The Roller Coaster continued and on foot of the governmental stimulus packages, especially the expected sign off by President Trump of the US package, markets recovered some of the falls by Friday’s close. Despite this individual stock markets are still significantly down on their opening values of 1st January.
In Local CurrencyLastWeek Year toDate
UK Equities
6.5 %
-28.0 %
US Equities
10.3 %
-21.3 %
European Equities
7.1 %
-27.1 %
Japanese Equities
13.7 %
-15.2 %
Hong Kong Equities
3.0 %
-16.7 %
Emerging Market Equities
4.9 %
-24.4 %
As I write this update at 5.30 pm Irish time, the US Markets have added another 2% gain by this stage having been followed, somewhat meekly, by Europe. Australia has had its rebound today which was just mimicking that of the US and Europe on Friday which happened after hours for them. In the meantime, South Africa has finished in positive territory.
An Update on the Medical Situation
As the infection and mortality rates gather considerable pace, each country’s population has a heightened awareness of its own statistics. Nevertheless it’s worth thinking about the possible projected figures for the US by Dr Tony Fauci, especially in the light of its importance in the global economy. Dr Fauci is a leading American immunologist who, amongst other roles, serves as a member of the White House Coronavirus Task Force, and has been the one to correct many of President Trump’s “mis-statements” on Covid-19. In his estimate issued over the past weekend, the US could experience as many as 200,000 deaths due to the virus. The UK for its part, based on its similar lack of initial urgency in dealing with the problem, could possibly see over 40,000 deaths on a proportionate population calculation.
To put that into perspective the number of “Winter Flu” deaths in the US over a 6 month period would normally be circa 62,000 while the total deaths of US military in its 17 year involvement in the Vietnam conflict came to 58,318 (with over 150,000 wounded that required hospital care).
In terms of managing the impact of the virus if a large percentage of your population hasn’t had the virus, but you still have people who are infected that aren’t identified or isolated, then the virus will continue to spread. In the short term, lockdown measures will most likely increase in severity in most countries and even when the worst may have appeared to have passed in terms of infections and deaths, the need for social distancing will restrict the broad economy, especially in tourism and hospitality. All this means is that a “back to work” strategy is probably going to have to co-exist with distancing measures for far longer than anyone and any country might want.
What’s The Economic Impact, Now And Going Forward?
Oil has now fallen to $20 a barrel (partly due to a disagreement between OPEC and Russia about reducing production) and there is now a genuine concern that oil producers will run out of storage space for oil which cannot now be put to direct use due to closures of factories as well as global travel restrictions. The price of copper has fallen 27% year to date underlining, if it was ever needed, the major slowdown in global economic activity which is becoming more obvious as each day passes.
The US economy is now entering recession and with it all the other economies in the world. Initial jobless claims (a measure of the number of new filings to receive unemployment benefits) rose to 3.283 million for the week ending 21 March. The speed and magnitude of the move higher highlights how US businesses have had to let staff go in the face of the sudden coronavirus shutdown. There were, up to recently, 29 million people employed in travel, leisure and hospitality in the US, so the jobless numbers are going to soar in the next few days and weeks. Similar statistics are also appearing globally with similar proportionate numbers for each country. As a point of reference, the US unemployment rate in the 1930s Depression period was 25% of the workforce.
In recognising the gravity of the situation, the world’s central banks have been full-on in their support of liquidity and borrowing. This is, as was the case in the Global Financial Crisis, a knee jerk reaction to keep economies afloat where the cost of providing business supports and “helicopter money” has stored up problems for the long term as far as each country’s debt is concerned. The reality is that the cost of servicing all these debts is being handed down to several generations to come.
One of the major impacts from Covid-19 is likely to be in the area of globalisation. Goods made cheaply in the Far East may be re-categorised in terms of their importance to each country’s economy. It is likely that we will see less reliance on, in particular, the Chinese supply of goods as products are sourced closer to home or even made at home. This will bring, over the long term, changes in product innovation and employment as well as investment opportunities.
What Should Investors And Pension Holders Do Now?
Nobody knows how the economic situation will play out in the coming year and, by extension, we don’t know how stock markets will play out. The likely scenario of a major death rate in the US, while already known, is most likely not fully priced into markets. I expect that the fear and uncertainty of health at an individual level will most likely spill over, in the short term, to further falls in stockmarkets in the coming weeks. This, in itself, will lead to a major investing opportunity for those who have cash holdings or new monies awaiting investment either personally or in their pension funds.
Of course, some people who might have switched out a few weeks ago at the start of this recent problem may decide to wait for a lot longer before they dip their toe back in. In my experience when people switch into cash they often stay in cash for years afraid to come back into the market and therefore miss the upswing.
And finally, I repeat my previous advice :
If you are invested already, keep the faith even riding out a likely further downward movement of the next month. If you are considering selling out with a view to coming back in at a lower price, don’t! These markets move far too fast to be certain of not missing the upside when it comes.
If you are continuing to make, say, monthly contributions to your pension fund then the next few months will be an opportunity to invest at cheaper fund prices than in the past.
Clients who are nearing retirement, but who intend to avail of an Approved Retirement Fund option upon retirement, should remember that your investment horizon is not time limited to the date of your retirement. Rather it extends to the length of your lifespan and most likely that of your partner also, in which case maintaining equity exposure to achieve real returns above inflation over time continues to be as important as ever.
If you have funds held in cash or “new money” pending investment then prepare for an opportunity to invest at a heavy discount to the January 2020 market.
Block B, Maynooth Business Campus Maynooth, Co Kildare
Colm Nolan & Associates Limited is a private company limited by shares registered in Ireland 653843
https://www.waypoint.ie/wp-content/uploads/2020/04/Financials-scaled.jpg16962560Colm Nolanhttps://www.waypoint.ie/wp-content/uploads/2016/03/waypoint-logo.jpgColm Nolan2020-04-07 14:11:032020-04-07 14:11:06Covid-19 Update On Its Impact On Financial Markets 30 March 2020
With effect from 31 March 2020, following the Addendum of September 2019 to the Consumer Protection Code 2012 issued by the Central Bank of Ireland all financial intermediaries are required to ensure that, in providing a regulated activity to a consumer, if it pays or provides, or is paid or provided with, any fee, commission, other reward or remuneration in connection with the provision of that regulated activity to or by any person other than the Consumer or a person acting on behalf of the consumer, the fee, commission, other reward or remuneration:
Does not impair compliance with the regulated entity’s duty to act honestly, fairly and professionally
in the best interests of the consumer;
Does not impair compliance with the regulated entity’s obligation to satisfy the conflicts of interest requirements set out in Chapter 3 of this Code and, as applicable, the European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018);
Does not impair compliance with the regulated entity’s obligation to satisfy the suitability requirements set out in Chapter 5 of this Code and, as applicable, the European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018); and
In the case of a non-monetary benefit, is designed to enhance the quality of the service to the consumer.
Furthermore, a regulated entity must avoid conflicts of interest relating to the following:
Fees, commission, other rewards or remuneration linked to the achievement of targets that do not consider the consumer’s best interests e.g. targets relating to volume (including override commission) and bonus payments linked to business retention; and
Agreements under which the regulated entity receives a fee, commission, other reward or remuneration in the form of goods or services, in return for which it agrees to direct business through or in the way of another person.
Finally, an intermediary may use the description “independent” or use any other word or expression that is a derivative of, or similar to this term:
In its legal name, trading name or any other description of the intermediary, only where regulated activities provided by the intermediary are all provided on the basis of a fair analysis of the market; or
In any description of a regulated activity provided by the intermediary, only where that regulated activity is provided on the basis of a fair analysis of the market,
and,
in either of these circumstances, only where the intermediary does not accept and retain any fee, commission, other reward or remuneration where advice is provided in respect of regulated activities provided by the intermediary, other than:
A minor non-monetary benefit that includes, for example, attendance at a conference within the State, IT software or platforms, or hospitality of a reasonable de minimis value such as food and drink during a business meeting or conference; and
A fee paid by a consumer, or a person acting on behalf of a consumer to whom the advice is provided.
The background To This Particular Document
Pursuant to provision 4.58A of the Central Bank of Ireland’s September 2019 Addendum to the Consumer Protection Code, all intermediaries, must make available in their public offices, or on their website if they have one, a summary of the details of all arrangements for any fee, commission, other reward or remuneration provided to the intermediary which it has agreed with its product producers.
What is Commission?
For the purpose of this document, commission is the payment earned by the intermediary for work undertaken on behalf of both the provider and the consumer. The amount of commission is generally directly related to the premium or value of the products sold. There are different types of commission models:
Single commission model: where payment is made to the intermediary shortly after the sale is completed and is based on a percentage of the premium paid/amount invested/amount borrowed.
Trail/Renewal commission model: Further payments at intervals are paid throughout the life span of the product.
Indemnity Commission
Indemnity commission is the term used to describe a commission payment made before the commission is deemed to be ‘earned’. Indemnity commission may be subject to a clawback (see below) if the consumer lapses or cancels the product before the commission is deemed to be earned.
Life Assurance/Investments/Pension products
For Life Assurance products commission is divided into initial commission and renewal commission (related to premium), fund based or trail relating to accumulated fund.
Trail commission, fund based or renewal commission are all terms used for ongoing payments. Where an investment fund is being built up though an insurance-based investment product or a pension product, the increments may be based on a percentage of the value of the fund or the annual premium. For a single premium/lump sum product, the increment is generally based on the value of the fund.
Examples of products include Life Protection (for life assurance, specified illness insurance and income protection), Regular Premium Life Assurance Investments, Single Premium (lump sum) Insurance-based Investments, and Single Premium Pensions.
Clawback
Clawback is an obligation on the intermediary to repay unearned commission. Commission can be paid directly after a contract is concluded but is not deemed to be ‘earned’ until after a specified period of time. If the consumer cancels or withdraws from the financial product within the specified time, the intermediary must return commission to the product producer.
Other Fees, Administrative Costs/ Non-Monetary Benefits
A non-monetary benefit could include (but is not limited to):
Attendance at product provider seminars
Industry Educational Seminars
Use of Product Providers resources
Co-branded literature
Product Provider hospitality
Assistance with Advertising/Branding
Our Firm’s Approach to Fees & Commissions:
The Principal of Waypoint Financial Planning has been in the financial advisory business for over 30 years.
We have at all times provided our financial advisory and implementation services on a clear, transparent and client centred basis.
We have decided (as has most of the Irish financial advisory market) to remove references to “independent” from our market profile with effect from 31 March 2020. This is despite the fact that we have in recent years operated on a fee basis for a substantial portion of the client advice and implementation of personal financial products.
We do, however, continue to provide clients with a fair analysis of the products that may be applicable to their personal circumstances. As such where a financial product is arranged for a client we also continue to offer clients a choice of fee only or commission as a remuneration method for our services. This is offered to the client so that clients can choose what might best suit their own personal cashflow needs and personal taxation status.
Where commissions are chosen as the remuneration option by the client the pages which follow for each product provider set out the maximum commission terms available in respect of their products. In all cases with clients the commissions that we elect to charge are usually far lower than the maximum that could be paid. This is because it is our business policy to provide good value for clients by reducing as far as possible the charges that they implicitly encounter by mainly using “clean pricing” methodology in receiving commissions for lump sum pensions and investments and by using lower commission rates for recurring premium contracts.
Apart from the arrangement of insurance, pension and investment products we also offer a fee only service to clients in respect of:
Standalone financial planning which involves an independent assessment of their personal financial situation, and
Expert Witness Reports for use in legal cases involving financial products including Family Law cases or investment losses in general.
These fees are bespoke and are agreed in advance with the client before any work is undertaken.
List of Product Producer Agencies Held By Waypoint Financial Planning Limited
Product Provider
Life Assurance
Serious Illness
Income Protection
Investments
Pensions including PRSAs, ARFs & Annuities
Aviva Life & Pensions Ireland DAC
Yes
Yes
Yes
Yes
Yes
Conexim Advisors Limited
Yes
Yes
Independent Trustee Company Ltd
Yes
Yes
Irish Life Assurance plc
Yes
Yes
Yes
Yes
Yes
Mercer (Ireland) Limited
Yes
Yes
PortfolioMetrix Asset Management Ltd
Yes
Yes
Cantor Fitzgerald
Yes
Yes
Standard Life International DAC
Yes
Yes
Zurich Life Assurance plc
Yes
Yes
Yes
Yes
Yes
Aviva Life & Pensions Ireland DAC
Waypoint Financial Planning deals with Aviva Life & Pensions DAC for protection covers of life assurance, specified illness insurance and income protection cover. We also use their investment and pensions (including PRSAs, Approved Retirement Funds, Buy Out Bonds and Annuities. Because of a merger with Friends First Life Assurance company in recent years they operate two sets of product each with their own commission structures.
Flexible Protection, Mortgage Protection Plan, Personal and Executive Pension Term Assurance
Period
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Rate Range
22% – 150%
3% – 22%
3% – 22%
3% – 22%
3% – 22%
3% – 22%
3% – 22%
Personal & Executive Income Protection & Wage Protector
Period
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Rate Range
30% – 200%
15% – 30%
15% – 30%
15% – 30%
15% – 30%
15% – 30%
15% – 30%
Heritage Aviva Product
Single Contribution Pension
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
5%
1%
N/A
Single Contribution PRSA
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
4%
0.5%
N/A
Approved (Minimum) Retirement Funds
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
5%
1%
N/A
Annuities
Initial
Trail
Bullet
Default
2%
N/A
N/A
Maximum
3%
N/A
N/A
Investment Bonds
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
5%
1%
N/A
Investment Only
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
1%
1%
N/A
Regular Contribution Pension
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
15%
1%
40%
Regular Contribution PRSA
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
22.5%
0.5%
N/A
Savings Plan
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
15%
1%
N/A
Heritage Friends Product
Single Contribution Pension
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
5%
0.75%
N/A
Single Contribution PRSA
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
7.5%
0.25%
N/A
Approved (Minimum) Retirement Funds
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
5%
0.75%
N/A
Annuities
Initial
Trail
Bullet
Default
2%
N/A
N/A
Maximum
3%
N/A
N/A
Investment Bonds
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
4%
0.75%
N/A
Investment Only
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
5%
0.75%
N/A
Regular Contribution Pension
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
25%
0.75%
N/A
Regular Contribution PRSA
Initial
Trail
Bullet
Default
N/A
N/A
N/A
Maximum
17.5%
0.25%
N/A
Savings Plan
Initial
Trail
Bullet
Default
10%
N/A
N/A
Maximum
10%
0.75%
N/A
Group Life
Year 1
Year 2 onwards
Default
Flat commission of either 0% or 6%
0% or 6%
Maximum
6%
6%
Group Income Protection
Year 1
Year 2 onwards
Default
Flat commission of either 0% or 12.5%
0% or 12.5%
Maximum
12.5%
12.5%
Conexim Advisors Limited
Conexim Advisors Limited, is a custodial and stock dealing service that provides our clients with access to over 4,000 Funds from leading international fund managers as well as direct equity investments, fixed income securities and ETFs from all international markets. Conexim’s risk management, dealing, technical and platform administration services are provided in conjunction with Pershing Securities International Ltd. which is one of the largest established custodians in the Irish market for domestic investors.
While Waypoint Financial Planning no longer promotes itself as an independent financial advisor it should be noted that all fees and commissions processed on the Conexim Platform meet the definitions required to be considered ‘independent advice’ as defined under the MiFID II Regulations and the Consumer Protection Code 2012 (as amended).
Accounts on the Conexim Platform are legally and beneficially owned by the client in the case of Personal, Joint and Corporate Accounts, and beneficially owned by the client in the case of Trust based accounts (e.g. where the Trustee is the legal owner). Under Central Bank of Ireland guidance, in the case of single member pension schemes, the firm looks through to the underlying beneficiary in terms of conduct of business rules under MiFID II.
When a client opens an account on the Conexim Platform, the client states on the application form that: “The charges payable to my financial advisor which will be levied and deducted from my account are X%/€X Implementation, X%/€X Annual Charge. I hereby consent to the deduction of these charges from my account(s).”
As such, when our clients use the Conexim service they agree to a specified fee payable to this firm and not Conexim. They also agree for such fees to be deducted from their accounts and paid to our firm – i.e. Conexim is acting on the client’s behalf in paying the advisor, Waypoint Financial Planning, the fee from the client’s assets. The narrative on the client account when deductions are made, separate the Conexim Platform fee from the advisor fee, and they are recorded separately in the books and records of Conexim.
Conexim does not set the level of remuneration payable to this firm – it is agreed between the client and ourselves. Conexim therefore is collecting what is clearly identified as a standalone advisor charge and remitting it to our firm from the client account, based on a fee level agreed between ourselves and the client when using the Conexim Platform. This advice may be provided on an independent or non-independent advice basis by the advisor, but in no case does Conexim and Waypoint Financial Planning have a bundled fee arrangement.
For the avoidance of doubt, Conexim does not pay any remuneration to this firm for account referrals, persistency lapse rates, volume considerations, soft commissions or other metrics, and as there are no ‘lock in periods’ for investments on the Conexim Platform – there are no exit penalties, clawbacks or other detrimental fees levied on redemption or account closure.
Independent Trustee Company Ltd (ITC)
ITC is used by this firm in a trustee capacity to process individual PRSAs, Small Self-Administered Pensions, Buy Out Bonds and Approved (Minimum) Retirement Funds.
Accounts handled by ITC are legally and beneficially owned by the client in the case of PRSAs, Buy Out Bonds and Approved (Minimum) Retirement Accounts, and beneficially owned by the client in the case of Trust based accounts (e.g. where the Trustee is the legal owner). Under Central Bank of Ireland guidance, in the case of single member pension schemes, the firm looks through to the underlying beneficiary in terms of conduct of business rules under MiFID II.
When a client opens an account through ITC, the client may specifically instruct ITC to pay a specific charge to this firm which will be levied and deducted from their account i.e. ITC is acting on the client’s behalf in paying Waypoint Financial Planning the fee from the client’s assets. The narrative on the client account when deductions are made, separate the ITC fee from any fee paid this firm, and they are recorded separately in the books and records of ITC.
ITC does not set the level of remuneration payable to Waypoint Financial Planning – it is agreed between the client and this firm for advice related to one of the above products. Irrespective of whether this advice is provided on an independent or non-independent advice basis by any advisor, we can confirm that ITC and this firm do not have a bundled fee arrangement.
Irish Life Assurance plc
Mercer Ireland Limited (MIL)
Mercer Ireland Limited use the administration systems and commission terms of Zurich Life Assurance plc for the lump sum investment and pension products that they market to financial brokers.
Single Premium Product
Initial Commission
Fund Based Commission
Pension, including Buy Out BondsMax
5.50%
0.50%
PRSA (Standard) Max
5.50%
0.00%
PRSA (Non-Standard) Max
5.0%
0.50%
Approved (Minimum) Retirement Funds Max
5.0%
0.50%
PortfolioMetrix Asset Managers
While this firm has an agency with PortfolioMetrix Asset Managers for the purposes of using their discretionary investment management services we do not receive any commission or fee payments from them. Instead any fees that are chargeable on clients are agreed with clients directly and are chargeable by deduction through their account with Conexim Advisers.
Standard Life International Ltd
Single Contribution Products
Upfront Commission
Clawback Period
Fund Based Commission
Pension (Maximum)
5%
N/A
1%
PRSA (Maximum)
5%
N/A
0.5%
Approved (Minimum) Retirement Funds (Maximum)
Annuity (Maximum)
Investment Bonds (Maximum)
Regular Contribution Products
Initial Commission
Clawback Period
Renewal Commission
Fund Based Commission
Pension Front Loaded (Maximum)
1.25% X term to max of 25%
5 years
2%
1%
Pension Level (Maximum)
5%
N/A
5%
1%
PRSA (Maximum)
5%
N/A
5%
0.5%
Savings Plan – Funded by Initial Commission
0-15% payable as a lump sum after the first premium is paid
5 years
N/A
1%
Savings Plan – Premium Based
0% – 15%
N/A
N/A
N/a
Zurich Life Assurance plc
Single Contribution Products (Pensions, Investments)
Initial Commission
Fund Based Commission
Pension (Maximum)
5.50%
0.50%
PRSA (Standard) (Maximum)
5.50%
0.00%
PRSA (Non Standard) (Maximum)
5.0%
0.50%
Approved (Minimum) Retirement Fund (Maximum)
5.0%
0.50%
Annuity (Maximum)
3.0%
N/A
Investment Bonds (Maximum)
5.0%
0.50%
Trustee Investment Plans (Maximum)
5.0%
0.50%
Regular Contribution Products (Pensions, Savings)
Initial Commission
Renewal Commission
Fund Based Commission
Pension (Maximum)
20.0%
3.0% p.a.
0.50%
PRSA (Standard) Maximum
5.0%
5.0% p.a.
0.0%
PRSA (Non Standard) Maximum
5.0%
5.0% p.a.
0.50%
Savings Plan (Maximum)
10.0%%
1.0% p.a.
0.50%
Commission clawback:
Commission clawback applies over a 4 year period for all initial commission.
Commission clawback also applies over a 4 year period for any bullet commission noted.
Guaranteed Term Protection & Guaranteed Mortgage Protection
Year 1
Years 2 – 10
Years 11+
Maximum
100%
12%
3%
Commission clawback:
Commission paid in year 1 is earned over a 12 month period.
Guaranteed Whole of Life
Year 1
Years 2 – 5
Year 6+
Maximum
90%
18%
3%
Commission clawback:
Commission paid in year 1 is earned over a 12 month period.
Zurich Life Assurance plc
Group Life Cover
Year 1
Year 2
Year 3
Maximum
6.0%
6.0%
6.0%
Commission clawback:
Does not apply. Commission is paid as premiums are received.
Group Permanent Health Insurance & Group Serious Illness Cover
Year 1
Year 2
Year 3
Maximum
12.5%
12.5%
12.5%
Commission clawback:
Does not apply. Commission is paid as premiums are received.
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