Pressures from the “credit crunch” continue to surface in business life or maybe it is a convenient excuse?? Continuing from the Abbey/Alliance & Leicester item in the previous blog http://www.georgeemsden.co.uk/2009/04/soft-openings-budget-leaks/ it seems that Abbey are now contacting customers directly 6 months before a mortgage product is due to finish, to tell them what offers are available. Good customer management you might think but these are customers introduced by brokers. Perhaps I should hang around in the local Abbey branch and quietly hand out my own business cards?
There is still the odd surprise in the property market where one client finds that a commercial property goes for £250,000 against a predicted £210,000. The yield at the £210,000 figure is about 6 per cent and obviously less when you pay £250,000. Auction fever can catch any of us, but you wonder if the buyer remembered that Stamp Duty is 3 per cent over £250,000. Property cost £250,000 duty £2,500; cost £250,001 duty £7,500.
One step away, an estate agent with a very impressive track record finds that commision terms are suddenly halved on a juicy deal he introduces to a firm he has been working with for 7 months. No answer to his phone call to the office querying this. Next day he is unable to log in to check his e-mails which is all explained a few minutes later, when the employer informs him that their arrangement is terminated “as we cannot agree terms….”
Fortunately, there are still some people who do keep their word, as I get a phone call regarding an introduction I made in Autumn last year. The deal is about to close, and the call is to inform me that a cheque will be on its way to me shortly. We have no formal introducer’s agreement and the deal is below their normal minimum, but my business instinct told me that the two parties could do business and it did not take long for a willing buyer to be found.
New postal charges remind me of an interesting nugget from a review meeting with a client who has a very successful courier business. Much of their business is from the legal profession and where two Lever Arch files are required in another office in London for example, their courier price is often cheaper than using Royal Mail – not to mention being a lot quicker.
Faced with the choice of jam today or jam tomorrow which in pension-speak might translate as salary today or pension tomorrow, insurance broker Aon (UK) and Aviva (was NU) are reducing contributions to their own staff pension schemes. In the case of Aon, employer contributions are being reduced and in the case of Aviva, employees will have to start contributing something if they want their employer to contribute. Employers/HR people reading this who want to get up to the minute pensions info might wish to look at: http://www.mycompanypension.co.uk/Employer-Zone
Further funding research reminds me that BIMBOs are not only two-legged creatures but can be Buy-In/Management Buy-Outs where the people buying into a business (MBI lot) may work with the people who are trying to sell out/exit (MBO lot). The latter might be an elder generation of a family business with no obvious succession, typically arising from: they have no children, the children aren’t interested or maybe live in another country. Funds for the purchase would be largely borrowed and the cash flow and profits used to clear the debt. At this point, the company would probably be sold or perhaps listed on AIM at a higher earnings mutliple than when they bought it – and so life goes on.
For those of you who find the financial BIMBO stuff a bit tedious, here is a short summary of the more popular human version which originally was male http://www.independent.co.uk/opinion/letters/words–bimbo-1271966.html
A regular topic in my monthly pension surgeries is transfers. Convenience is usually the driving factor whether for UK employees who have changed jobs several times or for ex-pat employees here who wish to return to say, India or Australia. For the former, transfer cannot be done on an execution only basis nor can the client get the forms from the pension provider and do the paperwork themselves – it has to be advice only. This will invariably be fee-based and not < £500 making the cost against a fund of a few £thousands, uneconomic. For the latter, pension benefits can be transferred provided the receiving scheme is on the QROPS list http://www.hmrc.gov.uk/pensionschemes/qrops.pdf
The list has been around for a couple of years and is basically a list of schemes where the laws in the receiving country are broadly similar to pension rules in the UK. This list used to be updated on an ad hoc basis but is now only valid for 24 hours, after last year when all Singapore schemes where removed http://www.telegraph.co.uk/finance/personalfinance/pensions/2792608/Expat-pension-schemes-Singapore-sling-may-sink-pensions.html
But in a final example of how life is changing with the credit crunch, thanks to http://www.ustaxonline.com/aboutUs.html for reminding me that the US IRS has anounced a six month amnesty for people who have neglected to declare overeas earnings etc – changing what some people might have thought of as cool to rather dangerous.