Wealth Management Update – November 2015

09 Nov 2015 | Wealth Management Update |

GDP increase slows, but so what?!

The Office for National Statistics’ forecast for GDP for the third quarter of the year noted that growth slowed from 0.7% to 0.5%. But what does this mean, and should you be worried, happy, sanguine or are you just confused?

Every government wants to grow the economy. A growing economy means that government debt falls in proportion to the size of the economy. It also means that the tax received increases, again producing more money for the government to use (or misuse, depending on your view).

The fall from 0.7% to 0.5% is of no great concern, certainly when we look at what is happening around the world. Although no other G7 country has yet released its third-quarter figures, it is unlikely that any will have our level of growth.

Of course, the falls in China’s GDP a couple of months ago caused a fall in stock markets around the world. We should not be concerned too much with this as, while annoying, it was still a temporary effect. The slowing of China’s GDP growth is, in the long term, a good thing. The world simply cannot sustain growth at this previous level; it could, however, sustain growth of 1–2%.

There is only so much ‘stuff’ in the world. With the exception of intangible assets, there is only so much coal, oil, steel, etc. There may be a great deal left, but a 5% increase based upon a population of say seven billion is much greater than a 5% growth based on four billion people.

In a perfect world we believe a level and steady growth of 1–2% in the world GDP is sustainable and would lead to reasonable increases in living standards all round. Therefore, moving closer to this level is generally good news.

The by-product of this is that falls in the growth of GDP will push increases in interest rates further away. If something similar occurs in the USA, we can expect interest rates to stay where they are for at least another six months.

We’re on the up!

As you are all aware, the markets have been moving in what we would call the wrong direction since August. It’s reported that the turmoil, caused predominantly by China, has cost the investment industry up to £7 billion in the All Companies sector alone. We imagine the figure across the entire industry would be staggering.

Of course, our strategy and active investment approach has meant that we were able to limit some of the losses to your portfolio and protect you from some of the market decline.

The good news is that it looks like we are now on the up!

Whilst the recovery is ongoing, it has not reached the peak we saw back in April, meaning that there is further growth to be had in the coming months. With the markets now in a much more stable position, and in view of some of the recent rises to date, I am sure that we will see an increase in new investments as people strive to take advantage of the potential growth of a rising market.

The state of interest rates

We think we can safely say that we are all keeping our ears pricked for any news on changes to interest rates, and have been doing so for some time!

We thought the suspense might be over when there was a clear indication that rates would be rising in the New Year, but a shift in stance has recently been reported suggesting that there is no end in sight for the record low interest rates that we are experiencing.

Some economists have suggested a rise will not be on the cards until April 2017, because of the activity of other international economies such as China and the USA. With such low interest rates prevailing, the cash savings and current accounts provided by high street banks now look less and less appealing, and there has been a notable increase in those seeking better returns via investment.

If you have large cash holdings you will probably be receiving almost no interest. Now is the time to consider investing that cash to try and achieve better returns, especially if low interest rates are here to stay!

Help to Buy ISA launching

1st December 2015 marks the launch of the Help to Buy ISA, which was announced in this year’s budget. This may be of particular relevance for your children or grandchildren who are hoping to get onto the property ladder, as it will boost the amount they save by 25%.

For every £200 an individual saves, the government will add a further £50 – up to a maximum “bonus” of £3,000 per person, based on £12,000 saved. Accounts will be available for four years, and once opened there is no time limit on how long one can save for.

The accounts are per person rather than per home purchased, so if a couple are both saving they can put aside £24,000 between them and the government will add £6,000 – a great boost to any deposit. There are, of course, a number of conditions attached to the new accounts, including property purchase price limits of £250,000 outside London and £450,000 inside London. To put these numbers into context, a couple saving the full amount will have a 12% deposit towards a home. Also, any bonus awarded by the government will be added when the home is bought – it won’t accrue like tax relief on a pension.

This is certainly a generous planning area to be considered for someone wishing to buy their first home – receiving a 25% return when interest rates are at an historical low and are expected to remain there is not something to be ignored.

Don’t Talk Talk

The recent Talk Talk cyber-attack has definitely highlighted for many people the importance of their data security and awareness, especially as it has now been reported that the person at the heart of the attack is a fifteen-year-old boy!

It can be all too easy to accidentally give up those seemingly insignificant details to that nice-enough caller on the other end of the phone, or to open that suspicious-looking email without really thinking.

Recent events at Talk Talk have highlighted how vulnerable we are when dealing with our sensitive personal information and how we must ensure we are vigilant in all areas to stop any potential attacks on our information.

As we have reported in previous Updates, we may call you if we receive emails from you requesting a change to any of your personal information, or if we receive anything we feel may be out of character. Please don’t take this personally – we are just trying to keep you safe.

Chinese state visit

As you are probably aware, the UK welcomed the Chinese President from the 20th to the 23rd October. During this short three-day visit, almost £40 billion worth of deals were agreed, including a £6 billion Chinese investment to build nuclear reactors at Hinkley Point C in Somerset. These deals represent a sizeable investment into the UK economy and will range across multiple sectors and industries. The agreements have strengthened international relations but, more importantly, it appears they will encourage an increase in employment.

The investment into nuclear reactors alone will create up to 25,000 new employment opportunities. This boost to employment is sure to stimulate economic growth within the UK by increasing revenue for the tax office whilst also increasing spending on the high street and pushing more wealth back into businesses. From what has been reported, it looks like a win-win situation for everyone involved.

Book of the month

This month’s book is a must for everyone who has trouble sleeping. Sleep Smarter by Shawn Stevenson gives us 21 techniques or tips to improve the quality of our sleep. What is interesting is the arguments that Stevenson gives for improving the quality and quantity of sleep.

This book would make a great Christmas present for those people who are obessessed with their phones and social media. It will really convince them that tired people are actually more stupid than fully rested people. I’m sure you will have noticed how daft some people can be when they’re tired! This book explains why.

Best Savings Selections

 Top Three No Notice Accounts without Bonus

Name Contact £1 Gross % £500 Gross % £1k Gross %
ICICI Bank UK Via branch 1.39 1.39 1.39
Virgin Money 0845 600 4466 1.51 1.51 1.51
 RCI Bank UK www.rcibank.co.
1.65 (min £100) 1.65 1.65


Top Three Monthly Interest Accounts
Name Contact £1k Gross % £5k Gross % £25K Gross %
Charter Savings Bank www.chartersavingsbank.co.uk 1.83 1.83 1.83
Charter Savings Bank  www.chartersavingsbank.co.uk 1.79 1.79 1.79
RCI Bank www.rcibank.co.uk 1.64 1.64 1.64


Top Three Cash ISA’s
Name Contact £1 Gross % £10 Gross % £100 Gross %
Mansfield BS 01246 202055 1.55 1.55 1.55
Virgin Money 0845 600 4466 1.56 1.56 1.56
Al Rayan Bank 0845 6060 786 n/a n/a 2.00 (min £250)


Please check with the terms and conditions before opening any account. If in doubt consult with your financial adviser directly as the above are for information only.

Source: Moneyfacts Magazine November 2015 Edition

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