Is Mr Blue Sky up there waiting? | IFAM98 | May 2021 by Clifton Media Lab

For today’s discerning financial and investment professional

Is Mr Blue Sky up there waiting? M&G: Pushing for greater impact through company engagement

May 2021

ANALYSIS

REVIEWS

IHT planning using business relief: Blankstone Sington

The rise of digital technology in financial planning

IFAM98

COMMENT

INSIGHT

CONTE NTS

CONTRIBUTORS

May 2021

Welcome

What are the key drivers in client acquisition?

Faith Liversedge

Cumbrian advice firm Financial Management Bureau has joined up with Lancaster University Management School to discover clients’ preferences

Why every adviser firm needs to think like a media company Faith Liversedge argues that effective client communication is essential in the current climate

Sue Whitbread Editor sue.whitbread@ ifamagazine.com

Senior Managers and Certification Regime – the “new culture” Compliance consultant Tony Catt looks at the details

14 Peter Wilson Online Writer, IFA Magazine peter.wilson@ifamagazine.com

Effective IHT planning using business relief A case study approach from Blankstone Sington

Pushing for greater impact through company engagement M&G’s Ben Constable-Maxwell

18 Alex Sullivan Publishing Director alex.sullivan @ ifamagazine.com

Tax: a window of stability in uncertain times? Matt Dickens of Ingenious considers how advisers can help to steer clients through speculation about future tax changes

Recognising clients’ changing expectations of technology

Kim Wonnacott Head of Technical Sales and Marketing kim.wonnacott@ifamagazine.com

Peter Carey Technical Sales and Marketing Peter.carey@ifamagazine.com

Visible Capital’s Ross Laurie highlights how ‘uberisation’ is affecting the world of financial advice

Does the ‘S’ in ESG have ‘middle child’ syndrome? MainStreet Partners’ Simone Gallo examines what defines ‘social’ in the context of analysing a company ’s ESG credentials

Is value investing returning to favour? Momentum’s Tom Delic believes the tide is turning

Mental ‘W’health An article with a difference from Michelle Hoskin as she warns of the dangers of failing to look after your own mental health effectively

The tax trap whose bite is worse than its bark JM Finn’s Atticus Kidd explains the increasingly complex rules around the pensions annual allowance

Digitise me Origo CEO Anthony Rafferty reflects on his personal experiences of the financial advice process to highlight how Fintech can boost efficiency and effectiveness

Where will we find the next Uber? EISA’s Mark Brownridge explains his reasons for believing that it will be companies from within the EIS and SEIS ranks

IFA Magazine is published by IFA Magazine Publications Ltd, Tel: +44 (0) 1173 258328 3 Worcester Terrace, Clifton, Bristol BS8 3JW © 2021. 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

Will Hale, CEO at Key highlights how and why the over 55s can use property wealth to support their financial plans

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Modern equity release has evolved along with its clients

Family offices are realising money does grow on trees Michael Ackerman of EcoForests Asset Management reminds of the growing importance of sustainability and the influence of millennials in family offices

Are tech stocks set for a dip as UK lockdown restrictions ease? Giles Coghlan of HYCM reflects on whether a strategy to ‘sell in May and go away ’ is likely to prove valid this year or not

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WE LCOM E

May 2021

MR BLUE SKY?

o here we go on our slow but steady journey emerging from the restrictions of the long and difficult winter lockdown here in the UK. As May progresses, we can now look ahead with the prospect of significantly greater freedoms coming our way. Who knows, this might even mean a return to office life for some across the financial planning profession. Will we start to see the emergence of a new hybrid model of working from home all mixed up with a few days in the office? There can be little doubt that many of us having been missing the benefits of working together as a team again, face to face, even if we do only end up doing so for a day or so each week.

A BEAUTIFUL NEW DAY?

WELCOME TO THE HUMAN RACE

MR BLUE SKY’S UP THERE WAITIN’

With Prime Minister Johnson’s ‘roadmap’ seemingly on track to allow the final opening of hospitality and other indoor venues later in the month, the stage looks to be set for a summer of change. At least here in the UK. After fourteen long months of living with Covid-19, our lives have changed in so many ways; some for the better perhaps, some not.

As is our way, the focus is always on delivering a series of longread articles, giving practical tips which you can consider and take away to integrate into your own business practice.

WHERE DID WE GO WRONG? Sadly however, as we look at the incidence of Covid-19 across the globe, we don’t see this same picture emerging everywhere. The catastrophic and desperate footage we see on our screens coming out of India at the moment is heartbreaking. It serves to remind us that this pandemic is far from over. We are going to have to learn to live our lives around it and adjust to its wicked and deadly ways for some time to come despite the huge benefits of the vaccination programme.

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So, what about the world of financial planning as we face these new freedoms? There can be no doubt that the profession has quickly adopted new ways of remote working and made rapid progress in the use of technology. But is there further to go? This edition of IFA Magazine is packed with insight, analysis, opinion and practical tips that you can use to shape your thinking around how you deliver business excellence for your clients and colleagues as well as broader issues around compliance and regulation, tax planning, products, investments etc.

On the subject of business practice, you’ll discover articles ranging from how to cope with mental (w)health issues through to the challenges of helping your business to thrive in these days of digital transformation. When it comes to technical subjects, you’ll find analysis on IHT, EIS, ESG, pensions, equity release and many other areas to help shape thought processes. So, go and get yourself a coffee and settle down for a read. As always, we’re indebted to you, our readers, as well as all of our contributors for sharing their expertise with us. Thank you all. Sue Whitbread Editor IFA Magazine

CLI E NT ACQU ISITION

May 2021

WHAT ARE THE

KEY DRIVERS IN CLIENT ACQUISITION?

Reputation and word of mouth still trump digital marketing for clients choosing which financial adviser they want to work with. That’s according to new research conducted by Lancaster University Management School on behalf of Financial Management Bureau, an advisory firm based in Kendal, Cumbria.

inancial advisory firm Financial Management Bureau (FMB) has tasked students at Lancaster University Management School with a six-month project to find out how people choose a financial adviser.

MODUS OPERANDI The six BA Marketing students who are based in the UK, South Korea, China, Spain and Romania, studied academic papers and third party research, as well as creating their own survey of around 150 people and conducting phone interviews.

Most people’s research into financial advisers (40 per cent) consisted of looking for referrals or recommendations, or via reviews (20 per cent) or news articles (15 per cent).

These results are very helpful in reminding us that often the most effective marketers are satisfied clients themselves, who will share their experiences with others

They found that the vast majority of people heard about their current financial adviser via either word of mouth (34 per cent) or referrals (24 per cent), with a further 33 per cent learning about them from people including family members, employers or professionals such as accountants.

Respondents to the survey listed reliability and reputation as by far the most important factors they considered when choosing a financial adviser. Price was the third most important consideration, closely followed by breadth of service.

Only around five per cent of the survey respondents said they would rely on an online search.

As FMB managing director Liz Beavis explains, “There are so many factors to take into consideration in marketing

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CLI E NT ACQU ISITION

these days that it can be easy to begin missing the wood for the trees. “These results are very helpful in reminding us that often the most effective marketers are satisfied clients themselves, who will share their experiences with others. And, of course, the basis of these positive experiences comes from the one-onone service they receive and staff and advisers making the effort to give them extra help and add value.”

May 2021

FMB has been working with Lancaster University for a number of years, collaborating on projects to both enhance learning for the students and give insights to the business. Ruth said: “We don’t have the resources or time to undertake this kind of market research, so student projects give our business something extra. They are looking at things as a blank canvas and often see things from a different perspective.”

Liz, who is also a financial planner within the business added: “People also said they appreciated honest, clear, jargon-free advice that was personalised to them. This is perhaps no great surprise, but it does go to show the value of being down to earth and taking the time to treat people patiently and ‘like human beings’.”

Liz added: “It’s so refreshing to have new sets of eyes on the business. They have really come up with some interesting findings as to what prompts people to seek advice and how they go about choosing an adviser. This is really important for us to understand, as we go about growing our business and finding new clients.

ONLINE FACTORS

“I would recommend that other local businesses take a look at how they can work together. It’s great for the students and really injects energy into your business as well.”

The research also found that having a high quality website was only moderately important to many respondents (41 per cent) when choosing a financial adviser, with the important target market of the over-55s placing the least value on this.

COLLABORATION BRINGS WIN-WIN

At the same time, 91 per cent said that social media had no influence on their choice, with 32 per cent getting their information from newspapers and 28 per cent from email newsletters. Ruth Power is Director of Business Development at FMB and says that this was a reminder that it was important for advisers to connect with people using a range of media. “Of course, the research doesn’t cover how much of a negative effect a poor website may have or how much of a part social media may play in subconsciously nudging people,” said Ruth, who is also an entrepreneur in residence at LUMS. “However, I think the transition to digital is a slow one when it comes to financial management, because we have a lifetime client journey and different clients access media in different ways. “It’s about managing that transfer to digital; you can’t just flip everything. You have to take into account that still the most important way for people to hear about the business is a recommendation from someone they know and trust.”

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The project has clearly brought benefits for the students themselves too. Project tutor Catherine Ford said: “There is no substitute for working on real world research projects for our students. It allows them to get first-hand experience of how businesses operate - insights into real clients provide invaluable employability skills for our final year marketing students and equip them with an impressive range of skills valued by employers. It’s also great to have been able to work with FMB and generate some genuinely helpful data for them to work with.” PUTTING THE FINDINGS INTO PRACTICE Having conducted the project, what changes will FMB be making as a result of its findings? Ruth Power explains that the team are now looking to engage more with traditional print media. She comments “our client base still likes newsprint, so we have started being more active in communicating with journalists and distributing stories through a range of channels.

May 2021

CLI E NT ACQU ISITION

"However, we are aware that people at all stages of their lives are looking for financial advice and that, often, it is a decision making process that takes a number of years. This means we have to communicate in ways that chime with all of these markets.

Our client base still likes newsprint, so we have started being more active in communicating with journalists and distributing stories through a range of channels

"So, we are taking measures such as listing ourselves on more online directories such as Unbiased.co.uk. Although this may not lead to a huge amount of direct leads it does improve our visibility on Google searches. "At the same time, although we agree with the students that social media is not a major influence for our current client base, we cannot rule out the fact it may influence future clients, so we are looking into ways we can grow our presence across a number of different platforms. The students also felt our website needs to show more of our credentials and expertise so we will be updating it to showcase our awards and qualifications more predominantly. "And, of course, the most important thing is to continue making sure each individual in the business continues to offer the best client service we can and that we all continue to

make the extra effort for our clients, because this will always be our most potent marketing tool." Key Points • Word of mouth and reputation trump digital when it comes to choosing financial advisers • The vast majority of people say social media has no influence on their choice • A high quality website is only moderately important to potential clients

About Ruth Power Ruth is FMB’s Director of Business Development. She is the daughter of founder Leslie Beavis and joined FMB in 2007. She enjoyed a successful career in Education including management roles in Primary Schools in Cumbria, London and Leeds, before moving back to start a family and join the company. Ruth's main role is communicating with clients and professional connections.

About Liz Beavis Liz began her career at FMB in July 1999. Starting out as a Marketing Assistant she worked her way through the company to become appointed firstly as Director of Marketing and then Managing Director in 2008, as well as being a fully qualified adviser. Before FMB she worked at the Chamber of Commerce Training Division in Lancaster, promoting their services to the wider community. As the daughter of one of the two founders, Leslie Beavis, FMB has always been an important part of her life as the business has grown from a desk in the family living room to occupying the prominent Shenstone House on the outskirts of Kendal, with over 25 employees.

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BETTE R BUSI N ESS

May 2021

WHY EVERY ADVISER FIRM NEEDS TO

THINK LIKE A MEDIA COMPANY

As clients become more tech-savvy, Faith Liversedge warns of the dangers of failing to make sure your advice business can stand out from the crowd in this new and changing world of advice

know what you’re thinking - another click-baitey headline - but please hear me out.

We all know the adviser world (as with every profession/industry on the face of the planet) is going through a period of enormous change, the seeds of which lie long before anyone had heard of COVID-19. Robo-advice, productisation, regulation galore, a nightmare PI market for many firms, the looming intergenerational shift of wealth, an ageing client demographic, acquirers becoming more picky than ever - not to mention the challenges of remote work, service delivery and then you guessed it... the pandemic. It’s a lot.

be compared against apps, productised services and roboadvice/investing solutions. Of course, you and I know that on one level, that’s mad, the value of a proper financial planning service, trusted advice and having a tailored portfolio to help you achieve your objectives cannot possibly be encapsulated in a mobile app. The challenge, however, is to communicate that effectively and... to stand out.

Advisers are facing a world in the near future where they ’re going to have to appeal to a younger, more tech-savvy generation

THE NEED TO STAND OUT Advisers are facing a world in the near future where they’re going to have to appeal to a younger, more techsavvy generation. A world in which their value is going to

Now that geographical boundaries don’t exist, both in terms of remote work and for clients choosing an adviser, what is it that is going to make a prospect choose to work with you?

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BETTE R BUSI N ESS

This is the challenge: how are you going to communicate the value of what you do, entirely remotely and stand out from the ever-expanding options available to those set to inherit the baby boomer wealth? WE’RE ALL MEDIA COMPANIES NOW Look, it’s an old idea. Ask a social scientist and they’ll tell you that Andy Warhol started the concept of a personal brand. Look at social media, we’re all creating content, we’re all communicating at scale, we’re all marketing ourselves in a bizarre way.

May 2021

What they want is reassurance, to know you’re there, to know that their money is safe, that you’ve got their back. Believe it or not, they do want to see your face - even if it’s a video in their inbox or a webinar on a valuable topic. Do not be in doubt: you have something valuable to communicate. In a remote-first environment, which, make no mistake, is here to stay, creating regular content for your clients and for your prospects is an absolute must for all firms. You have to think like a media company - who’s my audience? (chances are you have multiple audiences). What do they need to know? What do they care about? And… create content that speaks to that.

To stand out effectively, adviser firms have to create content and lots of it

To stand out effectively, adviser firms have to create content and lots of it. Blogs, videos, podcasts, case studies, testimonials, webinars - you name it. We need to explain the value of financial advice and planning and if you’re not already, you need to get into the business of producing content that does so.

Just take a look at this example: NHS Pensions Podcast - Barnaby Cecil Financial Planning This boutique firm in London specialises in financial planning for medics. Directors Tom and Emma created a podcast helping medical professionals understand the quagmire that is the NHS pension scheme. The podcast has built up a loyal following and has brought in numerous clients. You never know, once you get into the habit you might even enjoy it!

At the end of the day, that is what is going to make you stand out from a faceless iPhone app, the grandiose direct-toconsumer cashflow modelling solution with open banking. Putting yourself out there. Now I’m fully aware that for a lot of advisers, that might sound like a fate worse than death, and I sympathise as I felt like that once too. Who wants to hear from you anyway? You might think. Trust me, your clients do. THE NEED FOR REASSURANCE No, they don’t want to read some syndicated market update with your logo slapped on the top.

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About Faith Liversedge Faith Liversedge is an experienced communicator with a wealth of knowledge and understanding of the adviser profession. She was Marketing Manager at Nucleus for 5 years, creating innovative and award-winning campaigns. Before that she worked for Standard Life, Prudential and Royal London. In 2017 she set up her own consultancy to help forward-thinking financial advisers and planners to become more profitable through websites, communications and other laser-focused marketing techniques.

TONY CATT

May 2021

SENIOR MANAGERS & CERTIFICATION REGIME –

THE “NEW CULTURE” In this Catt’s Eye View, Compliance Consultant Tony Catt uses his personal experience to take a look at the integration of the SM&CR for all regulated firms and what outcomes it is trying to achieve as a result

his regime has been in position with the banks and insurance companies for some years now. The major effect for those institutions was the introduction of “formal” scopes of responsibilities for Directors and Senior Managers. It brought in accountability and focus to the roles of individuals. Whilst this could be seen as a stick to beat people with, it also acts as protection to those individuals as it clearly states where their duties start and stop. THE EXTENSION OF SM&CR It was introduced to regulated firms of all sizes in 2019. The start date of the regime was 9th December 2019 with a year for transition, which was then extended to March 2021 because of Covid. As is ever the case, many firms left it to the last minute to register their Directory Persons (yuck – there must be a better name that could be given) and also to provide the training on Conduct Rules. The Certification Regime passed the onus from the FCA back to firms in relation to due diligence on recruitment and ongoing supervision to ensure

continued fitness and propriety for the Directory Persons to continue to be registered. Also, there is a specific edict that firms need to keep the Directory up to date with accurate information. Personally, I am delighted about this as it provides work for me as a compliance consultant! However, all this is secondary to the adherence to the Conduct Rules. In fact, I have set up a Powerpoint presentation to provide the SM&CR training for some of my IFA client firms. THE LONG AND WINDING ROAD In order to raise the levels of trust in Financial Services providers and products, the Financial Conduct Authority (FCA) has tried many different projects over the years which are aiming to increase the likelihood of good outcomes for customers. Those initiatives are: • Treating Customers Fairly (TCF) • Retail Distribution Review (RDR) • Markets in Financial Instruments Directives 1 & 2 (MiFID 1 and 2)

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TONY CATT

• And now the Senior Managers & Certification Regime It is a puzzle to me that so much effort from the regulator seems to be needed to get advisers to behave honourably to clients. WHAT’S IT ALL ABOUT?

May 2021

• Rule 3: You must be open and cooperative with the FCA and other regulators • Rule 4: You must pay due regard to the interests of customers and treat them fairly • Rule 5: You must observe proper standards of market conduct.

The SM&CR aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence.

SENIOR MANAGEMENT CODE OF CONDUCT RULES

The SM&CR is a catalyst for change – an opportunity to establish healthy cultures and effective governance in firms by encouraging greater individual accountability and setting a new standard of personal conduct.

• Rule 1: You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.

As part of this, the SM&CR aims to: • encourage a culture of staff at all levels taking personal responsibility for their actions • make sure firms and staff clearly understand and can demonstrate where responsibility lies It is intended that the training for SM&CR is not simply a bit of training undertaken to tick a box, but the adoption of a culture within the organisation. • The culture of an organisation should be led by good practice within the management. • But should be adopted by all personnel – management, advisers and administrators. • The culture of the organisation should be constant good practice. • How people should behave even when their boss is not looking. As such, the Conduct Rules are very basic behavioural points and should not be news to anybody working in any business. They should represent minimum standards of conduct.

• Rule 2: You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system. • Rule 3: You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively. • Rule 4: You must disclose appropriately any information of which the FCA would reasonably expect notice The main takeaway from this article should be that the FCA wants the SM&CR Conduct Rules to represent the culture of your organisation and your own personal behaviour when you perform your duties. The FCA expects to see proof that training has been provided on the Conduct Rules and that it has been revised. Obviously, the main hope is that firms and individuals will embrace this culture with the result that clients will receive consistent and constantly good outcomes from the advice process. How difficult can it be?

INDIVIDUAL CONDUCT RULES

• Rule 1: You must act with integrity

• Rule 2: You must act with due skill, care and diligence

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Tony Catt Compliance Consultant TC Compliance Services 07899 847338

BLAN KSTON E SI NGTON

May 2021

EFFECTIVE IHT PLANNING USING

BUSINESS RELIEF Blankstone Sington’s Inheritance Tax Portfolio provides an award winning approach to sheltering part of your client’s estate from IHT, with the potential for capital growth. The following case study illustrates one way in which it can be used to support the needs of an individual client.

ith so many different ways in which advisers can help clients to minimise the IHT liability on their estate after their death, Liverpoolbased stockbroker and investment manager Blankstone Sington’s Inheritance Tax Portfolio has the advantage that investors have the opportunity to obtain full IHT relief after only two years. HOW DOES IT WORK? The IHT portfolio comprises companies traded on the Alternative Investment Market (AIM), with the objective of securing Business Property Relief (BPR) against IHT by investing in a range of qualifying companies, yet still enables your clients to maintain control of their assets. As a business, they have been successfully investing in smaller companies for over 40 years. Their Inheritance Tax Portfolio has been available to investors since 2010, and operates through our specialist in-house research department.

AN IHT CASE STUDY The following case study shows how the IHT portfolio can be used to help a client meet their IHT planning needs. The client scenario Mr Cunningham is 90 years’ old, is in good health, of sound mind and has investments valued at £600,000. The value of his assets is such that, notwithstanding existing tax reliefs and exemptions, and without acting soon, his estate is likely to incur an inheritance tax charge upon his death. His financial plan has shown that with a net disposable income of over £65,000 per annum, Mr Cunningham can afford to tolerate risk and some financial loss from his investment portfolio without negatively impacting his future standard of living. Critical for this client is his objective to mitigate his potential inheritance tax liability to the best of his ability whilst retaining control of his assets.

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THE ADVANTAGES OF BUSINESS RELIEF He understands that taking advantage of the tax benefits of Business Relief, by investing into a portfolio of qualifying investments for a minimum of two years, gives him that option. He further understands that the funds must remain invested until his death if a claim for inheritance tax relief is ultimately to be successful. An investment in selected AIM stocks via Blankstone Sington’s Inheritance Tax Portfolio is therefore an appropriate option to meet his needs. Mr Cunningham’s application is assessed to ensure that the service meets his needs, objectives and risk profile. ASSESSMENT OF NEEDS As he is over 90 years’ old, an assessment of Mr Cunningham’s vulnerability takes place and additional care is taken with regards to investment advice. Studies suggest he will become increasingly more likely with each passing year to suffer from physical ailments which may impact his ability to look after himself, potentially requiring costly additional care, or mental ailments which may impact his ability to assess and understand his investments and make financial decisions. We determine that he is a confident investor with experience using a range of financial products and services, frequently reviewing the value of his pensions and investments. His income exceeds his expenditure and his capital reserves are such that he will not require access to the portfolio to fund his current standard of living or to meet any future expenses including potential care costs, in future. Mr Cunningham’s tolerance for risk is high. Indeed, he understands that the Inheritance Tax Portfolio follows a high-risk investment strategy and that its value may fluctuate sharply. Despite his age presenting potential susceptibility for harm, Mr Cunningham displays no signs of vulnerability. Mr Cunningham decides to invest £65,000 in the IHT portfolio, which represents a relatively modest proportion of his overall capital.

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May 2021

KEY CONSIDERATIONS • Net worth and income • Current IHT liabilities • Confident investor whose attitude towards risk is high • Investment timescale – no requirement or intention to access funds SUMMARY OF BENEFITS • £65,000 invested in IHT portfolio • 100% IHT exemption after two years • Reduction in IHT tax bill of £26,000, assuming 40% tax (based on current legislation) • Continued control over the assets and ability to access at any time • Recommend retaining income produced for re-investment • Anticipated portfolio yield of 2-3% £1,300 - £1,950 additional income per annum About Blankstone Sington Since 1976 Blankstone Sington has been one of Liverpool’s leading investment management and stockbroking firms. Thorough yet flexible, Blankstone Sington provides a bespoke, trusted service and prides itself on being independently owned, meaning the firm isn’t burdened by a rigid ‘corporate view’. We have worked in close association with other professionals – including financial advisers - for many years, supporting their clients and businesses through our range of services, including: Bespoke Investment Management, Model Portfolio Service, Inheritance Tax Portfolio Service and Stockbroking. Our approach is tailored to meet individual clients’ needs and objectives. We will work collaboratively with you to review and develop suitable investment strategies and create a portfolio to meet specific financial targets and goals in order to help your clients to achieve their aims, delivering the same high standard of service that you provide for your clients. To find out more visit www.blankstonesington.co.uk or email enquiries@blankstonesington.co.uk

M&G I NVESTM E NTS

May 2021

PUSHING FOR GREATER

IMPACT THROUGH COMPANY ENGAGEMENT

Ben Constable-Maxwell, M&G Investments, suggests that by using influence to persuade companies to improve their disclosures and targets, impact investors can aspire to shape better outcomes for people and the planet

he purpose of impact investing is ultimately to exact positive change. By putting our money to work in a purposeful way, investing in companies that are committed to solving the world’s challenges, we can aim to have a meaningful impact. As active fund managers, we can also target a positive impact through how we invest, as well as what we invest in. We can do this by being a good influence. ENGAGING FOR POSITIVE IMPACT In the same way that impact investing is about solving challenges, company engagement is about using our voice to help shape better outcomes. The purpose of engagement is multifaceted. One aspect is to enhance our understanding of the impacts – positive and negative – that each company has through its activities. Dialogue not only allows us to gain new knowledge and insights, but also allows us to push companies to enhance what they disclose publicly. We might also persuade them to adopt more specific or more ambitious impact-related targets.

In 2020, a key concern for us was how our investee companies were being affected by the COVID-19 pandemic, and what they were doing to address its negative ramifications.

In the same way that impact investing is about solving challenges, company engagement is about using our voice to help shape better outcomes

We sent a letter to the leadership of each company held in one of our impact strategies. We firstly asked for an update on efforts, activities or initiatives undertaken to help combat the impact of the crisis. Secondly, we asked how the company balanced the interests and wellbeing of its workforce with issues such as executive compensation and shareholder returns. We received responses from most companies, demonstrating overwhelming support for those affected by the pandemic.

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Overall, we were pleased to observe a strong alignment between the actions taken and their mission statements. ENGAGING WITH CHALLENGING TOPICS I believe engagement is especially important when it comes to more sensitive topics. As impact investors, we need to recognise any negative effects from a company’s activities. Even sectors that generate clear environmental benefits, such as renewable energy, can have cause biodiversity damage, for instance. Hydro power systems can interfere with freshwater ecosystems, due to dams’ impact on natural river flow, and windfarms can affect bird life. For us, the key is that a company’s net impact on society is positive overall. Where there are negative impacts, I feel we have a responsibility as impact investors to help companies mitigate them and to push for change where it is needed.

While it can never guarantee positive results, engagement demonstrates our effort and energy to drive positive change There can also be sector specific considerations. Given the nature of the healthcare sector, for instance, we focus on whether companies provide affordable access to their products or services. Effective engagement can lead to better outcomes, for companies and wider society. While it can never guarantee positive results, engagement demonstrates our effort and energy to drive positive change. I therefore believe it can help maximise our impact as investors. Important information The views expressed in this document should not be taken as a recommendation, advice or forecast.

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May 2021

When you're deciding how to invest, it's important to remember that the value of investments goes up and down. So how much your investments are worth will fluctuate over time, and you may get back less than the original amount you invested. The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance. For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within. This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England and Wales. Registered Number 90776.

About Ben Constable-Maxwell Ben Constable-Maxwell is Head of Sustainable and Impact Investing, leading M&G’s strategy on impact investing as well as covering sustainability issues such as climate change and the circular economy. He has been central to the development of ESG integration within M&G’s investment processes and has supported the development of ESG solutions for clients across asset classes. Ben plays an active industry role as a member of various sustainable and impact investment initiatives, interacting with companies, policymakers, NGOs and other investors. He is a Trustee at Firefly International youth organisation, which provides educational and mental health support for young people in conflict-affected areas in the Balkans and Middle East. Previous to joining M&G in 2003, Ben spent four years with the Equities team at Invesco Perpetual. Ben has an honours degree in Classics from the University of Newcastle-upon-Tyne.

May 2021

I NGE N IOUS

TAX: A WINDOW OF STABILITY IN

UNCERTAIN TIMES? Matt Dickens, Senior Business Development Director at Ingenious considers how advisers can help to steer their clients through any further speculation and undoubted change around tax rises in future

s the Spring Budget on 3 March drew closer, speculation about the potential for tax increases to help pay for the booming deficit brought about by COVID-19 grew and advisers and investors alike were clearly mindful of this threat. So it was a relief to many when, instead of announcing sweeping hikes in taxation, Chancellor Rishi Sunak proved mindful of the fragility of the economic

For more than a year now, many people have held off on making vital long-term decisions due to the fear of the unknown

recovery and focused on retaining and creating jobs and supporting businesses. For personal tax affairs, the headline was a long list of rates and reliefs being frozen until 2026. THE ROAD AHEAD However, uncertainty about the future is a constant, especially in a period of profound economic adjustment. So, how should advisers help to steer their clients through any further speculation and undoubted change? For more than a year now, many people have held off on making vital long-term decisions due to the fear of the unknown, yet they need to accept that another year or more of inaction due to the potential for further uncertainty comes with its own real risk. And the longer it goes on, the more risk they are taking.

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May 2021

4. Reduce the potential for Inheritance Tax (IHT)

I believe that advisers should be developing a wider later life planning proposition, and not just be narrowly focussing on estate planning

KEEP IT FLEXIBLE Taking this backdrop into account, a financial planning strategy that remains inherently flexible to any possible future changes, but in the meantime delivers on the key outcomes the client requires is going to be the most appealing. Any financial plan needs to stack up in line with the wider objectives of the client, such as achieving investment growth, rather than focusing purely on the associated tax advantages, as these advantages could change or even disappear. This is why I believe that advisers should be developing a wider later life planning proposition, and not just be narrowly focussing on estate planning. PLANNING IN PRACTICE – AN EXAMPLE Here is an example of a desired outcome of someone planning for later life; “To manage my financial affairs in a way that means I can meet whatever opportunities or challenges may arise in the future. This includes dealing with long-term care, whilst growing my wealth throughout my life and lastly being able to pass any remaining funds on to my loved ones.” Breaking this statement down into individual objectives, the adviser will be looking to: 1. Maintain flexibility and access to the investment, so they can make regular or lump sum withdrawals as required 2. Maximise income and wealth through continued investment growth 3. Provide both financial and practical support to the delivery of care needs, if ever required

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Note the wish to reduce any IHT payable is deliberately last on the list of desired outcomes. The danger of focussing on the estate planning part of these objectives is twofold. Firstly, the threat of future legislative changes, or tax relief changes, causes uncertainty as to the efficacy of any purely tax-focussed strategy. And this remains the case whether one feels they can predict the future or not! Secondly, the danger of ignoring the other higher priority objectives. Many tax-focused strategies are a one-trick pony and restrict the potential for wider benefits. In this case, with a tax-focused strategy, the investor may have to forgo any long-term investment growth, or the flexibility to easily and predictably access the investment to pay for care, for instance. So, when considering the threat of tax changes to later life planning, the investment rationale and wider utility of the service you recommend should lead the planning decisions, rather than just narrowly focusing on the tax benefits. Any financial plan needs to stack up in line with the wider objectives of the client, such as achieving investment growth, rather than focusing purely on the associated tax advantages, as these advantages could change or even disappear. This is why I believe that advisers should be developing a wider later life planning proposition, and not just be narrowly focussing on estate planning.

About Matt Dickens, Senior Business Development Director at Ingenious Matt is Senior Business Development Director and co-Head of Ingenious’ Business Development Team, responsible for developing all relationships with both advisers and investors alike across the unlisted Private Equity space. As well as running the team, Matt specialises in imparting specific financial planning knowledge useful to those advisers and articulate to them the value in Ingenious’ range of specialist, alternative, non-correlated investments that also provide less volatile returns and a host of important tax-efficiencies. Ingenious achieves these outcomes primarily via a range of unquoted, BR-qualifying offerings designed to deliver class-leading returns and specific mainstream financial planning outcomes for investors.

May 2021

BUSI N ESS DEVE LOPM E NT

RECOGNISING CLIENTS’ CHANGING EXPECTATIONS OF

TECHNOLOGY Ross Laurie, CEO, Visible Capital, heralds a warning to adviser businesses to take a leap forward in automating their processes in order to improve their client service proposition in these days of ‘uberisation’

here’s no doubt that our lives have been rapidly digitised under lockdown. In the course of a run of the mill day, we regularly leap between a dozen or more different platforms to conduct our work and social lives.

1pm

Order in pizza for lunch from Deliveroo

2pm

Dropbox spreadsheet to colleague and share documents on google suite with team

4pm

GoToMeetings chat with a client to analyse their most recent financial data and objectives

These days for many of us, a working from home day may very well go something like this:

6pm

It’s a Friday - drinks with friends on zoom all arranged on social media

8.00am

Tesco delivery arrives after ordering online

8.30am

WFH day starts with logging onto Slack to message colleagues and set up Microsoft Teams meetings

9.00am

Help kids to log onto Mathletics for home schooling

Ironically perhaps, when there are few reasons these days to actually jump in a taxi - the word being bandied around for describing the digitisation of our lives is “uberisation”. Or as the Cambridge Dictionary defines it “to change the market for a service by introducing a different way of buying it or using it, especially using mobile technology”.

9.10am

Amazon delivery of printer ink cartridges

9.30am

Whatsapp video consultation with vet for dog’s infected eye

10.00am Log into Monzo banking app to check balance and pay bills 12 noon Feeling optimistic - use booking.com to put staycation in the diary

APP, APP AND AWAY In our uberised world, we are all more comfortable than ever before with the way markets have changed and with using the technology that drives them. According to Mastercard’s Global State of Pay report carried out across 14 different countries, 53% of the world’s

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population is using banking apps more than they were before the pandemic. Mastercard research also showed that people in the UK are now “more likely to have a banking app than a social media app on their mobile phone. Almost three in five (59%) of Brits say they have a mobile banking app, compared to half (50%) who have social media apps.” And interestingly, particularly for wealth management professionals whose client demographic is likely to be predominantly aged over 50, the Mastercard research, reported on finextra.com, showed that “26% of over 65 year olds are using their mobile phones to make payments and that 42% would consider using other types of digital payments due to their experience with using their banking app during COVID-19.”

Your clients will expect accessibility, convenience, efficiency and speed from you as their adviser because that’s what they ’re used to getting from all the digital platforms they are using across their professional and social lives

THE CLIENT EXPERIENCE This is important for our industry. The clients with whom financial services professionals are dealing with each day, whatever their age, are likely to be increasingly uberised. They are now digital savvy and that will affect their expectations of the service they expect from you, their adviser. Your clients will expect accessibility, convenience, efficiency and speed from you as their adviser because that’s what they’re used to getting from all the digital platforms they are using across their professional and social lives. We know, from the business which we are doing with them, that financial advisers throughout the UK are beginning to recognise this. Visible Capital’s complementary technology for the advice market uses intelligent automation to speed

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May 2021

There’s no going back and financial advisers who want to keep ahead of their competition will increasingly embrace technology to ensure they meet and exceed their clients’ expectations

up the onboarding process, provides a friction-free client experience and ensures that advisers continue to have access to crucial client insights so that they can build strong and profitable relationships with those clients. And when clients get the kind of swift and seamless service from their financial adviser that they are used to getting in all other areas of their uberised world, they remain loyal and profitable. Baroness Martha Lane Fox, interviewed on BBC Radio 4 recently, talked about the way that lockdowns would simply not have been possible without the internet and its associated technologies. Most of us have stepped up our dependence on technology and appreciated its many conveniences. There’s no going back and financial advisers who want to keep ahead of their competition will increasingly embrace technology to ensure they meet and exceed their clients’ expectations. Interestingly as Martha Lane Fox wrapped up her interview she said she was off to vote in the House of Lords - on her mobile. Uberisation indeed.

About Ross Laurie Ross is the Founder and CEO of Visible Capital. He has worked in the technology and finance sector for over 20 years. His previous company built a number of the onboarding interfaces for retirement planning both pre and post-RDR. Visible Capital is an award winning technology provider that helps financial advisers, wealth managers and pension providers automatically collate and enrich client financial data for use in the financial advice journey.

May 2021

MAI NSTRE ET PARTN E RS

DOES THE ‘S’ IN ESG HAVE

‘MIDDLE CHILD’ SYNDROME?

Long overlooked in favour of its more obvious counterparts, last year saw investors turn a corner and beckon in ‘an era of social impact investing’, says MainStreet Partners’ Managing Director, Simone Gallo

f 2020 was the year ESG went mainstream, it could also be viewed as the year businesses came under unprecedented scrutiny for their social practices.

In Europe, over half of new fund flows last year went into ESG products. Total fund flows in 2020 hit €574.3bn – the second highest amount in the industry’s history – of which ESG products accounted for 50.46% (€289.7bn). 1

Yet for an abbreviation growing more ubiquitous by the day, the ‘S’ (or social) element of ESG investing has been stubbornly difficult to understand and historically challenging to get the measure of. In this respect, it has been much like the fabled middle child – “excluded, ignored and often outright neglected”2 – largely skimmed over in favour of its environmental or governance siblings. Until last year that is. As with much of 2020’s contemplation of the previously underappreciated, the catalyst was the Covid-19 pandemic. Suddenly in plain sight the true chasm between the haves and have nots; the questionable treatment and remuneration of people in key worker roles; the shortcuts certain companies seemed willing to

take to protect their bottom line; and in some instances, the lack of provision of basic human rights. Finally, questions were being asked about big business’ ‘licence to operate’: Were they contributing positively to society? Was it right for profit to be prized above all else?

The ‘S’ (or social) element of ESG investing has been stubbornly difficult to understand and historically challenging to get the measure of

IT’S A PEOPLE BUSINESS Answers have not always been forthcoming. Part of the reason for this is the intangibility of what defines ‘social’ in the context of analysing the ESG credentials of a company. Broadly, we are talking about the impact a business has on people. Those inside its organisation and those outside

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May 2021

it: employees, customers, suppliers, neighbours, society at large and even future generations.

orders even when business slows due to unexpected ‘acts of god’.

This complex web of stakeholders goes some way to explaining why the assessment and measurement of a company or fund’s societal impact can be so difficult.

For a manufacturer, investors may look at staff turnover, health and safety practices and workers’ wages.

Another challenge lies in deciding where the accountability should end. Some of the recent abuses of human rights and/ or examples of modern slavery have occurred not within the companies listed on stock exchanges, which attract the bulk of investment, but somewhere in their supply chains – perhaps two or three businesses removed. This does not make it excusable, but it presents a challenge when it comes to assessing the wider social impact of a business. By comparison, the ‘E’ in ESG has in many ways been boiled down to a company, or an investment strategy’s commitment to tackling climate change and biodiversity issues, while the ‘G’ agenda is neatly covered through AGMs and reporting requirements of listed companies and asset management groups. SOCIAL BONDS ENTER THE FRAY Interestingly, while environmental impact may be easier to assess at a company, therefore stock level, the measurement of social impact seems to be proliferating through fixed income markets first. Last year, bonds issued by companies seeking to use proceeds to counter the devastating effects of the pandemic had a distinct tilt towards social impact. Standout examples include Unédic, the French unemployment insurance agency, whose five social bonds worth a total of €16 billion aimed to fund financial support and job retention schemes for workers. CADES, an administrative French state agency, has issued six Social Bonds recently also worth a total of €16bn. These bonds, as well as the €1bn and €750mn bonds issued by Italy’s CDP, which supports sustainable development in Italy, all abided by the International Capital Market Association’s (ICMA) Social Bond Principles. From an equity perspective, there are some commonalities within sectors. For a tech company it could be focusing on their talent management programme or assessing how they store and protect user data. For a retailer it could centre around the act of paying suppliers quickly, treating them fairly, and on honouring

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It goes without saying that in all businesses, regardless of sector, commitment to improving diversity, equality and inclusion is non-negotiable. COMING OF AGE Reinforcing socially responsible practices is not only ethically sound but should be financially beneficial over the long term. Not only can poor social practices create risks (not least to a company’s reputation) and destroy the investment value of a business; good social practices can also create value by enhancing productivity of workforces or making products and services more attractive to customers. We expect asset managers to focus on getting to grips with this unruly middle child over the next few years. While 2020 may be the year the ‘S’ came of age, after being thrust into the spotlight, it also revealed the amount of growing up the industry has to go through before it can honestly stand for E, S and G in investing. Refinitiv Lipper, February 2021 Interpretation of ‘middle child syndrome’: https://www.healthline.com/health/ mental-health/middle-child-syndrome#:~:text=Middle%20child%20syndrome%20 is%20the,of%20being%20the%20middle%20child.

1 2

About Simone Gallo, Managing Director of MainStreet Partners Simone Gallo, was head of intermediary distribution within the Business Development Team at Unigestion since July 2016. He began his career in 2001 at Schroders Investment Management. In 2003 he joined Goldman Sachs Asset Management and became Head of Global Partners focusing on sales relationships across Global accounts in EMEA. In 2010 Simone joined Pictet Asset Management and became Senior Vice President in the Global Clients Group. At Pictet he worked on Global accounts and on the long only and Alternatives Intermediary Business in the USA, focusing on sub-advisory, banks, asset managers and insurance groups. Simone holds a Master degree “summa cum laude” in Business and Economics from La Sapienza University of Rome, Italy.

May 2021

VALU E I NVESTI NG

IS VALUE INVESTING

RETURNING TO FAVOUR?

At the start of this year, Peter Hargreaves said value investing was dead. Tom Delic, Fund Manager at Momentum Global Investment Management, believes the tide is certainly changing with value investing coming back in to favour as he shares his thinking on why investors should focus on Benjamin Graham’s principles

aving been in consistent print since its first publication in 1949, Benjamin Graham’s ‘Intelligent Investor’ has, along with ‘Security Analysis’, provided the philosophical foundation to thousands of successful investment practitioners over the decades. However, as Mark Twain said, “A classic is something that everybody wants to have read, and nobody wants to read”. Open almost any page of those two texts however, and your mind will be enriched with the ideas and thoughts of Graham, and like most literature that has survived the test of time, you will soon realise why.

Is the consensus view of value investing in line with the thinking of Graham or has time distorted and twisted the interpretation?

The concepts laid down by Graham over 70 years ago sets an investor up with a sound, rational, mental framework to deal with the vicissitudes of a hyperactive stock market, that swings between the emotions of a broken-hearted teenager and a toddler’s first taste of chocolate. But what does Graham not say? Is the consensus view of value investing in line with the thinking of Graham or has time distorted and twisted the interpretation? MARGIN OF SAFETY Leaning on the work of Eugene Fama and Kenneth French, investing is often reduced to nothing more than quantitative pigeonholing. A fund manager strategy or a point-in-time valuation ratio of a listed equity can then be boxed neatly into categories, pitted against one another in an endless race where investors are pressured to pick a side. Today, the consensus is “value” investing is losing the race, with “growth” investing in an unassailable lead. Perhaps though, there are no “style” sides and instead a footrace

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May 2021

exists between investment and speculation, which can often feel like a marathon. This takes us back to Graham.

In a period of frenzied and excitable divorcement of price and fundamental value, as we have seen over the past couple of years, the speculators rule the roost, with investors flapping for a perch

Graham’s core tenets seek to teach us how to act like investors rather than speculators. The margin of safety concept sits at the heart of this approach and simply advises that the investor should only purchase securities where a gap exists between their conservative estimate of intrinsic value, and the price at which the security is being offered. In Graham’s words, “the function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future”.

Graham’s core tenets seek to teach us how to act like investors rather than speculators

The example of Microsoft provides an illustrative example of Graham’s concept in practice. From 1999 to 2012, Microsoft’s free cash flow yield increased from 1.6% to 13.1%1, with equity holders of the company suffering a -42% total return over the period2. The speculative era of 1999 had faded away and in 2012, an opportunity for a conservative investor was available. QUALITATIVE AND QUANTITATIVE

he states “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.” A margin of safety and the courage to act against the crowd would have resulted in a successful investment in Microsoft, as the investors of 2012 have handed the reins back to the speculators of 2020-21, which has seen the company move to a free cash flow yield of 2.7%. In a period of frenzied and excitable divorcement of price and fundamental value, as we have seen over the past couple of years, the speculators rule the roost, with investors flapping for a perch. There is no universal law to help investors second guess when a change will occur. Instead, investors should stay focused on Graham’s principles to ensure they are acting with a margin of safety using their own analysis. This is what value investing truly is. Bloomberg Bloomberg Bloomberg [4] Vanity Fair, August 2012 [5] Guardian, August 2012 [1] [2] [3]

Value investing today is assumed to be a blind investment in the optically cheap but in ‘Security Analysis’, Graham emphasises that “an investment operation is one that can be justified on both qualitative and quantitative grounds”. A cursory glance at the data in 2012 would have shown you that despite the share price halving since 1999, the business was fundamentally strong, with consistent revenue and cash flow growth over the period3 and Microsoft Windows remaining the dominant operating system in an everincreasing world of computer usage. The narrative around the company was certainly not as rosy however, with headlines such as ‘Microsoft’s Lost Decade’4 and “Microsoft once ruled the world. So, what went wrong?”5 . Turning to Graham’s principles once more,

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About Tom Delic Tom is a Fund Manager at Momentum Global Investment Management and is responsible for MGIM’s third party fund selection alongside Gary Moglione. He has worked in the investment industry since 2009 after graduating from the University of Liverpool with a first class degree in Mathematics with Finance. During his spare time, Tom can be found spending time with his daughter, at the gym or attending Stoke City FC games (when circumstances allow!).

M ICH E LLE HOSKI N

May 2021

MENTAL

‘W’HEALTH Known and admired for her practical no-nonsense approach to business excellence, Standards International’s Michelle Hoskin has a very different – but no less important - message. That is that those working in financial services need to take mental health very seriously in order to ensure that you can give your best not only to your family, friends, clients and colleagues but also to yourself

ver the past 12 months I have been shocked and saddened to hear more than once about tragic incidences of suicide and when I asked the unanswerable question of ‘Why?’ the response is often simply “life was just too much for them’… So, why am I writing about this here in IFA Magazine? Well, it’s because some of these devastating stories have been from within our world of financial services. How can these people, who were so loved and so supported, both personally and professionally, have come to feel so low that their only option was to take their own life? Why couldn’t we save them? CPD WITH A DIFFERENCE It was for this very reason that in early 2020, I decided to broaden my knowledge and expertise in areas that would

only enhance the support that I give to financial planners across the world. One of these areas was Mental Health First Aider training delivered by Mental Health First Aid England. I can honestly say it was one of the most rewarding and eyeopening pieces of learning I have ever done. The course was broken down over two weeks. There were four morning sessions and after each session I was left in emotional pieces. During each session I had felt every feeling possible – happiness, sadness, anger, frustration – I could go on. I could see that either myself, my friends or my family members had sadly suffered from one or more of the mental illnesses that I was learning about. One thing that really struck me was that, in the same way we all need to take care of our physical health, we also all have to make time for our mental health. One of the most important things we can do for ourselves is to schedule self-care, in other words ensuring that we schedule time to focus on our own wellness, wellbeing and the value of positive mental health – our mental w’health.

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May 2021

Scheduling this time is not an indulgence but sadly that is often how so many of us see it.

WORKING ON WELLBEING

I’d like you to make me one promise. It’s really a promise to yourself but given all of the pressures and complexities of life I believe having positive mental health will be our superpower.

In 2008, the UK Government commissioned a review into what actually contributes to a person’s overall wellbeing. That review was conducted by the New Economics Foundation (NEF) on behalf of Foresight* and it drew on state-of-the-art research from across the world to consider how to improve everyone’s mental capital and mental wellbeing through life.

So as you sit down to map out your own personal goals for 2021 (if you haven’t got round to them yet) or maybe even plan or review your own learning and development – think about what you need to do for yourself, what learning and development will broaden your own skills and abilities outside of your work or your job. Think about what you need to be well, to thrive and become a happy human. See my presentation How to be a Happy Human at HUM 2019. https://youtu.be/3kqgtRXBQ1Y SOME FOOD FOR THOUGHT • We all have mental health challenges and the wellness of our minds depends on many, many factors – too many to list. • Mental ill-health is a real thing – it can affect us all. It is part of everyday life at different levels for everyone. •

According to the Royal College of Psychiatrists’ Mental Health and Work report in 2008, it was estimated that at any given time ‘one-sixth of the working age population experience symptoms associated with mental ill-health’ (e.g. sleep problems, fatigue, etc.), symptoms which do not even meet the criteria for diagnosis. This was in 2008! Imagine what the figures would be for us now in 2021 and after a global pandemic. Added to this, their No health without public mental health positioning statement PS4/2010 estimates that mental illness is the ‘largest single source of burden of disease in the UK. No other health condition matches mental illness in the combined extent of prevalence, persistence and breadth of impact.’

•

I bet that, like me, you can count on both hands (and probably your feet too) the people you know, or know of, who have at some point experienced some form of suffering due to mental ill-health.

Sadly, there is no magic wand, silver bullet and/or answer to all of this. However, there are some hacks, tricks, tips and insights which can definitely help.

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The evidence suggests that a small improvement in wellbeing can help to decrease some mental health problems and enable people to flourish. And remember this is not just for the grown-ups… according to the Mental Health of Children and Young People in England, 2017 [PAS] Publication Date: 22 Nov 2018, ‘1 in 10 children aged 5-15 had a mental health disorder (either emotional, behavioural, hyperactive, or other)’. In the newly released 2017 figures, this has risen to 1 in 9. These figures are startling. The five ways to mental wellbeing The NEF’s Five ways to wellbeing sets out five core actions to improve personal wellbeing. The guideline has been adopted worldwide (including Australia, New Zealand and Canada,) and if there was ever a time to direct our attention to this… it’s now! 1. Connect Connect with yourself and with those important people (and things) in your life! There are always going to be people who you know you should have in your life, as well as those you’re not sure should be and you have no idea how they got here! Whether it’s over phone, Zoom, FaceTime or a simple text: make an effort to connect. Talk, laugh, moan and groan – it doesn’t matter but ONLY surround yourself with people who bring out the absolute best in you. Hack: Protect your mind for the first 8 minutes after you wake and focus only on forming positive plans or intentions for your day. Keep the phone away. 2. Be active Get out and about. Move, do a workout at home, run, even take a walk and if you can, get back into your physical groups and clubs. Exercising makes you feel good and of

May 2021

M ICH E LLE HOSKI N

course, most importantly, try to find a physical activity you enjoy, that can keep you motivated and engaged, and that suits your level of mobility and fitness. Hack: within the first hour of being awake do at least 10 minutes of exercise! Jog on the spot, do 20 jumping jacks or bench press the kids if you have to! 3. Take notice Take notice of everything. Watch and listen. Be naturally curious about the people and the things around you. Make sure that you catch sight of all the beautiful moments that you perhaps haven’t noticed before because life is nuts and we rush around way too much.Savour the moments that will be gone again in a flash. Be aware of the wider world and what you are feeling. Reflecting on your experiences will help you appreciate what matters the most. Hack: Practice gratitude. It could be every morning or every night before you go to bed. Simply write down at least three things you are grateful for and let the endorphins do the rest. 4. Learn Try something new. You might decide to rediscover an old interest. With the abundance of free content available, there really is no excuse. You can even become a Harvard or Yale graduate from the comfort of your own sofa. Push yourself, offer to help your team, take on a new role or new responsibilities. Read that book that’s been collecting dust on your bookshelf. Learn to play an instrument or how to cook your favourite food. Set a challenge you will enjoy

achieving while these restrictions to our daily lives still exist to one extent or another. Get stimulated, upskill and increase your confidence and pride. Hack: Allocate 2 x 25 minute slots each day to learn something that you didn’t know before. Go on – you can do it! 5. Give Give to others, but not before you have given to yourself. At a time of crisis, people’s true colours and character are shown so encourage the best of you to shine. Do something nice for a friend, or even for a stranger, because let’s be honest, we may not all be in the same boat, but we are in the same storm. Also smile: it’s amazing how that gesture alone will make others feel. Hack: Pick two neighbours, knock on their door and when they open it, say ‘Hi, I thought I would just check in to see if you were doing OK?’. Like I say, I know there is no silver bullet, but please, if you are not feeling yourself – please speak out. If you know someone who you just know is not OK – reach out

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to them. As we enter into a life ‘out of lockdown’ it’s not all plain sailing. Some people will struggle and we need to do our best to try and see them and support them. … and in case you need more fuel to get you inspired to take extra special care of yourself, here are a few of our favourite further resources for you to enjoy: LINKS TO GET YOU THINKING: The stand up kid https://www.youtube.com/watch?v=SE5Ip60_HJk Empathy (Brené Brown) https://www.youtube.com/watch?v=1Evwgu369Jw The influence of social networks (Nicholas Christakis) https://www.youtube.com/watch?v=2U-tOghblfE Sleep is your superpower (Matt Walker) https://www.youtube.com/watch?v=5MuIMqhT8DM 3 secrets of resilient people (Lucy Hone) https://www.youtube.com/watch?v=9-5SMpg7Q0k Wellbeing – what’s most important to you (Michelle Hoskin) https://soundcloud.com/littlemisswoww/wellbeing-whatsmost-important-to-you The WOWW! Hour with Michelle Hoskin and Sarah Ambrose

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May 2021

https://soundcloud.com/standardsinternational/the-wowwhour-with-sarah-ambrose

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.

May 2021

AN N UAL ALLOWANCE

THE TAX TRAP WHOSE

BITE IS WORSE THAN ITS BARK

Pension rules are increasingly complex, with the cost of getting it wrong often punishing. JM Finn’s Atticus Kidd explains the rules around the annual allowance and highlights the risks of inaction.

hen discussing pension contributions with clients, one of the primary considerations is the annual allowance. The annual allowance is the most an investor and their employer can save into a pension within a tax year before being required to pay tax on those contributions. Depending on an individual’s taxable income, the excess pension savings can be charged to tax in whole or in part at 45%, 40% or 20%. In the 2021/22 tax year the standard annual allowance stands at £40,000. However, there are limits to the taxrelievable contributions that can be paid. For personal contributions, one is permitted to make contributions of up to the greater of £3,600 or 100% of annual earnings each tax year, capped at the annual allowance, in order to receive tax relief on them. Also, the annual allowance may be reduced if the client has either flexibly accessed the pension pot previously, or has a high income.

LOOKING BACK To focus on the latter point, as of the 6th of April 2016, a tapered annual allowance was introduced for higher earners, for which an individual’s annual allowance was reduced by £1 for every £2 of adjusted income over £150,000 provided their threshold income did not also exceed £110,000. Adjusted income broadly being all taxable income plus employer pension contributions and threshold income broadly being all taxable income less personal pension contributions. BEWARE THE TRAP However, as of the 2020/21 tax year, the rules changed in which for every £2 of adjusted income over £240,000, an individual’s annual allowance is reduced by £1. The threshold income also received an increase going from £110,000 to £200,000. A generous £90,000 increase on the

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AN N UAL ALLOWANCE

previous amount which has served as good news to many who were previously restricted by this taper but will still serve as a bane to some. Unfortunately, for higher earners still impacted by the taper, the minimum tapered annual allowance was reduced from £10,000 to £4,000. This means that anyone with an adjusted income of £312,000 or above is now restricted to an annual allowance of only £4,000. GETTING DOWN TO DETAIL

May 2021

We have seen numerous high income individuals incur a large annual allowance tax charge as they were under the assumption they could pay in £40,000 and were restricted by this tapering

The calculation of annual allowance for higher earners can be the source of some confusion. There are numerous elements at play and, as a minimum, an individual would be required to know their income amounts chargeable to income tax and pension savings (including employer contributions) for the relevant tax year. This can be particularly troublesome for those with variable income arising from multiple sources. The consequences of not being aware of these amounts could be a tax charge known as the annual allowance charge. In order to calculate the charge applicable the total gross amount that has been contributed to pensions in excess

an annual allowance charge it is important they check with a professional adviser who will be able to work out the annual allowance and help adjust the contributions accordingly. We have seen numerous high income individuals incur a large annual allowance tax charge as they were under the assumption they could pay in £40,000 and were restricted by this tapering. It is a tax trap that is ensnaring individuals due to its complexity, and often it is individuals who do not employ the services of a professional adviser who fall foul of the rules.

The calculation of annual allowance for higher earners can be the source of some confusion

It might be possible to carry forward any unused allowances from the previous three tax years. Ultimately, this is a complex issue and one that could be detrimental to an investor’s long term financial planning were they to incur a large unanticipated tax charge however, this can easily be amended by proper and regular surveillance and seeking help from the right quarters.

of the annual allowance is added to income for the year and then income tax is applied. For earners in excess of the £240,000 threshold this would likely be 45%. This charge will be payable by the individual even in the case where the annual allowance has been exceeded through employer contributions. Subject to certain conditions, it is possible to have the charge paid from a pension however, this is still not a situation many people would wish to find themselves in. THE ROLE OF PROFESSIONAL ADVICE If someone believes they may be subject to the tapered annual allowance and as a consequence be subject to

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About Atticus Kidd Atticus joined JM Finn in 2017 as a Wealth Management Assistant. He previously graduated from Swansea University with a First Class Honours in Economics and after experience in various graduate roles was able to attain his Diploma in Regulated Financial Planning through the Chartered Insurance Institute (CII). He now works closely with Simon Wong and Anna Murdock in supporting the Wealth Planning offering and hopes to gain Chartered and Fellowship status in the near future.

May 2021

ORIGO

DIGITISE ME Anthony Rafferty, CEO of Origo, uses his own experience of the financial advice onboarding process to highlight how digitising and automating admin processes can make the experience better for advisers and their end clients

’ve previously written in IFA Magazine about the need for greater digitisation of processes in the financial advice market, particularly in respect of administration services which can be readily improved through automation.

While we can appreciate that need for change, it is really brought home to us when we have to go through the experience ourselves, i.e. we are in the client’s shoes. THE CLIENT EXPERIENCE Let me recount and share with you what happened to me when I became the client of a financial adviser here in Edinburgh and the hoops both I and the adviser had to jump through in what, to my Fintech eye, could have been a very simple process if digitised. When instructing my new financial adviser, one of the first things he had to do was contact 11 providers with Letters of Authority (LoA), confirming him as my agent

and that they should provide him with my information. To do this, he pulled out 11 photocopies of the same form, filled them in by hand and I signed them. He then sent them on to each of the providers. What soon became apparent to me was that there was no consistent way of working within the industry. Some companies would accept the form faxed across or scanned, some wanted it in the post. Some then came

When instructing my new financial adviser, one of the first things he had to do was contact 11 providers with Letters of Authority (LoA), confirming him as my agent and that they should provide him with my information

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ORIGO

May 2021

to me directly for confirmation that I had appointed the adviser, some didn’t. Some accepted my digital authority, some didn’t.

This is Origo’s area of expertise, as the industry’s longstanding Fintech with a remit to create efficiencies and cost savings across the industry.

And, although the adviser had asked for the same information from every provider what he got back was a set of very different and inconsistent packs of information, which he then had to wade through to find what he wanted.

The letter of authority issue which I experienced is one we have worked on with the industry and developed a solution. We brought together 70 different stakeholders in the collaborative approach to help us digitise the process, securely and in a way that works for everyone.

The exercise took weeks to complete. It was a poor experience for me, for the financial adviser and also for the 11 pension and investment providers, who would have had someone manually deal with each document.

Digitisation of the process means that instead of photocopied paper, the adviser takes the client information, clicks or swipes the relevant companies on a screen, which makes a digital request to them all using a consistent set of data. They then send back the information digitally and the adviser gets back a consistent set of data from every provider.

FINTECH TO THE RESCUE In my role as CEO of Origo, I work collaboratively with platforms and providers every day of the week, so I understand that priorities have to be made and resources put to best use for the business. But often there are areas where service can be digitised, and thereby improved for IFAs, while saving providers resources and so money to boot. A good example arising from the pandemic, is the greater adoption of a digital authority process by platforms, driven by a desire to provide better service for advisers and clients and facilitate adoption of new business, during a tough time for the industry. The technology is tried, tested and readily available but has only been adopted by a few providers until this point.

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As advisers you’ll know how many times you carry out the Letter of Authority process every month. Multiply that across thousands of advice firms around the country, and as importantly, thousands of clients, and it’s easy to see the benefits if you can turn that into a far improved experience for all concerned.

The letter of authority issue which I experienced is one we have worked on with the industry and developed a solution

May 2021

ORIGO

TIME TO AUTOMATE We see this as the core role of technology for our industry; identifying the areas where manual processes are still being used or manual intervention is slowing down a company’s service delivery. We can then put in place the digital solution to automate the process, making the whole experience slicker for providers and IFA firms. Thereby we can turn a process that currently can take weeks, into one that should take a few days, or less. When technology is applied like this, it enables providers and IFA firms to focus on those key elements that both require and are best delivered by people, the human touch of customer service and client care. This is clearly the part of the service where IFAs deliver best value for their clients. LEARNING LESSONS Another point about the pandemic is that consumers have become used to leading-edge service from the likes of Amazon with its Prime service, and slick online shopping, with food and products ready to collect or delivered to their door. Their expectations of what service is have been raised, let alone good service.

For providers and IFAs we have developed a solution which, once adopted, is a quick win for all concerned. We are currently signing providers to the service and advisers can register also. Where a provider is not on the system, IFAs can use a templated LoA pack which standardises the process with the information needed until they are on board. And if your chosen provider is not on board as yet, please do give them a nudge in our direction. By digitising this service, we are looking to avoid situations such as I experienced and help to deliver better service and outcomes across the board. About Anthony Rafferty I am Origo’s Chief Executive Officer, which means I get the honour of leading our fantastic team to deliver against our purpose of connecting the financial services industry for the benefit of everyone. Origo’s team are true industry experts with a passion for delivery and they make my job very easy! Before joining Origo, I held a number of senior roles in the life, pensions and investments industry (and was actually a customer of Origo!) where I developed a passion for wanting consumers in the UK to be more engaged with their financial futures and for the industry to make that much easier for them. That’s why I’m now at Origo, as we are uniquely placed to help the industry achieve that.

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E ISA

May 2021

WHERE WILL WE FIND THE

NEXT UBER? EISA’s Director General, Mark Brownridge, is in optimistic mood as he argues why he believes it will be companies from within the EIS and SEIS ranks which will rise to the challenge and become the next Uber or AirBnB

o now we know for sure. 2020 was the worst year economically for the UK in 300 years as the UK economy shrank by 9.9%.

And the grim reading doesn’t stop there. According to the Office of National Statistics, that contraction is more than twice as much as the previous largest annual fall on record and is one of the largest across all the major economies in the world. REMEMBER 1709? Not since 1709 has our economy fared so badly. What was the cause of the 1709 downturn? It wasn’t disease but cold weather. The Great Frost of 1709 was so cold, there were reports of flocks of birds frozen mid-air and plunging to the ground. Other stories told of corpses impossible to move because they were frozen into their bedsheets. All across Europe rivers iced over, bringing commerce to a halt. Three months of cold weather ruined a year’s worth of crops, caused starvation and was an economic catastrophe. The UK economy wouldn’t recover from it for 10 years.

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THE ROAD AHEAD This time round, our road to recovery should, fingers crossed, be easier. The Bank of England tells us the economy is like a “coiled spring” with businesses and households currently in stasis but ready to unleash pentup growth when the economy is fully reopened. So the prospects of a “roaring 20s” might provide salvation. Certainly, many of the small business owners and entrepreneurs that we talk to, and as I am sure many of you can testify, have found 2020 to be at best difficult and at worst catastrophic. Small businesses tend to be cashflow dependent; they don’t always have large reserves of profit to call upon so any downturn in sales can have a significant effect. So far, we haven’t seen the number of insolvencies and bankruptcies that we might expect given the situation. There can be little doubt that the Government’s interventions such as CBILS, Bounce Back Loans and Future Fund have propped up small businesses. However, as these measures start to get wound down, there’s no doubt these numbers will rise.

May 2021

E ISA

WINNERS AND LOSERS What’s clear is that the pandemic has created winners and losers, both at sector and firm level. At sector level, fairly obviously the hospitality, travel and leisure sectors have had a tough pandemic. Pubs shut, travel banned and social gatherings off limits have meant all almost all firms in these sectors have been decimated.

What’s clear is that the pandemic has created winners and losers, both at sector and firm level

But could they be due a bounce back in 2021 and beyond? With us all desperate to holiday, meet and eat together again, are these the hot sectors to invest in now? The retail sector has created winners and losers more than most. The major online retailers and supermarkets have had a great pandemic in terms of business performance. Smaller or high street stores with little online presence have struggled or in many cases (Debenhams, Topshop) closed their doors permanently. The other big sector winners have been those sectors which were already starting to see growth but which the pandemic has accelerated at lightning speed, predominantly in tech. Think Zoom, Hopin (first fundraising to Unicorn in 2 years) and Revolut. The question now is will these trends continue postpandemic or will such successes be short lived? Other sector success stories, for obvious reasons, have been medtech and biotech. The scramble for vaccines, testing kits, PPE, personalised health and diagnostic equipment has seen a wall of money reach a sector that has typically struggled to access funding given the traditionally longer timescales needed to start and scale such businesses (by contrast BioNTech, who developed

the first Covid-19 vaccine with Pfizer, started in 2008 with a “seed” investment of $150M, an amount a UK biotech startup can only dream of). Again, is this short term reaction or sustainable, long term movement? THE INVESTMENT CASE Many sectors are therefore in flux, which presents investors with opportunities. During the global financial crisis of 2008, we saw that it decimated the large, static, immobile blue chip companies whose focus was on maintaining their status quo rather than innovating and getting ahead of the curve. Correspondingly, it helped smaller, more nimble operators focused on disruption and technology to flourish. One simple example is Uber - granddad of the ‘order by app’ concept and which has totally transformed an industry. But back in 2008, it was a struggling start-up being turned down by every VC in America. Its early investors weren’t institutions but private investors like Mike Walsh. Walsh was on his way to buy a Tesla when he got a call from Uber founder, Ryan Graves, who told him about his new project. Walsh liked the idea, cancelled his Tesla order and instead invested $10,000 in Uber. That $10,000 investment went on to be worth $24,827,400. More amazingly, Walsh wasn’t a seasoned investor, this was only his second angel investment. With sectors in flux and companies beginning to identify and capitalise on fast moving trends, it feels like now is another great investment opportunity. Clearly, the Uber

With sectors in flux and companies beginning to identify and capitalise on fast moving trends, it feels like now is another great investment opportunity

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E ISA

example above is an exception rather than norm. For every Uber, there are 100 Betamaxes but it goes to show what is possible when investing at the earliest stages of a company’s growth journey. And it’s the job of a good VC fund not just to second guess these trends but to work with companies when things go against them and to help turn them around. STATE OF PLAY The Government plays its part by facilitating the landscape and has indeed committed to making the UK the tech and entrepreneur centre of the world. Actions speak louder than words and we wait to see whether the Government delivers but it has made a good start with initiatives such as the £20M Tech fund and the £134M Sustainable Innovation Fund. But it is private investors and fund managers who can play a significant part and drive sectors and companies forward even quicker. This is where EIS and SEIS come into play. In the past few years, the schemes have been focused on delivering funding to companies prioritising growth, innovation and tech. During the pandemic, EIS and SEIS funded companies and the funds which invest in them, have proved the value of this strategy. They have proved to be not only nimble and adaptive but also genuinely inventive, profitable and increasingly important job creators. NURTURING THE WINNERS It’s been genuinely thrilling to see so many EIS or SEIS funded companies be first responders to the pandemic, each in a different but rapid and effective way. It’s now the

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May 2021

It’s been genuinely thrilling to see so many EIS or SEIS funded companies be first responders to the pandemic, each in a different but rapid and effective way

job of those companies and the VCs that support them to ensure they continue to grow and are ready to take advantage of further opportunities when they present themselves either at a macro or micro level. There will always be winners and losers in early stage businesses. Both receive funding but only VC backed businesses get the mentorship, support and advice required to navigate through all types of economic conditions to create consistent winners. And it is consistent winners which the economy needs to put the economic catastrophe of 2020/21 behind us, get us back on track and start delivering years of sustained growth. Those winners sit within EIS and SEIS portfolios. It’s my absolute conviction that within a UK VC portfolio right now lies the next Uber or Airbnb. It will be exciting to see exactly where it comes from! About Mark Brownridge Mark has over twenty years’ experience in financial services and prior to becoming Director General of the EIS Association, he was Head of Research and Development at Mazars, a leading UK financial planning firm. Mark is highly qualified being a Certified Financial Planner, Chartered Financial Planner, Chartered Wealth Manager and Fellow of the PFS and also sits on the CISI’s Accredited firms committee and TISA’s Distribution Policy Council. Mark’s involvement with EIS began 8 years ago and he has since championed EIS investing within a financial planning context and is extremely passionate about promoting the industry, increasing its effectiveness and ensuring the private sector continues to drive much needed funding to small companies.

May 2021

EQU ITY RE LEASE

MODERN EQUITY RELEASE HAS

EVOLVED ALONG WITH ITS CLIENTS

The housing market has shown resilience during the pandemic and many over 55s will be considering the benefits of equity release for the first time. Will Hale, CEO at Key, considers the opportunities for advisers who wish to focus on the equity release market and outline the specific role of advice in this modern form of later life lending

he COVID-19 lockdown is easing across the UK as shops, restaurants and pubs reopen with the possibility of foreign travel returning, potentially, over the summer. The UK is returning to some form of normality and it feels like we are starting to get our equilibrium back. Unfortunately, the financial and economic cost of the COVID-19 crisis will not be as easy to fix with employees who have lost their jobs or business owners who have seen their companies fail, struggling to pick up the pieces. All age groups have felt the economic pain to some extent but it has been particularly tough for over-55s. Analysis shows the redundancy rate among over-50s is the highest of all age groups with the number made redundant between November and January this year nearly treble the same period in 2019. It’s estimated over-50s made up 28% of all furloughed employees. Many will struggle to get back into work or may need to take pay cuts at a time when they need to focus on boosting their retirement income. The one saving grace of the COVID-19 crisis and the measures to tackle it has been the

boom in house prices – Halifax House Price Index shows house prices have hit a new record high of £254,606 with the Stamp Duty holiday helping to boost demand and prices while the Government Mortgage Guarantee scheme is supporting first-time buyers. THE IMPORTANCE OF PROPERTY WEALTH AND ADVICE IN RETIREMENT Over-55s will in many cases have paid off mortgages and will be literally sitting in property wealth which can make a major contribution to their retirement. Helping clients to take a holistic look at their wealth and how this might support their retirement aspirations – even at this tricky time – is something that sits at the heart of the service which IFAs provide for clients. And the evolution of the later life lending market which includes equity release, retirement interest-only mortgages (RIO) and retirement mortgages means that it is better placed than ever before to meet these clients’ needs. Modern equity release is more flexible than many realise and there are more products on the market designed to meet a range of customer needs and wants. Indeed, we

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EQU ITY RE LEASE

saw 100 new plans launch in the latest year which takes the total number of plans available to an impressive 488. The addition of around 100 RIOs also shows the later life lending market is developing rapidly – and all of that has been achieved during the COVID-19 pandemic.

Helping clients to take a holistic look at their wealth and how this might support their retirement aspirations – even at this tricky time – is something that sits at the heart of the service which IFAs provide for clients

Equity release can deliver products which enable clients to serve interest or make ad hoc capital repayments and options for downsizing protection or inheritance protection as a range of flexible features become commonplace across the product landscape. Competition has seen interest rates (Q4 2020 average of 2.8%) which are fixed for life - not only lower than the average 10-year fix but also compare favourable to residential products. Underpinning the evolution of the market however is specialist advice which is vital to ensure clients look at all their options as the industry evolves into a true later life lending market offering innovative products with flexible features. One size does not fit all. We find that less than one in five of those who approach Key end up taking out equity release. Instead looking at downsizing, retirement interestonly mortgages and other later life lending products or simply deciding to defer any decision further down the line. The product story is important, but the bigger picture is the strong demand from new and existing clients and the growing acceptance that property wealth needs to play an integral part in financing later life. HOW THE MONEY IS BEING USED Since the Stamp Duty Holiday was announced last July, older homeowners have gifted £1 million per day or £254 million for house deposits. Alongside older customers using equity release themselves to fund a house purchase,

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May 2021

the trend we have seen in gifting highlights how equity release is contributing to all sectors of the housing market with the benefits for first time buyers and second steppers a clear illustration of intergenerational fairness in action. Refinancing of debt is also a big driver with 29% of the funds in 2020 being spent on mortgage repayment and 18% on unsecured debt repayment. Many clients will need to carry debt into retirement and with equity release interest rates at their current levels and products offering the option to service interest and/or make ad hoc capital repayments this can be a viable option. So where to next? The size of the equity release market has stabilised at nearly £3.9 billion for the past three years. The bounce back seen at the end of 2020 gives confidence around the prospects for the year ahead. Equity release is not right for everyone but with continued innovation and more RIOs and other retirement mortgages adding to the options available to customers the later life lending market is in good health. It is important that all over-55 homeowners take the time to consider if and how housing equity can play a role in their retirement planning. This is a discussion that trusted independent financial advisers are well placed to facilitate, even if they are not qualified themselves in this area, with referrals to specialist partners a sensible route to ensuring good outcomes. https://restless.co.uk/press/redundancies-amongst-the-over-50s-have-nearlytripled-in-a-year/

https://www.halifax.co.uk/media-centre/house-price-index.html

About Will Hale Will Hale joined Key in March 2014 as Corporate Business Development Director and was promoted to CEO in 2017. Prior to joining Key he was Director of Corporate Partnerships at specialist annuity provider Partnership and previously worked for Genworth’s European Retirement and Protection business and as Head of Distribution at Lincoln Financial Group. His early career was spent in the fund management and investment banking sectors working for JP Morgan and UBS.

May 2021

ECOFORESTS AM

FAMILY OFFICES ARE REALISING

MONEY DOES GROW ON TREES

Michael Ackerman, CEO of EcoForests Asset Management reminds us of the growing influence of the role of millennials and the drive towards sustainability within family offices

he world’s wealthiest individuals are estimated to collectively transfer more than $15trn to their families by 2030 –a sum greater than China’s GDP. This seismic intergenerational wealth transfer will have a major impact on global asset allocation, as a younger and more sustainability conscious generation takes the reins.

their accumulated wealth – such as oil and autos – and reposition themselves as leaders of the green transition.

While there is an important difference between generating sustainable income streams – a proven skill of family offices – and investing in sustainability, it is becoming more apparent with each catastrophe linked to climate change the former will soon necessitate the latter.

UNLOCKING SUSTAINABLE ALPHA

Patriarchs have traditionally been purely driven by profits, but family offices are now increasingly being led by a different type of thinker – the millennial. Guided by different goals, the millennial generation feels far more responsible for the future of the planet, with increased concerns surrounding environmental, social and governance issues. Embracing sustainability is also crucial for image. While philanthropy has always been integral to family office operations, high net worth families now have the chance to depart from the carbon-intensive sources of

According to the UBS 2020 Global Family Office Report, 39% of family offices intend to allocate most of their portfolios to sustainable investments in five years’ time – while many are also adopting net-zero mandates.

The growing influence of millennials has led the majority of family offices to increase their impact investments from 3-5% of their portfolios to almost a third of their entire portfolio. This is driving significant flows into one of the most direct forms of impact investment – forestry. Indeed, there are few greener assets – forests go beyond simply cleaning the air, they capture carbon dioxide and protect biodiversity by harbouring entire ecosystems. Elon Musk tweeted in January he would award $100m to the best carbon capture technology. But Musk cannot see the wood for the trees – the cheapest and most proven carbon capture device, which has been around for more than 370 million years, is the humble tree.

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ECOFORESTS AM

The growing influence of millennials has led the majority of family offices to increase their impact investments from 3-5% of their portfolios to almost a third of their entire portfolio When compared to popular renewable energy investments, such as solar panels, forestry is less carbon intensive and requires less maintenance. Solar farms are constructed using components from across the world, incurring a large carbon footprint, and require aroundthe-clock maintenance to optimise energy capture once built. On the other hand, forest cultivation requires little maintenance after the first four weeks and captures more carbon than it produces. Trees also benefit from the unique ability to keep growing regardless of market conditions, and aside from being an effective portfolio diversifier with a built-in inflation hedge, forestry offers the highest risk-adjusted returns over 30 years of any asset class – thereby ensuring the next generation is well looked after. PERSONALISED AND PURPOSEFUL For high-net worth individuals, forestry assets offer the additional allure of being customisable. Forests can be designed to align with an investor’s budget, return expectations and time horizon. While the time horizon for investing in forestry assets is longer than traditional equity and bond portfolios, this does not deter family offices focused on intergenerational wealth preservation. Moreover, a flexible harvest window allows trees to be felled within 16 to 25 years, and this can be timed to coincide with higher timber prices or to meet specific investor needs, such as estate management of regular cashflow. The type of tree can also be chosen to meet individual preferences – teak, mahogany and eucalyptus boast

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May 2021

different return characteristics, for example. In addition, the investment can be suited to investors’ location preferences, with plantations in Central America being the most common. In return, investors receive a forest named after them. This direct form of investment allows investors to feel connected to the positive impact they are making. Family offices are also exploring the use of forestry assets for carbon offsetting purposes. By sequestering carbon, forestry assets can be used to offset a group’s emissions or help other businesses do so through the sale of carbon credits – a global market estimated to be worth upward of $50bn by 2030. By taking advantage of the opportunities presented by forestry investments at this crucial turning point for the planet, family offices are tearing up the idea that money does not grow on trees and positioning themselves as leaders of the net zero movement.

About Michael Ackerman Michael Ackerman is the president and chief executive of EcoForests Asset Management. His socially responsible boutique forestry investment management company is headquartered in Toronto and operates 45 plantations in Latin America. EcoForests is a boutique forestry investment management company that manages high-end tropical timber species on behalf of their global private and institutional investors, maximising returns through a commitment to quality, technique, sustainability, and security. Headquartered in Toronto, EcoForests has forestry operations in Central and South America with regional offices in Hong Kong, USA, Israel, and Northern Ireland. EcoForests combines unique Carbon Capture methodologies to offer competitive pricing and fullservice reporting to ensure corporations can meet their sustainability goals and audit requirements by purchasing EcoForests Carbon Capture offerings. As timber prices reach record highs and forest valuations continue to rise, this new vertical presents opportunities for growth to the already multi-faceted forestry management investment category.

HYCM

May 2021

ARE TECH STOCKS

SET FOR A DIP AS UK LOCKDOWN RESTRICTIONS EASE? Giles Coghlan, Chief Currency Analyst, HYCM, reflects whether the old concept to “sell in May and go away” will apply to those holding tech stocks this year, given their particularly strong run of form over the past year

s lockdown restrictions and social distancing measures are gradually relaxed across the country there is a growing sense of optimism across the UK.

Schools, pubs, restaurants and shops have now been opening their doors once again; naturally this is impacting various assets and markets in different ways. At present, investors are pricing in on what the postpandemic world will look like. Given the great reliance on technology throughout the COVID-19 pandemic, tech stocks in particular have been on an impressive run since March 2020, as investors have pumped huge amounts into global equities. This is evidenced by the fact that tech giants are enjoying a strong performance. The so-called FAANGS – Facebook, Amazon, Apple, Google (Alphabet) and Netflix – are trading at, or close to, their all-time highs. Meanwhile, the broader S&P 500 is 22% up on its pre-pandemic levels.

However, as society begins to open up, debate has started to emerge as to whether these trends will be sustained. After all, it is likely that individuals will become less reliant on technology in all aspects of their lives as the UK follows its roadmap out of lockdown (and other nations follow suit). WILL TECH STOCKS LOSE VALUE IN THE NEW NORMAL? It is impossible to say how long the tech stocks boom will last, but right now at least, the market is performing strongly in spite of the continued economic volatility all over the world. Particularly for the US high tech market, the Nasdaq is a staggering 42% higher than its pre-pandemic level, which was at the time a record high. A setback in the rollout of COVID-19 vaccines in the US, as agencies temporarily halted the use of the Johnson & Johnson vaccine, has prompted a further

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HYCM

May 2021

boost to companies and asset classes that prospered in previous lockdowns. However, if there was a seasonal shift that could buck this trend, then the arrival of summer could be it. The old adage tells us to “sell in May and go away and come back on St. Ledger’s Day.” This is based on historic statistical data, which suggests that stock markets tend not to gain between May and November. It is largely based on the past, when bankers and stockbrokers would leave the city and escape to the country in the hot summer months so trading volumes were notoriously thin.

It is impossible to say how long the tech stocks boom will last, but right now at least, the market is performing strongly in spite of the continued economic volatility all over the world

This old adage might still ring true for traders; however, it is difficult to see whether the end of restrictions will signal a return to our old ways entirely. Although there is no denying that most individuals are keen to return to a sense of normality, it is highly likely that the “new normal” will look quite different to life before COVID-19. From remote working to the rise of videoconferencing, it is likely that digital services will remain increasingly embedded into our day-to-day lives and our ways of working. CRYPTOCURRENCIES CREATING MEDIA STORM The booming cryptocurrency market is another important trend to watch over the coming months, with Bitcoin alone recently valued at $1.2 trillion. Notably, this puts Bitcoin’s value ahead of Mastercard, PayPal and Visa combined.

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The advent of Coinbase offers many investors a straight bet in the crypto market which was otherwise not there

How long will these gains continue? This is the question so many people are asking. Also noteworthy is that Bitcoin’s latest valuation came in at the same time as Coinbase went public on the Nasdaq stock market, making it the first ever company specialising in cryptocurrencies to launch an initial public offering (IPO). This alone is a significant event that should be monitored. The advent of Coinbase offers many investors a straight bet in the crypto market which was otherwise not there. This is a key test for crypto buyers and strong gains in Coinbase will likely be met by strong gains in Bitcoin. We can expect to see much more discussion about these developments taking place in the weeks and months to come.

About Giles Coghlan Giles Coghlan is Chief Currency Analyst, HYCM – an online provider of forex and Contracts for Difference (CFDs) trading services for both retail and institutional traders. HYCM is regulated by the internationally recognized financial regulator FCA. HYCM is backed by the Henyep Capital Markets Group established in 1977 with investments in property, financial services, charity, and education. The Group via its relevant subsidiaries have representations in Hong Kong, United Kingdom, Dubai, and Cyprus.

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•

1.5 years of Junior Paraplanning experience

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Excellent attitude, hard-working, professional, great communication skills

Financial Planner – DG588512 Salary Indicator: £60,000

Location: EDINBURGH

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Level 4 Qualified with additional AF7 Qualification

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CAS and CF30 experience, giving full holistic financial planning to HNW clients both over the phone and face to face.

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Experienced in managing and maintaining a client bank consisting of around 80 High Net Worth Clients

Mortgage Paraplanner – AM535973 Salary Indicator: £30,000

Location: ILFORD, LONDON

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Highly experienced Administrator

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One-year paraplanning experience

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Available immediately due to redundancy

Paraplanner/Trainee Adviser Ref: AW456853 Salary Indicator: £35,000/Flexible for right opportunity

Location: NORTHAMPTON

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Excellent Technical Paraplanner with a wealth of experience seeking trainee IFA role

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DipPFS Qualified, looking to reach Chartered

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Fantastic Pensions and Investments Knowledge

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Proficient in the use of various software, including Intelligent Office, FE Analytics and Selectapension

I FAmagazine.com

CAREER OPPORTUNITIES Position: Seasoned Paraplanner Salary: £35,000 - £40,000

Job Ref: KL64674

Location: BATH

The opportunity has arisen for an Experienced Paraplanner to join a rapidly growing Financial Advice firm. The firm provides cutting edge advice on various facets of Wealth Planning including Pensions, Investments and Tax Planning.

The Opportunity • Preparing and maintaining the client file • Preparing recommendations • Implementing recommendations • Client Review • Support & Development

Position: Chartered Paraplanner Salary: £40,000 to £50,000

Job Ref: AW63937

Location: BIRMINGHAM

• During a period of key expansion, our client is looking for a Senior Paraplanner to support the successful Financial Planners of the business. • Being part of a small team you will be working closely with the adviser and to ensure report writing is of a high standard. • You will have the opportunity to work in a supportive team environment where progression is strongly supported.

Position: Client-Facing Paraplanner Salary: £30,000 - £40,000

Job Ref: LW64701

Location: LEWES

The client I am working with are a forward thinking Chartered financial planning firm based in East Sussex where the employees enjoy being part of a fantastic, long-established team. The firm in the last few years has experienced great success and is now looking to continue growing over the coming years.

The Opportunity This is a fantastic opportunity for an experienced candidate to provide technical support to the business as a whole and the advisers. You will also have the opportunity to liaise with the Operations Manager to ensure the smooth running of client service processes within the business. On offer in addition to this role will be an extremely competitive salary, comprehensive benefits package (including PMI & DIS & Income Protection), on-street parking, a discretionary bonus paid each year and a brand new office.

Desired Skills: • Hold Level 4 Diploma in Financial Planning, or working towards • Previous experience supporting Advisers within an IFA environment • Client facing experience (Advantageous)

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Position: Employed Financial Planner (With Client Bank/Leads) Salary: £35,000 - £40,000 (D.O.E)

Job Ref: DG63416

Location: CARLISLE

The Opportunity The opportunity here is for a Financial Advisor, with a professional and level-headed approach to come in and help provide advice to the clients generated through the firms lead source. This opportunity would be suitable for any Level 4 Diploma qualified professionals, whether you be an existing IFA with a strong book of business, or a newly qualified Adviser looking to work in a highly professional environment. The succesful candidates will work on existing clients, whilst looking to develop and build a personal bank of clients, with all back office support needed to allow them to thrive.

What’s Required? - Previous experience within a financial planning practice, within a face to face advisory position would be preferable but not “deal-breaker” - Minimum of Level 4 Diploma Qualified - Strong level of technical knowledge - Professional and competent manner

Position: Self Employed Financial Adviser Job Ref: AM62894 Location: LEICESTER The opportunity has arisen for a Self-Employed Financial Adviser to join a rapidly growing Financial Advice firm. The firm provides cutting edge advice on various facets of Wealth Planning including Pensions, Investments and Tax Planning.

The Opportunity • Self-Employed Financial Advisor role • Leads and clients provided • Access to paraplannng and administration support • Un-capped earnings • Able to build up a long-term client book • Able to build your recurring income • Able to work from home and access to office • Manage your own diary • Market leading IT systems

What’s needed for me to be considered? • Diploma Level 4 Qualified • CAS signed off in the last 12 months • Experience of advising clients on Investments, Pension and Protection • Proven track record of success and achievement • Good at business development or looking to build up own client book •

You may have a client book already and need a superior proposition

• Hungry, driven and motivated individual

I FAmagazine.com

April 2021 April has been an interesting month; we have started to see restrictions being downgraded from Boris and there is now light at the end of the tunnel. IFA companies continue to recruit, if not more than ever as we entered the new tax year. Old budgets were being used up and new budgets were being released. We have seen new candidates coming to us due to lack of flexibility in their current employer when the lockdown ends. It seems that people like working from home, they can maintain efficiency, save money on child care, not sit in traffic on long commutes and possibly just enjoy life that little bit more. But some people are keen to get back to the office asap, they miss the teamwork, the conversations, the change of scenery and sometimes the focus. It’s important to get the balance right with employees and communicate as best as possible with them. If you are looking to hire or are considering a change yourself then please get in touch.

Alex Russon Associate Director – Financial Planning Division, Heat Recruitment Alex.russon@heatrecruitment.co.uk 0117 284 1248

What’s next? If you are interested in any of the above opportunities, please contact us directly. If suitable, one of our specialist consultants will be in contact with you to discuss the opportunity in detail prior to submitting your Curriculum Vitae to the client. During this discussion, we will aim to identify your specific skills and motivations and, where appropriate, can also recommend other relevant opportunities to you that match your requirements.

And finally… If these specific vacancies are not exactly what you are looking for, please contact us to discuss other opportunities we may be recruiting for that aren’t necessarily advertised.

TELEPHONE

0330 335 8347 Visit the Heat Recruitment website for more details of these and hundreds of other jobs too www.heatrecruitment.co.uk

I FAmagazine.com

Handpicking the UK’s most promising tech firms Only applying our performance fee on gains above a high hurdle of £1.30 for every £1 invested. Only taking our annual management charge for the first four years. Investing with ESG (Environmental, Social and Governance) in mind, searching for companies making a positive impact. Targeting 3-5x return across a wide-ranging portfolio of companies in different sectors. Leading with a team highly experienced in start-ups including award-winning tech founders and technology specialists. Blackfinch Ventures EIS Portfolios Find out more at www.blackfinch.ventures Capital at risk.

Blackfinch Investments Limited is authorised and regulated by the Financial Conduct Authority Registered address: 1350-1360 Montpellier Court, Gloucester Business Park, Gloucester, GL3 4AH. Registered in England and Wales Company Number 02705948.

Is Mr Blue Sky up there waiting? | IFAM98 | May 2021

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