lincoln: 32:49

hands raised for that. Point. 1.2 5 million is not as

Alan Smith: 32:52

seem high for five years worth of market

Nick Lincoln: 32:55

abuse tiny. Yeah,

Carl Widger: 32:57

to be fair, so I read, I read the central bank ruling on it. And they there wasn't any particular cases where, you know, they did necessarily stuff wrong. It's just that they weren't tracking this stuff. And they weren't, they didn't have the Securities and the checks in places. It's just, I just thought, you know, the financial media here. Who loves to get stuck, decide who they're going to get stuck into and who they're not going to get stuck and decided to let this one just slide. Why

Alan Smith: 33:31

do you think that is call? Is it? I don't know, this stock broking firm in

Carl Widger: 33:37

their own but their own? I think REITs in this Yeah, they're owned by IBM. So I just look, it's kind of linked to my other story there. Right? Ireland is bloody tiny. And we need more competition. And the problem is the market is so tiny. Competition is always going to be difficult. And because it's so small, it's it seems to be, you know, to you know, and I just felt, you know, if Metis Ireland had a fine, I hope we never ever, ever do. But, you know, it will be news and it'd be newsworthy. And like, does I bet you tons and tons of good buddy clients don't know that this story broke. And, you know, I think this is stuff that should that the media should be good. The financial press should be covering. But then again, we've spoken about this before, well, if they're paying for all the ads, and blah, blah, blah. Yeah, that's the reason this stuff isn't covered. So I just thought I'd bring it up. I'm probably gonna be slated for this as well. But hey, look, it's profound. Yeah, there's just stuff that needs to be said. And this means this stuff needs to be said and clients need to know that. Look, this is a five year issue that these people had and they just when the central bank came in and did their investigation to put their hands up said Yeah,

Andy Hart: 34:59

totally You'd be fair to them code does sound a bit more just from what you're saying administrative issues rather than outright fraud is you know

Carl Widger: 35:10

and to be clear I did not say there was a fraud I am saying it probably is that they didn't have any any checks and balances in place. But

Andy Hart: 35:18

like here we are gonna have to Transact didn't it they had some mounting issues and

Nick Lincoln: 35:25

the money knows how they deal with it which is the real so nothing nefarious but they just had a breach of their protocols or systems

Carl Widger: 35:33

it's just some other fines that were meted out we're like met with this like frenzy of media like you know, oh my god, can you believe it?

Alan Smith: 35:45

Yeah, your point there which is probably I thought you were sort of slightly tongue in cheek maybe you weren't but the headline of this was the value of a good PR firms so they've obviously appointed somebody just let's just you know, brush up probably come out in a Friday night or something when everyone was sort of gone home for the weekend and and they brushed it under the carpet and it wasn't big news. So having a you know, they've already got just a damage limitation and brand management all these sort of people that come out and that's where we move

Andy Hart: 36:12

for feverishly trying to find out the PR firm was called No

Carl Widger: 36:15

no like we might need to try I might know

Andy Hart: 36:21

one of your colleagues on your content project is

Carl Widger: 36:25

so here we are matters are in small firm, we have a head of compliance and like you know, it's front and center of absolutely everything that we do to make sure this stuff doesn't happen. And yeah, here's a big firm that are you know, preaching holier than thou. Come on, guys. Get your shit in order, please. Anyway, that's my main point. Okay.

Nick Lincoln: 36:46

I've just had a second email from the FCA. They emailed my firm about two weeks ago, so invited me to take part in a survey. I've had a second email saying we record suggest the service not be completed by your organization. We will be grateful if you will complete it. And I'm now wondering, is this sort of mandatory completely

Alan Smith: 37:03

optional, but not only what

Carl Widger: 37:05

if I was you, I'd be completing the survey. I'm not telling you what to do, but I'd completed a vote.

Nick Lincoln: 37:12

I think I might do. I think I might. I think I might. Okay, sorry, Mr. Smith, now is the time to tell us about the folly of Best Buy lists.

Alan Smith: 37:19

I just noticed this every now and again. Do you know when this one you know naming names, and but loads of companies do this it was Hargreaves Lansdown, biggest DTC platform provider in the country. And I think more than that, we've kind of talked about this before about the constant barrage of sort of news and exciting, you know, hot funds and stuff to get people to buy and trade their direct holdings. And I, you know, the end of 2022, they produce this paper, which says, Here are the our analysis, analysts and researchers have put their heads together, done their homework and said, these are the five funds to look out for in 2023. And the, you know, the list of five funds, and the sort of sad person that I am, I sometimes keep these things. I think that will be interesting to look back on a year later. And I've forgotten completely about this, but it popped up in something I looked at the other day, and I thought, all right, genuine curiosity, but how have you done they must have picked a few decent funds with all the research. So there's five funds they paid can't remember all the name of them. But each one every single one bar, one, which I'll come to in a second, generated pretty poor returns. Every one of them by one generated below benchmark returns to whoever their benchmark is, which is all the other funds. You know, obviously, these four funds, which underperformed but all active funds, one was an absolute return fund. One was a bond fund one's an equity fund of some description, equity income. But the all over the period in question, which was the year 2023, they all significantly underperformed their benchmark, the only fund that they put on the list, which is probably just there to to make up the numbers was illegal in general. I think it's an international index fund. So it's global index fund. And even that, by some strange reason that outperformed the index by about 3%, which I don't quite know how an index fund outperforms by that amount, but hey, it depends what the benchmark actually what

Nick Lincoln: 39:21

an active global equity sector not against MSCI World, that's why

Alan Smith: 39:25

okay, but there was significant outperformance. I think the moral of the story here is you know, these organizations and as I say AHL are far from the only culprits but there's there's no comeback on this. They put push this stuff out. Here's our analysts have, you know, they've done their research. These are the funds. I guarantee you with the number of investors they've got a number of people bought those funds on the back of that research. They would have been better off completely ignoring it. And it's back to this issue that we have raised in the past the conflict of interest that exists between the platforms who have got a need to have people buy their funds, sell their funds traded funds. And each one of those things they take a margin versus the real the smart thing to do, which is to own simple effective low cost index type funds and hold them year after year after year. But that doesn't generate enough revenue for the platform. So just sort of flag that up. I think it's just no doubt if I paid or any of us paid much attention to this, this thing. You'd see it time after time after time, that was just a particular one Hargreaves Lansdown, their 2023 predictions. Were 80%. Terrible. Any thoughts on that?

Nick Lincoln: 40:32

I think you summed it up there. Really? I think, yeah, that's, that's fine. Yeah,

Unknown: 40:35

we've agreed. Nothing to say. Yeah.

Andy Hart: 40:39

I mean, okay. First and foremost, these platforms are marketing companies. They're not exactly investing wisdom companies. They're not advice companies. They're not retirement planning companies. They're marketing companies. I happen to be in the business of selling funds. So yeah, they want what we're

Alan Smith: 40:52

now rechristened the investment industrial complex, right thing, not the military industrial complex. So the farm industrial cover the investment industrial complex, is really marketing. These marketing organizations are gonna do a bit of investing in the backbone

Andy Hart: 41:07

is also science on 65. Nothing's changed. It's probably got worse. Yeah,

Unknown: 41:11

indeed. Okay. Point.

Carl Widger: 41:12

Oh, isn't it? It's like, you know, we're actually saying we're doing exactly what we spoke about earlier. We're actually just repeating the same message over and over again, because it's right. And Alan, we've also spoken about Star phone managers. That's why they exist because it's lovely to tell a story around the star Phone Manager, you know,

Nick Lincoln: 41:30

yeah, it is exactly it is indeed No, I think the current mrs. Lincoln wants to say a quick word.

Unknown: 41:36

Hello, dear Trappist. This is TLP great news. Somehow the four knuckleheads have managed to agree on the date and time and venue for the first ever track live event is happening on the later afternoon of Thursday, the ninth of May,

doors open at 3: 41:51

30pm. The venue is the historical Lolas bar at London's famous hippodrome casino right in the center of town. details, including a link to purchase tickets can be found at the real advisor podcast.com forward slash track live unbelievably, people like you are actually buying tickets fast. So don't hang around, get your tickets and come to what many people are already calling an absolute shambles. See you there.

Nick Lincoln: 42:27

Yes, we'll do gorgeous looking forward to May the ninth Trappists excitement is palpable that

Alan Smith: 42:34

sold out yet. High

Andy Hart: 42:36

variable 15 tickets left. So quietly confident we're gonna sell it actually 15 I'd maybe cut out the bid when you said the current mr. Lincoln. Current mrs. Lincoln, you tell me what to do the work. Don't tell me what to do.

Carl Widger: 42:55

That's a recurring line in our watsapp group. Are you telling me what to do?

Nick Lincoln: 43:00

Introduce, introduce me. Okay. So let's move on to what many people call the meat and potatoes of this show. St. James's place, we had our first long form discussion of St. James's place in Episode 15, which was 26 episodes ago. Now we're releasing episode bi weekly. That means every other week ever. So that's 26 times two is exactly a year ago, we had episode 15. And SGP we need to talk about it again. Because that brand is in the news for a whole host of reasons over the last year or so they've they firstly came out with the reduction in their charging schedule and the removal of exit penalties and so forth, which is big news. And that had a direct correlation on the share price. And then the last couple of weeks or so. I'm not going to use the word scandal but there's there's news is broken about SJP doing an internal review checking who of their 958,000 clients is getting an ongoing service for which they are all paying for and it turns out by the way, I'm going to preface this there are lots of SJP partners who are delivering the ongoing service but you know, when when when when that when the shit hits the fan, everyone gets a little speck of it on them. And there are a significant cohort of SJP clients who have not been getting their ongoing service for which they are paying. And no matter how you want to slice or dice that that is pretty diabolical. You don't need consumer duty to tell you that if if consumer duty makes you think that's a bad thing, then you shouldn't be in this thing of ours in the first place. It's a bad thing to charge anybody and then not deliver on a service you said you wouldn't deliver on for that fee flat out wrong. So that's driven their share price down even further. It was 31st of December 2021. The share price is around 1700. It's now down to about 470 Pence visuals pence. So a decline of 72% in the value of SGP so they've got issues going on. I understand And this is this is a very much a trigger subject for certain people out there SGP, the IFA forum that I that I managed the Google group thing. There's a guy in there who said he listened to one episode of trap and then said, I'll never listen to it again, it was such a loving for SJP, or whatever. I thought it was quite a balanced episode, Episode 15 is Sunday our most downloaded one. And we know that it went quite high up into the echelons at at the the SDP management. And there is a view that the SDP model was probably unraveling prior to this list of revelations, hence them reducing their charges, and so forth, there seems to be some discontent with a significant number of partners within the ESTP partner practice model. And there's also this other thing going on where they're going to make a move to incorporating passives in their business model, not entirely, but they're going to start bringing them in, which must be a very interesting discussion for a brand that for over 30 years or so, their whole cachet their whole this is what makes us special was we're going to pick the very best active managers. And we're going to have an investment committee to monitor these managers and make sure you Mr. And Mrs. Client are getting the very best active management you can and now to bring impact that passes that'll be an interesting thing to see how that pans out. So there's loads going on with SJP at the moment. Why am I why why is this of interest to an IFA? Well, the couple of things. The main thing is don't be too smug about this, okay? If, if these claims firms are going after SJP. Now, because of a lack of ongoing service, which classifiion pay, that lighthouse will eventually turn his beam on to our sector. So you better make sure you're delivering a service to your clients if if clients are paying for it. And if you better have evidence that you've, you've gone to those clients every year or every six months and offered them at least offered them the chance of a planning session or review service, whatever you call them. If you don't, don't be smug about this because you're going to be in trouble. And and I just, it's just very, very front of house, and perhaps potentially for ifas as well, there's a good chance you're gonna pick up some SGP business, I don't know there must be disgruntled SDP clients out there who are looking for proper full fat financial planning full fat financial planning, I'll use that phrase again. Because the guy in the IFA forum, he doesn't like that phrase. I'll say it a third time full fat financial planning, you might have the chance to pick up some business MSTP. So I'm throwing that over to the group call stop laughing. And who am I going to hand over to Mr. Hart? Ultra?

Andy Hart: 47:19

Okay. Yeah, I very triggering subject for lots of advisors. And there's lots going on. So first disclosure, yeah, I in my consultancy role I work with sa P and I've had that have done for years, I'm generally helping them implement their goal based financial planning, I've trained loads of their partners, lots of them listen to trap, lots of them come to hum, you know, so the ones I see are generally, let's say the good eggs, the ones that want to learn, of course, this coaster, I think four and a half 5000 advisors, you get a good, you know, big mix. But the latest changes are huge is their biggest change I've ever gone through in the history of the firm. So there is certainly a lot going on. But I still maintain that predominantly, they're providing financial advice and investment management with a human touch. And I think they're a high end vanilla firm. They use funds, you know, yes, they're not the best performing funds, you know, compared to some alternatives potentially, but they don't buy individual stocks. They generally are looking after pension. So they're there, they're helping middle England plan their retirement, which is the biggest financial, you know, societal issue. And out of all the money they look after, they're predominantly global equities, which is, again, something I've been banging on about for years. And something also I'm very pro, the latest account show that they're 76% in global equities. And the numbers are huge, As Nick said, you know, 958,000 clients, the close to a million clients, and these clients are not, you know, all idiots if they were getting no service, they wouldn't be clients as such. They've got obviously the Academy, which as well, which is what we speak about, which is bringing the next generation through and they're doing, I think, better work in that space than anyone else I've seen. Obviously, people like next gen are doing some great stuff, but that they've got the sort of full service model through and as I say they do proper financial planning, tax wrappers, getting clients to increase their contributions. They're not selling trash that blows up. You know, they're self insuring all the stuff that they sell, so they want to be clean business. Should I continue? The people I think there's real sharks in this business. A real pirates and pinstripes are the D FM's that just do investment management not investment. Yeah, these some firms charge minimum 1% plus VAT, even higher one and a half. And all they do and all these other smoke and mirrors costs extract value over time they provide zero financial planning zero tax strategy, they overcomplicate for profit, they hide behind quarterly investment reshuffles reports, Pinky rings, fancy coffees, I use words like wealth preservation. These are the firms that bought On my blog, and some people are paying two or 3%, for absolutely nothing apart from investment management, they're certainly not getting any proper financial planning reviews. So back to SJP. If they're charging, pick a number 2%. But you're getting proper financial advice, getting invested in generally global equities, and your income tax planning has been added to it. I think the guns are focused in the wrong direction. I mean, ifas lose their mind over, you know, SJP, for some reason, they each have their own, but obviously things slightly differently. My final point is on the other end of this market, you know, the robos on online, there's companies like not make pension be, they charge all in 1%, but zero advice, proudly, zero advice. And most of them get all the asset allocation wrong. So you're paying for asset Miss allocation, because you fill in some mumbo jumbo questionnaire, and you end up with a portfolio that's not predominantly invested in global equities, no advisor, nobody to call you, or sorry, nobody physical, nobody's doing your situation. So we've got the extreme of robos, charging 1%, the real sharks charging two 3% for wealth extraction, and then we're sort of in the middle, and I put SJP with us, you know, with the human advisor. But yeah, if they have clients that have been paying for service or haven't been receiving it, this is unacceptable. And consumer Duty has on earth that. But you're right, Nick, it shouldn't take consumer duty to tell a firm that someone's paying for a service, they should be getting something out of it. So there's a few just points there.

Nick Lincoln: 51:34

I think I think it came to light, it wasn't necessarily consumer duty, was it? I think that SJP didn't have a sort of CRM system in place for a number of years, or they had an in house one that just wasn't up to it. And they they brought in Salesforce in 2021. And migrated the clients answer there and suddenly they look through the past pattern of appointments and emails outside Do you want? Do you want you know, it's time for us to get together and throw a hold on there are sways of clients here who haven't even been offered this. So I think maybe maybe conjoined with

Andy Hart: 52:05

my point on the DFM if the regulator's going to say, we need activity to show ongoing service, I understand it, but what I mean is, it's hard. Okay, so what's going to happen is they're just going to do quarterly investment reshuffles. And so we've done everything, and all they've done is add a shadow Morphe Oh, yeah. But we're sassing the market out and we're keeping an eye out. And we're, we're making tweaks. So again, the regulator, obviously an annual planning review, that's lifestyle, financial planning, focus, what's going on, realize what's changed, how's the family getting on, that's the good stuff, obviously, that needs to be recorded. But if the FCA you're gonna go down on investment firms to say that we need to see activity, again, is gonna promote, you know, bad investment behavior. So it's a gray area on that side, just

Nick Lincoln: 52:50

before we had also been nice. So 958,000 clients with about four and a half 1000 partners. Bingo, that's, that's, that's all and again, it's an average to take this with him. So that's over 200 clients per advisor. It's really hard really, really hard to offer an ongoing full fat planning service if you've got a 212

Andy Hart: 53:09

Nick dischargers to chip in Remember, a lot of the admin a lot compliance a lot of the regulator's stuff is taken care of, you know, are like

Nick Lincoln: 53:17

talking about the emotional stuff. You can form deep friendships. Well, you Andy with about three people, me with about two, you have about five and you know, is five, five, too many mate if you're, once it goes to the thumb on bug, but they make about 100 people 125 people is the number of that you could probably maintain some kind of emotional relationship. So that's what sucked up. Sorry.

Andy Hart: 53:40

My final point, the advice gap is going to grow after this because obviously, larger firms are going to struggle to service smaller value clients, if they're going to, you know, someone's got a 3030 grand pension. Do I need to see them every year? Again, we can argue that all day, or is it just okay that I charge them a small fee that my firm can still be profitable, but we're there if you need us? Again, I'm just throwing out there. I'm not saying it's right or wrong. But I'm saying the advice gap will increase now. And then people will end up with nutmeg and pension B or who won't

Nick Lincoln: 54:17

get enough the law of unintended consequences. My friend, storyteller you've been you've been? You've been quiet for 15 minutes. I can see the steam coming out of your ears My friend.

Alan Smith: 54:27

Yeah, I mean, it's a huge subjects and I think obviously you've we started off with looking at SJP but as far for wider than that, SGP share prices collapse, but if you look at so has Aberdeen so has rathbones. So how Schroeder's none to the same extent but the vol most of the main players in Rita Hargreaves, in retail, financial investment advice, whatever you want to call it, sorry NICK Yes,

Nick Lincoln: 54:55

who wants to say quilters are looking to they're looking to shed loads of their advice is this this this models

Alan Smith: 55:02

there is a kind of talking about a talked about this a bit before there's, there's a lot more going on underneath the bonnet here loads, the SJP thing came in because of this very specific but that number of advisors, there is a consumer duty related thing yes probably was something about maybe that maybe some of these reviews are being done but weren't being adequately recorded. But that's a problem in and of itself, if you've no way of evidencing this, this stuff. But hand in hand with this goes, we we talked about this an episode or two ago, this kind of global transition towards low cost, more transparent index type investing, I think we reach this tipping point where passive investments for want of a better description on are more than 50% of the global kind of investment management world. The world is more transparent, people are looking at increasing value for money. We've referred to press and media before, there's lots and lots of press reports on this. So these organizations that have historically taken a significant margin, from money management, have been proven, you know, this is this is not news. This has been around for decades. But you know, I think sometimes things do take years and years and decades to happen. And then all of a sudden, the world catches up. And there's a real there's a kind of snowball effect. And it's really impacted. And so more and more people are looking at this. Don't forget, we talked about this before the FCA have, for some time now had these value assessments in place, which historically were a bit of a joke, because you got to mark your own homework and say, yeah, they're quite good value for money, even though it's underperformed the index or the benchmark years out year after year after year. So my kind of just sort of broadening this conversation. I find it very interesting, I really do there is there was a book written many years ago by a Harvard professor called Clayton Christensen, who's written a lot of books on this sort of subject. But in business in general, it's called The Innovators Dilemma. And it's this idea of large companies and incumbents, they often have a challenge, the very reason that they become successful over time is the very reason they should disrupt themselves. But of course, all these companies that we talked about are listed businesses, they've got shareholders. Now, if you're an SJP, shareholder right now, you're the least happy of all of them, you know, your clients are some of them are probably unhappy with some of them are perfectly reasonable. A lot of the advisors they're still doing okay, but a shareholder having a 70% reversal. In the last few years, they're probably the least happy of all. So what do you do? Now, again, I'm drawing a few comparisons from the broader world of just commerce, which I think was the last one, we talked about Google, for example. Now they've got a whole lot of other issues there. But they're, they've dominated the search space, again, for years, all of a sudden, they're coming under pressure with lots of perplexity, some in some internal cultural issues going on here. So the investors dilemma, that history is littered with organizations that dominated for decades and decades and decades, until they didn't, and the speed at which they didn't, once it was on earth happened quite quickly. So Kodak, Blockbuster, Nokia, BlackBerry, you name them, these were dominant players, St. James's plays a dominant player by a country mile, the largest wealth management company in the UK. The underlying issue here, I think, is cultural. From what I see I've got no inside view whatsoever. I know as we all do, some people who work there, I have a few off the record conversations, generally speaking, positive people, professional people. But there's a general view that the culture which was built for the last several decades was predominantly a sales culture. I grew up in a sales culture, nothing wrong with it. But at some point, if you're delivering a service, there's a difference between a sale sales culture out and out, sales culture was all about the initial fees, and gathering assets, and an ongoing service culture, which is predominantly about looking after your existing customers and clients and giving them a world class service and being rewarded for it. So long story short, there is a fund in the next I think the next two years for some James's place, not just them, but a lot of other organizations who who are in the same boat. It's make or break, they will either get their act together, they've got a new CEO in place more I gather, and he's just and he's getting all the bad news out there as far as far as he knows, and that's more bad bad news. We don't yet know if there's more. There's a lot of bandwagon jumping these kinds of ambulance chasing as a firm of lawyers who are all over this. They their view is something was published recently. I can't remember the name three letters, AKC or something like that. But they really see a bonanza for the legal profession and wouldn't stay in the profession, they have views that 70% of SGP customers are in for some sort of compensation. Obviously, they would say that they're talking their own book. But this is going to, you know, the next couple of years is going to be clearing out the stables, you know, they're going to have to really clear up their act. And it depends upon if you've been brought up if you're 55 year old advisor, they have been working for 25 years, do you want to be part of the new culture? Do you really want to do that because they're going to have to clean their their ACT UP. And they're going to have to almost cannibalize their business model upon which they become, you know, great at what they are doing. So this is I would say this, this is the blockbuster moment for some James Yeah, base there are, they're either going to have to recognize that Netflix is a new model. And people want to want different services, different value for money, greater transparency, or they're going to stick to their guns and say no, that because of the culture in the business, because the predominant senior people or a lot of the advisors say this is the way that it's worked for me. So I think we're at a really interesting point in history in UK, retail financial services, and the next couple of years is going to determine the direction of travel Andy.

Andy Hart: 1:01:04

Yeah, following on from the book, The Innovators Dilemma, I mean, as a parent example of disrupting themselves, this is their disrupting themselves moment. So you're right, it is make or break for the next block of time over to call? Yeah,

Carl Widger: 1:01:17

I suppose Look, I don't have necessarily skin in this game, because SJP aren't in Ireland. And they're, you know, they're not competitors of mine. And I do see, because of this podcast, I'm LinkedIn with tons and tons and tons of UK advisors on I see some particular advisors, you know, all they want to do is posts LinkedIn stuff about how it's return on the lists. It's tiresome, and you know, I don't know who they're aiming that off. Are they just looking for Pat's in the back from other advisors? Or, I don't know. But if I was a client, looking at somebody just putting out all this detrimental stuff about another firm I'd be, it would become tiresome for me. I think Alan hit the nail on the head there, right. And Andy has alluded to it as well, right? They've, they've, they've identified that this ain't gonna work going forward. And they've said, we are going to have to take some massive, massive pain, we're gonna have to I love what you just said, there, Andy, we're going to have to disrupt ourselves. And the one thing I would say, Ireland about, you know, Kodak, or blockbuster, whatever, those those businesses went out of business, because of technological advancements, this actually is a service business. And they've, you know, full fat financial planning. There we go again, Nick. Good luck, it's relatively new. And it's definitely much newer than SJP. So as JP have figured out, okay, we're going to have to get into doing full financial planning. passive investing is something that you know, people are looking for. So I applaud the leadership in SJP, to say, we are going to take some serious flak, serious pain on our shareholders get ready, this is going to go pear shaped, but it's not easy scale a business with full fat financial planning, that's going to be their challenge, because they scale the business on selling funds moving on selling funds moving on. So it's going to be interesting to see how it plays out. I don't invest in individual stocks. But if I did, I'd be I'd be investing in SJP. Now, because we know that this business is is broadly speaking really, really, really sticky. So I can't see them losing a whole ton percentage wise of their almost million customers, they're going to fix it, or they're going to at least try, they will lose some for sure. But they'll be in a stronger position going forward. So yeah, and the other point is, you know, they, they do do a lot of good stuff as well. And it is good. There's loads of good stuff in there. And yeah, I would say watch this space, they're certainly not going away, because they are taking the pain. It'd be much worse, folks, if they just buried the head in the sand and said, Let's just keep going for as long as we can. They're not doing well, at least they're trying to make changes. Let's

Alan Smith: 1:04:17

we're not an apologist as part of the organization that definitely we spoke about it as Nick mentioned already the previous episode, historically, they are they're they're expensive, their funds are expensive, and as a consequence of that the underperform you know, that's that's the things it's not it's not it's not a great place, you wouldn't you know, you wouldn't recommend your friends or family historically, I certainly wouldn't recommend friends family to use them. I have a high quality independent proper planning firm, for sure. And they were a mass market business. But I think there's a couple of interesting points that come out of this. And just to summarize what a couple of you have already said the key issue Hear the starting point is the delivery of promises, right? We promise we do an annual review. But the what makes up an annual review is yet to be determined. What does that mean? As Andy already talked about this? Does that mean? I'll send you a letter once a year with a statement of your portfolio and say you're up? 10%? You're down 10%? You know, is does that qualify? Because you go from there. It's like quantitative and qualitative. Because you can say we did, we did 100% client reviews this year, therefore, we've justified our fees that we've retained on it. But then different people want different things. I've often looked at when I when I can be bothered to look at other organizations that are listed business and they published their again, I think one of the very first episodes we did was we talked to the SGPs numbers and there was there for years they've come in for so much negative publicity, The Times has been a Sunday Times, what's his name, Ali has seen had a symptom of a vendetta and it was the first few reports he did were quite interesting and thought, haha, and then eventually got pretty dull, because week after week after week, but regardless of that, they still their numbers were just they relentlessly grew and the assets under management that continued to grow. So clearly they were they were doing something right. But there's a whole lot of different things here is if you if you've got 200 clients, it's very difficult to do the sort of work we do when I looked at the published accounts of them, I thought, how can this organization be so profitable? I know there's other things about taking margin on funds and everything else. But I see this a lot. And I want to just sort of wrap up my view. And I've got to be very careful what I say, I'm not going to go public on this at all is an ongoing situation that we've gone, I told you guys offline, but I see some other stuff out there nothing to do with SJP just a rageous ly sharp practice that exists. And it's it relates to people which would Yeah, to the generic term would be discretionary fund managers, discretionary portfolio managers who are there just to, in theory, manage money. And when you do a bit of a deep dive and analysis, they do really badly. The don't just marginally underperform a benchmark or an index they woefully underperform that buying a lot of individual stocks really, really poor, the charging like a wounded Rhino for this service, zero planning zero kind of collaborative, you know, family based experiences, just basic, really bad money management. And those to my mind are the are the ones that should be really worried about their agree that they're totally sure, and they're wandering

Andy Hart: 1:07:33

off the money badly. They look badly and extract wealth, at least as JP, telling

Carl Widger: 1:07:38

people that their fees are going to be like, one one and a half percent. And then actually, when you

Alan Smith: 1:07:44

layer upon layer, like non disclosed fees, you

Carl Widger: 1:07:47

said it was going to be one and a half. It's actually 3%. Uh, yeah, like, you know, either way,

Alan Smith: 1:07:51

and all that Yeah. And 75 page documents that nobody looks at exactly. And I think if I if I was these organizations, they should be the ones really concerned because we're not we're not here to

Andy Hart: 1:08:04

be concerned. And and but I think they've got such a long runway. Let's say you're a very bad DFM investment manager, and you're looking after 100 billion. There's a lot of them out there. I still think they've got 1015 20 years before it all falls out the boss whom, you know, well, we will we'll see it will be illegal for us to be paid for out of that gravy train. Yeah.

Alan Smith: 1:08:25

So the FCA have started clearly with the biggest in the country, right? So they've they've had it's clear that the senior management at St. James's place has been in I was gonna say Canary Wharf are the number the FCA move, but they've been having close negotiations with the regulator for I would say probably a year maybe longer than this. And then relatively recently, another dear CEO letter went out to the next 20 The CEOs the next 20, top wealth manager IFA advice that I have for, you know, advice firms, or some of the names that we've mentioned already, whether it's quilter, open work some of the big the big, big players. So they're next in the in the sites, I've got to assume that in due course the the discretionary managers these underperforming double barreled named people who are just rent seeking they just basically riding on the back of the you know, talking the right language, you know, but never any deep analysis that has to be next in the gun sights of the regulator. Absolutely. Because it is honestly the things I'm seeing I'll share some things for you guys. It's outrageous. It boils my blood it's just complete is borderline criminal, frankly,

Andy Hart: 1:09:31

this white collar crime. Yep, I agree.

Alan Smith: 1:09:34

Yeah. Any other thoughts?

Nick Lincoln: 1:09:36

Oh, that said with passion. I think we gave I think he gave the latest SGP episode a pretty decent balanced hearing there. So it'll be interesting to see how things pan out as we've all said in different ways. Things are certainly the game has changed and things are certainly underfoot, changing rapidly and it'll be an interesting times. May we live in interesting times as one of those old Johnny's once said, Okay, now obviously To my little nest camera that postie is walking on my drive. She's holding a bulging sack over her shoulder. And it's a sack full of trapeze questions posted by you, our beloved audience the TRAPPIST audience. If you want to send us a question, there's a link in the show notes. Click on it, we will get to them. I think today's question is from the tail end of last year, so we are gradually gradually getting there. Let's have a look and open up this envelope and see who this one is from. This is from a chap who's only given his first name will he's got a LinkedIn profile though so we'll uh, we'll Bennett Okay, there you go and your profile. Thanks. Well, we'll put a link to that in the show. Several trainers will say it's not that Jesus wet I've got a cold guy here that make this easy. I'm a youngish IFA turning 29 in November get and have been in the industry for seven years or so. I've been listening to the podcast for a while and find it really helpful to get outside perspective on financial planning other than those I work directly with. I know you're all advocates of passive investment strategies. And I understand that over a long term financial plan, this is likely to generate excellent returns, arguably more so than active managers can provide. But in the current climate, it's always the current climate. So it was the new thing. But in the current climate, with advances to tech and the availability of information, and markets becoming more sensitive to sentiment, is there an argument to explore active strategies and the hope of a more comfortable journey for clients, possibly at the cost of not beating well known indices, if you can achieve decent long term returns, but have a smoother journey? Is that not what clients want? Okay, I'll quickly go and then guys you want to join in. If you want to smooth the journey, if you want to give up some of the temporary declines, you are going to definitely give up the permanent advance you cannot have one or the other volatility is your friend. And I don't really have much to add on that, guys.

Andy Hart: 1:11:57

We'll go all in on active management, I'll see you in 10 years.

Alan Smith: 1:12:02

Nice fun. The first of all, just this this word, there's there's an undercurrent, Viana here, there's quite a lot about almost said with this tastes passive investing. So let's just be clear, there's no such thing as passive investing. You know, everything is a choice, everything's a decision, you got to asset allocate, you got to choose what index to track. So it's not passive at all. I talk about if it just efficient is efficient deployment of capital. So when you when you recognize eventually that the most important thing is this, and he just called it a minute ago, goals based financial planning is recognizing where you are today, and what a good life looks like in the future. Once you once you recognize that has been the most important part of a financial planners role. The next stage really is to recognize you just need to get there with the most efficient, reliable, low cost, predictable, transparent, blah, blah, blah, methodology. And you want to streamline everything and distill everything down to first principles. First Principles is just about capturing the returns that are generally available to everyone else out there. All this stuff will but I mean it with love and respect to see because there's more information available, there's more set of market becoming more sensitive to sentiment, that's just a word.

Unknown: 1:13:21

Blah, blah, blah.

Alan Smith: 1:13:23

And if everything is if there is more tech, you know, information access to information, well, the market understands it. All I would say is do your research, listen to past episodes of this podcast. Go and meet with the likes of Vanguard go meet the likes of dimensional don't sit on their courses, look at the research, look at the evidence, look at the facts read SPIEF are the Standard and Poor's index reports that they do. And we just need to move away from this investment industrial complex that makes you ask questions like this because it's kind of irrelevant. You just want to help your clients to live a fulfilled life in the most as I say simple, reliable, predictable manner.

Andy Hart: 1:14:04

That's it. So thank the Lord it took me only a year to get out of the investment industrial complex wherever you're talking about and and so for about a year, I was sort of randomly pick and funded another hell what I was doing and then I found the asset class type investing. So thank God it took me only a year I know obviously, other people. To me longer to me, of course, Jimmy will come it will has come into this business in 2017. We're abundant of information. I came into this business in 2008. There was a lot of information but it wasn't available like it is now. So still seven years in he's obviously not yet seen the asset class in investing life, but he may never do I'm not saying a lot

Alan Smith: 1:14:44

of that is about I had an offline sort of DM exchange last week with a young advisor wasn't well somebody else. And the issue is you're you are a product of the people you spend the most time with God help us. So that's exactly the world We'll be a bunch of older guys who were just you know, picking up everyone we're always remember that it's like Andy Hart, the casino attendee remembers when he won 1000 pounds, but he forgets, forgets the 10. Other times that you lost money, everyone remembers their winners and forgets their losers. So all the people and I used to be around people like that, and it seemed more I put in, I put my money, client's money into Terry Smith 10 years ago, or this fund or that fund, but they forget the 99 other funds that were a disaster. And I think that's, that's the issue. So I've been probably the people that will works with a good good people, but be prepared to challenge the conventional thinking in your organization. Seek information and evidence from outside your immediate circle, because it's likely to be, you know, tarnished with 25 years of thinking, and do your research. There's plenty of books, magazines, podcasts, all about this very sort of thing called any further thoughts.

Carl Widger: 1:15:53

Not really look at the like, well is 29. So he's still You're not young ish? Well, you're very young, right? So fantastic that you're exploring these issues now. And just as Alan said, just be careful, you know, who you're kind of being guided by. And that's much easier said than done. If you're in the firm, and you know, you're hanging around with these people all the time. Obviously, you're going to be wondering, are those Trump guys for real? Or are these guys for real? So I would say fair play. I think the interesting thing is, a lot of the questions we're getting here are broadly asking the same thing. And that's basically Are you sure lads about this whole passive thing? You know, we've done that we've done our research.

Andy Hart: 1:16:36

Like after a full a few pints, we'll be like, You know what, yeah, we don't actually really believe. Yeah.

Carl Widger: 1:16:44

Yeah. Yeah, but thank you well, for the question and keep doing great work, I would say

Nick Lincoln: 1:16:52

okay, lovely. And I said it before that there were scores of advisors for right or wrong who have a skewed active fund management and gone down the sorry, Alan, but the passive route, whatever verb you want to use. I don't know any of that gone the other way they've done I miss picking funds, I miss being held accountable for the fact that fund managers had a bad period because the style rotation has gone against the secular movement of the year against the Yang and all that other atom, bollocks. Okay, let's go one hour 17

Carl Widger: 1:17:24

It's a great point. It is right. That actually is a great point. I don't know anyone who has gone the other way.

Andy Hart: 1:17:32

Nobody goes back the other way.

Nick Lincoln: 1:17:35

So we'll, we'll take what you will from that my friend and thank you for your question. Okay, let's move on to culture corner. silence for me over to you who's ready to go?

Alan Smith: 1:17:50

I'm ready. Good Mahone born ready. My culture corner is simply a book one book recommendation is called the 8020 principle by Richard Kok K Och, just to be precise. You know, what got me into this call mentioned a few episodes ago, the book, Benjamin something rather, 10x is easier than to X. Yep. So I read that, and it's a great book, and it really gets you thinking. And that then led me on to was probably a bit came up on my Kindle, if you read this, you'll like this. So then I read, um, so just read this, but 8020 principle, now, there's nothing new in it. But the application of it when you begin to really think about an all aspects of your life, that 80% of the rewards that you do, are often been gained from 20% of the activities and various things personal life or professional life, you know, profitability in your business, any number of other things. And the author is very established kind of management consultant Bureau who started various different companies gives you practical examples of this. And I really think it's relevant to anyone running a well, if you're running a financial planning business, definitely relevant. But if you're an advisor running a book of clients, definitely relevant and also relevant to your personal life. So I've really enjoyed reading the 8020 principle. Thank you. Nice.

Andy Hart: 1:19:13

Call your next. Okay.

Carl Widger: 1:19:16

So mine is one of these days I'm gonna be honest, good culture corner. Oh, dear. My mind is a reshare that Nick shared this before Christmas so that there's a specific reason or two that I'm actually sharing so number one, because I didn't have anything else but I thought this one was really good. And it's it's it's an episode of Patrick O'Shaughnessy is invest like the best podcast. And it's John Collison of stripe fame, interviewing Charlie Munger when Charlie Munger was 98 So that's a year before he died. It is absolutely fantastic. And it's like the young buck into reviewing the old book and I'm probably somewhere in between. So I can kind of try and jump between both points of view

Andy Hart: 1:20:07

in terms of the wealth call, but Ireland's richest man. Now he's

Carl Widger: 1:20:13

not actually but but along with his brother stripe has been valued at 65 billion only in the last week or two. And a fun fact. John and Patrick Collison went to the same school that my four kids are going to. So no pressure,

Nick Lincoln: 1:20:31

there's hope yet.

Carl Widger: 1:20:33

The pension plan might actually come through but I thought it was I thought John Collison is absolutely fabulous in the interview, obviously super, super clever guy. He's super respectful, but they actually had a which is one of the one of the reasons I wanted to bring it up. They did have a slight disagreement about bitcoin and cryptocurrency but it was it was a really good back and forth. And it was kind of two different views. And yes, I've been one saying you know, cryptocurrency, bad. And then cryptocurrency hits all time record highs this week. So if you're interested, you know, but but at the same time, it will be remiss of me not to mention that right? If you're interested in kind of a really balanced argument. I think it's I think it's, I think it's really, really good. And just Charlie Munger just comes out with like, just golden. Obviously, like Carlson said, you know, what's one of the secrets to your success? Like, this is one of the most famous investors of all time. It's like, just surround yourself with really great people who inspire you every day. Like, the rules are simple here, folks, that's really

Nick Lincoln: 1:21:45

wrong. That's where we're going. Yeah,

Carl Widger: 1:21:48

so I'd like to announce my resignation. But Nick, sorry, I didn't listen to it back when you recommended it, but it's definitely I would say if you're interested in our world at all right investing at all, this is absolutely brilliant and really entertaining actually, as well. So

Andy Hart: 1:22:08

if you've missed it this time, I recommend in four months time just to square that circle. It's a good podcast, it

Alan Smith: 1:22:15

wasn't it was Shaughnessy his podcast really got to be a little bit I have to be a bit selective with some of the deep in the weeds about this and investment stuff, but there's been some really good ones over there. Yeah.

Nick Lincoln: 1:22:25

To get Charlie Munger just before we dive in, I even say a year but you know, 98 and obviously he's gone now. That's what uh, yeah, thank thank thank the Lord that happened. Okay. My my culture corner. No, the culture corner is a great things we sometimes pick on content that we don't think is so great. And I Seth Godin, I know you guys love him. I know you guys love him. And I really tried. Yeah, the good thing about tribes is only 137 pages. The bad thing about tribes is it's still 137 pages. And I was

Alan Smith: 1:22:56

surprised when I saw this come up on the list. I finally understood what Seth's all about.

Nick Lincoln: 1:23:03

What not to read. Kindle has this thing of the 99 P days, don't they? Yeah, well, my birth okay. Sorry. I'll get tribes nice. And I read it. With all these a lot of these people in the Simon Simon and all these people, I really I'm going okay, I'm waiting for somebody to really not know. What what are you telling me? It's just me. Great. aren't. So I didn't example.

Andy Hart: 1:23:31

In shipping, getting content out there feeling vulnerable? Ship Your work. This is also ship your

Nick Lincoln: 1:23:37

work? Well, there's hardly originals. I mean, Steven Pressfield is often clear, they'll it's just do the work. But yeah, fine. I think Seth Godin had a one success early on his career, didn't he? And he's kind of morphed off that. Really, if that's litigious. That was Andy Hart saying that. Okay, two more points.

Andy Hart: 1:23:55

Over time, okay, so my first point is, there's a daily email a few of these go around, but this one every time by the way, I just thought I'd do too, because you're the rest of them look pretty boring, especially Carl regurgitated Anyway, leave it to me. So the email recommendation is a company called Morning brew daily email. So Google morning brew daily email finance, nerds, investing with nerds will love this one. It's sort of an aggregator of information, as you know, happened the previous day. Really good. My final recommendation is an absolute must watch on Netflix. It's totally insane. This documentary series, three episodes is called the billionaire, the butler and the boyfriend. It's a real story about the lady who was the granddaughter sorry, the daughter of the founder of L'Oreal. She was a richest woman in the world. The richest woman in the world now is the grand daughter. So the daughter of the daughter of the founder of law Real, she's worth over 100 billion. It is insane the amount of money this lady had and people will just swindling her out of money like you wouldn't believe. Financial Advisor. He was up to all sorts. The sort of temporary boyfriend who wasn't quite a boyfriend. He was just into swindling elderly, elderly women don't get any ideas. Nick is just brilliant. This I mean, the cheque she was writing, she paid all of her staff in cash. I mean, they were obviously putting it through for tax but she just paid them in cash. She was paying a gardener like under 120 grand a year euros and like the account of foreigners. It's insane that this lady had so much money in the end that this guy swindled her for a billion euros didn't even touch the sides. It's like me, Swindon, Nick Lincoln for like, six pound 50 You know, it wouldn't even touch the sides wouldn't touch the side. So certainly, if you're a financial adviser if you're into money, it's the business story scene that is a new, it's a new one. It's not new. I mean, the daughter of the founder of L'Oreal, she based that outsiders for 10 years, but because she's rich and eccentric and mad, she's sort of okay. And we can just let her do stuff. I mean, people come to and say, oh, you know, my daughter. She needs a new dress. She's like, how much do you need? 200,000 euros? It wasn't like a new dress. What is it? 70 Euro? Like every check she wrote was six figures. And it was

Carl Widger: 1:26:27

fabulous. No, we don't have to watch it. You've told us everything.

Andy Hart: 1:26:32

The last bit about it. It's just you can't take your eyes.

Unknown: 1:26:36

She does. She does unfortunately passed away.

Andy Hart: 1:26:42

strong recommendation let me know what you think he came out about a year and a bit ago. It's, it's, it's wild.

Unknown: 1:26:48

All right. Okay,

Nick Lincoln: 1:26:49

cool. Right. One hour. 28 minutes. I think the Tech has worked. I say automatisch work. So we will say that's a wrap for this episode. Thank you, dear Trappists for your precious time and your input into this show. If you listen to the podcast, make sure you subscribe to the podcast that way every other Thursday. New episode lands on your phone freshly baked it's all done for you we got to do is play stick your headphones in with all the heavy lifting, like and subscribe to our YouTube channel. 666 the number of the beast

Andy Hart: 1:27:18

Allah Allah Allah Allah you tickets if you're still

Alan Smith: 1:27:22

on the fence. 15 left gearing is going to be fun. Advisor

Andy Hart: 1:27:27

podcast.com The real advisors calm. Exactly. That's

Nick Lincoln: 1:27:31

the place to go to get your tickets. Well, many people are calling in the event of May. Okay, let's go. Lobby Lowe's lobby Trappists Goodbye.

Unknown: 1:27:40

Take care. Iron Maiden bye bye bye now number the base