Financial review of 2012Posted on: 02 January 2013 by Andrew Stallard
LIBOR, CPI, PPI and RDR. Andrew Stallard looks back at a year dominated by acronyms.
It's been an interesting year for the financial world. 2012 started out with storms in the Eurozone and fears that the Euro itself was possibly facing its demise. Twelve months on and the Euro is still very much with us, although there are still choppy waters around the continent. France in particular experienced shocks this year with Nikolas Sarkozy losing the presidency to Francois Hollande, and the country itself losing its AAA credit rating from rating agency Moody's.
We've also been rattled by a few financial tempests, along with all the meteorological ones. The FTSE100 started the year with a good impression of a yoyo, but seems to have settled a little recently. Inflation has also been up and down, currently slightly down at 2.7%, meaning that stuff is still getting more expensive, just a little more slowly than it has been. As measured by the Consumer Prices Index (CPI) inflation in January 2012 stood at 4.2, dropping to 3.6 in February (the biggest fall of the year). It was at its lowest in October, at 2.2%. (1) Unfortunately, looking ahead to 2013, it's likely that rises in gas and electricity prices are going to mean inflation will rise again. (2)
What can you do to stop inflation nibbling away at the value of your money? We've a few suggestions, starting with making an appointment with your financial adviser to review your investments and financial plans. See the New Year as your opportunity for an early spring clean of your finances.
So what else for 2012? It's not been a good year for banks as fines and scandals have rocked the foundations of several of the biggest. Barclays bank was at the forefront of the Libor scandal that hit the headlines in late June (a quick reminder, Libor is the London Interbank Offered Rate, the rate at which banks lend money to each other). Barclays' involvement in the rigging of the Libor rate led ultimately to the resignation of Bob Diamond, the bank's chief executive, and fines from the Financial Services Authority and US authorities.
The bad news continued for banks with increases in mis-sold Payment Protection Insurance (PPI) claims. Banks have had to set aside large sums of money to deal with the compensation claims, which have caused dents in their profits. It might be a little optimistic, but the hope is that banks might learn a lesson from this and provide a better service for customers from now on. And the PPI compensation has proved to be a silver lining for many with the money paid out being spent and helping to boost the economy. (3)
We have something a bit stronger than just a hope for this with the Retail Distribution Review coming into force from the 1st January 2013. The RDR aims to set new standards for financial advice in terms of a minimum level of qualification for advisers, more transparent charging for advice and the requirement for advisers to make clear to clients whether they are independent and able to advise on every product in the marketplace, or restricted and able to advise on only certain products. Santander appear to have been caught out by this only recently with the bank's decision to suspend 800 of its advisers and send them on an intensive training course to bring them up to RDR standard. (4)
What else lies ahead for us in 2013? Without the use of a crystal ball, or a time machine (where's Dr Who when you need him?) none of us can really say for certain. Uncertainty is the only certainty. What you can do, however, is stick to the time-tested principles of planning as far ahead as you can, and always taking independent advice when it comes to your money.
And finally, good wishes from all at Worldwide Financial Planning for a happy and healthy 2013!
4. Money Management
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