Wealth & Finance June 2015

Wealth & Finance International | June 2015

5 Golden Rules for Today’s Millionaires Yuliya Makeeva, Head of Oracle Capital Group’s Representative office in Moscow, talks us through the key rules that today’s millionaires should be looking out for and working towards.

Taking the Stress out of Borrowing The UK population is scarred by bad borrowing experiences with almost half of over 55s admitting they wouldn’t ask for a single pound from friends or family.

Flendr.com helps friends and family come together to remove the stress of borrowing.

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Welcome to your June issue of Wealth & Finance. www.wealthandfinance-intl.com

This month, we explore fair and profitable pricing as Nomis Solutions and Berkeley Research Group team up to drive fairer and profitable pricing in the banking sector.

We delve into our ‘60 Seconds With...’ section with PremFina and Chicago Partners Wealth Advisors, highlighting their major successes and key attributes within the world of finance.

We hear from Yuliya Makeeva, Head of Oracle Capital Group’s Representative office in Moscow. She talks us through the key rules that today’s millionaires should be looking out for and working towards.

We feature celebrity singer/ songwriter, Will.i.am, as he joins the panel at Cannes Lions to discuss new advertising and media models.

In our ‘Financial Focus’ section, we speak to Cosmo Wisniewski, Director at Citisoft Plc as he discusses just how prepared typical, large asset management firms are when it comes to insurance mandates and meeting their responsibilities under the Solvency II regulation.

Flendr.com helps friends and family come together to take on payday loans, removing the stress of borrowing. They explain how the UK population is scarred by bad borrowing experiences, and why many refuse to ask for a single pound from friends or family.

Professor Mike Jackson, cyber security expert at Birmingham City University warns us about the dangers behind using emojis as an alternative to pin codes and, to round things off, there’s the regular round-up of the news affecting the major regions and markets from around the world.

We hope you enjoy the issue!

Contents 4. News

60 Seconds With...

14. PremFina 15. Chicago Partners Wealth Advisors

Financial Focus 16. Five Golden Rules for Today’s Millionaires 18.The Asset Management Perspective 20. Removing the Stress of Borrowing

Market Matters 22. Consumer Journey is Vital for Advertising 24. What Can the Lessons of History Tell Us? 26. Supercuts Surge in Business Growth

Taxing Times

28. Don’t Lose Your Business Just Because You’ve Lost Your Marriage

Banking Zone

30. Guilty Until Proven Innocent?

32. Trouble in Unchartered Waters 33. New Flexibility Will Boost Saving and Risk Taking 34. Emoji Alternative to Pin Code Could Leave Us All Sad Faced 36. Pension Lead Business Funding, A Forgotten Solution 38. Enhancing Eurpoean Capital Markets 3

Wealth & Finance International | June 2015

News

It’s Not About Advertising – It’s About Adding Value To Communities B

lack-Eyed Peas founder, singer and entrepreneur Will.i.am joined a panel of media and ad industry leaders at Cannes Lions to discuss the future of the creative industries.

agreed: “We’re all in the content business now,” illustrating how the media industry has evolved by saying, “content can be a Snapchat message, or it can be ‘Game of Thrones’. How we consume content now is completely different.”

At the event, hosted by global communications group The&Partnership and The Wall Street Journal, Will.i.am urged the advertising industry to think about advertising as “adding value to communities”, not “advertising or marketing”.

WPP CEO Sir Martin Sorrell agreed, referring to the days of ‘Mad Men’.

“75% of our business now is stuff that Don Draper would not recognise,” he said.

Talking about advertising that focuses on selling rather than adding value to communities, Will.i.am said: “You know people don’t like it on YouTube. They skip it.”

“There is a duopoly, with all due respect, of Google and Facebook,” Sorrell continued, “in terms of platforms.”

Will Lewis, CEO of the Wall Street Journal and Dow Jones, voiced concerns about how new media platforms and social networks are disrupting traditional journalism models, saying: “Do we run towards offers from companies like Apple and Facebook to put content in their walled gardens? Or do we pause and think together about what the most appropriate ways of dealing with these opportunities are.”

Ensured by Google marketing executive, Lorraine Twohill, that 87% of people do not skip ads on YouTube, he went on: “OK, well they’re not paying attention to it. They’re skipping it in their head.

“Regardless of what your metric says, we’re not paying attention to it.

If you don’t add value to people’s lives, I don’t really care about your advertising,” he said.

“Professionally created news is of incredible importance in societies and has deep moral purpose. If you stop doing the stories brilliantly and it just is all about cats on skateboards then none of this will work.”

Johnny Hornby, founder of The&Partnership, who was moderating the panel, brought up the topic of content marketing, asking Will.i.am what excited him most about content.

Will.i.am, however, enforced that Apple is here to stay, saying: “These guys changed the world. And it will never go back to the way it was. It just quickly alters.”

“The fact that everyone’s in the same pole position now,” said Will.i.am.

“Yeah, I make content, but I know some guy in a dorm-room or someone on an airplane or a bus has the ability to reach 1m airs in nine seconds.”

The star discussed why real creative success is measured by creating shareable content which penetrates culture.

The star also warned his fellow panelists that competing against each other was not the path to success, saying: “Right now, who you think your competitor is – if you’re competing with the people you think your competitor is, you’re going to lose.”

“When it’s adopted is when it’s successful, because that’s when you know it’s penetrated. The views… the views could be fake views.

Lorraine Twohill, Senior Vice-President of Global Marketing for Google,

Referring to the rate at which new technologies are emerging, he said: “You’ve got to compete with the invisible person coming round the corner.”

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Will.i.am joins the debate at Cannes Lions to discuss new advertising and media models.

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Wealth & Finance International | June 2015

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News

Scottish Edge Winners Now Set To Kick Start Ambitious Plans Thirty six Scottish entrepreneurs are celebrating after recently landing over £1million in funding and prizes at the Scottish EDGE awards.

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he Scottis Edge winners have recently scooped £900,000 after a gruelling Dragons’ Den style finals day to select the most promising start-up businesses that will bring the maximum return for the Scottish economy in terms of growth and jobs. A further £75,000 was awarded to 11 Young EDGE (founders under 30 years old) winners and £100,000 to 11 Wild Card EDGE (early stage businesses) winners who also collected their trophies at the gala event in the evening.

private and third sectors. I applaud the CAN DO spirit of all the entrants to this year’s competition. Their positive attitude reinforces Scotland’s position as a world-leading entrepreneurial and innovative nation.”

Gordon Merrylees, Head of Entrepreneurship, Royal Bank of Scotland & NatWest, said: “Entrepreneurs are the lifeblood of the Scottish economy and make a significant contribution in terms of employment and wealth creation. The Royal Bank of Scotland is delighted to continue to support the Scottish EDGE as it plays an important role in promoting and supporting entrepreneurialism in Scotland.

Scottish EDGE chairman David Shearer, who headed a panel of top business figures judging the entries, said: “We heard from many excellent businesses over the course of this funding round and those which have been selected to receive funding are the cream of the crop.”

“Starting your own business is becoming increasingly popular and The Royal Bank of Scotland is determined to play a major role in supporting and helping entrepreneurs fulfil their dreams.

Young businesses in the growth phase are the engine of the economy and we are delighted to be able to support the most promising of these firms with the funding they need to thrive. Many have ambitious plans that our funding injection will set in motion immediately.

“The quality of the enterprises we saw on Friday bodes very well for the future of the Scottish economy, and I’m sure that many of our finalists are destined to become well known as they grow and generate wealth and jobs. “

“Growing the economy by helping start-up businesses is crucial and that is why The Royal Bank of Scotland is working with organisations such as Scottish EDGE, Entrepreneurial Spark, The Hunter Foundation, Scottish Enterprise, HIE, Princes Trust Youth Business Scotland and Business Gateway as well as Scottish Government to ensure that people are given the best possible chance of success.

The funding competition, aimed at identifying and supporting Scotland’s top early stage and high growth potential entrepreneurs, received more than 250 hopeful applicants, which where whittled down over a number of rounds to leave 26 in Friday’s final.

“Once again, the quality of the finalists has been superb and the judging panel had to work hard to decide on the eventual winners. Each winner is a proud reflection of the entrepreneurial talent that exists within the Scottish business community and ecosystem.”

The awards were presented by Sir Tom Hunter at a glittering ceremony celebrating innovation and entrepreneurship at the RBS Conference Centre, Gogarburn, Edinburgh.

Hugh Lightbody, Chief Officer Business Gateway National Unit, said: “Our congratulations go to all of the award winners and finalists and we wish them well as their businesses grow and develop. Business Gateway supports thousands of SMEs across Scotland every year and we are delighted to see so many of our clients securing important funding from the Scottish Edge Awards that will help them on the road to fulfilling their aspirations.”

The judging panel consisted of Scottish EDGE chairman David Shearer; Highlands and Islands Enterprise’s director of regional development Carroll Buxton; Carol Graham of Graham’s Family Dairy; Royal Bank of Scotland HR chief Elaine Arden; and David Sneddon of Scottish Equity Partnership.

The entrepreneurs and attendees on the day also heard from BrewDog co-founder James Watt, who told of how the hugely successful Scottish craft beer company grew from a simple idea in 2007 to the expanding international business it is today.

Eleanor Mitchell, Director of High Growth Ventures, Scottish Enterprise, said: “The Scottish EDGE encourages and supports Scotland’s expanding base of entrepreneurial activity. Past winners have used the award to recruit new team members, fund their marketing activities, translate their ideas into products and expand their sales and they’re demonstrating strong growth.

Deputy First Minister John Swinney said: “Congratulations to the Round 6 winners of the Scottish EDGE. They demonstrate the strength of entrepreneurial talent emerging in Scotland. Talent that is helped by competitions such as this and by the range of high quality support across public,

“Providing companies with access to new sources of early stage growth finance is vital and the Scottish EDGE helps to fill this gap, complementing existing grants and investment products that support Scotland’s entrepreneurs to realise their ambitions and to build sustainable businesses.”

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Wealth & Finance International | June 2015

News

Fair and Profitable Pricing Nomis Solutions and Berkeley Research Group team up to drive goal of fairer and profitable pricing in the banking sector. Nomis-BRG will advise banks on optimising their mortgage retention strategies and stimulating margins.

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omis Solutions, a global pricing and profitability technology provider for the financial services sector, have announced a strategic teaming agreement with global advisory and expert consulting firm Berkeley Research Group to help banks optimise their mortgage retention strategies, stimulate margins and provide fairer and more transparent pricing for their customers.

Damian Young Head of Banking EMEA for Nomis Solutions, stated, “Working with a high-calibre consultancy like BRG is a great move for Nomis and provides a genuine new opportunity for the forward-thinking banks in the industry. BRG’s consultants have a wealth of experience working in mortgages and deposits and can really put themselves in the shoes of any bank’s CEO and advise objectively and impartially. Teaming with BRG puts us in a position to help banks tackle the regulators scrutiny and improve customer offerings responsibly and fairly. It is this kind of ethos which the banking industry should be founded on as it moves into the next stage of recovery. Bridging the gap between existing systems and innovative pricing technology is no longer nice to have; it is crucial for a bank to be successful”.

The announcement coincides with the recent anniversary of the FCA’s Mortgage Market Review (MMR), with its twin emphasis on affordability and fair and equitable pricing for customers.

The Nomis-BRG initiative represents a step change in the UK mortgage market, utilising both proven pricing analytics and customer segmentation based on customer needs and preferences. With one in two UK mortgages requiring a new offer on maturity of its existing fixed rate or introductory discount, understanding customers’ attitudes and behaviours is of paramount importance to boards and senior executives in meeting the regulatory requirements of treating customers fairly.

About Nomis Nomis Solutions provides best-in-class pricing and profitability technology for financial services companies. By combining a big-data platform with advanced analytics, innovative technology and tailored business processes, Nomis delivers quick time-to-benefit and improves financial and operational performance throughout the customer-acquisition and portfolio-management processes.

Increasingly, regulators are utilising behavioural economics to define acceptable practice for both new and existing customers. The Nomis mortgage solution creates a comprehensive picture of the economic and competitive environment, as well as consumer preferences and behaviours, enhancing a mortgage lender’s understanding of its customers and its ability to demonstrate fair and transparent pricing.

In 2014, Nomis customers optimised over $1 trillion in banking transactions, and since inception its customers have generated over $1 billion in incremental profits.

Headquartered in San Bruno, California, Nomis Solutions also has offices in Toronto and London. Visit http://www.nomissolutions.com or contact us at info@nomissolutions.com or +44 (0)207 849 3488.

The Nomis proprietary Mortgage Market Schema, to be launched formally this month, and already being utilised by one leading UK mortgage lender, uniquely combines the dual lens of market research data with banks’ customer data to segment UK mortgage borrowers into 50 distinct “Borrower Types”.

About Berkeley Research Group Berkeley Research Group, LLC (www.thinkbrg.com) is a leading global strategic advisory and expert consulting firm that provides independent advice, investigations, data analytics, authoritative studies, expert testimony, and regulatory and dispute consulting to Fortune 500 corporations, financial institutions, government agencies, major law firms and regulatory bodies around the world. BRG experts and consultants combine intellectual rigor with practical, real-world experience and an in-depth understanding of industries and markets. Their expertise spans economics and finance, data analytics and statistics, and public policy in many of the major sectors of our economy, including banking, healthcare, information technology, energy, construction, and real estate. BRG is headquartered in Emeryville, California, with offices across the United States and in Australia, Canada, Latin America and the United Kingdom.

Tony Moroney, a Managing Director of International Financial Services at BRG, said, “Our teaming with Nomis Solutions will help UK mortgage lenders to meet their business, regulatory and conduct requirements through a unique combination of Nomis’ proven customer segmentation and pricing analytics coupled with BRG’s leading expertise in conduct and behavioural risk management methodologies. Pricing will be more transparent and, importantly, appropriate to customers based on a real understanding of their needs and preferences. This meets a key requirement of the Boards to evidence fairness in how they treat their customers”.

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News

FCA Fines Firms Over £1.47Billion In 2014 Average FCA penalty value in 2014 two and a half times higher than previous year.

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Whilst fines against individuals in the UK seemed to have declined, Kinetic Partners’ research suggests that the focus on individual bad actors is still a priority globally. For example:

he Financial Conduct Authority (FCA) penalised firms a total of £1.47bn in 2014, according to the 2015 Global Enforcement Review published by Kinetic Partners, a division of Duff & Phelps.

•

In compiling the annual report, Kinetic Partners analysed publicly available data from financial services regulators across the UK, US and Hong Kong to determine regulatory trends and their effects on the financial services industry. The review observed that the total value of fines issued by the FCA has increased by 68% in 2014, up from £474.27m in 2013. Other significant findings include: • •

•

•

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Individuals were fined a total of £2.9m by the UK’s financial services regulator in 2014, down from £4.99m in 2013; The FCA imposed 46 fines during the 2013/14 fiscal year – down from 51 issued by the FCA’s predecessor, the Financial Services Authority (FSA), in 2012/13 and 83 in 2010/11; Average values of fines issued by the FCA in 2014 were two and a half times higher than in 2013, at £36.79m compared to £9.88m in 2013. This is indicative of a trend in recent years, as the average monetary sanction has increased by more than 1,800% since 2009, when the average FSA fine was £20.7m.

Julian Korek, Head of Compliance and Regulatory Consulting at Kinetic Partners, a division of Duff & Phelps comments on the fines towards individuals: “Actions against individuals are likely to play an increasingly integral role in regulators’ efforts to deter bad behaviour. Such sanctions are an undeniably powerful deterrent as, unlike financial penalties imposed on firms, they cannot be written off as a business cost. Regulatory leadership in the UK recognises that an organisation’s senior management is not necessarily able to police staff at all levels, so holding the bad actors themselves accountable is a step towards influencing institutional culture in the right direction. However, there is also a real risk that the targeting of individuals could reduce the attractiveness of financial services as a career. As always, it is a balance that regulators need to strike.”

Monique Melis, Managing Director and Global Head of Regulatory Consulting at Kinetic Partners, a division of Duff & Phelps comments on the penalty values: “2014 saw a significant spike in the severity of financial penalties virtually across the board, as regulators have been getting tougher on both firms and individuals. However, the averages only tell part of the story as they have been pushed up by a relatively small number of historic fines, mainly relating to Libor and Forex manipulation. We are now entering an era of regulatory enforcement in which the ‘new normal’ consists of exceptionally severe penalties and a growing focus on individual bad actors, the aim of which is to impact and change the culture of firms.”

The report also looked at trends in the US and Hong Kong: • • •

January 2015 saw the first individuals fined by the FCA in relation to Libor rate-rigging offences; Of those fines issued by the SEC in the most recent fiscal year, 449 individuals, or 59% overall, were penalised, compared to 306 financial institutions; The SFC pressed criminal charges against 26 individuals in 2013/14, the highest since 2010.

The US Securities and Exchange Commission (SEC) issued a record number of enforcements in 2013/14 at 755, up from 686 in the previous fiscal year; Penalty values, too, have increased in the US – the SEC’s sanctions totalled $4.6bn in 2013/14 compared to $3.4bn in 2012/13; In Hong Kong, the Securities and Futures Commission (SFC) issued HKD 62.8m in fines in 2014, compared to HKD 40.7m in 2013, a 50% increase in one year.

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Wealth & Finance International | June 2015

News

Uk Financial Advice Sector Urgently Needs New Blood Financial advice could become “the exclusive domain of only the super wealthy” unless more is done now to attract young people into the industry, warns one of the world’s largest independent financial advisory organisations.

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he comments from Mike Coady, managing director of deVere United Kingdom, part of deVere Group, come as the firm reports that demand is soaring for financial advice.

dynamic and growing financial advisory sector to the next generation of talented advisers.”

To try and address this burgeoning issue, Mr Coady confirms that deVere United Kingdom is aiming to take on more graduates from deVere’s UK Graduate Programme this year than ever before.

Mr Coady explains: “Demand for professional independent whole-of-market financial advice continues to skyrocket with no sign of slowing down.

“The strong demand is, amongst other factors, being fuelled by the recently introduced landmark pension reforms, which have given individuals new freedoms and controls over their retirement incomes; the fact that financial education is increasingly being offered in workplaces and schools; and because since the 2008 crash, people have become more aware of the importance of sound financial advice.”

He explains: “Progressive and well-established schemes such as deVere’s Graduate Programme, which puts grads on the fast track to career success, are helping to address the supply issue facing our sector.

He continues: “Whilst it is unquestionably positive that ever more people are seeking professional advice to help secure their financial futures, it appears that demand is beginning to exceed supply of independent advisers.

“Like all graduates who join the deVere programme around the world, they will receive unrivalled hands-on experience with high-networth clients, extensive one-to-one mentoring from some of the most senior and qualified consultants in the organisation, and formal industry qualifications.”

“Highlighting our commitment to encouraging and supporting young people, last month 10 graduates joined us at deVere United Kingdom.

“This is largely due to many advisers exiting the advice market, or opting for a ‘restricted advice’ business model, since the introduction of the Retail Distribution Review (RDR).

“Whilst RDR has driven up industry standards, qualifications and transparency, it has left the number of independent advisers significantly reduced.

“There is also an ageing adviser population, with considerable numbers retiring from the profession each year.

“With this in mind - and because it takes a considerable amount of time and money to fully and appropriately train independent financial advisers - the sector needs to attract new, young talent sooner rather than later.

“A failure to bring new blood into the industry, will leave consumers with a smaller pool of advisers - and, inevitably, this could result in financial advice become the exclusive domain of only the super wealthy.”

He adds: “Collectively, as an industry, we need to do something now before adviser numbers significantly fall over the next decade.

“We need to extol the virtues of the rewarding career to be had with the

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News News

Worksmart Urges UK Banks To Move Quickly On Individual Accountability Regime New rules will make it easier for the FCA and PRA to hold individuals to account for actions that can bring a bank to failure or harm customers with punishments potentially severe.

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orksmart, the provider of market leading software to financial services companies, has warned banks that they need to start preparing for the imminent implementation of the Individual Accountability Regime (IAR). The Senior Managers Regime (SMR) rules come into force on 7th March 2016 and the Certification Rules (CR) on 7th March 2017, leaving relatively little time for firms to respond appropriately to the requirements.

Colin Fox, CEO at Worksmart said: “These extensive proposals are now coming to fruition. The consultation period has ended and with an announcement on the final details due any day now firms need to start planning in earnest. The deadline is just around the corner and with a new criminal offence of ‘reckless decision causing a financial institution to fail’ being introduced along with the regulations the potential punishment for getting this wrong is severe.”

The new regime will have far reaching consequences, placing responsibility for breaches at the top of banks and enhancing the regulator’s ability to hold individuals in senior positions directly to account. The most serious breaches could even lead to criminal action being taken and those found guilty may face jail time.

Fox continues: “Key decision makers in banks face significant personal as well as professional risks and so taking steps to mitigate these early by putting the correct frameworks in place is absolutely vital. This is not an overnight job and those institutions that have not made significant head way already really need to start stepping up their efforts sooner rather than later.”

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Wealth & Finance International | June 2015

News

Official Gmat Guide and Quantitative/ Verbal Supplements Receive Extensive 2016 Updates Creator of the Graduate Management Admission Test (GMAT) Exam Provides 25 Percent New Content to Support Aspiring MBA Students

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he Graduate Management Admission Council (GMAC), in partnership with Wiley, is pleased to announce the publication of the Official Guide for GMAT® Review 2016 series. This year’s edition contains 25 percent new content — more than 350 never-before-seen questions across the Quantitative, Verbal and Integrated Reasoning sections of the GMAT exam, and other significant updates to the online portal.

director, Knowledge Services, Wiley Professional Development.

The 2016 Official Guide Series is available at mba.com/store and bookstores worldwide.

Additional product features of the Official Guide for GMAT Review 2016 series: The Official Guide for GMAT Review • A print guide with 907 practice questions and answer explanations, including a 100-question diagnostic exam and 213 new items. (£30.99)

Created and administered by GMAC, the GMAT exam is an important part of the admissions process for more than 6,100 graduate management programmes worldwide. It represents a significant first step for those who want to progress their career through graduate management education.

The Official Guide for GMAT Quantitative Review • A print guide with 300 practice questions and answer explanations, including 75 new items. (£13.99)

The Official Guide for GMAT Review 2016 series — comprising the Official Guide for GMAT Review, the Official Guide for GMAT Quantitative Review, and the Official Guide for GMAT Verbal Review — offers access to more than 1,500 past GMAT questions (across all three publications).

These guides are the only material available that use real questions from past GMAT exams. The Official Guide for GMAT Review also includes a 100-question diagnostic exam to help focus the test-taker’s studies.

The Official Guide for GMAT Verbal Review • A print guide with 300 practice questions and answer explanations, including 76 new items. (£13.99) All three books offer a Web-based tool with exclusive access to 50 Integrated Reasoning questions, video content and customizable question sets in which users have the flexibility to create their own practice sets by number of questions and difficulty level of a question.

The print guides also are supported by a Web portal with exclusive videos providing insights and study tips from actual test takers. With an enhanced user interface for 2016, this online component allows users to create their own practice sets and exams, arranging questions by subject or difficulty level.

About GMAC The Graduate Management Admission Council (gmac.com) is a nonprofit education organisation of leading graduate business schools and owner of the Graduate Management Admission Test (GMAT). They are used by more than 6,100 graduate business and management programs worldwide, along with other products designed to help students find, connect and apply and gain admittance to business and management programs around the world. GMAC is based in Reston, Va., and has regional offices in London, New Delhi and Hong Kong. The GMAT exam is the only standardised test designed expressly for graduate business and management programs worldwide and is continuously available at 600 test centers in 113 countries.

“The demand for new business school graduates continues to rise, as 84 percent of companies globally are planning to hire MBA graduates in 2015, up from 74 percent that hired them in 2014[1],” said Ashok Sarathy, vice president, Product Management, GMAC. “The GMAT guide and supplements have been updated to offer the best preparation material for those wishing to pursue an MBA, a professional qualification increasingly valued by employers.”

“Wiley aims to support individuals in their personal and professional development and are pleased to partner with GMAC in the publication of these guides,” said Joan O’Neill, senior vice president and managing

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News

Ignore The Greek Spectacle at Your Peril, Investors Warned The Greek government seems determined to leave the Euro, and investors should not ignore the noise coming from Athens, warns the boss of one of the world’s largest independent financial advisory organisations.

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he comments from Nigel Green, Founder and Chief Executive of DeVere Group, come as it is reported that the European Commission is braced for a “state of emergency” in Greece.

“It’s the last chance saloon for Greece on this issue and investors will be waiting and should be monitoring the situation carefully.”

Mr Green explains: “This Greek saga is about to reach its climax and investors should not ignore the growing noise coming from Athens.

“Syriza’s increasingly defiant tone strongly suggests that Greece’s government is quite determined to leave the euro. It seems Athens now firmly believes that it is better not to blink in its negotiations with the IMF and the Eurozone institutions, and to be thrown out of the Euro as a result, than it is to stay in the Eurozone and have to reform the economy.

“It would appear that Prime Minister Alexis Tspiras’ desire for power outweighs his desire for his country to remain in the Eurozone. He will be aware that if he bends to the austerity demands he will lose credibility, the hard-line left of his party will breakaway, and it is likely he would lose power.”

Mr Green continues: “All this is of fundamental importance as it is driving Greece further and further towards the Eurozone exit door.

“A ‘Grexit’ (Greek exit) matters for investors because although it is unlikely that many individuals have high exposure to Greek equities or bonds, it will send shock waves throughout global capital markets.

“Once the principle that a country can leave the Euro is established, investors will demand a risk premium on other highly indebted Eurozone countries.

“This volatility will impact on many investors’ returns. With this in mind, investors might wish to review their portfolios after Thursday’s crucial meeting between Greece and the Eurogroup of finance ministers.

“However, as savvy investors will be aware, the investors with the most diversified portfolios stand to lose the least. Geopolitical events like this highlight the need for multi asset investing, across regions and asset classes, as a way of diluting the impact of such events.

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Wealth & Finance International | June 2015

60 Second’s With...

PremFina

What does your business do?

Contact Details Name: Karolina Komarnicka Company: PremFina Email: Karolina.Komarnicka@PremFina.com Web Address: www.premfina.com Address: Debello House 1st Floor, 14-18 Heddon Street, W1B 4DA Telephone: +44 207 745 6210

PremFina provide insurance brokers with a high-margin, white-label, premium finance solution that consists of software to manage the sale of broker-branded finance agreements. We also supply the financing to enable their customers to pay policy premiums via monthly instalment plans.

Who are your clients?

Our customer base consists of UK insurance brokers. Brokers are currently restricted by inflexible offerings and rigid software of incumbent premium finance companies so we offer a solution to these problems.

What makes you unique?

What makes us stand out from other premium finance providers is the white-label solution we offer to brokers, meaning they can have their own premium finance facility in-house. Unlike our competitors, we also offer more flexible, market-leading software. This allows brokers an opportunity to generate higher profit, set competitive interest rates, and increase the lifetime value of their customers as well as cross-sell and up-sell additional products.

What’s your biggest challenge facing you at present?

Recruiting the best people in the industry is a big challenge, as high demand has lead us to produce rapid expansion plans.

What’s the aim for your business?

We aim to empower brokers to take ownership of their customer relationships, which they currently hand over to the financing company.

What’s your company’s biggest challenge?

Our biggest challenge is exporting our innovative model to other markets, both in Europe and further afield.

What business/business person do you most admire and why?

Elon Musk for being a success despite facing challenges. Also for being an innovator and pioneer of new businesses and yet still being humble for all his success.

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60 Second’s With...

Chicago Partners Wealth Advisors

What does your business do?

Contact Details Name: Jim Hagedorn, CFA Company: Chicago Partners Wealth Advisors Email: matt@chicagopartnersllc.Com Web address: www.Chicagopartnersllc.com Address: One North Wacker Drive, Suite 4110, Chicago, il 60606 Telephone: 312-284-6367

Chicago Partners Wealth Advisors helps individuals and foundations optimize their most important business – the management of their wealth!

Who are your clients?

High net worth and high income tax bracket investors; primarily corporate executives, business owners and not-for-profit institutions.

What makes you unique?

The Chicago Partners Wealth optimization process makes us unique.

We employ the following formula to drive our service to our valued clients: Investment Consulting + Investment Counselling + Tax Planning + Advanced Financial Planning + Relationship Management.

Wealth optimization formula = IC + IC2 + TP + AFP + RM

What’s your biggest challenge facing you at present?

Although we currently manage approximately $1.3 billion in asset for our valued clients, our biggest challenge is related to effectively extending our message to investors that need our services.

What’s the aim for your business?

To always act in the best interests of our clients and to help our clients optimize the management of their wealth.

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Wealth & Finance International | June 2015

Financial Focus

Five Golden Rules for Today’s Millionaires We hear from Yuliya Makeeva, Head of Oracle Capital Group’s Representative office in Moscow.

She talks us through the key rules that today’s millionaires should be looking out for and working towards.

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Buy on credit A significant change which we have seen among our clients from countries with rapidly-developing economies is that whereas seven years ago they would use their own money to buy yachts, aircraft or property, now they tend to make such purchases using credit from Western banks, where the interest payments are low. It makes more sense to invest their own money in projects which will bring a more advantageous return.

he majority of the business-elite in the emerging market are first-generation millionaires, who have created their own wealth and not simply had it handed down to them. But big money brings with it certain difficulties which are not easy to deal with for those who own it.

Hold on to your capital For today’s millionaires, making sure not only that you can hand your wealth on to the next generation but seeing it protected for generations to come is of primary importance. The traditional way of doing this in Western countries has been to put business assets into trusts or establish family foundations. This allows the heirs to benefit from the wealth of their predecessors without infringing inheritance rights and thus easing the tax burden. Given that in some jurisdictions tax can be as high as 40%, this can save millions.

Save time One of the most valuable things wealthy people have today is their time.

They live high-speed lives, taking quick decisions which they expect to be carried out rapidly. If ten years ago they had a personal banker and their own lawyer, nowadays they have a whole team of professionals who have their own reputations to uphold. These people not only have to solve any problems which may arise anywhere around the world, but they must also do everything necessary to save their employer’s time.

But as well as preserving their assets, wealthy people are increasingly concerned about how their heirs will handle them. So, for example, one of our clients, who is a collector of objets d’arts, made sure that it was written into the inheritance that his heirs did not have the right to sell off the collection and spend the money for their own gratification.

Don’t just live for yourself Charity work and philanthropy has also become an important part of the lives of many wealthy people. For today’s business-elite, philanthropic activities do not simply help to build their image, they become a spiritual priority. This is why many of them privately help the needy or the disabled, or give resources to help with the development of art, education or health projects.

Invest in education Just like any other parent, the modern millionaire wants to give his children a good education. The difference, though, is that they can afford to invest much more in their children’s education, and send their sons and daughters to the best schools and universities in the world.

Wealthy people know very well how to make money; but they know, too, that being wealthy means that you have to learn to live in a different way. As well as following certain rules, today’s millionaires not only make use of their own experience, but they also learn to avoid the mistakes others have made. Because they are only too aware of how great the cost of those errors could be.

It’s no secret that Great Britain and Switzerland are the principal countries where wealthy people want to send their children. Schools in these countries guard their reputations jealously. It’s not enough simply to pay a large sum of money to get in there (school fees might be £30,000 a year or more); the child also has to pass entrance examinations.

Furthermore, while they are students or even still at school, many of the children of these millionaires will carry out unpaid or lowly-paid internships in large, well-known companies. Their parents want to show them that you have to work hard to earn even small amounts of money.

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Yuliya Makeeva, Head of Oracle Capital Group’s Representative office in Moscow.

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Wealth & Finance International | June 2015

Cosmo Wisniewski, Director at Citisoft Plc.

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Financial Focus

The Asset Management Perspective We hear from Cosmo Wisniewski, Director at Citisoft Plc as he discusses just how prepared typical, large asset management firms are with insurance mandates, in order to meet their ‘responsibilities’ under the Solvency II regulation.

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The technology conundrum Buy-or-build: the eternal question. The reality is that many firms have built (or cobbled together) tactical solutions that are often highly bespoke to that organisation. Many of these solutions lack operational efficiency; they will also be error-prone and expensive to maintain.

Given that this is a regulation shared across the industry, it is highly likely that common solutions will ultimately prevail. Firms utilising these common solutions will benefit in many ways – not least a shared cost of ownership.

he readiness of asset managers for Solvency II has been the subject of a number of studies commissioned by consulting and law firms, but my objective is to get to the story ‘behind the data’ and perhaps unearth some issues that haven’t previously been highlighted.

From our conversations with asset management firms, it has become clear that the anecdotal evidence available online is probably quite accurate in terms of a general lack of progress among some groups of asset managers, but we are definitely seeing signs of increasing confidence among many of the managers who will need to provide the greatest volumes of data at the earliest point in time.

I believe that firms need to take a much more strategic view of what they are doing over the longer term and potentially consider Solvency II within a greater framework to meet the ever-developing challenges of regulation. As a result I do think that there is a need to monitor these wider solutions, with mind open to switching onto a commonly used solution at the appropriate time.

The stance that asset managers appear to be taking is that Solvency II is the responsibility of the insurers (which is correct), but the asset manager will comply with requests from insurers to the extent that the data being requested is readily or reasonably available. Significant numbers of managers are seeing Solvency II as an opportunity to win new business and are being ‘generous’ with what they are making available.

Relatively few managers, however, are keen to take on responsibility for external look-through data gathering and it is my belief that in most cases this should remain the duty of the insurer.

Challenges for asset management firms Right now, it’s a race to the finish for many projects. Our advice to asset managers is: if you are uncertain about some aspects of handling odd instrument types, LEIs and so on, don’t let that delay your overall architecture. We expect there to be many gaps in data as well as errors for the first six months at least.

Many asset managers are not yet using the ‘standard’ template that has been developed by the tripartite team and marketed so effectively and tirelessly by the Investment Association here in London. While many are not yet using the template, I believe that it will become the standard over time.

Keep your project on overall track and expect a series of rapid after-shocks during the first half of 2016 as the gaps are filled and the issues resolved.

Conclusion With live reporting getting ever closer, the task for asset management firms is still rather immense, but they should keep projects progressing while looking over the parapet at what is emerging.

Some asset managers have met with some Solvency II vendors to be told that their insurance clients were signing up (for free) for the vendor’s platform and that the asset manager would need to provide the data (and pay to use the service). Understandably, many asset managers are still unhappy with such a ‘proposition’. While the neatness of the solution is not in doubt, I don’t yet see great enthusiasm for this approach.

Where Solvency II initiatives are in progress we believe that these may often be short term, tactical solutions aimed at meeting the requirements and deadlines. The implications of this situation are to expect a lot of further change and implementation work in this area and to expect substantial further chaos as new regulatory issues become overlaid on top of immature solutions for Solvency II.

The data burden It appears that some asset management firms have already spent (or are committed to spending) considerable amounts to conclude the projects necessary to meet the minimum data requirements from their insurance clients. While progress with the template is very good, many questions remain concerning the detail.

Tactical must become strategic; expensive must become less expensive; labour- intensive must become STP; spreadsheet solutions must be replaced or very effectively managed; and chaos must become order.

Regarding the level of engagement from insurers, it seems that some firms are pressing to get more information on the Solvency II data being provided by asset managers and they are already asking for a lot of this data on a monthly basis. Others appear to be at the early stages in terms of data requests.

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Financial Focus

Removing The Stress Of Borrowing The UK population is scarred by bad borrowing experiences with almost half of over 55s admitting they wouldn’t ask for a single pound from friends or family. Flendr.com helps friends and family come together to take on payday loans, removing the stress of borrowing.

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ew research reveals that friends and family are the new source for payday and short term loans. According to Flendr.com, a recently launched platform, to take the stress out of lending and borrowing between friends and family, a third of Brits would rather their social networks borrowed from them over payday or other lenders. In fact, five times more 16-24 year-olds believe that lending and borrowing between friends strengthens relationships, compared to the over 55s.

all transactions and sends auto reminders for repayments, taking the awkwardness out of the process. For the first time, borrowers have an easy way to fund their loan via their friendship groups.

The study of 2,000 UK consumers revealed that the older generations have been so distressed by bad borrowing experiences that 40% of over 55s say that they wouldn’t even ask their nearest and dearest for a single pound.

However, this group is amongst the most generous lenders, willing to lend up to £1,219 before feeling uncomfortable. Younger groups were far more comfortable with social lending, forging stronger bonds and avoiding high costs.

About Flendr Flendr is a positive, disruptive fintech start up aiming to give consumers more control and put personal relationships back at the heart of finance.

It is also aimed to shake up a sector that has been tainted by payday lending. Flendr manages borrowing, lending and fundraising between family and friends – and can be used for anything from group holidays to financing a business, saving for a first home or paying an unexpected bill.

“Many of us have had occasions ruined by the stress of flending. Fortunately, Flendr is here to remove the stress and put the love back into loans,” concludes Green.

“Why wait for banks to make decisions or pay 1000% APR with payday lenders?” says Daniel Green, CEO, Flendr. “Most of us have friends and family who want to help. And while you might not know someone who can lend £250, you may know five people who can lend £50 and help you to take a course, organise a special event or just bridge the gap in a tight month. Flendr removes stress by providing an easy way to fund loans with group borrowing as well as one to one loans. Flendr sets out how much has been borrowed, when cash is due and even allows borrowers to pay an optional ‘thank you’ interest rate to their lenders.”

Flendr challenges the awkward precedent of social lending, encouraging borrowing from people you know. Flendr sends people alerts every time money is paid in and tracks all transactions automatically – a common problem when borrowing from friends/family.

Flendr makes it easy and stress-free to fundraise, lend and borrow cash from friends and family – all via a secure online portal. It removes the administration from social lending, helping friends and family to do what they do best.

According to the study:

Daniel Green - CEO

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Daniel Green is Co-founder and CEO of Flendr, a social finance platform that manages lending, borrowing and fundraising between friends and family.

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44% of UK consumers are keen to support friends and family financially Scots were least willing to lend to family and friends, unwilling to lend more than £535 on average. In contrast, Northern Irish respondents were happy to lend up to £1,461 Men are more generous than women, willing to lend up to £1,064 to friends and family before feeling uncomfortable, compared to women’s upper limit of £705 46% of young people (aged 16-24) were comfortable borrowing from friends and family but they were also twice as likely to feel awkward about payment reminders, compared to any other age group One in seven Brits admit that borrowing money shows them who their real friends are These issues also extended to collecting money from groups: a third (32%) of 25-34s admitted that they’d had dinner, gift collections or holidays completely ruined by trying to collect money

With more than 25 years’ experience starting up and running successful businesses, Daniel is an entrepreneur with a proven track record of success. He started his first company, Identikit, straight after completing his A-Levels. This was followed by Brand Centres, a designer-fashion retail business that disrupted the designer clothing industry by selling upmarket fashion at more affordable prices.

When he spotted the digital revolution looming, Daniel sold the business to Moss Bros and launched You Me TV, to help customers find the best TV packages. You Me TV was bought by Sky in 1999, where Green remained as the head of Sky Retail for three years.

Since leaving Sky, Daniel co-founded the UK’s largest and highest profile free solar energy panel company, HomeSun, before selling it for more than £100million to Aviva in 2012.

Flendr.com helps friends and family to arrange lending and borrowing – as well as collections and fundraising – within their personal social networks. It sends alerts every time money is paid in, keeps track of

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Daniel Green, Co-Founder and CEO of Flendr.

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Market Matters

Consumer Journey is Vital for Advertising Managing Director of MediaCom UK, Claudine Collins recently spoke at the London School of Business and Finance’s (LSBF) Great Minds Live series, where she highlighted the fact that the consumer journey is vital for advertising. We explore her speech to find out more.

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s Collins said that the key challenge facing the industry was the fast pace at which things are changing. It is important for advertisers to take consumers’ journeys into account.

Asked about her personal highlight in her career at MediaCom, Ms Collins chosen the moment she found out that she was to become Managing Director.

“When I was young everybody used to gather around to watch the television and read the national newspapers,” she said. “Now, everybody is always switched on. People, on average, look at their mobile phones 150 times a day. You now have to look at a consumer’s journey the whole way through their day.”

Before departing, Ms Collins took the time to offer some advice to LSBF students and graduates. She said: “Coming into a business in media or advertising, absorb as much knowledge as you can. Besides this, find your strengths and concentrate on them. Be yourself, don’t pretend to be someone else.”

MediaCom boasts a 200-strong client base which includes Sky, Selfridges, and Cancer Research UK. Ms Collins joined the agency in 1995, and now oversees more than £1 billion of revenue.

She is also seen as somewhat of a celebrity in the media industry, having appeared as one of the interviewers on BBC reality show The Apprentice.

The video featuring Ms Collins’s interview will be released by LSBF over the coming weeks.

LSBF Great Minds Series As well as offering programmes dedicated to fostering leadership skills, LSBF also endeavours to provide students with insight and inspiration through a number of innovative resources. One of these initiatives is the LSBF Great Minds Series: a collection of video interviews with leading business and political leaders promoting debate on education, employability, entrepreneurship and the economy.

Ms Collins spoke about Big Data and the way in which it is driving the industry forward. She said: “Data is incredible. The more information you have about your customer, the more effective you can make the advertising. Having [access to] data means that advertising is much more targeted and, some would say, less annoying.”

The video series started in 2011 with a conversation with former British Prime Minister Tony Blair, followed by an interview with former Education Secretary Lord Kenneth Baker. In 2012, entrepreneur Sir Richard Branson, founder and chairman of the Virgin Group said that universities worldwide should become hubs to boost entrepreneurship and inspire self-starters to develop their own businesses. In 2014, LSBF spoke to Will Butler-Adams from Brompton Bicycle, Guy Hayward- Cole from Nomura Bank International, with former British Prime Minister Sir John Major, entrepreneur and investor Deborah Meaden, Google UK sales director Kevin Mathers and BBC Worldwide CEO Tim Davie.

Moving on to discuss what skills MediaCom look for when recruiting, Ms Collins stressed the importance of creativity. “Everything starts with a big idea and we have big departments of creative thinkers,” she said.

Ms Collins also believes that business school education can help when it comes to climbing the career ladder. She said: “Business schools are really valuable when you really get to understand how a business works.

When you get to a senior level [that’s something] you really need to understand. I didn’t go to business school, and I’m considering it now, to get to the next level.”

When the conversation moved to focus on gender imbalance in the workplace, Ms Collins was quick to praise MediaCom. Four out of seven people in MediaCom’s higher management are women: the CEO, the Managing Director, the Chairman and the Chief Strategy Officer.

Kicking off 2015, LSBF hosted interviews with Andrew Miller, CEO of Guardian Media Group; Jill McDonald, CEO of McDonald’s UK; Kevin Costello, CEO of Haymarket Group; Amy McPherson, CEO of Marriott Hotels Europe; veteran BAFTA-winning broadcaster Jon Snow, and, most recently, a live chat with Kevin Ellis, Managing Partner of PricewaterhouseCoopers.

Ms Collins said: “In some industries I do think the glass ceiling still exists.”

When asked what could be done to change this, she said: “It’s about educating men about what women can bring to the party.” She also discussed the value of different viewpoints, which she feels is more likely to be achieved with a mixed gender team, rather than entirely men or entirely women.

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Claudine Collins, Managing Director of MediaCom UK. www.wealthandfinance-intl.com

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Wealth & Finance International | June 2015

What Can The Lessons Of History Tell Us? With the 36 hour deadline looming for Greece, Colin Cieszynski analysed past independence negotiations in Canada during the 1990’s and looks at what a Grexit situation could mean for traders. Colin Cieszynski, CFA, CMT, CFTe, Chief Market Strategist, CMC Markets discusses further.

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inston Churchill once said, ‘those who fail to learn from history are doomed to repeat it’, and the way the Greek debt negotiations have unravelled reminds me of the similar situation in Canada 25 years ago. But, what lessons could be learned by traders from that debacle?

A brief background on Canada’s failed Meech Lake Accord Following the victory by the federalist side in the Québec 1980 independence referendum, the Canadian federal government set about developing a new national constitution, which was enacted in 1982. The new constitution was agreed to by the federal government and nine of ten provinces with Québec passing.

By 1987, the ruling parties in the federal and many of the provincial governments had changed and the new politicians attempted to bring the Province of Québec fully into the fold through what became known as the Meech Lake Accord. In order to take effect, the deal had to be ratified by the federal government and all ten provinces by late June 1990.

June 1990 and the Collapse of Meech Lake Some governments ratified the deal quickly and some dragged their feet. Changes in ruling parties over the year meant that with a month to go until the ratification deadline two provinces had failed to ratify and one had pulled out of the deal.

In early June, Federal and provincial leaders hammered out a last ditch attempt to save the accord, but only one of the three remaining provinces passed the new terms in time and the deal expired.

The Aftermath of Meech Lake Despite all of the dire warnings from politicians and others, the sun did rise as usual the day after the collapse of the Meech Lake accord and life went on but there were major effects that played out over the next several years.

There was another round of constitutional negotiations that tried to resolve the opposition to Meech Lake and include parties that had felt excluded from the failed deal. The revised accord was defeated in a referendum vote in 1992. No attempts to change the constitution have been made since.

The failure of Meech Lake damaged the power base many of the participants.

The federal government and the provincial leaders of the three largest provinces (Ontario, Québec and British Columbia) all were soundly defeated the next time they went to the polls.

The acrimony caused by the deal’s collapse led to the rise of separatist and regional parties. The immediate effect was the creation of the Bloc Québecois, where separatist federal MPs from different parties joined together to create a new regional party.

The 1993 Federal election completed the fracturing of Parliament into regional groupings. Two of the national parties collapsed almost completely to be replaced by the Bloc Québecois and the Reform Party in the west. The winning Liberals

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Market Matters

gained power from big wins in Ontario and Atlantic Canada.

- Negotiations with Greece have gone so badly that it’s highly unlikely EU leaders are going to be interested in hearing from anyone else who wants to bring change. If there’s no mood to make changes for countries in the Eurozone like Greece, its hard to see how there would be any interest in dealing with ies outside the Eurozone like the UK.

Political unrest came to a head in 1995 with the second Québec referendum which saw the federalist side eke out a small win.

Meech Lake and the Markets The table below shows that the Meech Lake crisis did have an impact on trading but not necessarily when one might expect. On a positive news day for politics, one would have expected the stock market and dollar to go up and the treasury yield to go down.

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Incumbents/Establishment re-election prospects dropping like stones - It looks like those within the EU establishment who thought the best way to save their own jobs was to stonewall Greece and keep their failed policies going may be in for a surprise. The message that appears to have been sent is that the establishment has no interest in hearing new ideas or in helping anyone struggling in the Eurozone anywhere. Voters in several countries appear to be figuring out that the only way to bring change is to kick out the establishment and bring in new voices. Recent regional election results in Spain and Italy and the Presidential election in Poland suggest a growing mood for change.

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Nationalist party prospects on the rise - The Canadian experience of a rise in regional parties as voters turned inward after the Meech deal fell apart indicates that we could see nationalist parties and policies come more into favour at the expense of Pan-Europeans.

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Brexit vote may be just the beginning - A shift in voters among focus away from continental back to local or regional interests and the potential for nationalist or Euroskeptic parties to gain power. This means that we could see attempts in several countries to leave the Eurozone or the EU in the coming years, particularly if Greece leaves and is able to turn around its economy. The UK has already indicated plans to move up their referendum on EU membership to 2016 and we could see a line forming behind them in the coming years.

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EU instability could drag on for a long time - Political cycles are positively glacial compared to market cycles with elections taking place only every four years or so. This means it can take a long time to change all the players.

In Canada it was over five years between the Meech Lake collapse in June 1990 and the second Quebec referendum of October 1995. EU changes could drag out even longer.

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Dire warnings and Armageddon prophecies are likely overblown - Canada didn’t collapse with Meech Lake, Greece won’t collapse if it leaves the Eurozone and the Euro probably won’t collapse if Greece or others leave.

Anything that is that fragile isn’t really worth keeping around anyway. The Euro could continue in a smaller grouping of countries that are seriously committed to making it work. It’s important to remember that Syriza was elected out of desperation because austerity policies had failed so miserably and caused more suffering than they solved.. How an economy that has already collapsed is going to collapse on a Grexit is beyond me. The damage is already done.

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If things can’t possibly get any worse… I’ve had the feeling for a long time that nobody at the European establishment is worried that Greece could collapse on a Grexit. Rather they appear to be more afraid that Greece would be a success after leaving, expose EU own policy failures and encourage others to follow Greece out the door. Maybe the EU and Eurozone isn’t a one size fits all solution and that many countries (including the UK) would be better off taking the parts that work for them and leaving the rest.

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Crises come and crises go - 25 years later, Canada is in a very different place than it was in the middle of 1990. The period between 1988 and 2002 was a time of massive political, economic and financial upheaval, but the hard decisions that were made during that time turned Canada into one of the world’s strongest and most stable countries in the 21st Century.

Through this period of national restructuring, Canada benefitted from having a flexible currency exchange rate that enabled the currency to fall through the most difficult periods and help with the rebalancing then rebound as the economy strengthened. Although constitutional change is still a non-starter to this day, Canada has had a lot of successes in other areas. Canada is one of only 9 countries left in the world with an AAA credit rating from all three major agencies and at 1.76% has the lowest treasury yield of all the English speaking countries. In other words, turmoil comes and goes but now, even after the oil price collapse, Canada now is considered by the markets to be a more stable place to invest than the US or UK. A lot can change over time.

Market action between December 1989 and April 1990 reflected growing fear the deal could fall through and lead to a constitutional crisis. Canadian stocks fall much more than their US counterparts, CAD dropped half a cent and the Canadian 10-year treasury yield rose from near 9.50% toward 11.50%.

The last ditch attempt at a deal took place over a weekend. On the news that there was still hope, market response was mixed. The TSX rallied but less than the benchmark S&P the dollar slipped and the treasury yield fell slightly. This suggested there was cautious optimism emphasis on the cautious.

The market did respond to the day that Manitoba failed to ratify the deal, essentially killing it. On June 12th the TSX rose less than the S&P, CAD fell and the treasury yield rose.

By the time the deal officially expired on June 23rd, it was clearly already priced in as the TSX outperformed the S&P by falling less, the dollar rose and the treasury yield was flat.

Performance over the months of June and July showed that a mixed response to the deal as the TSX underperformed the S&P in June but then rebounded in July.

CAD finished up in both months and the treasury yield fell.

Over the following year, results were mixed as the TSX underperformed the S&P but the Dollar rallied benefitting from the Gulf War that drove up oil prices, while the treasury yield fall although it still remained above 10% and above where it was in late 1989.

What does this mean for traders?

Trading action around the death of the Meech Lake Accord 25 years ago shows just how much markets hate uncertainty. The biggest stock market and currency declines took place and treasury yield increases took place in the early months of the year. By June, failure had been pretty much priced in already and the market reaction to the actual news was fairly muted.

Similarly, Grexit risks may have already been priced into EUR and action in European indices over the last few days and weeks suggests increasing speculation on the impact a Grexit could have on corporate earnings.

In other words, the old adage of enter on rumour, exit on news still applies.

Bond markets could react differently and potentially be more volatile this time.

European bond yields are much lower now than they were back in 2010-2012 when the bailout deals were negotiated. This suggests a lot of complacency in the system that could be in for a rude awakening. On the other hand, having the ECB in the market with its QE program gives it the ability to manage the fallout.

The lessons of 1990 also remind traders that it’s important to be flexible as things can rapidly change dramatically. Six weeks after Meech Lake collapsed, Iraq invaded Kuwait, the price of oil soared and focus shifted elsewhere. Right now markets are fixated on Greece, but this could change to something else at any time without notice.

Lessons Europeans can take away from the 1990 Canada debacle •

By the time last ditch negotiations (like the ones rumoured for this weekend) are needed to salvage something, it’s probably past the point of saving.

There’s so much bad blood now between Greece and its creditors that even if something was reached its unlikely to be anything lasting and everyone could quickly find themselves right back where they started. Where there’s no will, there’s no way.

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Even if a last minute deal is reached there is no guarantee - All European parliaments will ratify a deal in time. The question is who could be the country to say stop the madness and put an end to it?

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Things don’t look good for anyone else trying to bring change to the EU

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Market Matters

Supercuts Surge in Business Growth Leading high street salon brand, Supercuts, is set to launch a new franchise model in the UK, as it prepares for a surge in business growth. The brand, owned by Regis UK, is set to roll out the franchise programme this summer, following the success of a similar model in the US.

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he model follows a simple yet effective format that provides individuals with the opportunity to benefit from a high-demand, high-repeat cash business with potential for growth and development. What’s more, Supercuts franchisees don’t need to know a thing about cutting or styling hair - professional stylists will be recruited to cover the creative direction for the salon, leaving the franchisee free to run the business with precision and focus.

With the upcoming UK launch, the high-street brand is now offering an exclusive opportunity for potential investors to become part of a dedicated and proven business model. As well as receiving ongoing business consultation, training and marketing assistance, franchisees will also receive the benefits of a replicable model, with the opportunity for further expansion by opening multiple salons.

Jackie Lang, managing director of Regis UK, said: “The introduction of the Supercuts franchise model in the UK marks an exciting prospect for anyone who might be considering a new business venture. We are seeking potential franchisees who have strong management and leadership skills, good business and financial acumen, as well as a desire to succeed and make a positive impact within their community.

“By expanding our franchising operations to Supercuts in the UK we hope to demonstrate Regis UK’s commitment to being the leading owner and operator of hair and beauty salons. We’re looking forward to providing new franchisees with our support in planning, controlling, increasing sales and implementing further growth for the future.”

To find out more about how to start your own Supercuts franchise, visit www. supercutsfranchise.co.uk or email Kurt.Landwehr@regiscorp.com for more details.

Supercuts is owned by Regis UK, the UK’s largest owner and operator of hair, beauty and retail product salons with more than 380 prime locations in towns and cities across the country. Other Regis UK brands include Regis Salon and Express Hair & Beauty by Regis.

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Taxing Times

Don’t Lose Your Business Just Because You’ve Lost Your Marriage Divorce can end up being a 50% “tax” on your entire wealth. That’s far, far worse than the tax rate you’ll pay when you eventually sell your company for billions. And it can be particularly problematic for us as entrepreneurs when a high proportion of our wealth is tied up in an illiquid private company.

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e spoke to Dr Stephen Bence, Founder and Chairman of fast-growing business information company Beauhurst and Director of Strategy and divorce finance expert at top family law firm, Vardags to find out more.

valuation of shares in a business by 90% or more. There is almost always something that can be done.

Judges tend to be quite unimaginative in what they will ultimately order as a settlement if your case is determined by the Court (not to mention the enormous cost of going through a fully-contested divorce process). Much better to try to negotiate a settlement. Perhaps you can find a way in which your spouse can retain a stake in the business and be aligned with your interests (both upside and downside); perhaps you could structure a payout over several years; perhaps you could raise money within the business; perhaps you can set up trusts to protect the long-term value for your children. By far the best settlements I’ve seen have been negotiated, creatively and early-on in the process before the parties establish entrenched positions.

Sadly divorce affects many of us, perhaps because of the difficulties balancing the extraordinary demands of growing a business with those of maintaining a thriving family relationship. The press has recently been awash with stories of business owners paying millions to their ex.

Thankfully, a number of avenues are available to an entrepreneur to mitigate the financial effects of divorce.

The first and most obvious is to get a prenup. That takes it out of the courts as much as possible and determines what’s going to happen to the assets in the unfortunate event of a marriage breakdown. If you’re already married you can get a postnup, and create a clear and plan in the best of times, to prepare yourself for the worst of times. Since Vardags’ success in 2010 in the Supreme Court in the “Radmacher” case, pre- and post- nups are generally upheld.

When your life’s work is at stake, the temptation to try and hide your wealth from the courts can be intense. The most common tactics business owners use are: hiding it offshore and/or in trusts, putting shareholdings into the name of relatives, friends or business associates, creating dubious debts (to parents, to the company, to friends), “hiding behind” the corporate veil and creating a web of companies. Recently I’ve recently witnessed more obscure attempts to hide wealth, for example by investing in hard-to-track Bitcoins.

The second thing is to look at what you brought into the marriage because that is typically excluded from the 50/50 division. Perhaps your company was still a start-up at that stage, but it may have had considerable latent value that should be taken into account.

In consequence, divorce law has become a highly sophisticated corporate and financial discipline as lawyers and experts try to crack their way through to the truth – in a complex game of hide and seek. There is no doubt that some people “get away with it”, but many others certainly don’t and the Courts can take a pretty dim view of people trying to deny their spouse access to their wealth. It’s a game of poker and we would never advise a client to play it.

“My company’s going to be worth a billion in a few years”. Great for investors and staff, and great for inspiring oneself through the inevitable tough times building a business. But a disaster during a divorce! You need to remove the rose-tinted glasses and ask a few key questions: What would someone really pay to buy shares owned by you, the key person in the business? Generally far less than an investor would pay to purchase new shares to help grow your business.

As an entrepreneur or business owner, if you’re involved in divorce proceedings, you really should get early professional advice. The worst cases I’ve worked on have been picking up the pieces of a DIY-job. If you head off in the wrong direction and you’ve got somebody on the other side who is absolutely determined to hunt you down, it can be incredibly time-consuming, horribly expensive and ultimately you may well get caught out. One should be quite proactive about financial disclosure: be upfront about it, present your wealth in a realistic – as opposed to optimistic – way and let that be challenged by the other side.

What rights do investors have over your business that restrict the value of your shares? Often quite a few: preference shares, consents or vetos, drag-along provisions, etc.

If the business were sold and a “professional manager” put in place to manage the business what would that do to the profits and hence the value? Certainly there would be the direct extra costs of that individual and perhaps some indirect ones too.

Of course, there is another option for people when faced with divorce. I’ve seen a number of incredibly successful entrepreneurs take the attitude of ‘I’m just going to give them half of it. I then want to move on with my life and just go and earn it again’. It’s an alternative: rather than fight it, just go with it and then make yourself successful again. It saves the time and misery of going through a costly and acrimonious divorce, something which can be incredibly distracting when you’re trying to make money.

What risks are there? Past performance is not necessarily a guide to the future.

Asking such questions and getting a realistic value for one’s business can sometimes go a long way to mitigate the effects of divorce. I’ve been involved in cases where using arguments such as the above have reduced the “headline”

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Banking Zone

Guilty Until Proven Innocent?

The new presumption of senior management responsibility is far from ideal, writes Alan Leale- Green, Managing Director at Compliance Consultancy CCL.

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n August 2014, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) published a consultation paper setting out their proposed rules and guidance concerning the new senior managers’ regime, the certification regime and a new set of conduct rules. These new regimes and rules would fundamentally change conduct regulation for UK firms, including banks, building societies, credit unions and PRA designated investment firms.

In February this year, the abovementioned regulators added some new requirements in a joint consultation paper looking at non-executive directors in banking and Solvency II insurance firms and the application of the presumption of responsibility to senior managers in banking firms. It is the presumption of responsibility to senior managers in banking firms that I would like to explore in this article.

The presumption of responsibility Under the presumption of responsibility, which was introduced into the Financial Services and Market Act (FSMA) by the Banking Reform Act, when a relevant authorised person (in a regulated firm) contravenes a relevant requirement, the senior manager(s) responsible for the management of any of the authorised person’s activities in relation to which the contravention occurred, will be guilty of misconduct, unless he satisfies the relevant regulator that he took such steps as a person in his position could reasonably be expected to take to avoid the contravention occurring (or continuing).

Some clarifications were required with regards to the circumstances in which the regulators would seek to apply the presumption of responsibility, how the regulators would apply it, and the steps that a senior manager should be reasonably expected to take to rebut the presumption of responsibility.

Anti-competitive This new presumption of responsibility is far from ideal. Whereas it is accepted that there is a problem with senior management taking responsibility for their own and their company’s actions, I feel that the proposed rules are anti-competitive. Indeed, if we are the only country making people guilty automatically until they have proven their innocence (especially as the UK regulators cannot be sued for recompense if the individual is proven innocent, even if they were at fault in the accusation), then there is a risk that the UK will be seriously drained of good managers.

The FCA and PRA have a responsibility under their Statutory Objectives to promote effective competition in the interests of consumers. Their answer is that ‘the regulators do not expect their proposed respective regimes to have an adverse effect on competition. The Europe Economics Individual Accountability Cost Benefit Report (Annex 10) has identified some potential for small deposit-takers to be disadvantaged relative to larger firms and this will need to be explored further during the consultation process. Overall however, the associated costs of the

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respective proposals and the potential for some exits from the market and a corresponding reduction of consumer choice are not expected to be significant enough to cause any adverse impacts on competition. The costs associated with the change in approach for individual accountability are not expected to affect firms entering the market differently, as they will not be subject to higher standards or different requirements compared with existing firms.

In addition, ‘The PRA and FCA consider that the proposals in this paper should help enhance the effectiveness of the SMR, which, in turn, should facilitate effective competition. A robust individual accountability regime should discourage reckless decision-making and mismanagement.

Latest developments Most recently the PRA and FCA decided to consult on the PRA Supervisory Statement and FCA guidance respectively concerning the presumption of responsibility. The PRA is seeking feedback on the draft supervisory statement and the FCA will consult on its proposed guidance shortly.

The PRA proposals relate to relevant authorised persons, and will apply to individuals performing a senior management function (SMF) specified by either regulator on behalf of a relevant authorised person whether physically based in the UK or overseas. And unless a NED holds one of the FCA or PRA specified non-executive functions, he or she will not be performing an SMF and will therefore not be subject to the presumption of responsibility.

Conclusion The position of the FCA and PRA appears, in my opinion, to take no account of competition from overseas, which will be to the detriment of UK consumers.

How many top senior managers will go overseas, with the consequence that our money is managed by less able people? When even large and well-funded global institutions have been found wanting in the areas of CASS and Transaction Reporting who will want to take on those responsibilities in the UK? The latest FCA statement (CP15/5 PRA CP7/15) may take some of the sting out of the non- executive directors (NEDs) issue, but it still leaves senior managers fully exposed.

Alan Leale- Green, Managing Director at Compliance Consultancy CCL.

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Wealth & Finance International | June 2015

Banking Zone

Trouble in Unchartered Waters Simon Gray, Management Consultant at Crossbridge, comments on the Financial Stability Report, looking at the impact of Grexit on banks as the events in Greece ‘have tipped the balance and the outlook has worsened’

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he truth is yet again we find ourselves in unchartered waters in terms of solution to this problem. If a new rescue package is agreed will the likes of Germany want to be footing the bill for Greece and their stand on cuts? Is the full and actual cost priced in?

Who will be next and what will the landscape look like after an exit?

Banks will need to look at their models and reverse the introduction of the EURO if Greece exits. Run and play books will be key to smooth transition for banks and as we know unrest like this means opportunity for the hungry. Financial institutions will have to change their internal infrastructures and models to handle new currency, with finance, treasury, IT and operation teams playing key roles in the coming months should Greece exit.

In reality most international banks have reduced completely or have extremely low exposure to Greece (and other struggling EU countries).

So the ripples felt should there be a Greek exit would not hurt the international community as greatly as it would have in 2012. But for Greece itself there is pain to be felt whatever the outcome; It’s fair to say that this damage as we sit in limbo is already being done.’

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Banking Zone

New Flexibility Will Boost Saving and Risk Taking Yorkshire Building Society explain how new research has revealed that the new tax free allowances and increased flexibility will encourage savers and investors to put more money away, but could lead to a rise in the levels of risk they take on investments and the impact on their money.

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ew tax-free allowances and increased flexibility will encourage savers and investors to put more money away – but could lead to a rise in the levels of risk they take on investments and the impact on their money, new research from Yorkshire Building Society shows.

Its national survey shows 42% will start or increase saving when new ISA flexibility rules come into effect in the Autumn and 47% will start or increase saving when basic-rate taxpayers will be allowed to earn £1,000 tax-free on savings and higher rate taxpayers to earn £500 comes into effect next April.

However the increase in saving could mean a rise in risk-taking with one in two savers believing the new rules give them the licence to take more risks with their money. Around 10% of savers, equivalent to 1.8 million, say they will definitely take more risk while 40% say they will look at more risky investments depending on circumstances.

That includes investing in peer-to-peer (P2P) but research highlighted a lack of understanding of it. Just 42% of people claim to be familiar with the term, and of those, 60% were unaware that they had no protection under the Financial Services Compensation Scheme (FSCS).

The study shows that attitudes to returns are a guide to the potential issues ahead its survey among savers and investors shows on average they are targeting annual returns on savings and investments of 5.30% despite historically low interest rates and recent stock market volatility But more than one in three (34%) are targeting an annual return of 6.00% over at least five years with one in eight believing 8.00% or more is achievable without taking into account any need to have access to their cash or potential losses of capital.

Financial advisers are concerned that the new saving and investing rules are likely to lead to more risk-taking without investors understanding the potential for losing money. Around 70% of those surveyed say they believe clients will look to riskier investments. Nearly half (45%) of advisers believe the new rules will increase interest in P2P lending.

Andy Caton, Executive Director at Yorkshire Building Society, said: “The Government is helping to encourage saving and investment with new rules and looks as if it will be successful with people keen to take advantage of increased flexibility and new tax-free allowances.

“Providers need to match that ambition by helping to encourage responsible saving and investing as there is a genuine threat that enthusiasm for saving and investing will be damaged if people are exposed to unnecessary risks they do not understand.

“Clearly there is evidence from the research that some have unrealistic expectations on the levels of returns they can achieve over the long-term with some people believing 8% a year or more is realistic.

“Advice will be crucial in helping achieve success for the launch of new savings rules and we would urge anyone considering riskier investments such as P2P or equity-based investment to take independent financial advice before doing so.”

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Wealth & Finance International | June 2015

Banking Zone

Emoji Alternative To Pin Codes Could Leave Us All Sad Faced Introducing emojis as an alternative to Pin codes could create more problems than solutions, warns Professor Mike Jackson, cyber security expert at Birmingham City University.

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ritish company Intelligent Environments have announced that it has launched an emoji alternative to the traditional four digit Pin code used for accessing online banking, claiming this method is more secure because there are more potential combinations.

However, Professor Jackson believes that introducing emoji’s could leave users worse off, and more confused as they try to remember multiple passwords: “The difficulty with emojis is that there are several options for the same expression, there isn’t just one smiley face, but several alternatives.

Whereas we all know what a letter or number looks like. Emojis can also vary between Apple and Android phones, which could cause problems if you decide to switch platforms, or want to access your account from a different device.

“At present this method couldn’t be extended to ATMs or used in retail outlets, therefore customers would still need a Pin code to access their account when not online, which would mean they would in fact need to remember more than one code.

“Although emojis provide users with many more potential unique password combinations, if people were more savvy when choosing Pin codes and avoided predictable combinations such as birthdays or ‘1234’, then this would equally ensure they are protected against online fraudsters.”

On June 15th a company called Intelligent Environments announced a new way of securing your mobile phone, your tablet or even your bank account. They propose replacing the standard four digit passcode with a passcode made up of emojis. They claim that it would be more secure and that it would prevent people forgetting their codes (apparently a quarter of UK citizens admit to having done this).

In case you don’t know what an emoji is, one example is a ‘smiley face’.

The word arose from a Japanese root and literally means ‘picture’ + ‘character’. In western culture we might refer to them as emoticons.

Essentially they are pictures which express an emotion.

Does the use of emojis in passcodes lead to greater security? For some reason Intelligent Environments chose to compare their proposal with four digit codes where no digit may be repeated. In actual fact allowing repeated digits leads to greater security, so it makes sense to compare

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the use of emoji passcodes against digital passcodes where the digits can repeat. Digits in this case are the numbers 0 to 9. The possibilities for the code run from 0000 to 9999 so there are 10, 000 possibilities.

Another way of looking at this is that there are 10 ways of choosing the first digit, 10 ways of choosing the second, 10 ways of choosing the third and 10 ways of choosing the fourth. This means that there are 10 X 10 X 10 X 10 possibilities which again give us the correct answer of 10,000 choices.

Despite the fact that if used properly the level of security would be better than the four digit passcode there would still be a lazy way to choose emoji passcodes. We can’t predict in advance what the most popular emoji code might be but one could hazard a guess that codes made up of the first four emojis on the keyboard would be common. It has been estimated that one in seven iPhones are vulnerable to thieves who simply assume that the phone’s owner has been lazy when choosing a passcode.

This means that if someone was prepared to try 10,000 attempts to access your phone they would be guaranteed success. On average they would be able to break into your phone after 5,000 attempts. Normally, however, the phone locks after three incorrect attempts so therefore the chance that any individual will succeed by chance is quite low.

This analysis assumes that people choose passcodes at random. In practice they don’t because they find numbers hard to remember. A phone thief might therefore try 1234 or 0000 in their three attempts at entering a passcode and in a surprising number of cases they would be successful! (This analysis ignores the known technique of looking at greasy fingerprints on the phone screen in order to reduce the number of possibilities).

The second possible drawback is that although we know that visual memory in human beings is good, the world of emojis offers opportunities for confusion. We can easily distinguish between 6 and 9 when using digital passcodes. Whilst it easy to distinguish between smiley face and angry face, is it always easy to remember whether you used dizzy face or astonished face? All four of these emojis are mapped to Unicode characters and the latter two have quite similar visual representations.

When you consider visual representations then another issue emerges.

Although there is an agreed mapping of emojis to the underlying Unicode character set, there is no agreement as to how the emoji should be drawn. So a smiley face on an iPhone will look different to a smiley face on an Android phone. If you always use the same phone there should be no problem but if the technology is employed in ATMs there will need to be some visual standardisation.

It’s not clear how the convention of using numbers in the phone passcode came about. In modern computing environments we are not limited to letters and numbers as characters. Extended character sets include codes which can be equated to emojis. Intelligent Environments propose using 44 emojis so the possibilities for codes are 44 X 44 X 44 X 44 = 3,748,096 (if repeat emojis are allowed). This would make it much harder to guess a passcode compared to the standard four numeric digit technique. The emoji proposal is therefore more secure.

Smart phones are the ideal platform for emoji passcode systems. On a smart phone the keyboard is displayed on the screen and therefore can contain any set of characters including emojis. If emoji passcodes are to be implemented on ATMs and chip and pin card payment machines, however, a further issue has to be resolved. At the moment the majority of these machines have a fixed numeric keyboard and they do not use touch screens. If emoji passcodes are to leave the phone and come into the high street then shops and banks will need to invest in new hardware. Managing the transition from a numeric to an emoji world will be a difficult task.

It would, however, be easy to devise a scheme which would be even more secure. To a computer programmer what is entered on the screen is simply four characters. For example, the calculations above assume that 0001 is a valid passcode even though it would not be the way we would normally write 1. Characters need not necessarily be numbers.

So it would be possible to implement a code which contained both letters and numbers. If we allow both upper and lower case letters this would give us 26 + 26 + 10 = 62 symbols to choose from. This allows 62 X 62 X 62 X 62 = 14,776,336 possibilities which means that codes based on this scheme are more secure than the emoji proposal.

In conclusion, the proposed use of emojis in passcodes is a clever idea which has the potential to lead to a more secure world where less people experience the frustration of being locked out of systems they rely on. Whether the technology is universally accepted will, however, depend on the resolution of a number of technical and non-technical issues.

Anyone who can recall the time when Wifi routers used WEP (Wired Equivalent Privacy) codes will, however, remember how difficult it can be to remember a password made up of random numbers and letters.

They might also recall that when you did know the password it always seemed impossible to type it correctly. As Intelligent Environments assert, the use of emojis might mean that it would be easier to remember the passcode since many studies have shown that human beings are much better at remembering pictures than they are at recalling passwords. The company also notes that younger users of phones regularly use emojis in their day to day communications.

The conclusion one might draw, therefore, is that the use of emoji passcodes whilst not being the most secure one could devise, is more secure than the current most commonly used system. There is also evidence which would lead us to believe that it would reduce the number of forgotten passcodes.

So can we award the idea four smiley faces? Not quite, as with all good ideas there are aspects which merit the thumbs down emoji.

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Wealth & Finance International | June 2015

Banking Zone

Pension-led Business Funding: A Forgotten Solution Despite improving economic conditions, small to medium sized enterprises (SMEs) face continued challenges when trying to secure affordable business funding, so it’s puzzling why so little is being done to highlight pension-led funding options to business owners. We hear from Richard Prior, Head of Self Invested Pensions, JLT Employee Benefits to find out more.

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MEs are the life-blood of the economy, with CBI data suggesting they account for 99.9% of private sector companies, providing 60% of private sector jobs. However, despite all the main political parties, recognising the importance of SMEs to drive economic growth, there is still too little being done to help these important job creators, who are often unable to access the capital they need from traditional sources – banks.

tools to help raise capital and reduce costs whilst at the same time putting the pension funds in the direct control of SSAS member trustees.

There is little sign that high street banks are helping to increase the sluggish pace of economic recovery, despite increasing pressure on them to increase lending. Therefore, many business owners are now looking for funding from alternative sources such as, angel investors, or peer-to-peer lenders. Whilst a booming alternative funding market and the emergence of challenger banks is viewed positively by most business owners, the cost of securing both traditional and alternative funding can often be punitive and business owners may often feel restricted by the constraints imposed on them by lenders. Therefore, it’s ironic that many business owners struggling with funding dilemmas, are totally unaware that they already have funds available in their own pension pots that could be used to benefit their businesses via a Small Self-Administered Scheme (SSAS).

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SSAS loans An SSAS can lend to the sponsoring employer provided the following conditions are met:

• • •

Most SSAS providers will require loans to be secured against commercial property, but may consider other assets, although care is required not to fall foul of HMRC restrictions related to taxable moveable property.

Purchasing commercial property Another option is to leaseback the company premises. Many companies or their directors own commercial property which can be sold to the SSAS to:

What is a SSAS? A SSAS is a pension trust traditionally set up by a limited company or a partnership, (the sponsoring employer) and is primarily used by private or family run companies for the benefit of the owner directors and senior employees. A SSAS has to be registered by HMRC and in most cases, SSASs will be administered by a specialist SSAS provider that will also perform the role of an independent trustee and Scheme Administrator to assist the members. The purpose of the independent trustee and Scheme Administrator is to ensure that HMRC rules are adhered to and the scheme is administered appropriately. However, the fact that the members (the business owners or directors) are also joint trustees, means they still retain control over the investment decisions.

SSASs offer all the standard tax efficient benefits of a normal pension arrangement, but with added features specifically designed to benefit business owners, including: • • • • •

The total loans must not exceed 50% of the combined SSAS funds.

Loans must be for no longer than 5 years and repayments must be made in line with an appropriate loan agreement.

The interest rate must be commercial and at least 1% above the BoE base rate.

The loan must be secured by a first charge.

• • •

Provide a capital injection for the business.

Protect the property from creditors.

Provide the SSAS with a reliable rental return on the asset.

The entire SSAS fund, plus borrowing of up to 50% of the fund, could be used to invest in property. However, limiting the assets within the SSAS to just commercial property is not without risk, so members should carefully consider the risks that a lack of fund diversification and the illiquid nature of the asset may present.

The pros and cons If business owners are investing their own pension funds in the business, this clearly requires significant forethought, appropriate advice and specialist support. SSASs should be used only when business owners or directors have a reasonable level of confidence in the future prospect of their business and they should fully evaluate the risks as well as the benefits. The flexibility of SSAS arrangements and ability to manage the funds in tandem with the financial requirements of the business can be hugely beneficial when utilised appropriately. However, owners of struggling businesses, without obvious growth prospects, should avoid the temptation to dip into their pension funds in desperation to fend off creditors or to simply keep their heads above water.

Utilising the combined pension funds to purchase commercial property to lease back to the company (the sponsoring employer.)

Loaning pension funds to the business.

Leveraging borrowing of up to 50% of the value of the combined pension fund.

Investing in the company (the sponsoring employer) by purchasing an equity stake.

Accepting assets transferred from the SSAS members as ‘in specie’ contributions or transfers.

There are however restrictions and strict rules to operate within, but when used appropriately, the options outlined above can be powerful

The SSAS members should take a long term view and understand that

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How much does an SSAS cost?

if the company faces difficulty in the future, this could result in loan or rental repayments ceasing. The trustees will need to be prepared to weigh up both the financial requirements of the business and the SSAS and take a commercial view. They could for example agree to a loan extension or rental holiday, but as this will affect the growth of the pension fund, they will need to consider whether the short term benefit to the business, will result in better longer term growth potential by ensuring the company has improved longer term prospects. If the SSAS takes a short term hit, but the business benefits in the long term from increased company profits, this may then provide scope for increased contributions to the SSAS at a later date.

The costs of establishing and administering a SSAS can vary significantly depending on the provider. Costs can also vary depending on the number of members and the type of investments that are held, with commercial property generally attracting additional costs. In addition to standard annual administration fees, transactions, such as making loans or purchasing property will usually be charged for on a transactional basis. Most providers will charge transparent fixed fees, with a small number charging on a time cost basis.

Some SSAS providers apply no set up fee, but most will charge between £500 to £1,500 for establishing the SSAS, with annual administration fees typically ranging from £800 to £2,000 p.a.

Why are SSAS arrangements so rarely used?

With the ability for a SSAS to offer such a wide range of flexible funding options, isn’t it strange that they are so rarely used? The reality is that most business owners and directors have simply never heard of a SSAS or have very little understanding of the options within a SSAS. In addition, many financial advisers and accountants lack sufficient confidence to recommend SSASs as a potential funding solution, due to the specialist and potentially complex nature of the product. A quick search of business funding websites will also produce very little reference to SSASs and despite their established nature and the strict HMRC rules governing their use, SSASs can also sometimes be viewed with suspicion if not fully understood.

Conclusion Before considering a SSAS, it’s always advisable to seek expert financial advice from a financial adviser that can demonstrate a clear understanding of the SSAS market. Cost should not be the only determining factor when selecting a SSAS provider. The ability and willingness for a provider to work closely with the member trustees and provide specialist technical support to facilitate complex transactions should also be a key consideration. Financial advisers will generally have experience of dealing with specific companies and can evaluate which SSAS provider is the best fit for their specific clients.

It’s also concerning that publically funded companies and organisations tasked with providing support for businesses, demonstrate very little understanding or appreciation of pension-led funding. This illustrates the urgent need for education and for more information to be made available to businesses to help them understand whether a SSAS could be appropriate for them.

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Banking Zone

Enhancing European Capital Markets An MOU has been signed with the China Construction Bank (CCB) to enhance access to European capital markets

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products by French enterprises, financial institutions and investors, and ultimately drive the internationalization of the RMB.”

uronext, the primary exchange in the Euro zone, have welcomed Commerzbank CCBI RQFII Money Market UCITS ETF to its Paris market. It is the first money market ETF denominated in RMB on its markets and underscores Euronext’s position as a key access point for Chinese investors. CCB International Asset Management Limited, the asset management arm of CCB International (Holdings) Limited (CCBI), serves as the Investment Manager of the ETF. CCBI and its afflliate companies are wholly owned by CCB. In addition, Euronext signed a Memorandum of Understanding (MOU) with CCB to develop a strategy to enhance the bank’s access to European capital markets.

Thomas Timmermann, CEO of Asset Management at Commerzbank Corporates & Markets, commented: “RMB is an increasingly important currency for investors and we are delighted to be able to broaden the reach of this product to French investors. We appreciate and recognise the importance of the French investor base in the internationalisation of the RMB. The ETF provides offshore investors the opportunity to use offshore renminbi deposits to invest in the mainland securities markets, with the aim of maintaining capital value and generating returns linked to the RMB money markets.”

The Commerzbank CCBI RQFII Money Market UCITS ETF, which offers investors exposure to interbank bond market in Mainland China, was successfully listed today and makes CCBI the 19th issuer on Euronext’s markets. The ETF will be available for trading in both RMB and Euros and will be settled exclusively with Euroclear, the International central securities depository, in multiple currencies.

Euronext now offers a total of 646 ETFs on its pan-European markets.

Stephan Pouyat, Global Head of Capital Markets at Euroclear, stated: “Further enhancing the RMB 2 trillion offshore market, in close co-operation with CCB, showcases our ability to meet clients’ ever increasing need for access to quality international instruments. A day after signing a Memorandum of Understanding with CCB in the presence of Chinese Prime Minister Li Keqiang and Belgian Prime Minister Charles Michel, Euroclear is privileged to be present at Euronext Paris today, where CCBI’s latest international ETF is breaking new ground in a major European capital market. With our partner Euronext, we are pleased to add to our already proven breakthrough listing platform this 15th international ETF. It does position Euronext has the leading stock market for international ETF listing in continental Europe and we are convinced it will go a long way in helping CCB achieve their strategic objective of making RMB financial instruments available to an even wider investor base.”

The MOU, signed in Paris by Lee Hodgkinson, Head of Markets and Global Sales and CEO of Euronext London and Anthony Attia, CEO of Euronext Paris, and WANG Hongzhang, Chairman of the Board of Directors of CCB, will explore how the two companies can further develop CCB’s access to European Capital markets. Areas under discussion include the possibility of CCBI becoming a trading member of Euronext markets; easing access to Euronext products within CCB; and RMB payment and settlement structures. It is expected that the cooperation between the two companies will further push forward RMB internationalization, and will enable Paris to become an offshore RMB business centre. The MOU will also pave the way for Chinese enterprises to come to Europe for finance, investment and commodities trading.

Jos Dijsselhof, Interim Chief Executive of Euronext said, “We are delighted to welcome CCB, one of China’s leading commercial banks, as investment manager on ETFs now listed on our Euronext markets.

The RMB is increasingly used in cross border transactions so this is an exciting step for Euronext as we continue to develop our offer in RMB denominated products and welcome Chinese investors to our market, underscoring our position as a leading financing centre able to attract high quality companies from across the world. We are very honoured to develop a new relationship with CCB to develop cooperation between the two companies and to reinforce our Euronext name in Asia.”

CCB is a leading commercial bank in China, providing a comprehensive range of commercial banking products and services. Its business consists of three principal business segments: corporate banking, personal banking, and treasury operations. It is among the market leaders in China in a number of products and services,including infrastructure loans,residential mortgage and bank cards. At the end of May 2015, the market capitalization of the Bank reached US$ 251.4 billion, ranking it third among listed banks in the world.

ETFs are open-end investment funds that are listed on an exchange and continuously traded in the same way as a normal share. In general, an ETF is linked to a benchmark index and aims to closely follow its performance. ETFs combine the simplicity of equities with the diversified risk of investment funds, and offer flexible, low-cost exposure to entire markets or market segments through a single transaction. The low level of management fees is a further benefit of ETFs.

WANG Hongzhang, Chairman of the Board of Directors of CCB said, “Developing offshore RMB business in Europe is one of the key elements in CCB’s internationalization strategy; the cooperation with Euronext marks another important historical milestone. We believe, not only does this allow us to gain further access to the European capital markets, internationalize our operations, and provide our clients with additional channels to invest in Euronext Paris, it will also encourage an extensive use of RMB

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