Networking Uncovered

In my book ‘Reimagining the Role of the Private Client Industry’ I make the observation that Private Client Professionals network, because everyone else networks –it is what is expected. However, the consensus of opinion is that the return on investment (ROI) is ‘poor’ if at all.

In marketing ‘speak’ networking is B to B marketing; Business to Business, the other form of marketing is B to C; Business to Consumer.

In our industry the Consumer is and wants to remain private. It may be tempting to go to events where you can meet your ideal client such as  the Monaco boat show or the Frieze Art event. But this simply does not work; it did not work pre lockdown and is even less likely to work now, because your ideal client has gone to the event to indulge his or her passion; not to talk ‘stuff’. Imagine that you love football, and as you are watching your favourite team play someone try’s to talk to you about your risk profile! Imagine how you would feel about the intrusion.

So, the preferred way to market is B to B which is networking.

In essence a Private Client Professional needs to meet other Private Client Professionals who have the type of clients they would like to work with, in the hope that they will refer their clients to them for their services.

Private Client Professionals, before lockdown – loved industry events, but in many cases they are confused between education and winning business.

The first type of event is industry specific events. These are full of other people doing your type of work – so no one is going to refer you business, because they will do the work you want themselves!!! Furthermore if you need to gain CPD points, there are far cheaper and more efficient ways to learn through industry webinars.

The second type of event is non-industry specific events where all the people in the room have different skills but the same type of clients. The trouble here is finding content which appeals to all the delegates. The danger here is that the speeches are of little interest and most delegates use the time to check their emails. An expensive place from which to work!

The value of the meeting they are told is in the ‘valuable’ networking break-out session.

But how valuable are these break-out sessions?

Maybe over the course of the day a Professional will have had one coffee break, one tea break, a buffet lunch and maybe a drinks session. At each break out they will have picked up four or five cards, which will mean in total over the day between 16 and 20 cards. Maybe they look at each of them filter out who they want to follow up with and send them one maybe two follow up emails. Most professionals have around 2,000 such connections with whom they rarely follow up. It is hardly surprising little business is won from this sort of activity

For B to B networking to be effective and efficient there needs to be four factors present

1                Information on what is special about their organisation

2               Client Stories on what the professional does for their clients

3               Both 1 and 2 need to be remembered and repeated and

4               Easily accessible for referrals to be made

There are four ways to make networking more effective and efficient

First we must stop trying to get, and start trying to give; this is what I call a Culture of Care. If we are to build trust with our clients, we need to look after their wider interests; and to refer other Professionals to our clients when the opportunity presents itself

Second, we need to decouple education from networking – effective networking has nothing to do with speeches

Thirdly, we need to say something about ourselves and our organisation when people have time to learn. Podcasts are trending, much more than webinars, because they can be listened to when we are doing other things; driving, walking the dog, mowing the lawn, or cycling in the gym and

Fourthly we need to convey our services in a manner in which they will be remembered. Client Stories are 1,227% more likely to be remembered than any other form of information.

Put all these factors together and you have Caroline’s Club which has now been recognised by City Wealth and shortlisted for Power Woman of the Year 2021 see below for your chance to vote!

If you would like to serve your clients better and network more effectively and efficiently join Caroline’s Club, simply register and join our Client Stories Zoom meetings here.

Fine line

The front page of last Thursday’s Financial Times made interesting reading.

It said the review by the Office of Tax Simplification requested by Rishi Sunak in July this year had been published. It proposed that the tax rates on Capital Gains Tax be aligned to Income Tax and the Annual Exempt Amount reduced from £12,300 to £2,000 or £4,000

Immediately colleagues close to Sunak began distancing themselves from the report with one being quoted in the Financial Times as saying, ‘it’s the job of the [Office of Tax Simplification] to review these taxes, but essentially these are a bunch of wonks doing this work’!!!

The article made it clear that Sunak needs to ‘tread carefully because any far-reaching reforms of CGT would hit core Tory voters’

Let’s take Terry, a client of mine. He was a trader in his twenties and made a substantial sum of money in the 1990’s which he invested in buy to let property. He is now married with two young kids and works as a web developer in London (not his real name or family circumstances).

He loves what he does, but he can do it anywhere and does not need to be based in London – or indeed the UK. He has seen the tax on his buy to let portfolio increase year on year and now the threat of increasing the CGT rate from 18%/28% to 45% had made him think

If these changes were introduced, Terry tells me he would never vote Conservative again and would move to Portugal (listen to last week’s podcast with Carlos Santos of Dixcart on the benefits of living in Portugal). He would then sell all his buy to let portfolio and the UK HMRC would get nothing.

It is not surprising that the Office of Tax Simplification has recommended these changes. As Noel Craven Investment Director of Quartet says in this week’s podcast only 281,000 paid CGT in 2017-18. This raised only £8.3 billion in revenue compared to £180 billions in income tax. If the Annual Exempt Amount is severely cut back, the number of people who would pay CGT would rocket and would include people like Agnes. Agnes, like 50,000 others annually report capital gains just below the £12,300 threshold

Agnes is elderly. She lives near Windsor and supplements her meagre pension by taking just under £12,300 capital from her portfolio of shares which her late husband had saved during his lifetime out of taxed income. She is not rich and lives modestly.

Agnes like Terry is a traditional Conservative voter, but unlike Terry cannot make a new life for herself abroad, so would be forced to make greater inroads into her portfolio to maintain her lifestyle. She has also sworn to vote Labour at the next election – if the Office of Tax Simplification recommendations are implemented.

It is a popular opinion that the rich should fill the shortfall created by the pandemic but raising the rates of CGT and slashing the Annual Exempt Amount but people like Agnes are not rich and the changes will barely make a difference

At best raising the rate of CGT will bring in £14 billion. But even the OTS admits this is an overestimate since in practice the amount raised would be less as people would change their behaviour.

Most gains are made by relatively few taxpayers; 62% of CGT is raised from gains in excess of £1m which is only 3% of the 281,000 who paid any CGT in 2017/18.

These people often have the flexibility about when to dispose of assets – Terry for example, would not sell any of his buy to let properties until he was no longer tax resident in the UK – in which case UK HMRC would get nothing

Furthermore, the revenue raised from CGT even if they increased the rate is miniscule when compared to the enormity of the problem. The national debt is set to be £2trillion, 100% of annual GDP. £8.3 billion even if increased by a further £14 billion is but a drop in the ocean.

There are only two ways to tackle the deficit in my opinion; the first is to catch tax cheats – which HMRC is well on its way to being able to do – listen to Andrew McKenna’s podcast – and about which I have written much upon, and the second is to increase the incentives on businesses to grow, make more money - which can be taxed, and employ more staff who will pay income tax.

In short, the only people who are going to make any difference are the wealth creators; either those who have tried to cheat by no paying their taxes (or HMRC would like to argue they were cheats) and wealth creators who do not cheat.

Episode 35 -

Winner of the PAM Cautious Award, Noel Craven: Quartet

In Episode 35, Caroline Garnham speaks with Noel Craven, an Investment Director at Quartet Investment Managers.  Noel has over 20 years of Investment Management experience for High Net Worth International clients. Caroline and Noel talk about what it means to be winners of the the Private Asset Managers (PAM) Awards in the category "Investment Performance – Cautious Portfolios” award. They further discuss the proposed increase of the Capital Gains Tax and what it could mean for investors.

At a difficult time like this when so much rests on the success of our wealth creators to pull the world out of the mess it has found itself in – we as Private Client Professionals need to pull together to serve our clients as best we can, by being better informed as to what each of us does for our clients

This is what Caroline’s Club sets out to achieve. It also makes networking more effective and efficient by decoupling it from education. You do not need to listen to speeches to meet other Private Client Professionals. All you need to do is to share Client Stories in matched zoom meetings

If you would like to serve your clients better and network more effectively and efficiently join Caroline’s Club, simply register and join our Client Stories Zoom meetings here.

It’s the economy, stupid!

Last week the New York Times said Trump had undoubtedly been ‘the worst American president in modern history’ – gravely harming the US and its interests around the world. He has unashamedly stoked racism and division, cut taxes for the rich, lied on an unprecedented scale and grossly mishandled a pandemic which has cost 232,000 American lives.

It went on to say that his administration has been nepotistic and corrupt. His foreign policy record has been equally abysmal: he has strained long-standing alliances, cosied up to dictators like North Korea’s Lim Jong Un, and abandoned any attempt to confront climate change. The Washington Post summed up Trump’s term in office as ‘uniquely incompetent’.

Wow harsh words – and yet despite this Donald Trump pulled off another ‘huge political surprise’ said The Wall Street Journal. The pollsters had expected Biden to win comfortably, so why was there a record turnout in absolute terms for the US, (expected to exceed 160 million of the American people, and its highest turnout percentage in more than a century) and Trump himself won 3,000,000 more votes than in 2016?

Clearly some people detest the man, but there are a lot of voters in the US who have been persuaded that they would be better off under Trump than Biden.

But we have seen it happen before.

In 1992 James Carville coined the phrase ‘it’s the economy, stupid’. Carville was a strategist in Bill Clinton’s successful campaign against incumbent George H. W. Bush.

Carville used the then-prevailing recession in the United States to unseat Bush. In March 1991, days after the ground war in Kuwait, 90% of polled Americans approved of President Bush’s performance. In August 1992, the following year, 64% of polled Americans disapproved of Bush’s performance.

In the last few weeks of his campaign Trump focused on his track record with the US economy. He put himself forward as the man to trust in the midst of a pandemic – it nearly paid off.

So, what is Trump’s track record? In 2017 the Trump administration introduced the biggest tax cuts ‘in history’ in a move to ‘simplify’ the US tax system. It, slashed taxes for businesses large and small – including Trump’s own – and eliminated inheritance taxes on death.

Individual income tax brackets were cut from seven to three (10%, 25% and 35%) and US corporate tax brackets were slashed from 35% to just 15%. Gary Cohen, chief economic adviser to Donald Trump said ‘This is about growing the economy, and creating jobs’

The critics saw these tax cuts as self-interest for Trump and for many of the billionaires in his cabinet – which was allegedly the ‘richest in history’.

But if the tax cuts benefited only the rich – there would not have been such a massive turnout for Trump, because the rich are a minority.

According to the BBC the US economy was doing well prior to the pandemic, and in the third quarter of 2020 saw a strong surge, although not quite back to the economic activity of pre-pandemic levels.  

Trump claimed that the recovery was ‘bigger than any nation’, but according to the BBC this isn’t true. From July to September this year, the economy grew by 7.4% in the US (33.1% in annualized figures). This is less than Germany, Italy and the eurozone as a whole.

 However, if you look at economic growth from the start of the pandemic to the present, the US has done better than Europe but "worse than China and some other Asian economies" such as South Korea, says Neil Shearing, chief economist at Capital Economics. 

President Trump often highlights the rising value of US financial markets as a measure of success - in particular the Dow Jones Industrial Average.

The Dow is a measure of the performance of 30 large companies listed on US stock exchanges, and it reached record highs at the start of this year.

It then crashed as markets reacted to the coronavirus pandemic, wiping out all the gains made since President Trump took office.

But the financial markets have been remarkably resilient and have largely recovered back to near pre-pandemic levels, although there have been recent wobbles.

The large turnout and increase in votes for Trump is undoubtedly due to the focus on the economy; which half the American people believed, and the other half did not!

Whatever is your view, mine, as a Fellow of the Chartered Institute of Taxation, is that as we recover from the pandemic – or learn to live with it, now is the wrong time to raise taxes on businesses.

The only way the economy can recover to pre pandemic levels is to encourage wealth creators to grow their businesses and employ more people. If we don’t then we are in danger of seeing wealth creators move elsewhere such as to Portugal – (listen to our podcast professional of the week – Carlos Santos of Dixcart)

Episode 34 -

Taxes in Portugal, Carlos Santos: Dixcart

In Episode 34, Caroline Garnham talks to Carlos Santos Managing Director of Dixcart in thee Portugal office. Mark is responsible for the expansion of the office as well overseeing the existing client base and client management. Carlos established the Family Office line of service in Portugal which is focused in immigration and personal taxation of clients and their families.

But it is not just a matter of politics – we as Private Client Professionals should also do our bit. We act for wealth creators – and we need to serve our clients better by learning how each of us helps their clients and to share these Client Stories with each other so that we can assist our clients across all areas of their concerns; not just in the areas where we have expertise and knowledge. This is the ethos of Caroline’s Club.

If you would like to join Caroline’s Club, simply register, prepare a podcast and join our Client Stories Zoom meetings here.

Death isn't optional

It is remarkable that despite being told that Covid-19 is a killer pandemic – so few people prepare for it – as if death were optional – it is not, it is only a matter of when and how!

I have a friend who is 82 she has stage 4 cancer and was told it was terminal. She and I sat down about six months ago and I explained to her how she could use the spouse relief to save an inheritance tax bill of 40% on her estate which is substantial and to set up a Lasting Power of Attorney for both her health and well-being and financial affairs so that her attorneys could do things for her if she became incapable.

 Her children have now come to me, my friend who I will call Margaret, is now on morphine and cannot be said to be of sound mind to implement my advice.

Luckily for them Margaret’s children are of one mind and are willing to enter into a Deed of Variation after their mother’s death to use the spouse exemption and save the tax. However, not all families are able to co-operate, and then the opportunity to plan could be lost.

I have another client who does not live in the UK. He has a significant business owned by a trust which was set up by his father many years ago. He asked me to write a report on the trust and what needed to be done to give him not only asset protection but also control over the investments and distribution to avoid what in this case would inevitably be a family dispute on his death. Because of the nature and circumstances of this case without prior planning it could quickly escalate into lengthy and costly litigation.

He has now had the report for just over two years but has dithered and delayed and now refuses to do anything unless we can first have a face to face meeting – which is now impossible due to the pandemic.

From my experience, family disputes are not uncommon and there needs to be a mechanism in place to resolving such disputes as soon and as fairly as possible if large chunks of the trust fund are not going to be wasted on professional fees and court expenses in trying to resolve it through litigation.

I see regular examples of greed, envy and jealousy when someone dies, and it is ugly. With careful planning most can be avoided, but people seem reluctant to address death and planning– even if death is staring them in the face – preferring to think that death will be postponed until the time is right to plan. But death waits for no-one!

If you want to save taxes on death and these taxes are significant then the sooner planning is done the better. There are still several exemptions and reliefs, but most people prefer to gamble on living – rather than planning now for death.

One would have thought that with a pandemic people would be more realistic about their mortality, but they prefer to plan to stay alive; self-isolate and wear a mask, than to plan for their own demise.

And it is not just fear of the pandemic, which is worrying, there are a host of other equally worrying concerns.

Deaths from cancer could rise significantly due to Covid-19 according to Cancer Research UK. It estimates that three million people have missed cancer screenings.

During the same period, 350,000 people with suspected symptoms have not had the hospital referrals they’d normally have had.

Michelle Mitchell, chief executive of Cancer Research UK said ‘Cancer Services already needed drastic improvement before Covid-19 hit’. The pandemic has ‘made this worse, leaving millions waiting for screening, urgent referrals and treatment’. The problem is not only bad from a hospital capacity perspective with screenings for breast, bowel and cervical cancer paused in the spring, but also people with symptoms are now more reluctant to visit their GP’s for fear of contracting Covid-19.

Philip Barber, consultant respiratory physician in Manchester wrote to the Guardian, that according to an official circular from a large medical group practice, it would now only deal with ‘urgent’ cases, nothing of a routine nature. He goes on to say, ‘What is not clear is how a patient is to know if a symptom is ‘minor’ (what if a tickly cough, for example, is lung cancer?) or how a patient is to know when self-care is ‘appropriate’’.

In my book ‘Reimaging the role of the Private Client Professional’ I draw the analogy between a sick person who can go to a GP for a preliminary assessment, but there is no equivalent in the Private Client Industry. It would now appear, thanks to the pandemic that sick persons are now, in some cases, being deprived of this safeguard for their health as well as their finances.

I go on in my book to say that in the absence of a GP in the Private Client Industry, that we, as Private Client Professionals owe it to our clients to know what the services of other Private Client Professionals are and make referrals as and when necessary. I set up Caroline’s Club to make this easy through podcasts and Client Stories – post lockdown.

The wealth creators, our clients, are the only people who can drag us out of this recession. My vision through Caroline’s Club is that we should work together to assist them in doing so.

If you or a client of yours needs to plan for their succession, please call me on 020 3740 7422 or drop me a line here

And if you would like to join Caroline’s Club, simply register, prepare a podcast and join our Client Stories Zoom meetings here.

Are we kidding ourselves?

We have all read articles in the national press and heard interviews on the radio and TV about the government’s attempts to encourage white-collar workers to return to their workplaces.

But as yet, only 34% of white-collar workers have returned to their offices in the UK, compared to 83% in France and an average of 68% amongst other major European City offices

This seems to suggest that that the governments edict to employees is not working and that employees decide when and who should return to the office  -  this view is poppycock.

The reality of it is that employers need to decide who and when employees return to the office but to date, they do not know what to do.

Should they let go office space and keep employees at home or keep the office space and insist employees return to work at the office – when it is safe to do so – or to put in place some sort of hybrid arrangement? Of course, the worst of all worlds is to keep the office space, and all the employees with and face the risk of continued down turn in productivity.

According to the latest CB/PWC financial Services Survey around 88% of 133 financial services companies polled in London said that the shift towards working from home as a result of Covid-19 had made them review how much office space they needed going forward.

The problem is, employers do not have a crystal ball; some fear losing control of their work force, and productivity, whereas others welcome the change as an opportunity to cut costs, but there could be unforeseen consequences.

I remember trying to work from home with a new-born baby. As soon as my child was asleep, I started working only to be annoyed and frustrated when he woke up demanding to be fed or changed - I found it really difficult to concentrate – and of course my productivity went down, but I loved my work and soon returned full time at the office like (after three months).

From my experience some employees can work from home, whereas others struggle.

This is backed up by studies. Since the lockdown about 50% seem to suggest that productivity has gone up and 50% down – I suspect that those who have  minimal or no distractions at home are more productive and those who have young children, crowded homes, or elderly relatives simply cannot.

The real questions to be addressed are i) how are employers going to evaluate productivity, ii)how much office space will they be able to and wish to, let go and iii) if they need to make redundancies who will they chose?

Employers have got used to seeing their employees arrive in the office at or before the appointed hour and leave at or after the appointed hour. They feel comfortable that if the employee is in the office they must be working; not nursing a hang-over. This is not necessarily the case. We all know colleagues who fritter away the day and only seem to start work at 6.30p.m.

In the future how will employers measure productivity. The simple answer is by the bottom line – but we all know it is not that simple; juniors need nurturing, business needs to be won, information needs to be absorbed and strategy needs formulating.

Two hundred years ago before the factory work was ‘put out’, workers were paid by what they produced regardless of how long it took them to produce it. But when the factory came into vogue, workers were ‘clocked’ in and ‘clocked out’ and this has now become the norm – but is this really good for either the  business or employees?

The next tricky decision is how much office space to let go. Some organisations simply do not have the necessary break clauses, so cannot, but of those who can, some are reluctant to see their fancy offices, reception rooms and meeting spaces cut. Would this loss of image send out a signal that they were struggling?

Then comes the hardest decision which is how many staff are required and who to ‘let go’.

Presumably those who can work effectively and efficiently from home will be kept and some juniors and those who cannot work so well from home will be let go – this would make business sense – but is it right?

Those workers who live in crowded apartments, cramped conditions with large families, young couples with infant children, and middle aged individuals with elderly relatives, maybe good workers, but not good at working from home.

Given the imponderables which our employers face in knowing what to do to maximise profits for the business post lockdown – is it hardly surprising that for now, most employers of white collared workers -  which include our industries, are sitting on the fence?

I would love to hear your views, click here to share.

In the meantime – bear in mind that our clients the worlds wealth creators are the only people who can pull us out of recession, and we owe it to them whether we work from home or not to work together to assist. If you agree, then join like-minded, client focused private client professionals in Caroline’s Club by clicking here.