What caught my eye this week.
How much does your upbringing affect your attitudes towards money?
Quite a bit, says new-ish UK money blogger Little Miss Fire, who has what she calls the Shop Floor Mentality.
She defines this as:
… looking at your money in terms of having it where you can see it. i.e in the till (or rather in the bank).
You set your budgets and strive to stick to them no matter what, such as buying food day to day or week to week just so you don’t go over budget. It’s seeing money in the here and now and not planning for the future.
I suppose it could be described as a a step up from poverty but whilst still having a poverty mindset.
It’s well worth reading the insightful post in full. It offers a perspective seldom heard in the financial blogosphere.
I’m looking forward to seeing how Little Miss Fire’s journey proceeds – both as a blogger and a financial independence seeker!
Our Q1: 2018 Slow and Steady Passive Portfolio update – Monevator
From the archive-ator: Personal time management for fun and profit – Monevator
Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.1
UK regulator sets out steps to improve competition in asset management – T.E.B.I.
MPs’ proposals would ‘destroy spirit of pension freedoms’ – Telegraph
The 2018/2019 tax year is underway: Here are the main changes – Guardian
Pay all UK 25-year olds a £10,000 inheritance, proposes IPPR – Guardian
Threat to fintech industry, as young coders shun London over Brexit [Search result] – FT
HSBC whistleblower who revealed a massive tax avoidance is arrested on way to whistleblowing conference in Spain – ThisIsMoney
You can tell a lot about an American city by who is leaving it – Slate
Products and services
Monevator Reader @bob discovered several US-listed funds and ETFs have been pulled following MIFID II – Comment
Virgin Money to overhaul its ‘wealth destroying’ £2.7bn tracker fund – Telegraph
How to manage the step-up in auto-enrollment pension payments – Telegraph
Fixed-rate savings accounts reach two-year high – Telegraph
Virgin unveils two new credit cards that earn points for Virgin flights – ThisIsMoney
RateSetter’s £100 sign-up bonus offer ends on April 11th. You need to put £5,000 away for a year. Follow the link for more information (and note I get paid £50 for referring you). This is peer-to-peer lending, so your capital is at risk, though no investors have yet lost any money – RateSetter
Dealers offer big discounts to new car buyers – ThisIsMoney
How to invest in property without becoming a buy-to-let landlord – ThisIsMoney
Comment and opinion
The ‘future’ of retirement planning – The Retirement Cafe
How to talk to people about money – Morgan Housel
Recognizing and preventing financial trickery – Of Dollars and Data
Is 56 too late to start a pension? – Telegraph
Why we investors fail to learn from history – Novel Investor
How one frugal 24-year old is on track for £50,000 in savings – Guardian
The limits of data – The Irrelevant Investor
Self-employed: Pay into a pension or work until old age? [Search result] – FT
Unanswered questions [US perspective but relevant] – The Humble Dollar
An unconventional (and cheap) wedding – Young FI Guy
Developing financial resilience – Get Rich Slowly
Spring cleaning dusty corners of the portfolio – SexHealthMoneyDeath
Reviewing what ‘President Chump’ did to a portfolio in Q1 – FireVLondon
Reasons to remain confident about US markets – Investing Caffeine
A pithy comment on Bitcoin under $7,000 – Joseph Young
Kindle book bargains
Side Hustle: Build a Side Business and Make Extra Money – Without Quitting Your Day Job by Chris Guillebeau – £0.99 on Kindle
The Millionaire Next Door by Thomas J. Stanley Ph.D.– £0.99 on Kindle
ReWork: Change the Way You Work Forever by David Fried – £0.99 on Kindle
The Growth Delusion: The Wealth and Well-Being of Nations by David Pilling – £3.59 on Kindle
Off our beat
What if Mark Zuckerberg was your Facebook friend? [Search result] – FT
What about The Breakfast Club? – The New Yorker
“The grim irony of investing, then, is that we investors as a group not only don’t get what we pay for, we get precisely what we don’t pay for. So if we pay for nothing, we get everything.”
– John C. Bogle, The Little Book of Common Sense Investing
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]
MIFID II has got right up my nose. It’s now next to impossible for a UK investor to buy US listed ETFs. We also have to pay more tax. Yes, that’s right. If you owned a US-listed ETF in a SIPP and had completed your W8-BEN you would pay no withholding tax on your dividends. All those ETFs that hold US stocks but which are domiciled outside the US – i.e. the only US ETFs we are now allowed to buy – have to pay WHT of 15% on US dividends. So: more regulation, less choice, higher average fund charges, larger spreads and more tax. Thanks, Brussels.
The title of the article about giving £10k to every 25 year old is annoyingly misleading. The IPPR report suggests the government set up and grow a wealth fund, much like Norway’s $1.3tn sovereign wealth fund, and very much like a FIREee’s freedom fund (but on a much larger scale). This is, in my view, a great idea and could solve many problems in the future, such as the fact robots will probably take a lot of our jobs. Then they go on to suggest one outcome is that 25 year olds could be given £10k, which is in my view a terrible idea. But it’s this latter suggestion that gets all the coverage and the initial, good idea gets lost. It irks me.
The article on the whistle blower shows that absolutely nothing has changed since the Snowden affair, it’s clear that despite feeble protestations to the contrary, the system suits the establishment just the way it is. Support for modern-day heroes who make serious sacrifices unearthing corruption is worse than window-dressing, it’s a thinly veiled threat to anyone else thinking about it – ”Do you really want to ruin your life?”
I’d been following his story for a while and feel so sorry for him, at best he’ll only be a martyr unappreciated & unknown by most …..the result will be endless Enrons, where nobody speaks out, like the big accountancy cartel today that rubber stamps the likes of Carillion’s books, geting richer by the day while nothing ever changes. Plus ca change…..
I found the article about new car discounts quite interesting. One of the reasons dealers have been struggling to sell cars is because of the dip in the number of people getting Motability cars through Disability Living Allowance (DLA)/ Personal Independence Payments (PIP). Motability is one of the biggest purchasers of new cars in the UK (c.700,000 customers, about 230,000 new cars a year). Roughly 70,000 people have “lost their cars” since the move to PIP, which is an awful lot of new cars sales that have dried up.
@mousecatcher007: well, hang on a minute, maybe it’s the Americans who’ve got this wrong? If the reason given by the people of Alpha Architects is “In the US, in brief, firms are encouraged not to give projections of future performance (something that is required in the PRIIPs KID)” then perhaps the distinction between ‘projections of future performance’ and ‘vague hypothetical what-if scenarios’ needs to be pointed out. The PRIIPs/KIDs I’ve seen all say something like *IF* you invest x and *IF* you pay y and *IF* you have outcome this that or the other (the categories being ‘stress’, ‘unfavourable’, ‘moderate’, ‘favourable’), THEN at the rate you are being charged w, you *MIGHT* get such-and-such a return. And all this is hedged around with the usual caveats in preceding and succeeding paragraphs. Hardly a projection or forecast.
Alpha Architects’ interpretation may or may not be wrong, or simply overly cautious. But no doubt they’ve taken authoritative advice from their compliance lawyers. Why should these firms risk being prosecuted by the SEC in order to comply with pointless regulation from Brussels? And Alpha Architects are hardly the only firm with these concerns: US fund providers on mass are not providing KIID documents. Are all their lawyers wrong? Either way, the effect is that UK platforms cannot offer their products. Did you or I or anyone insist we needed a KIID to invest? Did you or I ask Brussels to make them compulsory and be couched in language that causes US firms to worry that if they do provide them their own regulator might prosecute them? It’s absurd micro management for the sake of it.
Wow this blew my mind as it isn’t very clear in any doco at all – VWRL has a bit of a headwind if this is the case? Thanks! Not sure the alternatives aside from more UK equities…
@Chris – my understanding is that the problem is just with US-listed etfs. VWRL and most of the etfs that get discussed on this board from the likes of Vanguard and iShares are domiciled in the EU (Ireland), listed in London, and Vanguard and Blackrock (iShares) most definitely are producing KIDs – you can check yourself by running a dummy ‘buy’. If on the other hand you want to buy, e.g, the Guggenheim S&P Global Water Index ETF, listed on the New York Stock Exchange but not in London, you might find you can’t get a KID.
@mousecatcher007 – Public interest is an interesting thing. You comment could could be about any product in any regulated industry.
You, and for that matter the majority of this this blog’s readers, are a marginal case – a sophisticated well informed investor who doesn’t really need many of the protections that MIFID II offers. It’s difficult to produce public policy that covers all marginal cases.
If American-domiciled funds and ETFs are an integral part of your strategy, your problem could be solved by opening a broking account in the US. TD Ameritrade offers accounts to non-US resident investors, and I’m sure there are others.
@ hosimpson – thanks for the tip about TD Ameritrade. I’ll look into it. But being a US based platform they no doubt don’t provide SIPPs, and alas it’s the SIPP wrapper that provides the WHT benefit on US listed ETFs. Ho hum. On the public interest front you’re right that the Monevator readership almost by definition are not your ordinary punters. But I don’t think in this instance that that invalidates my criticism. What actually does a MIFID II compliant KID provide *anyone* with that the pre-existing monthly / quarterly fact sheet doesn’t? As far as I can see it’s simply the near worthless hypothetical returns projections. KIDs are a regulatory requirement that provides no real benefit but has a significant detriment. I do understand that bureaucrats and regulators need to generate output to justify their existences. They can’t remain static; they have to keep going forwards or they die. Rather like sharks. And I do appreciate that the ever expanding caste of secular priests (aka lawyers) whose intercession is required to interpret the bureaucrats’ interminable output have private school fees to pay and gymkhanas to support. But is too much to ask that regulations actually improve our lives, rather than simply limit them? Granted, I can live without US listed ETFs. But it’s just another unnecessary nannying annoyance. Rant over!
@Mousecatcher007: you ask “What actually does a MIFID II compliant KID provide *anyone* with that the pre-existing monthly / quarterly fact sheet doesn’t?” I can tell you – it provides you with a much more accurate assessment of the costs of a holding. These KIDs are already informing where I place my money. For example, prior to the KIDs wherever you looked to find out the costs of RCP you would encounter a figure just over 1%. Now you can see from the KID that the true figure is just over 4%. On the other hand, WPCT can be had for the princely sum of 0.23% – so you are getting active management by Neil Woodford for the price of an etf. (Okay, I know already that the jury is out on whether or not this is a bargain …..)
The MIFID II changes remind me of the EU mandated changes rolled out some years ago on propsectuses where the end result was virtually no corporate bonds issued firstly at anything less than 50,000 nominal (EUR/USD/GBP) then 100,000 nominal and even 200,000 nominal as the minimum trade size.
The reason? A two tier system of propsectuses where it was much more expensive to issue a retail compliant one with the longer timescale and extra information to be compliant. Of course the investment bankers and all funds love this, it effectively shuts out retail from any form of direct investment in bonds.
The irony? Well that would be that anyone with small amounts of capital can only invest directly in very distressed bonds. They can buy say 100,000 nominal if the bond is trading at say 1/10th of the issue price!
@Tyro – I take your point re actively managed funds. Greater price transparency is a good thing. But if you *will* insist on investing in the likes of RCP with their fund-of-funds approach, performance fees etc … . But for the ETF investor the add-ons are generally so much lower that the KID figure surely barely budges. Vanguard’s S&P 500 ETF (NYSE:VOO) headline costs figure of 0.04% is hardly going to rocket if to get a genuine total fee figure you have to add the cost of its (clearly declared) 3.1% annual portfolio turnover rate! (There may well be other costs buried in the annual report, but I’d wager the transaction fees are by far the major add-on). I just wish all those regulators could find a way to expose the racket of active fund management without negatively affecting those of us who are barely touched by it.
Thank you so much for bringing the true cost of RCP to my attention. 4.03%!! Shocking!
I have now sold my holding and am somewhat embarrassed by my ignorance, but you live and learn.
@Tyro – Thank you for a genuinely enlightening contribution. I hadn’t seen anything as stark as the RIT Cap. Partners / RCP example you cite. RCP is a fund I have been aware of for some time, and indeed was invested in some years ago. I pulled out of it, a few years back, unable to figure out why my returns were so lousy. The KIID you’ve highlighted explains why I was a mug. Thank you!
I’d just like to say thanks for mentioning me! Sorry its taken a while to say this but I got so much blog traffic to my little blog that I was swamped!
Thanks againa nd I promise to comment now and stop lurking 🙂
Little Miss Fire
@Little Miss Fire — You’re welcome! It was a great post, and glad it raised awareness of your site. Would be very glad to have you commenting here, but can I ask a favour and say please don’t leave your blog signature at the end of all comments on Monevator, as it’s against my finickity house style. 🙂 (You can of course enter your website address in the comment form, was you have done, so people can click through that way.) Thanks!
On that ratesetter link – has anyone noticed ratesetter rolling monthly returns getting worse and worse? I just got 2.5% on the last time round. Now I’m getting 2.25% from nationwide so its getting to the point where it doesn’t make sense.. no return premium for the risk. Anyone else thinking the same?
@TheRhino — The apple cart does seem to have been upset across all these interest rate related products. That said the RateSetter rolling monthly rate always seemed anomalously generous to me before, given you could in theory get your money out in a month, absent some kind of systemic failure. Maybe it was something to do with how they were parceling up loans which has since been addressed?
The best easy access rates from banks are still only about 1.25% last time I looked, though, so I don’t think your comparison is like for like. Of course the banks are protected by the compensation scheme up to £85,000, though, which is hugely attractive versus P2P.
The nationwide account I mention is a children’s one with limited withdrawals. Max limit 50k. So not totally straightforward, I’d call it easy-ish access. But critically, it’s not fixed term, i.e. you don’t have to tie the cash up for a year or more to get that rate. It’s a nice deal.