News & Views

Comparing your spending with others

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Our clients are often interested in how their household spending compares to others.  Do they spend more than their neighbours, about the same, or less?  This financial curiosity has been satisfied with the publication of new official figures reporting on household spending across the UK.

The latest Family Spending Survey from the Office for National Statistics (ONS) offers an insight into the spending habits of UK households, broken down by household characteristics and types of spending.  At a headline level, it shows that average weekly spending is up to £572.60 for the year ending March 2018.  This is the highest level of weekly spending since 2005, when adjusted for inflation.

According to the ONS, this rise in UK household spending is correlated with an improvement in the employment rate, which reached a record high of 75.6% in the first quarter of last year.

The ONS reports that the biggest outlay for households was transport.  The average household is now shelling out £80.80 a week on its transport costs.  A further £76.10 per week was spent on average on housing costs, fuel and power.  This was followed by an average of £74.60 a week on recreation and culture.

In addition to spending habits, the report also looks at how much we are saving.  It found that our savings ratio has fallen to its lowest level since records began, to just 3.9%.  Such a low savings ratio suggests that households are dipping into their savings, and even taking on new debt, in order to spend more and keep up with their lifestyle costs.

Looking at spending habits across different parts of the UK, the ONS report found some interesting differences.  Perhaps unsurprisingly, London households are spending the most each week with an average weekly spend of £658.30 in the City.  Other parts of the country to report above average levels of weekly spending were the South East, South West and East of England.

In contrast, the lowest average spending was reported in the North East of England, where households were spending an average of £457.50 each week.  There was also below average spending in Scotland, Northern Ireland and Wales, at £492.20, £488.50 and £470.40 a week on average respectively.

Another trend identified in the report was less of an outlay on alcoholic drinks.  It’s not the first time the ONS has spotted this downward trend.  Households are now spending an average of just £8 a week on alcohol.  A decade earlier, this figure was £10.90 a week, when adjusted for price inflation. More is being spent on food and non-alcoholic drinks compared to a year earlier; £60.60 a week now compared with £58 a week (inflation adjusted) back in 2008.

Commenting on the figures, Helen Morrissey, pension specialist at Royal London, pointed out they represent a home maintenance time bomb for the over 50s.  She said:

“Today’s figures show that just because people may have paid off their mortgage it doesn’t mean they stop spending on their house and many are facing a home maintenance time bomb.

“The stats show almost a quarter of all housing expenditure in households headed by people aged between 50-74 was on alterations and improvements such as central heating installations and double glazing. This figure is much higher than the average for all households which is more like 14%.

“It demonstrates the importance of having the necessary savings to meet these sizeable and often unexpected expenses for those approaching and in retirement. Being unable to meet these expenses as we get older can lead to people being forced to move from much loved homes because they no longer meet their needs.”

Of course, how you allocate your own household spending each week is likely to vary from these national averages.  What matters is that expenditure is intentional and forms part of your overall financial planning, helping you to achieve and maintain your desired lifestyle.

At Wells Gibson we put your life at the centre of our conversations and design a Wealth Plan which makes it easier for you to visualise and achieve the life you want; answers your big questions and helps you prepare for your life’s transitions; and gives you the greatest chance of a successful investment outcome and fulfilled life from the money you have and will have.

Six warning signs of an investment scam

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It can be a dangerous world when it comes to our personal finances.  Sadly, scammers and fraudsters are widespread, always looking for their next unsuspecting victim.

New figures highlighted by the Financial Conduct Authority (FCA) show nearly £200 million was lost to reported investment scams last year.  The average victim lost £29,000 in 2018, with common scams reported involving investments in shares and bonds, foreign currency exchange trading (forex) and cryptocurrencies.

The data comes from Action Fraud, which revealed more than £197 million of reported investment scam losses last year.  They also pointed out that scammers are resorting to increasingly sophisticated tactics in order to persuade their victims to give up their cash.

According to the FCA and data from their call centre, it’s investments from unregulated firms that are most commonly reported as scams. These include investments in shares and bonds, forex and cryptocurrencies, all from firms that are not FCA authorised.  These investment scams represent 85% of all suspected investment scams reported last year.

With the first quarter of the year considered to be a peak season for investing, with end of the tax year approaching, investors are being warned to be particularly vigilant.  The FCA warned that the profile of investment scams is changing, with more of these taking place online.  It means scammers are increasingly moving away from traditional cold calling on the telephone to find victims, although this approach does continue to exist.

Fraudsters are now contacting people through emails, professional looking websites, and social media channels, including Facebook and Instagram.

Research carried out by the FCA found that, last year, more than half of potential fraud victims did the right thing by checking first with the FCA Warnings List at  This is a tool that helps users to find out more about the risks associated with an investment and search a list of firms the FCA knows are operating without its authorisation.

The FCA is urging investors to consider the following six warning signs when making investment decisions:

  1. Unexpected contact – Traditionally scammers cold-call but contact can also come from online sources e.g. email or social media, post, word of mouth or even in person at a seminar or exhibition.
  2. Time pressure – They might offer you a bonus or discount if you invest before a set date or say the opportunity is only available for a short period.
  3. Social proof – They may share fake reviews and claim other clients have invested or want in on the deal.
  4. Unrealistic returns – Fraudsters often promise tempting returns that sound too good to be true, such as much better interest rates than elsewhere.
  5. False authority – Using convincing literature and websites, claiming to be regulated, speaking with authority on investment products.
  6. Flattery – Building a friendship with you to lull you into a false sense of security.

Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, said:

“Investment scams are becoming more and more sophisticated and fraudsters are using fake credentials to make themselves look legitimate.  The FCA is working harder than ever to help protect the public against this threat.  Last year we published over 360 warnings about potentially fraudulent firms.  And we want to spread the message so we can all better protect ourselves from investment scams.”

Director of Action Fraud, Pauline Smith, said:

“We are working with the FCA to raise awareness of investment fraud and would urge anyone who is considering in investing to check with the FCA before parting with their money.

“If you think you have been a victim of investment fraud, report it to Action Fraud.”

The FCA is advising investors to reduce their chances of falling victim to investment fraud by carrying out three simple steps. You should always reject unsolicited investment offers, whether these are made

online, via social media, or over the telephone. The recent introduction of new legislation makes it illegal for anyone to cold call you about pensions.  This should serve as a strong warning that any investment-related cold calling is likely to be an attempted scam, as legitimate firms do not cold call prospect customers.

Before investing any money, always check the FCA Register to make sure that the individual or firm involved is authorised.  You should also check the FCA Warning List to make sure the firm you are dealing with is not listed there.

And finally, you should seek impartial advice before investing.  There is never any harm in seeking a second opinion before investing your money.

There are more tips at the FCA’s ScamSmart website, which can be found at

If you’ve lost money in a scam, contact Action Fraud on 0300 123 2040 or visit their website at

Keeping the 2018 market fall in perspective

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2018 may have been a disappointing year for equities / shares, but it shouldn’t have been a surprise.

‘Stock market slide in 2018 leaves investors bruised and wary’ The Financial Times (31st December 2018)

Since 2009 (the bottom of the market during the Credit Crisis), global markets have delivered positive returns in eight out of the ten calendar years. The last negative year for equities was in 2011, when the markets were down around 7% – history reveals that on average, one in three years deliver negative returns.  Investors have, of late, been extremely fortunate.

Since 2008, in every single year, investors have suffered a fall from a previous market high and many of these falls were larger than 10%. However, even investing at the start of 2008 and suffering the 35% peak-to-trough fall in 2008, an equity investor would have turned £100 into £230, i.e. 8% compounded over 11 years, if they had been disciplined and patient.

As humans, we tend to have a strange view of what invested wealth represents and how we feel about it at any point in time.  We tend to be happy as wealth, at least on paper, increases in value at a specific point in time and unhappy when we reach that value again, if it is achieved after a market fall.

At Wells Gibson we believe real wealth is about much more than money and possessions and many would suggest the true meaning of wealth is having the appropriate level of assets that we require, when we require them, to meet our desired lifestyle.  In the interim, movements in value are noise, somewhat meaningless and part and parcel of investing.  As investors, we should try to avoid mentally banking the money we (appear to) make on the undulating, and sometimes precipitous, road we are on.  Remember too that the headline equity market numbers are unlikely to be your portfolio outcome, as most investors own a balance between lower-risk, defensive assets (bonds) and higher-risk, growth assets (equities).

Keeping things in perspective

Investing in equities is always going to be a game of two steps forward and one step back.  What equities deliver from one year to another is of little consequence to the long-term investor, who does not need all of their money back today.

As far as 2019 is concerned, no one who is honest knows what will happen in the markets.  The global economy is still set to grow by 3.5% above inflation this year, according to the IMF, which is not that bad.  Today market prices reflect the aggregate view of all investors based on the information to hand.  If new information comes out tomorrow, prices will adjust to reflect the impact this has on company valuations.  As the release of new information is, by definition, random, so too must price movements be random, at least in the short-term.  Over the longer-term they reflect the real growth in earnings that companies deliver through their hard work, executing the delivery of their business strategies.

In the longer-term, investing in the stock market is a game worth playing, at least with part of your portfolio.  As Benjamin Graham, a legendary investor in the early 20thCentury once said, “In the short run, the market is a voting machine but in the long run it is a weighing machine.”  At Wells Gibson, we could not agree more.

CISI Accredited Financial Planning Firm

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Wells Gibson has been approved by the Chartered Institute for Securities & Investment (CISI) as an Accredited Financial Planning FirmTM.

According to the CISI, Accredited Financial Planning FirmsTM  demonstrate excellence in everything they do and are recognised as some of the most trusted financial planning firms in the UK.  They deliver a comprehensive financial planning service, helping clients achieve their life goals.  They are the leaders in their profession, demonstrating the ultimate in professionalism through the calibre of the service they provide.

To qualify as an Accredited Financial Planning FirmTM, Wells Gibson has to meet strict criteria in relation to the delivery of financial planning; demonstrate that we place clients at the heart of our business proposition; and ensure clients consistently receive an excellent service.  In addition, at least 50% of our Wells Gibson’s FCA registered individuals must be qualified as a CERTIFIED FINANCIAL PLANNERTM (CFPTM) professional or Chartered Financial Planner.

As at January 2019, there were approximately 70 Accredited Financial Planning FirmsTM in the UK.

Key questions for long-term investors

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Whether you’ve been investing for decades or are just getting started, at some point on your investment journey you’ll likely ask yourself some of the questions below. Trying to answer these questions can seem intimidating but know that you’re not alone.  Your financial planner is here to help.

1. What sort of competition do I face as an investor?

The market is an effective information-processing machine.  Millions of market participants buy and sell securities every day, and the real-time information they bring helps set prices.  This means competition is stiff and trying to outguess market prices is difficult for anyone, even professional money managers (see question 2 for more on this).  This is good news for investors though. Rather than basing an investment strategy on trying to find securities that are priced “incorrectly,” investors can instead rely on the information in market prices to help build their portfolios (see question 5 for more on this).

2. What are my chances of picking an investment fund that survives and outperforms?

Flip a coin and your odds of getting heads or tails are 50/50.  Historically, the odds of selecting an investment fund that was still around 15 years later are about the same. Regarding outperformance, the odds are worse.  The market’s pricing power works against mutual fund managers who try to outperform through stock picking or market timing.  As evidence, only 14% of US equity mutual funds and 13% of fixed income funds have survived and outperformed their benchmarks over the past 15 years.

3. If I choose a fund because of strong past performance, does that mean it will do well in the future?

Some investors select mutual funds based on past returns. However, research shows that most funds in the top quartile (25%) of previous three-year returns did not maintain a top-quartile ranking in the following three years.  In other words, past performance offers little insight into a fund’s future returns.

4. Do I have to outsmart the market to be a successful investor?

Financial markets have rewarded long-term investors.  People expect a positive return on the capital they invest, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.  Instead of fighting markets, let them work for you.

5. Is there a better way to build a portfolio?

Academic research has identified these equity and fixed income dimensions, which point to differences in expected returns among securities.  Instead of attempting to outguess market prices, investors can instead pursue higher expected returns by structuring their portfolio around these dimensions.

6. Is international investing for me?

Diversification helps reduce risks that have no expected return but diversifying only within your home market may not be enough.  Instead, global diversification can broaden your investment opportunity set.  By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.

7. Will making frequent changes to my portfolio help me achieve investment success?

It’s tough, if not impossible, to know which market segments will outperform from period to period. 

Accordingly, it’s better to avoid market timing calls and other unnecessary changes that can be costly.  Allowing emotions or opinions about short-term market conditions to impact long-term investment decisions can lead to disappointing results.

8. Should I make changes to my portfolio based on what I’m hearing in the news?

Daily market news and commentary can challenge your investment discipline.  Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad.  If headlines are unsettling, consider the source and try to maintain a long-term perspective.

9. So, what should I be doing?

Work closely with a financial planner who can offer expertise and guidance to help you focus on actions that add value.  Focusing on what you can control can lead to a better investment experience.

  • Create an investment plan to fit your needs and risk tolerance.
  • Structure a portfolio along the dimensions of expected returns.
  • Diversify globally.
  • Manage expenses, turnover, and taxes.
  • Stay disciplined through market dips and swings.