Recent Financial Market Activity

May 14th, 2018

5By Scott A. Middleton BA(Hons), Chartered Financial Planner, James & George Collie Financial Management Limited

In a change from our normal practice of concentrating solely on the events of the last quarter, we expect investors will be interested in the events that triggered sharp falls in the first few days of the new year, especially given the media coverage this attracted. Therefore, we are extending the period under consideration slightly into the first couple of weeks of February.

As at the end of the quarter, investors had generally enjoyed another quarter of strong returns capping off a good year during which markets continued to provide positive returns for equity investors. Fixed interest investors have seen small returns from corporate bonds although there was a small fall in the value of Gilts, the second quarter in a row that UK Gilts fell in value.

Within the various equity sectors the most notable performance came from Global Emerging Markets, returning 4.26%, Asia Pacific ex-Japan returning 3.24% and North America returning 2.81%. Europe ex-UK, which performed well generally during 2017, lagged in the last quarter returning 0.78%.

The strong performance from equities in recent years has been due to the global economy performing better than expected, and the higher forecast for economic growth leading to increased confidence that company earnings will rise in the future, boosting share prices.

This current environment of economic strength emerged slowly from a period of intense anxiety in 2009 following the systemic failure of the global banking system. The path to recovery was created through dramatic action from central banks, cutting interest rates and printing trillions of dollars (or their equivalent local currency) in order to reduce borrowing rates to historical lows. This provided cheap finance and liquidity to the entire global economy and was ultimately successful in restoring economic growth.

At the present time the International Monetary Fund (IMF) is predicting that all of the economies it represents will experience positive growth in 2018. This picture of synchronised economic growth is a firm sign of confidence and is reinforced by various other economic leading indicators.

These factors combined to provide further upward momentum to stock markets which had already enjoyed a sustained period of growth with historically low levels of volatility. Towards the end of the quarter some falls were seen, which accelerated in recent days. At the end of March 2018, the Dow Jones, which measures the performance of the largest US company share prices, has fallen by approximately 10% from the peak whilst the FTSE 100 has fallen by around 8%. What has triggered these falls and what should investors expect from here?

Whilst the recent downturn has been in contrast to the previous period of stable upward returns, corrections of this type are normal, and occur frequently in both upward and downward long term trends. One of our responsibilities as investment managers is to stress test these types of events when constructing portfolios, to establish that the level of risk is appropriate to the objectives that we are aiming to achieve. The timing of a correction is often a surprise but the correction itself is expected.

Corrections often indicate a change in market expectations and understanding, which can be used to identify investment opportunities going forward and also have a useful cleansing effect. This can be visualised as the outgoing tide levelling the sand, after a sunny day at the seaside.

The cause of the alarm on this occasion is good news, in our opinion, and closely follows the views we have expressed in previous updates. Figures from the US, relating to the labour market, showed healthy levels of employment and wages increasing at a higher rate than previously thought. The prospect of people earning more and finding work easily is a sign of strong economic growth and is usually something to be cheered. On this occasion stock markets greeted the news with pessimism; why?

Within our previous updates we have discussed the interest rate cycle, which has been falling since the 1980s, representing a very long cycle length. In addition, we proposed that few investors had experience of a rising rate environment as most careers of investment professionals did not go back that far. Furthermore, we felt that the improvement in economic conditions suggested that this long term cycle was changing and we were now entering an upward interest rate cycle, which would change the behavioural characteristics of many asset classes.

The recent market downturn is a reflection of investors generally coming to the same conclusion and becoming concerned that interest rates will now rise, as central banks take action to keep inflation at around 2%. The era of cheap money is coming to an end and undoubtedly there are many assets which have seen their valuations fluffed up by this phenomenon and are now looking vulnerable. Where assets sell-off in one sector the effect of market correlations often causes sell-offs in other assets. Some assets go on to recover their value whilst others do not.

Fixed interest investments are sensitive to interest rate rises, as are companies reliant on raising ongoing capital, because the increase in interest rates has a detrimental effect on both of these asset values. Within these markets there are some worryingly high valuations, particularly within high yield bonds, long dated bonds and companies with massive valuations, but with negative earnings. We have positioned away from these assets prior to the recent downturn and we expect that some of the losses being experienced in these areas may not be recovered.

In terms of the broader markets we have reasons to expect asset prices to regain their upward momentum and these falls represent a buying opportunity rather than a signal of a prolonged downturn. Whilst central banks are moving into a rate rising cycle we expect this to be a very slow and measured process. Given the significant efforts which have been made to drag the global economy out of the 2009 credit crisis we believe that central banks will be anxious about choking the economic recovery and therefore inflation will be allowed to run over target rather than pursued aggressively, at least in the early years of the rate rising process.

For example, interest rates in the UK are currently 0.5% and, at the most, are expected to rise to 1% by then end of the year even after the latest comments from Mark Carney, the Governor of Bank of England, suggesting that rates would move earlier and higher than previously expected. A future rate of 1% is hardly an economic activity choking prospect and would still be a historically low level although it would be bad news for interest rate sensitive assets as mentioned previously.

Furthermore, the wage inflation which has caused the recent concern is actually preferable, in the medium and long term, to the alternative of stagnant wages. In order to continue an upward economic cycle it is important that wages rise in real terms in order to allow future consumption to rise. If wages do not rise faster than inflation then consumer debt builds to the point that consumption falls dramatically and leads to a recessionary outcome.

It is our view that the current shakeout of asset prices is a useful and necessary event. The assets most at risk are these which have benefited from speculative interest or where the valuation is heavily dependent on a low interest rate environment. Growth stocks have benefitted considerably in the market rises and some of these stocks now look vulnerable.

Tesla is a useful example, and this business requires new capital of hundreds of millions of dollars a year in order to keep trading, as revenues do not come close to meeting operating costs. Whilst a company like this may change the world in the future the inherent risks to investors are obvious and if capital is more expensive in the future this will add additional costs to the business model pushing the breakeven position even further into the future.

Value orientated stocks have provided reasonable returns but have not generally kept up with their growth counterparts. These companies have mature and predictable business models and whilst their upside potential is more modest they tend to be driven favourably by economic growth and are not sensitive to the relatively modest interest rate rises which are now expected.

In conclusion, whilst it is difficult to predict how long or how low a correction will go, we remain confident that global equity markets will continue in an upward cycle. The current market conditions provide an opportunity to increase equity positions with a bias towards companies linked to economic growth, which is expected to remain positive. The rate rising cycle will be gentle, but negative for fixed interest investments, which have a high degree of sensitivity and we have already limited our exposure to these areas.

The nights are getting longer, the weather is getting better (sort of!), and as we embark on the new Tax Year it is perhaps a good time to consider your finances.

Pension/retirement planning

Investment management

Estate planning

Tax planning

When it comes to making investments and reviewing finances, there is no substitute for taking specialist advice, but remember that markets can be volatile and the value of investments can go down as well as up.

To arrange an appointment with one of our experienced and professional advisers contact us on 01224 581581, or email Scott Middleton at

EU Succession Regulation

May 14th, 2018

euflagIf you have connections with more than one country, you need to know which country’s law will govern who inherits your estate when you die. This is important because the law of some countries provides that certain shares in your estate are reserved for close family members.

The EU Succession Regulation (EU 650/2012) (“the Regulation”) known as Brussels IV applies to all deaths on or after 17th August 2015. The aim of the Regulation was to unify succession laws across EU Member States.

The Member States which have signed up to the Regulation are: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. All EU Member States have signed up to the Regulation with the exceptions of the UK, Ireland and Denmark.

Prior to the Regulation coming into force, for those individuals with assets in more than one county, various factors were considered by the courts in determining which law should apply to the succession of those assets. Different jurisdictions applied different tests such as nationality, domicile and residence for example in order to determine what laws should apply to an individual’s estate. In some EU Member States, the law to be applied depended on whether the asset was moveable property such as money in the bank or shares, or heritable property such as land or buildings. This could often lead to conflict of laws where the different jurisdictions applied different connecting factors.

When an individual dies, if the Regulation applies, the default position is that the law applicable to the succession of that person’s estate is that of the country in which they were habitually resident, regardless of where the assets were situated and whether they were moveable or immoveable. The intention was that only one succession law will apply in any given case. An individual may choose to override the default position by electing in their Will for the law of their nationality to apply instead. Individuals who have more than one nationality can choose any of their nationalities to apply.

The default position can also be overridden if an individual was manifestly more closely connected with another country when they died, for example they had only just recently left that country.

Although the UK has not opted into the Regulation, it will still affect UK nationals who are resident in a Member State which has signed up to the Regulation or have assets in Member State which has signed up to the Regulation, such as a holiday home. The Regulation affects all assets in the Member States which have signed up to the Regulation, regardless of the place of death or citizenship of the deceased, even if they have no connection to those States or even to Europe.

As the UK has not currently opted into the Regulation, the position for UK nationals is unlikely to change following implementation of the Brexit vote, however this is not certain.

How might the Regulation affect you?

If for example an individual lives and is domiciled in Scotland and owns a holiday home in France, France will apply the Regulation. The holiday home in France will likely be governed by French law because Scottish law says that immoveable property located in France is governed by French law. However it is possible for that individual to make a Will in Scotland in which they choose Scottish law to apply to the Succession of their estate as a whole. In that case, France should apply the rules in the Regulation and Scottish Law should apply in relation to the succession of the whole estate, including the holiday home in France.

If someone who was born in Scotland moves to live in Cyprus and becomes domiciled there owning houses in both Scotland and Cyprus there could be a conflict between which law is to apply. Cyprus will apply the rules in the Regulation. This would mean that Cypriot law would apply to both the house in Scotland and the house in Cyprus. However Scottish law would apply Scottish law to the house in Scotland because it is immoveable property located in Scotland. This could lead to uncertainty and possible disputes. It would be possible to remove this uncertainty by including a choice of Scottish law in their Wills. Cyprus would then apply Scottish law to their estates as a whole, including both houses.

If you have connections with a Member State who has implemented the Regulation, the Regulation may not just affect who benefits from your estate when you die, it can also affect who administers your estate, how your estate is taxed and if certain family members are automatically entitled to shares in your estate.

If you believe that the Regulation may affect you, you should review any existing Wills to make sure that no amendments are required. You should be aware that any advice you received in the past may no longer be correct following the introduction of the Regulation. It is better to make a Will than to have a costly and time consuming cross-border legal dispute following your death.

If you own heritable property abroad it may still be beneficial to have a Will in that country dealing with the heritable property there as the Will should be drafted in accordance with local formalities and may make the transfer of that property easier. Both Wills should include the same choice of law.

For UK nationals living in the UK with property in a Member State who has signed up to the Regulation, it may be better to make a choice of law in your Will than to rely on the law of habitual residence being applied. You may therefore wish to consider making a “choice of law” election in your Will. Should you wish to discuss this or any other aspect of your Will or succession please contact Philip Dawson (Email: or Vivienne Bruce (Email:

An interesting contest – Family Law –v- Property Law?

May 14th, 2018

justiceA recent decision by the Sheriff Appeal Court in the case of Grant v Grant has shed some light on the situation where the law of property conflicts with family law and once again underlines the need for pre-nuptial agreements where one party is bringing assets into the relationship of a value greater than any assets which may be brought into the marriage by the other party.

In this case the issue was whether or not certain property comprising a plot of ground and a house which had been built on it, could be considered to be matrimonial property. The law of property states that the owner of land owns everything which is built on that land irrespective of who has paid for it. In the current case land was owned by the husband before marriage and a house was built on that land during the marriage. The Sheriff at first instance held that the land belonged to the husband but that the building materials which were used could be deemed to represent matrimonial property. Neither party agreed with the Sheriff’s decision which appeared to be a mixture between the law of property and family law. The parties agreed that either the house and the land upon which it was built was matrimonial property or it was not. There could not be a “middle cause” on the matter in dispute. The husband argued that the house and land were not matrimonial property since the land was acquired by him prior to the commencement of the parties relationship, some seven years prior to the marriage. When the house was built the house acceded to the land and therefore as the land was not matrimonial property the house itself was not matrimonial property.

Not surprisingly the wife took a different view and argued that both the house and the land were matrimonial property. Instead of relying on the law of property she relied on the terms of the Family Law (Scotland) Act, 1985 and argued. In family law an essential step in seeking to resolve matters is to identify the extent of the matrimonial property. The definition of “matrimonial property” is not one derived from property law, but is a creation of the 1985 Act and in particular Sections 9 and 10 of that Act. The term “matrimonial property” is defined as meaning “all property belonging to the parties or either of them at the relevant date i.e. the date of separation which was acquired by them or him……. before the marriage for use by them as a family home………. or during the marriage but before the date of separation”.

The Appeal Court took the view, in addressing what constituted the property in question, that this comprised both the house and the land upon which it was built. It should be seen to be a single item of property and not, as the Sheriff determined, property which falls into two separate classes namely the land itself on the one hand and the constituent elements of the house built upon it on the other. They then concluded that the single item of property in issue could only have been “acquired” when the house was completed i.e. during the marriage. The third matter which the Appeal Court had to consider was whether or not the property was acquired as a matrimonial home. Whilst the facts of the current case did not fit easily into authorities dealing with this matter the Court took the view that the wife had made sufficient averments to at least warrant enquiry as to whether or not the disputed property is matrimonial property. Whilst the Appeal Court did not find that the property did in fact comprise matrimonial property they at least allowed the wife the opportunity to lead evidence in support of her contention that it did.

For any further information or advice on the contents of the above article or any other Family Law related matter please contact Graham A. Garden by telephone on (01569) 763555 or by email at or any of our members of our Family Law team.

Latest Partnership News

May 14th, 2018
Mark Allan, Richard Shepherd & Tony Dawson

l - r: Mark Allan, Richard Shepherd and Tony Dawson

Every (Collie) Dog Has His Day

Tony Dawson finally retired as a Partner in James & George Collie on 31st March 2018 after 42 years as a partner –for many of which he acted as Managing or Senior Partner.

However, Tony continues to be associated with the firm as a Consultant working similar hours as before!!

He has also managed to persuade the partners that he should retain his office, his parking space and most importantly his modest expense allowance, so the profits at local hostelries are secure!

The continuing partners would like to thank Tony for his long service and dedication to the Firm.

His contact details remain the same as before – (email) and 01224 581581 (telephone).

Other Recent Changes

In addition to Tony Dawson’s retirement mentioned above, there have been some other recent partnership changes.

Two other long-serving partners – Anne-Maryse Churchill and Gregor Sim – stepped down as partners on 31st March, but will continue to be associated with the firm as consultants whilst Mark W Allan, previously an associate, was appointed as a private client partner, on 1st April. Mark joined the Firm in September 2014, and has over 10 years’ experience, primarily in residential conveyancing. Mark can be contacted by email at or by telephone on 01224 581581.

Richard D M Shepherd, managing partner, commented:
“We are delighted to have Mark on board; Mark is exceptionally hard working and we are delighted to recognise the contribution Mark makes to the Firm with this well-deserved appointment.  

We are also very grateful to Anne-Maryse and Gregor for their dedication and loyalty to the firm and its employees and clients and wish them every success in their future endeavours.”

Reasons to be Cheerful – Another Quarter of Above Average Performance from the James & George Collie Model Portfolios!

January 30th, 2018

5Q3 2017 Update
By Scott A. Middleton APFS BA (Hons)
Chartered Financial Planner


Once again, we have had another quarter of continued positive returns for equity investors with both UK and Global Equities moving strongly ahead. In contrast, Fixed interest investors have seen little return from corporate bonds and there was actually a small fall in the value of UK Gilts. However, the High Yield Bond sector did fare better.

Within the various equity sectors the most notable performances came from Japan, returning 7.19%, Asia Pacific Ex Japan returning 4.08% and Global Emerging Markets returning 3.90%.

This quarter marked a continuation of positive returns for most investors. After an extended period of positive returns, the question of profit taking versus continuing to expect further growth is in the minds of many investors, and we are setting out our current strategy within the context of this question throughout this update.

Investment cycles vary considerably in length from a matter of weeks to multi-decade cycles. The longest cycles can extend for more than 30 years and when these cycles change they can provide the highest level of risk and opportunity to investors.

When regulation was first brought into financial services in 1985 the most prominent warning introduced was to ensure investors were told that past performance was not a guide to future returns. Yet, more than 30 years later, the performance of an investment often remains the most significant determining factor in terms of selection.

The reason, in our opinion, is explained by the study of behavioural finance as people use their recent experience as the main basis for future expectations and current decision making. The longer the cycle, the higher the conviction, to the point where long cycles can make expectations so strong, that historical wisdom derived from experience becomes accepted as hard fact. The quote ‘It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so’ captures the essence of this point and appears at the beginning of the film ‘The Big Short’.

It is our view that another long term cycle has ended, but that investors are likely to continue to have expectations based on the old cycle for some time, leading to lower returns than might be available from a fresh review and interpretation of the current position. As a consequence we are reducing the value of recent past performance in our considerations, looking at much longer historical periods and closely considering the current position and prospects based on factual information rather than inherited bias.

The current bull (rising) market in equities has lasted 8.6 years to date, the previous bull markets since 1926, starting most recently, lasted 5.1 years, 12.8 years, 12.9 years, 2.5 years, 6.4 years, 13.9 years, 15.1 years and 3.7 years. The bear (falling) markets have lasted from 3 months to 2.8 years with the most recent two lasting 1.3 years and 2.1 years. This data suggests that the length of bull markets varies significantly and the current bull market is well within the range. Whilst the most recent bear markets have been towards the shorter end of the range the bull markets have been towards the longer end. Some investors are nervous that the current bull market has lasted longer than the previous cycle, but history suggests that this is not a relevant factor in determining when and if to take profits.

There is, however, a clear indication of danger within fixed interest markets at present, which we believe is being ignored in the same way as the warning signs mentioned previously in relation to the recent banking crisis.

The basic principle of investment is to invest money which is not required so as to provide greater spending power in the future. In order to be successful, the returns created must exceed inflation otherwise the spending power will be lower in the future. The current position is that fixed interest returns, particularly in gilts, are not likely to meet this basic fundamental requirement.

The problem is that fixed interest investments have enjoyed a favourable 30 year plus cycle and investors continue to have expectations based on the recent cycle. In addition, the investment community lacks professionals with experience of cycles where fixed interest returns have been disappointing. In fact, the recent cycle experience has been re-enforced with definitions of risk, which define fixed interest investments as low risk, as they generally only consider 20 years of data and disregard the fundamental lack of value which now exists.

To illustrate this, if a typical return from a fixed interest asset is 1.3%, but target inflation is 2% and inflation expectations are above 3%, risk appears high and the consideration of the historical strong returns, which caused the current position is an unhelpful distraction in determining asset allocation today. We are aware of this and will therefore continue to monitor these markets very closely.

In terms of equity markets the position appears more favourable than many commentators are reporting. Whilst valuations do appear quite high, historically there are a number of reasons to be optimistic that current levels are well supported and markets can continue to provide positive returns.

History shows that equities often outperform during periods of moderate inflation as companies are often able to raise prices providing some inflation protection for shareholders. The amount of quantitative easing injected into the global economy now exceeds $15trn and continues to rise at present. This cash is gradually filtering into the real economy and is driving global economic growth, reducing unemployment, increasing future confidence and beginning to increase inflation. The effects of quantitative easing are likely to continue for a decade or more given the gigantic size of the programme.

The US has raised interest rates 3 times, beginning at the end of 2015 and the Bank of England recently increased interest rates from 0.25% to 0.5% in the UK, which was the first rate increase for a decade. Clearly central banks are starting to worry about inflation, however both the Federal Reserve and the Bank of England have made it clear that the pace of increases will be very slow, as they are more worried about damaging economic growth than controlling inflation. While we expect further rate increases this year for both economies, we expect that the level will be modest and not enough to meet the long term inflation target which will be exceeded. Simply put, the $15trn inflationary stimulus applied through quantitative easing resembles a flame thrower, whilst the interest rate increases that are deployed to control the resulting inflation looks like a water pistol.

Whilst downside risk is important there is also the possibility of upside risk where markets move to a higher level and never re-visit lower thresholds. These periods of growth have occurred during periods of significant technological advancement, which many feel we are currently experiencing. If this is occurring it would also be likely to extend the current rise in equity prices.

In summary, fixed interest markets remain overvalued in our view and the risks in these markets are not being measured accurately by many investors. Equities have enjoyed strong returns which could continue in the short, medium and even longer term and are presently supported by synchronised global economic growth, high corporate confidence and central banks’ reluctance to raise interest rates aggressively. The key potential risks for equities are low wage inflation and high interest rates if central banks do target inflation effectively, which would reduce both bonds and equity markets and these risks are being closely monitored.


There is no change to the strategy at this time and the portfolios remain overweight to equities whilst bond exposure is generally focussed within shorter dated bonds, which are less vulnerable to capital losses if interest rates increase.

If we believe the risks to equities increase in the future we will consider profit taking, but at this time we believe that the upside potential is attractive, especially given the low returns available from cash.

The equity funds held are generally value rather than growth in style. There have been strong returns from some growth strategies, however the underlying business models often require on-going cash investment. Therefore growth valuations are vulnerable to the tighter conditions, we expect within fixed interest markets going forward.

This article is not intended to, and does not, provide investment advice. You should always seek professional advice.

For more information on the James & George Collie Model portfolios or how you could invest in them please feel free to contact Scott Middleton on 01224 581581 or via email at

Finally – A Happy New Year from all at James & George Collie Financial Management!!

Residential Property Sales – 2017 Review

January 29th, 2018

detached-house2017 was another challenging year in the Aberdeen Property market, however not to the extent of the previous year. In 2016, average prices fell by 10%; in 2017 the fall was 3½%. This reflects the general feeling that we are either at, or very close to, the bottom of the current downturn, with prices not expected to fall very much further from their current levels.

Since the beginning of the year detached properties in Aberdeen have been selling on average at 5% under the Home Report valuation figure, taking on average 5½ months on the market to achieve a sale. Non detached houses are also selling at 5% under valuation, but they are achieving a deal, on average, after 4 months on the market. Flats are suffering to some extent from the volume of properties on the market for sale. They are selling on average after 5 months on the market at a price 10% below Home Report valuation.

There are some reasons for mild optimism. The average house price in Aberdeen is still higher than it was 5 years ago and sale volumes certainly increased in 2017, up 3% on the number of sales in 2016. If this continues in the first quarter of 2018, combined with an increase in oil industry activity, then confidence in the market should return leading to a slow but steady improvement.

James & George Collie’s dedicated sales office at 450 Union Street, Aberdeen, located between Rose Street and Chapel Street, in the heart of the city centre, enjoys a prominent position on Aberdeen’s main street and provides ideal exposure for properties on the market for sale. Located directly opposite the new Capitol and Silver Fin office developments, it is ideally placed to advertise properties for sale in anticipation of the property market bouncing back.

For further information or advice please contact our property sales office on 01224 572777 or our estate agency partner Brian Sutton on 01224 563340 or by email at

Pensions in the context of separation and divorce

January 29th, 2018

pensionLast year, the Supreme Court (the highest Court of Appeal in the UK) made a landmark decision in the case of McDonald v McDonald relating to the question of pensions on divorce. Pensions can form substantial assets for these purposes. A question arose as to how much of Mr McDonald’s pension should be taken into account when calculating the assets to be divided on divorce.
The law sets out the formula to calculate the proportion of any pensions which should be taken into account. The regulations (regulation 4 of the Divorce etc (Pensions) (Scotland) Regulations 2000) provide the relevant formula. The formula is A x B ÷ C. A is the value of the pension at the relevant date (normally the date of separation), C is the length of time the individual was in the pension scheme before the relevant date and B is the amount of time C which falls within the marriage itself before the relevant date.
The difficulty in the above case arose with regard to the definition of the period of membership. It had previously been thought that would relate only to being an active (generally speaking a contributing) member rather than the whole period of membership whether contributing, not contributing or receiving the pension.
Mr McDonald joined his British Coal pension scheme in December 1978. He married his wife in March 1985. He took early retirement on the ground of ill-health and started receiving his pension in August 1985, a few months after marriage. In 2010 when the parties separated Mr McDonald argued the value of his pension rights should be restricted to the period during which he was an active member of the scheme, and this would amount to £10,002. Mrs McDonald argued the whole period of her husband’s membership of the scheme, both contributing and receiving, should be taken into account, which meant the value to be included would be £138,534.
The Supreme Court agreed with Mrs McDonald, deciding the period of membership should not be restricted to active membership but should include the entire period of membership.
This is not however the end of the road for anyone attempting to exclude the portion of their pension which does not relate to the time that they were contributing during their marriage. The Family Law (Scotland) Act 1985 allows for some flexibility under Section 10(1). This provides there may be special circumstances which allow that scenario to be taken into account and it remains possible to attempt to persuade the Court that a certain portion of a pension be excluded.
However, this case does bring about a significant change in the way pensions on divorce will be dealt with. This is a complicated area and legal advice should be obtained.
If you wish to discuss any matter raised in this article, please contact Senior Court Solicitor, Susan Waters, by telephone on 01224 581581 or by email at

Building Warrants – An Art and a Necessity

January 29th, 2018

constructionAberdeen City Archives recently held an exhibition called “The Art of the Building Warrant”. The exhibits were original building warrant plans of iconic Aberdeen buildings past and present such as the Northern Hotel with its Art Deco frontage, the police office at Lodgewalk, the Pittodrie Pavilion and the Tivoli Theatre. Looking in particular at the symmetrical lines of the plans of the Tivoli theatre it is obvious that drawing a building warrant plan can be a work of art.

No matter where you are reading this, the chances are that you will be sitting in a building which at some point has been the subject of a building warrant. The submission of plans to the Local Authority for approval and the grant of a building warrant for those plans has been part of our lives for many years. Modern building warrant legislation dates back to the Building (Scotland) Act 1959, but building warrants themselves have been in existence for some years before that. The building warrant plans for the Tivoli Theatre date back to 1872. However, in over 35 years experience of property transactions, I can say that nothing gives more trouble than a building warrant, or more accurately, the lack of one. If alterations which require a building warrant are carried out without one, this can cause untold problems and delay in a house sale even leading to the sale being called off. Also, mortgage lenders may not be prepared to lend on a property which has unauthorised alterations and that may radically affect its value. Anyone carrying out unauthorised alterations to their property should realise that he or she might directly be affecting the value and marketability of the property.

If the alterations were carried out before 1 May 2005 without a building warrant, there is a procedure whereby a “Letter of Comfort” can be obtained from the Local Authority. This is a letter confirming that the Local Authority will not take any action against the owner. Unauthorised alterations taking place after that date will require a retrospective building warrant which can be a time consuming and costly procedure. Fees for retrospective applications are substantially higher than for normal applications.

The message is clear. Check with the Local Authority or a qualified architect or building consultant whether or not a building warrant is required before carrying out any alterations. Many minor alterations do not require a building warrant but you cannot assume that and it is better to be safe than sorry. The building regulations are complex and constantly changing. Alterations which may not have required building warrant in the past may need one now. Don’t put yourself in the position of having to obtain retrospective building warrant for alterations in a hurry when you are selling or remortgaging your property.

Should you wish any further guidance on the requirement for building warrants, or indeed any other conveyancing related matter, please contact the author, Forbes McLennan, by telephone on 01224 581581 or by email at


January 29th, 2018

barristerOne common misconception that is often held by clients who consult a Family Lawyer for the first time, is in relation to what is possibly the couples most valuable asset, namely the family home.

A decision by Lady Carmichael in the Outer House of the Court of Session in the case of JA against WA has reinforced this point. This case revolves around a couple who were divorcing. The husband contended that the matrimonial assets ought not to be shared equally because the net value of the matrimonial assets derived substantially from his gifted, inherited or pre marriage property. He sought an order that the matrimonial home and two other heritable properties owned should be sold and the proceeds be divided in the proportion of two thirds to him and one third to his wife. The wife agreed that the matrimonial home should be sold but sought an equal sharing of the net proceeds. She also sought a transfer to her of her husband’s interest in each of the other two heritable properties, again with other orders.

By way of background, the husband’s father died when he was a child and he had inherited money. He brought investments to the marriage in the amount of approximately £100,000. He also owned a flat in Edinburgh. During the marriage he inherited a further £10,000 from his father’s estate and received a sum in excess of £200,000 from the estate of an aunt, and approximately £25,000 from his godfather. His mother also gifted him over £230,000, again during the marriage. On his mother’s death he received £140,000 by way of the proceeds of a Life Assurance Policy, the residue of his mother’s estate in the sum of approximately £23,000, a shared investment portfolio and a property in Bamburgh. Before their marriage the wife had owned a property in Edinburgh which she still retained. Since the date of the parties separation the husband had received further sums by way of inheritances totalling almost £580,000. During the marriage the husband had received redundancy and resettlement payments from the Army, part of which was attributable to his pre marriage service.

The Judge focused, in particular, on the matrimonial home which was bought during the marriage for £757,070, funded partly by a mortgage of approximately £300,000. In addition, the husband transferred £161,000 from his current account to settle the deposit. The proceeds of sale of a flat in Edinburgh of approximately £253,000 was also applied to the purchase and the husband’s mother contributed £75,000. The parties took title in equal shares. The wife contended that the £161,000 contributed did not come from her husband’s inherited wealth but from contributions he had made during the preceding years of marriage.

The Judge also looked at the background relating to the various other properties and reflected on the law. She then looked at the law regarding the unequal sharing of matrimonial assets. It is a trite principal that the whole of an asset may be excluded from sharing on the basis of the source of the funds used to acquire it, but at the end of the day the task of the Court is to achieve fairness between the parties.

In this case, the Judge noted there were discreet and substantial capital payments from the pre-matrimonial property of the husband and it was entirely practical to ascertain where the funds for the purchase of the matrimonial home came from. She therefore stated that it was clear that the greater proportion of the matrimonial home was acquired using the husband’s funds which derived from his own, non-matrimonial property, or were gifted to or inherited by him. Having said that she was not satisfied that the various orders sought by the husband, including the sale and subsequent unequal sharing of the value of the three heritable properties represented a fair sharing of the matrimonial property, she did conclude that the matrimonial property should be shared unequally. She therefore decided that the three items of heritable property should be sold and the net proceeds divided in proportion of one third to the wife and two thirds to the husband. The Judge also made orders regarding the husband’s pension and various other assets (which orders were opposed by the husband) to ensure a fair division was achieved at the end of the day.

In summary, this case simply reminds us of the need, where any couple are buying a property but are contributing unequally towards the purchase price or where the purchase of a property is funded by gifts or an inheritance received by one party, for these facts be recorded in an Agreement entered into between the parties to save the expensive, stressful and time-consuming Court cases which may result. Such agreements are not limited to events occurring before marriage or where a couple co-habit but can be entered into post marriage if for example one of the parties receives a substantial gift or an inheritance which is then used to acquire something either in that parties sole name or in the joint names of the parties and which may be deemed to be a matrimonial asset thereafter.

For further advice on this or other similar matters, please do not hesitate to contact Graham A. Garden on 01569 763555 or by email at or any of our other Court Solicitors.

James & George Collie Managed Portfolios – Review of Q2 2017

September 20th, 2017

by Scott Middleton, Chartered Financial Planner, James & George Collie Financial Management Limited

Executive Summary

  • The James & George Collie Model Portfolios again posted a positive return during Q2, extending the gains made in the first quarter of 2017
  • Equity markets continued their upward trend in the second quarter of 2017, with an improving global economic outlook, reduced political uncertainty and positive corporate earnings revisions providing support across regions
  • For sterling-based investors European, Asian (ex Japan) and Emerging Markets equities have been the standout performers year-to-date, with UK, North American and Japanese markets also enjoying positive returns in the first half of 2017
  • In contrast, conventional gilts sold off in June, reversing the gains seen in the first quarter as Bank of England policymakers debated whether to raise interest rates.

Review of Q2 2017

5While the general election itself did not have a massive impact on bond yields, one of the most important points to note during the second quarter of 2017 was that conventional gilts posted negative returns, as the perceived change in attitude of central banks towards normalising monetary policy caused a sharp spike in yields. The ensuing speculation about austerity policies being watered down, as well as a potentially softer Brexit, also did not help gilts, leading to a total return of -1.3% from the FTSE Actuaries UK Conventional Gilts All Stocks index over the period.

As highlighted last quarter, the James & George Collie Model Portfolios remain underweight fixed interest from an asset allocation perspective, a function of our relatively cautious stance on bonds in general given the historically low level of yields on offer. This positioning once again added to relative returns, though the majority of the outperformance seen over the quarter was generated at the underlying fund selection level.

Turning to equity markets, and the FTSE All-Share posted a total return of 1.4% over the quarter, with mid- and smaller-cap companies again outperforming their larger counterparts. Year-to-date total returns for the FTSE Small Cap (ex IT) and FTSE 250 (ex IT) now stand at 8.8% and 8.4% respectively, comfortably ahead of the 4.7% return from the FTSE 100 index. The period also saw a continuation of “growth” stocks outperforming “value”, with sectors such as Oil & Gas, Basic Materials and Utilities posting negative returns over the period.

The James & George Collie Model Portfolios active UK equity holdings outperformed over the quarter, with a number of managers extending their relative gains year-to-date. The Artemis Income, Investec UK Alpha and CF Woodford Equity Income funds were three such examples, all benefiting from strong performance at the individual stock selection level as well as their underweight exposure to those poorly performing sectors mentioned above. The James & George Collie Model Portfolios allocation to the smaller end of the market also delivered firmly positive returns, with the River & Mercantile UK Equity Smaller Companies fund enjoying continued strong performance from long-standing holdings across the AIM market.

Turning to international equity markets, Europe was the standout performer during the second quarter, with the FTSE Europe ex UK index returning 4.6% against an improving political, economic and corporate backdrop. In France, the election of Emmanuel Macron was received positively by markets, with significant asset flows into the region arising from the successful navigation of this perceived political hurdle. Pleasingly, the James & George Collie Model Portfolios European equity exposure outperformed at the fund selection level, while the overweight allocation to the region also contributed to relative returns. We further increased the exposure across several of the strategies towards the end of the quarter, while also making a change to our holdings. Further details can be found in the next section.

North American equities ended down in sterling terms over the quarter, a function of the dollar weakness seen during the period. The James & George Collie Model Portfolios exposure also finished in negative territory, underperforming the broader market as the Old Mutual North American Equity and Schroder US Mid Cap holdings lagged modestly.

Elsewhere, returns from the James & George Collie Model Portfolios Asian allocations were positive, with the BGF Asian Growth Leaders – a new holding introduced in March – also benefiting from its exposure to technology names. In Japan, the Baillie Gifford Japanese Income Growth fund continued its strong start to the year with another quarter of outperformance.

Finally, the James & George Collie Model Portfolios Absolute Return exposure delivered a marginally positive return over the quarter, with the Invesco Perpetual Global Targeted Returns and – within the lower-risk strategies – Newton Real Return funds the standout performers. Returns from the James & George Collie Model Portfolios Commercial Property exposure were positive on both an absolute and relative basis, with the F&C Property Growth & Income fund enjoying a particularly strong quarter to bring its year-to-date return to 7%.

Q2 2017 Changes to Portfolios

To summarise, the key changes made to the James & George Collie Model Portfolios asset allocations over the quarter were as follows:

  • The James & George Collie Model Portfolios exposure to European equities was increased, a move that reflects our continued positive outlook for this market on the basis of an improving economic environment, diminishing levels of political risk and positive corporate fundamentals.
  • The James & George Collie Model Portfolios exposure to Japanese equities was again selectively increased, with the allocation maintained as one of our key overweight exposures at the regional level.
  • We have closed our modestly underweight allocation to UK equities across the portfolios, a move that reflects more our constructive outlook for risk assets than a wholesale change in our view on the domestic economy.
  • We have increased the exposure to Absolute Return funds within the James & George Collie Moderately Adventurous and James & George Collie Defensive portfolios, having already raised this allocation within the James & George Collie Balanced and James & George Collie Cautious portfolios earlier in the year.
  • The James & George Collie Model Portfolios cash levels were selectively reduced in the process.

At the fund selection level, we have introduced a new active fund within the James & George Collie Model Portfolios European equity allocation, while also moving the James & George Collie Model Portfolios active Emerging Markets equity holdings to an equal-weighted basis.

Starting with Europe, we have exited the James & George Collie Model Portfolios exposure to the BlackRock Continental European Income fund in favour of the Henderson European Selected Opportunities fund. This move concludes the work undertaken to increase the economic sensitivity of the James & George Collie Model Portfolios exposure to the region, and was decided upon in the wake of the first round of the French election, when our positive outlook for European equities was reaffirmed.

The addition of the Henderson fund to the strategies removes some of the more defensive biases that we had identified as a potential source of concern in a pro-cyclical market environment. John Bennett, the manager of the fund, is pragmatic in nature and his current positioning of the portfolio reflects our own broadly positive outlook for the region. Indeed, the fund’s investment process provides the flexibility to rotate into sectors that are typically under-represented within the BlackRock fund, and Bennett’s recent activity has certainly increased the “value” characteristics of the portfolio in recent times, with a move away from Healthcare in favour of an increased allocation to Banks the most notable example. The rationale for this rotation was based partially upon the valuation premium of certain sectors appearing high relative to history, but also the team’s view that selected European Banks are finally investable, both in terms of their financial strength (with their dividend yield well covered) and lowly valuations.

Paired alongside the incumbent allocation to the JOHCM Continental European fund, the result of this change is an exposure to two ‘core’ active managers that better reflect our outlook for European markets. Both remain broadly positive in their outlook and positioning, as well as relatively large cap in nature, and ensure synchronicity with our overweight allocation to this region.

The final change of note was the repositioning of the James & George Collie Model Portfolios active Emerging Markets equity holdings to an equal-weighted basis, having previously been tilted in favour of the more “value”-orientated Lazard Emerging Markets fund. The resulting position ensures a more balanced exposure to the low beta, high quality bias of the Henderson Emerging Markets Opportunities fund alongside the positive tilt towards global reflation obtained from the Lazard holding.

At the headline level, there is little quarter-on-quarter difference to our positioning across the James & George Collie Model Portfolios. Rather, it is the emphasis of these tactical allocations that we have changed. As such, we remain biased towards equities, with North America, Europe (ex UK) and Japan our key ‘overweight’ positions relative to strategic benchmarks. This is in contrast to the UK, where we maintain a ‘neutral’ allocation.

Within the James & George Collie Model Portfolios bond exposure, we retain a cautious stance overall. Although gilt yields did rise modestly during the last quarter, they still remain close to historical lows and do not appear to offer much value, especially when elevated levels of inflation are taken into account. Unfortunately, most other parts of the bond market also look expensive following a prolonged period of strong returns. We are therefore focusing on quality and liquidity, while also seeking to earn a competitive return. We remain of the opinion that yields will be slow to rise, and expect the Bank of England to keep interest rates low for the foreseeable future.

Elsewhere, we have further reduced the portfolios’ cash levels, having already lowered levels earlier in the year, ensuring that the strategies now hold only a very modest overweight position. And finally, Absolute Return holdings have been selectively increased across the strategies, though alongside Commercial Property we retain our ‘underweight’ position to Alternatives within the portfolios.


Eight years into the economic cycle and with equity markets touching new highs, exceptional year-on-year returns and no sign of a correction, it is hardly surprising that many investors are feeling cautious. However, a combination of rising nominal GDP and relatively slow monetary tightening is a benign environment for risk assets, and strong 2017 corporate earnings will provide additional support. While the tapering of central bank balance sheets requires close monitoring for signs of tighter credit conditions, equities can still make progress. A modest rise in bond yields should also be expected.

The past year has seen above average sector rotation and this has provided opportunities for active investors. Falling bond yields in recent years have helped “growth” stocks out-perform “value” and, although the former are now looking expensive, valuations are still nowhere near “tech bubble” territory. If tapering by central banks results in a steeper yield curve, “value” stocks – typically represented in most markets by financials – could come back into favour. Analysts’ forecasts of a 14% increase in global corporate earnings puts world equities on a forward price/earnings ratio of 17x. This is above the longer-term average, but by no means extreme. The US looks the most expensive and Asian/ Emerging Markets the cheapest with Europe (including the UK) somewhere in the middle. Income-seeking investors will continue to be attracted by dividend yields and these are well supported by profits at this stage in the cycle.

When it comes to making investments, there is no substitute for taking specialist advice, but remember that markets can be volatile and the value of investments can go down as well as up.

For more details on how you could invest within the James & George Collie Managed Portfolios please contact Scott Middleton on 01224 581581 or by email at to arrange an appointment.