Financial Times Weekend 22-23Feb2020

8 | FTMoney FINANCIAL TIMESSaturday22 February 2020

Finance on Instagram: what’s

not to like?

Most people in the article

who have built up a good pot

either got lucky with a windfall,

or have had high paying jobs.

The guy whose net worth is

$3.8m forgot to mention that

most of it came from the sale

of his business in 2014.

It’s borderline irresponsible

to give people the fantasy that

they can retire early, or

become a millionaire if they

are average people on average

wages. —KKR, via FT.com

Interesting that most of the

Instagram financial advisers in

the article are women. —

Saltpetre, via FT.com

I find the language used by

the Insta crowd nauseating, e.g

side hustle. It’s trying to be a

cutesy way to normalise the

fact that a lot of people don’t

earn enough to support

themselves. It’s very

patronising. —Antinomy, via

FT.com

Pensions tax relief: is time

running out?

A tax on the pension lump

sum will result in mass

retirements of those who can

but have not yet retired. This

will include many hospital

consultants , GPs and other

health professionals and may

worsen our current staffing

crisis, which was brought on

by the last stupid reforms. —

AdamD, via FT.com

If the tax break is so wrong,

why not tax those in receipt of

their pension who already

received the tax break (and

who have significantly more

generous pensions than the

current working generation)?

Yet again the government

protects a generation of

pensioners who enjoy a far

higher standard of living than

those who will come after (or

those who have come before),

at the expense of the younger

generation. Cowardly. —

Average Josephine, via FT.com

Just keep it simple. I would

go for a lifetime allowance on

contributions (not the pot).

You could use the current £1m

level, and a flat rate of income

tax relief. Would the

government like to save

money? OK, how about

tackling the completely

unaffordable and over-

generous public pension

schemes. This should have

been done 30 years

ago. —Floreat, via FT.com

By merely talking about it,

the Tories will have scared

savers into believing that a

Conservative government

considers rules on long-term

retirement planning as fair

game. That can also be

extended to Isas. —Mr

Grumpy, via FT.com

Can you afford to retire when

you want to?

The lifetime allowance is a

skimming operation and

particularly nasty for private

sector defined contribution

retirees. The worst of

Whitehall, inflicted by those

with gold-plated defined

benefits schemes. —Robbie2,

via FT.com

Phew, I appear to be at peak

unhappiness and anxious age.

On the bright side there is a

steep line of upside ahead of

me until my demise. What a

relief. —Alternative view, via

FT.com

Y

You can comment on

FT Money articles via

email at

[email protected] on Twitter at

@ftmoney. Comments may be

edited for length and clarity.

READERS WRITE

Bobby Seagull Serious Money

S

olvingpuzzles—asa

mathematician,andquiz

showenthusiast—iswhat

rocksmyworld.

Sothisfinancial

conundrumposedbyFTreaderPeter

Stauntonintriguedme—whatdrives

ourofteninefficientdesireto

compartmentaliseourmoney?

OneofthewinnersofmyFT

ChristmasMathsQuiz,Peter’s

tiebreakersuggestedthistopicfora

ChristmasLecture,basedonthe

hiddenpowerofpersonalfinances(I

hadacameoroleinthe2019Royal

InstitutionChristmasLectures

hostedbyDrHannahFryonthe

hiddenpowerofmaths).

Thefatheroftwoboys,Petersaid

hewasstruckbythenumberof

parentswhosavetofundtheir

children’seducation.

Manyusecashaccountsbearinga

lowinterestratefortheselong-term

savings,butsimultaneouslypay

muchhigherratesontheirownshort-

dateddebts.Thisisillogicalandona

parwithborrowingmoneytoinvest

insavings.Sowhydoparentsdoit?

LatestHMRCstatisticsshowmore

parentsopenJuniorIsas(Jisas)for

theirchildren.Inthe2017-18taxyear,

therewasa14percentincreasein

newaccounts,witharecord£902m

ofourhard-earnedcashstashed

away.However,57percentofthat

totalwassavedintocashIsas.

Consideringthatthelock-upona

Jisaaccountcouldbeaslongas18

years,thereturnoncashisunlikelyto

beatstockmarketinvestments.

WhentheJuniorIsawaslaunched

onNovember12011,theannual

subscriptionlimitwas£3,600

(it’srisento£4,236today).

Ifyouhadopenedoneofthefirst

accountsforyourchildandput

£3,600inaglobaltrackersuchasthe

Legal&GeneralInternationalIndex

Fundondayone,itwouldbeworth

£10,131today.That’satax-freegain

ofjustover£6,500.

SarahColes,thepersonalfinance

analystatHargreavesLansdownwho

crunchedthesenumbers,alsolooked

athowthetop-ratedcashJisaswould

haveperformed—andtheansweris

notanumberyou’lllike.

TheCoventryBuildingSociety

JuniorIsalaunchedsoonafterthe

Jisawasborn,offeringinterest

ratesthathaveconsistently

toppedthebest-buytables

(currently3.6percent

interest).

Evenso,shecalculatesthat

aninitial“investment”of

£3,600wouldbeworth£4,718

today—andagainofjust£286

onceyoutakeinflationintoaccount.

“EventhoughJuniorIsasoffer

higherinterestratesthanare

availableelsewhere,£286overnine

yearsisn’tthekindofgrowthparents

dreamof,”shesays.

Inheropinion,parentschoosecash

overstocksandshares,because,

whenitcomestotheirkids,they’re

hard-wiredtoavoidrisk.“The

troubleisthatthey’refocusingonthe

short-termriskofmarketvolatility,

ratherthanthelong-termpotential

forinvestmentgrowth.Overaperiod

of18years,that’sanawfullotof

potentialgrowthtomissouton.”

Otherexamplesoffinancial

compartmentalisingincludepeople

withthousandsstashedawayincash

savingswhopayahigherrateof

interestontheirmortgage,credit

carddebtsoroverdraft(whenthe

new40percentbankchargeskickin

thisspring,makesurethisdoesnot

applytoyou!)

Mentalaccountingisonereason

whywedothis,accordingtoTim

Harford,theFT’sUndercover

Economist.Werecentlyhadachat

aboutthe2017Nobellaureatein

economics,RichardThaler,known

forhisworkonmentalaccounting.

Tim’sviewisthatmental

accountingisa“psychological

tendencyweseemtohavethatmost

peopleintuitivelyknowabout”

althoughThalerwasparticularly

successfulathighlightingit.

InThaler’swork,hereferstoan

interviewwithactorsGeneHackman

andDustinHoffman.Harkingback

totheirdaysaspennilessyoung

actorsinLosAngeles,Hackman

recalledwhenHoffmanaskedto

borrowmoney.

InHoffman’sapartment,there

werejarslabelled“rent”,“electricity”,

“food”andmore,denotingvarious

householdexpenses.Thejarswere

stuffedwithcashapartfromthe

empty“food”one,whichHoffman

obviouslywantedtofill.Buttoavoid

eviction,therentandelectricitybills

hadtobepaid,sothosejarswere

filledfirst.

Thalerexplained:“Youcanthinkof

mentalaccountingasdumb,as

violatingtheeconomist’sbasic

assumptionthatmoneyisfungible.”

Butfromamorepragmaticoutlook,

mentalaccountingmighthelpus

prioritisespendingandsaving.

Thisurgeiswellevidencedinthe

modernfinancialworld.Digital

bankssuchasMonzooffersavings

potsforcustomerstosegregatecash

forspecificgoals,andthe“envelope

system”ofallocatingcashforspecific

purposesisgainingtractionamong

Instagram’sfinancialcommunity.

Thisissensibleforthoseonatight

budget—butwhataboutthe

wealthy?

Coldrationalitysuggeststhey

shouldtreatmoneyasfungible.But

RuthSturkey,acharteredfinancial

plannerfromParadigmNorton,says

fromsomecompartmentalising“is

anabsolutelifesaver”asithelpsthem

tofeel“preparedandorganised”.

“Mosthumanbeingsarenotas

rationalasweliketothinkweare,”

shesays,notingthisiswherea

financialplannercanhelp.

Unliketheanswerstomymaths

questionsinschool,sheargues:

“Financialplanningisanart,nota

science.”

Shetalkstoherclientsabouttheir

moneybygettingthemtovisualise

threepotsfortheirshort,medium

andlong-termgoals,whichcaneach

bepopulatedbasedontheir

individualneeds.

Aswe’veseenwiththeJuniorIsa

exampleabove,ifsmallamountsare

placedintothelong-termpotearly

on,theycancompoundimpressively

overtime.Butifsomeoneintheir50s

hasneglectedtheirlong-term

savings,thenagreaterproportionof

theirincomewillneedtobediverted.

TimHarfordsumsup:“Thaler’s

pointisthatwe’regoingtodostupid

thingsanyway,andthatmental

accountingharnesses[thaturge]to

makelessstupidchoices.”

AlthoughourwinnerPeter

Stauntonisadmittedlynota

psychologist,heenjoyslearning

abouthowwearenotrationalbeings

andhowthis“translatesintobiasesin

ourdecision-makingprocesses”.

Wecanbeguilty,Petersays,of

lookingat“pensions,mortgages,

savings,creditcards,insuranceallas

disparateitems”sothatwecanmore

easilydealwiththem,ratherthan

considerthemholistically.

Butmoneyismoney,nomatter

whatlabelyouhavestuckontothe

jar.Youcouldunlocksomeofthe

hiddenpowerofyourownpersonal

financesbytakingsometimeto

puzzleoverthebiggerpicture.

Bobby Seagull is a maths teacher and

the author of ‘The Life-Changing Magic

of Numbers’. A long-suffering West Ham

fan, he is co-host of the Maths Appeal

podcast. Twitter: @Bobby_Seagull;

Instagram: @Bobby_seagull

The puzzle of

managing

money

Unlike the answers to my

maths questions in

school, financial planning

is an art, not a science

FINANCIAL TIMESSaturday 22 February 2020 FTMoney| 9

Barratt Developments executive

sells down after half-year figures

Barratt Developmentschief

operating officer Steven Boyes

has sold a total of 435,000

shares at £8.4235 per share,

banking an aggregate sale

value of £3.66m.

The sale, conducted across

four tranches that included Mr

Boyes’ wife Andrea, occurred a

week after the release of the

housebuilder’s interim results.

Barratt’s half-year figures

revealed its highest half-year

home completion figure for 12

years, with the group

completing 8,314 homes —

representing a 9.1 per cent rise

on the previous year. Its

adjusted operating margin

edged up to 19.4 per cent from

19 per cent a year earlier.

Investors have flocked to the

housebuilder in recent months,

with the shares having gained

about 17 per cent since the

start of 2020. Barratt boasts

healthy cash flows and a

strong balance sheet,

forecasting full-year net cash

of around £600m.

The group is a good

dividend play, having now

extended an annual special

dividend of £175m to 2021.

While management has made

room for rewarding

shareholders, it maintains its

land investment strategy

which has supported the

growth of the business.

Barratt approved £406m of

land acquisitions over its

interim period, up from

£338m last year.

The company said the

transaction was conducted

“purely to balance personal

investments”. Mr Boyes, who is

also deputy chief executive,

has a residual interest of

457,890 shares.

Legal and professional

services providerGateleyhas

announced that certain

directors and employees have

sold 5.5m shares worth £11m

via a placing. While only 4.75m

shares were originally set to be

placed at 200p each via an

accelerated bookbuild, more

shares were divested in

response to “excess demand”.

The group said the placing

was to “satisfy market demand

and broaden the institutional

investor base of the company”.

The names of the directors

involved and their resulting

holdings have not yet been

disclosed.

Unlisted law firms typically

operate under a partnership

structure where lawyers buy

into the company to become a

partner and receive a share of

the profits. If a law firm goes

public, those partners become

shareholders and salaried

employees.

Share ownership tends to be

concentrated at first. When

Gateley listed on Aim in 2015,

the former partners held 70

per cent of the issued share

capital and were subject to a

five-year “lock-in agreement”.

This arrangement dictates that

they can only dispose of a

maximum of 10 per cent of

their holdings in any 12-month

period after the first

anniversary of the IPO.

This is the fourth placing

since Gateley made its market

debut. Chief executive Michael

Ward and chief operating

officer Peter Davies, along with

their spouses, both trimmed

their holdings in the previous

placings. Mr Ward is due to

step down at the end of April,

but will remain with the group

and “retain a significant

shareholding in Gateley for the

foreseeable future”.Alex

Janiaud and Nilushi

Karunaratne

No. of

shares

Price

(p)

Value

Director Date (£)

BUY

SELL

Source: Investors Chronicle

OilCo Inv Spouse of Efstathios Topouzoglou 06-Feb-20

Midwich Stephen Fenby (Md) 07-Feb-20

Midwich Sharon Herbert 07-Feb-20

Fevertree Bill Ronald (Ch) 07-Feb-20

OilCo Inv Spouse of Efstathios Topouzoglou 07-Feb-20

OilCo Inv Spouse of Efstathios Topouzoglou 10-Feb-20

First Group Mark Sheppard 11-Feb-20

Wizz Air Iain Wetherall 14-Feb-20

Brewin Dolphin Charles Ferry 06-Feb-20

Greencore Patrick Coveney (Ceo) 07-Feb-20

Wizz Air Diederik Pen (Coo) 07-Feb-20

Severn Trent R Ballance 11-Feb-20

Severn Trent A Smith 11-Feb-20

Land Securities Group Robert Noel (Ceo) 11-Feb-20

Billington Holdings John Stuart Gordon 12-Feb-20

Barratt Developments Steven Boyes (Coo) 12-Feb-20

Barratt Developments Andrea Boyes (PCA) 12-Feb-20

Barratt Developments SJ Boyes (PCA)* 12-Feb-20

Barratt Developments A Boyes* 12-Feb-20

United Utilities John Russell Houlden 14-Feb-20

Whitbread Louise Smalley 18-Feb-20

Whitbread Robert Smalley (PCA) 18-Feb-20

67,000

200,000

3,000

7,229

65,000

70,000

75,000

9,100

36,141

154,249

15,000

3,497

10,510

113,127

200,000

116,090

288,910

15,000

15,000

18,000

5,000

3,000

740.7

500

500

1,390

741.9

751.9

580

4,475

359.6

237.33

4,175

2,605

2,605

966

410

842

842

842

842

1,002

4,734

4,768

496,269

1,000,000

15,000

100,483

482,235

526,330

435,000

407,22 5

129,963

366,085

626,250

91,097

273,786

1,093,128

820,000

97 7,478

2,432,622

126,300

126,300

180,360

236,700

143,040

* Discretionary Settlement 

PCA  person closely associated

D I R E C TO R S ’ D E A L S YO U R Q U E ST I O N S

What happens to my shares

if my broker goes bust?

called Beaufort Securities

collapsed and initially the

administrators sought to tap

into customers assets held

under their custody to partly

cover their fees. However, ulti-

mately a deal was struck

between the UK’s Financial

Services Compensation

Scheme and the administra-

tors to ring fence clients’ assets

which was approved by the

HighCourt.

While investors were pro-

tected and eventually had

their assets transferred to

another firm, the saga did

mean their investments were

in limbo for a period and the

experience was undoubtedly a

stressfulone.

Peter Parry of the UK Share-

holders Associa-

tionsays hold-

ingshares in

a nominee

account is

administra-

tively conven-

ient for many private inves-

tors. However, it is important

to understand that, when

using a nominee account, the

nominee is the legal share-

holder. This means that the

nominee’s name appears on

the share register and the

nominee receives the divi-

dends. The private individual

is the “beneficial” owner of the

shares. The companies them-

selves have no details of the

beneficial shareholders and

are therefore unable to com-

municatewiththem.

This means that the benefi-

cial owners have no rights to

attend the annual general

meeting or to vote — although

the situation is slightly differ-

ent for Isas. In terms of secu-

rity, the investments and any

cash or dividends are, in the-

ory, ringfenced as if they were

held in trust, so that if the

nominee goes bust the inves-

tor’s money is protected

and cannot be used to pay the

creditors.

In practice, the situation is

less clear. When Beaufort

Securities was placed in spe-

cial administration by UK

regulators it quickly became

clear that Beaufort’s own

assets would not cover the

administrator’s fees. The sug-

gestion was therefore made

that investors with shares in

theBeaufort nominee should

take a “haircut” with a propor-

tion of their money requisi-

tionedtocovertheadministra-

tion costs. This would have

resulted in an immediate and

total loss of confidence in the

nominee system and, fortu-

nately, in this case the regula-

tor stepped in to cover the

shortfall.

Another concern for inves-

tors is that, if the nominee

fails, their accounts will be fro-

zen. Investors could find

themselves unable to trade

their shares or receive divi-

dends until the administration

is completed. For those who

are dependent on their divi-

dend income this could lead to

financial hardship. The inabil-

itytosellsharescouldalsolead

tofinancialloss.

Investors who believe they

have suffered loss from a nom-

inee’s failure can claim under

the Financial Services Com-

pensationScheme.

The opinions in this column are

intended for general information

purposes only and should not be

used as a substitute for profes-

sional advice. The Financial

Times Ltd and the authors are

not responsible for any direct or

indirect result arising from any

reliance placed on replies, includ-

ing any loss, and exclude liability

to the full extent.

YOUR QUESTIONS

Lucy

Warwick-

Ching

I use an online stockbroker to

purchase shares in quoted

companies. I receive share cer-

tificates in return. If my broker

were to go bust, what would

happen? Does the trading com-

pany whose shares I partly own

know of my existence? Is it

likely that my dividends would

be sent directly to me?

Jason Hol-

lands, man-

aging direc-

tor at Tilney

Investment

Management,

says it is important to consider

the security of your invest-

ments when choosing an

online platform, broker or

wealth manager. While it is

still possible to hold invest-

ments directly in your own

nameandreceivesharecertifi-

cates, this is cumbersome and

usually more costly when it

comes to dealing in shares.

Investments are now over-

whelmingly held on nominee

accounts where the investor is

the beneficial owner but does

not directly appear on the

shareholderregister.

The use of nominee

accounts means dealing costs

arelow, trades can be settled

quickly and without paper-

work and accurate, consoli-

dated valuations can also be

provided.

Under the rules and regula-

tions governing client assets,

these must be held on trust

and strictly segregated from

the assets of the business.

Nominee companies are non-

trading companies and so can-

not run up liabilities of their

own,sointheeventofabroker

or platform running into trou-

ble, assets held in the nominee

businessshouldbesecure.

Many broking firms and

platforms don’t hold custody

themselvesbutusethird-party

custodians, typically divisions

of large banking organisations.

Importantly, investments held

with UK regulated platforms

and brokers are also covered

by the Financial Services Com-

pensation, which means losses

of up to £85,000 per institu-

tionareprotected.

In 2018, a stockbroking firm

I own three properties in the

UK — two of which are in

London and are rented out,

and another in West

Midlands where I used to

live which my mother uses. I

moved in with my partner

last year, and I am registered

at his address on the

electoral roll.

We plan to sell my

partner’s house — and

potentially my property in

the West Midlands as well —

so we can buy a larger

property.

What are the stamp duty

implications, if I do or don’t

sell my original residence?

Also, I hear the government

may be reviewing the policy

on the additional stamp

duty paid on additional

property purchases. What

are the potential changes

and how could they impact

me?

Do you have a financial

dilemma that you’d like FT

Money’s team of experts to

look into? Email your

problem in confidence to

[email protected]

Our next question

Barratt shares have risen by 17 per cent this year