With my niche in financial planning essentially dealing with the end of people’s lives i.e. those who are terminally/seriously ill or need advice when they are starting to have to pay for care, perhaps it is no surprise that a group that shows the future, makes a nice counter-balance. Solicitors Simmons & Simmons again host www.3Cscommunity.com meeting near Moorgate. This month there are 4 presenters in the auditorium and firstly, Modwenna Rees-Mogg of http://www.angelnews.co.uk/ tells us about Early Stage Finance. The best source is actually profitable customers rather than the more usual friends and family. Even cash neutral customers may help but getting rid of 20 per cent of unprofitable customers can help too.

Proper documentation for friends and family is best done properly to avoid the  “I need my money back next month” scenario as many start-ups only “cash out” after 6 to 10 years. Over 50 per cent go bust (usually within 3 years) so funding your friend/relatives business is quite a leap of faith. If you think shares are risky, stay away from start-up businesses which are unregulated and not covered by the Financial Services Compensation Scheme. A start-up is not a particularly smart investment for the tax-free cash from your pension either, unless you will not lose sleep if it doesn’t work out. Interestingly, some angels these days do not want to be directors of a new business as if it goes bust, this is on their record at Companies House. This may hinder raising money for future ventures. Instead, they may ask for observer status allowing them to attend board meetings but not vote.

Successful venture capitalists basically invest in good management teams and typically do 25 to 30 deals before they get The Big One! One needs to be open and honest with backers to avoid the so-called Oh sh*t! meeting where the money is in the bank, but you forgot to tell them about……   If you need research to perfect your gizmo, try and get a grant as what VC people really like to do is fund the growth phase of a business rather than the R&D bit. Using an intermediary is often better than a direct approach – perhaps a specialist solicitor or a group like 3Cs, which has helped about 30 entrepreneurs. Another source, if you want to keep up to speed on this stuff, is serial entrepreneur Mike Southon’s weekly column in the FT http://www.ft.com/comment/columnists/mikesouthon while the most economical way to get in front of serious investors is probably Bill Morrow’s Angels Den featured in one of my more popular blogs http://www.georgeemsden.co.uk/2009/07/im-an-investor-get-me-out-of-here/

Jack Butler of  http://www.future-foundations.co.uk/ who previously spoke at 3Cs in 2007 is back looking for extra funding for his programmes to help young people achieve their potential. This is done through 1 – 5 day total immersion programmes where the emphasis is on personal responsibility, leadership and enterprise skills.

Most exciting presentation is by Nick Coates of http://www.ultramo-engines.com/aboutus.html whose engines aim to reverse the current efficiency ratio of internal combustion engines. Your typical car engine is only around 30 per efficient with the rest going in roughly equal proportions via exhaust loss and heat loss. 40 years as a mechanical engineer has prompted a clean sheet approach from a thermodynamic perspective. Losses which cannot be avoided include  pumping, mechanical and Carnot losses - best explained here http://www.grc.nasa.gov/WWW/K-12/airplane/carnot.html

Starting from this carte blanche,  unavoidable losses account for about 30 per cent of the available energy, which should give an efficiency rating of around 70 per cent and really help save the planet as 45 per cent of world CO2 emissions are from the internal combustion engine. The respected Ricardo Institute http://www.ricardo.com/en-gb/ has seen the proposition and confirmed that the thermodynamics are sound – the question now is “will it work?” £200,000 is needed to build a working prototype plus another £1 million to develop it. Revenue would be from licensing and manufacturing and patent applications are in. While patents are needed to protect your idea (or intellectual property) lodging a patent tells the whole world what you are doing.

Third speaker is Matthew Scherba of http://www.tx3.biz/Events.html looking for funds to develop his project management software using MS Silverlite technology used by the public and private sector. Apparently, the pricing model is different as most software for example has a bronze, silver, gold model – more money = more/better/quicker features. Their’s is different but you pay less if you don’t need all the features. Surely this is the same principle but in reverse? Proving perhaps that I am beyond my zone of competence here, I don’t understand the answer but as the audience members are limited to one  question each, let it go. No point in wasting valuable drinking/networking time either which in the best 3Cs tradition continues at the nearest decent pub after we have have left the building.

Next 3Cs meeting 29th June 2010 at UCL Advances – the venture arm of University College London -see you there?

To finish on a more down to earth note, recent pension reviews will probably result in £26,000 of tax rebates for two clients. The people concerned did not realise that Higher Rate Income Tax relief on personal pension contributions has to be claimed unlike Basic Rate Income Tax relief which you get automatically (the pension company does it for you). Contact me if you are not sure here.

With some years of austerity ahead, perhaps it’s time to count one’s blessings and the subject at heading can do that quite easily. Haven’t seen them on TV for a while but there are still people who think that the government of the UK owe some people a living as their forebears were shipped off into slavery. Had this been the white man’s invention foisted on a vulnerable Africa then there might be a moral case, but the depth, extent and long history of slavery in Africa is staggering. Even today, your bar of expensive chocolate has probably been touched by slavery at some point, but that’s another story.

In essence, the slave trade only worked with the eager cooperation of (mainly West) Africa. Present day states of Togo, Benin and western Nigeria were previously known respectively, as the The Ivory Coast, Gold Coast and Slave Coast. These coastal kingdoms had land but few people to work it. Labour being in short supply, was therefore a more valuable commodity so slaves were a resource which could be used, traded or basically kept in the bank rather like gold bullion at the Bank of England. There was always a market for slaves, long before the Europeans with their “Triangular trade” arrived. The latter consisted of manufactures from Europe to Africa, slaves from Africa to the Caribbean and sugar from Caribbean to Europe.

Top of the African slave traders wish list was rifles and the British eventually took about half of this market against stiff competition from the Dutch and French. More rifles enabled you to attack your neighbours and of course, capture more slaves. Whether from the locals being better negotiators, shortage of slave supply or perhaps the rifle manufacturing cost dropping, the value of a slave gradually increased from two rifles in 1682 to over twenty in 1717. Losing African tribes formed alliances to protect themselves from other slave traders – like the Yoruba, for example.

Doing business overseas means inevitably socialising with the locals and watching local ceremonies which in west Africa occasionally included mass sacrifice. Dahomey was the most enthusiatic here with 4,000 being sacrificed when King Agaja Dosu captured Save and Ouidah in 1777. Arabist Sir Richard Burton witnessed these bloodbaths stating that they were “deporably mistaken but perfectly sincere” as they were considered essential for the wellbeing of the kingdom concerned. Palaces sometimes had human skulls incorporated in the walls while beheadings were done occasionally by the king himself or his male and female executioners. There were front line female troops too who fought naked to the waist, like demons and were the best men in the Dahomeyan Army according to a foreign soldier.

Readers may be wondering where this grisly information comes from and may not be surprised that it is another Foreign Legion book Our Friends beneath the Sands by Martin Windrow which deals with France’s colonial conquests 1870 to 1935 http://www.amazon.co.uk/Our-Friends-Beneath-Sands-Conquests/dp/0297852132 With the holiday season coming up, this might be worth putting on your reading list. The well-researched detail makes the book a demanding but rewarding read, and I am only halfway through. Anyone with an interest in French history should find it worthwhile. The most recognisable name so far is Clemenceau.

The book debunks a few myths pointing out for example, that cafard the Legion name for a special kind of madness in small outposts in the Sahara, had its own British version in India where bored troops got seriously “fed up” and occasionally went beserk – later expressed in a different context by the Salvation Army founder Gen Booth’s famous saying “The devil finds work for idle hands”. In the late nineteenth century, reforms made the Army more professional especially for officers where the Army had sometimes been seen as a rite of passage until an inheritance and marriage came along.

Reading the the French conquest of Tonkin (north Vietnam) shows they had a hard time of it especially against some Chinese troops. Tonkin owed loyalty to China but wanted independence too. Eventually a treaty between France and China allowed France to have French Indo-China and respect the Chinese border. There is a strange echo here in the 20th century. The Americans had an embassy in Hanoi with a one-star general posted there. The north Vietnamese asked the Americans for help in getting freedom from the French but the Americans declined as this was shortly after WW2 and the French were allies. The north Vietnamese got their arms elsewhere and their struggle eventually led to the French defeat at Dien Bien Phu where the Foreign Legion was heavily involved. Later of course, it led to the Vietnam war.

Perhaps most of all, the book illustrates the profound difference in the French and British approach to their colonies. Emigrants to British colonies were not hindered like the French who liked to retain control of their colonies. This led to huge emigration to America but much less to (French) Canada. Hardly surprising perhaps that the United States of America became the largest economy in the world as the size of their economy (GDP) passed that of the UK back around 1870. In the nineteenth century, economic growth rates were sometimes around 20 per cent p.a. helped by the new technology from steel, electricity, steam power and the telegraph, not to mention little regulation and low taxes.

China looks set to become the world’s largest economy soon but there the growth rates have been around 9 per cent p.a. and it is easy to forget that away from Europe, there is little talk of recession. Go East young man? http://www.gold-eagle.com/editorials_04/chuhran020204.html

The Bible talks of the meek inheriting the earth, which inevitably led to the graffiti post script if it’s alright with you. A small and sensible consequence of the Conservative/Liberal pact means the meek and maybe not so meek will have to earn their own money and pay more Inheritance Tax on what passes down. The Tory proposal to increase the threshold to £1 million has been dropped which means hopefully tax rises will not have to be quite so high elsewhere. Lovely to inherit something from our parents and families, but if it is a choice between taxing people working to create wealth/jobs/businesses and letting people get hefty six-figure sums tax free, taxing the wealth creators seems barmy. Labour’s introduction of transferable nil-rate bands was puzzling at best and cynical at worst.

Inheritance Tax in the UK is a donor-based tax where the people giving the money away in a will for example, are liable. Other countries have a donee-based inheritance tax where the beneficiaries have to pay an inheritance tax. In the UK, everyone has their own allowance where the first £325,000 is taxed at 0% (hence the name nil-rate band) and any excess taxed at 40%.  For any parents reading this, it is essentially your children’s problem, as it only arises when parents have passed away.  Parents’ attitudes to Inheritance Tax fall into two distinct camps. A minority feel that they have paid their share of tax in their working lives and don’t want their beneficiaries to pay more tax on what they inherit, so may start giving assets away. This is generally effective after 7 years and has the charming label of PET or Potential Exempt Transfer.

Others say that the beneficiaries can sort this out themselves as they do not want to pay the insurance premiums. Sensible children might take out a policy for the Inheritance Tax amount where they pay the premiums and the parents are the lives insured. This ensures that a cash amount is available to pay any Inheritance Tax and can avoid selling assets which they might prefer to keep. Inheritance Tax has to be paid before probate.

An essential detail here is the place the policy concerned in trust, so that it is not counted as part of the parents’ estate. If this is not done, then the policy proceeds are added to the value of the estate and result in an increased Inheritance Tax bill. Have actually heard of cases where the adviser forgot to do this and it was only picked up later in a review by a better qualified one.

Another way of keeping money in the family is to set up a trust. The trustees are the legal owners while the children or grandchildren maybe, are the beneficiaries. Income from the trust for example, could be used to pay for private education. If the trust assets are rental properties then the rent may well have paid off the mortgage in say, 15 years. This is only likely to work if the mortgage is not more than 60 per cent of the property value and there no long voids or empty periods. Gifts of more than the nil-rate band currently £325,000, will result in an immediate tax penalty so a way to stretch any gifts to say, a family trust is to get a mortgage on the property concerned. If the property is worth £300,000 and you put a mortgage of say, £150,000 on it, the net gift is only £150,000 meaning you still have £175,000 of unused nil-rate band.

Problem here is that few lenders understand what a trust is with private banks being the main exception. When handling previous mortgage enquiries from people who had trusts, the most common reaction when phoning a lender was a stunned silence followed by “What’s that?” or “What do you mean by trust?” Even the lenders that do lend to trusts are pedantic and in a recent case, the sticking point after 2 months of dithering proved to be the age of the trustees, who were in the 60s and still working. This affected the loan term and margin over Bank Rate which might be offered.

The deal was already approved by an underwriter, but some bright sparks on the credit committee wanted a trust administrator too. They had previously asked for a legal opinion on whether the trust had powers to borrow which the client had to pay for. Had they bothered to open the trust document, they could have read this themselves on page 3. Asking now for a trust administrator was pure vanity, as the trustees concerned ran everything very easily and with an annual cost of several hundred pounds, was money which would have been better spent servicing or paying off the mortgage. What about making one of the children a trustee? Oh yes, what a good idea! Fingers crossed for the mortgage offer.

More cheerfully, feedback is always welcome and thank you Rob Worth http://www.worthsolutions.com/ for pointing that the epithet The Art of the Possible is from Bismarck http://en.wikiquote.org/wiki/Otto_von_Bismarck who also gave us our Retirement Age of 65 http://www.georgeemsden.co.uk/2006/05/a-little-more-reality-returns-to-pensions/

A bank visit with a client is something new for me and while our objective is achieved, one comes away with the feeling that that some High Street Banks have lost the plot. Purpose of the visit is to reduce the confusing number of accounts that my client has ended up with and where the interest rates are pathetic. Some work to do this was done last week over the telephone with my client present, but the bank would like her to pop in? She telephones the bank the day before to confirm the appointment and ends up talking to a call centre in Liverpool who know nothing about it? We arrive on the appointed day and the polite cashier knows nothing about it either. Pointing out for the second time that the bank requested that she pop in, she finally finds the appointment logged “in another diary”. Two unused accounts are closed but when trying to find an interest rate over ONE per cent for a hefty 5 figure sum, this very well known bank has nothing to offer unless she:

a) ties up the money for over a year (may need access)

b) applies for another credit card (she does not need another one) or

c) gets a computer so she can have an on-line account (no thank you)

The guy she has seen previously knew that her assets could be moved from one account to another to get a better return, but seems to have deliberately left some of the money in an account paying 0.5% when another one with identical benefits paid 2.97% p.a. With the election out off the way, we can expect more regulation and more cost but one has to wonder how often the high street banks are inspected, or if they have heard of the Treating Customers Fairly initiative, for example. Main benefit is that my client at least has the business card of the young lady we saw and can talk to her directly when future issues arise.

An interest in politics and my shy retiring nature find me at a Polling Station on Election Day doing duty as a teller. This involves collecting the voting numbers of people going to vote so that this can be checked against people who have said they will support you. This election there is no one from Labour, just me and a guy from the Lib Dems. The local council has been Labour for 30 years while the MP is Lib Dem. One of the nice things about politics in this country is that people of widely differing views can at least go about their different political tasks in a civilised way. The numbers we collect at polling stations are shared, for example. My co-teller  this time is a professional writer who has been thinking about blogging, so our conversation is very interesting. 

Now the results are in, we are at the horse trading stage with both parties negotiating to get Gordon Brown out of Number 10 and if you are wondering where the blog heading comes from, it is Mrs Thatcher’s saying about politics.

For another political day which had very happy consequences see http://www.georgeemsden.co.uk/2005/12/a-nice-story/