Wednesday, April 22, 2009

Blogger Interview - Killian Nolan

What is the best business/investment decision you ever made?

Investing in an Equity SSIA. I'm still amazed at the amount of people that did not take up the offer.

What kind of car do you drive?

A very old BMW 520

What is the worst financial advice that you ever received?

Buy AIB shares at €18. Great Company and with a dividend of 5% you can't loose !!

Do you own property abroad?


How does the economic slowdown effect you?

From a business point of view we continue to do well and the current environment has probably helped us a little as we are the only triple A rated bank in Ireland. On a personnel basis money is a little tighter and I'm more comfortable to hold onto any cash I have as opposed to making any big purchases.

Do you contribute to a pension plan?


What's your favourite film of all time?

Life of Brian

Have you ever won money?

Won some money on the Grand National as a student but still waiting for the prize bonds to pay out !

Do you own your own home?

Yes (but still have a decent mortgage)

Do you invest directly in the stock market, through funds or both?

What is your preferred method/system of saving (Deposits, Funds,
Shares, Property)?

Regular investing into equity funds. Smoothes out the peaks and the troughs.

What financial product/s do you consider to be bad value for money?

Annuities - you invest in a pension for 30 years, retire, buy an annuity and then you get hit by a bus. Money gone.

ARF's and ARMF's are a better deal.

Do you trust your bank?

Yes, but I do keep an eye on things.

Killian Nolan is Investment Manager with RaboDirect

Friday, April 10, 2009

'Supermarket' Banks - Conflict of Interest

The last 25 years has seen much change in the services offered by Banks. The traditional role of Banks, as 'Deposit Takers', 'Risk Managers' and 'Prudent Lenders', has been morphed into something akin to 'Supermarkets' of Financial Services.

The ambition for greater profits and meteoric rises in business growth has led to a situation where the taxpayer/consumer is now picking up the tab for these misguided ambitions; and trust in the banking system has been severely damaged.

It would appear that the general consensus within banking was that they should offer their customers as many financial products as possible and pass the marketing of this business plan off as a convenient; 'One-Stop-Shop' .

The theory behind this plan is that you should be able to cross-sell as many products as possible to customers so that they are not tempted to buy from another service provider, thus maximising the revenue stream from an individual client. The problem with this targeting of 'Consumer Inertia' is that, the customer will always loose out.

Perhaps it is time to have an in-depth review of how banks market their non-core products to their client base. When the two main Irish banks launched their own Life & Pension Companies, it was commonplace that they would watch out for direct debits coming in from other Life & Pension providers so that they would then contact the client and offer them their own products. They got their knuckles rapped for this practice, but it still does not excuse their abuse of the information they had to hand.

Where one institution has a financial interest in another, there will always be the potential for a conflict of interest. This is heightened where information may be shared between the financial institutions or where recommended investment funds contain large shareholdings of their own stocks. It could also be argued, that the 'conversion' (cannibalization might be more appropriate) of deposit money to cost heavy investment products by some financial institutions may not be in the best interest of the consumer. Given the current need for capital in the banking sector, I am sure that there is no pressure on the branch network to 'advise' their clients to move their deposit money to investment products, as it is not in the banks best interest at the moment.

I think that it is about time that the core product offerings of banks are decoupled from their pension and investment arms and that they are operated in total isolation of each other. The banks should focus on deposit taking, risk management and lending. Targets for generating life and pension business should not be imposed on their staff/managers. In my opinion, the traditional role of the banks is not in line with the long term goals of consumers in respect of pension and investment products. They both have their parts to play in financial planning but you have to eliminate any risks of conflict.

When your business model is based on being a 'jack of all trades' you invariably become 'a master on none'.

Wednesday, April 8, 2009

'Execution-Only' Pension Products -

Who should use this service?

You should consider this type of service if :

(i) You have a good understanding of what type of pension product is suitable to your circumstances
(ii) You are comfortable with selecting investment funds appropriate to your risk profile
(iii) You want to buy a low-cost product
(iv) You do not require financial advice

Products Available

(i) Standard PRSA
(ii) Non-Standard PRSA
(iii) AVC PRSA
(iv) Personal Pension (RAC)
(v) Executive (Directors) Pension
(vi) AMRF
(vii) ARF
(viii) Retirement Bond

Sunday, April 5, 2009

'Lazy and Misleading' reporting of unemployment rate

I must say, that I had not given much thought to the way the figures were being interpreted by the media until I read the following on Saturday.

It's probably a negative perception that we could do without, if we want to attract foreign direct investment here.

PS: Can anyone persuade the media to abandon the lazy and misleading tendency to treat our Live Register figures as a measure of unemployment – despite the fact that every month the data includes the statement that: “The Live Register is not designed to measure unemployment”.

Last December the media was brandishing Live Register data to claim that unemployment then exceeded 275,000 – at a time when the internationally recognised unemployment figure was 170,000. The difference between these figures is accounted for by part-time seasonal and casual workers.

Garret Fitzgerald - Irish Times - 4th April 2009