Wealth Management Update – July 2018

Yahoo’s costly data breach

The UK arm of Yahoo has been fined £250,000 by the Information Commissioner’s Office (ICO) over a data breach in 2014 that affected 500 million users.

The hackers managed to access sensitive information, including names, email addresses, and security questions and answers, all because Yahoo failed to take the measures required to protect these data.

When the ICO’s investigation delved deeper, it was discovered that Yahoo had failed in many data areas, such as failing to make sure their processor complied with regulation, and vetting employees with access to sensitive information.

To make matters worse, this breach was not even acknowledged for two years and so measures that could prevent this from happening again were not addressed.

This is one of the largest breaches of security and personal data in history, something that the introduction of GDPR (those really annoying emails you keep getting) should go some way to helping prevent in the future.

P.S. Because the breach occurred before the introduction of GDPR, Yahoo will avoid the significantly tougher consequences and penalties that GDPR imposes. Lucky for them!

 

Banks making money from your misery

We are both pleased and dismayed to see many articles recently about how Banks and Building Societies are cashing in on people’s deaths. Dismayed that such a thing is happening, but pleased because finally it has been uncovered what Banks and Building Societies have been up to.

Banks and Building Societies who wrote Wills in the 1990s–2000s will have appointed themselves executors, or at least included in them the right to appoint themselves as executors. While this may seem like a good thing – a professional being around to help you with probate and the whole horrible process – that is not the case.

By allowing your Bank or Building Society to be an executor of your Will, you are opening up your estate to a large fee deduction. The Bank or Building Society can charge whatever they want for dealing with the estate as an executor, normally charging a percentage rather than a fixed fee. This means that if they charged 2.5%, you would pay out £12,500 in legal fees for probate and distribution of an estate of £500,000. The average charged by a probate specialist or solicitor in the UK is between £2,000 and £5,000, based on the complexity of the estate.

While 2.5% may seem reasonable at the time this can add up to quite a sum, especially if your estate has risen in value quite dramatically since the Will was written. We recommend that you never appoint a professional as an executor on a Will. It would be better to appoint a friend or family member who can employ the services of a professional if needed, at an agreed fee.

More than 1.5 million Wills were written with a Bank or Building Society as an executor so, if you haven’t already, check your Will to make sure yours is not one of them. And if it is, get it rewritten as soon as possible.

Penguin Legal Services can help you rewrite your Will. Find Pnguin Legal Services at www.penguinlegal.co.uk and get in touch to find out how we can assist you.

 

Equitable Life to transfer to Reliance Life

If you have a With Profits fund with Equitable Life then this is good news for you.

Equitable Life will be transferring all of its policies to Reliance Life to boost its capital distribution. This is set to complete at the end of 2019, with members being asked to vote in mid-2019 – so keep an eye out for voting papers dropping through the letterbox.

Equitable agreed to pay guaranteed interest back at a time of high inflation in the 1970s and then got into trouble when they couldn’t stick by the agreement. In making this move, Equitable are benefiting those with With Profit holdings as these are likely to get a substantial bonus. For this to happen, policyholders will need to agree that Equitable can remove the guarantees that were promised on the older policies, obviously.

This will be the end of Equitable Life, unfortunately – one of the oldest mutual assurer’s in the world – but it would seem that they want to bow out being fair and generous to their members and policyholders.

Watch this space for the outcome of that vote next year and keep an eye out if you have voting rights with Equitable Life to make sure you have your say.

 

Lasting Powers of Attorney – being an attorney

Putting in place Lasting Powers of Attorney (LPA) is highly recommended for the majority of us. For those of you who don’t know what they are, an LPA is a document or documents, put in place to be used during your lifetime, that allow individuals of your choice to step in and manage your affairs normally when, or if, you lose the capacity to do so yourself.

To put an LPA in place you need to be able to nominate at least two people to act on your behalf should you become incapacitated. The decision about who you nominate is not to be taken lightly, as increasingly frequent reports of the consequences of a poor choice of attorney attest – investigations into the actions of attorneys have increased by 45% in 12 months, meaning that attorneys may not be sticking to the guidelines set for them. Now, while some may take advantage of their new role as an attorney, it is not always the case that they are stealing from the “donor” of the LPA or anything equally wicked. It may just be that they are taking their role too far, and the lack of guidance and abundance of “grey areas” associated with these documents can make knowing your responsibilities as an attorney all that more difficult.

There are some golden rules that may be helpful to know for both donors and attorneys of LPAs:

• Both the donor of the LPA and the attorneys should be fully aware of their role and what it entails before the document is agreed.
• Clear records should be kept by the attorney of any activity undertaken on behalf of a donor.
• Make sure your attorney knows the rules specifically on “gifting” on behalf of a donor, as this has been a source of confusion and ambiguity in many cases before.

 

If all parties understand their role and are comfortable with what they can and cannot do, then these documents are invaluable for those who become physically or mentally incapacitated during their lifetime – and remember this may be due to an unexpected event that means it’s too late to put LPAs in place in the future or after a lifechanging event occurs. These documents can be registered and sit in your drawer, hopefully never to be used, at a cost that is minimal when you consider how much The Court of Protection will charge you to manage your affairs if you don’t have them.

If you don’t have LPAs but have trusted attorneys in mind, then please get in touch and we can tell you more. Below is a link that explains the role of the attorney for those who have LPAs or are thinking about putting them in place.

https://www.gov.uk/lasting-power-attorney-duties

 

Spend Spend Spend

It is likely that a large proportion of financial wealth will be left unspent, to be passed on to the next generation, rather than being spent in the retiree’s lifetime. We wrote about this back in May and encouraged you to spend some of your hard-earned savings on whatever your heart desires.

We understand that not everyone is so whimsical as to pop out and buy a few speedboats, a new car, go on a shopping spree and then finish if off with a fancy holiday! Some of you are understandably more sensible and reserved than that.

It has been reported that most retirees want to leave money to their nearest and dearest when they are no longer around, and we want you, our clients, to enjoy your savings in retirement. Please speak to us about how we could put arrangements in place for you to have the best of both. We can help you combine that little bit of luxury with making sure that the kids don’t miss out when you are no longer here.

If you are a client of Penguin you may already have a plan in place but you may want to update it. Those who are not, please get in touch to see how we can help.

 

ScamSmart website – a scamming education

The Financial Conduct Authority has a website dedicated to education and reporting of financial scams. There is a short quiz that tests your ability to pick out the scammer – worth a go if you think you are scam savvy, as you may be surprised!

It also has articles on how to report a scam if you think you have been a victim, and advice on how to avoid it.

It is a useful site if you have concerns or doubts over any website, email or firm. Obviously, if you are a client of ours and you are concerned, get in touch and we can help you decide whether something is a real opportunity or too good to be true – unfortunately it’s usually the latter.

https://www.fca.org.uk/scamsmart

 

Notes on Brexit

For the last few weeks we seem to have been stuck in a game of EU Withdrawal Bill ping-pong between the House of Commons and the House of Lords, with the ball passing between them with various amendments and proposals being debated and amended further before passing back to the other side of the “net” to be debated and amended again.

There are still four key areas of Brexit under negotiation: a meaningful vote, enhanced protection of specific areas of retained EU Law, refugee family unity, and the sifting committee. The meaningful vote is the one hitting the headlines most, so to summarise for you: The House of Lords has issued a subsequent amendment (referred to as Grieve II) which proposes that the Government bring forward an amendable motion to respond to each scenario, rather than an unamendable motion (as the Government’s amendment would aim to do). The amendment passed by the Lords is ultimately intended to provide a statutory guarantee that the Commons will have the ability to debate, amend and vote upon a motion on the Government’s Brexit policy in the event that either the Commons rejects the agreements or the talks with the EU fail to produce any agreements. As it stands, there is no guarantee that any such bills would be introduced in time, or would relate to matters sufficiently relevant in terms of scope, to influence the Government’s position on the negotiations with the EU.

The Enhanced Protections for Retained EU laws, the Refuge Family Unit amendments and the Sifting Committee amendments have not been as highly publicised (not quite as headline-worthy!). They are differences of approach to the same issues. The Commons feels that the proposal or existing arrangements are sufficient but the Lords wants to incorporate specifics into the Act to ensure the continuity of approach to these areas.

The good news is that the list of things which have been settled is much longer: the customs union, environmental standards, validity and principles of EU law, fundamental rights, the Irish border, exit day, implementing the withdrawal bill and many more.

Hopefully all will be settled in time to head off to the next stage with the EU: then we will see if we can reach an agreement with them!

Addendum – The Bill received Royal Assent on 26 June 2018 and is now an Act of Parliament – The European Union (Withdrawal) Act 2018, so we can assume that the dissentions are settled; relevant details in the next issue of the Wealth Management Update.

 

Book of the month

Turn The Ship Around has itself been around for a number of years but it is the first time we have had the opportunity, not just to read, but also to study it and its concept of ‘leader, leader’. L. David Marquet was Commander of a US nuclear-powered submarine. He took the USS Santa Fe from being the worst in the fleet in 1999 to being the best in the fleet in just three years. He did this by challenging his men to think for themselves rather than just to act on orders.

The book is a good study of how we take away people’s decision-making powers and responsibility in so many areas of life and then are disappointed when they don’t think for themselves.

Anyone interested in leadership, management or just being a better person should read, and probably study, this book.

 

Best Savings Selection

Top three Cash ISAs

Name	Contact	£1 Gross %	£10 Gross %	£100 Gross %
Al Rayan Bank	0808 231 6804	n/a	n/a	1.4 Min Deposit £50
Virgin Money	virginmoney.com	1.30	1.30	1.30
Charter Savings Bank	chartersavingsbank.co.uk	n/a	n/a	1.40 Min Deposit £1,000

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 July 2018 Edition