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Weekend press review: MIFID II and other animals

weekend press review

The Financial Times opens the New Year bidding with an extensive feature on the manifold ways in which MiFID II will impact on investors’ fortunes. This “curate’s egg” from the European Commission, says the FT’s quote, will improve matters by making trading fees more transparent and by stopping asset managers from accepting financial inducements that might not be in a client’s best interests. (Yes, we sorted most of that issue in the UK many years ago, but MiFID II did go a little further.) The downside, the FT says, is that some of the changes may leave retail investors shouldering additional costs “and make accessing expert research even more challenging.”

The FT lists a series of major areas which the average client probably won’t have been fully aware of – ranging from full cost disclosure, and from the new obligation on managers to pay for research separately from their execution activities, through to certain resulting discrepancies in the ways that costs are presented. With the added problem that the MiFID II changes may result in fewer brokers being willing to cover thinly-traded and smallcap companies where there is no ‘mainstream body’ od published research for them to use.

And finally to the impact of new rules requiring investors to hand over more information to their fund managers, including national insurance numbers. While it’s is all in the name of clarity, the FT agrees, it will add to brokers’ costs – and it might well mean that funds that aren’t yet MiFID II and Priips-compliant may get dumped from platforms. Eek…

Worried? There’s more detail in the FT’s own write-up. Recommended reading.

The Telegraph is also in seasonal scare mode, with a piece about the “nightmarish” implications of new rules for pension declaration for higher earners, as they prepare their self-assessment forms in the run-up to 31st January.

The point being, of course, that the 2016/17 tax year is/was the first in which the new pension allowance taper comes into effect. Meaning that anyone earning more than £150,000 will see the annual amount they can save into a pension being reduced year by year. On the face of it, says the Telegraph, only about 130,000 people would seem to be affected – but the number may actually be much higher, because the new rules may catch up individuals with incomes of £100,000 if their total incomes have been boosted to the £150,000 level by bonuses, investments or other sources of non-salary income.

The effective result, says the Telegraph, is that taxpayers are now having to present two different measures of their income in order to work out how much they can put into their pension in the tax year. One for their taxable income and the other for the pensions element of the tax form.

There’s more, says the article. Because many people won’t actually know how much they will earn until the very end of the tax year, it becomes doubly difficult for them to know in advance how much they can contribute to a pension plan without breaching the limits, and thus becoming subject to a tax charge – something that doesn’t come as news to advisers of course. Interesting times.

The top investments that will pay you a monthly salary. That’s the headline of Richard Dyson’s article in The Sunday Telegraph this weekend. Ok, the word“salary” might be pushing it a bit here, but the detail is more robust. The article highlights a range of investment and savings accounts that can deliver a regular payment. The value of dividend income from investment trusts in particular is highlighted, but also a number of unit trusts which pay a monthly income. The suggestion is that investors can look to combine different dividend-paying investments in their portfolio which have different dividend distribution dates, thereby generating a steady income stream over time – and one which has the chance of providing some inflation proofing too. Funds mentioned range from F&C Commercial Property, City of London and Invesco Income Growth ITs plus Premier Monthly Income and Invesco Perpetual Monthly Income OEICs.

In its fund focus column, Financial Mail on Sunday looks at the City of London IT, which looks to generate a growing yield from equity income. Jeff Prestridge reminds readers that for over 26 years, Job Curtis has managed the trust, in what he describes as a ‘conservative’ fashion – never taking unnecessary risks and always running a diversified portfolio, albeit predominantly exposed to the UK stock market. There has been an impressive unbroken run of 51 consecutive increases in the trust’s annual dividend. A record unrivalled in the investment trust industry. As the MoS reports, Curtis believes the equity income story is as ‘powerful as ever’ – if not more compelling. He is quoted as saying: ‘There are plenty of positives out there. You have solid earnings growth across swathes of UK industry, particularly in oil and mining stocks and the banks. It is good to see Lloyds Banking Group back on the dividend trail and the likes of BP and Shell benefiting from strong oil prices, global economic growth and cost cutting. With the dividend yield on the FTSE All-Share Index at 3.6 per cent, there are not many more attractive income stories out there.’

The Sunday Times, Ian Cowie takes a look at the commodities sector in his personal account column and asks whether the pick up seen since the bottom of the crash in commodity prices back in January 2016 is likely to continue or not. He confesses that it is not possible to tell with any accuracy but highlights China’s massive infrastructure plans in its “Belt and Road” initiative, as a factor which could well prove positive for the demand for commodities.  Sensibly, he reminds readers of the diversification advantages of investing into a collective fund in this sector, rather than individual stocks. Blackrock World Mining IT is mentioned – trading at a discount to NAV of almost 14%. He also reminds that a well balanced portfolio will have exposure to a range of different sectors to ensure that gains in one area can offset losses elsewhere. Wise words.

Also on the agenda for the Sunday Times are the options for savers who have NS&I pensioner bonds about to mature. This is something which advisers will be alert to for clients who are invested in these three year growth bonds. January 15th 2018 is the date to note. Those who do nothing will see their money automatically reinvested in a three year guaranteed growth bond paying 2.2%.

The Sunday Times is also warning readers of upcoming reforms to current accounts where, with permission, banks can reveal information to third parties, also of the need to ensure that any self-assessment tax is paid on time to avoid undue penalties and interest charges plus there’s a summary of some of the ways to cut the budget this New Year – much of the usual stuff we see at this time of year about gym membership costs, monthly subscriptions, broadband costs etc.  There’s nothing here that’s likely to trigger questions from your clients we would surmise!