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In this latest pile of TRAP, the Trap Pack discuss
Links referred to in the show:
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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Welcome to The Real advisor podcast, t r a p twerp 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:yes indeed, dear TRAPPIST, welcome back to what many people are calling episode 44 of the real advisor podcast T. AP trap. My name is Lincoln and joining me as ever in the digital studio of doom are the four other Horsemen of the Apocalypse. And the ultra hot call deliver the voice wager. And Alan the storyteller Smith Now gentlemen, we have a show packed full of salutely nothing so let's start unpacking it straightaway with some more high energy review reads read out by my very good friend the Right Honourable Mr. Andrew Hart.
Andy Hart:We have just one review this episode. This is from Keith boys who runs a great firm in Scotland entitled An honest and refreshing unedited journey five stars, you bring wisdom to those who are navigating their own uncertain path in the world, you bring reassurance that it's okay not to have all the answers you bring peace of mind that it's okay to make mistakes, and that you'll be wiser for it you bring optimism and hope. From your own achievements, you bring excitement to me and many others for what's possible. So thank you for taking the time to make a difference to inspire me and many others. The true impact of this you'll never know. But I for 1am hugely grateful. Great review back to you. But
Alan Smith:what a lovely review. Yeah, well, thank
Nick Lincoln:you very much, Keith. That is lovely. Trappists we do we do kind of live and die by these reviews, because we're all shallow and vain. And the ego is unbounded. So please do leave a review on your well I would say your app of choice is going to be iTunes, isn't it? Six out of five stars minimum please. Or give us a zero out of five? We don't want anything in between. Okay, we don't have
Andy Hart:a three star and then
Alan Smith:three stars. One, please. 105
Nick Lincoln:love us all know this, but nothing in between. Okay,
Carl Widger:that three, three star review was very good. Actually. We should definitely read that out coming out. We will very essentially it was very, very, very, very good.
Andy Hart:You're the only one paste in so yeah.
Nick Lincoln:Right. Let's put a topical timestamp on this show with some topical tidbits. So we're getting near the big financial services event of the year now. It's not October No, it's not harm. Yes, it's trapped live at London swinging swinging hippodrome in the heart of Leicester Square. London's equivalent of times Times Square, but it was a shithole. But never mind. The Hippodrome is great. And Lola's basement bar is fantastic. And those are coming emails in your inbox telling you about what time it kicks off. There'll be going out shortly. Can't wait to catch up with all the Trappists. That's going to be absolutely great. Mr. Smith, you've got some thing you want to talk about. Yeah,
Alan Smith:I mean, it is going to be a fantastic event. And you're right, as Andy just said, We three of us went along and just sort of checked it out the other day, and it's looking good, perfect, true story we have got there are five tickets remaining. And what we've decided to do in our wisdom is to offer them and what we're going to call scholarship tickets. So they're designed for anyone who's early on in their career early on in their financial planning journey, maybe the stretch to get a train ticket and pay for a ticket, etc. Might be a little bit too much. So they're going to be free. Complimentary, there are literally five available no more and no less. And the way you apply for them is simply get in touch with me, send me DM me on Twitter or LinkedIn or via email, get in touch. It literally has to be first come first serve the five first five people to apply for scholarship tickets. And we'll have our own definition of who you know, who qualifies, but basically anyone who's younger and early on in their career, please get in touch. You'll have a free complimentary ticket, come along and we'd love to see you on the day. Very, very good,
Nick Lincoln:how noble we are. You see we are a nice kind, caring, compassionate, empathetic people talking to being kind and caring and empathetic. I went to Spain recently to see my parents my dad's recovering from a broken femur. He's doing okay, but they're 85 and 83. So they've got issues, you know, as happens at that age. While I was out in Spain in Iberia, I had a phone call from a client and I couldn't take the call left a message and I called them straight back on WhatsApp because I didn't want him to know that I was abroad he'd need to know I'm in Spain. It's not his concern whatsoever. He's a client he gets a call back and I called him back in This guy, um, no, I know him inside out, like I know all my clients like you guys know all your clients inside out right you know their foibles and what makes them tick and their general situation. And he is like many people, he's been a bike lead investor. He's got other assets, but he's got to bike let's and for the last five years, it's kind of been treading water at best even with mortgage rates have stupidly low rates and now the rates have gone up, of course, he's underwater so he phones me says, Nick, I've got this money in my pension, it leaves a message. If you've got this money, my pension pot, I just remind me again how much I can take out as tax free cash because I need to blah, blah, blah, my mortgages are coming up, I need to refinance, I need some extra cash. So I called him back within about three minutes from leaving a message on my phone. I talked to him in language he understands you never use the word pension pension commencement lump sum with other human beings, that's used by people who have got zero empathy. You never use words like Flexi access, drawdown, or any of this crud with with other human beings, not if you love them, right. And I love my clients. I said, Dave, you got this tax free cash is 25% of your untapped pot, and then you've got the untapped pot, you can always take 25% That's tax free cash in your case, that works out to about 25 grand, conveniently. But that's the case. And once you've done that, the balance 75k will go and join the rest of your tapped fund as the money you've already taken tax free cash out from bear in mind, if you can no longer take any more tax free cash from that, and what's the tax free cash is gone, it's gone, spoke to him in plain English and a language he understood I didn't use any verbiage. And I got back to him within about three minutes from leaving. And the reason I'm going on about this is that I think all four of our businesses and many of the Trappists, who listen to this will have exemplary outstanding service that puts them there's an article in the show notes on LinkedIn about the declining levels of service in the UK and in Ireland as well. I imagine it's just impossible, impossible to get through to anybody at the first phone call, you're leaving messages with these big providers. And it's just an absolute nightmare. And I just want to reiterate that whatever fee your clients are paying you, because this is the subject as you are right this and this was this was the we're going to come back to this over the coming months and years even I think about paying for something and not getting it. But that fee is not just about the annual review or more correctly, the annual planning service, the fee clients are paying us it's for exemplary service. And that's just an example I think of where we can deliver and which already puts us apart. So let's not get too hung up on this, this our fees being just for the annual planning part. That's an element of it. But what sets us apart as owner, business people, our clients being being based about it, where our clients are our income we have, we're not employees, so we're just there for the ride, and then we'll bugger off to the next employer who dangles a bigger bit of fish in front of us. This is our life. And we live and die by service standards and I just want to defend ifas really do a bloody good job because I'll give you a very basic example. We've got fitted wardrobes upstairs, they're putting in 2019 They've got a 10 year coming off all the wardrobes and I'm in this ongoing battle to get the facial replaced and it's just I send an email and I hear nothing for weeks and weeks to this this wardrobe company. Just a very silly example. I know you know obviously utility companies are rubbish. HMRC is closed down its phone lines. I mean to put the love of Christ what's happening. So well I think we're just saluting other iPhones and our send me because we offer a fantastic service which is a cut above and that's a lot of what your fee is for and people will love you for it. disgruntled glands are the ones that complain happy clients do not complain. Right. So
Andy Hart:clinic play for yourself.
Nick Lincoln:To get one out from it we can't have to thank you. I appreciate appreciate the sentiments so segue seamlessly. Oh, by the way, I've got to think on that so about speedy boarding. So I go into speedy boarding. Yeah, cool. I've worked out what speedy boarding is i I'm going to channel my inner Rory Sutherland here all the way. And if I do that there might be some F bombs in the next 60 seconds. So for those of you that are precious about it, like the lady left the three or five star review and the kids or your children in the car, yeah, now, the car has to go slow. Okay, speedy boarding is completely wrongly might say we're always talking about speedy boarding. This is where the advertisers market is gonna completely regret spending money who the one who wants to buy the fucking plane for any longer than normal? Who wants to sit on it for 30 minutes longer next to some corpulent lard ass there's got to be no problem. No, there shouldn't call it speedy boarding it should be called speedy exiting the first five rows get off the plane first only that's what it's all about. If you're at the front there, the steps always go to the front because we can't have the dear pilot walking down the fuselage. He wants to get out the cockpit turn right and sawed off. You always get off first. If you're in speedy boarding you're surrounded by the infirm people on crutches. People with walking sticks if the old deer in front of you is getting on your nerves as you go through the airport give her a tap on the ankle she tumbles down you clamber over her and you'll first immigration patrol your first out of the airport when you're first in the limousine speedy boarding. I've always resented paying for it right. It's called speedy exit. Sign me up and now back to the Track Pack. You're paying for speedy exit as you call it speedy. Excellent. It's just that he wants me to write Sorry, I'm gonna go on good
Alan Smith:in the world of the mundane world of financial planning, that's very good, Nick. You've got an alternative career as a Rory Sutherland impressionist impersonator. Just following on from your point notes, you're absolutely right. The the role in the service that we provide is a lot more than this sort of magical mythical annual review. But that's what the regulator seems to be heavily focused upon. I guess a lot of this is going to come back to what it says in your terms of business or your agreement. There'll be a list of the we should be a schedule of services should be. And I think a lot of financial planners are urgently reviewing their terms that you mentioned last time, it should just I have Yeah, I think yours, as it was generally, you said was pretty good. But you just what did you do? You added something, say and the additional services,
Nick Lincoln:if you decline, the annual planning rating, and the fees will continue to be taken. But if the situation persists, then the chances are we will terminate the relationship, but the fees will continue to take an even if you don't take the annual planning meeting. Now, whether that holds up or not, I do not know. But I put it in the terms of business and they're signing it. So
Alan Smith:yeah. And the challenge, of course, is that you're right, we are offering a sort of comprehensive service, which includes, like you just did, being very, very responsive to client inquiries. Being proactive being ahead of it doesn't all revolve around an annual review. But of course, the regulator is very, very much data driven. So they need to know that's one way they can determine whether people were getting this thing and most obvious key metric here is an obvious key metric and talking of key metrics. And what I wanted to add here was I attended a seminar conference thing last week in London. And it was very interesting, it was around compliance, there was a number of sort of compliance firms and experts. And those firms have been brought in, they're all getting very busy nowadays. And some of the information that was shared was quite enlightening. And one of the things was that, as we all know, there's been a hell of a lot of consolidation going on in the market, the last five, five or 10 years and lots of firms have gone out and hoovered up lots of smaller IFA practices. And none of these firms have got data in terms of people that they did reviews for. So whereas they might well have absolute shambles, they might well have done a review. There's nothing to prove it. So this dear CEO letter that went out, I think, to the top 20 firms in the country that's causing a lot of consternation. And one of the reasons a there's not, there's a certain there's an underlying belief that these reviews were carried out, but they can't prove it. There's
Andy Hart:no Can you do a review without proving it, there must have been an email to confirm the meeting, there must have been some
Alan Smith:read, right? So here's here's the thing, and
Andy Hart:this is contributions, this is like has to be some say
Alan Smith:this can be a rhetorical you don't have to answer it. But if you were sent a request from the regulator and said, on one, cotton, send us a spreadsheet, list all your clients list all the ones who have contracted for review, which will be all of them, I guess, yeah, list all the ones who had a review and list all the ones who did hear the declined or for one reason, or they weren't able to have a review. And then for those ones list, the date at which you turned off the fee, if at all. The question is, could you access that? Full disclosure, I came back to the office and said to Shereena head of operations, can we commit to this? She said, of course, because we can work straightaway. Yes. Thank God for that. But there's quite a lot of firms who would have to literally go through each client file one by one, there's no central source of the greetings properly.
Andy Hart:Well, exactly. But what's happened is service. The firm is built around sales. Yeah,
Alan Smith:exactly. And so the particularly it's the larger firms I gather that are really coming unstuck here because yes, they can probably find that but they're literally some of these have got 10,000 clients more you know, 50,000 clients to go through to sort of press the button give a list of all the clients and the ones that got reviews, the ones that did and the ones where you turned off the so there is this huge issue and I gather there's a lot of worried people are sitting in boardrooms of large intermediary firms, particularly those that are bought 10 2050 firms in the last little while. I thought
Andy Hart:that was so thought it was interesting. Easiest gravy train cash cow and now they're realizing sugar 50% of this income might be turned off if we don't up our game. Not only
Alan Smith:you sold off, but you might have to refund for the last seven years. We need to up our game. Yeah. And the refunds could wipe out the company. Yeah.
Nick Lincoln:You know, that's alright, because they're just feeding some will pay for it. So Greg. Upset. Sorry. I'm okay with that. Okay. Yeah, good point. Well, it's the ongoing I think it's, I think we all think it's the ongoing next big thing perhaps not so much in your neck of the woods car, but certainly in the UK. Okay. Andrew, budding author, over
Andy Hart:to me. Yeah, so I've been threatening to write a book for some time. I've gotten various different projects with this. And I'm sure some of the trappers listening would also be thinking about writing a book in the niche or niche that they are part of As I'm sure Mr. Storyteller's got a couple of books, obviously, but that's another story. So I finally found a sort of Publisher to help me write this book, I just need an accountability partner to, you know, hold my feet to the fire. As I put all of these chapters together, and launch the book, I'm using a company, I've not yet signed the final terms, it cost a few quid. It's not cheap. But again, they're professionals and they're going to teach, please publish my book on.com. I'm paying about 14 grand to get it paid overnight. So I'd be
Alan Smith:your accountability partner for 13.
Andy Hart:Basically, keep it simple. I'll be working on the project over 14 months, let's say so it's a grand a month and has different you know, timeframes, and there's different people that work for me at different points, and it's called the editors and the bulk gonna be about the book is working title is going to be called, again, push the kids out the car, no bullshit financial advice. That's the working title. So yeah, if there's other Trappists, listening to this, that thinking about writing a book, the company I'm using is called the right book. company.com. Do you know the lady there called Sue, she was highly recommended by a good personal friend of our show, Jason Butler. Yeah, so that's it.
Alan Smith:That's what the world needs. And
Andy Hart:obviously, they're gonna, they're gonna, they're going to help me with the sort of overall project, but it's that accountability thing. I've gotten to write a couple of books before and I've got chapters coming out my sort of ears and different folders and stuff. But anyway, this is why I need to just pay the money does it? Does
Nick Lincoln:it come with grants professional? Sorry, come coloring in? Yeah, maybe we should do
Andy Hart:that. But does not say by number, by publisher
Alan Smith:is by global equities, and stare out the window for the next 20 years.
Nick Lincoln:Because a lot a lot of our critics would say we do paint by numbers, which is actually the knack of it, but
Alan Smith:it's just for you on on this there's
Andy Hart:it's not going to be your normal personal finance BS that's out there. You know, get yourself it's gonna be totally different. Totally refreshing. It's gonna be a seminal book that everyone can refer to a best seller, a best seller. Exactly.
Alan Smith:He's got a new business, I think where the US Ai no magic books.ai Apparently, you'll get you can create a book. Well, far quicker, far better, far lower.
Andy Hart:I'm gonna write every single word and one an old school publisher. But yeah, okay, we
Alan Smith:want an update every month. How many chapters
Nick Lincoln:just put some money towards the editing side of that budget.
Carl Widger:I was. I was thinking about how can I put that to him? You just
Nick Lincoln:did. Yeah. Very cut. Well, Andy, listen, seriously, you're the man in the arena on that. Good. Good luck. And I'm sure I'm sure it'll be in. It'll be some call
Alan Smith:you and I bought and his previous book, didn't we?
Andy Hart:Just author with a five minute money message, the five minute money message. Not too much of a fan of the quality of the book. But I think it was missing like a week in August or something. Other calendar?
Carl Widger:Yes, it was. Anyway.
Nick Lincoln:Listen, you gotta be you gotta try pushing stuff out there to sometimes not get the product perfectly right.
Carl Widger:Definitely. Watch. Boy. Yes. Yes.
Nick Lincoln:What are you doing that week in part,
Carl Widger:a partner Cillizza partner, Scylla. is on the Ring of Kerry. Absolutely beautiful part. I went down there.
Alan Smith:It's a beautiful part of the world. Andrew Carey. Okay.
Carl Widger:Where are you boys have actually seen where the Trump podcast was launched, if you remember. Yeah. So look, I did this. I've done this last couple of years. And it's really well spend time. So just to just get myself away, kind of have a chance to think about to think about the business and where we might go and all that kind of stuff. So look, I would encourage anybody, especially if you're running a team, just get yourself away, spend some time just thinking about the business. I did. bits and pieces of work and lots of long walks and then bits and pieces of other work. So it was very, very good. And I would recommend everybody does it. No, Ireland does that
Alan Smith:as well. Yeah. How can you do this and I get critic criticism for doing the same couple of times a year and I get just taken apart from my little
Nick Lincoln:because he changed.
Andy Hart:He that's got no heating, no food and leave your clothes, their car went to a hotel. Some
Alan Smith:of the above is true. Not all. Yeah, okay. Yeah, it's a good thing to do. I recommend. Highly
Carl Widger:recommend highly recommend. Okay, I made a mistake this year. I put in lots of video calls. And I shouldn't have done that because it just interrupts the flow of just trying to actually focus on the bigger picture stuff. You got stuck in the weeds a little whereas that we
Alan Smith:don't do the we don't take enough time to think to actually think without a screen or coal or whatever it is just remove devices and go for long walks. You have your best ideas I always find Yeah
Carl Widger:100% Yeah, and we got I got lovely weather so it was really good, really good. Brilliant,
Nick Lincoln:brilliant good for you recharge those batteries. Okay, and I know this year it was a big part of your sort of overall overall just goals and aspirations was to make sure that you looked after yourself and your your your balance as it were.
Carl Widger:100% And I'm actually you know, I am very intentional about that this year and it is working beautifully for me so long may that continue?
Nick Lincoln:Excellent call excellent because we do love your voice but you heard about three or four at the same time in your head and that must have been quite unsettling at times. p IPS Smith.
Alan Smith:Yes, sir. Pirates and pinstripes, aka sharks and suits. Look, we do speak about this from time to time, when all this other stuffs going on in the financial planning community is getting some criticism about this kind of not delivering some not delivering on annual reviews or whatever. I think it's fair to say that all of us when we discuss this, you know, online and offline, some of the things that we sort of come across in our, in our jobs, you think that really sort of make sure to pause for thought and say there are some real you know, people here who have in our opinion the biggest culprits the people who are you know, really challenging in terms of exit a client delivery and client service we kind of most of the people listening to this will know who we mean you'll have come across them in your new job but just to brief things that I've come across recently do it back back to backdrop, I've got two very very quick stories very quick. Snooze and
Unknown:grab yourself a drink a very long drink it Storytime with Ellen Smith.
Alan Smith:We were referred to a client a few months ago. Her investment portfolio was managed by a firm of discretionary portfolio managers who should who shall remain nameless. There was zero financial planning there was zero sort of consideration of her broader family circumstances what she wanted to achieve today tomorrow in the future out of her life, it was a it was basically a money management facility. So and she was not particularly happy with it so she introduced to us and of course we get through the normal process and we do a deep dive on the portfolio and long story short you know, we make a recommendation that she relocates her her assets across to us and we do a complete you know the usual stuff that all you guys do comprehensive financial planning and take into other family members as well who are important to her and give the whole sort of Family Financial Planning experience and that's all well and good and she says great like to engage with you guys let's go ahead so we make the arrangements to move the assets from the existing in our previous Portfolio Manager Vega all uppity about it, they write some very blunt emails which we inadvertently get copied into which on the verge of libelous is criticizing our firm which was you know, I felt pretty unprofessional, unnecessary you know, you can't win them all and sometimes clients do decide to move on and these were perfectly legitimate reasons and we were not in any way critical of them we just said you know, this is a way this is the way we do things this is the way we operate this the way we manage money. So you know, they fought tooth and nail eventually the client insists we go ahead and transfer the assets and this firm wanted about 23,000 pounds in effectively exit fees and charges which was their costs effectively for selling the assets now we all know monies are held on platforms this these monies were held on a platform it's an administrative function it takes us you know, minutes really to click a few buttons on a on a platform so we couldn't work out what happened they could possibly justify these outrageous fees as I say well north of 20,000 pounds just to just execute trades and send funds to our platform of choice. We thought that was unreasonable the client was very upset by the whole thing the whole they back to your point earlier on Nick about just client customer service and customer experience. None of this shows any of us in a good light because clients anything at all goal financial services, you're all blind. Yeah, you know our money. So we then embarked upon a fulsome debate, if you like with the ceding advisor and got the client to write, effectively a sort of, I've never, I've never encouraged clients to write complaint letters. But to put it this way to express her dissatisfaction with the way that she was being treated on exiting the portfolio, we managed to win that battle. They eventually renewed the wave this outrageous fee level in the clients that have reallocated the funds, and she's not very happy, she's now with our scope of the full comprehensive service. But again, it just makes me think you know, that it's just unreasonable, unacceptable and unfair. And if these organizations who are well known companies are are doing this, then there's a lot of other customers and clients who are being poorly served by them. And the second one was just another similar situation, someone that we're currently speaking with. And they'd asked for some performance data and asked to look, ask us to compare, this goes back to the point we've raised before, sometimes people want to know about performance early on, I'm kind of resistant on it. But back to this point, Carl Knight current isone spoke about this, in the past, meet the customer better meet the potential client where they are, they want to see performance data, because I know our data will be good compared to a lot of these other people. So we're happy to do that. And we can run we use Financial Express, we run sort of portfolio managed portfolio charts. And they're all you know, the absolute legitimate, we, you know, make sure we're covering the time period, we're not sort of being selective of the time period. But this one company, again, they use their model portfolio service for the client. I've shared it with you guys. It's not fair for me to share it, you know, give the names, but check. The fee was 1.67% annualized, again, nope, is zero planning. This is just for NPs portfolio management 1.67. Year, we know you can get that for what 20 basis points. So it's a absolute multiple we can get for elsewhere. And you looking at their own portfolio data sheets, they had underperformed their own benchmark, over three months, six months, 12 months, three years, five years and 10 years, every single data period. And some of them were hugely underperforming. And not surprisingly, this potential client comes to us and says, I'm just a little bit disappointed with the performance, you know, what, what are you what is up guys, and it was just dreadful. And there's quite a quite a few millions, you know, 10s of millions, hundreds of millions in this particular model service. And again, it's just look, it's not all about the lowest cost fund, it's not all about trying to get the best possible performance, we know. But this was on a, on a risk adjusted basis. So we're comparing ours, you know, absolute like for like, you know, we're only a small business, but our investment for the money that was involved, this client has lost out and about a commerce, hundreds of 1000s of pounds over the last number of years, just by being in a suboptimal expensive underperforming investment portfolio,
Andy Hart:the dangerous risk of low returns, which very few people talk about, well,
Alan Smith:that's a whole, that's a slightly other thing. But this was just we were just comparing like with like this was it was a predominantly equity portfolio, but it was just dreadful in terms of his investment returns. And and of course, one of the reasons it was so bad is because the cost was so great. It's so difficult to try to beat the market, if you charge 1.6% a year, just for the management, you know, you're not gonna be able to do that consistently. And they weren't able to do it for any single time period. And yet, there's millions, so no doubt 1000s of clients are invested with them. They're a well known name quite a posh brand. And it's just disappointing. I'm not, you know, we get some pushback here, but criticizing other parts of our sector of our industry, but I think it's justified, I think there are just better things out there for the, for the investing public. And you know, it's not saying that all of us are the best thing since sliced bread, but ours is generally a very simple and very effective and generally a lower cost approach. And there were just two examples in last couple of weeks. I thought I thought I'd share I know we all have them on a regular basis. But it's yeah, it's disappointing. And we can we can all do better. Any any thoughts or should we move on?
Nick Lincoln:No, I think that's that's well said. And I think we all concur with quick on the on the client who was always that lady client, the first example you're muted. Okay. Did she have a relationship with anyone at the firm and advisor or that allows you to push you know, she tossed around? No, she
Alan Smith:does. She believes she had a relationship with with more than once you had a point of contact, but of course, these are portfolio managers, your portfolio manager, Tarquin kind
Nick Lincoln:of getting the chair wasn't there wasn't that there wasn't that human that yeah, there wasn't that it? Wasn't that
Alan Smith:you this. This is the thing like this is, as we know, it's a lot of organizations whose raison d'etre is money management. So they will have a range of people they'll have their portfolio manager and the assistant fund manager and they're, I don't know what they're fixed interest manager and the barber button or all this sort of thing, but they know practically zero about this client's life that's needed. Just Know how much money she's got, and what their risk of her risk profile is.
Carl Widger:And that's about it. They also Island or they know that another thing they know well is that they've underperformed 369137 10 Whatever, right? They know this, but they they confused the clients by, you know, making the whole investment story, a very complex issue convoluted. Yeah. And then when if they do come up against, you know, a capital or a mattress or whatever, they'll they'll kind of dis the simplicity, simplicity of the portfolio.
Alan Smith:Well, this is what this is what the emails were saying. They've obviously done their research, they found out that we do not have discretionary permissions, which is very intentional. We explored this years ago, should we take discretionary permissions, but we make very, very few fund switches, it doesn't seem to be any point in doing so it had to NASA that was, that was one of their criticisms towards us. And we and we can't buy single line stock items. Right as if that's a negative, we can't buy Yeah, happy day P or Tesco or whatever, as an individual stock, whereas they've got that together with a bunch of other crap. And well, it
Nick Lincoln:can be layering guilts, though you could be layering guilts if you could do that the income ladder ladders. I mean, if you can't do your ladders, you're not at the game. You can be
Andy Hart:buying and selling structure notes every single day. Oh, the joy.
Alan Smith:I know. Yeah, exactly. He was quite as quite revealing. Actually, when you see an email, which was sent to the client, which she then forwards on to us and you go through the email chain, you think, Oh, interesting. Yeah. While
Carl Widger:you're there, look at the email Transact, see all those weaknesses they've pointed out? Well, we think they're actually really good for you from a compliance and governance point.
Andy Hart:Thank you so much for highlighting an
Carl Widger:extra layer of protection for us.
Alan Smith:But this is the thing they'll call in all honesty, from a client's perspective, they don't know, right? They someone else, you know, and worked with for years that says, These are weaknesses in this firm that you're moving to, they can't do this, they can't do that. She comes to us and said, Well, what do you think? And we go, we agreed that we can't do this very intention, we could choose to should be wished or should we? Or should we think there's a benefit or a zero benefit, in fact, there's a negative benefit, there's a minus in doing so. But the client is confused by all this stuff. So it's often a challenge. And it's maybe something we should come back to is when you're meeting with prospective clients. And they're hearing your proposal, your thoughts and your ideas, but they're working with an existing firm, and they might be working with them for years, they might know the people. Personally, I've certainly come across instances in the past where the client prospective client used to play golf with them and do all that sort of stuff. And you're kind of telling them that one of their sort of professional friends is a bullshitter. Is and it's a difficult one to to actually get across in certain circumstances, the relationship can historically be quite good. And you've got to navigate that quite carefully. I think.
Carl Widger:Yeah, you know, you're so right, we had a client. It's probably last year, maybe the year before, where the annual management charge was quoted as kind of 1% plus VAT. And we were reviewing it kind of three years in and we looked down through the all the fees and added up was nearly 3%. to Jesus Christ, we're like, this is slam dunk clients gonna move across and the client is like, yeah, hey, look, I'm gonna have a word with him about that, because that's very bad. But look, I know them really well. And, you know, they're big, firm, and whatever. So you're right, you know, it's people, you know, sometimes we'll put up with it, you know, and you gotta be careful how you position it, I suppose.
Andy Hart:And at the end of the day, at the end of the day, it's people's life saving. So they obviously want to make sure it's going to the right new person, if they're switching switches, Eva is ever harder friction than finding the first person in the first place. So they want to make a second mistake is much
Alan Smith:worse, right? And the challenge you've got, and again, we covered exactly the same thing as you've described. Car where they're seeing one hand, let's say it's 1%, we just lift a little, little bit, and now it's two or three times that. And then you've got the client saying, well, they told me that and it proved to be not correct. How do I know that what you're saying is going to be great. How do I know two years from now? And it's a tricky one to deal with.
Andy Hart:Also, I don't know if you guys can remember a few years ago, horrendous example I saw there was there was a firm A very well known firm that was charging 3% on rebalances. Do you remember this one? Yeah. So when they do a rebalance every single year, funny, funny outcome, they've switched all the frickin funds, so it wasn't a minor rebalance have been rebalanced fund switch. Well rebalance funds, which timeout is
Alan Smith:a fun day to fund be within the portfolio and will charge I mean, 3% or 3% for swimming around money
Andy Hart:that they already look after they're already charging on. And it was public on their website, and then all ifas started plowing in referring to it, then they pulled it from their website. Oh, yeah, do it. Yes, white collar crime absolutely is just going through. So it's like let's say someone's got a million quid that have already been invested with that firm for X amount of years and they've decided to switch all the funds they're going to be charged 30 grand for a five minute online at substitution with obviously with a 950 page suitability letter that explains why the moving from crap Japanese fun to crap a Japanese come you know I mean it's insane
Alan Smith:that's the real wealth transfer this from the client so those are the that's the
Nick Lincoln:joke is that my vet my investments put put the children through through public school unfortunately they were my stockbrokers till let's closing on this you have any all alluded to already got to be very careful having because if you're dissing if you're saying somebody's and you've been touched by this other firm, the personal term that you might feel a bit stupid and might feel a bit defensive about it. So you've got to cut you know, you have to be you have to navigate your way through this definitely.
Alan Smith:You don't want to say anyway, and I've learned to my costs, and you certainly don't want to say it to a couple. You know, we're a husband and wife. And one of them looks at the other and says, Did you not know this? Have you cost us a lot of money? No, you don't want to shame anyone. There's there's ways and means you got to be delicate around the communication, but you got to do it. I don't know. I think me and
Carl Widger:Bill, who was screwing us all the time.
Nick Lincoln:I never like I never like told you. I told you potential snafus. Let's move on to the next topic, which is a snafu that I've got with the FCA I don't know if and the landing, you've experienced this, but the FCA bless them, I've introduced two factor authentication on their website for the reg beta stuff. You can't opt out of it, of course, I mean, I'd love someone to hack into the FCA with my credentials and fill out the shitty returns. It's all garbage anyway, let someone else make it up. But now they put two factor authentication in I can't get into the bloody thing.
Andy Hart:Obviously a joke, Nick, it's a very serious report that you file a very
Nick Lincoln:serious report. And it's a very, very serious report. We don't make it up. Do we between us? Whose turn is it this year? Am I doing yours up? Anyway, the
Andy Hart:bane of my life Jesus
Unknown:two factor would like to distance myself. I do not know
Nick Lincoln:depreciation cinema can get through. So anyway, let's wait for the call. I can come and go I give up.
Andy Hart:Sorry, Nick, haven't you got the record for submitting the FCA return in the fastest time possible? You
Nick Lincoln:you do in the morning. And I do it about I do it about at 8am. And
Andy Hart:the opening window is midnight the day before and use submitted by 7am. They've never seen this speed.
Nick Lincoln:Well, this is my point. Andrew, this is my point. So the cadence of the FCA reg data stuff as you all know, UK advisors is every six months, and the 12 month one is the big one. But there's every six months. And then you get these occasional ones in between which just how much stuff you have, how much motor insurance have you sold to people of Bangladesh, she just sent her under five foot three, and you got Okay. And you want the end round? Is that decimal points after that or not? And then you find it's not to use all that crap. Anyway. So I've got I've got one of these emails across, okay, I'm not going to do it to get out of my life because I'm a bit like that, and I can't do it. I bought in two factor authentication. They won't let you use your standard authenticator app, you've got to use the Salesforce app. So now I've got a download as different authenticator app which I've now downloaded on my bloody plan. And it doesn't recognize the QR code on the PDF guide the FCA put out as to how so I'm in this back and forth with them and this is just comical ties in with my service thing earlier on. It's just not. And this PDF file the base written by Charles doesn't look at the QR code and steps for QR codes in step six. To page I figure in PDF classic example of bureaucracy on bloated and just doesn't care you're
Carl Widger:you're doing okay about this.
Nick Lincoln:I wasn't happy having to download the bloody app and
Carl Widger:I've shared hotel rooms with you. I know what you're like Nick. Can you imagine Victor Victor Meldrew on steroids.
Andy Hart:I think you are the fastest person to submit those big returns to the FCA. They should ring you up and say how do you do this publicly? You don't look like you're the most honest financial adviser in the UK. You are showing us you are what are you doing? FCA
Alan Smith:hold up Nick, as an example of the post
Andy Hart:efficiency
Nick Lincoln:as a parent that whatever it is, you're a one man band, you've got all your accounts in the cloud. So that 24/7 they're up to date. It's that Job's wrong. And I am I am very, I mean, Carl, you made my plan. Very organized. Right. So I do I can find anything I need like that. That's
Andy Hart:one way. Dishwasher instruct the boiler. All right. Okay.
Nick Lincoln:I'm glad about that. Thanks for yeah, thanks for the right. Why don't you give us another one of your investments. It's a recurring thing. I'm not saying anything about you or your countrymen but the city
Alan Smith:friends.
Carl Widger:So this was I got a little bit of kickback, privately said the last time whenever I did say, hey, you know what, you should actually put that out there in the public, which I'm brave enough to do all of the time and I have no problem. Anybody challenging me anybody? Anyway. Yeah. There was a latest report from the guardi which the police here in Ireland, saying that there was 25 million or something like that lost in fraudulent investment firms last year. Now it was. So basically what this is, this is you know, scammers basically, you know, cloning websites or pretending that they're dealing in cryptocurrency, whatever. And the interesting thing was that, you know, this is 25 minutes. So it's not, we're not talking about massive amount of money, and it's thrown a year, but we're all like 3040 5060 grand cases, and there was people thinking they were buying cryptocurrency are, and we spoken about this before, Alan, you know, people going in and cloning websites. So look, I just put it up from the point of view, like, I suppose from the clients point of view, they have to be very, very careful who they're who they're choosing to do their business with. But I suppose it is, you know, we do have a responsibility ourselves, to have some sort of trackers out there as to you know, are people pretending that they're mad as Ireland or values division or whatever, you know, so I know we do have a tracker, don't ask me how that works. But if anybody does try to, you know, pretend their metas are in and will be all over it straightaway. So I just thought I'd mention it. Because, like the reputational damage that would occur for your firm, you would have done nothing wrong at all, you know, it is out there. So, you know, just be careful. And I think this is only kind of getting started. That's only ramble. There's not
Alan Smith:time you can do I know that both? I think Andy, our websites have been sort of cloned or semi cloned and we've identified them and you can communicate, you know, you report it to the FCA and everyone else you possibly can, but ultimately, you know, you're in a whole other world. Yes, there's not a million things you don't do.
Carl Widger:I suppose being aware of it allows you to make decisions as to what you can or can't Yeah, you know, the worst thing would be if someone is doing this for a period of two or three or four weeks or whatever, you know, then you're kind of going to be reacting as opposed to be being proactive about it. investment scams are not sorry. Yeah, they're not gonna go away. And yeah, don't an AI is just going to make them more and more and more sophisticated. Human
Andy Hart:nature, human nature and greed, fooling their money, you know, his book, same as ever talks about it in detail. It's not going away. investment grade scams are there to stay here to stay. Unfortunately, folks,
Nick Lincoln:42 minutes let's have a quick tight wrap up Mr. Smith, excited with a pie renewal story.
Alan Smith:Just wanted to update we just read you're in the process of renewing Scott always quite interesting when you hear from other advisors, you know, the PII is kind of the bane of all our lives has historically been I mean, to my mind is just expensive, it's unnecessary expense. And it just got cost beginning to get kind of outrageous to think all these other sort of scams, things we're talking about, what actually happens is the a lot of companies will close down and they've got because of the financial services compensation scheme as part of the thing as a levy that we all pay, contributing to this kind of safety net and the cost and the DB pension transfer debacle and all that went on. So as an increasing costs for as of last few years, despite the fact we run a very sort of tight ship here. But I just wanted to report we're just in the process of renewing being quoted, our revenue has gone up but our pie premium has gone down. It's gone down a fair it's gone on about 10% which I think is pretty good overall, despite the fact our revenues has gone up and hopefully that is a sign of things to come. Having said that and talking about administrative processes the process is a freakin nightmare. If you think the paper forms sort of financial service that we operate in operate in a kind of the Dark Ages, the sort of the traditional insurance Lloyd's of London type professional indemnity insurance market. And, you know, no disrespect to Dan or broker and all the rest of that it's just the section the sector the work in, you've got to fill in these 80 page or Shareen does here or at page application forms kind of by hand or or typing them and it you can't just say it's all the same information as last year. Here's the information that we've got his audition information, everything else remains the same. Got to transfer them all the day, all the information across and it's just it takes it takes the best part of a day to do this process. And then they kind of walk around and speak to the underwriters. It just seems like nothing's changed as they're going to, you know, the 17th century, the Lloyds of London Coffee shops. There is one company we haven't used them yet, but I heard a couple of Jonathan's positive responses called bear rock heard about the look to these. They seem to their website, and again, no idea how good they are good or good or bad they are but the whole process seems I've had a couple of people saying it's really good. Everything's digitized all the data is there and increasing is another thing talking about AI and what have you. More and more of this data will be aggregated will be accessible and I think the better firms will benefit from it because we'll be able to demonstrate all right tivities and what we're doing, in order to secure a better rate, this is all about risk management, I would like to think we're very low risk business to any insurer, because we do do all the right things. But where's hard, it's hard necessarily to prove or to differentiate yourself. So hopefully, technology is finally coming to the pie insurance market. And hopefully this time next year, Shareen won't have to waste a day filling in a form by hand, Nick.
Nick Lincoln:I've had the same PI form, since I've been out on my own since 2008. So what's that I'm in my 16th year of filling out a paper form. It's not even an editable PDF, it's a PDF you have to print off. And as you said, you just add an extra year, and you copy all the previous years over. And my handwriting is bad enough for the best. It's I mean, I should have been a doctor. So what I did in an idle moment, I've actually created the Google Doc. I've replicated the PI form with the questions, and I'm going to send that off this year via Docusign. They can America so they can like it or lump it. I've got if they say no lick we need to pay for I'm gonna use it because I've got to use
Andy Hart:the same people. Yeah. collegial,
Nick Lincoln:collegial. Great. I mean, they fight whenever she with me. And my and my PI insurance has gone down as well with despite increased turnover. That's that's all lovely. But it is it is just going back on the arc. Isn't that incredible?
Andy Hart:There's a couple of extra questions. I wasn't there, Nick, but one or two every year?
Nick Lincoln:I just say yes to one note to the other. I think as long as you say yes to half of them and no to the other. You're okay. Just just jumble up the sequence to have three years to
Carl Widger:no risk profile questionnaire.
Andy Hart:Yeah. Can you just slightly different the
Nick Lincoln:I think the FCA and the PR and their PR insurers are enjoying this episode that Nick Lincoln, capital. That's my phone, and I'm based in Manhattan.
Carl Widger:We are meant as Ireland.
Nick Lincoln:Go to Ireland. That's what it is. Okay, look, 47 minutes shoot me. Let's move on to the meat and potatoes of the show. And it's that holy old subject of property. people either love it or not. I wouldn't say people loathe it, but people generally love it. Especially in the UK. Specially in Ireland. We're all obsessed with property prices. There's not a day goes by when you're not on Rightmove, looking at that property can't quite afford but enjoying the drone videos of a garden that's too big, and you'll never own. It seems a bit of an obsession. So we're going to start off with a session around property. I'm going to start off with Maven Ultras
Andy Hart:fairy aspiration of UNIQ will, as you well know, I'm an ex polyester suit wearing slightly smelling of desperation mortgage broker. This is true. So I am heavily involved in mortgages and the property buying process. And from the age of I think 22 to 28, I was in the mortgage business was today I'm going to just sort of open up and sort of widen the conversation around our personal thoughts, thoughts on property, the various different flavors of it, but mainly clients and their obsessions or not with property. So as a wealth creation strategy, which were in the wealth creation, business, I'm pro individuals owning, or individuals or companies owning physical property, any other flavors of property, property, funds, syndicates, commercial properties, student led all this stuff that have just been devised by people, I'm not a fan of I put that in the financial trash bucket. But you buying a single family home for x 100 1000s, getting a mortgage, put it deposit down and renting out, I'm sort of a fan of that wealth creation strategy, you know, provides a rising income through rising rents. And when something provides a rising income, like physical property and global equities, as a result of the rising income, you have rising capital value. And what most people do is the property, keep it simple doubles in 20 years, or pick a timeframe. They re mortgage or buy another one. And this sort of creates this sort of wealth foundings fountain situation so mainly to younger clients. So I have taken on various different clients that have been that have been involved in the property game, to a minor or major extent. Younger advisors sometimes get a bit excited when they come across a portfolio land or with a shedload of property. And the numbers seem quite big. And the net worth seems quite high. But they generally make really bad financial planning clients. You know, we work with the people that sort of had enough of the property again, they realize it's a high hassle factor, high tax environment. And they now want to sort of get involved in traditional wealth creation routes, which is investing in global equities via tax wrappers typically, so yeah, you can waste your time with portfolio landlords as a financial planner. And then you realize actually they're not my people on a focus on some other people. Most of my clients have one or two properties in the background. Some have property companies with with more properties inside them, but early on, I want to sort of Gage, are you just going to continually, you know, on the quest of buying more and more properties anytime you get a small amount of money nice as you can just going to, you know, buy another property, etc. So I really try and sort of screen the clients early on to work out, are they just property mad? Are they going to be programmatic forever? Or are they going to just sort of diversify now and move away from the physical property asset class and build up traditional wealth. So that's my starter for 10. I'm pro property, you being the owner of it, any other flavor of it, I'm not a fan of and I know, and I've seen it work. I've also seen some horror stories. I've been a landlord myself, I'm a landlord myself. And I also understand traditional ways of building wealth, which is, you know, via tax reps and global equities. So that's where I sit with it over to you, Nick, who has a slightly different opinion.
Nick Lincoln:Yes, I mean, I'm obviously in favor of, of property as your home. owning property ever renting it to me seems, does seem a bit of a no brainer. I know. I mean, other European countries, the Germans they rent far, far, far more than we do here. Maybe it works there. I don't know. I you know, I've talked about this before with with your point, Andy, about you. Younger advisors might take on clients with property portfolios and think well, over time, I can probably persuade them to you know, to diversify and divest some of them and, and invest the proceeds perhaps in other assets because look, good luck. Exactly. It's never happened once people get there unless they have a really bad experience that most people get the property bug, they just, they're just immersed in it. And it's all time consuming. Or being a battle Atlanta, I'm just not a fan. I just I you know, very prosaic example, I I sold my last house in 2018. I'd been there for 18 years. What property suffers from is this perception, this time perception kind of fog, this fog, because you don't get the property valued every day the same way, the way companies are valued, you only get value when you come to sell it really you might get the value, you might get the stage around to give you a valuation, but you never know what you're gonna get until you sell it. And because we need to sell our family homes for example, every 510 1520 30 even longer time period isn't that we think, Oh, we bought it for that. And that's this. Look how much has gone up. So my property I had it for 18 years and they've gone up by 90%. Nine 0%. Over that time.
Andy Hart:Is there a blue black outside this previous Lincoln Taos? He'll
Nick Lincoln:is Victor Meldrew. 2000 To 2018 You'll have a plaque of your house soon Wait no matter where you live? So you think, Okay, well, I think the sounds condescending, I probably would, you know, 90% appreciation in the asset class, that's really good. And I want properties and their brain rashes, not that any 3.6% annual return on my house was a new build. So you pay a bit of that in 2000, CFA, you pay a bit of a premium for that. Sure. But it won't be that much. 3.6% compounded return is not exciting. That's nominal, you knock off inflation, which is running at 2.8%. You've got an asset that's grown by nought point 8% per annum over 18 years, and you haven't even looked at mortgages and everything else. Now, I know the title, let people are screaming at me now say, Nick, you're ignoring rental income, you know, that I would give me a maybe whatever. But rental income. Okay, I know that yes, you are undergoing wrinkling income. And it obviously is a big component. But rental income typically goes and just paying the mortgage. That alone not a lot of the the advisors, clients I've spoken with who have bike, let's say over the last 20 years have been buying for capital gains. And I think there are losery, these capital gains, they're just really not there to any great degree. And you know, and you've got the you've got the utilities, you've got the rates, you've got the replacement of white goods. If you have a property for 18 years, most of my property wasn't my hand, but a bike led over 18 years. I don't know what the average tenancy is, would you get maybe three to three tenants in there, but that times I feel about every six years or so. So every six years, you have a deep clean, you've got to revamp the place more sunk costs, you're going to have void periods. Back let landlords are making money just about I think during the time of stupidly low interest rates, well, those days are gone. And interest rates now are only where they've historically typically been in the UK. So this clamor to get them cut and cut quickly though don't bank on that four or 5% is, is typically where they sit and battle and landlords now are really struggling and yes, the tax situation has changed. But that's you know, that's the way governments work you do something and they change the rules. I mean, just you've got to suck it up. So I am I think I just share with you guys on WhatsApp, I declined a client recently a prospect was referred to me by an accountant primarily because the clients had a lot of money in in in vita let's and I just I just, you know, we can do the voyance we can do the cash flow for sure. But intuitively we know is as experienced real financial advisors, you look at a client's assets on a bit of pipe and you can kind of work it they're going to be you know, there's just not enough intention so there's not enough liquid stuff. This client's gonna be it's gonna be a nightmare. She's gonna have to sell her battle let's which you won't want to do. Capital Gains Tax, not the right Don't tell me you got the wrong type of whatever you know that this is all the stuff that goes with property it's I just find it a nightmare I, I don't understand the love with it. I've never been attracted to it. I used to have it in my client portfolios because I worked for Zurich, the IFA division X ally Dunbar as was and the one thing we had that was close to with profits was the Allied Dunbar property for the commercial bricks and mortar property fund. So you'd sell that because it was an alternative to equities. And it was a, it was okay, but I haven't used haven't used those kinds of funds for ever since the credit crunch. When those funds became highly illiquid and redemptions, were cancelled. I then used REITs, for a little while in my client portfolios. But I think as Carl will agree to, they don't actually add much diversification at all. So I don't I don't like property in any shape or form. And I've never, I haven't got the bug. And I know that I know people do have the bug and that just that bug has never gotten me, Alan, your digital rose.
Alan Smith:Yeah, I think this, there's at least two different conversations here when talk about property because property means a lot of different things that you both kind of mentioned or alluded to that one of the reasons people are attracted to it. And listen to colleagues, I know that historically, what I've known about the Irish market is Irish love it but the British love it as well, British love property historically, although absolutely seeing lots and lots of signs that that love affair is waning somewhat for all sorts of different reasons, not least of all, the golden, golden obviously, and interest rates, but they do love it, there's a sense of it's tangible, isn't it, I can see that I own these three flats, and that block over there, I own this building. So I can show my friends I can talk to about the the area, the location, it's a kind of middle class dinner party type conversation, versus I got this really dull investment portfolio that just kind of, you know, I can't really talk about it. And it's not very tangible. So there's definitely some behavioral stuff going on there people like to discuss it like to talk about it. Next point is absolutely spot on, they're looking at their their property, the value of the property portfolio, you know, most once a year, if your own property if you get a valuation, probably once every few years, versus by the hour by the day, and everything else. So there's a much greater sense of smoothing that exists historically. And and you've made the point as well. I mean, I've come from a background of fat father family very into property, but my dad is a property developer. And it's all about as you say, it's about leverage borrowing against the asset, high risk, but high return if you know what you're doing, that's an entirely different thing to a DIY landlord doesn't know what they're doing the buying kind of off off the page kind of your new builds and what have you whether the valuation is kind of made up by the developers at the time so it's entirely different thing. And not to be compared Nick talking about investment funds. And I think this is a huge thing of course my days are they we haven't had this for a long time Nick might in my day back at Standard Life, shall we save it? Will save it but when I was drunk in charge of a wheelbarrow up and down when the high road and alperton Oh, come on I can see my wheelbarrow with props signed by the week. I was 21. And the rest I owed out what a tune what a tuner. I love that any excuse to play that and that you must play that at Trent live to get the whole audience along. We saw the wheelbarrow was full full of props for the property fund, because it was the one that sort of seemed to steadily go up. Now of course, they all came unstuck later on because they are classic open ended investments. With an illiquid asset they own office blocks and shopping centers and everything else and all of a sudden, if everyone wants their money out, you can't do it. And of course, it has been now demonstrated largely I think a lot of them have since closed because during that time you had all these lockups didn't you people wanted to get the money out G one, the M and G ones just closed that was a big one. But loads of them if you just at the time when if people weren't I mean in some ways, that's the other thing was in a way it was quite good because it locked people in. But it we obviously failed to deliver and what people wanted, which is get access to the capital in this kind of so called low volatility type fund. And so they're not really the right asset class for these open ended type investments. Now, in our portfolios, we do have allocation to Reese and everything that we do. And I guess you guys as well is thought through is evidence based is research base. There is lots of evidence that says owning global REITs is a diversify it does show some noncom will indicate heart shaking his head. You know, it's a fact I can share the data with you. So it does show, particularly when you had real because of global market tension 2007 2009 global REITs actually performed reasonably well the held up pretty well over time, if you have funds, which own you know, data centers shopping center, you know, whatever it is sort of thing, they're definitely shown to have more resilience during times of global crisis. And actually, there is data to show that they do provide a small uplift to your expected returns versus completely 100% equities. So as a as a growth engine, having maybe a 10% allocation to global REITs has proven to be both helpful in terms of dampening volatility during extreme periods of extreme market tension, and giving a small uplift to the investment returns as a fact. So we do have an allocation. There actually are a limited number of index funds. It's another area by the way, we're sort of global active REIT funds, every single one of them underperforms the market so buying active refunds is pretty disastrous. But you can buy index funds has plenty of REIT global reach indices and you can buy funds, very low cost there's not a load of them. That's the thing. There's not like there are with equity funds. There's hundreds of them. There is a handful. How
Carl Widger:does that work? Alan, how do you have a passive refund? I
Andy Hart:think what you used to be invested in the Blackboard one I just thought we're just over complicating, just confusing. So
Alan Smith:you just buy fun? Well, it's same as equity fund you buy fund which tracks the whatever the global real estate investment trust index is and there are several of them but you buy them you Blackrock is the one we use. There are, there are others. They are they do make you somewhat skewed to us real estate, and funnily enough, Japan actually is big. So you've got more, I mean, UK property is tiny, like it is with equities in terms of the global reach market. But the actual, the value of global real estate is just vast. It's just, I believe it, there's not as much as equities, it's, it's as close to it if not more, it is a huge asset class. Lots of data suggests research suggests that as I say, it does add a small uplift. And it does dampen volatility during periods of market stress. So we have I think, broadly now in our growth portfolios, I think 10% allocated to global reach. So it can add value, you know, does it are you better off just simplifying? Maybe, maybe you are, but our view is you can do and of course, that's very, very different to somebody who's got you know, about I owe my property, my own home or something, you know, UK, domestic property is entirely different asset class, to global commercial real estate.
Andy Hart:Can you share a little bit about your experience with dealing with clients that are either property mad or not for the somewhat younger listeners?
Alan Smith:Again, I think if they are property mad, they're unlikely to really to want to engage with us. And I've met plenty people over the years that are exactly that. And they just say, Well, why I'd invest in you guys, I'm always I would outperform your equity portfolio. So you tend not to engage? Got certainly got clients. And as you know, a lot of roads lead back to meet the prospective client where they are. Sometimes we'll meet people and say, Look, I do like property, I've got five by two, let's or whatever it might be. I'm never I'm never gonna say more that case, you can't become a client of ours. I'll say, interesting. Okay, that's fine. Happy to work with you happy to talk to you about that. What we're not going to necessarily do I don't think we've ever done is take on a client that's only got those sort of assets. I think over time, like a lot of things you begin to you can't you have good conversations you educate you look at things and you begin to unravel this love affair for property. And I think one of the biggest things really is a particularly we speak to clients as they get older. As they go into retirement. And they've got this view, there is a sort of a, there is a view out there. There's lots of media and companies selling this stuff about creating a passive income stream on property as a passive income stream as we know it is the least passive income stream you could ever have. And I talk about this, these various factors of why do you invest in the first place, and particularly as you get older, I just call it the hassle factor. Again, like you guys have mentioned, I'm a buy to let landlord as well. I mean, one of my tenants is my mother in law, which causes a whole set of other complexities and challenges. But there is no there is no doubt there is a hassle factor. And I say to those clients who own properties, so it depends how active you want to be involved because and they say, well, I'll pay an agent and we'll finally get another 10% of your yield or your income going out the door. And if you net net net that all down. Plus, you may well be able to outsource a staff to get if somebody if there's a burst pipe in the middle of the night you might be able to outsource that. But you've got it takes up mental headspace you're thinking about it, you get emails about it, you get updates and what have you. And particularly as you get if you're young, and you've got the energy, you want to do it. And some people really are passionate about it.
Nick Lincoln:Some people like that though, I think some people they like, and it
Alan Smith:becomes a part time job for you if you want to do that fine. But I say to this club, gently going into retirement, you want to be you know, often your travels, you know, playing your tennis, your golf, or on your cruise, or whatever it is that you want to do, the last thing you need is to get a phone call about this stuff. So the hassle factors to start, and that'd be fine. If you're getting like double the returns or something else, you might be able to be prepared to pay for it. But the data says you're actually getting particularly on bricks and mortar domestic property, you're getting a lower return than a comparative sort of global equity type portfolio. So yeah, not a fan, I believe it does have a place in but in the sort of real estate investment trust do have a place in diversified portfolios, low cost index based, but beyond that, no, not a fan. Looking forward to the view from Limerick.
Nick Lincoln:Well, let's go over to call us because we in the UK, well, globally, we suffered in the credit crunch didn't all of us did. But Ireland especially didn't it,
Carl Widger:Tiger. Yeah. So look, I've kind of a couple of points to make on this. And maybe a couple of counter points to what kind of parts have been said already. But I will I will then finish about how we deal with clients, because obviously, the Irish love their property. So to be madness for us to be turning everyone away. If you if you love property, we wouldn't have any clients. Right. So I'll finish on that point. First thing to say is, it doesn't automatically follow the Irish experience, my personal experience, that rising rents equals rising capital values and over 1820 year period, that you know, you will have capital appreciation, I can prove that because I have a an apartment in my pension fund that I bought in 2006. And only this year, has the capital value gone ahead of where it was at in 2006. Okay, so that's, yeah, correct. The rent has gone, you know, maybe 50%, over that period of time, but it's modest enough, right. So. So there's one good example of the, you know, the the the amateur landlord, who all I displace, I know that it will be value and, you know, right, that tends to backfire spectacularly aren't enough, it tends to it can and I can prove that, I also have that that apartment is in my pension fund. So all of the craft going on about you know, you know, the liquidity and the charges and how you have to now have a professional manager taking though I think it's 8%, or whatever. So it's just, I can honestly, just tell people my story, if they come in and say I want to buy an apartment in my venture for New Zealand, you can, we're not the place for you to do that, if that's all you want to do. But here's my story. So that's the first thing to say. The second thing to say then is on the rates, Allen, like you're kind of pointing out that on the one hand on the downside, you get protected, and on the upside, and it's going to give you more so like I think perhaps there's some middle ground in there.
Andy Hart:It'll be out of him and a couple of years down the road. But
Alan Smith:anything that we do is facts and evidence based and be I mean, there's no there's no guarantee that that will repeat in the future. But certainly during 2007 Nine global crisis, they did provide a dampener to the extreme down swings of traditional equities. And yes, there is data to show that something like a 10% allocation can historically has given you a small kicker to the outperformance again, it's just I'm not making this up. But you know, we take this stuff very, very seriously. No, I
Carl Widger:know that I know that I was I was I was gonna I was gonna just finish my point on my my experience of REITs is on the Irish REITs. Right. So and that, that that dream is definitely boasting apart at the moment, right? So they were kind of a lot of those were put together at post financial crash, right. So it was a it was a new way of investing and there wasn't gearing and blah, blah, blah. So, but those funds tended to act like the stock market, as opposed to the property market. Now, those funds are struggling now because office rents and prices, whatever, but I will admit that my experience of REITs that I've looked at is the Irish
Alan Smith:Yeah, we're talking something very specific. I'm open to global commercial property being you know, you would own it. They're listed company, obviously, they're real estate companies, you know, some New York real estate companies. I'm talking about real estate at the owns, yeah, billions of dollars worth of these companies. So it's quite different to I guess, to an Irish local REIT, which would be which was effectively actively managed, I think, by the sounds of it anyway.
Carl Widger:100 100% But look, this Derrick kind of, that's my experience and kind of my thoughts on it. But so how do we deal with? So after all this is this is a show for financial advisors. So how do we deal with every single client who walks in and says, Oh, I've got an order property right? And so the first thing to say is if we've got an I have had those people out and who owe the property will will always be global equities. And your funds can can't possibly beat me. I was like, Well, sure, the very best to look and shake hands and move on, right? Because there is absolutely no point in talking those people around. But they're thin underground now. Right. So that was the great thing about the financial crisis in Ireland that people realize the really successful property developers. And a lot of them were clients of mine, right. So I knew them really well. And they were really good at what they did. And they just got caught, because they just went into one too many of the next deals and leveraging gearing and all of that kind of stuff, right? So even those guys now have their max out their pension funds. And it tends to be in global equities, right, or something like that. So I think, as a nation, we did learn our lesson, we're still madly in love with property, though. So I think, you know, if you got a client in who's willing to maybe fund their pension and do it your way, but have all the other stuff, right? Your software, your financial planning software is where it's all about, right? where it's all at. And you can bring the client on a journey over a period of time. And this is, this is going back to the Alan has said it twice, I think today meeting the client where they're at, and frankly, being commercial about it, right. So to say, Well, yeah, it we it would be commercially viable for us to take on a client who's going to max out their pension fund, 2 million quid and you go through your your cash flow modeling, and then you hit the assets. And you go through the assets button, and you go on, here's your liquid assets, that's your pension and your little bit of cash and your investments. And here's your illiquid, here's the property. And by the way, Mr. or Mrs. Client, you know, you're you're the liquidity is going to strike when you're heading towards nursing home fees are maybe you want to start passing money on to the kids and all that kind of stuff. And you can sell a window out of the house. Right? So, you know, this is the, this is the journey, you you're trying to bring the client on to say, No, it's the best advice for the client, let's start with us. This is the best advice for the client to diversify their property portfolio over time to make sure number one, they don't run out of money. Because you can have a property, it's illiquid. So you can't sell the window out of the house. But also, maybe you haven't got the property rented out at a particular point in time. So your rents have dried up as well, or whatever. So you bring them on the journey. And you try and make that mix of colors. I always say to everyone who matters, get the mix of colors, right? Okay, because that has those quarters have to be diversified. That means you have a piece of everything. And it's perfectly fine. And it's gonna happen in Ireland that you'll have a lot in your or you'll have a significant portion, the liquid part, but bring the clients on the journey because they're not stupid, they're gonna realize, yeah, this is actually this makes total logical sense. So that's, that makes
Alan Smith:a lot of sense. And as a war, I'm seeing more of the last few years as you take client on. And you're right, the property is part of the family balance sheet, right, the own it's part of their assets and all the issues around liquidity and income generation and tax efficiency and all that. A lot of people I've spoken to, they do want to divest, but they don't want to sell it all tomorrow, this huge tax issues. And it's just loaded up this tenant said, Yeah, but you work together with them over a period of time. I like the term, but you just work it out. You say let's over the next 10 years, let's work out you've got six properties, let's just work out let's build the strategy. This is what a lot of the real value that we deliver is project management strategy. Where are we say? Where would you like to be 10 years from now? And often is said, You know what, what I'm what I am fully retired or when I'm doing something else. And you don't want to have any of them. Because I just want a simple life. But I can't do it. I can't do it tomorrow. So Fine. We'll build the model, we'll build a plan, and every year or so depends on prevailing market conditions and the plans will change. But you got to strategies
Carl Widger:and tax strategies as well. Does that strategies as well? And so you can you can manage your tax bills along the way. So like I do think genuine, you can have, you know, you can add significant value, and the clients will see it. Now, in my experience. I don't know if this is your experience Island, right? That it might take two or three years to build up the trust so that the client starts to come on the journey with you. That's fine. We're not
Alan Smith:here to take you come to that you're not and we're not as being completely anti property. It's good thing Tell me your own story. Like we can all tell our own personal background. We've all shared some stuff, too. Don't you tell your own joy to say that I'm, I'm broadly neutral about it, you know, so it's an asset class, but I think there are better ways. But if you come across and say, the property is rubbish equities are the only place to be, then immediately you're coming across as a salesman, because you've got your toolkit, which has got equities in it, and you haven't got you don't sell bricks and mortar property. And it sounds a bit confrontational, but to say, No, it's fine. Of course, it's got a place and you know, how do you feel about it? Do you want to keep it and hold it forever? Have you got a strategy? How are you going to generate your income? How, what's your tax strategy for this? You want to still be looking after this when you're 75 years old, etc, etc, and have those? I agree, and like Nick's point earlier on, there are some that you just got to say, look, it's probably not going to work for us. We've got a slightly different philosophy towards it. We're not anti property, but we've got a different strategy and a different approach. But most people you can have a you know, healthy conversation and just, it's all about getting people from where they are to where they want to be in the future. In the simplest, most tax efficient, most reliable, low cost efficient way, Nick,
Nick Lincoln:okay. I'm conscious of time where 78 minutes in and Andy, how do you think arose? Fellas? I'm just
Andy Hart:gonna say again, bringing this back to listeners and younger listeners. I'd also say sorry, excuse me. Three
Nick Lincoln:for the frog in your throat
Andy Hart:I do say to exactly. Young man is in
Unknown:his throat. What's in his throat?
Andy Hart:Okay, crikey. Crikey. Okay, so Yeah, bring it back to the listeners I do say to new ish financial advisors coming into this business that didn't come through the same route as me as in mortgages and property. I said look, you do want to get your head around because it is an integral part of a lot of people's financial situations. So just saying oh, I've never researched mortgages I don't know anything about them I just focus on the investments and pensions I think there's a hole in your arsenal as a full rounded real financial planner a hole in your arsenal Okay. A gap a Qing particularly Rama
Unknown:please just quit.
Andy Hart:So, I think it is important to understand how the mortgage business and the property game work. So I do tell advisors, younger advisors coming through to focus on it a little bit. Because it does crop up you know that a client will say, Well, I've got this property and the mortgage is up for renewal at certain point. And then again, they'll say well, what are my options they sometimes they don't even know that they can remove it with the current lender, you know, some really basic stuff that you you know, I've literally sat at the client said no, you just remove the current lender. They said I didn't know I could do that. And I've saved them 600 grand a month for the next five years. You know, there's like massive immediate wins around around mortgages and property just understanding roughly how it works because clients have often you know, not got much idea at all. So my word of warning to younger advisors don't totally neglect and discard mortgages and property if you want to be a full rounded financial planner that yeah, and the last and last point
Alan Smith:before we move on is aren't we? I think I've talked about this in the past about having you kind of your advisors BlackBook every financial planner needs to have at least one really good mortgage specialist one if you don't do it in house salutely Yeah, we've got one we got a couple and yeah, because holiday home comes to property buying complex things and you want to buy it through a company so nothing's I don't know, it's too complicated, but I know a team of people who are really really good at that and you can add value by referring them on
Nick Lincoln:okay, we've given that subject a damn good thrashing hopefully we won't revisit property and texture for quite a while but hope TRAPPIST you got some nuggets from that especially the younger advisors for the reasons that ultra laid out. Okay, now on my ultra swish nest camera thingy, I can see that Posty is traipsing up the drive to Lincoln Lodge and she's dragging the bulging sack of TRAPPIST questions tracklists if you want us to answer a question submit via the link in the pinned tweet or in the link in the so called shownotes. We will get to your to your questions. We're running a bit behind as ever. Let's see who we've got today right Patrick Dugan brackets South Africa four times Rugby World Cup champions yes okay Patrick your Springbok? Social handle Yes, you say Patrick Dugan is your social handle? That's just your name Patrick so you might have won World Cups but you're struggling with just basic communication skills so that's minus five and they That's right. That's
Andy Hart:another battery in his armor. Shinken
Nick Lincoln:Exactly. Patrick my good for if you're coming home in his arsenal probably quite big in South Africa. Don't hit me. Hit somebody else. Okay. Firstly, thank you for an excellent podcast, then and apologies if you've covered the topic in a previous episode, I'd like to hear the trap teams thoughts, experiences with regard to structured notes which are becoming increasingly popular given their capital protection and return profiles. Also, any thoughts on other alternative investments such as private debt, thank you. Thank you. Whoosh. I don't think we've covered this directly. But we've given our opinions on these kinds of things. Haven't we didn't want
Andy Hart:to avoid these my clients pay me to avoid these haidilao. I wouldn't go near them with a bargepole, that Roger voice over and done
Alan Smith:structured notes, private alternatives. Some, the biggest question is, why? Why why do you why do you allocate? Why do you invest? I mean, he has mentioned it about becoming increasingly popular due to capital protection. Again, all these words are dangerous, and just mixed messages. You know, all we talk about this week comes up from time to time, and it will come up forever, probably because there's always a new thing, isn't it? There's no as a new investments, a new fad, or a new idea. All roads lead back to having a very thought through investment philosophy. We believe in this because and you need to really, really spend time and break it down. Again, data evidence based research base, What is your reason for using any of these alternative products? What role do they perform, that either equities or bonds or cash can't do over time. And if you are a real financial planner, this sort of capital protection stuff is irrelevant. It's a nonsense, you don't need capital protection, whatever that means. You've got capital protection and form of inflation proof growth through using equities, and you've got short term liquidity through cash or short dated bonds. So I would just say to anyone who's considering these things is just go back to your fundamental ask yourself some very, very basic questions as to why and what role they will play in a portfolio that existing mainstream asset classes can't provide.
Nick Lincoln:Perfect, great culture opinion.
Carl Widger:Yeah, they do. They are illiquid. They pay very high commissions to the ifs. They are complex instruments designed by salesmen. They are absolutely rubbish. Nobody should go near them. And I would say any IFA considering distributing these to his clients needs to look themselves in the mirror and ask him or herself, why actually, are we doing it? Is my client? Is this the best advice for my client? Is my client going to benefit from having this instrument in their portfolio? The answer is no. What do
Alan Smith:you really think? point would you really think
Andy Hart:just the point, Patrick's a smart dude, I do know him. So I know he's probably referring to a certain type of structure note so I need to maybe have a conversation when we get some further information about it, but he's a he's a smart cookie. Back to you boss. Okay,
Nick Lincoln:I'll just close on this I just looking at the 10 year figures for our preferred global equity solution which has returned 10% A year compound over the last decade despite the fact that's what that's the Wuhan LED. Lovely bedwetting is the seventh of October last year it's crippling inflation double digit inflation for the first time in 40 years. And it's still returned 10% per annum over 10 years that is life changing wealth creating the elixir of financial planning Why would you go anywhere else? Why would you pay some of that away to some third party through a dreadful concocted structured notes or what have you my I think they're old school and you know, I think the advice these in the UK I can't speak for UK but the UK tends to be advisors of a certain generation who just for whatever reason fell in love with these things 25 years ago and can't fall out of love with them. But they're not and
Andy Hart:they'll they'll they'll keep creating them they'll still
Nick Lincoln:be somebody but they're yeah if you if you imbibe the Nick Murray kind of ethos about the you know, the declines are temporary and the advance is permanent then why are you protecting in some of this? That's temporary you're giving up so much the permanent advance to mask against the temporary declines in sanity on stilts, Patrick but each to their own each to their own right, come on. Let's do it. At four minutes. Shoot me let's go on to what many people call. Oh, and Don will do your question. Next Don Spalding friend of the show, good guy, or think Jonathan is actually the better advisor. better human being but they're both both. Okay. What are your question next time now? Let's move on to Coca Cola Okay, and I'm kicking off here. I'm going to just introduce an AI podcast from another IFA I haven't heard much about the guy actually. But I looked into his website and his podcasts. It's quite sound Pete Bridlington. And if Andy, you've heard him, it's on your dailies. You see, it's quite switched on guy. He's also got this you can advise Yeah, this year, this brand does look, he's doing this tech thing as well another IFA building the sort of back office system. And now he's got a podcast called advice, amplified podcasts were secure enough in our skins on track that we recommend the podcasts of other advisors. And his most recent episode is with a guy called TASH Singh, who's an property evangelist and he loves it and is raving on about it and I was listening to it and I was screaming in my gut. This is what he's talking about, you know, yeah, he had to get up and go to the Knights Unblocker you Ben and all this kind of stuff, but you know, I was just going, but if you want a perspective on why people go into property, and why people will never be switched off from the love from it, I would listen to that podcast Lincoln so called Gen X very quickly. friend of the show John Doyle who's on Twitter as Juniper underscore, John good guy. Good firm. I've just switched my password management software from last pass to keep a security on his recommendation. Last Pass has had a few security breaches recently, which gives me the app jobs and my first experiences of keeper security as a past all in one password manager. Look it up Alan, very positive, right on to the next culture corner.
Andy Hart:Right diary of the CEO, Jimmy cars back, Jimmy Carr is a turning into modern day philosopher. Got some really, really insightful stuff to share. So do check it out. Hi, YouTube. He's also got a show out on Netflix. I can't remember his call. But I'll recommend that once I've watched it. I've listened to this podcast. Thank you very much over and out.
Nick Lincoln:Okay, good stuff. And I listened to Jimmy Carr on the trigonometry podcast. So he's obviously touting his Netflix special. He's an interesting guy. I mean, I'm not it's humorous to leave it but he's, he's a he's a rounded individual. He does think about things. It doesn't just take the wrote the script, so dominates the entertainment industry. Okay, next point.
Carl Widger:David McWilliams podcasts. Get in on row two in a row. Yeah, David McWilliams podcasts are really actually good. And this particular one, he's interviewing Michael Lewis, who's talking about his book, I think the SPF book that you recommended before Andy going in. Yeah, but it's just really interesting to kind of wrap up with a kind of synopsis at the end I just thought was really interesting. good insights. And who's using David he's kind of an Irish of well known Irish economist he used to work and trader and that kind of stuff. But he's,
Andy Hart:he's a successful post. Alan, you would know much about him. He's one
Nick Lincoln:of the 85 Yeah. For a GA.
Carl Widger:Anyway, that's an in joke. We'll move swiftly along. Yeah. Listen to it. It's good.
Nick Lincoln:Okay.
Alan Smith:I'd like to mention someone that we have mentioned on this podcast in the past. He is a close personal friend of mine. I'm, I've got I'm having dinner with them tonight. But it
Carl Widger:is so so he pays for the dinner, you'll be able to say I will indeed
Andy Hart:today. We said no. Coincidence, you're breaking the rules you're
Alan Smith:breaking. I'm sure I'll be paying a lot of trap. You're the only one that I've ever let pay for me, Andrew. Oh, yeah, rye bread, bread. Bread is a consultant to financial planning. He is for those who know him. He's He's well known. But there's a lot of people who I don't think who do
Andy Hart:classically but isn't laughing
Alan Smith:myself. But Brett Brett Davidson, he puts out his blog is regular sort of updates and newsletters and every I must say every time I read it, I just kind of nod my head. It's almost like he's, you know, he understands the zeitgeist. He understands what financial planners are thinking about the issues, their challenges, their opportunities, and if you haven't subscribed, it's called F p f of Freddie, Peter Peter, F it cycle advance. Brett Davidson subscribe to his newsletter puts out a lot of content and honestly, I think it's really really good. So I want to give a shout out to Brett
Andy Hart:he also does a really good course I know a lot of people have gone on uncover your business that you they take in sort of a
Alan Smith:three year coaching program and it has transformed a lot of businesses recur, who you know, looking to improve get better. So now Brett is definitely one of the good guys. And he's what they call straight talking Ozzy, isn't he does if
Carl Widger:you're worried about EF f but the best thing
Alan Smith:if you'd like if you'd like it, yeah, you know, said as it is then listen to what he's got to say. Definitely. He's
Andy Hart:no BS, which is great. Yeah. Yeah, he's
Nick Lincoln:very, very direct. I do like to like Brett. Okay, fantastic. Look at that. It's almost exactly 90 minutes of our lives that will never ever get back. That's a wrap for this episode. Dear Trappist. Thank you for your precious time and your input because it's your show as much as ours. Please do rate us and leave a six out of five stars on iTunes. Remember to subscribe that way the podcast lands freshly baked on your phone every other Thursday. And do the same with our YouTube channel. A surprising number of people like to look at us gormless to bronies. And we're around 800 subscribers now on there, which is really, really good. But until next time, folks take care out there and EOS and we look forward to seeing so many of you live at trap live on May the ninth it's coming up and then you can meet the lovely Penelope it's just leave one more time with this blooper which I never play again if you've got kids in the car through the window now.
Unknown:Hello, dear Trappist. This details including a link to the purchase tickets
Alan Smith:goodbye traffic bye now