Wealth & finance July 2015 by AI Global Media

Wealth & Finance International | July 2015

Drawing A Line Under Gender Wars Have we finally found a way to end the gender pay gap? Following David Cameronâ&#x20AC;&#x2122;s recent pledge, we hear from Richard Nicolle, Partner at Stewarts Law to find out.

Workplace Worries We explore whether or not often-held views that paint todayâ&#x20AC;&#x2122;s students as lazy and unprofessional are any more than just lazy stereotypes.

The Financial Five Five values that every financial institution needs to have in the Human Era.

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Welcome to your July issue of Wealth & Finance.

This month, we explore how cybercrime is targeting small businesses. We hear from Stuart Poole-Robb, Chief Executive of the security, business intelligence and cyber security adviser, KCS Group Europe to find out more. Leading London law firm, Wedlake Bell LLP, is urging individuals with assets in EU member states to review their wills ahead of a revolution in EU succession law, and we learn the five values that every financial institution needs to adhere to in the so-called ‘Human Era’. Brevet Capital, a U.S. based direct lender, helps us to explore how the private debt market will have the opportunity to establish itself as a lasting asset class and fill the void left by contracting banks due to increased regulation. Elsewhere, we hear from John Lunn, Partner at transformation consultancy, Moorhouse about recent changes in regulation and the banking sector. And, finally, millennials have, in the past, been criticised for being lazy employees, lacking communication skills, being too demanding as employees and not being work savvy. We hear from Jonathan Sharp, Sales and Marketing Director at Britannic Technologies to find out whether these accusations ring true. We hope you enjoy the issue!

Contents 4. News

60 Seconds With... 18. Next Generation Wealth Management 20. IDS Fund Services

Financial Focus

22. Why Financial Institutions Need The Human Touch 24. Gender Pay Disparity: Equality In The Workplace 26. The Economic Benefits of a Managed Data Service for Asset Managers 30. Brevet Capital

Banking Zone

32. Don’t Lose Clients Overboard When Onboarding 34. Brussels IV: New Inheritance Rules For EU Assets

Market Matters

36. Millennials Re-Defining The Workplace 38. Business Is Child’s Play 40. Market Abuse – A Complex Problem For Compliance Teams

Taxing Times 42. Be A Man With A Plan 3

Wealth & Finance International | July 2015

News

Rising Domestic Demand Benefits When thinking about global emerging market equity investing, the focus tends to shift toward China and India, despite questions about their near-term growth outlooks. And yet often overlooked are countries in Central and Eastern Europe (CEE), which are enjoying clear economic improvements. By referring to the ‘CEE’, we exclude Russia and Turkey and include those countries buffeted between Germany to the west and Ukraine to the east - predominantly Poland, Czech Republic, Hungary and Romania. In aggregate, these countries delivered 4.1% growth (annualised) in the first of 2015, surpassing market consensus forecasts and leading to upward revisions to growth in 2015 and 2016. A significant contributor to growth is rising domestic demand. Real disposable incomes are increasing, unemployment is falling and retail sales are growing. On the external side, net exports are also improving as the eurozone recovers. This region benefits from a strong German economy. For example, half of all exports from the CEE to Germany are re-exported to the US and China. Investor outflows from last year have yet to return, but we expect that investors will begin to reallocate to this region in recognition of the improving economic fundamentals. Smaller countries’ inclusion into the MSCI Emerging Markets Index, such as Romania, would be another stimulus to flows. We also find it reassuring that this region attracts mainly long-term institutional investor flows, rather than ‘hot money’. Valuations remain compelling versus other emerging market countries. The market is susceptible to political risks, most recently highlighted in May with the surprise election of the socially conservative Andrzej Duda in Poland as President, as well as political corruption accusations against the Prime Minister in Romania. Meanwhile, market sentiment is exposed to ongoing political aggravations in Russia/Ukraine. Notwithstanding these headline risks, we expect the economic fundamentals in CEE countries to overcome political noise and support the longer-term investment case. Based on the above factors, we have taken the opportunity to invest in Trigon New Europe Fund, which has a special focus on Central and Eastern Europe, as well as investing in new European Union countries and those aspiring to accession. By Jaisal Pastakia, Investment Manager at Heartwood Investment Management.

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New Tax-Free Childcare Scheme Following a Supreme Court judgment, self-employed parents and those with more than one child who have been eagerly anticipating the launch of the Government’s new Tax-Free Childcare scheme this autumn, will now have to wait until 2017. children. There’s a limit for childcare vouchers, which isn’t dependent on the number of children.

Commented Sarah-Jane Butler, childcare expert and founder of Parental Choice (www.parentalchoice.co.uk) states that, “The delay in the introduction of the new Government supported childcare vouchers is good for some and bad for others. Good for all those who are currently in employer supported childcare vouchers, which is actually the minority because a relatively small percentage of companies actually participate in the childcare voucher scheme, but bad for the majority of parents, including the self-employed or couples who earn less than £150,000 each, as they’re eligible for Tax-Free Childcare, but can’t get childcare vouchers.”

However, as Sarah-Jane continues, “The stay of execution for childcare voucher companies is welcome relief for people who earn over £150,000 as they would not be eligible for Tax-Free Childcare along with couples where only one parent works. “It is to be hoped that this hiatus in proceedings will give companies the chance to think about what they can do to value the talent of their working parents and look outside of the box for something that will truly make a difference to parents and their families.”

The news is also bad for parents with more than one child and high childcare costs, as the help available goes up with the number of

Wealth & Finance International | July 2015

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Cyber Crime Targets Small Businesses High-profile hacks such as that conducted against Japanese electronics giant, Sony and the US Office of Personnel Management (OPM) appear to have lulled small businesses into a state of complacency. We hear from Stuart Poole-Robb, Chief Executive of the security, business intelligence and cyber security adviser, KCS Group Europe. There is growing evidence that small firms now mistakenly feel that they are below the radar of those Organised Criminal Gangs (OCGs) who are moving their nefarious activities online in order to increase their profits and minimise the risk of detection. According to research from Texas-based identity protection specialist CSID, 52% of small businesses surveyed are failing to take preventative steps to guard against cyber-attacks. Around 85% have no plans to improve cyber security; fewer that 13% are working with third parties to improve their cyber defences.

Own Devices (BYOD) policy in operation. Cyber security breaches can also be caused by unwary staff using unsecured devices such as smartphones and tablets bought in the high street to access the corporate network. Organisations of all sizes should have a policy in place restricting the use of non-corporate devices in the workplace.

But there is growing evidence that OCGs are increasingly targeting smaller organisations, which they regard as low-hanging fruit, as the bigger players improve their cyber security. UK businesses, which are generally years behind those in the US in terms of cyber security, should be particularly aware that smaller organisations can also be used by skilled hackers a ‘a back door’ through which to break into larger a organisation’s communications systems. Just because an organisation believes it has little data worth stealing does not mean that its clients or service providers do not have data that can be traded easily and profitably on the Dark Web.

Most small and medium-sized companies do not fully grasp the way in which modern hackers work. A crucial part of the cyber criminal’s homework is social engineering. By trawling websites such as Facebook and LinkedIn, hackers are able to discover a wealth of information concerning key individuals within an organisation. This information can then be used in what is called a “spear phishing” attack. This typically takes the form of an email sent by the hacker but appearing to come from a trusted colleague. All the recipient has to do is click on an attachment, such as a seemingly innocent Word document, in order to unwittingly install malware on his/her organisation’s IT system. Sometimes, information relating to a target’s personal life found on dating sites can be used to blackmail a member of staff into revealing passwords.

But those organisations which are too complacent to protect themselves adequately against cyber attack may find that they have already been hacked. According to CSID, under half of small businesses monitor what is written about their business online. Among those who do, the search is often cursory, relying on a standard search engine such as Google.

It is essential that small businesses in the UK understand the full extent of their vulnerability. Although most believe that the growing menace of cyber crime is not something that affects them, they are more vulnerable than most large organisations. Few grasp the extent of the power a hacker can wield over them once their IT system is compromised.

This is ineffective as the Internet is fast resembling an iceberg where most of what is available on the web is hidden. Only 5-16% of the Internet is believed to be indexed by Google. The Deep Web, which includes abandoned websites, paywalled sites and research firm databases, may also contain references to a small business or its clients. More disturbingly, one of the fastest growing part of the Internet is the Dark Web and many organisations of all sizes are often blissfully unaware that some of their most sensitive and confidential data may already be up for sale on sites run and frequented by professional criminals. The only way for firms to monitor this type of activity, which is becoming increasingly common as hackers realise the full market value of stolen data, is to have access to embedded sources within the Dark Web.

One modern form of malware, ransomware, effectively locks away the target company’s database. The hackers only release the software key to unlock the data when a hefty ransom is paid. If the company is too slow in paying up, some OCGs simply destroy the data. Last year, for example, US-based code hosting and project management services company Code Spaces tried to regain its data after a security breach. But the data losses suffered put Code Spaces out of business overnight. Small businesses must now take immediate steps to safeguard the IT systems. Although staff should, in any case, be warned of the dangers of opening attachments in messages from unknown sources, this would afford little protection against a socially-engineered spear phishing attack. The only real defence is to use 21st Century best practice software capable of filtering out those attachments which contain Trojans or other forms of malware before they can be used to seize control of the company’s digital assets.

Small firms are also unaware of the threat posed by staff who frequent social networking sites and bring their smartphones to work. Only 15% of small firms have a social media policy and only 3% have Bring Your

Wealth & Finance International | July 2015

News

Fewer than One in Five Financial Advisers Would Invest in P2P Fewer than one in five (18%) financial advisers would invest, or already have invested, their own money into peer-to-peer lending schemes, research from Yorkshire Building Society shows. Advisers are concerned about consumers’ low levels of understanding of the potential risks of P2P, which is not covered by the Financial Services Compensation Scheme (FSCS) and can mean savers lose capital as well as interest while also facing restrictions on withdrawing money.

“It is clear that many financial advisers have concerns about consumers’ understanding and are unwilling to invest their own money in P2P despite the potential returns. “It is good that the Government has decided to create a new and separate type of P2P ISA instead of linking it to the existing stocks and shares option, which will help to limit potential confusion among consumers.

More than four out of five (82%) of advisers surveyed believe customers do not understand P2P lending rules. The Yorkshire’s study among investment specialist advisers found just 4% have invested in P2P while another 14% would consider investing their own money.

“We hope our research and guide highlights the importance of making sure the risks and possible returns are considered. We would urge anyone considering investing in P2P to discuss their options with a professional adviser.”

Last week the Government confirmed it plans to introduce from next April a third type of ISA, the Innovative Finance ISA, allowing for up to £15,240[2] tax-free investment in the P2P sector.

Yorkshire’s research[3] with savers and investors shows a growing appetite for risk ahead of new rules on ISA flexibility and tax-free saving allowances due next year. Around 10% of people questioned said they will definitely consider riskier investments as a result while 37% will look at riskier investments depending on their circumstances.

Yorkshire Building Society, which does not offer any P2P investment options, has created a guide to the sector to increase levels of understanding of how it works.

Earlier research[4] showed a lack of understanding of P2P among consumers. Just 42% claimed to be familiar with the term and, of those, 60% were unaware that they had no protection under the FSCS.

Advisers are braced for increased interest from clients about investing in P2P once it is covered by the trusted ISA regime and believe the new ISA will provide further momentum for the growth in the sector. Nearly half (45%) believe interest in P2P will grow as new savings rules come into effect and 20% have already seen increases in inquiries from clients about investing in P2P over the past 12 months. However nearly two-thirds (62%) say they would never invest their own money in P2P despite the potentially attractive rates on offer, while another 20% are undecided. Forecasts predict strong growth for the P2P industry, which almost trebled in size last year to be worth more than £1.3 billion. This compares to the £57bn placed in cash and stocks and shares ISAs. Andy Caton, Executive Director at Yorkshire Building Society, said: “Investing in P2P can offer strong possible returns but people need to be fully aware of the possible risks and costs involved.

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News

Saga Welcomes FCA Quizzing Pension Providers

UK Executives Give Boards ‘A’ in Cyber Literacy

New pension freedoms introduced in April mean that the over 55s are able to cash in their pension. However, lots of people wanting to do this are having to jump through hoops to release their savings or are being charged large fees to move to providers offering more flexible schemes.

Tripwire, Inc., the global provider of advanced threat, security and compliance solutions, today announced the results of a study sponsored by Tripwire on cyber literacy challenges faced by organisations.

The FCA announced that it is giving pension providers until 7 August to disclose the fees they are charging people, as well as to come clean about any barriers they are putting in peoples’ way or they will face a fine.

Despite the increasing number of successful cyberattacks against U.K. organisations, the study revealed that 54 percent of C-level executives at organisations within the Financial Times Stock Exchange (FTSE) 100 index believe their board is both cybersecurity literate and actively engaged in routine security. IT professionals from the same organisations are less confident in their boards cybersecurity knowledge, with 26 percent stating their boards only steps in when there is a serious incident.

Commenting on the FCA’s announcement, Paul Green, director of communications at Saga, said: “Firms should not be taking advantage of the new rights – people should be able to access their own savings whenever they want. “It is good that the regulator is starting to act and ensure fairness for both individuals and pension providers. Exercising your rights should not be a source of profit for providers but an opportunity to help and just recover their costs. However, there is also a clear need for straightforward guidance and advice on the options people have, but trusting people is the right place to start.”

While the results of the Tripwire study point to executive confidence, they reveal the uncertainty of IT professionals. When asked if their board was “cyber literate,” almost one-third of IT professionals either answered “no” or “not sure.” However, when C-level executives were asked the same question, 84 percent answered “yes.” “There’s a big difference between cybersecurity awareness and cybersecurity literacy,” said Dwayne Melancon, chief technology officer for Tripwire. “If the vast majority of executives and boards were really literate about cybersecurity risks, then spear phishing wouldn’t work. I think these results are indicative of the growing awareness that the risks connected with cybersecurity are business critical, but it would appear the executives either don’t understand how much they have to learn about cybersecurity, or they don’t want to admit that they that they don’t fully understand the business impact of these risks.” “Most organisations are not struggling with communication tools,” said Melancon. “They are instead struggling with finding the right vocabulary and information to accurately portray cybersecurity risk to their boards, and they are trying to find the right balance of responsibility and oversight for this critical business risk.”

Wealth & Finance International | July 2015

Indian Businesses Strengthen UK Ties with New Bilateral Agreement The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and the UK India Business Council (UKIBC) jointly signed a new bilateral agreement on Thursday 2nd July at the ASSOCHAM Global Investorsâ&#x20AC;&#x2122; India Forum, London, to further strengthen UK-India trade and investment corridors and establish a stronger relationship between investors and companies. The event also coincided with the launch of the UK Chapter of ASSOCHAM.

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News

Supporting Indian Prime Minister Narendra Modi’s Make In India programme and in partnership with UK Trade and Investment, the roadmap aims to promote trade delegations and facilitate cross-border business relations to actively engage in identifying projects of mutual interest for Indian and UK businesses to invest.

British but my heart is Indian. I always look for ways of how I can grow India. The Indian Prime Minister has really put India centre-stage and it really is the right time to invest in India. The world’s future, economic prosperity and success lies in Asia – if India succeeds, then Asia will too. And if Asia succeeds, then so will UK and Europe.” Mr Hinduja also highlighted the effort and contribution of UK’s 1.6mn non-resident Indian audience in enhancing both UK’s and India’s economy.

Mr Vijay Goel, Chairperson of ASSOCHAM UK and Partner of Indian law firm Singhania & Co inaugurated the session and introduced the keynote speakers. He said, “India and the UK share deep commitment to fostering more investment and ASSOCHAM has recognized the need for the changing business and investment environment to encourage this.”

Rt. Hon. Patricia Hewitt, Chair, UKIBC opened her keynote address by commending Mr Kapoor’s entrepreneurial spirit. She said: “India invests more in the UK than in the EU put together. Under Mr Kapoor’s leadership, ASSOCHAM has gone from strength to strength. By deepening and renewing the UK-India partnership it would be hugely beneficial to both countries.”

Mr. Rana Kapoor, President of ASSOCHAM and Founder & CEO of YES BANK, led the signing event with the release of a report titled Make in India – Pressing the Pedal. The exclusive report identified several key findings including a prediction that the value of Indian exports are expected to grow $64billion annually, as China loses out to India’s increasingly competitive labour market and growing working population.

Mr. Michael Boyd, MD, UKTI, spoke about India and the UK’s cordial business relations, saying: ‘The UK is the largest G20 investor in India; over the last year, FDI into the UK rose by 50% creating 7,700 jobs.’ He also said that India is the third largest source market for FDI in the UK.

Notably, the report underlined the UK’s prominent position as the fourth largest FDI contributor to India and, with India set to surpass China as fastest growing economy in the world in 2016, the UK is set to benefit from India’s energised export drive. The new road map will maximise opportunities for UK businesses and harness India’s potential especially in the fields of manufacturing, infrastructure and renewable energy.

Speaking about the benefits of doing business in the UK, he said: ‘The UK is a popular destination for Indian business investors, and this is because it is easier to do business in the UK; the UK is the eighth best country to do business in.’ Mr. Boyd concluded by saying how this mutually beneficial relationship would increase jobs and direct investment, saying that the ripple effects would be felt throughout.

Welcoming the signing of the agreement and the launch of a UK base for the Indian chambers, ASSOCHAM President Mr. Rana Kapoor stated: “India’s potential manufacturing and export-driven growth, key pillars of the India’s government’s Make In India campaign, offers a fantastic opportunity to UK investors and companies.

The Rt. Hon. Baroness Sandip Verma, Parliamentary Under Secretary of State for International Development, UK Government mentioned that her ambition is to have the UK as India’s number one partner. She said: “Without bodes like ASSOCHAM there would be no relationship between India and the UK. There is a real appetite for investment in India but there needs to be an ease for all businesses to enter India.

“As a hub for trade to the European continent, London is an excellent platform for new relationships to be built and we hope the strengthening of this corridor will improve the ease of doing business and provide British and Indian companies, especially in the SME sector, a new era of cross-border cooperation.

from SMEs to large corporations. I value Mr Kapoor’s vision of creating an entrepreneur valley in India.” She also spoke about the opportunities India is presenting for businesswomen, stating, “India has many women led businesses and we need to encourage this.”

“The launch of ASSOCHAM in the UK is a turning point between UK and India relationships. The potential partnership between the UK and India is great but we cannot expect results overnight. To all investors here at this event, do not think twice, just invest: you will be successful.”

Mr. V.N. Dhoot, Chairman & Managing Director, Videocon Industries, gave the concluding comments by congratulating Rana Kapoor for taking ASSOCHAM to this great level. He said that the aim should now be to take ASSOCHAM to all G20 countries. ‘This is the best time to invest in India, as its economy is booming and it has political stability. I am confident that Mr Narendra Modi will build India in the next five years, it will take time, as Rome wasn’t built in a day, but we will surely get there. India can become an economic superpower in the world’.

He added, “There is a tectonic shift happening in India’s SME sector. I want to commend Prime Minister Narendra Modi for his vision and foresight in tapping India’s vast potential. He has created confidence, conviction and communication, and he has opened up India to a world of possibilities. India is a growth story, and this story is set to continue.’ The ASSOCHAM’s Global Investors’ India Forum saw keynote speeches from Rt. Hon. Patricia Hewitt, Chair, UKIBC, The Rt. Hon. Baroness Sandip Verma, Parliamentary Under Secretary of State for International Development, UK Government, Mr. Michael Boyd, MD, UKTI, Mr. G.P. Hinduja, Co-Chairman, The Hinduja Group and Mr. V.N. Dhoot, Chairman & Managing Director, Videocon Industries.

Also in attendance at the event was Mr Praful Patel, Former Minister of Heavy Industries and Public Enterprises, Government of India who said: “India is really forging ahead and has its own growth story.”

Mr. G.P. Hinduja, Co-Chairman, The Hinduja Group highlighted the unique position of India and it’s investment potential. He said: “I am

The event closed with an Interactive Investment Forum to explore how India’s growth story can be fast tracked with confidence and conviction.

Wealth & Finance International | July 2015

News

A Naïve Budget That Puts Caps on Aspiration The Summer Budget has been branded “in parts a cap on aspiration, in parts delusional, and in parts naïve,” by the chief executive of one of the world’s largest independent financial advisory organisations.

Nigel Green, founder and CEO of deVere Group, which has $10bn under advice, is commenting after Chancellor George Osborne delivered his seventh but first exclusively Conservative Budget. It has been dubbed an ‘emergency Budget’ since it comes after the surprise Conservative election victory in May.

the Chancellor is, in my view, hinting that tax relief on pension contributions could go altogether some point in the future.” Maintenance grants to loans Mr Green says: “By confirming that maintenance grants for students from poorer backgrounds will be converted to loans, the Chancellor is again putting a cap on aspiration.

Mr Green affirms: “With no election for five years, Osborne has been more willing and able to make tough measures that could upset people. This should be largely expected.

“Those from less affluent backgrounds are now more likely to be deterred to going to university by the debt they will face and it will inevitably impact where students choose to live and which courses they take.”

“However, it is somewhat surprising and disappointing that the Chancellor has delivered the first Conservative-only Budget since 1996 that is in parts a cap on aspiration, in parts delusional, and in parts naïve.

Curbing the non-dom tax status is ‘delusional and naïve’ The deVere founder and chief executive explains: “The Chancellor has confirmed that the permanent non-dom tax status is scrapped.

“Behind his rhetoric of blue collar conservatism to appeal to the ‘working people’ his party claims to champion, in some respects Osborne has put up even more barriers for those who want to get on in life through hard work.

“It is delusional to believe that there will not be far-reaching, adverse consequences to taxing the wealthiest in our society more harshly.

“Of course, this flies in the face of the Chancellor’s message that today’s was a ‘big Budget for big ambitions’.”

“It is a naïve policy measure in the extreme. Why? Because it is almost certain that the move will trigger an exodus of many of Britain’s most successful wealth and job creators, who also support the Revenue through their significant UK income tax receipts and personal spending. Can the UK afford to lose these people when other countries are vying hard to attract them?

Tax relief on pensions The deVere CEO affirms that in a bid to demonstrate that ‘we’re all in this together’, the Chancellor is making radical changes to higher income earners’ pension tax perks.

“In addition, it is going to make Britain a less attractive place to work for top international talent, meaning lower tax revenues. This can all only bode ill for the UK’s sustainable, long-term economic growth.

He comments: “The tax allowance for high earners is being tapered away to a minimum of £10,000. This move is another bloody nose for those who prudently want to save to be able to achieve their retirement aspirations.

“Even if the tax raid brings in the estimated £1.5bn reported by Osborne, the underlying economic cost will be much higher than the narrow fiscal boost.”

“How can this measure incentivize people to work hard and save to secure their own financial future? Targeting pension tax relief is nothing short of a cap on aspiration to do better, to save more.

Inheritance tax – ‘a step in the right direction’ Mr Green comments: “Whilst an increase in the inheritance tax threshold to £1m for married couples by 2017 is a step in the right direction, as always, the devil is in the detail.

“It is another example of how politicians of all parties seemingly believe that pensions are an easy and convenient target to bolster government coffers as and when they need to. “This is short sighted in the extreme. Individuals being financially secure in later life must be being actively supported by the government, not only because it means that people will be best-placed to have the retirement they wish, but it means that they are less likely to be a burden on the State later in life, and this will help ensure the country’s long-term, sustainable economic growth.

“Behind the smoke and mirrors headline grabber, there is only a new inheritance tax allowance of £175,000 on homes left to children or grandchildren from 2017. “IHT is universally regarded as one of the most despised taxes as it is, essentially, a form of double taxation, and passing on a decent legacy to our loved ones is a very human instinct. Osborne missed an important opportunity to go further today on inheritance tax.”

“And worryingly, by highlighting that a Green Paper is to be published,

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The Time to Act Is Now for Britain’s Non-Doms The clock is ticking for Britain’s non-doms and they should urgently consider reviewing their tax affairs, warns one of the world’s largest independent financial advisory organisations.

Neil Walker, Global Head of Tax at deVere Tax Consultancy, part of DeVere Group, is speaking out after the Chancellor announced in his first Conservative-only budget that the permanent non-dom status is being scrapped from 2017.

time to act is now. In addition, and importantly, it remains unclear if the changes being brought in will be retrospective.” “The non-dom status remains for the first 15 years and, therefore, the UK should stay a low tax environment for most Britain-based expats if their affairs are correctly structured.

Mr Walker comments: “Approximately 116,000 UK residents currently enjoy the benefits of the UK’s non-dom tax status, which dates back to around the times of the Napoleonic wars.

“These non-doms will also need specialist advice and assistance to complete their tax returns, which are set to become more involved.”

“However, in a bid to demonstrate ‘we are all in this together’, this tax perk is now being abolished by George Osborne.

“The new rules open the doors to so called non-dom boomeranging, which is the process of moving out of the UK for a few years and then returning in order to refresh your domicile status.

“Despite it not being scrapped until 2017, non-doms should urgently consider reviewing their tax affairs as the clock is ticking to put all the legitimate available measures in place in order to mitigate the effect of the new, controversial rules.

Of the wider implications, Mr Walker affirms: “Many of the budget changes were aimed specifically at UK residential property ownership. Many investors are likely to consider exploring the tax advantages of divesting this type of asset in favour of assets which do not attract the same level of charges, whether owned personally or through a trust or corporate vehicle.”

“There are a raft of ways that the impact can be mitigated, but the options will invariably become narrower the closer we come to the cutoff point and, due to the complexities of each individuals’ status, the

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Wealth & Finance International | July 2015

News

Stepping up Efforts to Build Pipeline of Women Executives Business group partners with Women’s Executive Network to support UK launch.

In support of its goal of increasing the number of women in senior executive positions at British companies, the Institute of Directorshas announced that it is partnering with the Women’s Executive Network (WXN) to support its UK launch. Founded in Canada in 1997, WXN’s mission is to provide development and networking opportunities aimed at helping women to achieve and retain leadership positions.

Accountants (ACCA) and media partner The Guardian: Women in Leadership. WXN is proud to be working in collaboration with the Institute of Directors (IoD). The organisation has secured an impressive line-up of advisory board members: Helen Brand OBE, Chief Executive, ACCA; Lady Barbara Judge CBE, Chairman, Institute of Directors; Harry Samuel CEO, RBC Investor & Treasury Services and Chairman, European Executive Committee; Susan Vinnicombe OBE, Professor of Women and Leadership, Cranfield University School of Management and Director, International Centre for Women Leaders; Dame Fiona Woolf DBE, British Solicitor and former Lord Mayor of London.

Large UK firms have made progress in appointing women directors, recently hitting the 25% target of female representation on FTSE 100 boards. However, the appointments have largely been to non-executive roles, and there are still only five female chief executives. The IoD believes that the only sustainable solution is to build a pipeline of executives, which picks talented women out at an early stage in their career and propels them up to the very top. The Institute’s involvement with WXN will complement its existing efforts, including its annual Women in Business conference, which this year features speakers such as Margaret Mountford giving their insights on the challenges and successes they have experienced in business.

WXN’s sister organisation, the Canadian Board Diversity Council (CBDC), is the leading Canadian organisation advancing diversity on Canada’s boards. The CBDC has helped Canadian board diversity reach 20.1% on TSX60 boards and 17.1% FP500 boards. WXN complements the efforts of the 30% Club by growing and supporting the pipeline of high potential professional women to reshape diversity in the boardroom and at the executive level.

The expertise of WXN will be invaluable to the IoD as it looks to enable women to reach for senior executive positions, and help its members further their careers. Lady Barbara Judge, who was appointed as the IoD’s first female chairman earlier this year, said: “I am delighted that the IoD is partnering with WXN as they seek to bring their substantial experience of helping women to develop as leaders to the UK. Enabling more women to take up senior executive positions is one of my primary goals as IoD Chairman, a task which will be aided by this collaboration.” On 12 October WXN will host Moya Greene, CEO of Royal Mail, as the keynote speaker at an event at the Institute of Directors in London. The first of four events in this series, it will provide a view on the latest in global leadership trends and current issues facing female—and male—leaders. The Women’s Executive Network (WXN) WXN works with 100+ organisations internationally to support the advancement of women into senior management and executive roles. In London, the IoD joins significant corporate partners including the Royal Bank of Canada (RBC), the Association of Chartered Certified

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News

Value of SME Credit Applications Rejected by Banks in Q1 Rises 23% on the Year Research from alternative lender Fleximize which estimates that between January and March 2015, banks rejected credit applications from SMEs, including loan and overdraft facilities, worth an estimated £1.36 billion. Fleximize, the SME alternative lender, estimates that between January and March 2015, banks rejected credit applications from SMEs, including loan and overdraft facilities, worth an estimated £1.36 billion. It believes this was around 23% higher than the £1.1 billion of SME credit applications rejected in Q1 2014(1) and 0.7% up on the previous quarter (Q4 2014).

However, banks’ apparent reluctance to lend is fuelling increased demand for alternative lenders. The value of SME credit applications received by Fleximize in Q2 2015 was 27% higher than Q1. The company has loaned more than £8m to over 300 businesses since it began trading in January 2014. Max Chmyshuk, Founder and Managing Partner at Fleximize, said: “The Chancellor’s creation of the National Living Wage will put further pressures on SMEs, many of which rely on a low-skilled workforce and will subsequently be faced with a steep rise in wage costs.

Fleximize estimates that loan rejections totalled £1.09 billion in Q1 2015, or 24% higher than the £876m in Q1 2014. Fleximize also reveals that around £274m of overdraft applications were rejected in Q1 2015, which was 18% higher than in Q1 2014.

“Many SMEs are still finding it difficult to secure credit from banks, and this is leading to an increase in demand for alternative lenders like Fleximize. Unlike some of the banks, we are not constrained by archaic systems or a back-book of bad debts and we are also using more efficient and fairer systems for assessing applications.”

Once again, it was the small businesses that were hit hardest in Q1 2015, with the latest findings(1) showing that while over one in five (21%) applications from small businesses for overdrafts and loans were rejected by the banks, the corresponding figure for medium-sized enterprises was around 11%. Corresponding figures for Q1 2014 were around 22% and 8% respectively.

Wealth & Finance International | July 2015

News

Success in Succession New EU Succession Law simplifies succession for those with EU assets. Leading London law firm, Wedlake Bell LLP, is urging individuals with assets in EU member states to review their Wills ahead of a revolution in EU Succession Law. Things to think about:

As many holiday makers jet off to enjoy the sun in their villas in France or Italy, they should consider a new piece of legislation which will affect those with assets in the EU.

Are you an EU Citizen? If yes, then Brussels IV could benefit you.

On 17 August 2015, the European Succession Regulation (650/2012), colloquially known as “Brussels IV”, comes into effect. This ground-breaking step aims to simplify cross-border EU succession and for the first time across the EU allows individuals to choose the law governing the succession to their EU assets on death.

Do you have assets in different EU countries? If yes, you may have the ability to override the default position under Brussels IV. An express election in your Will allows you to choose the law of your nationality to govern the succession to your EU assets, avoiding unfavourable succession regimes, such as forced heirship where certain individuals must receive a share of the estate.

Brussels IV provides a positive opportunity for anyone with assets in EU member states, to take control of the succession to their EU assets and their heirs’ financial future.

I thought the UK had opted out of Brussels IV? The UK has not opted in to Brussels IV, but this does not mean that UK citizens will not be affected. Brussels IV will impact anyone with EU assets in the countries which have adopted it (all of the EU except the UK, Ireland and Denmark).

Under Brussels IV, the default position for a UK citizen with EU assets (with the exception of those in Denmark or Ireland), is that the succession to those assets will be governed by the law of the country in which the deceased was resident when he died. However, if that country has forced heirship rules– as they do in France – this default position may not be favourable as forced heirship means that a portion of the estate must pass to certain family members, and you may, for example, wish to leave your assets entirely to a spouse. Importantly, Brussels IV allows individuals to override this default position by making an election in their Will for the law of their nationality to apply.

What about my holiday home? If you are a UK citizen with a holiday home in, for example, France, you can update your UK Will to cover the French property with an election for UK law to apply, instead of having a separate French Will for your holiday home.

Currently, EU cross-border succession law is extremely complex. Which country’s law applies depends on a multitude of different factors across EU member states. In addition, some EU member states apply forced heirship rules. Brussels IV is revolutionary as it gives all EU citizens for the first time the ability to choose the law of their nationality to govern the succession to relevant EU assets.

If a UK citizen lives in an EU state, for example, Spain, the default position will be that Spanish law will apply to both their Spanish and UK assets but this can be overridden by making an express election in the Will for UK law to apply. What can I do now? Look at your Will now, be aware that Brussels IV may change who inherits your EU assets on death, and contact a lawyer to review your Will and advise on the best course of action.

What are the benefits of Brussels IV? 1. Individuals have the ability to control the succession to their EU assets by making an election for the law of their nationality to apply. 2. UK nationals have the ability to avoid the forced heirship rules that might otherwise be applied by some EU countries, giving them freedom to leave their EU assets to whomever they wish.

Eleanor Metcalf, Head of Wedlake Bell’s Private Client Group, comments: “Brussels IV provides an excellent opportunity for those with multi-jurisdictional assets to take control of their heirs’ financial future. At the core of succession planning is preservation of wealth and the introduction of an EU Succession Law is a major step forward in providing certainty in Will writing for all those with assets in the EU. Making a Will is an important and often difficult step for clients and anything which simplifies cross-border succession issues and gives them the freedom to leave EU assets to whomever they wish, is very much to be welcomed. Individuals should look at what Brussels IV means for them now.”

3. The potential for lengthy and expensive legal procedures to determine which country’s laws apply to particular EU assets is lessened. 4. The potential for disputes amongst family members cut out from inheriting certain EU assets (because of forced heirship rules) is reduced. 5. There is less need for multiple Wills dealing with assets in different jurisdictions; in many cases, a single Will covering all EU assets will suffice.

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Wealth & Finance International | July 2015

60 Seconds With...

Next Generation Wealth Management What does your business do? Next Generation Wealth Management focuses exclusively on private client matters – investment management, advanced planning, and relationship management. We have the depth of a large organization with the service of a boutique firm. Our team has over 90 years of experience advising clients. Who are your clients? The majority of our clients are located in the Midwest; however, our reach extends across the United States. Our clients created their wealth in many different ways. We advise business owners, entrepreneurs, executives, individuals, retirees and individuals with inherited wealth. What makes you unique? First of all, we are employee owned, which ensures stability of our purpose and alignment of interests. Second, market share is not our primary goal; rather providing superior client service and investment performance is paramount. And most important, we invest in a personal relationship and are very accessible to every client. What’s your biggest challenge facing you at present? Our challenge is to remain focused on the things we can predict, control and the long-term goals of our clients. We have, and will continue to resist the temptation to grow the firm to the point where it compromises our efficiency, expertise, and exceptional client service. What business/business person do you most admire and why? There are many but I’ll highlight Warren Buffett for his pledge to donate 99 percent of his vast wealth to do the most good. He once said, “There’s no Forbes 400 in the graveyard. My Berkshire Hathaway stock has no utility to me, but have enormous utility around the world.”

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60 Secondâ&#x20AC;&#x2122;s With...

CONTACT DETAILS Name: David A. Massart Company: Next Generation Wealth Management, Inc. Email: dmassart@ngwealth.com Web Address: www.ngwealth.com Address: 10700 Research Drive #150 Milwaukee, WI 53226 Telephone: (414) 257-4248

Wealth & Finance International | July 2015

60 Seconds With...

IDS Fund Services What does your business do? IDS Fund Services offers Fund Administration in South Africa and also to international funds through Malta and Mauritius. Who are your clients? Clients are leading hedge fund, private equity funds and long only funds. The majority of the funds are investing in South Africa and the rest of Africa. We do have a growing client base of funds domiciled in Malta, BVI and Cayman. What makes you unique? We are unique in that we use South Africa (Cape Town) as a hub for outsourcing some of the fund accounting work. This means that IDS covers Europe in terms of time zones. The staff are English speaking and are well qualified. International funds enjoy visiting Cape Town as it is a great destination to generally visit. Staff quality and continuity is excellent. The company is management owned. IDS is happy to work with start-up funds. We believe that we should partner with the stars of tomorrow and give them the support required even if they are still small. What’s your biggest challenge facing you at present? Our biggest challenge at present is in South Africa in converting our clients fund structures to regulated structures. South African hedge funds in the past were not regulated but are now required to conform to new regulations by the end of September. This is a headache for IDS as fund managers are reliant on IDS to provide all types of services and the conversion and meeting deadlines requires cooperation from the fund manager. It is a great deal of extra work over and above the day to day administration. What’s the aim for your business? To continue to maintain growth at a sustainable pace without slipping standards. We started in 2002 with the first hedge client of $2m. IDS now has $10bn under administration. IDS sees itself as an invisible partner helping the fund managers achieve their goals. What’s your company’s biggest challenge? Maintaining excellent service and dealing with changing regulations in multiple jurisdictions. Also to still be affordable for the emerging and start up funds. What business/business person do you most admire and why? I still admire CITCO that grew as a privately owned company into a world leader in the hedge fund space.

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60 Secondâ&#x20AC;&#x2122;s With...

CONTACT DETAILS Name: Ian Hamilton Company: IDS Fund Services Email: Ian.Hamilton@idsfundservices.com Web Address: www.idsfundservices.com Address: Box 24, Cape Town. South Africa

Wealth & Finance International | July 2015

Financial Focus

Why Financial Institutions Need the Human Touch Five values every financial institution needs to have in the Human Era. Personal relationships with banks have changed. Nationwide puts ‘people before money’, Santander is ‘Simple, personal, fair’ and RBS is ‘supporting you through life’s important journeys’ – financial institutions are adopting a human touch, and not before time.

the institutional behaviour of financial institutions. There was certainly enough anger and frustration. Our research with UK banking customers, back in 2009, found predictably strong criticism of the banks, and appetite for some quite different banking services – and yet a strong preference to receive these services from their current bank, not an alternative provider. In that moment of crisis, despite everything that had happened – or more accurately, because of everything that happened – customers wanted the security of a big institution.

Hidden fees, locked-in contracts, and unfair executive compensation are now made highly visible in consumer-controlled media, creating perhaps irreparable fissures between people and institutions. Institutional companies, often staying quiet or hiding behind policy, fine print, and a “Please hold, your call is important to us” attitude, find themselves a growing target for a changing culture expecting better. Every financial institution should look at its fitness to compete in the Human Era.

This reaction of traumatised consumers has been invaluable to the banks, but may also have given them a false sense of security. Because the threat is not a traumatic exit, but a more gradual shift in loyalty as the behaviours of the Human Era play out, in financial services as in other institutionally dominated sectors.

Living in the Human Era A fundamental shift is taking place in business, which has profound implications for brands and organisations. At the core of this shift is the realisation that, to create a meaningful connection and real trust, brands need to start behaving more like people and less like faceless institutions. Customers are demanding that companies connect in new ways, more transparent, empathetic, open and authentic.

Five values every financial institution needs So what does it take to adapt and thrive in the Human Era? Because the shift is fundamental, the transition must be deep and cultural. Adaptation is not easy. But as a start, here are five values we believe every financial institution should have in the Human Era: • Really care about people as people As a frustrated telecom customer tweeted, only half in jest: “Couldn’t get Wi-Fi so I ate a whole pack of Jammy Dodgers out of frustration and now I hate myself.” Would a customer service agent helping with her connectivity have focused only on the technical problem to solve, or have recognised the degree of frustration – apparently out of proportion, but not unusual – that it led to? A good hotelier cares not just about the quality of the service they provide, but whether the guest is having an enjoyable and productive stay. What should the equivalent be in financial services? It goes far beyond Knowing Your Customer. And it is not about replacing an anonymous number with a computer-prompted name. It’s about what you really care about.

This fall in trust in institutions is not confined to the commercial world. Governments, Churches and the media have experienced the same fate. Complex and rigid institutions, design to function with machine-like efficiency but impenetrable to outside opinion or influence, have not kept pace with the expectations of today’s consumers. As human beings, we have a fundamental need for connection with others. Meaningful human connections can’t be formed in one direction — they require the other party to reciprocate, to level with us. When they do, the connections become a foundation for something we intuitively understand and value highly: trust. At the core of today’s Human Era is the realisation that the expectation of meaningful connection — the search for trust — extends to organisations and brands as well as people. Value creation has become not only more intimate and personalised, but more cooperative and inclusive.

•

Have a purpose and guiding principles that are infused through the customer experience Human behaviours can’t be scripted. Scripts are a mechanism for delivering institutional behaviours through human mouths. To act in a Human Era way, individuals must make their own judgments, in real time. That’s what we mean by companies empowering their individual people to be the brand.

Brands that thrive in this era talk differently. Not like institutions have always talked – to declare; to preach; to sell. But like humans talk with each other – to learn and to teach; to ask a question; to apologise; to share joy. Brands that thrive in this era also act differently. They are empathetic with customers, and care intensely about the little things. They aren’t boring; they are open, real and even flawed. And they can only do that by empowering their individual people to be the brand.

But how should we expect individuals to make those judgments? Human is good, but not if it means that a customer’s experience could be anything, depending on who answers the phone. Employees don’t need a script, but they do need a context: a guiding purpose and principles that they can draw on in any given situation, so their judgment is about

The financial crisis might have been the trigger for people to reject

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interpreting the situation, not about setting policy. Today when we articulate a company’s brand positioning, we think not just about how it will drive external communication, but how it will guide people’s intuitive behaviours within the company.

that will have the big impact – an 80-20 approach. But that’s top-down thinking, from the command and control of the institutional era. And it won’t take you into the Human Era, because all the niggly things your customers encounter will undermine your efforts. It’s the attention to detail in the daily interactions that will reveal the truth about whether you are really a Human Era company.

The Icelandic volcano that stranded an unprecedented number of people around Europe for several days provided a test for many companies. Few had scripts that anticipated the situation, so everyone had to improvise, guided not by situation-specific instructions but by the broader principles in their company. M&S Insurance (in partnership with HSBC) had the principles to decide quickly that it would honour insurance claims from stranded travellers, even though the terms of the contracts suggested they were not covered. In another insurer, a customer service agent needed to turn to his supervisor for advice after talking to a stranded traveller. He needed to know how he should react to this ‘distress purchase’ occasion: should the vulnerable customer on the phone be supported or exploited?

Being sensitive to the little things doesn’t require an unmanageably complex programme. Only if you try to achieve it top down. It requires what we’ve already talked about: empowering individual people to be the brand, directed by your guiding purpose and principles. All we are adding with this fourth value is to encourage, and support, your people in attending to what might seem small details, when these are the clues that customers look for to judge the relationship they have with you. • Align these values to your company’s profit model The fifth value is an enabler of all the others. You can set out on the four points above with the best intentions. But if this is all seen to be something extra – an enlightened view of how business should be, driven by nice but soft ideas like caring and purpose – then it won’t survive the first underperforming quarter. Short-term financial pressures are real. If all the efforts above are seen as discretionary, then it will prove impossible to deliver them with enough consistency, and from the first cut-back their failure will be a self-fulfilling prophecy.

• Convey humility with confidence We said earlier that Human Era brands need to level with their customers. They are open, and listen to customers a lot, to get feedback and ideas. They are real and acknowledge their flaws. All this requires humility. But not feebleness. Customers don’t want to make all the effort. They want to be heard, but they still want to be led, and to be stimulated with ideas they hadn’t thought of. Deep, open, involvement with customers is a route to leadership, not a substitute for it. The best Human Era brands involve consumers, respond to them, put them in control – but within a context the brand has conceived and innovated. Think how you order coffee at Starbucks. ‘Your coffee, your way’, with a zillion options, many of which were conceived or influenced by customers – but few of us ordered coffee that way until Starbucks showed us how.

In the most successful brands, these activities are not cut back when money is tight, because management understands that they are fundamental to the profit model. In a tight month, courier companies don’t compromise on on-time delivery, and hotels don’t skimp on changing the sheets. They could, and both would produce better numbers for the month; but they know it would be short sighted, and their metrics (operational performance metrics and customer satisfaction surveys) would expose such short-sighted actions. Perhaps the toughest challenge in the Human Era is not just to make the efforts above as individual initiatives, but to bake them into the management culture and hard metrics, so they are embedded in how the company does business.

• Be sensitive to the little things When making a big transition, it’s tempting to focus on a few big things

Simon Glynn is a Senior Partner and Head of EMEA at Lippincott

Wealth & Finance International | July 2015

Financial Focus

Gender Pay Disparity: Equality in the Workplace Last week David Cameron made a pledge to ‘end the gender pay gap in a generation’ as consultation on the government’s proposals on gender pay reporting has now been launched. We hear from Richard Nicolle, Partner at Stewarts Law to find out more.

Under section 78 of the Equality Act 2010 (the Act) the government will require companies with at least 250 employees to publish details of salary differences between the average pay of female and male employees. Whilst this transparency measure could be a key factor in promoting business, political and social change, numerous factors are behind the disparity in gender pay and progress will inevitably also depend on wider changes. Furthermore, it is important to be wary of current data deficiencies and gender pay disinformation potentially being used to form false assumptions. In light of this, the government will have to ensure that precise details of these new measures are carefully considered during the current consultation period. Although gender pay equality has improved since the Equal Pay Act 1970 and Equality Act 2010, the gender pay gap clearly remains a problem in the UK. Recent Eurostat statistics have found that the UK has the sixth-largest pay gap between men and women in the European Union. Whether the publishing of information will have the desired effect of closing the pay gap will depend on what is actually being published and the data being used to form assumptions. Distorted results could arise from simply comparing the overall pay of men and women as opposed to their pay per job descriptions. For example, law firms may show pay disparity where there is a large group of secretaries and administrative staff who are virtually exclusively female; however, gender pay disparity may not exist if the category was lawyers up to say 10 years PQE. There will need to be a focus on job descriptions and companies will have to publish pay at different job levels before any ground can be made in closing the gender pay gap. The government’s move to publish details of salary differences will be important, however, in that it will force businesses into addressing the situation and finding solutions. In addition, such data and information could serve as a useful negotiating and pressure point for women discussing pay with their employers. It is true that the mean average of gender pay is largely distorted by the fact that generally those groups with the highest incomes are male. The City is still predominantly a male environment, albeit that it is likely to become a more equal playing field in years to come due to the introduction of targets for the number of women on the Boards of FTSE 100 companies. Other professions with a disparate impact on average pay

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include the 2000 plus premier league footballers, hedge-fund managers and professions with a greater risk to personal safety such as mining. Needless to say, such industries and sectors which offer higher incomes tend to attract men, something largely attributable to our social and cultural structures. On the contrary, one could argue that the Conservative government’s implementation of the National Minimum Wage next April could prove indirectly discriminatory to male employees since it is expected to primarily benefit women, who tend to occupy the most lower-paid jobs. Therefore, gender pay disparity discussions should not focus solely on the difference in average salaries of men and women.

the gender pay-gap. Our business culture is intrinsically linked and has a massive effect on employees’ pay; businesses should ensure that the working environment and conditions are more tailored towards women, for instance more flexible working arrangements and greater support to when returning from maternity leave. It remains to be seen whether Shared Parental Leave which came into force for children due on or after 5 April 2015 will be effective in banishing assumptions of women being responsible for childcare. A change in culture and social attitudes should be at the forefront of changes to closer the gender pay gap. However, it should be acknowledged that the disproportionate number of women in part-time roles and taking time off for childcare may be mainly a product of career choice rather than employers discriminating, notwithstanding the fact that this may be steered by family responsibilities.

Another issue which should be considered in the consultancy period regarding the overall effectiveness of the transparency measures are the proposed penalties for non-compliance. Section 78 of the Equality Act 2010 provides for fines of up to £5,000 for non-compliance. However, this could prove an inadequate sum to force companies to disclose sensitive financial data when the risk of any negative publicity from pay reports, and possibly equal pay claims, would likely be more damaging. In fact, the question could be raised as to why the current transparency regulation focuses on large companies when smaller companies could also be responsible for gender pay disparity.

Although steps are already being taken to resolve the issue of men and women being paid different amounts for doing the same job, the issue of difference between pay for men and women doing different jobs remains more problematic. David Cameron’s transparency regulations acknowledge that closing the gender pay gap needs to be largely driven by businesses committed to equality. However, it seems that a sole focus on differences on average pay and reliance on distorted data could hinder development in this area. Instead, businesses and the government alike will need to undertake a more comprehensive and accurate breakdown and comparison of data by job role as well as considering the wider and more cultural factors which contribute to gender pay disparity. With the consultation period running until the 6 September 2015, it remains to be seen whether these issues will be addressed…

Of course, another point of consideration is the disproportionate number of women in part-time roles. Inherent in our social structure is the fact that many women seek jobs to fit around their family responsibilities, which means vast proportions of part-time positions being taken by female workers. Moreover, many women stop work for periods of time when they have children which can delay career progression for women and thus their long-term earning potential. Of course, this contributes to

Wealth & Finance International | July 2015

Financial Focus

The Economic Benefits of a Managed Data Service for Asset Managers As the investment environment has changed, the drivers of data management have evolved accordingly.

In the pre-2008 environment, data management within asset managment firms comprised centralized operational teams, focusing on:

and recognizes that all benefits have a positive impact on the business even though qualitative benefits may be hard to enumerate in the short term. Quantitative benefits will be discussed in more detail in a subsequent paper.

• Data timeliness for key business processes • Data quality and accuracy • Cost management – both visible and hidden costs.

Flexibility is also central to the TEI framework. Forrester defines flexibility as an investment in additional capacity or capability that can be turned into a business benefit for some future additional investment. In effect this provides an organization with the right or ability to engage in future initiatives but not the obligation to do so.

While these drivers remain relevant today, feedback from the RIMES outreach program reveals new strategic drivers that increase the data management burden.

For example, a managed service equips a firm to implement new projects, such as launch new funds or support a more complex investment strategy with little or no incremental capital expenditure. A revenue expenditure model means that costs can be aligned with business success.

All firms face additional data management challenges that include: • Improving transparency and control to support data governance and evidence regulatory compliance • Enabling and facilitating strategic business change • Shortening time to market by increasing business agility and responsiveness.

One organization noted that as it rolled out new projects in the future, it would continue to see the faster time-to-market benefits and project cost savings from RIMES. Organizations interviewed were also confident in the ability of RIMES to partner with them on future product offerings and additional services.

As data management becomes more strategic, it has moved up the corporate agenda and is receiving close attention at executive level. But, firms need to understand the potential economic benefits of any course of action before committing to a significant investment.

Flexibility may also generate additional benefits, for example facilitating business change, winning new mandates, and simplifying regulatory compliance.

RIMES clients report both quantifiable and qualitative benefits. These include:

The exact value of flexibility will vary according to each organization but in most cases RIMES clients report it as significant.

Quantifiable • Improved productivity and operational efficiency • IT resource savings with improved data feed and delivery maintenance • Improved ability to scale without additional headcount • Faster time to market • Reduction in third-party legacy vendor fees.

The Forrester TEI framework also accommodates the inclusion of risk metrics that include ‘implementation risk’ and ‘impact risk.’ The greater the uncertainty the wider the potential range of outcomes for cost and benefit estimates so the model remains firmly rooted in practical reality. Next steps The Forrester TEI framework has been designed to calculate the potential benefits of managed data services for any asset management firm. RIMES is encouraged by its power and flexibility and would like to help you measure the potential benefits for your own organization.

Qualitative • Improved data quality and accuracy • Increased agility and responsiveness • Better risk management and risk mitigation • Access to expertise.

The RIMES Managed Data Service (RIMES MDS) RIMES MDS provides asset managers with the means to address their key buy-side data management challenges. It can improve service levels, ensure quality data for disparate business functions consuming data, manage the TCO (Total Cost of Ownership) of the full data management workflow and provide the business intelligence required to implement effective data governance processes and procedures. Read more at www.rimes.com/forrester and

A recent study, commissioned by RIMES and conducted by Forrester confirms these benefits but goes further to establish the potential return on investment (ROI) that an individual firm could achieve on a managed data service. The study adopted Forrester’s proven methodology to assess the Total Economic Impact tm (TEI) of a managed service. It offers a robust framework

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www.rimes.com/what-we-do. Email info@rimes.com to receive a copy of the Forrester TEI study.

The ToTal economic impacT™ of RimeS managed daTa SeRviceS RIMES Technologies commissioned Forrester Consulting to conduct a Total Economic ImpactTM (TEI) study to examine the potential return on investment (ROI) enterprises may realize by deploying RIMES Managed Data Services (MDS). The study and associated calculator provides readers with a framework to evaluate the potential financial impact of RIMES Managed Data Services on their organizations. RIMES Technologies is a global provider of managed data services, using cloud-based technology to deliver highly customized financial data. RIMES’ MDS offering includes the Benchmark Data Service (RIMES BDS ®), Reference Data Service, and Data Governance Service. To better understand the associated benefits, costs and risks, Forrester interviewed several customers, each with multiple years of experience using RIMES Managed Data Services. Prior to implementing RIMES Managed Data Services, customers were faced with data quality and timeliness issues. Their performance and data operations teams were spending a significant amount of time on data validation and remediation, in addition to other ongoing data operations overheads. With RIMES Managed Data Services, customers were able to improve service levels; improve data quality with customized data feeds from RIMES; increase operational efficiency, leading to better cost management; achieve faster timeto-market for delivering benchmark data to key processes; and improve their responsiveness and ability to scale. As one VP for Market Data Services remarked, “RIMES gives us a lot more flexibility with comfort that we can deliver and freedom from operational concerns, so we can really focus on what the core values of the company are, which are managing money and getting people their data.”

RIMES Managed Data Services can help improve data quality, accelerate data timeliness, increase ability to scale, save costs, and improve productivity. The costs and benefits over a three-year period for the composite organization, based on customer interviews, are:

$1.2 Million

Investment costs

$4.8 Million

To receive a copy of the full study, or to calculate the TEI cost for your organization, please contact info@rimes.com

RIMES Managed Data Services brings operational efficiency and improved data quality Forrester interviews with existing customers and subsequent financial analysis found that a composite organization based on these interviewed organizations experienced the risk-adjusted ROI benefits and costs shown in Figure 1 below. The composite organization analysis points to benefits of $4.8m over three years versus implementation costs of $1.2m adding up to a net present value (NPV) $3.6m. With RIMES Managed Data Services, performance analysts were able to improve their productivity by as much as 20%, and the composite organization experienced additional savings in terms of productivity gains, cost avoidance of additional headcount, resource savings, data delivery cost reductions, and savings on legacy vendor services fees.

Figure 1

Source: Forrester Research, Inc.

Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 309%

Total cost savings and benefits

NPV: $3.6m Payback: 2.9 months Improved productivity: ▲ as much as 20%

winner

Copperstone Capital is an investment management firm founded in 2009 with offices in Moscow, Russia and London, United Kingdom. We manage wealth for high net worth individuals and institutions through various hedge fund strategies. 16 Sadovnicheskaya Street, Moscow, 115035, Russia T +7 495 988 0010 F +7 495 951 1410 www.copperstonecapital.com

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Wealth & Finance International | July 2015

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Taxing Times

The Rise of Direct Lending in Europe The European private debt market is currently facing an opportunity for enormous growth. Brevet Capital, a U.S. based direct lender, explains how the European private debt market arrived at this position, and what it means going forwards.

institutions to establish a greater market presence and develop stronger overall management capabilities. In fact, many firms have already recognized and pursued this opportunity. The amount of global private debt funds aimed at Europe has increased by 25% within the last 2 months,3 and the number of private debt funds has increased by 66%4. Many U.S. based firms have increased fund raising for global private debt funds,5 and $58.7 billion has been raised globally in the past year6. Brevet Capital believes that the current European private debt market is positioned for the same growth that the U.S. private debt market has experienced and that private debt will be a part of both credit landscapes for the foreseeable future.

The European private debt market, which was underdeveloped relative to the U.S. until 2013, is encountering new opportunities to expand in the wake of recent regulations. The private debt market, comprised mainly of distressed debt, mezzanine financing, and direct lending by alternative lenders, is maturing rapidly with the help of non-core assets being shed in growing numbers by banks. As the availability of such assets increases, the private debt market will have the opportunity to establish itself as a lasting asset class and fill the void left by contracting banks due to increased regulation. Brevet Capital, a U.S. based direct lender, foresees market opportunities arising overseas that parallel the post-regulation opportunities many alternative lenders took advantage of within the United States. The European private debt asset class has mainly been fueled by the withdrawal of banks after the global financial crisis. In the last six years, banks have reduced their lending to European businesses by 12%, leaving small and midsized enterprises particularly strained to find new methods of financing1. The need for new methods of financing has been demonstrated by the rising popularity of methods such as crowdfunding, private placements, and loans from non-bank financial institutions. These methods were even encouraged by the government in countries such as Italy and Spain through actions including creating new bond markets and permitting public agencies to lend directly to small and midsized enterprises.

1. “Financing Europe’s Small Firms: Treasure Hunt.” The Economist. The Economist Newspaper, 16 May 2012. Web. 20 July 2015. 2. “Moody’s: European Banks’ Asset Sales to Boost Private Debt Funds; Won’t Relieve Credit Constraints.” Moodys.com. Moody’s Corporation, 09 July 2015. Web. 20 July 2015. 3. Cotterill, Joseph. “Europe’s Private Debt Funds Enter Public Eye.” The Financial Times. The Financial Times Limited, 2 June 2015. Web. 20 July 2015. 4. “Moody’s: European Banks’ Asset Sales to Boost Private Debt Funds; Won’t Relieve Credit Constraints.” Moodys.com. Moody’s Corporation, 09 July 2015. Web. 20 July 2015.

The most recent catalyst for growth in the private debt market has been the Asset Quality Review (AQR) conducted by the European Central, which has created new investment opportunities, particularly in non-core assets. Until 2013, few banks actually divested non-core assets – which include non-performing loans – but rather attempted to reduce leverage ratios by increasing capital. The AQR resulted in massive sales of non-core assets by banks at deep discounts after many more loans were classified as non-core and non-performing. Sales of non-core assets increased from €46 billion in 2012 up to €91 billion in 2014,2 and this new supply from banks was met with strong demand by private debt investors.

5. JacobiU.S., Arleen. “Private Debt Market Ready for Takeoff.” Pensions & Investments. Crain Communications Inc., 20 Apr. 2015. Web. 20 July 2015. 6. Fuller, Craig. “Private Debt in 2014: A Year in Review - January 2015.” Preqin. N.p., 22 Jan. 2015. Web. 20 July 2015.

As the sale of non-core loans by banks gives private debt investors the means by which to grow, it will also provide an opportunity for such

Wealth & Finance International | July 2015

Banking Zone

Don’t Lose Clients Overboard When Onboarding We hear from John Lunn, Partner at transformation consultancy Moorhouse about recent changes in regulation and the banking sector.

The banking sector has certainly been no stranger to change since the economic upheaval of 2007 onwards. And there is little sign that there will be much respite in the future, with regulatory changes and attention from various regulators continuing, technology impacting fundamentally the ways in which the sector operates, and competition from new players taking the form of both challenger banks such as Metro and technology companies like Apple.

1. Decentralised: this is when information is function or product-specific – it’s held in different silos in the business. It’s hard to reconcile and requires manipulation to meet regulatory requirements, and customers can have multiple touch-points based on the products they use with the bank, resulting in a fragmented experience 2. Centralised utility: this involves integrated ways of working and automation to efficiently handle the demands of new regulation and speed up client on boarding, margining and settlement through straight through processing. This structure has common workflow platforms and reference data

As the landscape becomes more competitive, banks must fight ever harder to attract – and keep – customers. Influenced by the way they are treated by other providers, such as supermarkets and mobile phone companies, customer expectations are changing dramatically. We are no longer willing to wait days for responses to questions or complaints; we expect to provide information once and not have to repeat it every time we interact with a business and we want to access everything on the go - at a time convenient to us.

3. Customer relationship model: this provides a single view of the customer through effective use of data (economic architecture) to determine the cost to serve each customer and the profitability of products. This is a fully integrated model of industry utilities and business rules

These changes in customer expectations can be challenging for banks to respond to. But in our experience with a number of investment banks, putting the customer at the heart of operations and services does not need to come at the expense of increased revenues and a more cost-efficient business. In fact, done right, it can actually help banks grow.

Most banks are currently in the second category, or are working towards moving into this category, but it’s a difficult process. Banks are facing challenges such as legacy IT systems, poorly defined processes and low availability of the people in the market with the right skills. There is no silver bullet as there’s not a one-size-fits-all approach; each business will have different needs and priorities.

Traditionally, back office functions such as client on boarding (COB) were very much seen as a backwater by banks. Non-revenue generating, operational and not that inspiring or important; the term ‘back office’ really shows you how they were perceived. But times have changed and there is a growing recognition of the value to the customer that these services provide and a corresponding move up the value chain.

While the move of COB up the value chain does not itself break down the barriers between front office departments, it does provide the basis for superior customer service, as it allows banks to ask for information only once and to process requests in a timely manner. It allows improved structuring of products and more choice, which can help move customers to products that carry higher margins based on cost to serve. And it provides the ability to better tailor offers to clients as there is an all-encompassing view of the client, enabling easier identification of the types of products and services that they may value.

The ‘know your customer’ (KYC) and anti-money laundering (AML) legislation have also increased the importance of COB. The onus is on the banks to establish – and be able to prove – that nothing illegal is occurring. If these kinds of checks take too long before a customer is taken on, it can negatively impact the customer experience. Equally, if gathering the information to respond to requests from regulators is an arduous and complicated process, it takes resources away from other parts of COB where the bank could be providing more value.

For those looking to improve their COB processes, it is important to start with the end goal in mind and then under that put in place the steps needed to achieve it. Ideally a one-page strategy plan would be devised. This would set out the vision, the desired outcomes for each of the strategic business units, the core processes and the changes required to deliver the new way of working. It is a valuable tool to communicate the end goal of the transformation and the activities needed to deliver it.

COB is often an early and crucial interaction a customer has with a bank and this can set the tone for the entire relationship. We have seen an evolution in the way client on boarding functions are moving up the value chain:

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Such changes are large and complex projects, and an organisation implementing such changes needs to have a clearly defined IT strategy linked to the organisational strategy. They need to know what it means for the technology in the business as well as the overall organisation. As it is a lot to do, it needs to be structured in a way that aligns with any regulations and that also allows benefits to be realised during the project, not just at completion.

While banks are being pulled in many different directions, a laser-like focus on putting the customer at the heart of their services can provide a hook for the development of a framework that will enable the organisation to grow and prosper. This is not a simple job and requires many parts of the business to come together. But by agreeing on desired outcomes and then putting the processes in place to achieve these, while also linking the IT and organisational strategy, banks will be able to start generating benefits for the organisation and their customers from the very early stages of the process.

As part of planning how to achieve the desired transformation, a review of the businessâ&#x20AC;&#x2122; operating model should be conducted. This would encompass examining the following aspects through the lens of the industry themes: scope and vision; organisational structure; a single view of the customer; return on investment; the impact of the regulatory environment; and the client experience. In this way, priorities can be identified and a process established that drives value for the business from a very early point in the transformation.

Wealth & Finance International | July 2015

Banking Zone

New Inheritance Rules for EU Assets Those with holiday homes in the EU may currently be enjoying their property and some more reliable Summer weather, but if they want to ensure that their spouse and family can continue to enjoy it after their death, they will need to take heed of the European Succession Regulation (650/2012), colloquially known as “Brussels IV”, which will come into effect on 17 August 2015. Brussels IV will mark a revolution in EU Succession Law affecting all those with holiday homes and other assets in EU member states outside the UK, Ireland and Denmark, in some cases changing who will inherit them on death.

might not be favourable. There are no forced heirship provisions under the domestic law of England and Wales, which means that it may be advantageous for English and Welsh nationals to make an election for the succession law of England and Wales to apply.

We all know that you should have a Will setting out who you want to inherit your assets; however, at present with EU assets, your wishes may not necessarily be upheld. This is because many EU states have “forced heirship” rules dictating how much of the estate must be left to children, spouse or other family members. If your Will does not respect these rules it is effectively disregarded. Determining which state’s succession law applies is not always straightforward. Sometimes, particularly with individuals who have assets in one state and are domiciled or resident in another, more than one state claims jurisdiction and there is a clash of laws. Generally, UK citizens with assets in EU member states are advised to take advice in the states concerned and make a separate Will to govern their assets in each state.

Brussels IV should also make it less important to have separate Wills in the EU states where assets are located. In many cases, a single Will should suffice for all EU assets which should simplify individuals’ estate planning and be more cost effective. By way of example, if you are a UK national, living in the UK with a holiday home in France, Brussels IV will affect you. You may already have a separate French Will on the basis that, pre-Brussels IV, French succession law will apply to the property. However, under Brussels IV, this will change and the default position will be that UK law will apply provided you are resident in the UK at death. This means that you can leave the property to whomever you want, rather than having to comply with France’s forced heirship rules. Regardless, it may be advisable to include a choice of law clause in your Will for UK succession law to apply. This is because there is presently uncertainty as to whether UK citizens can rely on the default position in respect of land or buildings. You should only need one Will dealing with both your UK and French assets.

However, Brussels IV will change all of this. Individuals will be able to determine which succession law applies to their EU assets with much greater certainty as Brussels IV specifies a default position, which is that the applicable succession law will be that of the country in which an individual is habitually resident when he dies. And, in a significant move, individuals are permitted to choose the succession law of their nationality if they do not wish to rely on this default position. This is the first time, across the EU, that UK individuals have been given this amount of control over inheritance.

The UK has not opted in to Brussels IV, which means that those who only have assets in the UK and no EU connections are unaffected. Otherwise, anyone with assets in the EU outside of the UK (and excluding Ireland and Denmark) should take advice on how Brussels IV will affect them as they may benefit from changing their Will to choose the law of their nationality to govern the succession to their EU assets.

An election for the succession law of your nationality can be made by including a choice of law clause in your Will. The same choice of law can also be implied in certain situations and will apply automatically. Affected individuals should find out about this. Brussels IV does not alter the tax laws of EU states, so the tax consequences on death of a particular succession law applying should be checked before choosing it.

Cross-border succession law is probably not top of the list of those enjoying the sun in Europe at present, but it presents an excellent opportunity to protect the next generation’s inheritance giving peace of mind in the less sunny months to come.

The ability to choose the succession law of your nationality will allow affected individuals to take control of how they want EU assets to pass on death, allowing them to avoid the succession laws of states which

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Camilla Wallace, Partner at Wedlake Bell LLP

Wealth & Finance International | July 2015

Millennials Re-Defining the Workplace Summer is the time when A Level results and degree results are issued, and typically students are disparaged for getting bad grades, or not being ready for the workplace. Millennials have in the past been criticised for being lazy employees, lacking in communication skills, or generally being too demanding as employees, and not being work savvy. We hear from Jonathan Sharp, Sales and Marketing Director at Britannic Technologies to find out more. Whether we like it or not Millennials are coming into the workforce in droves and they are here to stay. It is also worth remembering that they are not only the new generation of employees - they are also the new generation of customers. They are re-defining the workplace and the market; if businesses donâ&#x20AC;&#x2122;t become aware of what changes are taking place then they will ultimately lose out in terms of talented recruits and competitive market share.

It was therefore no surprise to discover that 41% of graduates (Source 1) surveyed stated that they prefer to communicate electronically rather than face to face, or over the phone. Millennials are expecting the technologies that they have grown up with to be present in the workplace, and to help them communicate better and do their jobs more effectively. A total of 59% (Source 1) of graduates mentioned that state of the art technology is important to them when considering a job. And, 78% (Source 1) said that access to the technology they like to use makes them more effective at work.

Expectations in the Workplace Jonathan Sharp, Sales and Marketing Director, Britannic Technologies comments, â&#x20AC;&#x153;Millennials have grown up with technology and using social media; instant messaging, video and conference calls are all part of their DNA. These vehicles of communication are in-fact natural behaviour for them, and companies need to embrace these technologies.â&#x20AC;?

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Market Matters

Businesses are Lagging Behind Surveys have revealed that companies are not utilising the graduates’ skills in technology and many companies are not adapting their IT policies to incorporate these technologies. A recent IBM survey (2014) stated that only 4% (Source 2) said that their organisations had no issues in implementing new technology. The vast majority said that companies didn’t deploy them as they didn’t understand the benefits it had to offer, and there was a lack of vision from the top. More than two in five surveyed said they felt their use of technology was not clearly understood and felt held back by the out-dated and rigid work styles.

“We are currently working with a financial company who want to deploy Microsoft Lync to improve productivity, communications and customer service. We have rolled out the technology to a group of Millennial employees in the business who will ascertain the benefits of it, and then teach the rest of the employees how to use it in their individual job roles and across the business. This is very much a step in the right direction!” states Jonathan Sharp, Sales and Marketing Director, Britannic Technologies.

Tom Williams, Account Manager, Britannic Technologies joined the Britannic Graduate Programme last year.

Setting Guidelines Corporate guidelines should be set, particularly for the use of social media – Millennials will be the best advocates of your brand – if they believe in you, so therefore it is important that guidelines are set so they know what they can and can’t talk about.

Millenials will also be eager to have access to senior management, and in turn will of course appreciate the time spent with them to learn all they can.

“I joined the programme last year as an Account Manager for Britannic and as it is in the ICT industry I was excited to be in such a fast moving environment. However, I found it rather ironic that many customers I was talking to weren’t using video, instant messaging, and collaboration technologies, as they should be. This type of communication was part of my daily life and I was surprised that it hasn’t filtrated yet into a lot of businesses. A year down the line I have seen traction in the take up of these technologies, and feel privileged that I can advise and help companies discover the benefits that technology can bring.”

Also, expectations should also be in place – for example with the use of instant messaging. Millennials will expect an instant response but the older generations may not want to respond instantly and may take their time over it. Striking a Balance Interestingly 95% of Millenials surveyed (source 1) stated that ‘work/life balance’ was important to them. And 19% saw it as a benefit. Flexible working should not just be restricted to the younger generation, and companies should implement tools to enable employees to work from anywhere if it motivates them and increases productivity.

A Brave New World Companies need to take the time to understand this generation – how to attract and retain them. They need to take notice of the requests from Millennials, not just because they are demanding the ‘latest and greatest toys’, but also because the technology will improve: productivity, communications, customer service and ultimately your bottom line.

Customer Experience Millennials are the customers of today and tomorrow. This generation have been use to seamless shopping experiences online and instant gratification. If a business doesn’t live up to their immediate expectations, then they will take their custom elsewhere. Also, they will write negative reports on social media about their experience, which will damage your reputation and brand.

Of course implementing new technologies such as: Microsoft Skype for Business (formerly known as Lync), using video and audio conferencing, mobility solutions, and social media is no simple task. So, you need to ensure that you work with a trusted communications solution provider who can discover what you need, advise you on a technology roadmap, implement it, and crucially plan and assist you with the change management that is involved.

Businesses need to change their technology roadmap not just for employees but to ensure that they are retaining and attracting customers. They need to be prepared to offer customers multi-channel communication from: text, email, phone calls and social media. Customers need to have the choice on how they communicate with you, and they expect a slick experience where the communication method is straightforward, and intuitive to create the ultimate seamless experience.

Intergeneration tensions Another factor that businesses need to be aware of is how to manage the different generations that are in the workplace; they have never been so different. There may be some tensions in the workplace between the generations as the younger generation will want to use the technology available, and the older generations may want to carry on doing things as they have always done. Departments need to work together, such as HR, IT and managers to ensure that employees are learning and progressing but at the same time are comfortable.

Working Together to achieve results In today’s work environment the answer is ‘working together’ to achieve the businesses and individuals results and goals. It is crucial that departments no longer work in silos and start collaborating together – to maximise each other’s skills, and learn from one another.

It is not just about technology – Baby Boomers are more comfortable with making decisions alone while Generation X and Millennials prefer working as a group.

Companies need to change to accommodate Millennials as employees and the new generation of customers. If they choose to ignore the changes they will be left behind, and if they choose to embrace them and the technology available, the employees and business will prosper. Millennials will take you on the start of the journey to make changes for the better, and their input and the relevant technology will increase productivity, communications and customer service. So - what are you waiting for?

Businesses need to create pilot groups and mentoring to assist with these differences. Many businesses are now using ‘reverse mentoring’ where companies are teaming up the younger employees with the older ones, so they can learn how to utilise technologies such as: Microsoft Lync - video conferencing, instant messaging and social media.

Wealth & Finance International | July 2015

Market Matters

Business Is Child’s Play Primary children across the UK are finding out how they can run their own business with support from business owners. Stepping into Business, a social enterprise, is working with schools and companies across the UK to inspire children to make their own ideas into small businesses – and is seeing big results.

Stepping into Business provides programmes that support teachers and businesses to work together with primary and secondary schools to grow entrepreneurial skills in young people. One school who has already benefited from the service is All Saints’ CE Primary School, Wandsworth.

Mr Marinus Viljoen, the Deputy Headteacher was blown away by the children’s creativity throughout the project: “The results have exceeded our wildest expectations. The children have proverbially knocked it for a six. During market day, all the teams sold their products in under an hour, making over £400 in profit, which is being donated to a variety of charities. Their Year 6 teacher Mr Stephen Russell added ‘’The children’s enthusiasm and hard work was impressive and the skills they learnt so young will be invaluable.”

The Year 6 students from All Saints’ worked with inspirational speakers and business angels from London-based organisations, who advised the children on different areas of running a business, including teamwork, innovation, marketing, finance, presentation skills and production.

Stepping into Business has already worked with schools across the UK and are seeing future entrepreneurs and business leaders develop in front of their eyes. Director of Stepping into Business, Dinah Turner, explains the importance of the work they are doing: “Enterprise, business and life skills are so important, the programmes we have developed really put the child in control of their own experience and they are free to try, fail and learn from mistakes. For a small sponsorship investment businesses can support and nurture future generations of entrepreneurs in schools throughout the country.”

‘Enterprise taught me to work as a team and that finance is much harder and important than I first thought’ explained Josh, from the Creation 4 Kidz team, who made sleepover kits for boys and girls. Each child then took on their own role and area of responsibility in their company, and the group worked together to create a business plan promoting and selling the product they created. Max, who took on marketing for his team Smoothie-licious said, ’It made me realise the skill in everyone and combined we were better’. The groups then pitched their business ideas to the business angels asking for financial backing, this could have been daunting! ‘I have learnt to be more confident and be able to speak in front of people’ said Cameron, a member of the Shake team who made healthy fruit drinks. The teams were judged on their presentation skills, teamwork, pricing, marketing and branding. After getting positive feedback and the requested investment, the children set about producing, promoting and selling their products ready for market day. ‘It took a lot of team work and hard work’ said Maria, a year 6 pupil, ‘but each group made products and when it came to market day we all made lots of money which will go to charity.’ Sam Smith from finnCap, who sponsored the activity in All SaintsCE School, acted as a launch speaker for the event said, ‘‘As a business founder I know the importance of developing talent in the next generation. Life skills like resilience and self belief cannot be underestimated, we saw these grow in the children at the school through the Enterprise project. I have loved working with the pupils and teachers at All Saints, it’s been inspiring! All the business angels were amazed with the quality of the ideas and the confidence of the children’

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Sam Smith, CEO of Fincapp

Wealth & Finance International | July 2015

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Market Matters

Market Abuse – A Complex Problem For Compliance Teams Since its introduction, the Retail Distribution Review (RDR) has placed a heavier burden on the compliance and regulatory obligations of many retail firms, increasing the compliance costs. The consequences have included profit warnings, consolidation and exits by smaller IFA firms across the industry. This pattern has continued unabated. We hear from Neil Herbert, Director atHRComply (www.hrcomply.co.uk)

‘Compliance creep’ Nevertheless, ‘compliance creep’ eventually affects all sectors of the financial services industry. For example, in recent months there has been extensive press coverage of the FCA’s criticism of the funds industry, specifically at its failure to impose and manage adequate market abuse controls. This was the result of a recent FCA thematic review across a pretty broad sample group within the sector. The move reflects the FCA’s intention to apply its standards across the wholesale, investment banking and fund management sectors.

restraints being communicated to the front office? And what constitutes the limits of ‘acceptability’ for those who are being trained to spot or avoid market abuse? Senior Managers Regime The new Senior Managers Regime in particular will worry the big banks. The consequences for those on whose watch market abuse or scandals occur will become very dire indeed. The FCA assesses culture through factors such as how firms respond to, and deal with, regulatory issues; what customers are actually experiencing when they buy a product or service from front-line staff; how a firm designs products and the considerations around this; the manner in which decisions are made or escalated; the way in which claims or complaints are handled; the behaviour of that firm in certain markets; and the remuneration structures and how a firm’s board engages in those issues and satisfies itself that the firm is operating as the regulator expects.

Increasing sanctions In 2013/14 the FCA took action against 28 individuals, imposing over £3.6m in fines, 26 prohibitions, and obtaining five criminal convictions. The regulator held 16 Significant Influence Functions (SIFs) holders to account, imposing penalties and prohibitions. The ever increasing compliance burden and the need for vigilance, monitoring and control of market abuse has fuelled demand for Compliance staff – which in turn has driven salaries upwards in this once unfashionable area of financial services. Other outcomes are increased tracking and monitoring of previously designated low-risk staff and growing investment in technology to monitor electronic and voice messaging and communications.

An FCA speaker at a recent industry conference owned up to the fact that the FCA deliberately did not have a master definition of conduct risk and that conduct risk profiles would be unique to every firm – making a one-size-fits-all approach impossible. Instead she said that the FCA has made it clear that having the right ‘culture’ is an important component of conduct risk. No specific definition of the kind of culture required has been offered.

Many investment banks are retreating from proprietary trading, particularly in Europe. This has been driven by further regulatory clampdowns and political and public hostility, together with the increased risk of enforcement and fines.

Conclusion In a ‘good culture’, everyone has a responsibility for compliance. A focus on conduct, quality and suitability of advice, know your customer and general customer and market outcomes must then drive outputs in terms of behaviours.

Market abuse and a compliance culture The FCA continues to advocate the embedding of a compliance culture – not just in the Compliance department but also across the whole firm. Yet in the wholesale sector in particular, this is even less defined than in other areas. By its very nature, the primary risk is conduct risk and this almost entirely means market abuse of some kind.

The problem requires real-time monitoring of trades, but is this practical or even desirable? Throwing more Compliance staff at the issue certainly won’t make it go away. The effective deployment of automated training and competence (T&C) technology and process–based decisions will help free up the already overburdened Compliance team to work alongside HR and concentrate on the cultural change required to reduce market abuse. Furthermore, clear rules or benchmarks on how firms can ensure that they are meeting the expectations of the regulator will be necessary.

Market abuse is a cultural problem, requiring the HR and Compliance teams to work together. Types of conduct constituting market abuse are set out in section 118 of the Financial Services and Markets Act 2000 and in the Market Abuse Directive; yet how effectively are these

Wealth & Finance International | July 2015

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Taxing Times

Be a Man with a Plan Mike Deverell, investment manager at Equilibrium Asset Management, discusses the Greek crisis, lessons learnt and what it means for investors.

“We’ve been watching with baited breath over the past few weeks as the Greek crisis has unfolded. Investors have been left wondering what they should so about Eurozone assets and the future could hold.

“We also want to execute another volatility trade should markets drop to around 6,350, buying another index tracker. We had already decided to reduce property exposure and so we’re bringing forward our previous plan to ensure we have cash available to make both investments.

“The Greek crisis has been rumbling on for many months so the investment team at Equilibrium decided to not only prepare a plan for instability, but also to start implementing the plan.

What next? “If markets dip further still then we will review again and potentially convert more of the portfolio to cash just in case.

“In fact Greece has taught us not only do you need to have a plan, you need to have several so you are prepared for every eventuality.

“However, if markets don’t dip but instead recover then our existing volatility trade will likely be sold at around 6,900. It should be remembered that it is rare a calendar year goes by without a 10 per cent correction. Even 20 per cent falls are pretty common. Most of the time these represent long term buying opportunities. This can cause a few nerves in the short term but as always we will watch events carefully.”

The plan “Prior to the recent market dip we had set a trigger point at a FTSE 100 level of 6,700 to set up a new defined returns product. When this trigger was hit we got to work, managing to get a great product at a market level of 6,750, only slightly higher than the ideal level. However, given we were at 7,100 not so long ago and the product has an attractive potential return of 10% pa, we’re more than happy with the entry point. “We had originally set a trigger of 6,700 to purchase an equity tracker in our latest “volatility trade”. However, as events unfolded over the past couple of months we became more cautious and dropped our entry trigger to 6,600. “This was also hit and we bought a tracker for most clients at around 6,580. We are likely to sell this fund should markets recover to previous levels. The plan’s new plan “Of course not everything will always go according to plan. Unexpected events will happen and when our first actions were executed we had to draw up a new plan. Whilst we already had some draft actions in place we had to agree specifics and review the evolving situation. “Our conclusion was that in all likelihood the Greek situation should be relatively contained. There are of course potential issues and there is a risk of contagion in the event of a Greek default and banking collapse. We’re fairly cautious about Europe for this reason but there are still some very good reasons to buy equities, particularly those outside of the region. “As a result, the team decided to ensure more cash was available to purchase another defined returns plan should markets remain at an attractive level. However, we won’t use a Eurozone bank for this just in case!

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