For today’s discerning financial and investment professional
Where next for European markets? Februar y 2019
ISSUE 75
Special ETF Supplement inside this issue
ANALYSIS
REVIEWS
COMMENT
INSIGHT
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Ed's Welcome
CONTRIBUTORS
Brace, Brace
6
Editor's Rant - Beached Mike Wilson sidesteps Brexit to analyse the health of European markets
12
Brian Tora
Calculus Capital
an Associate with investment managers JM Finn & Co.
Sue Whitbread, talks to Richard Moore of Calculus Capital, about how the company is using its 20 years of experience to deliver effective EIS and VCT solutions.
16 Better Business Brett Davidson of FP Advance takes a practical look at some of things you can do to transform the way you approach your goals.
Richard Harvey a distinguished independent PR and media consultant.
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Everything Changes Tracey Underwood of PACE Solutions reflects on changes in job roles within financial planning.
22
Neil Martin has been covering the global financial markets for over 20 years.
Brian Tora Don’t upset the Apple cart: Brian Tora considers what the troubles facing Apple might mean for investors in the technology sector
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Michelle Hoskin
Brett Davidson
Time and task management – Michelle Hoskin gives practical tips on how you can boost your success in managing a growing workload
FP Advance
28 CISI Professional bodies in financial planning – the 2019 perspective: CISI
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30 Multi-Asset Investing We talk to Prudential's Paul Fidell about the big changes which have been made to their multi-asset fund range. Prudential is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority.
35 Triple Point 5 reasons why your clients should look beyond traditional ISA investments in 2019
Sue Whitbread Editor sue.whitbread ifamagazine.com
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Richard Harvey Badlands: Richard Harvey is thinking about some of the inequalities in society – including matters of retirement
Alex Sullivan Publishing Director alex.sullivan ifamagazine.com
Rachel Bray Head of Design rachel.bray cliftonmedialab.com
IFA Magazine is published by IFA Magazine Publications Ltd, Arcade Chambers, 8 Kings Road, Bristol BS8 4AB Tel: +44 (0) 1173 258328 © 2019. All rights reserved ‘IFA Magazine’ is a trademark of IFA Magazine Publications Limited. No part of this publication may be reproduced or stored in any printed or electronic retrieval system without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies. Wherever appropriate, independent research and where necessary legal advice should be sought before acting on any information contained in this publication. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. IFA Magazine is for professional advisers only. Full details and eligibility at: www.ifamagazine.com
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E D'S WE LCOM E
Februar y 2019
BRACE, BRACE
F
irstly, I’m starting with an apology. It might be almost February, but this is our first publication of the New Year, and the whole IFA Magazine team wish to extend a very warm welcome to 2019 to all our readers. And what a year it looks like being. The phrase ‘Brace Brace’ spring to mind as the ongoing Brexit turmoil does little to suggest that market volatility is likely to ease off any time soon. But as all good advisers know, it’s when times get tricky that the role of a financial planner proves to be even more valuable to clients, helping them to steer a path through what might seem to be unfathomable situations. The job of a financial planner involves trying to make educated assumptions as to what might lie ahead for the economy – and in particular for factors such as inflation, interest rates etc. - in order to try and build clients’ financial plans which are as robust as possible. All we can say, for the moment at least, is good luck with that. And it’s not just Brexit which is causing all sorts of imponderables for financial planners and paraplanners who are trying to make some sense of what on earth is going on. As Mike Wilson reflects in this month’s rather snappily titled rant ‘Beached’, there are all sorts of factors at work within European markets – not least the present incumbent at 1600 Pennsylvania Avenue. There are more imponderables when it comes to technology so Brian Tora is reflecting on whether the latest news from Apple might spell concerns for investors in the technology sector more generally. As always, in the pages which follow, there are helpful ideas and tips aplenty on how you can conduct your business in a more effective way this year, with articles from Brett Davidson, Michelle Hoskin and Tracey Underwood.
I FAmagazine.com
We’ve got a few guest interviews included for good measure, as we talk to Prudential about the changes they’ve made to their multi-asset range and to Calculus about how they work behind the scenes to deliver consistently robust EIS and VCT schemes for clients. There’s all this and a lot more of course. ETF S IN THE SPOTLIGHT This month, the mid-section of IFA Magazine consists of the latest IFA Magazine special focus supplement, this time on the subject of exchange-traded funds. ETFs are growing rapidly in terms of take up by advisers and investors alike. We talk to various experts about what’s going on the sector, and report the conversations and highlights from our ETF round table discussion which was held back in November. Our thanks go to all those who participated. Finally, it’s been three years since yours truly joined the IFA Magazine team here in Bristol. And a very happy three years it has been too. As someone who didn’t previously hail from a journalist or even media background, it’s been a fascinating and very enjoyable journey (hmm, I’m sounding like Strictly or the X-factor now so that’s enough of that). Anyway, I’m hoping for many more years in the hot seat here. Thanks to so many of you who sent me kind messages on Linkedin when you saw my work anniversary flag up – many were names from the past and which were particularly appreciated. Three cheers for social media! Sue Whitbread Editor IFA Magazine
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E D'S RANT
Februar y 2019
European markets are being left high and dry by the rush to fund America’s stronger economy, says Michael Wilson. Well, that’s the way it sometimes looks. How long before the tide turns again?
H
ands up if you’ve heard enough about Europe for now? Okay, okay, you can put them down again. I’m going to try and talk about something that isn’t Brexit this time.
the bosom of the European establishment, having scared ourselves silly during a 30-month flirtation with the cold, empty darkness outside. It might be one, it might be the other. Then again, it might be something else. I’m sure I wouldn’t know. So, just for once, I’ll try not to bully you into looking at it in any particular way. Shall I mention, though, that over the last year my Legal & General European Index fund has outperformed the Footsie, the All-Share, the Nikkei, the bullion index and the Brent oil price? Not so bad, perhaps, for a part of the world that’s not been getting a good press?
I promise…..
I mean, what would be the point? By the time you read this, depending on who you choose to believe, we’ll either be heading proudly out toward the sunlit uplands, flying free with £39 billion of unpaid euro-divorce bills jingling in our back pockets - or else we’ll be returning gratefully to
Major stock index movements in 2018 % change 2018 (nominal)
Estimated p/e end2018*
Shiller CAPE end2018*
S&P 500
-6.1
17.5
26.8
Shanghai Composite
-25.5
6.7
13.9
Nikkei 225
-12.1
11.9
22.4
FTSE 100
-12.4
14.8
14.6
Euro area average
-14.6
13.5
18.8
Germany DAX
-18.1
12.5
16.4
France CAC 40
-11.7
14.4
18.6
Italy MIB
-16.1
11.7
21.5
Netherlands AEX
-10.7
14.2
21.6
Spain IBEX 35
-14.9
13.3
13.9
Belgium
-14.4
14.6
20.7
Portugal
14.9
17.4
13.9
*Estimated. Sources: Star Capital, Financial Times, IFA Magazine
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E D'S RANT
Over the last year my Legal & General European Index fund has outperformed the Footsie, the All-Share, the Nikkei, the bullion index and the Brent oil price? Not so bad, perhaps, for a part of the world that ’s not been getting a good press
EUROPE SAYS IT HAS OTHER FISH TO FRY In short, I’m going to leave you for the moment with my personal view that Europe’s market situation isn’t actually as tough as it looks, even though its economy is growing at only about half the rate of America’s. It’ll be back eventually. It’s just that we don’t know exactly when. In the meantime, though, I’ll step back into my antiBrexit character for long enough tell you that Brussels has got much more on its plate than dealing with a stroppy departing Britain that’s wasted the last two and a half years of its life by initiating a Brexit programme without undertaking any Brexit planning, never mind any attempt to establish a common platform on which its own politicians could agree. No, the Europeans have a host of other issues to think about - any of which could normally be expected to put some sort of question mark under a stock market at the best of times. Such as the rise of xenophobic nationalism; the slowing rates of growth in many of the major European economies; the growing doubts about whether China will prove to be the friend it claims to be; the still awful state of joblessness in many areas; the tricky problem of defending the weakening euro at a time when the US dollar has been hoovering up the whole world’s liquidity; and, oh yes, the 45th President of the United States. And all of this, moreover, at a time when the two great political bulwarks of the European Union are losing some of their vice-like hold over the stroppier peripheries of the Union. Germany’s Chancellor Angela Merkel is set to step down in 2021 after 21 solid years at the helm of the EU’s primary economic powerhouse. Her French counterpart, the impressive liberal Emmanuel Macron, has been around for barely two years but is already threatening to go the same way as the country’s last golden hope, the centrerightist Nicholas Sarkozy. Which is to say, Macron’s reforming impetus has been blunted and stifled by the same stroppy proletariat demanding the same impossible things: short working weeks, early retirement, a generous state, and rock bottom taxes. It doesn’t stack up, but who’s going to tell them?
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Februar y 2019
Meanwhile, the European populists who take their cue from Donald Trump have been consolidating their positions – from Hungary’s prime minister Viktor Orban, whose overt racism has been ruffling feathers in Strasbourg, to Matteo Salvini, the far-right Italian deputy prime minister who says he wants to create an anti-foreigner alliance with Poland. While also demanding that Italy’s government must ignore the economic foundations of the euro and spend, spend, spend until those boring Germans get tired of their insistence on a shared fiscal responsibility. ABSENT FRIENDS But the most commonly quoted reason for Europe’s disquiet is, of course, the current occupant of the White House, who has actively set out to distance America from the internationalist stance which the United States has adopted since the end of the Second World War. Donald Trump’s many rants about Europe’s terrible state are often as funny as they are annoying. (Did you know that Birmingham is an all-Islamic zone where the British police don’t dare go? That Finland sweeps its forest floors daily with brooms to prevent fires?? That Paris’s gilet jaune protesters have been loudly shouting “We want Trump”, in English? No, nor did we). But beneath the deliberate lies and the obfuscations is the undeniable fact that Trump’s supporters believe every word that he says. And that in turn means that whenever Trump brands Europe an enemy of the American people, they tend to believe him. When his unilateral tariffs on imports of European steel raise the domestic prices of US steel - and hence the US prices of refrigerators – the rust belts are happy to agree with him that the accursed Europeans, ungrateful for their salvation on D-Day, deserve everything bad that will come to them. We could, of course, giggle and wait for the madness to pass. But that wouldn’t help the German auto industry, which is suffering hideously from Trump tariffs at a time when its Eurozone volumes are already down because of the switch away from diesel cars. It wouldn’t help European government bonds, which have been tanking because their ultra-low yields can’t compare with the fruity 3.0% (and upwards) that dollar bonds can currently offer. SOUR GRAPES? It wouldn’t help Europe’s stock markets, which have witnessed a disproprtionate outflow of foreign funds over the last year because of the magnetic effect that Trump’s $1.6 trillion tax giveaways are exerting on the Wall Street mood. And it does no good at present to remind Americans that splurging $1.6 trillion of new money during a strong economic phase is the exact opposite of what that other American, John Maynard Keynes, said we should do. (Fiscal stimulus was strictly for lean points in the cycle, he insisted.) More to the point, it isn’t just sour grapes for Europeans to point out that Trump’s economic ‘boom’ is all demand-side
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E D'S RANT
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(“go out and buy another TV”) rather than supply-side (“build a factory that makes better TVs.”) That’s the way that US GDP has been calculated for many decades, and although it looks strange to us, it’s the way people are used to seeing it. Surely this feast of empty fiscal calories can’t last, can it, the Europeans ask? Surely there’ll come a point where the strong dollar and the surging trade deficit tip over and invert themselves? (Perhaps suddenly?) And when the relative virtues of a traditionally based, non-interventionist and fundamentally sane management philosophy in Europe start to show their true colours? UPSIDES, DOWNSIDES Well, indeed. That day will come eventually, as I say, which is why I’m holding onto my eurostocks. But, for the time being, we might as well accept that when a Japanese or Chinese investor decides where in the world to invest his cash, he’s likely to go with the current favourite. Let’s also accept the fact that Trump’s anti-European tariffs and other worries have hurt Europe’s trade prospects in tangible ways. And that basic metal-bashing industries such as Germany’s all-important car manufacturing trade have caught it especially badly. (The Dax lost 18% last year, compared with 12%-ish losses in the stock markets of Britain, France, Canada, Japan, Spain and the Netherlands. All this, of course, on top of the euro’s 5.5% slide against the mighty dollar and the pound’s 8.1% decline.) Let’s cheer ourselves with the thought that Europe’s financial services are in world-beating form, with masses of emergency cover. That its medical and scientific research is unrivalled. And that European listed companies tend to be only the very largest, whereas in America size is less important. And let’s add that European companies tend to be more wary of bank debt, which in theory ought to make them more solid. Weaker external demand impacts Europe European exports to the rest of the world have weakened. Foreign demand for the region's exports moderated in 2018 and is expected to remain soft in 2019. (Year-over-year percent change)
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And that, at the end of the day, the European Union is the world’s largest trading bloc. (Well, it is now that last July’s free trade zone with Japan has come into effect.) These are important points that Wall Street tends to overlook. How about you? CYCLICAL AS A PARROT All the same, though, Europe’s economy is not in a particularly happy cyclical position. Its business cycle, like that of America, is probably nearing its peak after a ten year bull run, and the most obvious way forward points to down. Its economic growth doesn’t match America’s (officially stated) results. And European worries about relationships with Turkey (which takes the Middle East migrants), Russia (which supplies a lot of its gas) and the oil producing world (on which it almost totally depends) are always on policymakers’ minds. And we haven’t even mentioned China yet. The EU’s second largest external trading partner (after the US) has taken a knock from worries about its own headlong internal growth which have sapped confidence in Chinadependent industries throughout the European bloc. All of which underlies the IMF’s uncomfortable feeling (graphic on this page) that 2019 is unlikely to bring any immediate likelihood of stronger trade. SOME COMPARISONS Does it sound as though I’m obsessed with what the external forces in China and the US are doing to European financial markets, rather than focusing on the internal strengths and weaknesses of the European economy? If so, I apologise. It isn’t all Mr Trump’s fault, no matter how tempting that conclusion might be. There are reasons why European companies don’t command the same profit multiples as their transatlantic counterparts, and they’re not all about Wall Street insanity. The Eurozone’s economic growth will be lucky to equal last year’s puny 2.1% during 2019, the economists tell us. The 2.8% rate that was still around during final-quarter 2017 had fallen to 1.6% in third-quarter 2018, and quarterly growth had halved to 0.2%. Whereas in America, by comparison, the 2.9% growth rate during 2018 seems set to hold broadly steady during 2019.
7 6 5 4 3 2 1 0 2012
2013
2014
World trade volume
2015
2016
2017
2018
2019
European foreign demand
Source: IMF, World Economic Outlook, and staff calculations
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Or that a self-isolating America, if that’s the way it continues to go, will necessarily increase the economic self-reliance of the 400 million West Europeans who inhabit this continent.
US unemployment is running at a wafer-thin 3.7%, and falling; in the Euro zone it’s 8.1%, with Greece and Spain scoring 18.6% and 14.8% respectively. (Germany has just 3.1%, but France has 8.9%, more than twice the British level.) And yet, as the International Monetary Fund reported last October, there is much to commend the European economic scene, if only for its ability to keep on going.
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E D'S RANT The IMF’s current 2019 forecast of 1.9% GDP growth (rising to 2.0% in emerging Europe) looks a lot less vulnerable to extreme volatility than the US, where around half of analysts say they are currently expecting not just
Februar y 2019
a downturn but a recession. (This year, next year? None of them seem willing to commit themselves, for some mysterious reason.)
European growth: down but still above capacity In the near future, the region is expected to continue growing, but at a slower pace than previously estimated (real GDP and potential GDP growth forecasts, year-on-year percent change) Previous forecast on real GDP
Current forecast on real GDP
Current forecast on real GDP
Current forecast on potential GDP
2018
2018
2019
2019
Advanced Europe
2.3
2.0
1.9
1.7
Euro Area
2.4
2.0
1.9
1.6
Emerging Europe
3.1
2.9
2.0
2.3
Emerging Europe Excluding Turkey
2.7
2.7
2.5
2.2
Sources: IMF, World Economic Outlook; and IMF staff calculations.
LIFE, QUANTITATIVE SQUEEZING, AND THE ANSWER TO EVERYTHING But if we’re really looking for an Answer to Life, the Universe and Everything - in the true spirit of Douglas Adam’s 42 (you’ll either understand that reference or you won’t……) - we could probably do worse than turn our gaze to the phenomenon of quantitative easing, which has dominated the last decade but which is now in its terminal stages. (Well, unless you count Trump’s tax cuts, which amount to the same thing by different means.) Europe has done QE relatively well, and has known when to call the game off; America, perhaps, less well. There’s no denying that QE has delivered an enormous and much-needed boost to global developed-market economies in the ten years since the 2008 global crisis – mainly by allowing central banks around the world to issue vast quantities of new and unfunded debt, with which to buy back existing obligations and generally to put liquidity back to the pockets of banks, employers and investors. But a cyclically strong period is the time to be taking your foot off the throttle, which is why the European Central bank first decided in 2016 to rein it in. December 2018 marked the formal end of QE issues in Europe, with the ECB having pumped €2.6 trillion ($3 trillion) of new liquidity into the European economy. Whereas the Federal Reserve, er, hasn’t. Well, not yet, in the sense of reducing the central bank’s overall balance sheet, anyway. Technically, QE is indeed in the past (since 2014); in practice, however, Trump’s “calorie-free” tax breaks, which generate no intrinsic GDP growth, have revived the dilution of value, and more such vote-grabbers may well follow from the White House in the coming year. It’s QE by another name. Call it QE3, or maybe QE4?
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INTEREST RATES AND CURRENCIES But one intractable worry still remains for European economies. Namely, that Europe’s interest rates and bond yields are now so low that many have dipped into negative territory in inflation-adjusted terms. And that simply hasn’t been the case in America, where a ten year government bond will get you 2.75%, against 0.21% for an equivalent Euro zone bond. (Ouch.) Or 1.2% for a UK bond with a significantly inferior outlook. You can see why international investors prefer to back the greenback? There’s another drawback which doesn’t get much attention. Donald Trump may be currently livid at the Federal Reserve’s Jay Powell for raising US interest rates, but it does mean that the US retains one advantage which Europe doesn’t have – it can always opt to stimulate growth by cutting the bank rate. That’s because the Fed is running a 2.75% base rate, whereas Britain offers just 0.75%. And the euro zone – wait for it – comes in at a big fat zero. Which means that, if the European economy were to weaken for any reason, the European Central Bank – unlike the Fed would have no obvious fiscal means of encouraging growth. That’s an issue which the economists are well aware of. So, to repeat the question, if you were a Japanese looking for a place to park your investment cash, which would you find more attractive? Well, as an EU fan (and a languages graduate, and an ex-Berliner), I’m hanging in there while I wait for better and more optimistic times. Which must surely arrive one day? For that matter, who knows, maybe I’ll even forward-book my car ferry to Normandy for the summer holiday season? But otherwise, my money is staying in my sceptical wallet until I can see the way forward a little more clearly. There is more to this situation than Trump – much more….
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Februar y 2019
CALCU LUS
Learning from
EXPERIENCE Sue Whitbread talks to Richard Moore, Co-Head of the Investments team at Calculus Capital, about how the company operates and why its 20 years of experience is invaluable in helping the group to deliver effective EIS and VCT solutions for advisers and their clients
C
alculus are pioneers of the EIS industry, having launched the UK’s first approved EIS Fund in 1999, it is the longest established EIS fund manager. At its heart, Calculus offers growth and scale-up capital to later stage, world class businesses. Its focus has remained consistent over the years: building diversified portfolios of smaller, UK growth businesses and creating value for investors. Drilling down a little more, advisers will see that Calculus is a diversified, later-stage growth investor. Over recent years the firm has increasingly focused on the healthcare and technology sectors as this is where they believe prospects for well above average growth potential are coming from. This also conforms with the government’s enhanced terms for ‘knowledge intensive companies’ announced in the autumn 2017 budget. These companies, often in the healthcare and technology sectors, have seen a doubling in the amount of EIS funding they are allowed to take; from £5million to £10million. In 2019, the firm expects a continuation of the long-term shift towards businesses in technology and healthcare, although they are still committed to the principles
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and practice of diversification so other sectors will be represented in portfolios. As Moore explains, “This year sees our 20th anniversary so we’ve been around a long time. I’d say that our USP is definitely focused around the age and experience of the firm, especially given the ever-changing scenario for EIS. This first-hand experience becomes increasingly important in ensuring successful growth investing.’ GOING FOR GROWTH EIS and VCT schemes enjoy generous tax breaks of course. However, the quid pro quo of providing that support is that the Government wants to direct the investment towards growth companies and those focused on the knowledge-intensive sectors. As Moore comments ‘each year they tweak the rules a little bit, to make sure that funds are going to businesses which are going to grow, employ people and thereby boost overall economic growth. The good news for us is that this has always been our strategy. ‘We’ve always worked within the spirit of the EIS rules, investing in companies that genuinely have the opportunity
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for growth, are growing their top line and employing people. They simply need the financial investment to help cover the costs whilst they do that. This brings challenges which require a particular skill set to help overcome them. Often the company is quite small – perhaps just 25 or so employees in the smallest case. Because of our experience, we understand the challenges and growing pains which the management team will go through as they grow their business – and their cost base. They need hand-holding, they need support. The fact that we’ve been following this strategy of finding businesses with exciting growth potential and seeing them through that process for a number of years, we think is crucial. It’s partly an intellectual challenge but I don’t think there’s any substitute for experience, both theirs and ours. They don’t all work out of course. That’s the nature of EIS investing. The experience that we have in identifying the companies that have the best chance of success – and helping them through it – is absolutely key. THE DUE DILIGENCE PROCESS So when it comes to doing their due diligence, lifting the lid on different business propositions for possible inclusion in their funds, which companies do they decide to invest in and why? When it comes to due diligence and research, Calculus operates an intensive and rigorous process. Moore explains: ‘it’s useful to consider this process in terms of data and scope. Each year we probably review between 500-600
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Februar y 2019
opportunities, although we’re looking to make just 5 or 6 new investments. We say no to a lot of businesses, and we can see early on what isn’t going to work for us. Our experience and longevity means that we get a good feel for what is out there at the moment, what is getting funded, what is likely to work etc. I think that volume really helps us to identify the stronger businesses that we like the look of. ‘We then operate a two stage process.. One of the key determinants is how ready the company is to engage with us and provide us with information. Sometimes we see a young, exciting, entrepreneurial team who haven’t been through the process before and they don’t have the proper data. The fact is that we do need to see numbers and data to really get to understand the business. This first stage takes on average 6-8 weeks but throughout that time we are going through our intellectual process to decide whether it’s a company we want to invest in and if so, on what sort of valuation and what sort of structure. This is a very important period for us, when we do our own research and spend a lot of time with management.’ THE CALIBRE OF MANAGEMENT For Calculus, a key factor behind making a good investment is assessing the calibre of the management team and, according to Moore, this means spending time with them to really understand how they operate. ‘We will go and meet with them on site and spend a lot of time going through accounts, the sales pipeline, getting a product demonstration, and even having them pitch to
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CALCU LUS
us in product/sales mode as if we were a customer. A lot of it is core data – the detail we need to help make our decision. In that initial period we are building up our view of the company, its market position, its product and its opportunity to deliver on what the management is presenting as its plan. If we do see an opportunity, we then go to our investment committee with a formal proposal, although they are constantly updated throughout the process so they are always in the loop. We present them with a detailed analysis which they will thoroughly test. We will also arrange for the management team to present to the committee as it is important for the committee itself to have direct experience of meeting and hearing them. If after that we are happy, we’ll make an offer. ‘In the instances where we get to term sheet stage, we go into a period of exclusivity in which we then incur a lot of time and external cost. At this stage we bring in accountants and lawyers to verify the details. We will often do our own commercial diligence internally, the most important element of this is speaking to the company’s customers. For technology companies, we’ll often do technology diligence too. We approach HMRC for advance assurance at this point, a process which takes a few weeks. During that time we do all the rest of the work we need to do so that when HMRC comes back to us, usually in around 8 weeks, then we’re in a position to complete. It’s quite an involved and a very detailed process to get to final investment.
That’s life though. On occasions, we have seen two or three good businesses within the space of a week. We just have to find the resources to cope with the workload and make sure we give each one our fullest attention. It’s important for us to stay firm and true to our beliefs during the quieter time, so that we really focus on whether or not a company is worth investing in.’ GOVERNMENT SUPPORT Despite the action to remove tax breaks for capital preservation schemes, the Government remains firmly behind EIS and VCT investing. According to Moore, this has been a positive change for tax-efficient investment, as money will now have to be focused on investing in genuine, entrepreneurial, growth companies. But does he have any fears that future Government changes could undermine the scheme’s effectiveness? Moore thinks not. ‘We think the schemes work well and, whilst changes can never be foreseen, it is important to note that every country in Europe has some form of governmental incentive for investing in / supporting SMEs.’ So, if he could influence changes to the schemes, some suggestions he voices would be higher limits, both lifetime and annual, in order to allow for proper scale-up. He believes that with the present limits, EIS & VCT investing can only partially address the “equity gap”.
THE INVESTMENT PIPELINE
THE ROLE OF ADVICE
When it comes to the existing pipeline of businesses, Moore sees it as a good mix. “We currently have two businesses that we’re looking to close on during Q1 2019. The frustrating thing is that the pipeline can be quite lumpy in terms of timing, we often see a few businesses coming through at the same time.
Nowadays, there is far greater awareness of the schemes and their benefits, however, some investors remain wary of SEIS in particular, seeing them as too high risk. In Moore’s view, EIS & VCTs are better positioned to manage risk and with the added benefit of independent reviews available, this can provide some additional comfort around the pros and cons of the specific providers.
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although they have announced funding to address these issues.
Despite the action to remove tax breaks for capital preservation schemes, the Government remains firmly behind EIS and VCT investing.
With the end of the tax-year rapidly approaching, it is looking likely we will see even more adviser and investor interest in VCT and EIS schemes than ever before, Calculus are well-placed to continue delivering effective solutions for clients looking to capitalise on the opportunities which investment in this dynamic sector can deliver.
So how can advisers continue to educate their clients about the investment opportunities in EIS? With a growing expectation amongst clients that their advisers have sufficient knowledge around these products, Moore stresses that this is why Calculus continually offers teach-ins for advisers and advisory firms specifically on EIS & VCT. WHAT’S NEXT? When it comes to the ongoing confusion over the UK’s Brexit plans, Moore doesn’t think that this has affected the future of EIS. He believes that the Government’s stated commitment to EIS and VCT schemes post-Brexit is supportive. So does he see any clouds on the horizon, such as trade wars, a slowing global economy, interest rate rises etc. that might spoil the party? One concern that Moore has, further confirmed recently by the government, is that the UK isn’t producing enough qualified people for the skills required to drive growth and innovation, particularly in science and technology,
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About Richard Moore Richard joined Calculus Capital in 2013. Prior to this he was a Director at Citigroup, which he joined in 2005, and previously worked at JPMorgan and Strata Technology Partners; resulting in over 14 years of corporate finance experience and a large base of industry contacts. Since joining Calculus, Richard specialises in advising companies in the technology industry and has worked with a number of our portfolio companies including Cloudtrade, Avvio and ActiveOps. Richard began his career at KPMG where he qualified as a Chartered Accountant, and remains a member of the ICAEW. He has a BA (Hons) in Politics and Economics from Durham University.
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Februar y 2019
BETTE R BUSI N ESS
You are your
HABITS Achieving long term business success whilst living the life you want to live means establishing great habits. Brett Davidson of FP Advance takes a practical look at some of things you can do to transform the way you approach your goals
T
here is a lot written about the power of goal setting. I’ve often shared how important it is to be clear on what you want. With clarity comes greater focus and the ability to say ‘no’ to anything that isn’t advancing you toward your goal. However, setting goals is not enough. You’ve got to do something. In fact you’ve got to do a lot, over a long period of time, if you want your goals to be realised. Focusing on your goals is great, but when it comes to achieving those goals it’s what you do every day that matters most. Your habits, in other words. In a recent blog from master of habit formation James Clear, How to Stop Procrastinating on Your Goals by Using the “Seinfeld Strategy”, he quotes an interview originally posted on Lifehacker, where Brad Isaac, a young comedian, caught Jerry Seinfeld backstage and asked if he had any tips. James says: Here’s how Isaac described the interaction with Seinfeld…
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“He said the way to be a better comic was to create better jokes and the way to create better jokes was to write every day.
Focusing on your goals is great, but when it comes to achieving those goals it ’s what you do ever y day that matters most.
“He told me to get a big wall calendar that has a whole year on one page and hang it on a prominent wall. The next step was to get a big red magic marker. He said for each day that I do my task of writing, I get to put a big red X over that day.
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“After a few days you’ll have a chain. Just keep at it and the chain will grow longer every day. You’ll like seeing that chain, especially when you get a few weeks under your belt. Your only job is to not break the chain.
Examples of these are things like keeping fit, making time for my important relationships, as well as the important projects that, if I can get them done, will really make a massive difference to my business.
“You’ll notice that Seinfeld didn’t say a single thing about results. It didn’t matter if he was motivated or not. It didn’t matter if he was writing great jokes or not. It didn’t matter if what he was working on would ever make it into a show. All that mattered was ‘not breaking the chain’.”
Here are three great ones:
To make sure the important things get the focus and priority they deserve, I plan each week on a Sunday night, and plan each day the night before. You should too. Dominika Sieradzka at RIE Solutions , a freelance practice management consultant who works closely with a number of my FP Advance clients, gets advisers and business owners to complete an annual capacity planner. They have to work out how long existing workloads will take (e.g. a year’s worth of client reviews), how many weeks’ holiday they’ll have, how much time to set aside for handling new clients, attending conferences, etc. etc.
1. REGULAR MEETING FLOW
I did the same thing for myself this year in my business.
Meetings are not something that should be hit and miss in your business. The most successful businesses I work with have a meeting ‘flow’ that ensures they are communicating well as a team and staying focused on the right tasks.
What did I - and many advisers - learn?
Typically that involves a weekly leadership team meeting, quarterly meetings that review goals set for the quarter, and a couple of days of annual business planning.
And this is why people don’t like to plan or fill in capacity calculators in my view, because it destroys the illusion that “you can get it all done.”
This is all pretty straightforward and a highly effective habit for any business.
You can’t.
It’s all about establishing great habits. WHAT ARE THE HABITS THAT WILL GET YOU TO YOUR GOALS?
In their book Triggers: Sparking positive change and making it last, Marshall Goldsmith and Mark Reiter state that “One of the most dysfunctional beliefs is our contempt for simplicity and structure. We believe we are above needing structure to help us on seemingly simple tasks… When we presume that we are better than people who need structure and guidance, we lack one of the most crucial ingredients for change: humility.” 2. FOCUSING ON WHAT’S IMPORTANT – NOT JUST URGENT Whenever I read a statement like “Focus on what’s important, not just urgent”, my head goes straight to my work projects.
Once you put in all the stuff that is important or just has to be done, there isn’t that much time left. It’s quite confronting.
When you plan properly you are confronted by how little time you really have. However, it’s only by getting completely honest about this, that you can you then plan effectively and use your limited time wisely.
To make sure the important things get the focus and priority they deserve, I plan each week on a Sunday night, and plan each day the night before. You should too.
However, if I take a little more time to ask myself what’s important, then a more balanced set of priorities emerge.
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BETTE R BUSI N ESS
Not only do you need to plan, but you need to be realistic in your planning and allow lots of time for the unexpected. “I won’t get distracted today and nothing unexpected will happen. We don’t plan for the high probability of low probability events, like accidents, children not being well enough to go to school, household headaches, stuck traffic, bad weather. Yet the odds of one of these is high.” Marshall Goldsmith and Mark Reiter, Triggers
3. TAKING TIME OUT For leaders and entrepreneurs, taking time out and time off is essential and often completely disregarded. In our ‘hard work is cool’ culture it’s easy to just keep slogging away. I recently had a call with a person who is part of my current crop of Uncover Your Business Potential delegates. He’s been through some major change, working very hard for the last six months, and is doing great. However, with all the extra work as a result of these changes, along with a busy tax year-end and business-as-usual, he was a little behind on some work and feeling a bit flat. I asked him what he thought he should do. He said, “I know I just need to grind it out and get this backlog of stuff done.”
up immediately. Then if the backlog really does need to be dealt with, set aside some time and get that caught up. “As soon as that’s taken care of it’s time for a holiday; a week or two somewhere nice where you can relax and recharge.” Taking time out allows you to renew and go hard again if that’s what it takes. However, the right cycle of working hard and taking time out is essential if you want to maintain your focus over a long period of time (e.g. 10 or 20 or 30 years). Life is a marathon not a sprint. GET IN THE HABIT Take a look at your current habits and see if they are taking you where you want to go. If they’re not, maybe it’s time to change that up.
When you plan properly you are confronted by how little time you really have.
I said, “No, you need a break.” We talked about taking a couple of extra days off to freshen
About Brett Davidson Brett is the Founder of FP Advance, the boutique consulting firm that helps financial planning professionals to advise better and live better. He is recognised as one of the leading consultants to financial advisers in the UK. You can follow Brett online and via social media: You can follow Brett online and via social media: Twitter: @brettdavidson Facebook: www.facebook.com/FPAdvanceLtd LinkedIn: www.linkedin.com/in/davidsonbrett Website: www.fpadvance.com
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FI NANCIAL PLAN N I NG ROLES
Everything CHANGES
B
ack in the nineties when Take That was a five man group sweeping the charts and the then regulator, the PIA, was about to begin the ‘Pension (Transfer) Review’, I started my first job in financial services, employed by a life insurance company working with IFAs. Job roles were limited and I distinctly remember at that time, there were essentially only two job roles within an IFA practice; adviser or administrator. The advisers fulfilled the roles of business writer, report writer (ok maybe a letter writer, these were the days of reason-why letters), completer of application forms and in summary, an all-round sales person. The minimum qualification standard for providing advice was the Financial Planning Certificate, broadly equivalent to the current CII Certificate in Financial Services (Level 3). The administrators did everything else from obtaining quotes (in those days you had to ring the provider), processing new business and sending off letters of authority. In later years, I went on to join one of those IFA practices but was fortunate that they had newly created a paraplanner role which, looking back, was way ahead of its time. The role encompassed cashflow analysis, attending client meetings and working alongside the adviser making planning recommendations. That was a rarity then - and perhaps even now.
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Tracey Underwood of PACE Solutions reflects on how career opportunities have changed in financial planning and considers what might lie ahead
Some would say not a lot has changed in twenty years but within financial services recruitment the picture is ver y different
THESE DAYS So, let’s fast forward twenty years. Take That is still going strong - albeit with three band members. Our current regulator, the FCA is once again reviewing Pension Transfer sales. Some would say not a lot has changed in twenty years but within financial services recruitment the picture is very different. The modern financial advisory practice has established itself into a business with a diversity of roles, with more individuals than ever being professionally qualified and trained in that role. Such roles are no longer limited to sales or administration. Those people entering this profession in 2019 should feel excited that there is so much more variety available - and skills required - than has previously been the prerequisite within IFA firms.
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New roles such as Systems (IT) specialists, Marketing Administrators, Operations, Investment and Practice Managers have all emerged. Not only have new roles appeared, but the skills required for the more ‘traditional’ roles have also changed substantially. Administrator roles have been replaced with client servicing tasks involving more interaction with clients. ‘Paperwork’ has been reduced due to more automation from back office systems and providers. Adviser roles have changed from the traditional product ‘selling’ skills and report writing to utilisation of soft skills, financial planning strategy and cashflow analysis. The minimum qualification standard has also increased to Diploma (Level 4). Needless to say, these role changes are all positive but they have come with their challenges for individuals and businesses alike. Financial Planning businesses themselves are having to become more adaptive to efficiencies and higher quality as price and value is brought more into a client’s attention, not least due to MIFID II disclosure requirements. Most firms are transitioning their investment proposition from the cumbersome advisory process over to a Discretionary Management model. With that brings added regulation but the efficiencies created internally by utilising IT and investment specialists and redirecting administrators from paperwork to client interaction can far outweigh the additional regulation and costs.
As your business grows and diversifies its roles, it is important to recruit the right person for the role rather than fit the role to an existing member of the team
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HOW DO WE RECRUIT TALENT INTO THESE DIVERSE ROLES? As you start to build your business brand, attracting the right candidates becomes much easier as they are naturally drawn to your business rather than having to search for them. This can also be boosted when you recruit your first graduate who then becomes a great ambassador for attracting future graduates as well as presenting an opportunity to link up with a good university. ALTERNATIVE RECRUITMENT AVENUES INCLUDE: • Apprenticeships • University Placement Fairs - using your recent graduate recruit to promote this • Specialist recruitment consultants For Marketing and IT roles, it pays to look outside mainstream financial services and use specialist firms / head hunters to find candidates specific for the role. Remember, if you recruit correctly your business and team will be far more successful as a result. As your business grows and diversifies its roles, it is important to recruit the right person for the role rather than fit the role to an existing member of the team. From my experience of working with firms, rather than spending time (and money) recruiting, firms have been transitioning existing members of their team into these newly created roles because: 1) A particular person has been part of the business for a
while and they are good at what they currently do 2) You like them
Using an existing member of your team may sound an ideal solution to your recruitment problem, but beware. Not recruiting the right, experienced person into that role will only cause you problems further down the line. This is unfair not only to the business but also to the individual that you have transitioned into the role. Gino Wickman
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gives an excellent overview of this issue in his book ‘Traction’. If you decide to bring your marketing function in-house then make sure you recruit someone with a market degree and/or experience in marketing. They are more likely to succeed in the role and offer greater benefits to the firm than someone else who has a fraction of that knowledge and skill might be able to deliver. Similarly, with firms now developing apps and becoming much more demanding with data extraction from their client management system, individuals with IT and / or advanced maths and excel skills are becoming more of the norm. SO, WHAT MIGHT THE NEXT TWENTY YEARS LOOK LIKE? The debate about ‘Robo Advice’ goes on and on. Undoubtedly, the continuing development of technology will have a large impact on some of the roles currently available. There will be a continuing demand for value over cost and so deriving more value will naturally drive down costs internally as businesses look for more efficiencies. There will be a continuation of less traditional client services / administration roles. A large amount of the current ‘double key entry’ on back office and wrap provider is now input directly from the client directly into the back office and automated onto the platform. Paraplanning, in the traditional sense of report writing and cashflow inputting services, will also become automated. These roles, if they haven’t already, will transition to become more client-facing. PROGRESS Our profession is built on trust. Undoubtedly there will still be a requirement for clients to have - and need - human contact. Advisers and planners will need to develop deeper skills in communication and emotional intelligence to help their clients clarify their life goals. This would run in parallel with their team working alongside them, bringing specific skills in their specialist area, whether that is investment management or technology.
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Those roles that clients see as having value to them will be in demand whereas non value-driven services, such as data entry, fund switching will all become automated. This should see an increase in demand for internally or externally driven Discretionary Management Services. This can therefore, present a challenge to business where skill sets need to change or be replaced. Advisers and support teams are already increasing their technical expertise and adopting a variety of qualifications from Chartered Financial Planner and/or Certified Financial Planner, Chartered Financial Analyst, ILM Leadership and Marketing Diplomas. Change is inevitable. However, there are two things that we can be sure of in the next twenty years: Never forget that Take That will still be around in some form or another (maybe just as one band member). Also, that the Regulator will still be reviewing the impact of defined pension transfers.
About Tracey Underwood Tracey is the owner and founder of PACE Solutions. The business provides support for financial planning businesses by focusing on operational practices including; recruitment, compliance, processes, client proposition and business strategy. This is achieved not only through a consultancy process but by hands on implementation to ensure that firms achieve effective results that would otherwise not be achieved through consultation only. Tracey is a Certified Financial Planner and Chartered Wealth Manager. She has held several senior management positions within financial planning firms, most recently as Operations and Managing Director at DB Wood. www.pacesolutionsuk.com
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BRIAN TORA
Februar y 2019
Don’t upset the
APPLE CART
Shares in Apple have lost over a third of their value since October but what does this mean for long term investment in the technology sector? Brian Tora is bracing himself for more volatility ahead
2018 was not the most comfortable year for investors. While the early part of the year saw the long bull market intact on both sides of the Atlantic, conditions became more troubled as October, that most capricious month, got under way. Wall Street had its worst December since the 1930s. Several markets ended the year in bear territory. The new MiFID II rules meant that many investors received letters from their portfolio managers in 2018 advising them that their investments had fallen by more than 10%. And it was right at the end of the year that most damage was done to developed markets, with the expected Santa rally regrettably absent. ONE BAD APPLE Nor did 2019 get off to a particularly auspicious start. Apple Chief Executive, Tim Cook, warned that revenues and profits would be below expectations, blaming reduced demand from China as a principal cause. Given that not too long ago Apple became the first corporation to be valued at more than a trillion US dollars, its fall from grace has been disturbing to say the least. The big fear is that demand for its iPhone has finally peaked. Certainly, the replacement cycle for these phones is lengthening, while it is difficult to see innovation coming in at such a dramatic pace as before.
The new MiFID II rules meant that many investors received letters from their portfolio managers in 2018 advising them that their investments had fallen by more than 10%
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BRIAN TORA
TECHNOLOGY IS HERE TO STAY But there are worries too for the tech sector in general which has both driven the long bull market in America and subsequently led the way back down. Technology now plays a dominant role in all our lives. Computers exist in all manner of objects which we use on a daily basis. Our movements are tracked by our smart phones, while social media collects information on our likes, dislikes and habits in a way that many consider intrusive. The role of the financial planner and paraplanner has also been transformed by the use of technology which underpins the more robust service that clients are now experiencing as a result. Whether it is the use of platforms, CRM systems or cash flow modelling tools, life is very different to that of the financial adviser even twenty years ago. Returning to life before the technology age no longer seems possible – or even appropriate. THE CRYSTAL BALL It is hard to predict what the coming year might have in store for the technology sector. It would have been difficult to predict how technology would change our lives a generation or so ago, though one American science fiction writer gave it his best shot. In 1983 Isaac Asimov, who had written extensively and had coined the three laws of robotics – still referred to today, was asked how the world might look in 2019. Not all his predictions turned out to be correct, but in one area at least he was remarkably prescient. He foresaw the rise of computers, saying that we would become increasingly dependent on them and that they would penetrate all aspects of business and become an important part of our life at home. He also believed that robotics would lead to the loss of many manual and clerical jobs, changing the face of the workplace. To think that he made these predictions 36 years ago when computers were a relatively small part of business life and hardly present in the home is truly remarkable. NEW DEVELOPMENTS Today there is an increasing focus on artificial intelligence and a belief that smarter computers will continue to encroach upon occupations considered to be
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outside the capability of non-humans. The smart handling of data is also changing how goods and services are marketed and distributed, though we are seeing something of a backlash as governments become increasingly aware of the power placed in the hands of corporations, rich with detailed information on all our lives. And we shouldn’t forget that governments themselves are becoming big players in the technology world as they seek to combat cyber-crime and efforts to destabilise systems and infrastructure through cyber intervention. The world has indeed changed radically in less than a generation and the pace of that change will, if anything, accelerate. It would be a brave man or woman who tried to forecast what things might look like in a decade from now, let alone 36 years into the future.
Only about a fifth of the companies in the FT Actuaries All Share Index finished in positive territor y at the end of 2018
SHOULD INVESTORS BE CONCERNED? For advisers and investors, the technology sector is hard to ignore. It is telling to look back at the year recently ended to see where the successes and failures lay. Only about a fifth of the companies in the FT Actuaries All Share Index finished in positive territory at the end of 2018. Retailers were amongst the biggest casualties, arguably victims of the technological revolution taking place in the way in which we buy things. Yet the best performer was a type of retailer – Ocado, which virtually doubled in price over the year as it found new customers for its technology in retailing from foreign supermarket groups. The biggest risk for investors remains the increasing volatility we are seeing in these companies. Volatility, which had been muted since this long bull market got underway, started to spike upwards as last year progressed. As new developments emerge and with regulation likely to tighten around the world, the fortunes of individual companies could vary massively. That said, technology is a sector investors disregard at their peril. Brian Tora is a consultant to investment managers, JM Finn.
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Time and task
MANAGEMENT The message from Michelle Hoskin of Standards International is that when it comes to managing a growing workload everything is possible - with time
T
he methods by which an organisation delegates, logs, tracks and gets stuff done will ultimately define how effective and successful the team is as a whole. Teamwork is ultimately the key to a business’s success, which is why it is essential to have robust and scalable processes and procedures to help individuals be as effective as possible, whether they are working together or on their own.
Never underestimate how managing time effectively is an artform. It takes skill, practice and dedication to get it right
COMING IN THICK AND FAST! Requests for tasks to be completed can come in from all directions, such as clients, colleagues, business associates and suppliers. Each has their own agenda, which is why everyone within your team (you included) should remain focused at all times both on why the task is being requested in the first place and also on getting it completed as effectively as possible. If a task is worth starting… it’s worth completing.
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There is a caveat to this, though. It is often the case that the amount of work required simply outweighs the amount of time that has been allocated to it. It is important to be realistic with what it’s possible to achieve in the time that you have available. DO NOT under any circumstances over-commit and then under-deliver on your promises. No one wins. The damage that follows includes stress, unhappiness, low morale and ineffective performance.
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TI M E AN D TASK MANAGE M E NT It is simply not worth it! Be honest and open and work within the parameters that have been set; always do your best but do not over-work yourself and NEVER, EVER take on the work of another member of the team if their failure to complete the task stems from a lack of care, skills or ability. If this situation is happening, you must speak to another team member, your line manager or the business owner. It is not your job to do someone else’s.
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Ever yone needs a deadline and the primar y deadline rule is that no task should be delegated or requested without a deadline attached
Never underestimate how managing time effectively is an artform. It takes skill, practice and dedication to get it right. It is a change in mindset and will support the achievement of every task, regardless of size! THE RULES
DEADLINES
Always remember:
Oooh, I love a deadline. Everyone needs a deadline and the primary deadline rule is that no task should be delegated or requested without a deadline attached. We are all really busy, we all have more stuff on our lists than we have hours in the day, so the main purpose of a deadline is to focus the mind – be that your mind or someone else’s.
• Being busy doesn’t mean you are being productive • Lists and structures (whether held in hard or soft copy) are crucial to success • There is always a more effective and efficient way of doing something – so strive to find it • Learn to love lists and structures • We are not designed to multitask… so, wherever possible, don’t even attempt it START AS YOU MEAN TO GO ON I always kick-start the day with some planning time. I find it’s important to set out my stall, and get my head around the day and what is to come. I run through in my mind the key things that I need to get done before the end of the day. I then commit to up to five things that, by hook or by crook, I must get done that day. If I need to review my inbox before I can define my list, then I do. BUT I WILL NEVER respond to anything until my plan for the day is in place. My daily commitments are the most important things on my agenda. They become the key tasks that MUST be completed before the day is out. Getting these tasks straight in your head, prior to taking any action, will help you stay focused and not get distracted by the many other things that will likely come hurtling towards you during the day. If you don’t take a moment to clarify your goals before the chaos of the day takes hold, you may spend hours in a frenzy of activity. However, you are in danger of achieving mixed results because you are simply not concentrating your efforts on the things that matter the most. It’s simple, really. Whose agenda are you working to? Yours or the next person who emails or messages you? Shut out the noise, even if it’s just until the big-ticket stuff has been done. If you need help prioritising, ASK. It’s much better to seek the input of a colleague or (preferably) your line manager than to risk getting stuck down a rabbit hole facing in the wrong direction!
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Think about it – when you are facing a mountain of tasks, after the initial panic of ‘How the hell am I going to get all of this stuff done?’, the question becomes, ‘What do I focus on first?’ Most people are drawn to start and (hopefully) complete the tasks that have a direct deadline attached to them. In fact, most people do their best work when a deadline is fast approaching and the pressure is on. Why? Focus… the deadline is forcing them to focus. With an imminent deadline there is no time for faffing, over-thinking or procrastinating. It’s time to focus and get it done. So, even if there isn’t a deadline associated with a task, give it one. Even if you have to make one up. Trust me… with a deadline, everyone’s a winner, baby! RECEPTIVE DELEGATION™ It is one thing to be given a task to complete, but it is quite another to put yourself forward to be delegated to. Receptive Delegation™ is when a person asks for more work by offering to support a person who looks like they need some help. ‘Is there anything I can do/help you with?’ are magic words to someone who is drowning in work or struggling to hit key deadlines. So, wherever possible, work ‘aware’ – look around you to see what is going on in your office or team and don’t be one of those people who says, ‘That’s not my job’. EFFECTIVE HANDOVER • If the required task needs completing by someone else, it is vital that the handover process is effective. A misunderstood task could result in catastrophic outcomes, so this should be avoided at all costs. Be clear about what is expected and make sure that the person doing the task has all the information they need from the outset.
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• Adequate time should be allocated to the handing over of key tasks. Notes should be taken to make sure that the instructions and details are clear and can be recalled at a later point if needed. • Be clear on the absolute and desired outcomes. Ambiguity doesn’t help anyone. • During the handover meeting (which should be scheduled into all diaries), both parties should be clear about the work involved and the time allocated to complete it. Any potential issues should be raised, discussed and resolved at this point. • Agree check-in points. It is no good discussing what needs to be done at the start and then not again until the end. You don’t want anyone to go off track and waste time. Work in progress meetings are recommended throughout the task. • Once the action points have been agreed, these tasks should be incorporated into the master ‘to do’ list (see below), task planner or project planner.
• Plan your next month:
• Count the unplanned days available • Reserve a free period each week to review and plan • Reserve key task time • Plan this week:
• Develop regular habits (e.g. CPD, general filing, time for reading, review the ‘to do’ list) • Plan each day at the outset:
• Develop regular habits • Set specific times to review work • List and rank jobs and phone calls • Make daily action lists MANAGE YOUR DAY
PLAN YOUR DIARY
• Plan each day at the start of the day – or, better still, the night before
You’ve heard it all before I know… which is why I’m telling you again.
• Make a list of tasks, work out the time needed for each and prioritise
The trick is to plan your year first and your day last.
• Isolate the key tasks (between three and five tasks) and make sure they get done
• Enter key year planning dates in your diary:
• Regular meetings for the year • Known one-off events (e.g. annual seminars)
• Don’t be too ambitious and clutter each day with tasks that can wait
• Holidays
• Build in a time for solitude and/or to handle an issue that could crop up
• Family occasions
• Tie each day in with the week, the month, the year
• Key tasks (e.g. monthly returns)
• Only access emails two or three times a day and allocate a time to respond to those that require your attention
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• Follow up effectively by using three follow-up files –
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• Don’t keep papers hanging around:
• Diarise when to action and then file them
‘This week’, ‘Next week’, ‘This month’ • Diary/daily planning format – adopt a system which can accommo¬date detailed timings and sections (in each day) to list ‘Tasks to be done’, ‘Phone calls to be made’ and ‘Emails to be answered’
• Dump unwanted items • Pass on, with action notes • Don’t let filing pile up • Don’t get side-tracked reading items that should be put in a separate to-be-read pile
GET YOUR PRIORITIES RIGHT Think about the set tasks for the day. You then need to consider how much time should be allocated to a particular task. Focus your energy on the tasks that are significant to you. Is there a particular time of the day when you feel most productive? If your thinking powers are particularly sharp in the mornings, try to finish your important tasks during that period. You can use the rest of your time to finish the seemingly smaller tasks later.
It may seem like a lot of things to do and remember, but sticking to your guns and putting more structure and thought into how you manage your time will result in significantly better results - and a happier and more contented you!
KEEP SOME EXTRA TIME IN HAND Time management is all about dividing your work schedule in your planner but there may be certain hitches along the way. Sudden meetings or additional time spent on a particular project may require you to change your schedule. You need to be aware of these possibilities and add more time to a particular task in advance to have some extra time in hand. In this way, if there are any unexpected issues, you will still be left with a comfortable amount of time to deal with them. AVOID PROCRASTINATION Procrastinators end up working more than required and often feel stressed about work. Avoiding work so that you can do it later is not a good idea. Know the reasons why you are avoiding a particular task. It would be a better idea to finish the task before its deadline rather than keeping it piled up for the month end. HAVE FOCUS Maintain your focus on the important tasks. People often waste precious time on tasks which are not really important to a particular project. A clear focus should help you to attain your objectives. ORGANISE YOUR WORKSPACE Perhaps the most important aspect of organisation (and one which affects everyone’s ability to tackle important tasks) is how your desk/workspace is managed. Ways to clear your desk:
About Michelle Hoskin Michelle Hoskin (aka Little Miss WOWW!TM) is well known for her endless enthusiasm and energy, infectious personality and unique outlook on what she describes as a “magical profession”. With over 20 years’ experience working alongside some of the world’s most successful financial services organisations, Michelle is an internationally recognised author, speaker, coach and leading expert in the design and implementation of international framework-based best practice standards. Michelle is pioneering a drive towards increased professionalism and operational excellence through her continued work at Standards International – the UK’s premier certification body for British and international financial services standards – of which she is the founder. She also most recently led a sector committee whose objective was to develop and launch an exciting new international standard for professional paraplanners. Relentless in her pursuit of a global movement of change within financial services, Michelle is fully committed to supporting financial professionals worldwide to achieve things they only dreamed were possible, and to working with them so that they become the best possible version of themselves.
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CISI
Professional bodies in financial planning –
THE 2019 PERSPECTIVE It’s been just over three years since the Chartered Institute for Securities and Investment (CISI) took on the role as professional body to financial planners following the merger with the IFP in 2015. We ask Jacqueline Lockie, head of financial planning at the CISI, to highlight what plans there are for 2019 to help members grow their knowledge, skills and competence and to build the profession
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s 2019 gets underway and we are all over our winter illnesses and bugs (I hope), attention turns to putting more detail on the CISI plans to continue to build the profession of financial planning. We are seeing more and more wealth managers and investment managers turn to financial planning and more financial advisers taking on cashflow planning tools to develop a more comprehensive financial planning service for clients. By now you have all probably given thought to segmenting your client bank and reviewing the cost effectiveness and appropriateness of the services you offer to your clients as a result of FCA’s Product Intervention and Product Governance Sourcebook. For those of you who also offer a discretionary fund management service, you are probably seeing the fruits of many months hard graft in the disclosure of costs and charges for that service. THE PARAPLANNER PERSPECTIVE Here at the CISI we have already built a strong programme for the CISI annual Paraplanner Conference in June this year – with a clear emphasis on using case studies to enhance technical knowledge and engage in debate. But we’ve not forgotten about the need to support the many paraplanners who want to learn how to speak-up at the office and engage with business owners to improve the quality of advice given to clients. Paraplanning is such a fun element of the financial planning profession with many younger people becoming interested all the time so we have built into our Conference some fun activities along the way.
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FINANCIAL PLANNING CONFERENCE Our Financial Planning Conference, 30 Sept-1 Oct will also have a different flavour than in previous years and I believe will provide thought leadership and best practice to grow our profession. Talking of growing the profession, one of the most exciting and new initiatives we have here is the CISI Financial Planning Mentoring Scheme with over 40 individuals already involved as either mentors or mentees, all doing their bit to support growth in our profession. We also have two large technical service providers offering free technical help on a wide range of subjects, doing their bit to support the growth of the profession. CFP Certification – the qualification to build financial planning skills We all know that financial planning sits at the centre of every client relationship. However, many financial planners do not have a clearly defined, robust and repeatable financial planning process. For those of you who are already CFPTM professionals you know that the CFPTM process helps give an independently verified structure and guidance on that, thereby helping you build a sustainable financial planning service. 2019 will see the introduction of the new Certified Financial PlannerTM exam and assessment pathway. The quality of feedback on the financial plan assessment will also be improved to help support those going through the process. This brings the UK version of the CFPTM assessment in line with other
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Februar y 2019
countries around the world. With the training support and workbook, courses and videos that will be available, it will give entrants clear guidance and support to pass the assessment and join the other 175,500 CFP professionals around the world. This is the first significant release of the CFP assessment pathway since its introduction in the UK by the Institute of Financial Planning in 1995. DON’T FORGET THE ROOTS Adding to all of this, there is great work going on at the grass roots level in the CISI branches all around the UK with a financial planning representative on most committees helping build in good quality financial planning content at a local level. Do keep an eye out for some of the things we have planned and watch this space for more as the year goes on.
About Jacqueline Lockie Jacqueline is the Head of Financial Planning at the Chartered Institute for Securities and Investment (CISI). She has worked in the financial services sector since 1988 in technical and training roles and also as a financial planner. She is a Fellow of the CISI and holder of the internationally recognised Certified Financial Planner Licence, for which she was one of the first examiners in the UK. Jacqueline was previously Head of Training at the Association of Investment Companies and Director of Training and Education for the Institute of Financial Planning, where she designed, wrote and delivered new courses for financial advisers wishing to enhance their investment and planning skills and paraplanners to learn the methodology of financial planning.
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M U LTI-ASSET
Februar y 2019
Making more of
MULTI-ASSET Big changes have been made to Prudential’s multi-asset range. Paul Fidell, Head of Business Development –Investments – at Prudential, explains why the changes have been made and how the team are approaching asset allocation within the multiasset portfolios given today’s challenging economic climate IFAM: As we start 2019, many advisers have concerns over the valuations of - and the outlook for - both bonds and equities. In this light could you talk us through the asset allocation approach within the range of Prudential’s multi-asset portfolios?
Prudential is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority.
PF: We believe that the key to delivering better riskadjusted returns for investors comes down to having complementary strategies for both strategic and tactical asset allocation. Teams across M&G Prudential work collaboratively to research capital markets with different teams having different areas of expertise across both strategic and tactical asset allocation, portfolio management
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and implementation. We think this is vital. These elements provide quite different market insights, both of which can provide information for the portfolios in unique ways.
that. As advisers would expect, within the higher risk portfolios you’d have correspondingly higher exposure to risk assets such as equities.
Our long-term investment strategy team analyse a huge range of strategic factors. Overall we position the portfolios to benefit from medium to longer term capital market views. This means that the team will consider things like secular views and regime change alongside taking broad views on the business and economic cycle. In general, the outlook here is on the period of three to five years plus.
IFAM: How are you positioning the portfolios for 2019 and beyond?
Working alongside them we have a separate team focusing on shorter term behavioural market timing. They will work on anything from a one month to an 18 month outlook. It’s this approach which helps to inform and underpin our portfolio decisions. It applies to all our multi-asset portfolios and is basically the DNA or commonality between them. Our multi-asset risk managed range, PruFolio, consists of three different investment styles – passive, active and smoothed. Within those are five different strategies to match various risk profiles. This creates a matrix of 15 different funds but essentially it’s one philosophy, three different investment styles with five risk strategies within
PF: Overall, we are still focused on the fundamentals which we still think look pretty good. However, we’ve been seeing some extreme bouts of volatility recently which we try to work through and use such periods to look for opportunities to buy or sell on what we see as attractive terms. Generally we’re aiming to position the portfolios for the medium to longer term and to cope with a number of different economic scenarios. This may sound like we are aiming for the average. We’re not. We’re aiming for the best possible return for the amount of risk that our underlying clients are comfortable taking. And to create as much of an all-weather approach as we can. IFAM: What do you see as the main economic “headwinds” that might impact upon performance?
PruFolio Transform your client’s investment universe Introducing the PruFolio Risk Managed Range – 3 investment styles, 5 risk strategies, 15 funds. 1 philosophy.
Discover more at pruadviser.co.uk/prufolio This is just for UK advisers – it’s not for use with clients. The value of any investment can go down as well as up so your customer might get back less than they put in.
Februar y 2019
M U LTI-ASSET
PF: As we start 2019 there are quite a few of these. The slower growth outlook looks likely to be around during 2019 and for some time to come. As the global economy adjusts to life coming off quantitative easing (QE), deals with worries about Brexit, concerns about Italy, interest rate hikes, trade wars etc. This is creating a degree of uncertainty which markets don’t like. This is being borne out in market movements of late. Outside of equities, credit indicators are not looking too extreme - not cheap, but not expensive either. The bottom line is that short term volatility is likely to be greater as investors and markets deal with this uncertainty on a whole range of different fronts. IFAM: Does the current investment climate make diversification/efficient frontier even more important? PF: In our view it has always been important. It is more of a challenge to achieve. No longer is it possible to rely on major building blocks of equities, bonds and cash. Within our portfolios we look to be as well diversified as we can without overdoing it and where possible – and appropriate - we will use asset classes outside the major ones. This includes alternative investments, hedge funds, private equity, infrastructure etc. In the credit market we’ll consider
Explore The PruFolio Risk Managed Range Transform, simplify, and personalise your client’s investment universe with the PruFolio Risk Managed Range from Prudential.
Discover more at pruadviser.co.uk/prufolio This is just for UK advisers – it’s not for use with clients. The value of any investment can go down as well as up so your customer might get back less than they put in.
private high yield, private placement, bridging finance and new geographies. This all requires the team having the requisite knowledge, skills and experience. All of these exist within the Prudential Group. IFAM: With the fund range being refreshed, what are the differences between the PruFolio Risk Managed Passive, Active and Smoothed ranges which advisers and paraplanners need to be aware of? PF: Our multi-asset fund range has been in place for some time, but from January 2019, we’ve made some fundamental changes as well as some name changes. The main thing is that the whole fund range now shares the same approach to strategic and tactical asset allocation, as I explained earlier. When it comes to the differences, firstly, there are changes to the way that we deliver that asset allocation exposure. The passive range is now at least 70% invested in passive vehicles. Here we’re predominantly using funds from iShares by Blackrock. Within the range, up to 30% can be invested in actively managed funds.
M U LTI-ASSET
In the active range, we’re using actively managed funds predominantly available from within the Prudential group - from M&G and Eastspring Investments (our Asian asset management business). The remainder is invested in a selection of funds from external investment managers. Mainly these are Royal London and Legal and General and have been selected for further diversification benefits. These sit appropriately alongside funds from M&G to provide greater diversification. The most significant change here is that we used to involve Morningstar as fund advisers to help with selection of external managers for use in the portfolios. We are now using a largely internal, activelymanaged approach. Our smooth range uses the established PruFund smoothing approach. It combines this with full active management of the underlying range of assets, the majority of which is managed in-house. IFAM: How does your team approach work to support the investment process? PF: Essentially the team approach IS the investment process! Our team continues to do all the same things they’ve done for years, but it is now a wider team
Februar y 2019
known as the M&G Prudential Investment Office. It has significant scale, expertise and knowledge and oversees the management of around £170billion of Prudential’s investments. They do all the thinking around the strategic and tactical asset allocation, here working in conjunction with the M&G Multi Asset team on TAA, and also do manager oversight, risk and all the modelling for the longer term views. This brings together all the expertise we have. After that we use the processes to deliver the returns in the three ranges. IFAM: Why do you believe that advisers should be considering Prudential’s PruFolio Risk Managed Range for their clients’ portfolios? PF:Our particular strengths are the Prudential brand which clients are very likely to be familiar with, our excellent long term reputation as investment managers, the past performance of our multi-asset approach and also the simplicity of the fund range. This gives a broad variety of different styles which we believe will help advisers to match them with their different clients’ needs and their variety of risk appetites. Running multi-asset funds is what Prudential has specialised in for over 20 years. If you go
Prudential is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority.
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back to the with profits fund, which could be seen as the grandmother of all multi-asset funds – you can trace that back for many decades and see how this has performed throughout a multitude of different economic and market conditions. More often than not, we have delivered returns which exceed expectations and done so without taking on significantly greater risk. This approach is now available to advisers in a wide variety of funds and styles – and risk profiles – so it gives advisers greater choice. IFAM: What are the costs of the funds now? PF: We’ve reduced the cost of all of the collective funds to be extremely competitive. The passive range has an ongoing cost to the fund Ongoing Charge Fees (OCF) of around 26 basis points as an average. For the active funds, this increases to around 56 or 57 basis points as an OCF. Of course, selecting funds is not just about price, it’s about having all the benefits of the M&G Prudential Investment Office including the skills and thinking of the experts within it around strategic and tactical asset allocation.
They are run and named in a relative way - a step up in the amount of risk being taken – which should, if things work out as we expect, lead to higher returns for investors – as well as higher levels of volatility of course. So portfolios with the number 5 in their name will have the highest risk exposure, whilst those with 1 will have the lowest. Overall, we are confident that the changes we’ve made to our range will help advisers to provide more effective multi-asset solutions for their clients, so that they can spend more time building and developing client relationships and demonstrating the value of the financial planning service they can provide. For more information about the PruFolio Risk Managed Range visit www.pruadviser.co.uk/prufolio
IFAM: Are there particular client scenarios where you believe that the multi-asset approach is particularly appropriate? PF: As advisers will know, multi-asset funds are appropriate to a variety of clients’ needs. Whether the client is in the accumulation or decumulation phase and whatever their risk profile, we have an efficient and cost-effective solution to help. IFAM: When it comes to risk management, how does that work within the range? PF: The range was previously defined in terms of risk by an equity holding range which could be held within each fund. For example, 0-30%, 10-40%, 20-55%, 40-80% and 60-100%. Rather than simply tying ourselves to using equities, and beyond that in quite narrow bands, we’ve changed the objective to using a volatility ceiling limit. This gives greater flexibility for the teams involved in portfolio construction to align more closely to their risk parameters. In addition, it fits in more closely with the FCA’s current thinking about how risk managed funds should be described for investors. There is great pressure of transparency for managers so that investors have a better understanding of how those funds operate. In this light, having a volatility ceiling makes a lot more sense. These funds are essentially run relative to each other. We don’t have a particular benchmark, we’re not trying to track sector averages or anything else.
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About Paul Fidell Paul has been a Business Development Manager for Investments with Prudential since March 2008. This is his 39th year in the industry and for over 30 of those he has specialised in the areas of investment, onshore and offshore tax planning and trusts. He now covers all Prudential’s investment funds and tax wrappers including ISA, onshore and offshore bonds as well as collectives. During his career he has worked for a variety of companies including AXA, Scottish Life International and Scottish Equitable. He is DipPFS and IMC qualified.
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Advertorial
Februar y 2019
5 REASONS WHY YOUR CLIENTS SHOULD LOOK BEYOND TRADITIONAL ISA INVESTMENTS IN 2019 1. THE UK ECONOMY IS IN A PERIOD OF MARKED UNCERTAINTY The uncertainty around Brexit is weighing down the UK economy and adversely affecting growth. Additionally, Sterling’s weakness against the dollar is directly fuelling the rise of inflation. Such a situation is driving Investors towards investments that provide security in this potentially volatile environment. 2. UK INTEREST RATES ARE AT HISTORIC LOWS Your clients have been living with the reality of a low interest rate environment for almost 10 years, which is expected to continue for the foreseeable future – investors seeking to grow the value of their savings need to consider alternative options rather than traditional cash or stocks and shares ISAs. 3. THE UK INFLATION RATE IS STILL AT A HIGH LEVEL With the current inflation rate still relatively high, clients who have their savings on deposit with banks or in Cash ISAs are effectively losing money. According to the Office of National Statistics, the CPI was at 2.3% as at December and if your client was earning 0.5% pa on their deposits, they have lost 1.8% in real terms – a huge price to pay! 4. THE FTSE 100 ENDED 2018 WITH ITS WORST PERFORMANCE SINCE 2008 2018 saw the FTSE 100’s performance drop to its worst level since 2008 and although there is a chance that 2019 might see an upturn, continued macro-economic instability across the globe has the potential to bring more volatility. It’s probably fair to say that stocks and shares ISAs have traditionally done well, however investors must recognise the potential short term volatility of the stock market, and the risk that accompanies it. 5. INCREASES IN UK PROPERTY PRICES ARE EXPECTED TO SLOW Across the UK as a whole, a leading real estate services provider expects house price growth to halve over the next
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five years, from the record growth recorded since 2012. This, together with the Government’s stance towards the private Landlord makes the property market a lot less attractive to potential investors. TRIPLE POINT INCOME SERVICE ISA - A PREDICTABLE ALTERNATIVE Triple Point’s Income Service generates an attractive fixed return by providing funding through a single holding to thousands of carefully-vetted UK businesses. The service is engineered to generate a predictable income stream which is uncorrelated to traditional listed equity and bond markets. Investors benefit from Triple Point’s extensive experience as an investment manager in the Direct Lending sector. Funds raised are used to provide loans, leases and other asset finance to a large and diverse range of UK SMEs. As a leader in the private debt market, Triple Point currently manages over £350m of assets in lending and leasing strategies and has provided funding for over 100,000 businesses. If you are looking to build a balanced investment portfolio that provides clients with dependable returns over a fixed term along with security that exceeds mainstream investments, including direct investments or equity funds, the Triple Point Income Service could be considered for part of the client’s portfolio. Risk Warning: As with all investments, the Triple Point Income Service places capital at risk. Investors may not get back the full amount invested, and interest is not guaranteed. We do not provide investment or tax advice. Tax treatment will depend on your individual circumstances and may be subject to change in the future. Investors should only subscribe to the Triple Point Income Service on the basis of the information and terms set out in the Information Memorandum and Investor Agreement. Triple Point Investment Management LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 456597. Triple Point Administration LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 618187.
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Februar y 2019
Richard Harvey
Springsteen may have said that “you’ve got to live it every day” but Richard Harvey has been thinking about those whose daily lives are not so fortunate
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ddressing anyone in the vicinity who was inclined to listen, the man with the illustrated arms, strange earring and downing lager recently in my local pub loudly opined: "The world's gorn mad. Stark, raving mad". Normally, this geezer has rancid views about life in general – things like all immigration is bad or that we should tell the EU where to stuff their backstop but on this rare occasion it was difficult not to cede that he had a point.
Destitution is, of course, relative. The Joseph Rowntree report stated that poverty now affects increasing numbers of people with jobs - allegedly more than half a million workers have fallen into poverty in the last five years. To those begging on the streets of the West End, they would nevertheless seem comfortably well off. Because it doesn't matter where you are on the income scale, we all fear a sudden fall in living standards, which is particularly acute among those coming up to retirement.
RACE AGAINST TIME He'd just read (God knows where, because his usual intake is the greyhound racing column in the Daily Star) that while Britain is the fifth largest economy in the world, we had, according to the latest report from the Joseph Rowntree Trust, breathtaking levels of poverty across the nation. Now I'm no bleeding heart liberal, as the Americans so charmingly put it, but it is difficult to walk the streets of London without seeing clear evidence of begging and rough sleeping. The last time I did this was en route to a splashy Christmas lunch at The Dorchester, which compounded my swiftly-growing sense of guilt.
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Because it doesn't matter where you are on the income scale, we all fear a sudden fall in living standards, which is particularly acute among those coming up to retirement
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Richard Harvey
Februar y 2019
RISK AND REWARD As advisers will no doubt know, it was only in 2004 that the Pension Protection Fund (PPF) was set up, saving many people from a miserable old age in instances where their private sector pension schemes collapsed. Although retirees whose pension schemes have fallen into the merciful embrace of the PPF will at least see 90 percent of their benefits preserved, it is annoying to see some commentators still describing defined benefit or final-salary schemes as "risk free". They're not, as confirmed by one St James's Place adviser who I sat next to at the Dorchester lunch. But what about the freelancers and the self-employed who place their faith in an IFA to help them to plan ahead and build their savings, or - and I've come across one or two who manage their own savings? What's the protection for them? PROTECTION? Because it's not looking good out there, is it? Sliding share prices, worries about the health of the global economy, business investment curtailed because of Brexit, the destruction of High Street retail property values all threaten the savings of everyone with a pension plan, but particularly those who do not have an employer-provided scheme. Of course if the retirement fund of a freelancer taking advice from an IFA is damaged by an inappropriately risky punt, one would hope that the overall portfolio is sufficiently well diversified so that losses on one holding are made up by gains elsewhere. In serious instances where such diversification is sadly lacking, and the adviser didn’t quite deliver an appropriate solution to meet the client’s original needs, they can always complain – a journey
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Although retirees whose pension schemes have fallen into the merciful embrace of the PPF will at least see 90 percent of their benefits preserved, it is annoying to see some commentators still describing defined benefit or final-salar y schemes as "risk free".
which might even end up with the Financial Services Compensation Authority (FSCS). The FSCS paid out £372 million last year. As IFA Magazine readers will probably know, they also take a long time to decide whether or not to uphold a claim. It’s not perfect by any means. Even those in the public sector will be looking nervously over their shoulder because it surely cannot be too long before government has to bring their own employees’ pension benefits more in line with those paid to the rest of the population, simply in the interests of "fairness" (a word much beloved of politicians). Perhaps the money saved by reducing public sector pensions - plus Gordon Brown's notorious tax raid on pension scheme dividends - might be channelled into ensuring that those living on our streets are given at least some basic protection and income. Or is that too "bleeding heart"?
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M AGAZINE
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As with all investments, the Triple Point Income Service places capital at risk. Investor’s may not get back the full amount invested and interest is not guaranteed. Past performance is not an indication of future performance. Tax treatment will depend on your individual circumstances and may be subject to change in the future.
020 7201 8990 contact@triplepoint.co.uk
INCOME SERVICE
This financial promotion has been issued by Triple Point Administration LLP (“TPAL”), which is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom with firm reference number 618187.
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