Irish Financial Review

Staying the course in a fluctuating investing environment

The US dollar is still the global reserve currency. And over the course of the last few weeks, its value has fluctuated by just under 9% and over the course of the last 12 months, the swing has been much greater.

Staying the investment course in choppy waters

Staying the investment course in choppy waters

If you plan to vacation in the US this summer, then this fluctuation will have an immediate impact as prices of everything in the US will appear much more expensive in euro terms. The cost of hiring a car, the cost of staying at a hotel, eating out and buying the odd few bits of clothing will be more expensive.

However, even if you have no plans to take a trip state-side, the fluctuating value of the dollar will have an immediate impact on your financial situation, here’s why.

In the investing world, a significant weighting in the make-up of investments, be they equities or bonds are done in US dollars.

So, even if one purchases a particular investment or range of investments, be they included in mutual funds, ETF’s, bonds and so on, chances are they will be heavily weighted in asset classes that are ultimately priced in US dollars.

Over the course of the last number of weeks, watching the value of investment funds rise and fall, the variations are almost universally tied to the swings in the value of the US dollar. Sure, the value of the underlying assets have risen and fallen but it is the US dollar that most closely matches the swing in value.

Today, more than ever, investors need to focus on their investing strategy as opposed to tactics. If they are true believers in the concept of time as a key ingredient of sound investing, then they must begin to develop a very tough skin when it comes to daily and even weekly fund valuations. Otherwise, they risk becoming investment tacticians which can cost them dearly as emotion can trump reason and short-term concerns out-weigh long-term performance.

Over the course of the next few months, a lot of major global events will unfold which have the potential to significantly disrupt fund valuations. Greece is an obvious example but so too is the decision of the US Fed. to increase interest rates. Also, on the margins is the unfolding UK in-out narrative on EU membership, while this is slated to be put to a UK-wide referendum in 2017, the developing narrative will be closely watched and reacted to across the world.

Protecting and growing personal wealth is never easy. But remaining informed along with having a sound strategy that is aligned to one’s long-term, personal financial needs are key ingredients to success.

Frank Conway is a qualified financial advisor and author of Cents & Sensibility – a financial guide for young adults. He also founder of, a financial literacy initiative available across second level schools.


Political pressure on Irish banks as Central Bank warns of dangers

Irish bank bosses have been instructed to make less profit on mortgage lending or else face punitive levies it has been revealed.
Beginning of the end of austerity

Minister for Finance proposed new levies to restrict bank profits

This is despite a chronically low level of residential mortgage lending across the economy as lenders continue to suffer massive losses on boom-time tracker loans. Residential mortgage lending in Ireland has been slowly rising. It fell 90% from peak to trough. In 2014, total mortgage units drawn down were slightly ahead of the levels last seen in 1975, a time when there were almost 40% fewer people living in the Irish state.
Across Ireland today, there are an estimated 400,000 ‘tracker’ mortgage in Ireland with many of those loans charging under 1% over the ECB base rate of lending.
Ireland also continues to experience among the highest rates of mortgage arrears across the OECD but conversely, one of the lowest rates of property foreclosure, largely owning to social and historical pressures. There were also some legal impediments.
Central Bank raises concern on political interference.
Earlier today, the Irish Central Bank issued a warning on the dangers of political interference in the working of the banking sector. In its paper, Influences on Standard Variable Mortgage in Ireland, the Bank warns:
The spread between official ECB interest rates and the standard variable mortgage rate is relatively high in Ireland, both by historical standards and compared to European peers. Three factors are important determinants of this margin.
First, the pricing of loans needs to reflect credit risks. In Ireland these risks are elevated due to high levels of non-performing loans and the lengthy and uncertain process around collateral recovery.
Second, competition is weak. This is not unrelated to credit risks since high credit risk deters new players from entering the market.
Third, bank profitability is still constrained by legacy issues. Profitability is essential to ensure banks build up adequate capital buffers to meet increasing regulatory requirements and to withstand future adverse shocks.
Any policy aimed to address the level of SVR rates must take these factors into account if it is to be effective and constructive. Hasty policy measures to administratively determine interest rates would be likely to have damaging side-effects.
By discouraging entry, innovation and competition, such measures could result in higher spreads and higher exchequer costs over the longer term

Why health planning is as important as retirement planning

It’s no secret that Governments everywhere are concerned about the number of people that actively contribute to their pension. Too few do and with longer and longer life expectancy predicted, this poses a major dilemma for what Governments are to do, especially if they want to avoid a massive number of folks with inadequate financial resources in old age.

Personal Wealth Management Key to Long Term Financial Success

Personal Wealth Management Key to Long Term Financial Success

Unless you are a Bill Gates or a Warren Buffet, you are one illness away from Bankruptcy.

Across the US, bankruptcies due to medical bills increased by nearly 50 percent in a six-year period, from 46 percent in 2001 to 62 percent in 2007, and most of those who filed for bankruptcy were middle-class, well-educated homeowners. (Source: The American Journal of Medicine.)

Obesity levels and diabetes are on the rise here in Ireland, both of which can be major causes of serious illness, including heart attack, stroke and cancer.

Taking action

In the world of personal financial planning, the central focus too often is just on the money side of the equation. While this is the right approach generally, it often also misses a beat, especially when it comes to a truly holistic approach.

The better approach

There are five essential ingredients to thorough and complete personal financial plan. Those are:

1. Establishing one’s relationship with money. Is it a caring one or an abusive one? For some, money is a means of a better financial future while for others, it is a short-lived display of personal wealth. The former is good, the latter is self-defeating.

2. Adequate planning. Setting goals is not going to produce results without adequate planning to reach those goals.

3. Better money knowledge. This is key. Money knowledge is all about knowing the detail of what one actually pays for, this includes the type of health insurance policy they own to the energy efficiency of their home. A few years ago, the author met a corporate executive that hadn’t realised they owned a critical illness policy yet never claimed on it after they suffered a serious illness.

4. A little but of luck. Unfortunately luck does play a key role but with bad luck can be mitigated against with 1, 2, and 3. This would mean having a good rainy day fund built up for that period of poor luck.

5. Health. This is key for long-term financial well-being. While health insurance (public and private) will cover a high level of costs and medical expenses, they do not cover all. Besides, modest levels of daily and weekly exercise are excellent ways to reduce stress and weight, which have a big impact on reducing diabetes and heart disease.

If we are to enjoy post retirement, we all need to take a greater level of care that our health does not become a financial nightmare.

Frank Conway is a Qualified Financial Adviser and founder of, the financial literacy initiative.

Have annuity funds gone sub-prime under accounting alchemy?

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, or so one dictionary would have you believe.

In fact, when it comes to global insurance, reinsurance and annuities markets, things are working out a lot different.

Way back in the 1860’s, on a visit to London, Elizur Wright was so shocked at the sight of elderly men auctioning off their life policies to speculators that he set out on a mission to establish the foundations of the modern insurance industry.

For so long, insurance was governed with some very important yet straightforward rules; assets should at least cover liabilities. In real terms that insurers sold policies, accepted policy premiums and made sure that they would always have enough funds on hand to pay out policy benefits. And, in order to achieve this, they invested money wisely, in safe investments, including bonds.

But time moved on and many of the original Life insurance companies moved on from being mutual in nature to becoming publicly traded organisations where profits trump prudence.

Across the US, insurance companies are increasingly taking greater risks in how they invest funds; this includes Life insurance as well as annuities which millions of people rely on for retirement income.

Hollow assets and creative accounting

Various state requirements and so-called ‘permitted practices’ are creating more and more shell games and increasingly creative accounting where assets that are supposed to underpin the financial structure of various insurance companies are little more than worthless I.O.U’s, in effect, they are underpinned by hollow assets.

Aside from denying state’s of tax revenue, this creative accounting is also at risk of undermining the very nature of the foundations that Mr. Wright fought for.

Glass-Steagall all over

The repeal of the Glass-Steagall Act is widely cited as the catalyst that eventually led to the financial crisis of 2008. Under Glass-Steagall, banks commercial and investment activities were strictly separated. Some observers, especially those in banking dispute this but overwhelming opinion agrees that the repeal was a disaster. The bottom line was old-fashioned banking was safe banking and reforming a law that had served so many for so long was ever only going to serve a few and hurt many. This is exactly what happened and it has had massive global implications.

Something similar now seems to be taking place in the global insurance markets where ‘black box’ activities, shell games, propping up of balance sheets, hollow assets, permitted practices and financial alchemy are all taking the place of safe investing strategies. And we all know what happens when creative accounting replaces the time-proven practice of safe investing; the tax payer generally ends up paying!

When it comes to investing for the future, reading and interpreting key financial data is key to your investing success. If you cannot read the accounts of companies you invest in then your chances of success will be limited by lack of core information.

Frank Conway is a qualified financial advisor and author of Cents & Sensibility – a financial guide for young adults. He provides corporate financial training and personal investment advice.


“Whether you think you Can or Can’t, you’re right!”

This famous quote from Henry Ford is often misinterpreted, with some people believing that if you do not have self-belief this will keep you from achieving your dreams. Let’s face it; if your dream is to turn brass into gold, then you don’t want to spend the rest of your life in the garden shed trying to achieve this goal, especially when all the scientific evidence tells you that your efforts will be in vain.

A plan of action is needed if one is to be successful

A plan of action is needed if one is to be successful

Henry Ford had a different meaning in mind when he uttered this phrase.

For example if you think you have the ability to run a sub 4 minute mile, either you Can or you Can’t. There are only two possible outcomes, so Mr. Ford is advising you to think carefully before you give your answer, because if you keep making the wrong calls in life it could have a profound impact on your ability to succeed.

Let’s work an example of what this all really means; let’s say that you think that you have what it takes to be the next president of Coca-Cola. Great ambition but unfortunately, your CV shows that your background is in graphic design and that you have worked from a home office for the past 10 years. Most likely the next president of Coca Cola will have senior experience of managing a large corporation listed on the stock exchange, so realistically your chances of becoming the next Coca-Cola president are slim.

However, you may be a great graphic designer and have some great creative ideas which would be of interest to Coca-Cola. So in making your call, you should be saying “I would like to be president of Coca Cola, but I think that I Can’t achieve this position, but I think I Can become an important supplier of graphic designs to this organisation”. By making the right calls you are adding to your own credibility, so other people are more likely to take you seriously and believe what you are saying.

Our passion is in showing people how to understand Finance, because Finance is a critical part of both business and everyday life, from the cradle to the grave. If you understand this subject it Can have a profound impact on your ability to succeed within business. For example it Can help you identify inefficiencies within the business, which Can only be good for your career progression. In addition it Can help you make better long term personal investments, because you will know how the numbers stack up and not be totally reliant on an advisor who just wants the sales commission.

See how you get on with the following five questions:

Ablata - Can or Can't

If you answered “Can” to all of these then you are on the right track. However, if there is just one “Can’t”, you need to take action to correct it.

At, we have created a dynamic portfolio of solutions that will move you from Can’t to Can at minimal cost. Take charge of your future with

Eugene Daly is the Director of Executive Financial Training at


Putting the time value of money to work for you

Picture this. It is the winter of 2045, you are retired and you have had enough of the cold winter days and long dark evenings. You would love to turn the lock on your front door for a few months and head south to the sunshine, perhaps inviting some friends to join you for Christmas lunch on the veranda, overlooking the sea.

Value of Euro about to be shredded

How much money will you have when you retire


Or perhaps you are a traditionalist, and you like the idea of spending Christmas at home, but wouldn’t it be lovely to treat the grandchildren to something special, like a trip to Lapland to see Santa and his reindeer.

For many  people reading this article, these options will be out of their reach in 2045, primarily because they will lack the financial resources to make it happen.

Today, the average person in their thirties or forties can expect to live to 90 and beyond, and surely it is worth spending a couple of hours understanding how your future will unfold over the following decades. The rewards could be well worth your while, giving you real choices which you can only dream about right now. The alternative is to find yourself locked into an existence where you will have plenty of time to look back and regret the decisions you made.

As an example, a bar of chocolate in 1985 cost 30c and today it costs about €1. By the time 2045 comes around you can expect a chocolate bar to cost say €3. Clearly you should take this rise in prices into account when planning for your future, otherwise you are going to be very disappointed when you get there.

Wouldn’t it be great if there was some way for ordinary people to realistically understand how much the money they are saving today will really buy them in the future. In fact there is such a method and it is known as the Net Present Value (NPV) technique. It has been in existence since the 1930’s and today it is widely used by businesses to help them make long term investment decisions. In fact this technique should also be used to help you plan for the future. has developed a suite of short videos which show you how to assemble the data and make the NPV calculations which help you make better long term investment decisions. Remember that it is the same technique that is used both at a business and at a personal level. Therefore if you learn this method you can apply it immediately within your current business to help choose the best business projects,  but also you can use it at a personal level to optimise how your personal investments perform. So learning how to carry out the NPV calculation could be good for your short term career, which in turn will lead to higher remuneration, which you can then invest with an eagle eye, to make your dreams come true.

How frugal living and patience are keys to growing personal wealth

Ronald Read  lived in rural Vermont and pumped petrol for a living. But on his death, friends were surprised by his wealth.

Personal Wealth Management Key to Long Term Financial Success

Personal Wealth Management Key to Long Term Financial Success

Mr. Read, a longtime resident of Brattleboro, Vt., died in June at the age of 92. His friends were shocked when they learned his estate was valued at almost $8 million. Long widowed and with two stepchildren, he left most of his money to a local hospital and library.

So how did he manage to pull it off? Besides being a good stock picker, he displayed remarkable frugality and patience—which gave him many years of compounded growth.

He lived modestly, working as a maintenance worker and janitor at a J.C. Penney store after a long stint at a service station that was owned in part by his brother. Those who knew him talk of how he at times used safety pins to hold his coat together and sometimes parked his 2007 Toyota Yaris far from where he was going to avoid having to feed the parking meter.

When he died, Mr. Read left behind a five-inch-thick stack of stock certificates in a safe-deposit box. The shares represented the bulk of his estate, and his executor and Wells Fargo still are working to determine their exact worth.
To Have and to Hold

Friends say Mr. Read typically bought shares of companies he was familiar with and those that paid out hefty dividends. When dividend checks came in the mail, he deposited the money back into more shares.

Physically holding stock certificates became passé for investors more than a decade ago, but Mr. Read held onto his.
In recent years, as investing shifted to electronic platforms, firms began imposing fees for ordering the actual certificates. So Mr. Read turned to a more thrifty option, agreeing to have his purchases held by the official record-keeper for share ownership—known as a transfer agent—that each public company employs. That likely saved him from $25 to several hundred dollars per transaction, says Peter Duggan, a senior vice president at transfer agent Computershare.

By buying shares this way, he likely also paid low fees, even compared with those charged now by many online brokerages for do-it-yourself investors. The average fee for buying shares in a so-called direct-stock purchase program is about $3 at Computershare, Mr. Duggan says.

Mr. Read relied in part on print publications for his investment research and, while he subscribed to The Wall Street Journal and Barron’s, he also made use of the local library. He also chatted about investing with those he knew, including a neighbour who also was his Wells Fargo adviser in Brattleboro. He regularly sought advice from this adviser and kept a brokerage account at the firm, but it held only a small portion of his investments, according to Mr. Read’s attorney, Laurie Rowell.

For today’s investor, using Mr. Read’s exact approach could be somewhat cumbersome. The fees now charged for paper certificates make that kind of trading expensive, and having purchases held by a transfer agent puts an added burden of research and record-keeping on the investor. Most low-cost investors these days favour the ease of online trading platforms and the ready accessibility of research on the Internet.

From Anna Prior, Wall Street Journal


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