The ABC of DIY investing

Herald Scotland

By Iona Bain

Saturday 7 September 2013

WE are eight months into the new world of compulsory fees for financial advice and it seems many Scots are far from happy to pay the bill.

Up to one-third of active investors have ditched their financial advisers since behind-the-scenes commission – a company’s reward for advisers who recommended its products -was banished in January, says research firm GfK.

Advisers now have to charge by the hour, typically quoting £160, or take a chunk off your invested assets each year, at an average rate of 2.67%, according to the My Touchstone database. The latter could cost you £1335 if you had a portfolio worth £50,000.

Major investment firms such as Scottish Widows have reported an influx of so-called “orphaned” investors, cut off from their financial adviser because they cannot afford upfront fees, buying directly from the firm. Many are turning to online tools offered by a widening choice of “platforms”, that allow them to take the reins of their portfolio seemingly at a much lower cost.

Willis Owen, the online discount broker, has reported a 115% surge in new business over the last year, suggesting that many are happy to use an “execution only” service that simply lays out funds for you to pick and mix. The biggest player in this market, Hargreaves Lansdown, is now hoping to win over DIY investors by offering a list of 30 funds at exclusively lower prices.

Does all this mean that financial advice is on its way out? Not necessarily. Adviser rating website Vouchedfor, in a recent sample poll, found the vast majority (97%) of advisers saying they have welcomed rather than lost clients since the dawn of the new era.


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Has the short-term credit market reached a new low with ‘Loans for Poor People’?

Online loan companies and brokers are using tawdry tactics to try and attract vulnerable customers – what can we do to make sure this doesn’t have terrible consequences?

by iona bain

New rules were ushered in this year to ensure that the term “independent financial adviser’ can only be used to describe someone with top qualifications and the ability to recommend all kinds of products to consumers. But what happens if we chop off the word ‘independent’? Well, just about anybody can pass themselves off as a ‘financial adviser’ – even promoters of quick fix loans that could do more harm than good.

I have come across a site called “Loans for Poor People”, which recently appeared on a forum for real financial advisers. The individual behind this firm calls himself a financial adviser on Linkedin and various blogging sites. It is not a joke, as far as I know, even though the website absurdly states that it is ‘designed for the deprived’.

I have never come across a more dehumanising name for a financial services outfit than “Loans for Poor People”.

What’s more, the Office of Fair Trading recently raised alarm bells over the damaging slogans used by the short-term loan sector, such as ‘no credit checks’ and ‘get cash ASAP’. I have seen some of this flippant language used by firms like LFPP on forums, and have reported my concerns to the watchdog. It is now looking into my complaint and assures me it is taking it very seriously, given that this firm does not appear to show up on its public register.

Stuart Carmichael at the Debt Support Trust agreed that this company’s title was exploitative. He said: “I was amazed to see the company is promoting loans for people in an IVA & bankruptcy. I’m not sure whether the people behind this are foolish and targeting the deprived or unethical and aware of the error they are making. As an intermediary, they will get paid when people take a loan from another company. Most people in a deprived situation will do anything for credit, so this company probably feel they can maximise their profits by targeting people in a desperate situation.”

The title suggests that people who are in a vulnerable position should self-identify as ‘poor’ or ‘deprived’, and that the magical cure-all for that desperate predicament is simply the right loan at the right interest rate. If such people really are in need of help, surely an ethical and responsible ‘financial adviser’ would seek to lay out all their options, including debt advice charities and the Citizens Advice Bureau. It is not clear whether an applicant for a loan on the site would receive such information.

Church Action on Poverty, a Christian social justice company in the UK, released a report earlier this year which highlighted the stigmatic terms attached to people in financial difficulty, and rightly argued that they deserved more compassion and better understanding.

Firms like LFPP are trying their utmost to promote products, which may be totally unsuitable for many consumers, under the auspices of financial advice. Thankfully, they will not always succeed, as many savvy consumers will not fall for it.

But history tells us that the public is not necessarily alive to false marketing, mis-selling and poor advice – far from it. And the number of young people who are going online for financial information cannot be underestimated. It’s a recipe for disaster.

LFPP says it is neither a broker nor a lender. Instead, it matches ‘poor’ customers to the most suitable loans on the market for, apparently, no fees. Mr Carmichael said that the firm is likely to be paid commission every time if refers somebody to their service. But it is a mystery as to which third party firms obtain your details from this ‘matching service’, whether they would be adequately regulated and what kind of costs will be involved during the process. After all, the terms and conditions page simply links to a different website where you can apply for a loan instantly.

Of course, it’s hard to see what the regulators could do about the uncontrollable jungle that is the internet. But if you have doubts about a firm, you can call the Office of Fair Trading consumer helpline. You can also search its public registry to see if a firm has a consumer credit license. You can report firms on social media sites who use demeaning terms to describe certain sections of society. You are, by no means, powerless.


Filed under Loans, Payday loans, Personal Finance, Technology

Is Lady Gaga and the like taking young fans for a ride?

As One Direction and Lady Gaga are set to cash in on their newest projects, I look at the marketing techniques deployed by the entertainment industry, and ask whether it is financially exploiting young fans


Why has a band like One Direction made so much money? That is, literally, the billion dollar question that is being widely asked this week, since Business Insider Magazine has now predicted that the boyband will be worth a cool 10 figure sum thanks to the release of their first film.

It is easy (and perhaps lazy) to attribute this handsome bank balance to the disposable income of teenage girls. After all, where do they get all that cash from? It’s Britain’s most forgiving and reliable financial institution, of course.

Bank of Mum and Dad PLC is paying for the concert tickets, the album sales, even the make-up range that 1D is planning to bring out (and no, I’m not making that up, if you pardon the pun). It even branches out into providing unpaid security and chauffeur services when teenage girls want to go screaming to One Direction’s live concerts, as this photo aptly demonstrates.

Falling asleep: Vice photo editor Jamie Taete took pictures of bewildered fathers at a recent One Direction concert in Los Angeles

BMD provides this extraordinary service because it recognises the powerful pressures that are exerted on young people to buy into certain cultural phenomena. Let’s face it – resistance is futile. Teenagers have an overwhelming urge to conform and consume; this overrides all other considerations, since young people have not yet grown into mature consumers who can discern real value, know what it’s like to work hard for money and can recognise when they are being financially exploited. Institutions, politicians and even parents often forget the urges that drive the younger generation – that is partly why many of my peers do not receive advice on how to overcome commercial influences and become more savvy individuals.

I believe the One Direction Corporation is bankrolled by BMD Limited under the tacit agreement that it will not take the mick by charging excessive amounts for its goods and short-changing its loyal fanbase. There is no evidence so far that it has done either. But this week, another pop star stands accused of financially preying on young fans.

Lady Gaga is currently running a competition in the U.S. via Twitter, where fans are encouraged to buy multiple copies of her new album, among other things, if they want the chance to be her ‘date’ at the London iTunes festival in September. There are reports that some young customers have spent up to $200 on her new album in order to be in the frame. Entrants can also submit fan ‘artwork’, but I suspect this pays lip service to critics who say the scheme has been devised purely to drive album sales.

Many of her ‘little monsters’ will be young and therefore highly susceptible to this astute marketing technique. They’ll inevitably feel under pressure to spend money they don’t really have in the vain hope that they’ll meet their idol. They will receive no benefit from purchasing more than one album – in my opinion, the songs all sound the same if you listen to one copy of the album, let alone a different one. But the ploy will sure bump up LG’s album sales.

Young people can get easily caught up in the zeitgeist, and the entertainment industry knows this all too well. The film critic Mark Kermode once had a telling exchange with a producer for the blockbuster film Titanic, which made over $2bn across the world. In his book “The Good, the Bad and the Multiplex”, he said that the studio mogul discounted all his criticisms of the film by saying; “The problem, Mark, is that you are not a teenage girl”.

If we have any chance of regulating our natural impulse to spend as  we grow up, we must be more aware of the persuasive and even manipulative marketing strategies used by the entertainment industry.

My very first blog highlighted the impossible economics that were developing in connection with music festivals, relying as they did on broke young people to pay ever-higher sums in order to watch the same old acts year-after-year. Just as music festivals eventually suffered a backlash, so too could pop acts who deploy questionable tactics when trying to elicit spending among young fans. Gaga, you have been warned.

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My recent Ch 4 news debate–what was said, what wasn’t said and what YOU had to say about it

by Iona Bain

SO the dust has settled following my recent appearance on Channel 4 news – I thought I’d take the opportunity to look back on what the experience taught me, as well as expand on the big themes that were really skimmed over in such a short time slot

In case you missed it, I was asked to comment on the latest report from the Office for Budget Responsibility, which articulated the need for serious cuts in public spending to keep our fragile economy in balance in years to come. I was asked to provide the young person’s perspective on what the future holds, and my views were contrasted with those typical of the older generation, outlined very thoughtfully by Mervyn Kohler, special adviser to Age UK;

Now you’ve seen the clip, check out some of my thoughts – treat it like a written DVD commentary, if you like!

- Firstly, it taught me that you should always, ALWAYS, look smart, no matter where you’re going and what you’re doing. Put on something that makes you feel brilliant every morning, even if your diary consists of Jeremy Kyle followed by Bargain Hunt that day. You never know when you’ll get the call to do something incredible, or even life-changing, and when it happens, you’ll want to look the part. FYI boys, you don’t have to pop on a flowery dress and tan wedges, though I’m not judging anyone…

Look sharp – even if you’ve only got Jeremy Kyle lined up in the diary

- More seriously, while we touched on some of the report’s findings, this was really a sounding board for a wider, more philosophical debate, and a 5 minute TV segment could never do this discussion real justice. Nevertheless, it is heartening that a major news programme (which just added Newsnight supremo Paul Mason to its team) is inviting young people to comment on big economic news, which you rarely see on TV. Is it a sign of things to come? Could the government and mainstream media finally be facing up to all the predicaments facing young people, and are they finally looking into the precipice to see what lies ahead for *our* children?

- There are still signs of an ostrich mentality among politicians when it comes to our renting trap, financial education is *well* overdue and there’s little awareness in the real world about the effect of degree inflation on young people’s prospects. The pensions debate is really in its infancy by comparison, which is why I was so keen to highlight the question marks over auto-enrolment for young people like me. What many older people may not realise is that many young people aren’t even at first base with budgeting and saving, and this needs to be urgently addressed before we start looking at the long-term.

- It was inevitable that some older viewers felt I was ganging up on pensioners. I wish I had more time to say that I’m aware of the pensions devastation that many of them have experienced, and that they have a huge amount to teach young people in terms of hard work and diligent saving. I also wanted to say that a more ‘get-up-and-go’ spirit is just not optional any more, not if young people are going to survive this fierce jobs market. I started my blog because nobody was lining up to give me a job when I graduated. If our woes start when we leave university because of inadequate degrees – this was the degree inflation I alluded to in my opening gambit – then we need a plan B, and the support to put that in place, until we find that golden career path. 

- Life is easier for a young person if a) they can stay at home and b) find work that is commensurate with their training and education nearby. Sadly, many young people have to go a long way to find a better biscuit, spending more money by living in expensive places or having the extra cost of long-distance commuting.

- Young people can’t necessarily stay at home because of personal reasons. But if a parent or guardian can help a young person in these tough times, either financially or emotionally, it can make a huge difference.

- That’s what I was referring to when I spoke about keeping up morale. This really touched a nerve among viewers, which took me by surprise. The technical descriptions of auto-enrolment, the impact of cheap labour on job opportunities – none of this seemed to strike a chord in the same way as a simple yet obvious sentiment, which rarely gets heard – we have to keep young people’s spirits up!

- The older generation has a huge role to play in this ‘re-moralisation’, as I’d like to call it. We don’t want to see people give up their hard-earned benefits necessarily, but please, how it can be helpful to tell young people that they face an impoverished retirement and will suffer from squeezed public spending, without giving them the realistic tools to tackle these challenges? Education, as well as charity, has to start at home where possible, and in our schools as a necessary backstop.

- Many kind people contacted me to say that I was ‘representing’ the younger generation, giving young people rare voice on a big platform. That is very flattering but not necessarily true. I would only say that I speak for myself, based on my own experiences and what I have seen around me, and anyone is free to disagree with my thoughts. I simply hope that I can sum up what many other people might be thinking, but don’t have the means or ability to say it.

- The reaction to my appearance suggested that other young people do not feel they are represented enough in the media, and I sincerely hope that this starts to change. 

- There is undeniable substance to the theory that a) the younger generation do not have a secure life path ahead and b) it is the fault of babyboomers both in power and in the electorate. However, that is not to say that many citizens and organisations have left young people in the shade. Check out my blog from last year on this issue:

- These TV items on these issues bring so many people out of the woodwork to talk about their experiences and views, and a super debate was had on Twitter as a result. Yes, there were a couple of trolls who got in touch, but I used to collect those as toys when I was a wee girl, so they hardly scare me.

Trolls aren’t so vicious after all

- The vast majority are prepared to take the time to thank you and earnestly respond to your points. It was wonderful to have people react openly and sincerely to the ‘young money’ cause, not trying to get anything from you in return. In the two years that I’ve been writing this blog, I have seldom received honest feedback, either praiseworthy or critical, from the people who really matter – you. So never hesitate to get in touch, even if you disagree with my views, because I relish any reaction (within reason!)    

- If you do plan to go on television anytime soon, bear in mind that you never know who’ll get back in touch to congratulate you on your appearance. Ex-boyfriends, former piano teachers, family friends who last saw you swimming naked in a paddling pool as a toddler…you’ve been warned.

- My best email came from a librarian at my former university. He congratulated me, saying it reminded him that I owe £4 in overdue book fines and he was wondering when I might clear my debt. The perils of instant fame…

So I’d like to express my sincere gratitude to all the people who got in touch. To all you new readers, please do subscribe, follow me on Twitter and, most importantly,  have a look at my back catalogue of articles. I hope you’ll find something helpful in there!

Don’t forget to comment or email ionabain[at]

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Are ambitious pension goals realistic…or demoralising?

As auto-enrolment creeps up on young workers, should we resolve to make more active decisions about our financial future…or leave it up to fate?

Iona bain

The swirl of negative headlines surrounding the pensions industry, the latest being the £1.4m fraud hitting the Nest corporation, would make anyone stop in their tracks.

Nest, for the uninitiated, is the new state-backed pension provider for workplaces that lack an existing pension scheme. It was created in the wake of auto-enrolment, a new regime requiring workers to ‘opt out’ of workplace schemes. If workers sleepwalk into this arrangement – and the majority are expected to do so – they’ll remain in the same scheme until they leave that workplace.

Companies will, at the very least, match their employees’ contributions, injecting more money into the pot. The basic theory behind auto-enrolment is that people will be unwittingly coaxed into saving for their retirement, not only receiving free money from their employer but taking some of the responsibility off the government in the future when state pensions will be squeezed.

Sadly, a major vehicle for this new pension project has suffered a setback in the form of a fraudulent transaction. It was so serious that the chief executive, Tim Jones, decided to waive his bonus while the company got its systems back under control.

Though this seems like a rare glitch, the incident will do nothing to bridge the gulf between pension schemes and sceptical critics, who fear that long-term savings vehicles place a burden on young people today without providing the guarantee that the funds will really do their job in the long haul.

This is also refocusing attention on what happens to a pension pot when young employees up sticks and leave a workplace. Since this could happen several times over the course of a young person’s career, that could produce an awful lot of dormant pots potentially racking up charges. 

This is an unintentional consequence that the government is working to resolve, with proposals for a ‘pot-follows-member’ system; this measure does exactly what it says on the tin.

But only in the last year have new rules come into effect that would force pension funds to disclose a much more realistic projection of future performance on investments.

The unfeasible growth levels of 5, 7 and 9 per cent were scrapped in favour of 2, 5 and 8 per cent – that meant the average projection would drop from 7 to 5 per cent in forecasts.

Providers said this could risk ‘undervaluing’ future returns but some critics are happy to refer back to Kylie’s golden era by saying ‘you should be so lucky’.

Should clients be made aware of the full spectrum of future performance, with the chance that they’ll be pleasantly surprised if things turn out better than expected?

Last week, I met with Joanna Hall, who works for a niche company called eValue, which provides technology tools to financial advisers. This company seeks to provide insights into the future performance of pension funds, among others, and give a more comprehensive view of where the investments are headed.

She pointed out that the decision to lower projections from an average return of 7 per cent to 5 per cent should have been the catalyst for a much more honest conversation about how pension funds are likely to perform.

This is all the more important when you consider a downright ridiculous missive issued by advisory group deVere this week.

The firm recommended that a 30 year old on an average wage of roughly £26,000 should save more than £800 a month into a pension. Yes, you read that right.

That is the saving commitment that would be necessary for a worker to stop working at 65, the current default retirement age, on at least three quarters of their previous earnings – the optimum target in the pension industry, according to the firm.

Any financial expert will tell you that saving should be top of everyone’s agenda. Countless pieces of research tell us that an ageing population and strained government budgets could be a timebomb for our generation when we come to retire. We can fight the risks by working longer – most of us will enjoy good health to fulfil that promise – and by saving prudently for the future. But most of us would do well to remember Tesco’s advertising slogan. Even a little, every month, will make a huge difference without compromising our ability to save for more short-term goals, such as a house deposit or marriage. And it all depends on the contribution terms offered by our employer and whether we have debts – something that this advice does not reflect.

The figure also does not account for any other type of legitimate saving that a 30 year old worker may be engaging in. So if are saving decent chucks of your income in a tax-free Isa, you can afford to treat this advice with a fair pinch of salt. I still meet young people who have been told to get a pension at a young age but don’t save into an Isa. Why would a young person jump the gun, picking the most rigid savings vehicle above any other, without considering how they’ll access funds for their most immediate needs? It can be down to well-meaning but ultimately misguided advice like this.

DeVere makes regular appearances in the ‘out-of-touch’ pensions advice sphere. The firm produced another classic of the genre last year, namely a press release which discussed what financial advice millionaires would give to younger generations. The number one piece of wisdom was – you guessed it – save for a retirement rather than save for a home. Whilst I’m sure the participants in DeVere’s survey had good intentions, the resulting press release was stunningly misjudged. These considerably wealthy people were seen to be lecturing to the rest of the population about they should manage their financial affairs, or older people lording it over the young.

Pensions have a vital role in a considered and rounded savings strategy, but we must encourage young people to have a feasible plan, not be daunted or demoralised by fantastical goals.

I’ll be talking about the value of saving and the fantastic correspondence I received as a result of my recent appearance on Channel 4 News – watch this space.

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Can young people afford to be generous volunteers?

By Iona Bain

Young people have always been renowned for their idealism and commitment to good causes – who would want it any other way? But research is now showing that members of generation Y are helping their local community as a way of gaining vital experience in the ‘real’ world, even if they seldom get basic expenses for their time and effort.

A recent report by Ecclesiastical, a specialist insurer of charities, heritage sites and community organisations, has revealed the vital role that young people play in driving the UK economy simply through volunteering. One in five young people are active in their local community in one way or another, a greater percentage than any other generation.

The Community Census report showed that 35% of young adults intend to spend more time in community activities and believe this will enhance their skills and knowledge much more than older generations. Interestingly, heritage sites seem to offer the most potential for learning – it’s the reason why almost half of young people sign up to volunteer at places of historic interest.

Why? Well, young unemployment continues to be a stubborn fact of modern life. It’s remained depressingly high for the last year, with one fifth of 18-24 year olds out of work and not in education.

Getting out there and making yourself useful in the community is certainly better than waiting for an employer to conjure up a dream job for you. The labour market has now changed beyond recognition compared to even twenty years ago. Young people need to demonstrate get-up-and-go far earlier in life, rather than depend on a school and possible university education to provide a seamless route into continual employment. Furthermore, the third sector needs all then help it can get in the current economic environment, so will welcome energetic and fresh young volunteers with open arms.

However, young people who are generous (and intelligent enough) to recognize the value of volunteering could be in a very financially precarious situation. This could be seriously exacerbated if the people and institutions around them don’t support their quest to plug the employment gap in their life.

They may need continual help from the Bank of Mum and Dad (or from other family members and guardians) whilst they essentially work for free. Furthermore, young people have to resist the temptation to access payday loans, run up massive overdrafts or max out credit cards in order to tide themselves over.

Fortunately, these challenges are being acknowledged by more charities, financial providers and politicians, as they seek to improve both the financial awareness and job prospects of young people in this economic storm. The Personal Finance Education Group and Standard Life have launched a new initiative called Take Charge, which will help to clarify the upcoming priorities in financial education and enable young people to becoming more employable.

Let’s hope young people can continue to help others (and themselves) in their local communities without being at a massive financial disadvantage.


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Warning: new rules from Law Society will make buying and selling properties more costly and troublesome

Herald Scotland

by Iona Bain

Scots buying and selling homes in the future face higher fees and a more tortuous troublesome legal process unless plans by the Law Society of Scotland are withdrawn, experts say.

Scots buying and selling homes in the future face higher fees and a more tortuous troublesome legal process unless plans by the Law Society of Scotland are withdrawn, experts say.

The society next week ends its consultation on the introduction of mandatory separate legal representation for borrowers and lenders. That would mean two sets of solicitors would always be required in any transaction.

The move is designed to prevent any conflict of interest and allow people to obtain “truly independent” legal advice from a solicitor of their choosing, according to the society’s property law committee convener Ross MacKay.

He argues: “The severe economic downturn, increasingly complex transactions, increasing risk of mortgage fraud, and the additional pressures from lenders, mean that it is clearly no longer in the public interest to continue acting for both a lender and a purchaser in a secured lending transaction.”

Mr McKay stresses that the practice is already widespread across the industry. But critics say the measure could add hundreds of pounds to legal bills, and sometimes prolong the transaction by weeks.

“This is a rearguard action being fought across the industry to keep this dwindling market alive for solicitors,” saidAndy Knee, director of property services firm LMS, said this week.

“If lenders are represented separately from customers in every transaction, there has to be two solicitors on the purchase side and one on the sales side. It is going to increase costs and make transactions more troublesome, because two sets of solicitors on the purchase side have to approve the documentation. What it will do is keep lots of very small solicitor firms in business.”

The Council of Mortgage Lenders in Scotland has branded the move “self-protectionist”.

Bob Marshall, senior property partner at Aberdein Considine, a Scotland-wide legal firm, said: “Lenders tend to use a panel of solicitors they know and trust.

“It is becoming much harder for smaller solicitors to get on those panels, so this move is bound to be supported by those firms, because they have a better chance of representing the client instead, and staying in this market.”

Mr Marshall said potential for hold-ups could be more “theoretical” than real, and delays may only occur in a “tiny percentage” of cases.

The Law Society of Scotland is adamant that separate representation will not necessarily hike costs for the customer.

Mr MacKay said: “It will be for the lenders to decide if they are going to pass on additional costs to their customers on top of the administration fees already charged.”

Mr Marshall commented: “It remains to be seen how much the extra cost will be. It could be a couple of hundred pounds or several hundred pounds, but whether clients pay that will be down to commercial pressure on lenders.

“If lenders are keen to get business, offering free legal and valuation fees would be an incentive. But not all will take that attitude, and that could be a problem if they happen to offer a very competitive mortgage deal otherwise.”

House purchase lending is 23% up on a year ago, driven by a 47% rise in high loan to value lending to its highest level since September 2008, according to UK figures published yesterday by e.surv.

It says lower rates, easing criteria, and wider choice of mortgages, are the key to the upturn.

Nevertheless, borrowers can be “shocked” to find how much valuation and legal fees push up the true cost of a mortgage as they go through the process, says Charlotte Nelson at

A recent test of prospective homebuyers, carried out by consumer group Which?, found only a quarter correctly identified the cheapest and most expensive deals out of a group of similar mortgages due to confusion over extra charges.

Ms Nelson said: “Many deals offer borrowers incentives such as free or refunded valuation and legal fees. Although these are designed to entice customers, it can work to the borrower’s advantage as it can keep their initial cost down.”

She highlights English building societies as worth considering for cost-conscious borrowers, with many deals available north of the Border.

Glasgow Credit Union this week unveiled a 95% loan to value mortgage aimed at “second-steppers” trying to move on from their first home but hampered by falling values.

“Although the property market is recovering the average selling price in the Glasgow area is £119,000, £2500 less than the same time last year,” says Scotland’s biggest credit union. The 5.25% three-year fixed rate with £499 fee discounts solicitor and survey fees to members.

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Can building societies help to educate youngsters about money?

The Building Societies Association asked me to look at whether the mutual sector will help to deliver the education curriculum mooted by the government earlier this year – here’s my verdict


Iona Bain

It was an announcement made four months ago, the culmination of fierce lobbying by charities, MPs and respected bodies in the financial sector. But the news that money lessons will soon have to be taught in all schools is still reverberating around the industry.

Up to now, financial education has been an ad-hoc affair – in England, at least. Scotland, Wales and Northern Ireland have technically been ahead of the game for many years.

But the Department of Education has finally caught up with its neighbours, and perhaps not a moment too soon. In this economic maelstrom, few doubt that the next generation need all the help they can get. As well as depressed interest rates and stagnant wages, young people face their own unique set of financial obstacles. Numerous studies show that bumped-up tuition fees will leave graduates with a debt pile worth over £50,000. A first-time buyer could be waiting until their late 30s to get on the property ladder – if the bank of Mum and Dad can’t help.

It’s little wonder that three quarters of the population are in favour of financial education, according to a poll carried out by the Nationwide Building Society. Half the population think that lessons on money management would have had “a positive impact” on their situation if they had been around before now.

But there are so many questions surrounding this landmark decision; what exactly will be on the syllabus, and who is best placed to teach it?

That uncertainty could be down to the way this curriculum has been drawn up. The Department for Education has stated that school pupils must be “equipped with the financial skills to enable them to manage their money on a day-to-day basis as well as to plan for future financial needs”. That means learning about budgeting, as well as the basic financial services that young people are likely to encounter at some point. Pupils will also have to get to grips with wages, taxes, credit and debt, as well as the more ‘sophisticated’ financial products that their parents may still be struggling to grasp.

But that is as far as it goes in suggesting how money is taught. In this way, the new Draft Curriculum follows arrangements already seen in Wales and Scotland, where teachers can decide what resources they use and how to cover the basics.

But could building societies, now attracting more support following the traumatic fallout of the banking crash, prove helpful? Many mutuals are already working with young people to improve their financial literacy. The Nationwide Education website, which has plenty of interactive resources, has received over 35 million hits since its inception in 2008. But there are plenty of smaller, local building societies, demonstrating various strategies to engage children with this thorny topic.

For instance, Cambridge Building Society has hosted “Dragon Dens” style events to ensure local school children understand the world of work, similar to the Progressive Building Society’s Young Enterprise Programme. Experts at Ipswich Building Society have gone into local schools as part of a Money Day programme, offering games and Debt Cred sessions. The Beverley and Newbury Building Societies have even set up ‘junior banks’ to get children learning about key financial products through practice.

So however teachers decide to broach this tricky subject when it becomes compulsory next year, they can, at least, be assured they are far from their own.

What do you think? Let me know in the comments section below.

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The rise of the virtual university

My latest column for Baillie Gifford – this month, I’m discussing whether the virtual university will ever replace the real thing, given the VERY persuasive financial upsides…

Virtual University

Iona Bain

If you were asked to conjure up a picture of university, what would spring to mind? Perhaps you’d be drawn to images of beautiful libraries, mortar boards and manicured lawns preserved down the generations. Or maybe it’s those hazy nights spent in bars and stimulating mornings in lecture theatres that best sum up the university experience for most people.

However, the seat of learning tomorrow could well be in our children’s bedrooms – right in front of a computer. If experts are to be believed, students may never have to attend university in any physical sense very soon. Some are, already, able to attain the highest possible qualifications in the comfort of their own homes, and it’s all thanks to the internet. The consequences this may have for young people’s education, and how parents save for it, could be startling.

The renowned financial journalist, Gillian Tett, spoke of this phenomenon – the “virtual university” – in a thought-provoking piece for the Financial Times Weekend Magazine earlier this year. It was prompted by her attendance at a debate during the Davos World Economic Forum, where a packed auditorium heard how the internet could well place universities “on the brink of dramatic disruption”. This could possibly overshadow any upheaval we’ve seen so far in finance, retail and media (all of which have been devastating enough).

Before I left Oxford four years ago, the wind of change was already sweeping through even the most staid colleges. Only a few years previously, all essays had to be deposited in our tutors’ ‘pigeonholes’ in the college’s entrance area, but emailing essays soon became the norm. An online database hosted all kinds of useful academic papers. Facebook was, at that stage, restricted to universities in the UK and already having a profound effect on how we socialised. Nonetheless, it still seems inconceivable that these august institutions will ever accept remote learning.

Yet TED, the U.S. organisation that provides online lectures, is gathering millions of fans all over the world, showing that the rise of gadgets like the iPad is making the quest for knowledge more convenient and egalitarian than ever. And it is the American universities that are taking this to the next level, just when they are drumming up interest among British students who have become disillusioned with rising tuition fees. (Last year, The Telegraph reported that the number of British students taking the mainstream US college entrance exam had increased by a third in recent times). Places like MIT and Stanford have long been putting coursework online for people to complete anywhere in the world, with the latter managing to attract a 12 year old girl from Pakistan to lessons on artificial intelligence, according to Ms Tett’s piece. Not only can anyone enhance their learning through the internet, they can actually gain worthwhile degrees. A bright young Brit could effectively attend Harvard without ever leaving Hertfordshire.

The benefits of this are self-evident; widening out access to education, erasing a huge number of the usual expenses associated with campus life at the drop of a hat. Surely universities can no longer charge top whack if fewer students live on campus and draw on facilities like libraries and lecture halls?

It’s certainly true that it’s getting much harder to justify this investment in one’s future. Those who started a degree last autumn will graduate with typical debts of £53,330, according to a study by LV=. The insurance company also predicted two years ago that almost half of all students will choose a local university and live at home with their family by 2020, slashing their living expenses. A recent survey by the Wesleyan Assurance Society showed that two thirds of parents are worried about how they’ll pay for further education. A third will even turn to their own parents – the bank of gran and grandad – for additional help.

However, the same research shows that the astronomical costs will not discourage 87 per cent of parents from advising their children to go to university. Furthermore, almost seven in ten families have already starting saving up for this vital milestone.

It’s clear that families are not betting on the cost of education falling anytime soon. Even if the online revolution takes off at UK universities, a more remote way of learning may never be a satisfying substitute for campus life as we know it. Many students may choose to live at home in the future but they’ll still want to attend lectures, read books in libraries, go to events and meet like-minded people. Traditional university may be a more expensive option in the short-term, but by integrating young people into valuable social and career networks at an early stage, it could reap huge rewards in the long-term. That’s why it’s paramount that young people have a choice about their education, and where possible, not let financial considerations dictate a huge decision in their lives. So the sooner that parents or grandparents start saving for university – whether it’s physical or virtual – the better.

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How to get rich by the time you’re 50: Guide 3 in the Young Money Series

Welcome to the third instalment in this week’s Young Money Guides, in association with Investors Chronicle. Today, we’re looking at investing your money for the longer-term, and whether the stock market is a  potential path to riches…

Saving is important if you want to get rich, but there’s a much faster way to grow your money – investing. Investing is an essential tool if you want to get rich by the time you’re 50 because it gives your money more potential for growth.

If you’re looking to grow your money, one of the major problems with saving is a huge and unstoppable beast that will eat into your money and devalue it over time. That beast is inflation. So what exactly does it do? Let’s pretend you want to buy a pair of £100 headphones, but you are going to wait until this day next year. So you put £100 in a savings account with a 3 per cent interest rate and wait. What will happen to your cash? Well, because the current rate of consumer price index inflation is 2.8 per cent, that means that in a year’s time, your money will be worth 2.8 per cent less than it is today. So, although the interest will turn your £100 into £103 after a year, in today’s money it’ll only be worth £100.80. That means you can still afford the headphones, but only just. This is pretty lame.

If you want to beat inflation, investing is a much more effective tool than saving – and we’ll come on to why in a second. Now, forget the headphones we just talked about – because you’ve got much bigger fish to fry. Investing can help you reach your life goals faster than saving – and if you’re in your 20s – the one that probably springs to mind first is buying a house. But if you’re a first-time buyer in the UK, on average you’ll need to stump up a £31,000 deposit (source:
Council for Mortgage Lenders). Most people don’t manage to save this much until they’re in their 30s – and many will never manage it. Let’s look at how much faster investing £200 a month can grow your money than if you’re saving the same amount in a cash individual savings account (Isa) over a 10-year period.

Investing in the stock market can help you achieve this much faster. As you can see from the chart on the next page, a £200 monthly investment into the FTSE All-Share over the last 10 years would be worth £36,680 now compared with the £26,400 you’d have if you’d invested it in a high street cash Isa. So the difference between saving and investing could mean years between you being stuck renting and affording your first home.

So, how is investing different to saving? It’s actually quite simple. When you save money it sits in the bank and the bank give you a bit of interest, which makes it grow. But when you invest money, it is not just sitting in the bank. What you are doing instead is handing over your cash to buy assets that rise and fall in value over time. After you buy them, they will either lose or gain value, so when you decide to sell them in the future they will have either stayed the same or generated a profit or a loss.

There are many different types of assets you can buy and we will take a closer look at them soon. Collectively we refer to them as the stock market.


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