UK company shares fell sharply during afternoon trading on Friday after disappointing US GDP data. The US economy grew by 2.8% rather than the expected 3% that had been priced in to markets.

Over a year the FTSE 100 has fallen from 5,965.10, a fall of 231.65 points or -3.88%.

£1 is currently worth $1.57300 US or €1.18980 Euros.

Brent Crude Oil Futures is currently priced at $111.53/barrel. Gold is $1,726.00/ounce and Silver is $33.48/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 4.2% for the year to December 2011.

We take a neutral stance when it comes to the active and passive investment debate, with a belief that both approaches to fund management can add value to investors.

Some new analysis from the Investment Management Association (IMA) has found that transaction costs within actively managed funds are more than offset by investment returns, on average.

The research looked at the accounts of UK All Companies funds from 2009.

Actively managed funds had average transaction costs of 0.31%, compared to tracker funds at 0.06%.

For active funds, two-thirds of these transaction costs were the result of stamp duty.

Most interesting, the IMA analysis found that (again, on average) these transaction costs are more than offset by the returns delivered to investors from actively managed funds.

By looking at the annual difference between benchmark returns and fund returns after charges over a ten year period to December 2011, the IMA found that the difference between the net fund return and the benchmark return was on average significantly less than the Total Expense Ratio (TER).

For tracker funds, this analysis found that the TER was broadly the same on average as the difference between the benchmark return and the fund return.

Fund charges are important when constructing and managing an investment portfolio, but they are only one factor to consider.

There are situations where tracker funds are less suitable than actively managed funds, and vice versa.

An obsessive focus on the cost of investing can often ignore the importance of value, which in the case of fund selection is partially the net return received by the investor.

Photo credit: Flickr/redwood 1

This has fallen sharply from the over 50% of men who were contributing to pensions in 1999/2000. This is compared to only 39% today.

The current contribution levels represent the lowest level of pension participation in the last decade.

It is a worrying set of figures.

With life expectancy continually improving, saving for a financially secure retirement is becoming increasingly important.

The major decline in private sector defined benefit pension schemes suggests that more people should be making greater private provision for retirement.

Commenting today for Morningstar, Informed Choice chartered financial planner Martin Bamford said there could be several reasons for this declining popularity in pensions:

“With personal, private pensions, it takes a great deal of planning and motivation to open a pension plan,” he says.

“It’s difficult to know what to do, where to go, where to invest and how much to contribute. This prevents people from taking action.”

Making private pension contribution is unfortunately not as simple as it could be.

A good starting point is to understand where you are today and where you want to be in retirement. These are the two figures required before you can calculate how much you will need to contribute during your working life to create a large enough pension fund.

Seeking advice from an independent financial adviser can help you to answer these important questions.

Photo credit: Flickr/artisrams

It was only slightly worse than expected, with many economists forecasting a 0.1% fall.

This means that the UK economy expanded by only 0.9% last year.

The fall in economic output in the final quarter followed GDP growth of 0.6% in the third quarter of 2011.

Whilst this latest GDP figure could be revised upwards, it increases the chances that the UK economy has already entered a recession.

A recession is technically defined as two consecutive quarters of economic decline. If the UK economy has fallen again in the first quarter of this year, we will have entered recession once more.

Whilst it is disappointing to see GDP falling in the final quarter, the economic growth for the year as a whole is in line with official targets from the Office for Budget Responsibility.

Contributions to this GDP fall in the final quarter included poor performance in the manufacturing sector and the economic impact of the public service strikes in November. Nearly a million working days were lost as a result of this industrial action.

Earlier this week we saw the International Monetary Fund cutting their forecast for UK GDP in 2012 from 1.6% to 0.6%.

It is difficult to predict for how long any new recession might last, with the eurozone sovereign debt crisis acting as the deciding factor in any economic recovery closer to home.

Investors should keep in mind that economic performance is not always closely correlated with stock market performance. A sluggish UK economy will not necessarily mean disappointing returns from UK companies, many of which now derive most of their earnings from overseas activity.

Photo credit: Flickr/Christopher Elison

Speaking in the Financial Times, new FCA managing director Martin Wheatley explained that the global financial crisis had changed the view taken by the regulator of investors.

As a result of this new view, which draws lessons from behavioural economics, the FCA will take a more interventionist approach than that previously taken by the FSA.

Some investors will be unhappy with the description of them used by Wheatley.

He said to the FT that investors, when faced with complex decisions or too much information, will often hide behind credit ratings agencies or the promises that are given to them by the salesperson.

By taking a more interventionist approach, the new regulator could help to protect some investors from those financial products that involve the greatest risks.

We have recently seen the FSA flex its own interventionist muscles, with a warning over the suitability of life settlement funds for retail investors.

Had this approach been practiced earlier, it is possible that the FSA could have banned the sale of other toxic investment schemes, including Arch cru.

There is a risk that the FCA banning unsuitable products will result in their tacit approval of the products they have not chosen to ban. This will not be the case.

The FSA has not historically been a product regulator and we do not expect the FCA to take up this role either. There is a big difference between banning toxic financial products and giving approval to all financial products in the marketplace.

Whether a more interventionist approach from the FCA works to benefit investors in the long-term is still to be seen.

Photo credit: Flickr/Grumbler %-|

The legal publisher Sweet & Maxwell is reporting an 11% increase in the number of pension sharing orders in 2010, the latest year for which data is available.

They say that more than one in ten financial settlements ordered by courts include an arrangement to share pension benefits.

This is likely to be in response to the falling value of other assets, including property, as a result of the economic downturn.

There were 82,290 ancillary relief cases in 2010, up 3% on the previous year. 10,205 of these cases involved pension sharing orders which was 9,218 more than in 2009.

Pensions, which have historically represented the second largest family asset, are now in some cases becoming the most valuable asset that needs to be divided on divorce.

A pension sharing order has been an option available to divorcing couples since 1st December 2000, when they were introduced by the Welfare Reform and Pensions Act 1999. Until the availability of pension sharing, the only options for pensions on divorce were earmarking and offsetting.

With pension sharing becoming a more important part of divorce settlements, it is vital that lawyers engage early with a competent independent financial adviser to ensure a fair and suitable distribution of pension assets is achieved.

All too often we are called in to divorce cases once pension sharing orders have been finalised, at a stage in the process where little if anything can be done to assist with suitable agreements.

Photo credit: Flickr/jcoterhals

Spotting a fake financial adviser is relatively simple.

The first step you should take before working with any financial adviser is to check the FSA Register.

This online register lists every authorised and regulated firm, as well as every individual approved person. Check that the business is authorised and that the individual adviser appears on this register with a CF30 Customer controlled function.

When using the FSA Register, make sure you select the correct firm name and address; occasionally fraudsters will ‘clone’ the details of existing authorised firms to give the impression that they appear on the FSA Register.

In addition to checking this register, always take a business card from the financial adviser, particularly if you are meeting with them away from their offices. This will show you the designatory letters used by the adviser, which will allow you to check with their professional body.

The financial adviser should be a member of at least one professional body, such as the Chartered Insurance Institute (CII) or Institute of Financial Planning (IFP). If they are not, it means they have not subscribed to a code of ethical behaviour.

Another important step to avoid being duped by a fake financial adviser is to never make out a cheque to the firm or individual adviser. Only ever write a cheque for an investment to the administration platform or product provider that has been recommended.

You should certainly never pay in cash when dealing with a financial adviser. The financial adviser should never handle your money.

Any financial adviser promising investment returns that seem too good to be true deserves closer scrutiny, particularly given the current state of the economy.

Whilst offering high investment returns might not always be an indicator of a fake financial adviser, it does suggest dubious advice and greater than disclosed risks to your investments.

If in doubt, seek a second opinion from another independent financial adviser or from a professional adviser, such as an accountant or solicitor.

Photo credit: Flickr/the|G|™

One method of curbing excessive rewards for executives is giving greater powers to shareholders.

This is favoured by Business Secretary Vince Cable who is planning to announce measures today in a speech to the Social Market Foundation.

Other proposed measures include making remuneration reports easier to understand and executives needing to justify their salaries in relation to the earnings of other employees.

On shareholder influence over remuneration, this could see shareholders given a binding vote on areas including notice periods and exit packages.

These proposed measures could represent good news for investors.

The Investment Management Association (IMA) has supported these calls for reforms to executive pay, welcoming the strengthened accountability it would provide.

These measures could place a lot of power in the hands of fund managers, with the IMA representing asset managers with £4 trillion of funds.

If the proposed package of measures is introduced, the selection of investment funds in the future might need to include an understanding of the approach taken by the fund manager towards executive pay.

That said, with the government already in a position to curb excessive pay and bonuses at some of the major High Street banks but seemingly failing to exercise their influence as major shareholders, the prospect of decisive action on this subject seems limited.

Photo credit: Flickr/stevendepolo

With interest rates on cash falling to near zero, the yields available from other investments quickly followed in the same downwards direction.

The entire banking sector came under immense pressure to slash dividends and bond yields dropped to record lows as investors flocked to the relative safety of gilts.

Even the income available from commercial property, whilst initially looking more attractive as capital values fell, came under increasing pressure with the failure of big name retailers.

Whilst there are some indications that investment income levels are starting to return to a more tolerable level, the challenge for income investors remains stark.

The Search for Income by Maike Currie

This new book from investment journalist Maike Currie arrives at the perfect time and is an invaluable resource for income investors. In fact, the elements of investing are so well explained in this book that those investing for capital growth will also benefit from having this in their library.

Maike takes readers through the basics of investment income before describing each of the main investment income asset classes. The explanation of the various investment terms and calculations relevant to income investors are some of the clearest I have seen.

As well as providing a clear explanation, The Search for Income is a very practical read. Maike uses real-life examples of funds, platforms and portfolios to illustrate the different approaches to income investing.

Aimed at the retail investor, this book is equally valuable for professional advisers who want to improve their understanding of the issues and refresh their knowledge.

One benefit of the recent publication of this book is that it contains explanations of some of the most popular current investment options, including Exchange Traded Funds (ETFs) and infrastructure funds.

As a Chartered Financial Planner, I devote a great deal of time each month to reading and keeping my knowledge up to date, particularly in respect of investments. The Search for Income is one of the best investment books I have read to date and I can recommend it to anyone with an interest in the subject.

Photo credit: Flickr/alancleaver_2000

The tax would apply to homes with values in excess of £2m, with a tax of 1% on the value over this level.

Whilst the Liberal Democrats are keen to see this wealth tax introduced, and claim to have the support of some Conservative MPs, it is understood that senior Tories including George Osborne are opposed to the introduction of a mansion tax.

Leaving aside the ideology of taxing wealth rather than income, would a mansion tax be right for the UK?

If applied in addition to council tax, it could result in an additional £1.7bn a year being raised for the public finances. The Institute for Fiscal Studies estimate there are between 30,000 and 40,000 properties in Britain valued in excess of £2m.

If introduced, the tax would apply to the value of a property in excess of £2m, so the owners of a property valued at £2.5m would be liable for a mansion tax of £5,000 a year.

It is likely that the focus of such a tax would be on the owners of property in London and the South East, where the largest concentration of high value properties can be found. Agreeing on a common valuation methodology for property would be a challenge as would agreeing on whether inflationary increases in value should be taxed.

In our experience, the owners of properties valued in excess of £2m tend to own them as a result of years of hard work. It seems unfair to subject the owners of such properties to tax on their wealth when they have already paid tax on their incomes.

Where we can see a meaningful application of a mansion tax is for foreign owners of high value UK property who have not historically contributed to the UK Treasury through income tax.

It will be interesting to see how this call for a mansion tax develops over the next few months.

We feel it is unlikely to be included in the Budget on 21st March but it could be used by the Liberal Democrats as leverage to get one of their other proposals introduced, such as an increase in the tax-free income allowance to £12,000 from the £10,000 originally agreed by the coalition.

Photo credit: Flickr/Xerones