Our content this month are as follows:-

• Charges - a Timely Reminder
• A Correct Prediction
• Books We Have Read
• Buying property in France?
• Quotes of the Month

While we encourage clients to use their ISA allowances as soon as possible in the tax year, we are made aware by investment company literature that the "ISA season" is still with us. Investment companies are keen to increase their share of the market at this time, when many people are encouraged to think about using their £7,000 allowance before the end of the tax year; their methodology is to crudely increase the commission they are prepared to pay to IFAs to sometimes ludicrous levels.

For example we recently received a flyer from a large investment house which is prepared to pay 6.25% initial commission for investments and, if the client will commit to regular payments, will pay as much as 20% initial commission. Naturally, the client will pay for this and in this case will be charged 4% initially plus 0.5% of the fund each year as an account charge plus between 0.3% and 0.8% per annum for choosing a wider market fund plus the fund manager’s typical charges of between 1.5% and 1.75% per annum. Total charges of up to 7.05% in year one alone. We would be happy to name this investment house but will not for the simple reason that this is not at all unusual. Hopefully, we do not need to remind you that the Dimensional funds we include within client portfolios are charged at between 0.25% per annum and 0.55% per annum; Dimensional do not pay commission to anyone.

Some of you may remember that, a couple of years ago, Noel wrote an article for one of the Financial Times magazines about the debacle at Fidelity regarding their Special Situations fund. Although we believe that predictions are worthless in the investment world we are proud to report that Noel predicted that Fidelity would lose about £1 billion from the fund as a result of their mishandling the handover from Anthony Bolton to the new managers. It has been reported this month that precisely that has occurred.

Interestingly, the herd instinct among advisers is still intact as Invesco Perpetual reported in the same month that they raised a record £895 million of new money and most of this has gone to funds run by Neil Woodford, obviously the new darling of advisers. Whilst we cannot with certainty link the two events there is a high probability that clients are being taken out of Fidelity's funds to go to Invesco Perpetual's funds, with all the attendant costs (see above) and a high probability of no discernible benefit. It is highly likely that precious little attention is being paid to asset allocation either.

We have previously recommended Tim Harford's, "The Undercover Economist" and therefore looked forward to the publication of his latest, "The Logic of Life" and we have not been disappointed.

This book analyses and explains how people make decisions and how most of those decisions are entirely rational, even when the outcome is perhaps not what we would want. Among other questions, he answers one we have all asked from time to time, "Why your boss is overpaid" and finishes with an explanation as to why this is the best time to be alive. Like many new popular economics books it is extremely well written, full of interesting facts and we were unable to put it down.

The book is available from shops and Amazon but if you have any difficulty finding it simply e-mail nikki@indexwm.co.uk and we will be happy to help.

Anyone who has bought a property abroad will know that there are many traps for the unwary and that it is very important to obtain good advice. Below is an article from Kim Taylor at Simpson and Co, Solicitors, together with her contact details should you wish to discuss a potential purchase.

PURCHASING IN FRANCE?
PITFALLS AND PRECAUTIONS

There is no doubt that the property market in France has changed considerably over the last few years. More and more people are taking advantage of the ever increasing low-cost flight access to France and the affordability of French property. Coupled with this, purchasers are reassured that France is one of the safest property markets in Europe with transactions rigidly and methodically controlled by the French authorities.

It is, however, important to be aware that there are some fundamental differences between purchasing in the UK and France. The purchase transaction usually takes around 12 weeks from start to finish but care should be taken at each stage.

Once you have found a property, you will be given a contract, usually a Compromis de Vente, which is a legally binding contract on both sides. You, as a purchaser, however, will by law be issued with a 7-day cooling off notice during which time you have the right to think over your proposed purchase and withdraw if you wish with no financial penalty. Once your 7 days has elapsed, however, you will be locked into the Contract and your deposit, usually 10% of the purchase price, will be retained by the appointed notaire, a quasi Government official who is subjected to rigorous controls and through whom all property conveyancing must be handled. If you withdraw from the purchase after your cooling off period has expired you will almost certainly lose your deposit and, in some circumstances, you may be sued by the seller for the full amount of the purchase price. You should therefore seek independent legal advice on the purchase contract so that specific clauses where necessary can be added to offer you, as a purchaser, greater protection. Such clauses may include the purchase being dependent upon the return of a positive survey or you obtaining the necessary finance to purchase through means of a mortgage or upon the sale of your property in the UK.

Once you are happy with the contract and its terms, you will then need to seriously consider the implications of French succession law before you sign your final purchase contract, the Acte de Vente. Such is the rigid structure of French inheritance law, it is always advisable to seek independent legal advice prior to completing your purchase. Although, as of August 2007, there is no longer any IHT liability between spouses, this does not mean that your property will automatically pass to your spouse. For married couples with no children from previous relationships, structuring a purchase is relatively straightforward although there are still several ways in which the property can be held. For unmarried couples or couples of the same sex, however, the purchase of a property in France from an IHT point of view can be a costly experience. There is currently a 60% inheritance tax liability payable by the survivor if he/she should inherit from the deceased. This situation becomes more complicated if either party has a child from a previous relationship as French law dictates that you cannot disinherit your children.

So, depending on your personal circumstances, whether you are married or unmarried, with or without children, have children from a previous relationship, whether you are a sole purchaser, joint purchasers or group purchasers, there are a number of ways in which your purchase may be structured not only so that your succession wishes may be met but also to mitigate your inheritance tax liabilities as much as possible.

For all your French property conveyancing issues, we can help.

Contact Kim Taylor at Simpson & Co, on 0121 233 2298
or email us at law@simpsonsol.com

“The only thing new in this world is the history you don't know.”
Harry S Truman, 33rd President of the United States

"The only value of stock forecasters is to make fortune-tellers look good."
Warren Buffet, 1992 Annual Report of Berkshire Hathaway