Your questions answered Vol 2 - IM Private Clients

[Stevil]

Quick query about IM Lifestyle, happily invested in it now, but wondering what options I'll have come retirement, would want to keep a couple of years money in the most defensive pot, with 3-5 years in a slightly less defensive one, then the remainder with more exposure to risk again. Will that be possible, or will I need to just split my pot up and adjust the target date appropriately for each of the pots?

[JulianPH]

I thought some information on the 'British ISA' might be helpful.

For background, you have to look back to PEPs (Personal Equity Plans) which were the precursor to ISAs.

PEPS were originally limed to UK listed companies only. They were basically a very tax efficient way of promoting general public investment in UK business.

As time went on they were opened up to companies listed on any recognised stock exchange.

You had your normal (general) PEP annual allowance, then also your 'Single Company PEP' allowance. The Single Company PEP was able to invest in just one company (as the name suggests) and this company b[]had[/b] to be a UK listed company.

What the Chancellor seems to be doing now is revisiting this concept. It would be suicide to restrict ISAs to UK companies only, so a new allowance is being created to funnel investment into British (listed) companies, in turn putting money into the UK economy.

Regardless of the take up of providers prepared to offer a tax wrapper with such a small investment allowance, I would remind people of an old and very wise adage;

Don't let the tax tail way the investment dog.

Basically, lead with the investment and then utilise the tax wrappers available to you. The collective view of our investment committee is that the UK is not well positioned for the best investment returns right now and as such, creating a portfolio restricted to this market so as to access a £5k a year tax wrapper is not remotely logical.

This would be facilitating the ability to not pay tax on gains we don't consider will be very good in the first place (when compared to what is potentially available elsewhere).

Using round numbers to give an example; it is better to pay tax on a 20% gain than to generate a tax free 5% gain!

From my perspective, we can be doing a lot more useful things right now than building a portfolio dedicated to a market sector that, whilst being useful and not to be ignored, does not stack up in isolation at the moment.

The creation of a £5k annual ISA allowance for this market does not change this investment fundamental.

I hope this helps!

Cheers

Julian

[JapanRed]

Not posted in this section for a looooong time. Logged into my IM account this morning to move the disinvested funds following PHO sell down and was pleasantly surprised by the overall performance of mine, my wife's and 3 kids funds since I last logged in (almost 12 months ago I reckon).

Seems PHT is doing well.

Glad to see Julian is back. Hopefully you are well mate.

Can anyone give me any more info on IM lifestyle? I've had a look at the website but its not clear to me.

I currently split all our investments roughly evenly between IM OGG, IM 100, PHE and PHT (20-30% in each). This is mirrored across mine, wife's and 3 kids investments. All have long term horizons (12-20 years). Would IM lifestyle be worth looking at? Appreciate you guys cant provide advice

Best wishes,
Rob

[AdamIM]

JapanRed said:

Not posted in this section for a looooong time. Logged into my IM account this morning to move the disinvested funds following PHO sell down and was pleasantly surprised by the overall performance of mine, my wife's and 3 kids funds since I last logged in (almost 12 months ago I reckon).

Seems PHT is doing well.

Glad to see Julian is back. Hopefully you are well mate.

Can anyone give me any more info on IM lifestyle? I've had a look at the website but its not clear to me.

I currently split all our investments roughly evenly between IM OGG, IM 100, PHE and PHT (20-30% in each). This is mirrored across mine, wife's and 3 kids investments. All have long term horizons (12-20 years). Would IM lifestyle be worth looking at? Appreciate you guys cant provide advice

Best wishes,
Rob

HI Rob,

Happy to talk you through IML. You can contact me through the PM function and we can arrange a call.

Regards

Adam

[Rodintee]

I have a question about IM funds in general. I have a number of savings including ISA, JISA and SIPP. As I understand it the somewhat spurious amounts that tend to accrue after shifting funds, say from PHE to PHT, are from dividends received after the funds are moved. Assuming this is correct can these dividends simply not remain in cash? This would avoid the small amounts languishing in what are otherwise terminated holdings.These do tend to clutter the picture and I, as others, have no wish to add costs to IM for moving relatively insignificant sums.

Also, do these "re-investments" not risk falling foul of the maximum annual allowance or are re-invested dividends outside the allowance?

[JapanRed]

AdamIM said:

HI Rob,

Happy to talk you through IML. You can contact me through the PM function and we can arrange a call.

Regards

Adam

Thanks Adam, PM sent.

[AdamIM]

Rodintee said:

I have a question about IM funds in general. I have a number of savings including ISA, JISA and SIPP. As I understand it the somewhat spurious amounts that tend to accrue after shifting funds, say from PHE to PHT, are from dividends received after the funds are moved. Assuming this is correct can these dividends simply not remain in cash? This would avoid the small amounts languishing in what are otherwise terminated holdings.These do tend to clutter the picture and I, as others, have no wish to add costs to IM for moving relatively insignificant sums.

Also, do these "re-investments" not risk falling foul of the maximum annual allowance or are re-invested dividends outside the allowance?

Hi Rodintee,

Yes the dividends will be cash. And as the growth/dividends etc was derived from a 'wrapped' investment, e.g. ISA, any such items are investible regardless of the annual limit provided they stay within the wrapper

[Rodintee]

Thanks Adam. In that case would it not make sense to leave these small follow up dividends as cash rather thank re-invest into the relevant portfolio if it is clear that the client has un-invested from that particular portfolio. Surely that would save IM dealing fees and leave the client a choice going forward as these small amount build up to an investable sum. Or maybe it would be an option to have a simple yes/no choice at the point of investing in a portfolio as to whether dividends should be reinvested or held as cash?

[2Btoo]

JulianPH said:

I thought some information on the 'British ISA' might be helpful.

>SNIP<

Thanks Julian. That's logical and sensible. I agree: it seems that the UK is royally screwed and the £5k 'British ISA' is a pretty thin attempt by the chancellor to direct investment to a flagging economy which doesn't make sense if you look at the figures closely. I think that there are some UK-listed companies which are worth putting a bit of money into (Diageo, perhaps. And maybe P&G) but not very many.

Thanks for another sensible and very understandable post.

[ferret50]

2Btoo said:

JulianPH said:

I thought some information on the 'British ISA' might be helpful.

>SNIP<

Thanks Julian. That's logical and sensible. I agree: it seems that the UK is royally screwed and the £5k 'British ISA' is a pretty thin attempt by the chancellor to direct investment to a flagging economy which doesn't make sense if you look at the figures closely. I think that there are some UK-listed companies which are worth putting a bit of money into (Diageo, perhaps. And maybe P&G) but not very many.

Thanks for another sensible and very understandable post.

Yes, JPH aka elderly daddy, has nailed it with his assessment.

Perhaps there is potential for an 'add on' using proven GB based companies in the future?

[pingu393]

JulianPH said:

I thought some information on the 'British ISA' might be helpful.

If any British companies become part of one of your portfolios, will we be able to add more into our ISA than the normal £20k?

Does the difficulty of splitting British / non-British make it too difficult to invest in Britain? The Law of Unintended Consequences .

I suspect that you will invest in the best available, but we won't be able to gain any ADDITIONAL tax advantage.

[Simpo Two]

On the 'not letting the tax tail wag the investment dog' principle, are we saying that thanks to a 'British ISA' we might invest in companies that otherwise we would not? There would be a point, I think, where an investment that would otherwise be ignored becomes viable if a sufficient tax incentive exists.

But would that mean Rishi is paying us to invest in Britain? Who funds that? The good old taxpayer I suspect.

[pingu393]

Simpo Two said:

On the 'not letting the tax tail wag the investment dog' principle, are we saying that thanks to a 'British ISA' we might invest in companies that otherwise we would not? There would be a point, I think, where an investment that would otherwise be ignored becomes viable if a sufficient tax incentive exists.

But would that mean Rishi is paying us to invest in Britain? Who funds that? The good old taxpayer I suspect.

How much tax would they get from a £5k investment? Bugger all, I would suggest. But it means that UK plc has had £5k of investment that has not come from the Government.

[JulianPH]

Stevil said:

Quick query about IM Lifestyle, happily invested in it now, but wondering what options I'll have come retirement, would want to keep a couple of years money in the most defensive pot, with 3-5 years in a slightly less defensive one, then the remainder with more exposure to risk again. Will that be possible, or will I need to just split my pot up and adjust the target date appropriately for each of the pots?

Hi Stephen, I trust life is treating you well!

Yes, you can indeed do this using different target dates.

It is important to remember though that this is effectively what IM Lifestyle is already doing at the income stage (a balance of different assets at varying risk/reward levels within one portfolio).

So it will have some defensive and caution exposure, with the reminder taking more risk/reward, thereby the whole providing that balance.

If you prefer to see these clearly set out and labelled externally, selecting your own specific weightings for each element, then you will soon be able to do this yourself using the the IM Optimum portfolios (when they have moved over to being the constituent parts of IM Lifestyle).

The advantage of this approach is that everything is clearly visible to you (compared to IM Lifestyle managing this internally in one portfolio) and you will clearly see this labelled in different portfolios (that you can treat differently for specific purposes).

There is no right or wrong way, it is just personal preference and to quite a degree this is phycological (as the overall portfolio balance remains very similar with all three approaches).

Give me a shout if I can give further explanation.

Cheers

Julian

[JulianPH]

JapanRed said:

Glad to see Julian is back. Hopefully you are well mate.

All well thanks - and very glad to be getting some more time to be back here.

With so much going on in business and family life (including 3 month old son!) I miss the days when I used to spend far too much time on PH in general and realise (quite genuinely) that these forums are the most enjoyable part of "work"!

[JulianPH]

Rodintee said:

Thanks Adam. In that case would it not make sense to leave these small follow up dividends as cash rather thank re-invest into the relevant portfolio if it is clear that the client has un-invested from that particular portfolio. Surely that would save IM dealing fees and leave the client a choice going forward as these small amount build up to an investable sum. Or maybe it would be an option to have a simple yes/no choice at the point of investing in a portfolio as to whether dividends should be reinvested or held as cash?

Hi Rodintee, you are correct on all counts and as I posted previously we are talking with P1 regarding a solution for this and the dashboard in general.

[JulianPH]

ferret50 said:

Yes, JPH aka elderly daddy, has nailed it with his assessment.

Perhaps there is potential for an 'add on' using proven GB based companies in the future?

Thank you, I think...

[JulianPH]

pingu393 said:

JulianPH said:

I thought some information on the 'British ISA' might be helpful.

If any British companies become part of one of your portfolios, will we be able to add more into our ISA than the normal £20k?

Does the difficulty of splitting British / non-British make it too difficult to invest in Britain? The Law of Unintended Consequences .

I suspect that you will invest in the best available, but we won't be able to gain any ADDITIONAL tax advantage.

It doesn't work that way I am afraid. The British ISA is a separate allowance and you can't extent your normal ISA allowance by way of UK listed stocks within it.

Yes, lead with the investments and take all tax advantages available. The only exception to this is a pension, where the tax advantages are so great. With ISAs, as good as they are, they are not strong enough for you to lead with the tax wrapper.

[JulianPH]

Simpo Two said:

On the 'not letting the tax tail wag the investment dog' principle, are we saying that thanks to a 'British ISA' we might invest in companies that otherwise we would not? There would be a point, I think, where an investment that would otherwise be ignored becomes viable if a sufficient tax incentive exists.

But would that mean Rishi is paying us to invest in Britain? Who funds that? The good old taxpayer I suspect.

Yes mate, in a nutshell!

There is a world of difference between using UK exposure in your overall portfolio to achieve a desired balanced approach - and picking UK stocks specifically for the purpose of this small tax wrapper.

Of course, if you hold UK stocks on a stand alone basis and can take advantage of the additional allowance then this is something you should certainly consider (assuming any cost of selling them and buying them back within the wrapper does not take away from the new benefit).

Cheers

[Stevil]

JulianPH said:

Hi Stephen, I trust life is treating you well!

Yes, you can indeed do this using different target dates.

It is important to remember though that this is effectively what IM Lifestyle is already doing at the income stage (a balance of different assets at varying risk/reward levels within one portfolio).

So it will have some defensive and caution exposure, with the reminder taking more risk/reward, thereby the whole providing that balance.

If you prefer to see these clearly set out and labelled externally, selecting your own specific weightings for each element, then you will soon be able to do this yourself using the the IM Optimum portfolios (when they have moved over to being the constituent parts of IM Lifestyle).

The advantage of this approach is that everything is clearly visible to you (compared to IM Lifestyle managing this internally in one portfolio) and you will clearly see this labelled in different portfolios (that you can treat differently for specific purposes).

There is no right or wrong way, it is just personal preference and to quite a degree this is phycological (as the overall portfolio balance remains very similar with all three approaches).

Give me a shout if I can give further explanation.

Cheers

Julian

Thanks Julian, sounds like I won't need to meddle with things then, think I'd perhaps thought by the time the income stage arrived that the majority would be in low risk investments and I'd miss out on all the lovely growth, but I should have known that wouldn't be the case.

Edited by Stevil on Saturday 9th March 12:41