The launch of Candid Financial Advice

I am absolutely delighted to announce the launch of Candid Financial Advice - an independent adviser intent on bringing down the cost of advice..

When I first launched Candid Money around four years ago my aim was very simple – to provide impartial guidance that helps savers and investors make better decisions with their money. And, over one million visitors later, I hope this site has gone some way towards achieving that.

However, one of the things I’ve learned along the way is that not everyone wants to go it alone. Many people either want, or need, the added comfort of a professional financial adviser to help them make the right choices and always act in their best interests.

Since such financial advisers seem to be thin on the ground, especially at a reasonable price, it seemed a logical next step for me to fill this gap. So I’ve been working flat out over the last six months to do just that - the fruit of my labours being Candid Financial Advice (www.candidfinancialadvice.com).

As you would expect, Candid Financial Advice has exactly the same values and ethos as Candid Money. But instead of guidance, it will offer first class advice and ongoing service – at a fraction of the usual cost charged by most other adviser firms.

Is Candid Financial Advice independent?

Yes. It is an independent adviser able to select the most appropriate products from the whole of the market. The business is also independently owned and run by myself and long time friend Ian Millward.

What areas can you advise on?

Candid Financial Advice can help with savings, investments, pensions, tax planning and protection. Common scenarios include reviewing existing pensions and investments to ensure they’re appropriate and cost effective, as well as investing new monies and optimising tax efficiency.

How can I be sure you’re impartial?

Good question. While many advisers proclaim to be independent and impartial, you’ll never usually know for sure. It’s not uncommon for advisers and financial providers to have quite cosy relationships that might influence advice.

Since total impartiality is fundamental to the Candid brand, Candid Financial Advice will never accept any hospitality, inducements or hidden fees from financial providers – the only source of revenue will be the fees paid by clients. As far as I know, no other financial adviser has to date made this commitment.

How much will advice cost?

Candid Financial Advice has a fully inclusive sliding fee for initial advice and service - capped at an absolute maximum of 1%. The exact level will obviously depend on the amount of work involved, but it normally decreases as the sum invested increases. By contrast many advisers routinely charge up to 3% or more and some bolt on extra ‘implementation fees’, so I believe Candid Financial Advice will prove significantly cheaper than the vast majority of other financial advisers.

And what about the investments, pensions and other products you recommend?

I’ve long believed that paying too much for investments, pensions and/or advice can greatly reduce the likelihood of success. Candid Financial Advice is therefore, unsurprisingly, brutal about keeping overall costs to a minimum, preferring low cost options wherever it makes sense to use them.

Does cutting costs mean cutting corners?

No, far from it. The truth is many advisers are content to pick up a handful of very profitable clients each month. My approach is to price high quality advice and service as competitively as possible to attract a large number of clients. We will then work harder, smarter and more efficiently to ensure the business makes a fair profit on much tighter margins. Since the business model relies on retaining clients long term and growing their investments, we have every incentive to do a great job.

What will happen to Candid Money?

For those of you who prefer to look after your own finances, please rest assured I remain fully committed to running both this site and Compare Fund Platforms. Above all else, I enjoy it.

So thank you for all the positive feedback and reader contributions that Candid Money has received to date. Please check out the new website www.candidfinancialadvice.com and don’t hesitate to get in touch if you think we can help you or someone you know.

Please note that when clicking the above links you will leave Candid Money, a financial guidance site not regulated by the Financial Conduct Authority, and go to Candid Financial Advice, a financial adviser that is authorised and regulated by the Financial Conduct Authority.

Read this article at http://www.candidmoney.com/articles/275/the-launch-of-candid-financial-advice

Royal Mail flotation summary

The financial story grabbing the headlines at the moment is the Royal Mail flotation, so let’s take a look. Might the shares be worth buying? And how best to do so? .

I should start by apologising for my lack of new articles recently - due to working flat out on a new business over the last few months. Launch is imminent, more news shortly...

Now, onto the Royal Mail share flotation.

What’s it all about?

The Government needs cash and selling off public assets like the Royal Mail offers a fairly straightforward way of raising some. It will be selling between 40.1% and 52.2% of its stake while giving a further 10% stake to Royal Mail staff. The issue price will be between £2.60 and £3.30 per share and if both the size and price of issue end up being at the midpoints the Government will raise around £1.33 billion after costs.

Will Royal Mail shares be a good bet for investors?

On the face of it yes, at least in the short term.

A simple measure used to assess whether a company’s share price seems good value is a price to earnings ratio, or P/E. Royal Mail’s initial P/E will be between 6.5 and 8.3 depending on launch price. This makes the shares appear quite cheap given a P/E of around 15 for the FTSE All Share as a whole. And UK Mail Group, a competitor of some sorts, has a P/E of around 24% at the time of writing.

And the Royal Mail has also pledged to pay a dividend of £133 million in July 2014 (equivalent to a full year dividend of £200 million), which would equate to an income yield of between 6.1% and 7.7% - again very attractive versus peers. Based on current earnings this appears to be a sustainable rate (it represents roughly half earnings).

But, of course, life is never that simple. There are risks. In the very short term expect lots of staff unrest and industrial action, as in private hands Royal Mail will look to aggressively cut costs. It will also find maintaining the Universal Service Obligation (in simple terms, delivering a letters six days a week to every UK address with uniform prices) a drag, especially in the face of falling letter volumes. Higher parcel volumes (thanks to Internet shoppers) could compensate, although Royal Mail faces stiff competition in this sector.

On balance, the shorter term outlook looks quite favourable thanks to a seemingly low issue price range and very attractive anticipated dividends. But moving forward a few years things could start to get choppier – and some of us will likely get the hump as the Universal Service Obligation is inevitably watered down.

How much can I invest?

Since the share price will not be known until after the application deadline, investment amounts are fixed as follows: £750, £1,000, £1,500, £2,000, £2,500, £3,000, £4,000, £5,000, £6,000, £7,000, £8,000, £9,000, £10,000, £15,000, £20,000, £25,000, £30,000, £35,000, £40,000, £45,000, £50,000 and £10,000 increments thereafter.

If oversubscribed, he the issue will be scaled back, so you may receive fewer shares (and of course invest less) than expected.

The Timescale

If you want to buy shares you’ll need to apply by 8 October. The share price and size of issue will be announced on 11 October and formal trading on the London Stock Exchange will commence 15 October.

How to buy

You can buy shares either via the Government’s own service or a third party stockbroker. Either way, there are no purchase costs nor stamp duty. However, the route you choose could have potentially big cost implications while you hold the shares and/or when you sell.

The Government

This service is provided by Equiniti and shares will be held in its nominee account unless you opt for a certificate. There is no option to hold within an ISA or pension. While there are no charges for holding the shares, the sting in the tail is potentially high charges when you come to sell when using the nominee account – whichever of the 4 options you use:

1. Sell online: 1% with a minimum £17.50.


2. Sell by phone helpline: 1% with a minimum £25.00.


3. Sell by phone automated service: 0.75% with a minimum £7.50.


4. Sell by post: 0.75% with a minimum £7.50.

However, even if you do buy via this route and face a potentially high charge for selling, all is not lost. You can transfer to another broker’s nominee account for £10, although this involves some paperwork, a wait of up to 2 weeks and potential fees charged the new broker.

If you opt for a share certificate you can sell through whoever you choose, but most brokers tend to charges upwards of £40-50 for this.

Other brokers

There is a long list of other brokers through whom you can buy the shares instead (see here). You won’t pay a fee to buy, but any usual account fees and dealing fees when selling will likely apply. In terms of pure cost, the one that stands out is x-o.co.uk, since there are no account fees and a dealing fee of just £5.95 to sell (at time of writing).

Can I buy within an ISA or SIPP?

Yes, provided you have an ISA or SIPP account with a participating stockbroker containing enough cash to fund the purchase by the 8 October deadline.

Read this article at http://www.candidmoney.com/articles/274/royal-mail-flotation-summary

Should I swap savings account for high yielding shares?

Question
I am depressed by the low saving rates and seeing my savings capital eroded by inflation.

I have received numerous mailings from Newsletters advising investment in High Yielding Shares. They claim if you purchase the shares they recommend each month then you have a better return and as you hold these shares for 'life' - you do not have to worry about how the share prices of the portfolio perform. You just enjoy the income. There are also suggestions that high yield shares tend to enjoy increasing share price.

Is this a good place to move my savings to as a retired man of 74 years of age. Isn't there a risk of capital loss?

Are there any other drawbacks of a High Yield share Portfolio?Answer
High yielding shares are a very different beast to a savings account and I would avoid unless you are comfortable potentially loosing capital.

The reason most of us have savings accounts is to hold 'rainy day' money in a safe place. So even if markets crash, reducing the value of investments you might hold, you still have a safety net to fall back on.

If your savings are well in excess of the amount of 'safe' money you think you'll need, then by all means consider investing some of the surplus provided you are comfortable with the risks. Otherwise, I would stick with savings accounts despite the depressing interest rates currently on offer.

It is true that the dividends paid by some companies are currently more attractive than savings rates, especially since dividends are deemed to be paid net of basic rate tax. And, since dividends generally tend to rise over time, such shares are a potentially good source of long term income.

However, share prices can fluctuate significantly, with even large companies sometimes seeing their share price drop by 20% or more during turbulent times. If you can afford to sit tight for several years in the hope of recovery you might deem the risk worth taking, but if not then I would be inclined to play safe.

And if you do want to invest then perhaps consider funds investing in higher yielding stocks rather than buying stocks directly. You’ll have to pay fund manager charges, but your investment should be spread far wider and the manager will (in theory at least) be keeping a close eye on things.

Read this Q and A at http://www.candidmoney.com/askjustin/921/should-i-swap-savings-account-for-high-yielding-shares

Can I move my Hargreaves Lansdown SIPP?

Question
I was quite suprised when I read the drawndown article in the Sunday Times today quoting you.

I have my SIPP with Hargreaves Lansdown Vantage and l always believed they were cheap. As a result I have a couple of questions...

The first is I am thinking of moving £120,000 into drawdown. Can I move that amount from HL and put it in drawdown with a new provider or do I need to leave it with HL?

Second, assuming I can move it I want to take the £30,000 tax fee lump sum but leave the rest of it. What would you recommend?Answer
To answer your first question, yes you can move your pension from Hargreaves Lansdown to another pension provider. You can do so either before entering income drawdown or after entering income drawdown with Hargreaves Lansdown (the former is probably more straightforward).

And yes, you can take £30,000 (i.e. 25% of the fund) as a tax-free cash lump sum, leaving the balance invested from which to draw an income.

Hargreaves Lansdown (HL) tends to be more expensive than some rivals when holding funds because it effectively pockets an annual platform fee out the charges you pay to fund managers. On average HL keeps about 0.6% of the commission it receives from fund providers after paying back an average 0.17% to customers as a ‘loyalty bonus’. So customers with commission paying funds are, on average, effectively paying an annual 0.6% fee for HL's services, which is high versus many competitors. The figures I supplied the Sunday Times reflected this.

HL will have to change its charging by April 2014, as will other platforms and discount brokers who haven't already done so, in line with new rules banning platforms/discount brokers from receiving payment for their services via fund managers. This will result in having to offer lower cost 'clean' versions of funds, which have no commission or platform fees built into charges, coupled with an explicit fee paid directly by customers for the service provided.

You may wish to wait until HL reveals its new charging before making a decision. It will be interesting to see what happens as HL would have to cut its profit margin somewhat and/or negotiate cheaper fund versions than the competition to look competitive on price overall.

Meanwhile, you might want to use my other site www.comparefundplatforms.com to get a feel for how the competition stacks up in terms of fund choice and cost.

Read this Q and A at http://www.candidmoney.com/askjustin/920/can-i-move-my-hargreaves-lansdown-sipp

Can I take AVC before company pension?

Question
I paid into an AA pension for 12 years plus AVCs to Equitable Life. Can I take the AVC to buy an annuity before drawing my AA Company Pension?. My year of birth is D.O.B 1955.Answer
Yes, in theory it's possible to take benefits from an Additional Voluntary Contribution (AVC) pension scheme before or after you take benefits from your occupational pension, provided you are age 55 or over (which you obviously are).

However, it all depends on whether your AA pension scheme rules allow this (just because HMRC rules do, it doesn't automatically mean your pension scheme does), so you'll need to check with the AA pension scheme administrator.

If the AA pension scheme does allow you to take the AVC before your AA pension then you have the option of taking 25% of the AVC fund as a tax free lump sum with the balance used to buy an annuity. It's the usual retirement gamble of receiving less income now but for longer or more in future for a shorter overall period of time. There's no right or wrong as such, it depends on how long you think you'll live and prevailing annuity rates. And, of course, how keen you are to get some extra income now.

Read this Q and A at http://www.candidmoney.com/askjustin/917/can-i-take-avc-before-company-pension

Will mortgage offers hurt my credit rating?

Question
My daughter and her spouse are looking to get a mortgage and recently had a first interview with Lloyds Bank. All went well and they were cleared to borrow more then they required, however they stated they will be seeking a number of offers and options from various lenders and the bank stated this could have a detrimental effect upon their credit rating which is very good at the moment.

Is this just a ploy or does it have any truth?Answer
Although various mis-selling scandals suggest banks have sometimes told half truths to win business, in this instance Lloyds TSB is very likely telling the truth.

When lenders look at your credit report (via an agency such as Experian), one of the things they might consider is how many applications you've made for credit. For example, they might deem someone who's made a lot of credit applications in a short space of time as high risk – the simple interpretation being you are trying to borrow a lot of money.

The key is whether seeking a mortgage offer is deemed to be an application and hence end up appearing as such on your credit report, or just deemed to be a quotation which is likely to leave your credit report unscathed.

In simple terms, asking a lender for the mortgage rate you're likely to pay should be classed as a quotation, hence safe. But asking a lender whether they'll lend you a specific amount of money will likely leave its mark on your credit report, even if it’s only a decision in principle.

Read this Q and A at http://www.candidmoney.com/askjustin/916/will-mortgage-offers-hurt-my-credit-rating

Repay mortgage or buy shares?

Question
My wife and I have a endowment policy maturing in December 2013 and is estimated to pay out £18,000.

We have a mortgage for £25,000 that is on a base rate of 2.5%. This is our only debt.

Is paying the mortgage off the best option or do I add to our 5,200 standard life shares?Answer
There is no right or wrong answer, it depends on whether you want to play safe or take risk.

Paying down your mortgage would be playing it safe and equivalent to a 2.5% annual return at current rates. Choosing to invest the money instead could result in a higher return or loss, depending on how it performs.

It boils down to which you are most comfortable doing.

Another option could be to reduce your mortgage and then set up a monthly investment with the money you save via lower mortgage repayments.

Finally, if you do choose to invest, maybe consider an alternative investment to Standard Life so you don't have all your investment eggs in one basket – assuming you don't already hold other investments. That way, should Standard Life shares dive in price for some reason your won’t be fully exposed.

Read this Q and A at http://www.candidmoney.com/askjustin/915/repay-mortgage-or-buy-shares