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Saturday April 13th, 2024 

News Archive - August 2007

Enduring Power of Attorney


An Enduring Power of Attorney (EPA) is something that you might want to consider when you update your will.

An Enduring Power of Attorney is a legal document that enables someone (the donor) to appoint one or more persons (attorney(s)) to manage their financial affairs and property, either now or in the future.
Obviously, such a document is extremely powerful as it can allow the attorney to act totally on behalf of the donor and without their written consent- for example, signing cheques from their bank account or selling their property.

Because of this, an EPA is often set up to come into force only in the event of the donor becoming mentally or physically incapable of handling their own affairs. In this event, the EPA would then have to be registered with the Public Guardianship Office before it could be used.

EPAs can be set up and then stored in a safe place (often with your will) so that they are ready for your family to use if you become physically or mentally incapable of handling your financial affairs (for example, due to dementia or illness).

A good reason to do this now rather than later is that a revised power of attorney is being introduced on 1 October 2007. The new 'Lasting Power of Attorney' offers increased powers, but it is a more complex form and as a result it is likely to be more expensive to set up. EPAs signed before 1 October 2007 will still be valid.

If you have been planning to review your wills, please contact us and we can advise you on Inheritance Tax as well as recommending a local solicitor with extensive experience in this area who will be able to help.


All Change? (again)


You probably don't know it, but a fight is brewing within the Financial Services industry.

The Financial Services Authority (FSA), who are the body who regulate Financial Services in the UK, have recently issued a consultation paper called the Retail Distribution Review. This includes their suggestions for the future of financial advice. They are proposing some changes because there is general disquiet about the way many advisers are paid.

Most IFAs (Independent Financial Advisers) are paid via commission, which means they only get paid when they sell a new product to a client. The product provider pays the commission to the adviser when the policy is set up. This is also how tied advisers (who can only advise on products provided by a limited range of providers) are usually paid.

There is a general perception that commission skews the sales process and encourages advisers to sell products which generate commission rather than giving the most suitable advice.

The FSA are proposing a completely new structure for financial advisers, with only the most highly qualified advisers being allowed to call themselves "Independent". Furthermore, they are proposing to change the meaning of "Independent" when used in this context to mean "paid by fees rather than commission". This is likely to confuse the public who are used to the conventional meaning of "Independent" - ie not tied to any one company.

To add another layer of confusion, the FSA are looking to change the meaning of "fee-based" - they define this when the charge for the advice given is agreed with the client, rather than being determined by the level of commission available.

At Mulberry Financial, our business model is designed to avoid churning and the other problems of commission-based advisers.

We prefer to set up long-term savings, investments and pensions with an ongoing 'renewal' commission, which is paid to us each year. This covers the cost of our ongoing advice and allows us to review the investments. Because of this, there is no need for us to 'churn' or switch investments around every few years for the sake of extra commission.

We charge a fee for the setting up of a new policy, but this is usually be covered by the commission that we could have been paid. We will then refund any excess commission back into the policy, which benefits the policyholder. Alternatively, our client can pay the fee themselves and all of the commission is rebated to the policy.

So how do we at Mulberry feel about the new plans? Well, they seem to favour the big banks at the expense of small IFA firms, which is not a good thing for competition and consumer choice. However, there should still be room in the market for small specialist firms giving a high quality personal service.

What do you think? I'd love to know. Send me an email.


Keep Calm & Carry On


I have an old wartime poster on my office wall sporting the slogan above, which seems especially appropriate now. Over the last month, global stockmarkets have been extremely volatile and some of the excellent gains experienced over the previous one or two years have been given back. The FTSE 100 currently stands at around 6200, but movements of 100 points plus in one day have been a regular occurrence recently. What this effectively means is that many consumers' investments and pensions could be losing or gaining 10% of their value or more on a weekly basis. If you are approaching retirement within the next few months then this is far from ideal and makes the decision of when to take benefits a difficult one. Nobody can guarantee what will happen next, and if you have other financial commitments then you may be forced to buy an annuity or cash in an investment when its value is much less than it has been recently.

This market volatility highlights the vital importance of two concepts.

Firstly, the use of a range of asset classes with differing levels or risk which reduces the chance of a major fall in the value of your fund. This really is bread and butter advice, but it is amazing how many people have little or no idea exactly what their pension is invested in. We will explain this for you.

Secondly,the idea of moving your fund gradually from stockmarket-linked funds to safer asset classes as you approach retirement. This is called 'lifestyling' and is offered by many pension companies as an automatic process. Alternatively, the process can be managed by an adviser by recommending fund switches within your pension. Often it takes this kind of stock market turmoil to remind people how choppy the financial waters can be. Mulberry Financial can review your pensions, however long you have until retirement, and recommend how best you can maximise your retirement income. We will also monitor your fund's performance on an annual basis and recommend changes where appropriate.

For those who have longer to go until they need to cash in their investments, the situation is not as uncomfortable but it still might cause doubts about using equity-linked investments. In the next news article I will address the issue of volatility for long-term investors. In the meantime, keep calm and carry on!

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The material here is for general information only and is not intended to be relied upon for individual investment decisions. Appropriate independent advice should be obtained before making any such decisions. Mulberry Financial Ltd does not accept any liability for any loss suffered by any user as a result of any such decision.
The information is based on our understanding of current HMRC rules and practices (as at the news article date) which are always subject to change. Taxation and trust advice and Cash ISAs are not regulated by the Financial Conduct Authority. This site is aimed at UK residents only.
Please remember that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. Past performance is not necessarily a guide to the future.

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