Who do they
by Doug Brodie
In this blog:
/1. Metro Bank
/2. Is he who he says he is?
/1. Metro Bank
We’re hoping that time won’t render this blog out of date by the time you read this: Metro Bank is having a hard time of it and has been called to the head master’s office this afternoon. As a reader (or a client) you’ll remember Northern Rock back in 2007, but I’ll bet you struggle to remember after the media had published the pictures of the queues around the block to withdraw money? (It was nationalised, no one lost any money).
It's fairly daft – higher interest rates mean higher revenues (profits) for banks so this is the time all banks should be in fairly rude health, so we’ll see how this pans out. We don’t think anything untoward will happen (memories of ‘There will be no hurricane’ flash through my mind), however the danger is all the knee-jerk reactions that happen when there is a trigger like a retail bank in trouble.
Being a boomer, you’ve seen this all before and it’s quite tedious. You know the market recovers so switch the channel to something more interesting. I’m not suggesting we’re heading for a major correction but if we do, this is what happened in the biggest one year fall the FTSE has seen:
More importantly, our portfolios are designed to deliver their income, month by month, whatever the weather. This is the chart of cumulative income for Lowland, covering the dotcom crash, the 2008 crash, the 2011 European bank scare and the 2020 pandemic – the reason why you can’t see any fall in income when the markets crashed is because there was none. Clients of ours know that the income is NOT correlated to the capital values, and that is because the income is not paid from the share values, it is paid from the reserves that thrusts hold. It is not smoke and mirrors, it is not financial engineering, but it is counter intuitive. As a boomer, you’ll have many more crashes to scare the b’jeezus out of you as a retiree so its probably useful for your anxiety levels to learn this.
If you have not yet read our core research white paper then it is important that you do so: it is all about data, not economic opinion, which means we can accurately measure investment income versus investment capital.
Not only has Lowland paid its dividends every year, it did not cut its dividend over any of the market crashes mentioned earlier. That’s not to say it won’t, however the difference between possibility and probability is detailed research and analysis.
It’s not simple to provide you with a relevant comparison with gold because gold is priced in USD not GBP, so the figures are not comparable. However before the commentator in Investors Chronicle or the Saturday Telegraph spins an article on how ‘gold is it’, this is the simple Lowland back to back with BlackRock’s gold fund since 1995:
/2. Is he who he says he is?
Ok, I’ll confess, this is regarding the school chum who works for St James Place; SJP is a life insurance company, its advisers are self employed and as the excerpt from the FCA says, their work is as agents of SJP and not the clients.
“Independent” is a regulatory category, it’s not just how one feels or recognition that a firm is not owned by another. Where that affects you is that an independent adviser acts as the agent of you, the client, not of any company.
It’s important to understand the difference: where the law and the FCA talks about ‘agency’, we would understand that more clearly as ‘responsibility’, and we think that retail investors of any material wealth are always better served by advisers with legal responsibility directly to them. I think you’d agree.
Doug