The Sunday Times - UK (2022-06-05)

The Sunday Times June 5, 2022 13

MONEY

Ombudsman ignored by 60 firms since 2019

Pick up some Dr Martens and

join the 33% club of bargain stocks

Australian fertiliser could help to

wean ourselves off Russian energy

Ian Cowie Personal Account

About 60 firms have failed to

abide by a Financial

Ombudsman Service order

since 2019, according to data

obtained under a freedom of

information request.

The Ombudsman, which is

free to use, can order a

regulated firm, such a

financial adviser, to pay up to

£375,000 if it finds that it did

something wrong, but it

cannot force it to pay. It can

however refer a firm to the

Financial Conduct Authority

(FCA).

There were 19 cases

referred by the Ombudsman

its decision, it will first

ascertain why from the firm

and refer it to the FCA as a last

resort. The FCA also lacks

powers to force payment of

an Ombudsman award but it

can withdraw permission to

provide a financial service.

The FCA said: “We take

referrals for not complying

with Ombudsman awards

very seriously. If a firm fails to

pay, we could stop them from

offering financial services.”

in 2019, 15 in 2020 and 19 last

year. Fewer than ten have

been referred so far this year.

About half the firms have

either paid up or failed since

being referred. The rest are

still being investigated.

Ron Treherne IFA Ltd, an

independent financial advice

firm based in Cardiff, had its

regulatory permissions

cancelled in May last year

after it failed to abide by two

2018 Ombudsman awards

over pension complaints.

One of the awards was for

£132,124. In the other case the

firm failed to calculate what it

owed the complainant. The

firm went bust in March 2022.

Customers can take a

company to court over its

failure to abide by an

Ombudsman decision, and

some firms may decide to

shut their business instead of

abiding by an order. In such

cases, a customer may appeal

to the Financial Services

Compensation Scheme,

which can pay up to £85,000

from an industry-funded pot

to help those out of pocket

because a failed business.

The Ombudsman does not

monitor what happens after it

makes a final decision about a

complaint. However, if a

complainant informs it that

the business has not acted on

Ali Hussain

YOUR STORY

Has your adviser failed to

abide by the ombudsman?

[email protected]

MOT system and online voter

registration service.

Burgeman likes Liontrust

Asset Management, which is

down 50 per cent this year.

The performance of the firm’s

shares is correlated with the

general stock market because

it runs investment funds, but

Burgeman said he thinks that

its funds range is excellent.

Webster-Smith and

Burgeman suggested Scottish

Mortgage’s current share

price could prove a good

entry point if you don’t

already invest. Burgeman

said it “is well resourced and

well managed, with an eye

firmly on the future.”

Shares in the boot maker

Dr Martens were down 50 per

cent from January 1 to May 31,

but rose last week thanks to a

surge in profits and better

than expected forecast for

this financial year. The share

price jumped 18 per cent but

the firm is still down 40 per

cent in 2022 and 49 per cent

in the past 12 months.

Russ Mould from the

investment platform AJ Bell

said that the loyalty of Dr

Martens’ customers “could be

an absolute godsend at a time

when budgets are tight.”

The share prices of one in

seven of Britain’s large and

medium-sized companies

have fallen by a third, giving

investors the opportunity to

buy at cheap prices.

Most of the large share

price falls have been within

the FTSE 250 index, which

comprises mid-cap UK firms.

The index has fallen 15 per

cent so far this year.

On the other hand, the

FTSE 100 index of large UK

stocks is up slightly (0.37 per

cent). Some FTSE 100 firms

have, however, had sharp

falls in their share values.

Investors have been

reassessing the types of

stocks that they want to own.

Rising interest rates, for

instance, will hurt firms

expected to make the bulk of

their earnings far into the

future because it will erode

the value of those profits. As a

result, fast-growing tech firms

have taken a tumble.

The Scottish Mortgage

Investment Trust invests in

such firms and its share price

has fallen 38.4 per cent so far

in 2022.

“The speed and depth of

some falls have been

extraordinary and are

indicative of a sense of panic

in certain parts of the

market,” said Rob Burgeman

from the wealth manager

Brewin Dolphin.

By contrast, the oil price

has risen rapidly because of

the war in Ukraine, leading to

surging share prices for the

UK oil giants BP and Shell.

Miners such as Glencore and

Rio Tinto, have done well too.

For contrarian investors

willing to bet against the

crowd, share price falls may

present opportunities.

Jonathan Webster-Smith

from Bowmore Asset

Management said: “With so

many companies having

sharp falls, investors can now

pick up good quality

companies at value prices.

Businesses that can continue

to grow their revenues each

year should rebound quickly

once the negative sentiment

moves from markets.”

Webster Smith said that

some technology stocks could

be interesting investments.

This includes the software

firm Kainos, whose share

price is down 32.5 per cent in

2022. It has helped the
      government to overhaul the

David Brenchley

GOING INTO REVERSE

Kainos Group Scottish Mortgage Investment Trust

300%

100

0

200

-100

Source: FE fundinfo

2019 2020 2021 2022

Investment return

world, instead of poisoning us with pet-

rol fumes.

This deal should boost production of

potash (potassium-rich salts), which is

essential for agricultural fertiliser, at a

time when war in Ukraine has made food

security more obviously important and

caused the price of potash to spike

240 per cent higher in Europe.

David Lamont, BHP’s chief financial

officer, said: “In effect, we are replacing

our petroleum business with potash.”

Explaining that it will take time and

money to develop its vast potash mine in

Saskatchewan, Canada, discussed here

last April when I invested half my Isa

allowance in BHP, Lamont added: “At

potash prices half of where they are

today, we would be generating around US

$4 billion of earnings a year. For compari-

son, our petrol business averaged $3 bil-

lion per annum over the past five years.”

Bear in mind that, at present, Russia

and Belarus account for almost 40 per

cent of global potash exports, according

to the investment bank Morgan Stanley.

Putin might block those exports at any

The miner BHP said it is replacing its oil business with potash, the potassium-rich minerals used in agricultural fertliser

time. So you can see that BHP’s switch

away from pumping fuel to producing

fertiliser might enable it to clean up in

more ways than one.

What about Woodside, I hear you ask.

Even in the fossil fuels business there are

grounds for hope about practical survival

and positive change.

Before the European Union imposed a

partial ban on importing Russian energy

last week, it was in the absurd position of

opposing the invasion of Ukraine while

also helping to pay for it by sending

Russia €22 billion (£19 billion) per month

City cynics joke that non-executive

directors, also known as “Neddies”, are

like Christmas tree baubles — they look

good but don’t do much. Shareholders

might be tempted to agree when we

watch these suits filling their pockets

while the value of our equity shrinks.

Until last week that was how it looked

at Unilever (ULVR), the consumer goods

group, where the sickly share price had

melted by nearly a fifth over the past

year.

Then the American investor Nelson

Peltz, announced that his fund

management arm, Trian, has built a

stake in ULVR, where he has also

become a Neddy.

The share price perked up by more

than 9 per cent on the news. Peltz is a

largely self-made billionaire who began

driving a truck for his father’s frozen

foods business before riding the junk

bond boom all the way to Wall Street.

More to the point, he has a track

record of waking up sleepy giants such

as Heinz (KHC), Mondelez (MDLZ) and

Procter & Gamble (PG). Peltz should

make senior management perform.

His arrival has lifted ULVR to become

my eighth most valuable shareholding.

A founder constituent of the “forever

fund” at £25.45 per share in September

2013, it now trades at £36.96 and yields

3.9 per cent dividend income.

ULVR’s success or failure will depend

on whether it can cope with inflation by

passing on the rising cost of raw

materials into prices paid by consumers.

With all those well-known brands, is it a

price-maker or a price-taker?

Can Trian

wake up this

sleepy giant?

£36.96

The price of Unilever shares

that Cowie transferred into his

“forever fund” at £25.45 in 2013

Y

ou don’t often buy a share in

the confident expectation

that its price will fall by more

than 10 per cent the next

day, but that’s what I just

did. The explanation, as out-

lined here several times over

the years, is that the primary

aim of my “forever fund” is

not to win a parlour game by

achieving the biggest capital gain in any

particular period, but to obtain a sub-

stantial and sustainable income to pay for

an enjoyable retirement.

That’s why I increased my investment

in BHP Group (stock market ticker: BHP),

the biggest miner in the world, by more

than 10 per cent just before it went ex-

dividend, paying £26.92 for shares that

promptly slumped to £24.09 the very

next day. Since then they have partially

recovered to £25.52 as all those highly

paid suits in the Square Mile begin to

wake up to what anyone with a scrap of

common sense can see is coming next.

BHP does not just dig up iron ore and

copper but also had substantial assets in

oil. Fed up with the opprobrium the latter

attracted from folk who would rather the

world relied on cleaner energy, the miner

agreed to merge its oil interests with

another Australian business. To be spe-

cific, one Woodside Petroleum (WPL)

share was distributed as a special divi-

dend for every 5.5 BHP shares held at the

close of business on May 24.

Because I believe both businesses will

benefit from higher prices for the com-

modities they sell, I hope it was worth

buying more BHP to get more WPL.

The details of this deal was agreed last

November, since when the oil price and

Woodside’s share price have both soared

more than 30 per cent. So it seemed obvi-

ous to this small shareholder that the

greater my exposure to the distribution

of WPL stock the better.

I won’t know for sure until after WPL

starts trading in London tomorrow, but

there are several reasons why I believe

this deal will be good for long-term inves-

tors — I first invested in BHP more than a

decade ago — despite the short-term hit to

the share price. First, as also mentioned

here from time to time, this DIY investor

is keen to make my money matter and, in

however small a way, to pay for positive

change in the world.

Although I don’t suppose the miner

would put it like this, getting rid of its

oil will enable it to help to feed the

10.5%

The dividend yield on BHP shares

for its oil and liquefied natural gas (LNG).

Closer to home, as The Times revealed

on Monday, our government fears that

millions of British households could suf-

fer this winter if our energy supplies are

disrupted by the war.

More positively, Woodside is one of the

biggest producers of LNG in the world.

LNG is cleaner than oil, so it is an impor-

tant fuel to keep us warm and at work

while we wait for the transition to renew-

able energy.

BHP, which has become my sixth most

valuable holding, and Woodside are

yielding dividend income of 10.5 per cent

and 6.2 per cent respectively, which will

be entirely tax-free in my Isa, because,

unlike British dividends, there are no

Australian deductions at source on this

income. Yield will help with eating and

heating bills while the free world weans

itself off Russian fertiliser and fuel.

Meg O’Neill, the chief executive of

Woodside, said: “The Europeans post the

Second World War thought there would

never be war on European soil again.

What has happened is so shocking for

them that they will not be lulled into com-

placency around acquiring energy from

Russia in the future.”

This small DIY investor agrees with her

and is just amazed it is taking institutional

investors so long to work it out. Some-

times it is worth accepting short-term

pain in order to achieve a long-term gain.

ANDREY RUDAKOV/BLOOMBERG/SCHELLHORN/ULLSTEIN BILD VIA GETTY IMAGES