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Attitude to risk may depend on the age of the client or the business. Younger people lean more towards risk, as Michael Pagliari explains in this TV show.
I think that goes back to sort of life cycle questions. As clients are younger and are looking to build assets they may well have a higher disposition towards risk and that might lead them towards more growth-type portfolios. As clients advance through that life cycle and perhaps sell a business or begin to retire then it’s really a question about draw-downs and inheritance tax planning and so on, and portfolios tend to de-risk to some extent. So as you grow through that life cycle portfolios do tend to sort of de-risk over time.
The attitude to risk form those in high risk environments is to exercise caution as Michael Pagliari explains in this TV show.
I actually have a few clients that have done exactly that and I’ve actually found that there I’m on the more cautious of our clients. So their business risk, if you like, is very high and they’re well aware of it and the last thing they want to do is suffer losses under their financial asset portfolio, so I’ve tended to find those people the most cautious of all the clients that I manage money for. Investment does involve risk. The value of investments can go down as well as up. This video contains information believed to be reliable but no guarantee is given. See Video for full disclaimer.Keep visiting Inside Finance for more great videos on attitudes to risk and similar subjects.
Informed financial planning advisors pass on their wisdom to clients. If a company fails they will naturally look at back at this advice. In this TV show Doug Hall discuses throwing the spotlight on professional advice.
For example auditors, we are dealing with a number of cases, where a company has failed, and if the company had not failed there wouldn’t be an issue. But in the company going into administration for example, major creditors had lost and they may say that they have relied for example on audited accounts to make decisions, to lend money or to support the company and in the cold light of day the company having failed, that’s an example where you may go back and look at what the auditor said in earlier years. So we have situations arising from insolvent companies where the spotlight is thrown onto a whole range of professional advice that they were given before the company failed. Which never would have come under that spotlight if the company hadn’t gone into administration for example. It's not an area that we get involved in but valuers have seen a big increase in the number of actions against them very simple because the banks relied on valuations of properties for example, and then when the company has gone into administration and the bank has lost out, they then go back and look again at the professional opinions that they relied upon, in making their original lending decisions.
Inside Finance will continue to produce great videos on informed financial planning advisors and similar subjects.
Keep an eye on Inside Finance for more great TV shows on attitude to risk and other related subjects.
Business assets that are allocated correctly can potentially contribute 90% return to a portfolio, as Michael Pagliari discusses in this TV show.
One of my pet hates is seeing, you know, proposals sent out to clients that are very deterministic in nature, in other words coming up with a particular solution to a client’s investment problems. I think, you know, it’s much more complex than that and really the whole question about risk and asset allocation is absolutely key, and I think there have been plenty of studies which have been done which show that asset allocation, good asset allocation, contributes about 90% of the total return to a portfolio. So it’s really, really important that a lot of time is spent at the beginning and during the course of a relationship focusing on getting that asset allocation as good as you possibly can.
Keep browsing Inside Finance for more expert insight into investment processes, business risk, and dealing with business assets.
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Inside Finance TV will continue to explore the issues surrounding finances in high net worth families. Look out for more from Frank Akers-Douglas.
Inside Finance TV will continue to follow discussions about business assets and liabilities. Keep an eye out for more from Doug Hall.
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Merger business advantage should be the first consideration when joining with another company. Giles Murphy of Smith & Williamson looks at quantifying the business benefits of a potential merger.
I think the question of what are the advantages of a merger is actually the first question we will often raise with clients when we’re talking to them because quite often people will end up in conversations with other firms simply because there is a relationship there and somebody believed it was a good idea.
Bearing in mind the pitfalls and the downsides, and the costs involved in a merger, I think it’s very important that right up front people fully understand what the benefits are and can articulate them, and actually also put a monetary sum against them so they can actually quantify what the opportunity is.
There are more TV shows with Giles Murphy on Inside Finance TV and plenty more discussion about merger business advantage for you to explore.
Digital retail is the future, and retailers have to embrace it says Henderson's Alice Breheny in this Inside Finance TV interview.
Oh, I mean the ramifications, it’s terrible really, I mean I think, you know, if you don’t embrace it then you know, you’re on a slippery slope really into decline, whether you’re a retailer or a property owner.
I think you can defend yourself against it and keep your head above water.
But those that are going to thrive are those that really embrace it and seek every opportunity to exploit it.
But you know, we certainly see locations becoming unviable eventually, you know, there’ll be very little reason for people to visit them.
Retailers that, if they don’t up their game, you know, the competition out there is really fierce at the moment and certain asset types that just won’t be relevant in the future.
Inside Finance will continue to look at digital retail and the affects of digital technology on other industries.
Disruptive technologies that can completely change the way an industry works may be developed by another industry all together. Keith Coats Discusses:
Disruption in business is probably not going to come from within your own industry, and the danger of benchmarking is that we mark ourselves and our progress against those who are running the same race. So you would have expected Yellow Pages to be at the forefront of search engines – Google didn’t come from Yellow Pages.
There’s a large bank in Africa who rolled out an entire African strategy who, by benchmarking themselves against fellow competitors, that’s all they looked at. They went into Africa to discover that the biggest competitor to banking came from cell phone technology, or mobile technology, people transacting through their mobile devices, that changes the rules of the game.
So, the principle is this, is if we’re only looking within our industry, at people running in the same race as us, the chances are we’re not going to see the disruption. And smart organisations today are looking far enough and wide enough outside of their windows to … and asking the right questions to see the disruption that will change the rules of the game.
And our message to big companies who are leaders in their own particular sphere is don’t wait to be disrupted, be the disruption in your own industry, change the rules of the game. And if you don’t and you become complacent and you focus on business efficiencies, there will come a time when somebody will disrupt your industry and it’s going to come from outside.
We will have more videos about disruptive technologies on Inside Finance, where you can also watch more from Keith Coats.
Simply, I don’t think they are. I think most organisations are aware of it.
The standard itself is a pretty weighty tome, it’s very complex and is difficult to understand.
And so inevitably I think, most organisations recognise they need to do something but haven’t really explored the full impact and effect it will have on both them as an individual, but the finance team that they’re part of and the organisation that they’re part of.
So people, I don’t think have really yet grasped the potential impact of what this could mean.
I think it will vary depending on the type of organisation you are.
The complexity will depend on how complex an organisation you are yourself, how many subsidiaries you have, you know, whether you’ve recently done any mergers or acquisitions. So it will depend from organisation to organisation. The key thing is to really understand what the potential impact may be.
And that has to start somewhere, so one of the things we look at is, and we talk about is a readiness assessment which looks at how ready you are as an organisation to implement the changes associated with FRS 102, whether you have the right volume of resource to do that, whether you have the right type of resource in terms of the technical ability and actually indeed whether you have the time and the focus to really invest what is required to ensure a seamless and efficient implementation.
I think there are a variety of things, one is my earlier point that not many people in business now have actually been through this process before. I think the second one is that the whole thrust of shareholder value and the, you know, the financial economic engineering that there is mitigates against that kind of risk taking for the long term.
I don’t want to get into a short termism kind of rant.
But there is a definite prejudice against taking those kind of long term risks.
And I think the third thing is as well that the media, the politicians are pretty bad at suggesting we’re ever going to get out of this, you know, they’re almost making a meal of the gloom.
And so even if you are a businessman who has an optimistic streak about your own business, it’s very difficult to be optimistic about the wider economy because every time you turn on the television or pick up a newspaper, you know, you get slapped in the face, I think it’s bad news.
It's something for us it doesn't appear that complex.
We do it for a living but there are, I suppose... it is a skill in itself and often management teams don't have the tools to do it for themselves and so they often need to seek advice.
And we often advise other stakeholders like the company's bank for example, who may have concerns about the company's viability and about their exposure to it in terms of the loans.
So we'll often go in, either advising the board or advising the bank and we are needed because the management team or the bank don't have those skills themselves to identify, what the problems are, where they're likely to show themselves in terms of where the pinch points are and advising on what the best outcome.
Often, as I said earlier, directors leave it too late, come to us when they have to pay the wages at the end of the week and don't have any money to do so and in those circumstances it's often very difficult for us to do anything other than advise them to commence an insolvency process.
If they come to us earlier, there are ways in which their working capital facilities can be restructured or the business can be restructured so that they can avoid an insolvency process. But the key thing is for management to spot the problems early, come and seek advice and we can help them.
There is a risk for directors personally that they could be found liable personally for their company's liabilities. Many directors aren’t aware of that. If they carry on trading in business beyond the point that they know or ought to know that it's not going to avoid insolvency, then a subsequently appointed liquidator could apply to court to have them found personally liable.
That is a big risk for directors and one that not many are aware of. Another thing for directors to watch out for when they have businesses that are in financial difficulty is the question of preferences.
So for example if they have given a personal guarantee to a bank, and they arrange, in the period leading up to the appointment of a liquidator or administrator for that loan to be repaid, so to take away their personal guarantee liability, then that's something that can be overturned by the liquidator of the company subsequently.
So they're not avoiding that liability. That also applies to director's loans account, if they have taken loans from the company... sorry if they have given loans to the company and either arranged for those to be repaid just before the company goes into liquidation or administration, then that's a transaction that can be overturned by the liquidator or administrator.
So that also applies where directors have given loans to their companies and in the period leading up to the company going into some form of insolvency process, whether that's administration or liquidation, they arrange for those loans to be repaid by the company to themselves. That's a transaction that a subsequently appointed liquidator would certainly seek to return and would be successful in doing so.
For more information on the personal liabilities of company directors as well as other types of risk, you can watch more videos from Henry Shinners here.
Mark Webb: "If a company fails to look after its tax position correctly two things flow. If there’s tax due there will be interest charges, so the business has got to find that and fund it, and there can be penalties. And part of the issue with penalties, if they’re raised is that they are an actual cost for the business and they’re not tax deductible. There’s two main problems. The first is that if they’ve got to make payments of tax and they should have been made earlier, obviously there’ll be an interest cost, that’s how the Revenue treat late payments of tax. But also if there’s a penalty raised then a penalty situation is, that’s actual money from the business and it’s non-tax deductible in a lot of circumstances. So there’s almost a double hit for that type of business if that happens."