My goodness what a rollercoaster it has been recently!

It seems that not a day goes by without more gloom. A bank goes bust or is rescued, an insurance company is swallowed up by another or is nationalised.

It is in times like these that people quite naturally get very worried and want to make sure that they are protected.

Let's look at cash deposit savings.

What are the rules and what protection do you have?

Where should you put your money?

Are Offset Deposit Accounts in mortgages affected and what about Life Assurance Companies and other investments?

What are the rules on deposit accounts?

This area is covered by the Financial services Compensation Scheme (FSCS).

The basic cover for deposits is 100% of the first £50,000 (was £35,000 prior to 7th October 2008). This ceiling is per investor, per banking license holder. So a single joint deposit with a bank is covered for a maximum of £100,000#

However, some banking groups operate several different brands, but have only one banking license. The best example of this is HBOS, as they own Saga, AA, Birmingham Midshires, Intelligent Finance, Halifax and Bank of Scotland.

So any investor should limit their total deposits in these six institutions to £50,000.

Of course, this is further complicated by the proposed merger between Lloyds and HBOS, and it is unclear as yet how this will affect things.

Deposits in non-UK banks operating in the UK are generally covered up to £50,000, but not necessarily all through the FSCS. European Economic Area (EEA) banks can adopt a 'passport' approach, which means that the home country compensation scheme applies first with the FSCS providing a top up, if required.

However, two exceptions apply here.

They could choose to operate on the 'passport' basis only, leaving depositors with only the bank’s home country compensation. The big name foreign players do not do this because of the bad publicity it would bring.

Also, the Irish Government increased its compensation scheme limit to €100,000 (about £79,500) on 20 September 2008. So banks like Anglo-Irish and Bank of Ireland offer UK investors a lot more protection than the FSCS. This affects the Post Office, as their accounts are operated by the Bank Of Ireland.

100% protection without any ceiling is available through National Savings & Investments and, for the time being, through Northern Rock.

Offset Mortgages

Many of our clients quite rightly use offset flexible loans as this can save them a lot of money over the years. However, what rules apply here?

There are two possibilities:

A rule called 'set-off' could come into play with the banks. This states that Insolvency Law rules that your net position is calculated - savings would be deducted from your debt.

But this law may not apply to Building Societies. The Building Societies Association have confirmed that the set-off rule would not automatically apply, although individual societies may have it written into their terms and conditions. Even then, this would depend on the administrators.

Life Assurance

For UK authorised life companies, it works like this - the FSCS covers 100% of the first £2,000 of value and 90% after this with no limit.

Offshore Life Companies

They rely on their home company scheme – if any exists. The Isle of Man's scheme is similar to the UK's, whilst Guernsey has no scheme, but insists on 90% of a life company's assets being held by an independent custodian.

UK Investment Bonds Invested in Cash Deposits

Neither the life company nor the investor can look for compensation from the FSCS if the deposit provider goes down, unless there is a guarantee the investor will simply see the value of their bond fall.

On the other hand, if the life company fails, then the FSCS protection would apply. In such an instance the FSCS offers less protection than a direct deposit for sums of up to £38,667, but more cover for investments that are higher than this.

Investments

For FSA authorised investment business, the maximum compensation is 100% of the first £30,000 plus 90% of the next £20,000. This means a total of £48,000 in respect of investments worth £50,000 or more.

The important point to remember is that the FSCS comes into play when an institution fails, not when the investment itself fails.

However, if the failure of an investment leaves a bank or insurance company unable to meet any guarantees it has made, then protection rules do apply.

Rates

Don't forget to make sure you receive a competitive interest rate!

It is important to stress that whilst it is prudent to take all these factors into account, the interest rates you get on each account is crucial. These days you should be able to get in excess of 6% AER.

Key Considerations:

It is worth checking how you would be affected by these rules, and that you won't be affected if a bank fails.

Action Point

For an overview and more detail on all the issues covered here, click here (note: the increase to £50,000 may not be covered here, depending on if the site has been updated).

Especially, guidance is given here on which brands are owned by who - spend a few minutes of your time to research these links. It could save you a lot of money!

This article was written by Simon Hocken of Breathe Business and first appeared in their newsletter. You can subscribe here.

The bad news keeps coming from many financial institutions, household names, both here and across the pond. A case of many chickens coming home to roost and hindsight being a wonderful thing. Interesting times. I don’t know (yet) what we are supposed to make of it, I just know that we find ourselves daily in the front line of our businesses, charged with the responsibility of making our business work and inevitably this means making sales.

So, here are ten strategies (already proven by some of Breathe’s client base) to help you make sales at this time:

• Maintain your Confidence (and that of your team.) The question is not whether there is going to be a recession, the question is whether you are going to take part in it? Be relentlessly positive and abundant. There is still plenty of business for all of us, still plenty of customers with good jobs and an income to dispose of. Still plenty of recent divorcees looking to improve the way they look and feel. Make sure that they choose you and your team. “Optimism is true moral courage.” Shackleton.
   
• Add (lots of) Value. In a recessionary environment buyers want a “deal”. So make sure your offer stands out and immediately distinguishes you from the competition. Our clients are making offers such as (time limited or number limited): White for Life, (free tooth whitening for life) “Whitening     for lovers” (buy one get one free), Incentives to refer a friend, Gifts such as Ipods when committing to starting a big treatment plan, Hotel Chocolat subscriptions for 12 months, Free electric toothbrushes, with free replacement heads for life etc when signing up to a membership scheme.
  
  
• Membership Schemes/Members Only Practice. A recession will test your client’s loyalty. It’s easy to postpone a check up or a hygiene appointment until the stock market starts going back up. Unless… your patients are all (or mostly all) on a membership scheme and committed to your practice. It much less likely they will cancel a standing order.
   
• Reactivate dormant patients, dormant treatment plans and create a robust and effective internal referral system. My coach, Dan Sullivan from Strategic Coach has a phrase I use a lot, “All the money that you need for the rest of your career is in the pockets of the patients that you know and the people that they can introduce you to.” Every practice I walk into has patients who have cancelled appointments and not re-booked them. Now is the moment to contact them, make then an offer, make them welcome (don’t scold them for their absence) and reactivate them as clients. This is so much easier and more cost effective than marketing to attract new clients.
  
  
• Improve your “Patient journey”. Find new ways to wow your patients all the way along the client journey, from their first contact with your practice through to the end of their first treatment plan and beyond. This is what distinguishes you form all of your competition. Make this a system that you reproduce time after time, consistently.
  
  
• Create A Niche and then Diversify! No, not as paradoxical as it sounds. Create a niche that is your patient demographic and then diversify the offers that you make them. For example, some of the more progressive cosmetic practices we work with have brought in new services that address the same demographic that they already attract. Such as laser skin resurfacing, laser hair removal, facial aesthetics including skin peels and cosmetics. Even life coaching and hypnotherapy for smoking  cessation and weight loss.
  
  
• Easy ways to pay. Make your services affordable. It’s not about the ticket price, its about making it easier for your clients to afford it. Interest free and interest bearing credit is easy to set up through  providers such as Medenta. Give discounts to clients who will pay up front. Have a team member trained and dedicate to have these conversations with your clients (not you). These offers and having someone take the time to explain them, in private, will make it more likely your clients will say yes.
  
  
• Web Site and Internet Marketing. There’s an opportunity here! To date, not many practices have commissioned a professional, state of the art website. And even fewer have noticed that it has to be search engine optimised so that your site comes up visibly when potential new clients surf the net looking for the services you provide.
  
  
• Create a “Diffusion Range” of Services. You might be the best clinician in your practice with the most experience and a whole set of post graduate courses under your belt. You are certainly worth every penny of your fees. However, do your clients really need to see you to have a simple filling replaced and pay £120 for the privilege? Could your new associate, with 5 years clinical under his belt, offer a service that allows this patient to buy the same filling for £75? Top retail brands create a “diffusion rage” that allows access to their goods for less, but with all the cache of their brand. You can do this to.
  
  
• Incentivise your Team. Enlist the help of your team to sell your practice’s services. Reward their success with a clever bonus scheme. You will get more of what you reward. I suggest you pay bonuses for: new Membership Scheme sign-ups, New Patients who book a new patient consultation and big case treatment plan acceptance.

Last month I told you that I was off on a cruise around the Mediterranean with my wife, Laura.

In fact, it was a second honeymoon

We set off from Southampton on Saturday August 9th. The weather was grim as we left the port, but we knew we'd be heading into the sun within hours.

Crossing the Bay of Biscay was a wee bit choppy on night one. What made it even more interesting was watching the actors and cast in the theatre trying to keep their feet! They did it admirably so I guess it all comes down to experience. The ship was quite sparse the first night so I think many decided to get an early night rather than putting their bodies to the 'motion test' (aparently sea sickness does not exist, it's technically motion sickness).

Rather than give you chapter and verse the main highlights were…

Barcelona

This really is an amazing city! We docked at 6pm and headed into the city. We wandered around the usual tourist haunts but unfortunatley Laura was feeling ill so we retired early.

The next day we were booked in to drive a 'GoCar'. We found it online before we travelled. To quote from their website:

"GoCar is an entirely new way to explore a city. These nifty yellow convertibles talk to you and take you on a city tour you'll never forget. The advanced navigational capabilities of the GPS deliver an informative tour, high-lighting specific locations throughout Barcelona as you drive. Just follow the friendly audio directions and relax.

Unlike a traditional tour GoCar gives you complete autonomy over where, what and in what order you see sights and also how long you spend at any given point. The cars have a personality and a sense of humour, telling the stories that bring a city to life while guiding the way with clear driving directions".

This is us setting off

If you are a couple this is a fantastic way to see the city. The main benefit is that you will be able to see sights far away from the main tourist areas. It's very easy to follow the directions of the GPS as it's delivered through a speaker in the car (a bit like a hands free system).

The cost is very reasonable as well. You can read all the details at their GoCar Tours website (will open in new window).

The only downside we could see is that if you deviate from the GPS route the commentary stops! This happened once (I think we were talking and missed what was said). To get back on track we just followed our instincts, as well as trying to read the map provided.

The company (this is starting to sound like an advert!) is actually run by a Brit. We met him in Lisbon where we hired another car.

What I will say is if you do hire one in Lisbon be prepared for the potholes! It was pretty rough at times so you've got to keep your eyes on the road and dodge them if you can. That said, Lisbon was even better for going 'off the beaten track'. We ended up in areas where there were no tourists, just locals.

You can also hire the cars in San Diego, Miami and San Francisco.

Monaco & Nice

What a place this was. Even if you had a few million in the bank you would not feel rich here. We saw all the yachts in the bay in Monaco

And enjoyed a rain storm in Nice. We nearly missed the ship on the way back so the heart was thumping. We just made it though with a few minutes to spare. Another couple got lost and tried to get back on board after hitching a lift off a local in his dinghy (the ship was anchored). The ship's staff sent them back to the shore and they had to be brought back in a tender…to huge applause from many on board! Funnily enough, we didn't see them again (must have been keeping their heads down).

We had a superb trip and if you're considering a cruise, I can totally recommend it.

Back to reality now though :(  

Q. I'm thinking about applying for some critical illness cover. I'm in two minds about it as I have life assurance and income protection. I see that most plans cover a number of conditions. What figures are available for the claims paid out for these companies? I want to know that they actually honour their commitments to policyholders.

A. Critical illness cover is a very important safety net for the right people. Where someone has not built up many assets, the cover can provide an injection of cash when most needed, especially as the recipient will not know what the condition will be in advance. They may be diagnosed with a qualifying condition and make a speedy recovery, or the condition could be for a considerable period of time, even permanent. 

The money could then be used to modify a home, repay a mortgage/debts or pay for treatment. You should view your income protection as the most important cover as at least, in the event of a claim, you will have a basic level of income (depending on how much cover you have) to pay for life's necessities. 

Now to answer your question. Looking at the claims statistics for one of the major life assurance companies in this area, Scottish Provident, we can see in 2007 they paid out over £93.6 million in claims. 

The major conditions claimed for were:

• cancer (58%)
• heart attack (14%)
• multiple sclerosis (7%)
• stroke (6%)

Interestingly, the average age of a MS claimant was 39, therefore this underlines the need to take cover from a young age. 

Companies such as Scottish Provident take all claims seriously, and are keen to ensure they have a good claims record. After all, would you want to insure yourself with a company that had a history of not paying valid claims?

There are other companies to choose from, so make sure you do thorough research before you choose a provider as you want to try and get your choice right at the outset, rather than having to change provider after a few years (when you may not be able to change if your health has deteriorated). 

Good luck!   

Over the month of August, the family had a bit of holiday.

For the first week, we decided to do the usual UK bit with my mam & dad in Scarborough, but were not too impressed with the weather forecast.

However, off we went, staying in a small hotel on the south bay. My daughter Charlotte (Chalk) had her friend Bethany (Bat) to accompany us, and they were very excited as the car got near to Whitby. My wife Aly (Paper) and I (Wizard) were looking forward to a great break, and we started by having Fish n' Chips in Whitby - fantastic.

We also did the open top bus tour, and jolly good it was, with lots of interesting facts.

By the way it rained.

Then off to Scarborough. My parents go to the Spa there for the music, and are happy to go to 2 concerts a day and just chill.

Our job of course was to entertain Chalk & Bat. It went something like this - breakfast - beach - simulator - amusements - swimming - lunch - simulator - ride on the donkeys - beach - simulator - back to the Hotel - shower - say hello to parents - out to dinner - simulator.

I have to say it was still raining.

Now I've mentioned the simulator a few times here - are you with me? It's a machine you sit in and you feel like you are on a roller coaster or whatever. The kids absolutely loved it, and to be honest we did too.

We also went to Bridlington, and there they had an amusement park with rides as well as a huge 'London Eye' type wheel. It was very high, but we did go on it, saying a prayer while the capsule swung in the wind over 240 feet up. Good views!

The rain kept coming.

We did get some sun it must be said, and we had a weekend at home before we set off for the second week of holiday.

The second week was me combining business with pleasure. I had a new client to see in North Wales, and on the Monday off we went.

I have to report it was raining.

The client meeting was Tuesday night, and we stayed in a lovely Hotel near Caernarvon. The next morning we visited Port Merion, an amazing creation by an individual who wanted to build a 'fantasy' village. Those of us over 50 may remember the series The Prisoner from the late 60's - I am not a number!

We stayed for many hours as it is really a most incredible place built in the Italian style. The chap who built it spent 50 years of his life creating it, and died in his 90's in the late 70's.

Unlike Italy, we were rained on.

Then off to Alton Towers - no not the bit with rollercoasters, but Splashworld. This involved guess what? Lots of water! Chalk dragged me in and we spent over 3 hours getting totally soaked on slides and all sorts of things. Great fun!

Our tour then took us to Kent for me to see another client (who I have known for 20 years), and we stayed a few days seeing old friends and also went to see Mamma Mia the movie. What good fun! If you haven't seen it, go!

The good thing 'daan saath' though was we had very little rain, it was even gloriously sunny on the Saturday. Paper was very happy sunbathing in Broadstairs on the beach, and little Chalk did her favourite thing - swimming!

All too soon it was over, and the journey back was ok. No rain

Oh well, back to the real world.

Q. I have had various investments in the Irish stock market for many years now.

Last month the latest valuation arrived and I was very shocked to see that my investments are less than half of what they were worth a year ago. I can’t remember why I had so much in this market. Since my adviser retired, I have to admit to not paying full attention, and have let things slide.

As I have quite a bit of money invested here, should I sell? 

Why have my investments fallen in value more than other markets? 

A. Reuters recently reported Ireland's stock exchange to be the world's second worst performing market over the past twelve months, trumped only by Vietnam! Overall its 60% from its peak!

Why Ireland has been affected more than the UK market is interesting:

• Low eurozone interest rates added fuel to the fire during the property boom, sending house prices higher than they would otherwise have been, and combined with the 100% (or more) mortgages that were typical of the period, this left banks and borrowers very exposed when property prices fell
• Secondly, banks and other financial institutions have a very high weighting on this particular market - 46% at its peak compared to about 27% in UK. So the worldwide re-rating of banking shares has had a disproportionate effect on the Irish market.     

So it is certainly not good news for you, and whether or not you should sell now is very difficult to advise on.

All we can say is find a fee based planner/wealth manager to devise your own strategy, and really find out how much risk you actually need to take (or DON'T NEED to take) and diversify where possible.

One of the first things we come across when we take on a new client is starting to make sense of the collection of policies and investments they have.

They are usually in a pile somewhere and tend to consist of many different funds across several providers. Almost without exception, their investment plans include 'active fund manager' investments.

The values vary, but £100,000 to £250,000 is not uncommon.

A sizeable amount, I'm sure you'll agree.

We have written many times on this subject - have a risk assessed portfolio - get your asset allocation right (where your money is and in what amounts) - buy and hold etc.

Today we thought we would simply look at why we advocate 'passive investments' and not 'active fund management'. After all, the latter is still recommended by most salespeople, banks and commission based financial advisers.

To remind ourselves, active fund managers believe they can buy and sell more effectively than their peers to create higher returns, whilst passive investors will accept the return of the market.

So, can these active fund managers deliver higher returns for you consistently over the long term? Let’s see what evidence there is.

In the USA, numerous studies have been conducted to see if this can be achieved. One of the more recent was conducted by Thomas P. McGuigan and appeared in the February 2006 edition of the Journal of Financial Planning.

He found that, on average, only 19 percent of the actively managed mutual funds were able to beat their corresponding passive benchmark. This would suggest that a classic buy-and-hold strategy for purchasing active managers would yield a "success" only 19 percent of the time, and that means of course that 81% of the time you would lose.

A Canadian study in 2007 by Standard & Poor's showed that typically over five years, less than 10% (8.4%) of actively managed Canadian equity funds  beat the TSX index while over three years only 13.3% managed to do so. This means that you would lose circa 9 times out of ten.

"Even during turbulent market conditions we continue to see the majority of active fund managers underperforming their relative S&P style benchmark," says Jasmit Bhandal, director at Standard & Poor's.

"In addition, results continue to show that active fund managers lag their passive counterparts over one, three and five years.

These results continue over the longer term as illustrated in a paper by Rex Sinquefield called “Active vs. Passive”. His paper also took into account how many funds that started out years ago are still around today.

Using a fund data organisation called Morningstar, and looking back 15 years to when there were 10,000 funds, he found that only 1200 of these funds still operated!

So immediately, his data source was reduced by approximately 90%.

He then looked for any funds that outperformed the S&P index over that period. He found that only 14 mutual funds beat the index, and a few of these funds were index funds themselves!'

He pondered quite naturally,"would I have been able to select the (few active) managers 15 years ago that would outperform the index? Hardly. Fourteen out of over 1200 is no more than one would expect from chance".

Study after study shows that when active funds do outperform benchmark indices, this is down to luck rather than skill and no more than would be expected by random chance.

It also usually costs a lot more to invest in actively managed funds, and it just doesn’t make sense to pay so much more for random chance.

So instead of looking for the needle in the haystack, why not just BUY THE HAYSTACK?

The subject of cost also becomes even more important when we look ahead to the future returns you can expect from the stock market. It is generally expected by most commentators that the double digit returns of the 1990's will not be achieved again any time soon.

So, as a proportion, costs eat into your returns far far more.

This reminds me of a classic saying: "The key to financial success is to understand what you can change, appreciate what you cannot change and have the wisdom to know the difference".

Key Considerations:

As Ron Ross, Ph.D., writer of 'The Unbeatable Market' in 2002 said - "Active [investment] management is little more than a gigantic con game."

ACTION POINT

We cannot stress enough the importance of reviewing your investments. If you hold actively managed funds, and the chances are you will, you are far more likely to lose out in the long term.  

If your adviser has put you into an active fund - ask why!

Any answers your adviser gives, or if you have any  questions on this
subject, let us know - we will give you our impartial view.

At the time of sending this newsletter, I will be on a cruise ship for some much needed R&R.

My wife and I are taking a second honeymoon and we set sail from Southampton on 9 August.

We're on the Norweigan Jade ship through http://www.ncl.com  (although we did find a cheaper deal through a US based travel agent).

Having never been on a cruise we've been asking around to get an insight to what lies ahead. And in the process I can't believe how many people have been on cruises and generally rave about their experiences!

After leaving southampton we head to Malaga. We also visit Barcelona, Nice, Florence, Rome, Lisbon and Vigo. 

One of the main attractions to the cruise is that dinner is in 'freestyle' format. On some ships you are required to sit at the same table every night in the same restaurant with the same people. Now I'm all for meeting new people, however didn't fancy being 'stuck' with someone that I didn't want to be with.

With freestyle, there is a choice of 13 restaurants. In some of them you need to pay a supplement, but the rest are included in the price. And all the rest of your food is inclusive as well.

Thankfully there is a gym on board as I think I'm going to need it!

One thing we did do was research what to do in each port. In some, such as Barcelona, you just walk up into the city from the ship, but in Rome for example it's a 90 minute train journey. Rather than doing this ourselves, we used a company in Bangalore who did all the research for $50. They're a sort of Virtual Assistant company and I have been quite impressed by them. If you want to know who they are email me and I'll pass on their details to you.

We sail back into Southampton on 23 August and then fly back to Newcastle, but at least it's bank holiday weekend so that'll help a wee bit when the Monday comes around

Q. I have heard that Norwich Union are going to make a £1bn reattribution offer to certain policyholders.

What does this mean and how do you qualify?

A. This announcement was made on 30 July 2008 by Aviva, Norwich Union's parent company. Basically, it means that of you hold a policy that invests in one of two 'with profits' funds, you will qualify for a payment, probably sometime in 2009.

Here's an excerpt from the Aviva website:

Aviva today announces that it intends to offer a cash payment averaging £1,000 to one million policyholders in two of Norwich Union Life's with-profits funds.

In a process known as reattribution, policyholders in the CGNU Life and CULAC funds will be able to choose whether to receive a cash payment now in return for giving up their right to receive any possible future payouts from the funds' inherited estates* - or to stay as they are, in the knowledge that sizeable distributions are unlikely, especially in the next few years.

Mark Hodges, chief executive of Norwich Union Life, said: "This is a great offer. We believe that it represents good value for 99% of policyholders and almost all of the cash payments will be tax-free. Most importantly, we recognise that policyholders have a choice and everyone will be entirely free to make their own decision on whether or not to accept the offer."

The cash payments will not depend upon a majority vote. All policyholders, regardless of whether they accept the cash offer, will continue to receive their normal bonuses and the payment will have no impact on the security or performance of their investment.

To read the full version click here:

To find out if your policy qualifies, you can enter your policy number into this website:

We hope this helps!