The Parliamentary Review by Flambard Williams

2016 / 2017 FINANCE

A YEAR IN PERSPECTIVE

FOREWORDS

The Rt Hon Theresa May MP The Rt Hon Philip Hammond MP Liz Field P L A N N I N G & I N V E S T M E N T R E P R E S E N TAT I V E S

Flambard Williams

Synaptic Software

IncomeMax

Navigator Financial Planning

ML Financial Associates

The Money Carer Foundation

JPS Global Advisers

Bywater Properties

Cheetham Jackson

Smith & Pinching

Churchill Investments

Willis Owen

Inspire Wealth

TEAM Asset Management

F E AT U R E S

Review of the Year Review of Parliament

www.theparliamentaryreview.co.uk

Foreword The Rt Hon Theresa May MP Prime Minister

And, of course, it was a year in which the General Election showed that parts of our country remain divided and laid a fresh challenge to all of us involved in politics to resolve our differences, deal with injustices and take, not shirk, the big decisions. That is why our programme for government for the coming year is about recognising and grasping the opportunities that lie ahead for the United Kingdom as we leave the EU. The referendum vote last year was not just a vote to leave the EU – it was a profound and justified expression that our country often does not work the way it should for millions of ordinary working families. So we need to deliver a Brexit deal that works for all parts of the UK, while continuing to build a stronger, fairer country by strengthening our economy, tackling injustice and promoting opportunity and aspiration. In the year ahead we will continue to bring down the deficit so that young people do not spend most of their working lives paying for our failure to live within our means. We will take action to build a stronger economy so that we can improve people’s living standards and fund the public services on which we all depend. We will continue with our modern Industrial Strategy,

deliver the next phase of high-speed rail, improve our energy infrastructure and support the development of automated vehicles and satellite technology, building a modern economy which creates the high-skill jobs of the future. At the same time, work needs to be done to build a fairer society – where people can go as far as their talents will take them and no one is held back because of their background. So we will continue to work to ensure every child has the opportunity to attend a good school. We will continue to invest in the NHS and reform mental health legislation, making this a priority. And we will work to address the challenges of social care for our ageing population, bringing forward proposals for consultation to build widespread support. So this is a Government determined to deliver the best Brexit deal, intent on building a stronger economy and a fairer society, committed to keeping our country safe, enhancing our standing in the wider world, and bringing our United Kingdom closer together. We will continue to put ourselves at the service of millions of ordinary working people for whom we will work every day in the national interest.

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This year’s Parliamentary Review follows a significant year in British politics. It was a year in which our economy continued to grow, as the Government followed its balanced plan to keep the public finances under control while investing to build a stronger economy. It was a year in which we began to deliver on the result of the EU referendum by triggering Article 50 and publishing the Repeal Bill, which will allow for a smooth and orderly transition as the UK leaves the EU, maximising certainty for individuals and businesses.

This year’s Parliamentary Review follows a significant year in British politics

FOREWORD

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Foreword The Rt Hon Philip Hammond MP Chancellor of the Exchequer

It is only by making sustained increases to our productivity that we can deliver the higher wages that will increase living standards and fund the improvement of our public services. That is why I announced the £23 billion of additional investment in infrastructure and innovation at the Autumn Statement last year, and why I launched an overhaul of our technical education system at the Spring Budget.

By controlling our public spending, backing business and creating the environment for enterprise and investment to thrive, we have got the UK economy back on track. But now we face new challenges. The deficit is down but debt is still too high. Unemployment is at a 40-year low, but real pay growth is stagnating. And I understand that people are weary of the hard slog of repairing the damage caused by Labour’s great recession. All our progress could be put at risk if we listen to those who say we should abandon the economic plan that has brought us so far, just as we are coming to the final furlong. And it is up to all of us, in business and in Government, across every sector covered by The Parliamentary Review, to make the case, all over again, for a market economy, sound money and a system that incentivises enterprise and innovation. So I will stick to the plan to bring the public finances back to balance, at a pace that supports the economy in the face of short-term challenges, and to make longerterm changes. I will pursue a Brexit outcome that puts jobs and prosperity first. And I will continue with my priority to build a productive and dynamic economy.

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FOREWORD

It is a good start, but there is more to do if we are to close the productivity gap with our competitors, and build a strong economy to provide opportunity, prosperity and the funding for public services that this country needs. I am determined to get on with the job. This is how we can unlock the full potential of our economy and create an economy that works for everyone.

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We have been the second fastest growing G7 economy for the past two years

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It’s been a long road back for the British economy. In 2009 our deficit was at a post-war high, our economy shrank by 4.3% and millions feared for their jobs. Thanks to the hard work of the British people since then, we have reduced the deficit by three-quarters, we have been the second fastest growing G7 economy for the past two years, 2.9 million net new jobs have been created and our employment rate is the highest ever recorded.

Foreword Liz Field CEO, PIMFA

By PIMFA works with key industry stakeholders such as the NCA, City of London Police, the ICO, the FCA, HM Treasury etc. to help educate and advise our member firms in this area.

PIMFA’s mission is to create an optimal operating environment so that our member firms can focus on delivering the best service to clients and responsible stewardship for their long-term savings and investments. Today that environment has a host of regulations impacting it that are proving to be huge undertakings for our firms. Chiefly amongst these is the European legislation, the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) that comes in to effect on 3rd January 2018. The regulation has multiple facets and over ten areas that require review - from costs and charges and suitability to product governance and transaction reporting. Another issue keeping our members awake at night is cybersecurity. This was rated as the second key risk by CEOs in our recent sentiment survey (with regulation being number one). In an accelerating technological world the sensitive data held by financial services firms is highly sought after and under constant attack, with the UK economy estimated to be losing over £52 billion a year as a result of cybercrime.

acknowledging clients’ requirements and designing evolving solutions to best meet their needs we can ensure we remain as one of the world’s leading investment centres. One way to do this is to develop the debate around diversity – employment figures from ONS’ Labour market data highlights that the UK’s finance and insurance services industry is currently employing fewer women than ten years ago. As the political and regulatory context continues to gather momentum the industry is working hard to keep pace. Alongside over 80 events and multiple publications, PIMFA has 30 committees and working parties dedicated to covering key issues with over 450 participants from the sector sharing their insights and expertise to discuss the way forward in our industry.

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Our trade association became PIMFA (Personal Investment Management and Financial Advice Association) by bringing together the former memberships of the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) on 1st June so we can speak with a stronger united voice in such a context.

Our member firms can focus on delivering the best services to clients

Finally attracting and retaining talent was the third highest perceived risk cited in the PIMFA survey. There is a need for the industry to be more broadly reflective of its ever changing, dynamic client base. FOREWORD

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Andrew Neil Return of the Two Party System The BBC’s Andrew Neil gives his take on the state of Parliament following the June 2017 general election. It was a year in which politicians learned not only of the power of a referendum to overrule the will of Parliament – but of its power to change the party system in which they operate. Nobody saw this coming. But, in retrospect, perhaps we should have, since we had the fallout from the Scottish referendum to guide us. In the autumn of 2014 the Scots voted 55%-45% to remain part of the United Kingdom. That was supposed to settle the matter of Scottish independence for a generation, until some Scottish Nationalists began regarding a generation as no more than a couple of years. But in postreferendum elections to Holyrood and Westminster, it also recast the Scottish party system. Remember, Scotland had been one of the first parts of the UK to throw off the British two-party system and replace it with a multi-party choice of SNP, Labour, Tory, Green, Lib Dem and even UKIP. But as the constitutional issue took centrestage – and remained there even after the referendum – Scottish voters coalesced round a binary choice: for or against independence. Thus was a new two-party system born of a centre-left Nationalist party (the SNP) and a centre-right Unionist party (the Scottish Tories). The other parties have not been completely obliterated, especially in Holyrood with its peculiar voting system. But by the general election of 2017 Scotland had become a battle between a dominant

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Nationalist party and a resurgent Tory party representing the Union. Two-party politics was back north of the border. So we should have been prepared for something similar when Britain voted 52% to 48% to leave the European Union in the June 2016 referendum. At the time, we remarked on the power of referenda to overrule both the Commons (where MPs were 65% pro-EU) and the Lords (probably 80% pro-EU). What we did not see was how the Brexit referendum would reconfigure English politics just as the Scottish referendum had redrawn Scottish politics. So we were taken by surprise for a second time. In this year’s general election – perhaps the single biggest act of self-harm a sitting government has ever inflicted on itself – almost 85% in England voted either Conservative or Labour. The English had not voted in such numbers for both major parties since 1970, when the post-war two-party system began to wane – and declined in subsequent elections to a point where barely 65% voted Tory or Labour, encouraging some commentators to think the decline terminal.

The referendum, however, reversed the decline. The Brexit vote ended the schism on the Eurosceptic Right as UKIP voters returned to the Tory fold; and those on the Left of the Greens and the Lib Dems flocked to Jeremy Corbyn’s more ‘Red Flag’ Labour offering. So, as in Scotland previously, two-party politics was back with a vengeance in England too. But without one crucial element. Our historic two-party system regularly produced one-party government for the life of a Parliament. But our new two-party system has produced a hung Parliament with no party having an overall majority. This knife-edge parliamentary arithmetic means the smaller parties may be down – but they are not out. The Conservatives need an alliance with one small party (Ulster’s DUP) to be sure of a majority. Even then, with the Tories and Labour divided over Brexit, no majority on any issue will be certain and on many votes the smaller parties will be pivotal in determining many outcomes. So politicians return from their summer recess to a great parliamentary paradox: the two-party system has resurrected itself but rather than bringing with it the stability and certainty of the two-party politics of old, almost every major vote in the months ahead will be uncertain and unpredictable – and politics will be peculiarly unstable. Power will rest in Parliament. Government will be able to take nothing for granted. No vote will be in the bag until all the votes are counted. Westminster will have a new lease of life – perhaps even a spring in its step. Our democracy might be all the better for it.

Neil believes two referendums have redrawn the map of British politics. ANDREW NEIL

FINANCE

Review of the Year Brexit and beyond 1.1 million people. It also generates some £60–67 billion worth of taxes every year. Plus it contributes to a trade surplus that amounts to some £558 billion. The sector, the report points out, is an interdependent, interconnected ecosystem that has been developing now for many years. The ecosystem itself brings significant benefits to financial institutions and the corporates and the households that it supports. The downside of this, the report notes, is that the UK’s exit from the EU could be felt more widely than simply in business transacted with EU clients. The effect of Brexit on the finance industry is uncertain, given the complexities of leaving the EU

In July 2017, following the disruption of a snap election, talks with the EU over Brexit started to take shape. There has been no shortage of serious attempts to forecast what the outcome of Brexit and the talks could mean for the financial services sector. In October 2016, Oliver Wyman published a report, commissioned by TheCityUK, which aimed to estimate the impact of the UK’s exit from the EU, particularly with respect to the UK financial services sector. In compiling the report, Oliver Wyman worked closely with TheCityUK’s Senior Brexit Steering Committee and senior industry practitioners. It also consulted the major sectoral trade associations in its attempt to estimate the impact of the UK’s exit from the EU. The starting point is that the UK-based financial services sector (FS-sector) is very important to the UK economy as a whole. It’s annual earnings amount to some £190-205 billion and the sector provides direct employment to over

‘Our analysis suggests that, at one end of the spectrum, an exit from the EU that puts the UK outside the European Economic Area (EEA), but otherwise delivers passporting and equivalence and allows access to the Single Market on terms similar to those that UK-based firms currently have, will cause some disruption to the current delivery model, but only a modest reduction in UK-based activity. We estimate that revenues from EU-related activity would decline by approximately £2 billion (around 2% of total international and wholesale business), that 3–4,000 jobs could be at risk, and that tax revenues would fall by less than £0.5 billion per annum,’ the report says. However, a scenario that sees the UK move to a ‘third country’ status with the EU without any regulatory equivalence, would be expected to have a more dramatic impact. The report points out that severe restrictions could be placed on the EUrelated business that can be transacted by UK-based firms. REVIEW OF THE YEAR

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Review of the Year ‘In this lowest access scenario, where the UK’s relationship with the EU rests largely on World Trade Organization (WTO) obligations, 40–50% of EUrelated activity (approximately £18–20 billion in revenue) and up to an estimated 31–35,000 jobs could be at risk, along with approximately £3–5 billion of tax revenues per annum,’ the report says. At the same time, the knock-on effect on the financial services ecosystem in the UK could be profound as major players relocate out of the UK. ‘An estimated further £14–18 billion of revenue, 34–40,000 jobs and around £5 billion of tax revenues might be at risk,’ the authors note. Europe too, could be a big loser. Oliver Wyman points out that for some institutions, the cost of relocation and the ongoing inefficiencies associated with a more fragmented environment could cause them to close or scale back parts of their business. ‘Others, particularly with parents located outside of the EU, could move business back to their home country, reducing their overall footprint in Europe,’ it warns. On the plus side, with Brexit giving the UK a strong push in the direction of forging new relationships and trade links, the report points out that we could see significant opportunities arising from new networks of trade and investment agreements. Initiatives that,

for example, nurture the growth of FinTech, would boost jobs, revenues, taxes and the trade surplus delivered by the financial services sector. It seems obvious that EU business in general has a strong interest in supporting the UK’s continued status as an international financial centre. This is true not just because of the services directly provided to EU businesses by the sector, but also, as the report notes, because the UK has been, and continues to be, a conduit for global investment into the EU. ‘The best outcome would be to recognise these dynamics and [craft agreements that] deliver mutually beneficial results for the UK, the EU and the rest of the world,’ the report concludes.

The legal implications Following on from the Oliver Wyman report, the law firm Freshfields Bruckhaus Deringer (Freshfields) was commissioned by TheCityUK to carry out a legal analysis of the impact of Brexit on the sector and related professional services industries. The Freshfields report rules out the most optimistic scenario, which is where the agreement between the UK

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and the EU results in full equivalence and passporting across the scope of the single market directives. However, the report was commissioned and written before the disastrous (for Theresa May) June General Election, and therefore is partially blind to the current argument (or debate, to give it a politer colouring) within the Government between the ‘soft Brexit’ camp and the ‘hard Brexit’ camp.

European businesses, as much as their British couterparts, have a strong interest in ensuring minimal disruption to their work

FINANCE Quite which faction, the ‘hard’ or the ‘soft’ Brexiteers will come out on top at the end of the proposed two-year Brexit negotiating cycle remains to be seen. The Freshfields report focuses on two scenarios. The first sees the UK having ‘third country’ status, with the equivalence already established continuing, but with no new access arrangements in place to compensate for the loss of passporting rights. The second is where the UK does not succeed in obtaining equivalence across the core single market directives. The possibility of a hard Brexit, particularly given the government’s deal with the DUP, is a cause of concern amongst some of the British public

The crux of the matter is immigration, where the likes of Chancellor Philip Hammond want to ensure that UK business continues to have access to EU domiciled talent – making him more favourable towards the EU’s ‘free movement of peoples’ doctrine – while the Prime Minister and those in her camp are strongly opposed to the ‘free movement of peoples’ approach and want strictly enforced borders with strong controls over immigration. The latter approach is incompatible with continued membership of the European economic area (where acceptance of the ‘four freedoms’ is a non-negotiable requirement for membership).

To be clear, ‘equivalence’ occurs where the EU agrees that a particular UK supervisory regime is ‘equivalent’ to the requirements in a specific EU directive, and offers equivalent protections to consumers. Equivalence can be granted in full, or partially, or can be time limited. According to the Freshfields study, firms they talked to wanted to keep as much of their activities in the UK as possible and to continue their EUrelated business with as little disruption as possible. No surprise there. The report also found that firms are basing their contingency planning on a worst case scenario, i.e. no equivalence and massive disruption to services.

Legislating for the UK’s withdrawal

David Davis, as Secretary of State for Exiting the European Union, has been personally responsible for much of the negotiations

The main takeaway from the Government’s own March 2017 white paper on how it sees legislation progressing, is Theresa May’s assurance that the Government intends to convert the ‘acquis’ i.e. the body of European Community legislation, into UK law at the same time as it repeals the European Communities Act. ‘The same rules and laws will apply on the day after exit as on the day before. It will then be for democraticallyelected representatives in the UK to

decide on any changes to that law, after full scrutiny and proper debate,’ the Prime Minister said in her foreword to the white paper. David Davis, the Secretary of State for Brexit, emphasised in his foreword that the Great Repeal Bill would not be ‘a vehicle for policy change’. It is just designed to take what was EU law and turn it into UK law. The business of deciding which of the EU derived laws needs to be repealed or amended can happen at a more

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Review of the Year leisurely pace. The Great Repeal Bill

to correct or remove the laws that

will simply give the Government the

would otherwise not function properly

necessary power, as Davis puts it,

post Brexit.

Review of the UK banking sector In a briefing report looking at the regulatory environment the global financial services sector can expect to face through 2017, the Deloitte Regulatory Centre notes that, taken as a whole, 2016 was another difficult year for the financial sector. Economic and political uncertainty added a large complicating factor to the already difficult task the sector faced in completing preparations to bring their organisations into line with the postcrisis regulatory regime. ‘A prolonged period of tepid economic growth and persistently low and volatile interest rates has squeezed profitability in some sectors and put

significant pressure on longstanding business models and balance sheet management. Firms are further challenged by continuing uncertainty over the final shape of post-crisis financial regulation. While regulators are keen to preserve the hard won reforms of recent years, rising political uncertainty in developed economies (as demonstrated by the UK’s referendum decision to leave the EU and the US presidential election results) has increased the volatility and hence unpredictability of the macropolicy environment. This has caused some to go as far as questioning the sustainability of free trade and open markets,’ the report claims.

The City of London is the centre of the UK banking industry, and a focal point of concern following the referendum result and the ensuing uncertainty regarding regulation

Barclays comes close to tripling profits for 2016 Barclays’ pre-tax profits for 2016 rose to £3.2 billion for 2016, almost triple its 2015 pre-tax profit figure. However, as Chairman, John McFarlane, warned in his press briefing, the bank still has serious issues to resolve. The bank needs to reach a settlement with the US Department of Justice over a longstanding mortgage-bond mis-selling scandal. So far Barclays has refused to settle out of court. It is the only major bank to hold out against the swingeing fines imposed by various US authorities for egregious mis-selling and other fraudulent or semi-fraudulent activities by financial institutions in the lead up to the global financial crash of 2008.

position of millions of American homeowners over the sale of residential mortgage-backed securities (RMBS) in the run up to the banking crisis.

The US Department of Justice case is that Barclays jeopardised the financial

Barclays is also struggling to dispose of its African bank at an acceptable price.

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The US Department of Justice has been highly critical of Barclays’ behaviour, and is still taking action against the group

FINANCE In March 2016 Barclays announced that it wanted to sell its 62% stake in its Africa business, despite its long history of operating in Africa. The bank has been heavily criticised in the past for its sluggish management of its Africa business and its failure to identify and exploit opportunities in a continent that has the youngest demographic on the planet. Barclays Africa Group employs 45,000 people across Africa and controls banks in ten African countries, including Ghana, Kenya, Tanzania and Uganda. By November 2016 Barclays Africa was the worst performing lender on the six-

member FTSE/JSE Africa Banks Index. The bank managed to sell around 12% of its stake in May 2016 but further sales ran into trouble when the South African Reserve Bank made it clear that it did not want shares to end up in the hands of a buyout company. The Reserve Bank is playing the role of lead regulator for all of the African countries involved in Barclays Africa and is determined to ensure that any transaction that takes place will go smoothly with no disruption to customers, the banking sector or the South African currency.

Lloyds Bank clears its bailout debt Despite inevitable criticisms over its branch closure programme, 2017 started well for LBG. Announcing its first quarter results at the end of April, the banking group reported that profits had doubled by comparison to Q1 2016. Pre-tax profit was up at £1.3 billion versus £654 million. This looks particularly healthy in the light of the bank having to set aside a further £350 million to cover payment protection compensation claims. Lloyds Banking Group is now almost wholly privately owned, with only a small government stake remaining

In the first week of April 2017 Lloyds Banking Group (LBG) announced the closure of 100 branches and the loss of 325 jobs. The closures affected 54 LBG branches, 22 Halifax branches and 24 Bank of Scotland branches. The losses are part of a wider attempt by LBG to shrink its cost base, with the total job cutting exercise said to ultimately result in the Group shedding 12,000 jobs. The closures are part of a plan announced by the bank in June 2016 and reflect a general move among High Street banks to shift more of their business to the internet – which they say is in response to customer demand. LBG plans to use mobile branches to continue services in affected areas.

At the time the results were announced, the Government’s stake in Lloyds had shrunk from 43% to less than 2%, and it had already recovered all the taxpayer’s bailout cash, amounting to £20.3 billion. In May, just a few weeks after the Q1 results announcement, the Government sold its remaining 0.25% stake in Lloyds, returning LBG to full private ownership almost a decade after the 2008 bailout. The move was widely seen as a pivotal moment for the UK banking sector, with LBG being the first lender to clear its bailout debt to the Government. According to LBG, the Government made a profit for the taxpayer of £900 million on the conclusion of the deal. Not so good for the bank is the fact that in October this year its former Chief REVIEW OF THE YEAR

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Review of the Year Executive, Eric Daniels, and Chairman, Victor Blank, are due to give evidence in a £450 million law suit brought against the bank by some 6,000 investors who claim the bank withheld information from them during its governmentinstigated take-over of Halifax Bank of Scotland (HBOS) at the height of the global financial crash of 2008. Claimants include many small retail investors and some 300 corporates, including pension and investment funds. The takeover massively damaged Lloyds and led directly to the Government having to bail out the bank. Helen Weir, now Marks & Spencer’s Financial Director, is also due to give evidence. The Lloyds/HBOS Shareholder Action Group expects the hearing, scheduled

for 2 October, to last for 12 weeks. One of the main claims being made is that the directors of Lloyds TSB failed to disclose that the bank had secretly made a £10 billion loan facility available to HBOS and that HBOS had already required funding of up to £25.65 billion from the Bank of England and $18 billion from the Federal Reserve. Under the circumstances, the action alleges, exchanging 0.605 Lloyds shares for each HBOS share amounted to a gross over-valuation of HBOS’s share capital. The case ‘would highlight the inexcusable failure of the Directors to share crucial information with their shareholders ahead of the deal going through,’ the shareholders claim.

Former Lloyds chairman Eric Daniels is undergoing intense legal scrutiny, which may have ramifications for the bank

FinTech’s bright future In a recent speech, the Governor of the Bank of England, Mark Carney, pointed out that FinTech has spurred a host of new entrants, including new payments providers, peer-to-peer lenders, roboadvisors, innovative trading platforms and foreign exchange agents. In time, he noted, these new entrants would likely bring about the unbundling of traditional banking models and may well deny banks their traditional economies of scale and scope. Plus, he pointed out, FinTech has systemic consequences that are highly complex and pose challenges for regulators. More diverse business models and alternative providers are positives for financial stability, but roboadvisors and traders could encourage

‘herding’ behaviour, with trades becoming more and more correlated. Other positives include the possibility of better credit risk analysis, with Big Data analysis able to provide a more accurate and dynamic picture of the state of the economy. Economic forecast improvements might well emulate weather forecasting, which has steadily improved in accuracy in recent years. ‘My own forecast is that FinTech’s consequences for the Bank of England’s objectives will not become fully apparent for some time. Many of the technologies needed to deliver such transformations are nascent – their scalability and compatibility untested beyond Proof of Concept,’ he added.

Governor of the Bank of England Mark Carney has stressed both the challenges and opportunities that the growth of FinTech presents to regulators and the industry at large

Rapid growth suggests InsurTech could rival FinTech Global investment in the InsurTech market by insurance companies totalled US$1.7 billion in 2016, across some 173 deals. The insurance companies were way behind the

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banks in recognising that buying innovative technology start-ups was a great way of responding to and countering the potential threat from such start-ups.

FINANCE

Accenture, alongside other organisations, have noted the disruptive and innovative potential of InsurTech

Accenture Partner, Steve Watson, keeps a close eye on InsurTech. He reckons that although more than half of all insurance InsurTech deals take place in the US, the UK, along with Germany and China has become a significant centre for such deals. ‘There is a growing recognition that although the banking and capital markets may have started their FinTech journeys earlier (and built up a considerable weight advantage), it will ultimately be the insurance industry that sees the most benefit – and the greatest level of disruption – from this global upsurge

in innovation,’ he comments in a recent blog. In particular, a number of new InsurTech companies are focusing on the potential benefits to be derived from the ever expanding ‘network of things’. ‘This is great news for those insurers and start-ups that can harness this army of devices to deliver new levels of insurance personalisation, better real-world outcomes for their customers, and increased due diligence with respect to their own internal risk profiles,’ he comments.

The Financial Conduct Authority in 2016/17

FCA proposals regarding competition and behaviour aim to strengthen regulation whilst limiting interference

On 27 July 2017 the Financial Conduct Authority (FCA) outlined proposals to extend the Senior Managers and Certification Regime to all financial service firms. As always with this regime, the aim is to make individuals more accountable for their conduct and competence. The intention is to encourage personal responsibility for actions and to make sure that the lines of responsibility are clearly demarcated. The proposal envisages five conduct rules that apply to all financial services staff at FCA-authorised firms. The rules emphasise integrity, due care, skill and diligence, along with being open and cooperative with regulators. Senior managers will need to be approved by the FCA and will appear on the FCA Register. Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations, at the FCA, said ‘This is about individuals, not just institutions. The new Conduct Rules will ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals with whom they deal.The regime will also ensure that Senior Managers are accountable both for their own actions,

and for the actions of staff in the business areas that they lead.’ One of the FCA’s major reports over the last year was its study of the competitiveness of the asset management industry, which it launched in November 2015. The FCA notes that the UK asset management industry is the second largest in the world, managing around £6.9 trillion of assets. Over £1 trillion of this is managed for UK retail investors, £3 trillion for UK pension funds and £2.7 trillion for overseas clients. The final report confirms the findings set out in the interim report published in 2016. This found that price competition is weak in a number of areas in the industry. To drive competitive pressure on asset managers, the FCA will: » support the disclosure of a single, allin-fee to investors » support the consistent and standardised disclosure of costs and charges to institutional investors » recommend that the Department for Work and Pensions (DWP) remove barriers to pension scheme consolidation and pooling REVIEW OF THE YEAR

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Review of the Year » chair a working group to focus on how to make fund objectives more useful and consult on how benchmarks are used and performance reported. The report also contains recommendations aimed at improving the effectiveness of intermediaries. These include proposing a market study into investment platforms and a recommendation that HM Treasury should bring investment consultants into the FCA’s regulatory perimeter. In October 2016 the FCA and the Prudential Regulation Authority (PRA) came under attack in a report compiled

by the Cass Business School for the financial services think tank, New City Agenda. The report suggested that UK regulators were ‘sleep-walking’ into another financial crisis, and that crucial changes put through in the wake of the 2008 global financial crash were already being watered down. The administrative costs incurred by the regulators now amount to £1.2 billion a year, six times what they were in 2000. Plus, there are now over 13,000 pages of rules guidance and supervisory statements published by the FCA and the PRA, which, the report claims, is creating a bureaucracy that is both overzealous and ineffective.

What’s next? Commenting on the prospects for the UK economy after Brexit, accountants PricewaterhouseCoopers (PwC) note that the current rate of growth going into the Brexit negotiations is not exactly brilliant. Growth slowed in the first half of 2017, while inflation rose sharply, squeezing consumers. PwC is predicting that gross domestic product (GDP) growth for 2017 as a whole will come in around 1.5%, and will drop another point in 2018, to 1.4%. This modest growth prediction is despite the fact that the UK economy grew by 2%, from Q1 2016 to Q1 2017. However, the quarter-over-quarter growth rate for Q1 2017 was just 0.2%. Nor, in all probability, can the UK expect much help from the US economy, traditionally one of the major growth engines driving global growth, along with China. At the time of writing, forecasters were scaling back their growth predictions for the US economy. One of the major concerns for pundits being the fact that President Donald Trump’s attempt to repeal the health care reforms instituted by his predecessor have been

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thrown out by the Senate. This has cast doubt upon President Trump’s ability to deliver his promised tax and economic stimulus and has caused some analysts to downgrade their growth predictions for the US economy. As The Parliamentary Review goes to print, it looks as though low growth will continue at least through much of the Brexit negotiations. Whether it will have given way to higher growth or started to slide towards recession by the time the Brexit talks come to an end is anyone’s guess.

Early setbacks for the Trump administration on healthcare reforms have caused growing doubt over the president’s ability to see through his planned economic measures

FINANCE

Flambard Williams

et’s get one thing clear, the Buy to Let property market has continually proven to be the best investment vehicle over the medium to longer term. It has comfortably outpaced bonds, saving rates and even the FTSE 100. Despite the recent Government intervention, where we have seen an increase in Stamp Duty rates for second properties along with the phased removal of tax relief on mortgages, Flambard Williams are still regularly achieving 8% income per year (on average), with up to 9% annualised growth for our clients. The team at Flambard Williams

History of Flambard Williams I purchased Flambard Williams as a going concern in 2013 as I felt there was a lack of options and transparency for investors when purchasing a Buy to Let property. I completed months of market research which involved speaking with over 1,350 Buy to Let investors. From this, it was soon established that over 90% of the individuals in question had purchased within three miles of their current home, thus restricting themselves on their potential income and growth. Importantly, from the individuals asked, there were only 17 instances of yields that could not be beaten.

AT A GLANCE »» Established 5 years »» Placed over £50m of buy to let property deals

From this, my intention was to increase clients’ knowledge of the potential of Buy to Let property throughout the UK, particularly in growing cities such as Birmingham, Manchester, Liverpool and Leeds.

»» Clients benefiting from 8% NET income

As a company we offer clients a full, bespoke service and each client has their own dedicated consultant. Our consultants are flexible and available to help seven days a week across multiple platforms, including WhatsApp, We Chat and traditional forms such as email, telephone, and face-to-face meets. Due to this approach, we are now a leading company in our sector with offices in London, Manchester, Liverpool, and our head office in Chelmsford.

Clear and Concise Property Solutions A common misconception that I have found over the years is that many clients are deterred from property investment due to the automatic assumption that they will simply not be able to afford the cost. However, when I explain to them that they could achieve a Buy to Let which paid 6% NET (after all costs such as ground rent, service charge and management fees) requiring just £25,000 in savings, many would be surprised. We have helped numerous clients venture away from leaving their money in a low-interest bank account to making double-digit returns.

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Property prices on average double every 10 years

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Over the last 4 years I have increased turnover from just over £30,000 to £695,000 from Sep 2015 to Sep 2016. I anticipate that this current tax year we will increase turnover again to £1.5m+.

I fully believe that the less regulation the better. Businesses and the economy in general perform far better without bureaucracy and intervention getting in its way. FLAMBARD WILLIAMS

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Despite a slight slowdown, property still remains one of the best investments over the longer term

However, it is important to note that there are still times when an industry needs a helping hand. The property investment market is becoming so mainstream, that it is now at that conjuncture where we need a little nudge in the right direction to prevent any horror stories from re-appearing (such as the ones we saw in 2008). Unfortunately, many industries and regulators don’t act, instead they react. I have listed a number of issues below and the solutions that would lead to these issues being avoided.

Issues and Solutions in the Property Investment Industry

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1. The over-promising of rental yields

The Issue: Many companies promise yields of 10% NET of all costs and guarantee it for 10 years. This simply is not possible. In this instance the developer has inflated the initial price of the property and will pay a portion of the income from this. You usually find that after 3-4 years the income has stopped being paid and you are left with a property which is worth less that what you paid for it. The Solution: These so called ‘guaranteed’ rents should be abolished. The FCA would not allow a broker to state that a share will guarantee a dividend of x% in 5 years so it should be banned in the property market. The correct way of moving forward is to give clients clear indications of what they can potentially make and put them in touch with independent letting agents rather than forcing them to use in-house agents. Stunning development on Manchester’s riverfront

2. Low cost properties in areas which are not suitable for Buy to Let

The Issue: Whilst it is true that you can still purchase low cost properties in the UK, these may not be suitable for investment. For example, a threebed terrace house three miles from Manchester can be purchased for £75,000. Equally, a studio in the city centre will also be priced at £75,000.

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Unfortunately most clients feel they are getting better value by investing in the three-bed terrace house, but this is a fallacy. City centre studios deliver better income.

The Solution: As previously mentioned, clients should be encouraged to make enquiries with independent letting agents who will give them realistic income prospects. 3. The prevention of one-man bands

The Issue: Currently there is no regulation surrounding the industry meaning that essentially, an individual with a ‘phone can start calling potential clients and sell them an investment without any formal training or knowledge. This is unheard of in every other investment industry. The Solution: The simple solution is to ensure that each company setting up has to be a member of a regulatory body. This regulatory body would not have the power to force anything through. Also, there should be a financial amount held in a bond. If you are an FCA regulated company you have to set aside a nominal amount, which is ring-fenced and cannot be touched. If this were to be the case, the companies in question would have to put their money on the line (which they could lose) should they misinform their clients. 4. The regulation of commission

The Issue: Currently commission is uncapped. Commissions can vary from 0.5% up to 10% depending on the developments. The majority of the smaller companies tend to market the lower quality developments with the higher commission. The Solution: The simple solution is to cap the commission that agents can make or even bring in consistent commissions across the board.

FINANCE

IncomeMax

e know that life happens, but believe there is always a step forward. We provide independent personal money advice for the real world that helps vulnerable and low-income households take control of their finances. We have helped thousands of families to maximise their income and manage their finances since we were founded in 2009. IncomeMax are a community interest company and social enterprise that helps low income and vulnerable families with their money problems. We provide welfare, debt and money advice so that our customers can take control of their finances again. Our service is delivered by telephone and email. We are funded by partnering with creditors. By funding our service and joining our partner network, creditors can refer their vulnerable and low-income customers to us for support. Our current funding partners include EDF Energy, SSE, Nationwide Building Society, Vanquis Bank, Santander and Agility Eco. The main aim of our service is to help families increase their income, reduce household bills and get the debt advice they need. We act as an independent agent so that we can provide advice and support to that customer and their family. We try to increase the customer’s income through any available financial support that is out there; things like benefits, work, pensions and charitable trusts. We also try to find ways of reducing key household bills. For example, we do a lot of work with energy and water companies because these suppliers have a lot of support available for vulnerable customers. The work that we do enables us to support customers with debt advice if it is required. We work with key charities like National Debtline, StepChange Debt Charity, Payplan, Citizens Advice and Christians Against Poverty, who can provide the right level of debt advice that customers need and which is free at the point of contact. There are millions of vulnerable households in the UK that do not get all of the financial help and support they need. It is these customers we aim to help. Billions of pounds of welfare benefits goes unclaimed each year because the welfare system is complex. Digital skills can be lacking, and some households we work with are financially excluded or have difficulties with financial capability. Many do not have access to everyday financial products that makes life easier for people. Being on a low income makes things really difficult to manage bills and debts. There are also social exclusion issues as well as a lack of basic numeracy and literacy skills. Quite often it is a change of circumstances where people need our help. For example, unemployment, sickness, disability, caring responsibilities, separation or bereavement can really make things difficult financially. Sometimes, we have to help customers who are caught up with benefit problems.

Lee Healey, Founder of IncomeMax CIC

AT A GLANCE »» Employs 14 advisers »» Currently helps around 10,000 families each year »» Aims to help low income and vulnerable families increase their income »» Areas of expertise includes welfare and debt »» Funded through a partner network of creditors from the energy and financial services industries

INCOMEMAX

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Invaluable help for me as I have problems filling out forms. Took the stress out of trying to understand the benefits system

KEY FACTS »» The firm was established in 2009 »» £11 million of additional income confirmed for IncomeMax customers since inception »» For more information www.incomemax.org,uk / info@incomemax.org.uk.

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IncomeMax customer

My background is the Department of Work and Pensions, as well as the charitable advice sector. I believe strongly that the personal touch is what makes the difference to helping vulnerable families maximise their income. When a customer is really struggling with life, complexity and the skills to be able to navigate the system, what really helps is talking to someone who knows their stuff. This was the reason why I founded IncomeMax. I know from experience that the personal touch can make a real difference and I believe we have proved there is a need for a service like IncomeMax, where you can talk confidentially to a real person who is on your side. I am immensely proud of my friendly, award winning team, who find millions of pounds of missing income and financial support for thousands of customers each year.

Staffing a social enterprise To enable us to deliver the level of service that our customers need, it is paramount that our staff have the training and expertise required. We have developed our own in-house training and quality control systems and we are also Financial Conduct Authority (FCA) regulated and Advice UK members. Staff also undertake the IMA Certificate in Money Advice Practice qualification.

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Top quality service. I now have a better quality of life and have been lifted from gloomy to 100% IncomeMax customer

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For me, social enterprise is a business with a mission that is clear on what its social impact is. Profits do not drive what we do, social impact does. It is very much about changing the lives of the families we work with and it is great that our partner companies support us in that aim. We want the kind of support that IncomeMax provides to be available to everyone that needs it and there are millions of families that potentially need our help. I hope that many more creditors and companies decide to work with us so that we can help many more vulnerable customers in the future.

Role of government The government has got a big part to play in making sure that vulnerable households are supported. It must be acknowledged that there is a cost to helping and supporting people in this way and it is about recognising the social value of helping vulnerable families to maximise their income. The drive is to offer more and more digital support and these services are important, but for many millions of families, when they hit hard times we need supportive, personal services like IncomeMax to be on hand to help them. The knock on effects and benefits of our service are really evident. Customers often report feeling much better about life when their income has been maximised and debts are reduced. We would like those in government to know about the work of IncomeMax and to be encouraging creditors to use services like IncomeMax as part of their vulnerable customer strategies. We would welcome the Department of Work and Pensions talking to us about best practice and asking what we do that they could learn from, especially as Universal Credit further rolls out.

FINANCE

ML Financial Associates

t ML, we help clients achieve their financial goals by focusing on maximising their wealth whilst ensuring the same clients protect all they have built up over the years for their loved ones. With expert advice in all financial areas such as Pensions, Savings, Investments, Protection Plans and Trust Planning, our clients are extremely well looked after from the time they identify their goals through to when they achieve them.

Very innovative as financial advisers, there has not been a financial conundrum that we have not been able to solve and help the client understand and see the best solution to help them achieve what they want to. At ML, the journey is all about the client, with no interest in products, just solutions.

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The tale of John and Charlotte The ethos of the firm is well evidenced by the experiences of our existing clients John and Charlotte. Referred to us by long-standing clients, John and Charlotte were keen to discuss how they could afford to retire early after spending over 30 years in business together. Although running a successful business for over three decades they had neglected to manage and review their personal finances over those years. This is a relatively common position that we find many of our clients are in when they first approach us. We began by reviewing what John and Charlotte wanted with their lives and what they wanted from their finances. We then took John and Charlotte on the ML client journey, which starts with a discovery meeting. This is a review of where they are today using the ML Review Service, we are very much a believer of you cannot know where you are going until you know where you have been. This involves discussing your aspirations and getting to know you, we must ascertain certain pieces of information but really it is a discussion all about you and gathering of all required financial information. We then will ask all the questions to financial providers about John and Charlotte’s finances, that John and Charlotte did not always want to ask, they were not sure what to ask or the providers do not want to answer.

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ML Financial Associates excels at helping the client to get what they want from their finances. We make what can be perceived as a very complex subject simple to understand. Whilst very experienced as Independent Financial Advisors, we are a young passionate firm who want to help change peoples’ lives by helping clients use their finances to their advantage.

Craig McClurg and Simon Lister Directors and Independent Financial Advisers

Expert advice in all financial areas

AT A GLANCE »» Business founded in 2011 »» Offices in Norfolk and Northamptonshire »» Over 70 years of expertise in the financial sector »» Both directors ranked in the top 1% of Independent Financial Advisers worldwide* *Million Dollar Round Table (MDRT) 2016

We then took John and Charlotte on the next part of the journey where we introduced what we refer to as the five rings of financial planning. Much like the Olympic Rings that denote the interconnection of the five inhabited regions of the world, we use the same concept utilising all financial resources that John and Charlotte could for their advantage. ML FINANCIAL ASSOCIATES

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ML Financial Head Office at Wymondham, Norfolk

This is where we explained to John and Charlotte, to achieve what they want, it can take several forms such of the five financial planning tenets of our own Olympic Ring and it is the distribution and spread of this wealth that not only offered them greater security of diversification, but also that if their portfolio was structured correctly then they could create a significantly more tax efficient income using various tax allowances that they had no idea existed!

Creation, Protection and legacy planning.

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At ML, the journey is all about the client, with no interest in product, just solutions

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At the start of our process – The Discovery Meeting

The value of investments can fall as well as rise. You may not get back what you invest.

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Whilst some decisions were easy, we found we could add significant value to the client’s primary goal by using a three-point check on their finances. Both clients had various pension plans, many had not been reviewed for several years so the starting point was to review each and every plan in terms of the following: »» The charging structure: Many newer plans greatly reduced charges to their predecessors, even if they are held with the same company. An important feature as our long-found belief is not that our clients should look for plans with no fees, rather the fees should represent good value for money. »» Investment performance: A bewildering area for most clients as the pension plans held by John and Charlotte housed different assets which had all performed differently over the years of investment, some had made money and some had lost money. The investment returns they had made had been achieved more through luck than judgement. Everyone that invests must follow a process that removes emotion from the equation. Most people are lethargic about their involvement in the process, however, this area is like anything else in life, it needs work in order to succeed – not a week goes by when our clients’ investments are not reviewed to make sure they are doing what they should do. Risk is also a key consideration and we strive for below average risk with above average

return. It is easy to take risks when times are good but there needs to be a balance. It is important that once gains have been made they are kept. This may involve a strategy of removing some funds when an investment rises and perhaps reinvesting if the price later falls. We like to think of it like climbing stairs, you need to take one step at a time. If you try to get straight to the top, you will fall and hurt yourself! It is our strategy to try and limit the losses and take advantage of the gains based on the tried and tested Markovitz theory. Harry Markowitz is an American economist, and a recipient of the 1990 Nobel Memorial Prize in Economic Sciences. According to his theory, it is possible to construct optimal portfolio offering the maximum possible expected return for a given level of risk. »» Taxation: Taxation is a very vexing question and one that garners a lot of opinions. In our minds, our role is to utilise all the legal tax regulations that are available to us to the client’s advantage that ensure their tax position is as efficient as possible and that they utilise all their allowances. »» Flexibility: Despite the pension freedoms rules offering exactly what John and Charlotte needed for their retirement goals, we had to check whether their older style plans offered the flexibility we wanted for them.

Ensuring value not comparing costs By using the above processes and spending some planning time with them, we could put John and Charlotte in the position where they had a structured financial plan, that they could see, that met their future aspirations. This success was all about financial planning not products. A well-structured strategy that delivered small improvements in a variety of areas that add up to a large overall gain. Financial planning is all about taking advice, having a plan and adding value, to which John and Charlotte can now testify.

FINANCE

JPS Global Advisers

PS Global Advisers is an independent global firm advising corporate clients, government owned entities and private equity firms on cross-border M&A and fundraising with a tactical, strategic and execution-focused approach on providing advice and getting transactions completed. The advice we provide is across the product spectrum and is advisory-led, relationship-led and focused on originating and executing preemptive opportunities and providing an execution road map for our clients, particularly on complex; cross-border situations. We have a focus on cross-border transactions, strategic advice, investor relations advice and fundraising for our clients given our deal experience and global connectivity among corporates in the UK, Asia, Europe and the US. We have linkages and senior relationships with leading financial institutions and consulting firms in Latin America, Asia, the Middle East, Europe and Africa to access intelligence and proprietary insights about targets for our core clients.

Our role in society The effectiveness of a society is judged by creating a private-capital induced and corporate-investment induced base of investment. This should create sustainable employment, not self-employment, at high wages. This in turn, creates a broad tax-based system of revenues and a self-renewing capital base for pensions, education and health spending for an ageing British population that is challenged by stretched government budgets and too much government-funded employment.

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The problem we face is not unemployment but under-employment or low wage employment. The lack of lateral movement of talent across sectors has created ‘salaried unemployment’ and this has economic and therefore social consequences for families and communities. A problem that is far too severe to be solved by a few hundred pounds of tax credits here or there for a struggling and growing middle class in the UK. A growth in self-employment is not always a precursor to an entrepreneurial venture or large scale employment, but a necessary outcome of a lack of similar, corporatebacked opportunities that do not naturally fit into the venture fund driven criteria for hiring within digital and technology companies. These digital companies, often lossmaking, even at the point of sale or an IPO, look for niche skills, often as consultants on contracts filling niche tasks. What has been the result? The large displacement of taxable, salaried and talented employment from the retail and industrial sectors has not been absorbed by other sectors in the UK (or globally for that matter) and is adding pressure to already stretched state budgets.

The lack of lateral movement of talent across sectors has created ‘salaried unemployment’ and this has economic and social consequences for our communities

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The experience and ability to provide advice to corporates and governments across all jurisdictions holistically on specific aspects of formulating a transaction strategy, refinancing, fundraising and strategic investor communication strategy or providing holistic, independent board advice to clients in an integrated manner is a differentiating aspect of our advice.

Jai Singh, Founder and CEO of JPS Global Advisers

JPS GLOBAL ADVISERS

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At this point of our growth cycle, a tunnel vision approach to investment and overspecialisation and a lack of corporate funded investment will inhibit both growth and private wealth creation that are both critical in the current fiscal and political climate

To create a wider, tax-based revenue system, we need more sustainable salaries with equity incentive plans per employee. This may mean incentivising and encouraging corporates to invest in new industrial divisions (including, but not limited, to technology). This would refocus the funding towards a less risky method of financing and create sustainable new business divisions, initially owned by well capitalised corporates that have a longer-term view on stakeholder returns.

capital raised. Going forward, we need less fund entrepreneurship and more corporate guaranteed entrepreneurship. Not only would the transparency of this investment be preserved via corporate reporting and transparency, it would also create less leverage and greater stability in the global financial system with positive knock-on socio-economic effects from more loans available for global infrastructure investment and therefore, public to private partnerships and sustainable employment in the UK.

Following a period of positive, exponential financial-driven growth, it is time to seek a balanced way in which new businesses are funded through a shift towards less of an intermediary finance culture to a more direct, corporate backed investment culture where the funding of asset based investments is more directly linked to excess capital on corporate balance sheets and pension funds. How do we accomplish this?

Yes, it may mean the onset of Conglomerates. Is that necessarily a bad thing in this cycle of our economy after a period of corporate governance legislation and activist led restructuring that have raised the bar on corporate governance?

Corporate guaranteed entrepreneurship and investment Corporates could be sitting on approximately $2 trillion in cash based on companies only in the S&P 500 and FTSE 100. This is investible cash which need not be returned to shareholders, but utilised in new areas of investment. However, funds and institutional shareholders need to stop breathing down the necks of corporates to stop new discretionary investment in the name of specialisation.

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At this point in our growth cycle, a tunnel vision approach to investment and overspecialisation and a lack of diversification will inhibit both growth and private wealth creation that are both critical in the current fiscal and political climate. After all, the five-year fund-raising total for the top 10 private equity firms is $320 billion, which accounts for approximately 24% of the total

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Conglomerate should not be a bad word in today’s context and indeed in economies like India and USA, groups like GE and Tata that operate from soup to nuts, create employment and absorb economic shocks with their longer-term investment horizons. In the past the Hanson’s, Virgin’s, Carnegies and Rockefellers created wealth for employees in the US and UK. After all, if Tata was not a conglomerate with the ability to absorb losses, Port Talbot would have been shut down without debate had it been wholly-owned by a fund that relied excessively on debt? If we do not act now to modify our approach to funding new private sector investment and changing our investment orientation that would utilize excess corporate cash, and if we do not create wide scale salaried employment at low tax rates through corporate diversification and if we continue to insist that either governments or private equity funds solve our large-scale, underemployment problems, we may end up with socio-political chaos in the western and even, emerging world.

FINANCE

Cheetham Jackson

e are an independent financial planning business with a drive and dedication to deliver excellent financial planning to our clients, at a lower cost, to ensure more of the return stays in their pockets. Our ambition is to be the most trusted financial advisory service for local people, local businesses and all of the local communities that we serve, across the UK.

Stuart Jackson, Founder

Why our culture is the answer With our culture, we built an organisation. Most Advisory firms begin with a single owner who has been a successful advisor. As part of growing the business, they recruit other advisors so they do not need to advise any more. The evolution both of me and the business is a very different journey. I started life as an accountant then moved into the world of continuous improvement and gained an appreciation for the importance of processes in terms of delivering consistent, high quality outputs. Alongside this, I have shared a belief that business need not be simply about making profit, but rather about adding value to the family of people who make it great, those it serves and the communities in which it operates. I thought this might just be me; happily I was wrong and this is part of the values held by many other skilled professionals. I know, because I have the benefit of working with them. Here suddenly, there was the potential for building a scalable business based on efficient and effective processes and core guiding principles, in an industry where the reputation was rock bottom and in need of repair. Financial services done well has the ability to truly help people and what we have done is create a process-driven business populated by great people that have a very different set of values and beliefs than most financial services organisations. It is those values and beliefs that look after our clients.

Accountability through ownership As Cheetham Jackson grows, success at office level is driven by a genuine sense of accountability. We have built into our operational model that the office itself is effectively a shareholder in their own business. Thirty per cent of each office is owned by those working in it. Ownership and accountability go hand in hand. By making this a part of our model, we have an office full of business-owners who are building something in their own communities for themselves, for each other, for their families and for their clients. This creates something very special. Everybody from the lead advisors all the way to the apprentice, they are all shareholders in their business and they treat the business as a business-owner would. The role of the central team therefore shifts from ensuring people do the right thing to understanding their ambitions and supporting them to fulfil their potential.

AT A GLANCE »» Founded in 2010 »» 11 offices across the North of England »» Intention to become a National business with 10 regional hubs, each supporting 15 offices »» Low cost service proposition driven through highly efficient processes, delivered by incredible people »» Average growth of 75% per annum since 2013 onwards

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Failure leads to success

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We have amazing people, so our role is to show them what they are capable of and to then support them in achieving those things

The continuous improvement background that I came from, and the belief that the best way to speed up improvement is to fail more, drives us to perform better. We have made many mistakes along the way and, fundamentally, those mistakes have created the organisation that is here today; an organisation that still isn’t perfect, but which insists on learning every single time any mistake is made. Through learning to do better every time, the proposition gets stronger and our clients get better service. That passion for continuous improvement, continuous learning, and building an organisation of which we, our families and our communities can be proud, is within every single person within the organisation.

It’s good to talk Remote offices are incredibly difficult to deal with, but without question communication is up there with culture because the culture can only be maintained through effective communication. The way we have dealt with it up to now is relatively manual. We have myself and a leadership group of six who spend a day in each office every month. Every week there will always be somebody from the central team in each office and that opens the lines of communication for the offices back to the central group. The new business management system we have built, will open further lines of communication.

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One of our key limitations early on was that we were trying to operate within the constraints of the industry that existed. All the products are built for stereotypical IFAs and we do not really work in that world. We have had to go out and build our own. Our new system allows communication based on our belief system and allows

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the offices and the individuals in those offices to communicate in a way that is much more proactive and effective than picking up a phone. The next evolution of that is what we have called The Council. This is a concept based on the book ‘Good to Great’ by Jim Collins. The idea that if you have a committee, including those from our offices responsible for day-today decision making, then everybody gets involved in the decisions and the direction of our business. It is not just me and my team making all the decisions all the time, it is people on the frontlines who come together once a month, and deal with the issues we face as a business. That gets fed back to us, as the strategy group, who listen to those solutions and rubberstamp them.

Built for growth All the building blocks to take us forward into this next phase of growth are in place. They need to embed, and we are probably looking at six months of nurturing the culture and processes. From then onwards we are into the next phase of growth which is ultimately the progression towards ten regions with 15 offices in each region, so 150 offices across the UK. What we are trying to achieve here is going in the opposite direction to our competitors. What we are trying to do is start from scratch using traditional values. It is almost the old banking model, when banks worked, which was a local person that you trusted making good financial decisions. Our organisation is rebuilding the trust in a financial organisation. A business that stands for the right things, does things the right way for the right reasons for the client, and by doing that we can still be successful. Along the way many have scoffed at our ambitious plans, but that only makes us more determined to prove everybody wrong.

FINANCE

Churchill Investments

y career in the financial services industry has spanned 37 years, starting in insurance companies, then fund management companies and now as an adviser to private clients, as founder of the 20 year old, family-run Churchill Investments. Looking back, and forwards, the one constant theme is change. Some has been good and driven the industry forward, while some has held us back, actively stopping us from building better advice businesses. The best changes have been new technologies and the increasing professionalism of the industry, the worst have been the lack of change from the regulators. The impact of new ways of working in the advice business has been nothing short of revolutionary; easing our administrative burden, allowing us more time with clients and enabling us to provide a broader range of options. A new professionalism has brought intelligent and enthusiastic recruits whilst the approach of the regulators has not really changed at all; same old approach; same old results. The introduction of ‘wrap platforms’ has been a positive development bringing a secure internet-based account that lets us view and manage clients investments in one place. In 1995, if a client had £200,000 to invest in a portfolio, they would typically be invested in 12 unit and investment trusts. This meant 12 telephone calls, 12 contract notes, 12 registration forms with 12 cheques and, finally, 12 certificates to be forwarded to one client. Each time we had to negotiate to secure client discounts, some companies paid renewal commissions, some didn’t, and the security risk was always high. Then, in the late 1990s, came the first fund supermarket, which has become the modern wrap platform, bringing advantages to clients and businesses alike. Everything can now be done in one place, at the touch of one button. The Retail Distribution Review (RDR) was a major upheaval when it came into effect on the last day of 2012. Churchill already had the suggested fee structures in place and similarly had implanted ongoing remuneration and regular client reviews. My experience as Sales and Marketing Director at Foreign & Colonial meant that I was familiar in dealing with independent financial advisors (IFAs) who would sell products to earn the maximum initial commission then put them in the filing cabinet for a few years before digging them out and selling something else. Churchill’s business model was different; to operate with fewer but more loyal clients providing regular reviews and newsletters and simply charging an ongoing fee.

Jamie Ware, Director

‘A new professionalism has brought intelligent and enthusiastic recruits to the industry which I hope further education establishments will respond to providing further courses in financial services.’

AT A GLANCE »» Chartered Financial Planners »» Founded 1995 »» Six employees »» Family owned and run »» Located close to Bristol Airport

The RDR introduced a minimum examination requirement which advisors needed before they were allowed anywhere near clients. It also introduced a Statement of Professional Standing requiring advisors to fulfil a minimum annual amount of CHURCHILL INVESTMENTS

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Highlighting best practice ongoing education, thus avoiding the habit of recruiting failures from other professions and instead attracting high-quality graduates; a positive move for the long-term success and sustainability of the financial advice sector. Churchill’s first graduate was my son, Tom, our two administrators are both graduates working for their professional exams and I too have increased my own qualifications. IFAs and Wealth Managers are now directly attracting graduates and training them themselves, bringing the future into our own hands, rather than that of product providers.

Tom Ware

‘In an industry which is certainly moving through a phase of consolidation, our ownership structure allows us to take a truly long term view when it comes to the future planning of the business and a long term approach to client relationships.’

In my lifetime in the industry has seen nine Chancellors of the Exchequer and innumerable changes in legislation, mainly positive, for clients and savers, e.g. from the humble Personal Equity Plan (PEP) we now have a whole range of ISAs available to clients. On the negative side, Gordon Brown’s raid on pensions funds, hardly reported in the press, resulted in the demise of one of the finest Defined Benefit pension systems in the world. Whereas previously retirees could rely on a pension related to their final salary they were left having to plan their own, which in many cases were inadequate for their retirement. The 1987 Financial Services Act created a welcome distinction between tied agents who were limited to offering one company’s products and independent advisors who were free to investigate the marketplace. This resulted in tied agent sales forces being disbanded and seemed a backward step. Tied agents had successfully provided advice and products to individuals who would not otherwise (and do not now) save on a regular basis; the ‘Man from the Pru’ provided the lower paid with policies at favourable rates of interest and I wonder if today’s Pay Day Lenders could compete.

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The bad practice of a few have led regulators to impose an ever-greater burden on the many. Too often it has felt like kicking those who have always acted in the best interests of their clients, while the rogue elements have long departed. The current regulatory system continually fails to spot companies in trouble and the honest IFA picks up the bill for their incompetence. Whilst the industry has reacted to constant change, the regulators’ reaction has remained unchanged. Theirs is a reactive response with little consideration of the consequences. A closer scrutiny of products before they were launched and monitoring high-risk companies more closely could have avoided the irresponsible lending practices of the pre-financial crash. Instead the regulators walk onto the battlefield when the battle is lost and bayonet the wounded... or as the past Chief Executive of the Financial Conduct Authority put it, ‘we will shoot from the hip and ask questions later’. Another constant for many years has been the fragmentation of the industry. I have been very impressed with the Personal Finance Society since it was formed. It provides a sensible response to consultations on behalf of its members with quality quarterly meetings now attracting huge numbers of IFAs and has been at the forefront of the industry’s drive towards professionalism. We have come a long way since the 1987 Finance Act and, generally speaking, this has been a positive path. We now have a more professional industry to satisfy the growing need for quality financial advice and flexible, innovative products to help people save and plan for the future with confidence.

FINANCE

Inspire Wealth

nspire Wealth is a firm of independent wealth consultants with a special focus on wealth consultancy and planning. Our main strategies involve investment risk, tax planning and lifestyle cash flow models. I have been in the industry for 30 years and worked for various insurance companies before starting my own business. Originally, I was employed in the home service market where strong relationships were forged with clients. Unfortunately, it turned out not to be a cost-effective business model, especially with the increased cost of compliance and regulation and these companies gradually closed. I then saw an opportunity to work closely with an Accountancy firm and an Independent Financial Adviser company was set up in 2007 and it was called FIFA Ltd (Financial Intermediaries for Accountants). A year later I took full control of the company and in 2012 bought out an IFA practice through an accountancy firm. Through our expansion and growth of the business we rebranded and Inspire Wealth Ltd was born. We moved the business to the Royal William Yard which is an exclusive waterside location in Plymouth. The business has further expanded and we have built funds under management more than £40 million.

Peter Williams, Managing Director

Staff and Service Proposition At the core of everything is our staff. The quality of the staff and the ethos of teamwork is fundamental to our approach. We have a series of dedicated teams and have regular meetings to keep all staff involved. Whilst being led by strong management, staff are encouraged to freely communicate and express their thoughts and ideas to help the business grow and improve efficiency. Our strength is our service which is focussed and delivered efficiently. We offer a personal service to our clients, establish goals and aspirations, arrange paperwork, implement plans and make investment changes according to our strategies and advice process. In an industry that at times has had a bad reputation in the past, I believe in integrity and clarity for clients and keeping things easy to understand. Our service and costs are explained upfront and we are probably one of the only industries where we disclose everything upfront. There are no hidden costs or charges for clients these days.

Threefold focus We focus on three strategies. Investment strategies, Lifestyle strategies and Tax Planning strategies. For ten years we have run our own investment strategies of which only 10% of adviser firms operate, with an in-house model portfolio service offering five different risk profiles from low risk to high risk. This has been a great success for our clients as performance has been consistently excellent and we can ensure that clients risk levels remain within an acceptable range. We strongly favour tactical asset allocation and can control the amounts of clients’ money going into the various geographical areas, but keeping a wide range of diversified assets to spread risk. This is based on where we see growth opportunities over the next twelve months.

AT A GLANCE »» April 2007: Company started trading as FIFA Limited (Financial Intermediaries For Accountants) »» April 2008: Peter Williams took ownership and became Managing Director »» Nov 2012: Potter Baker Financial Services was acquired and integrated »» Feb 2015: FIFA Limited rebranded to Inspire Wealth Ltd and moved into a prestigious waterside location »» Mission statement : We are committed to inspire individuals, by providing innovative and proven strategies to help grow their personal and business wealth

INSPIRE WEALTH

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Highlighting best practice Taking a view on ‘what’s happening in the world now’ rather than basing things on past risk and returns like strategic models used by other adviser firms. All funds are monitored and screened on various performance, risk indicators and data to ensure continuance of strong performance and ensuring risk is managed. Recently the FCA have varied our investment permissions to allow discretionary fund management, this will further assist us to create a niche market for our company as only two per cent of adviser firms offer this service.

The Inspire Team

Our Lifestyle strategies have the intention of helping us to inspire people to plan and provide for their future. It starts with a desired lifestyle cost which is measured and converted into a wealth pot and then that becomes the focus or target. With this information we can plot all client’s assets into a cash flow, so providing an independent and holistic view in an understandable way.

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Our lifestyle strategies have the intention of helping us to inspire people to plan and provide for their future

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INSPIRE WEALTH

Our Tax Planning strategies are based on innovative solutions which take advantage of tax incentive type schemes. These schemes can offer other reliefs, but they need to be tried and tested and accepted by HRMC before we will recommend them.

Challenging environment The biggest challenge we face, and I think you will hear the same answer from any financial adviser, is the regulations. The Financial Conduct Authority have been more supportive in recent years, but changes from government have often been a challenge. One topical measure is the pension cold calling ban. We have used lead generation companies that book pension appointments related to pension pots that people hold; we have had a lot of success with this over the years where we have helped improve peoples’ situation financially for the future. First, we can educate them to understand their pensions and then provide advice and improve performance along the

way. With a simple blanket ban, there has been a focus on the negative aspects of so called cold calling rather than looking at the full picture by including all the good work that has been happening. In my experience a proactive approach to clients is needed to improve their financial planning and for them to better understand their financial products. It has always been a concern of mine that people simply do not save enough money. It is not a new sentiment and I’ve said it for many, many years. The problem stems from the fact that it is not encouraged enough. Too many people work hard to build their lifestyles through borrowing rather than saving. With retirement, it generally comes down to the simple fact that most people are totally unaware of what their pension will provide for them in retirement, or they bury their head. It is an area that financial advisers such as ourselves have an important role to play. I understand that there are many people who do not understand finance, and maybe do not want to, but it is our job to educate them, to inform them and ensure that they are fully prepared for life after work. More government support would be a good thing. Government needs to recognise the importance of advice too, just trying to bypass this valuable advice by leading consumers directly to products based on ‘cheaper is better’ is not allowing an adviser the opportunity to build a relationship, provide advice and guide a client to a happier and wealthier future. Even though many advice firms are turning their backs and closing their doors on clients with smaller amounts of money, at Inspire Wealth we welcome more people to invest by allowing them access to our services and advice. Most of our clients are wealthy, however we also see clients with smaller pots as our ‘nursing ground’ of potential wealthier clients of the future. We are engaging with those clients to build their wealth and to help them ultimately gain benefit and rewards of a wealthier lifestyle, like so many of our clients already have.

FINANCE

Navigator Financial Planning

ver the past two years, the financial services sector has operated in an atmosphere of global political uncertainty. Political upheaval worldwide has had a huge impact on the value of investment portfolios. Such an impact was expected; the fact that the impact, so far, has been positive was less widely predicted. Prior to the Brexit referendum, most commentators were suggesting that a ‘Leave’ vote would have a negative effect on markets, as well as causing an increase in volatility. So far, neither outcome has materialised. We have, however, been warning clients to expect the value of their investments to fluctuate more than normal as Brexit negotiations proceed and we face at least two more years of deep uncertainty. Financial planning is about matching assets to liabilities. In times when markets might reasonably be expected to be more volatile than usual, one option could be to increase cash holdings. We never want clients to have to sell investments at a time when values are depressed.

Brexit – I want to break free

It is possible to identify three themes that have been growing in importance:

Continued scrutiny on active managers The Financial Conduct Authority (FCA) reported on a study1 which found that, over 20 years, investors in a typical passive fund were likely to earn up to 44.4% more than those investing in a typical active fund. While some investors will earn more by investing actively, active fund managers as a whole are not delivering value for their extra fees. This is unsurprising. It is a matter of simple arithmetic. Because funds buy and sell from each other, the aggregate return from all funds is the return from the market, less – crucially – charges. This means that, on average and over time, the average fund will underperform the market. So, pick a good manager? Good luck with that! Although I have no doubt that there are fund managers out there who outperform through skill, statistics make it difficult to pick them in advance with any degree of reliability. Markets are so volatile at present, and returns are so low, that it is extremely difficult to prove that outperformance is down to skill rather than luck. A fund may have outperformed the market by 5% annually, but when volatility is 20% it takes – wait for it! – 64 years to have enough data to be statistically confident that the results are significant.

AT A GLANCE »» Location: Newry & Belfast »» Key contact: David Crozier, CEO & Senior Financial Planner »» Team: 9 »» Assets under direction: £72 million »» www.navigatorFP.com

The consequences of getting it wrong are huge. In January 2016, RBS recommended that clients ‘sell everything except high quality bonds’. I hope very few of their clients took that advice. £10,000 invested in a diversified basket of equities on 11th January 2016 was worth £14,0362 a year later. MS15/2.2 Asset Management Market Study, Interim Report November 2016. Source: Financial Express, growth of £10,000 invested in the MSCI World Index between 11/01/16 & 11/01/17.

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Highlighting best practice other sources of income in retirement – then we welcome increased transfer values and improved flexibility making a transfer a better deal for the client.

Socially responsible investing The final theme that has been exercising us is the impact of our investment portfolios. The Navigator team

Navigator’s approach is that we want clients to have a good financial planning experience, underpinned by a good investment experience. It is too easy just to focus on performance, but if good performance is achieved by taking risks that leave people feeling uncomfortable, then that is not a good client experience. The Navigator approach is to educate clients about the risks they are taking, manage those risks, and aggressively cut costs by using asset class funds, so that the client enjoys returns commensurate with the risks they have agreed to and are in fact taking.

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Defined benefit pension transfers

Good financial planning experience, underpinned by a good investment experience

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NAVIGATOR FINANCIAL PLANNING

Another major theme, driven by falling gilt yields, is the rise in transfer values of defined benefit pensions, and a very understandable heightened interest from clients. The numbers in themselves are appealing – we have seen transfer values that are 37 times the deferred pension – and the pensions freedoms and improved death benefit options in money purchase pensions are definitely contributing to that increased interest. Because Navigator is one of the few companies in Northern Ireland with the required FCA permissions, we have been dealing with an increased number of enquiries. Our starting point is that the benefits of a defined pension, guaranteed for life, are extremely valuable, should not be given up lightly, and certainly not just because Jimmy next door has done it. Conversely, if the client’s circumstances are appropriate – for example, no spouse or partner, reduced life expectancy, requirement for flexibility in income,

All economic activity has an impact, sometimes positive; often, sadly, negative. More and more of our clients are becoming concerned about these issues and one of our major goals for 2017 is to give them a meaningful choice. Of course, not everybody is concerned, and we need to be careful not to preach to clients. In our discovery meetings we are now asking people if they are more concerned about financial returns or the impact of their investments. One of the truisms about ethical investing is that you can be ethical, or you can invest. For example, how can you be unhappy about investing in an arms manufacturer, but at the same time have no conscience about investing in their bankers, or a shipping company that transports their arms? The interconnectivity of global trade makes it very difficult to be squeaky clean. Accepting these limitations, we are now able to offer our clients the choice between portfolios that are fully invested in the market, warts and all, and portfolios that, while not being completely free from any taint, at least make some inroads on the worst excesses of carbon emissions and some social issues. I call these ‘half fat’ portfolios. Importantly, they have the same expected return, no material extra risk, and very little extra cost, so people are not having to make difficult choices between financial return and being at least somewhat socially responsible. If we accomplish nothing else this year than to give Navigator’s clients the opportunity to reflect their moral compass in their investments, I will consider 2017 to have been well spent.

FINANCE

The Money Carer Foundation

he Money Carer Foundation was founded in 2009 to provide daily money management services to vulnerable adults across the UK. This new category of enterprise based in Runcorn in Cheshire has grown continuously since. How we deliver services to our clients has changed greatly over the past few years. This is due to our own economies of scale as we acquire a bigger and more diverse referral base but also the consequence of the continued decline in social services support available to clients. In many cases we are now helping to fill this gap, which explains why we say ‘and we also pay the bills’ when we describe what we do.

Sean Tyrer, CEO

The business in which we operate is one of supporting adults with various vulnerabilities including older people with a dementia diagnosis, individuals with learning disabilities or people with mental health problems or addictions with the resultant chaotic lifestyles. Most of our clients have low assets and do not have a traditional family support network. That is often why we are asked to step in.

The Information Challenge For most of our clients we act as the Corporate Appointee. This a role given to us as a local partner of DWP to receive and manage someone’s welfare benefit entitlements and to utilise these funds in their best interest within our realm of responsibility. Importantly, however, an appointeeship only provides authorisation to deal with welfare benefit issues. It doesn’t provide any legal authority to deal with utility companies, high street banks and many other organisations with which our clients have dealings. We need this information to have an initial oversight of someone’s daily finances but we cannot rely on this information to be provided (or known) by social workers or carers due to widespread social service reductions. We have therefore taken ownership of the problem and innovated.

Partnering with Other Innovators Accepting that the environment in which we operate is multifaceted with organisations such as local authorities, the NHS and the DWP all going through a systemic period of change was key to The Money Carer Foundation being able to enter our latest growth phase. We put a strategy in place that would help us partner with like-minded organisations that were interested in collaboration to solve problems for mutual benefit. We started by addressing the need to have a fit for purpose, modern digital bank account service for clients and dealing with the issue of providing exposed carers with weekly shopping money for clients in a safe and secure way.

AT A GLANCE »» Established in 2009 »» We are the leading provider of daily money management services to vulnerable people nationally »» We provide access to our unique innovations to other like-minded organisation »» National network of independent social workers »» Developed ‘Monika’, our proprietary daily money management software

A Challenger Bank and The Carers Shopping Card This ultimately led to us forming a close relationship with our partner, one of the new generation of challenger banks. Whilst this solved an issue for our organisation, our banking partner also acknowledged that we have helped it to grow and spot opportunity THE MONEY CARER FOUNDATION

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Highlighting best practice in other ways. Out of this relationship we launched another innovation, our Carers Shopping Card service.

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Most of our clients have low assets and do not have a traditional family support network. That is often why we are asked to step in.

This is a unique system that enables The Money Carer Foundation to provide ‘shopping’ money to the carers of our clients in a safe and secure way that gives greater protection to a carer from accusations of theft, as well as to the client from actual incidences of theft. It is still the case that vulnerable people who cannot access their own bank due to frailty or other disabilities provide carers with their bank card and PIN number, creating a risk to both. This is can be an innocent, albeit precarious, arrangement, but quite often it proves a risk. We wanted to innovate to solve this issue for our clients and since have made this service accessible to solicitors and charities that also manage the finances of vulnerable people. Our innovation solves the same problem for them that it did for us and is in line with our remit as a social enterprise to support vulnerable people whether they are a client or not.

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In May 2017, we launched the Carers Shopping Card service to consumers on a national basis so that carers and the vulnerable people whom they care for can receive better protection. This, coupled with the development of our proprietary software ‘Monika’ provides enhanced protection. This is due to its suspicious transaction alert system which monitors card transactions and informs individuals or ‘trusted’ points of contact of any concerns.

Genealogists and Independent Social Workers

Our office in Runcorn, Cheshire

Operationally, having accurate and up to date information about our clients is key. Practically, however, it is often the case that the knowledge about a client’s current situation and history is extremely limited. This is particularly the case with older people who sometimes simply appear on the radar of a social services department with very little known about

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THE MONEY CARER FOUNDATION

their background. They might then might be referred to our organisation for ongoing support with just basic personal history details provided. Having information about a client’s history has significant implications for legal matters such as wills and probate administration on a financial level but its importance goes beyond that. Managing the everyday finances of someone can sometimes provide a unique opportunity to make a material difference to that people’s lives if you have a clear understanding of their background. Partnering with a leading genealogist firm has enabled The Money Carer Foundation to utilise its expertise of that firm to find lost loved ones and bring families back together with all the benefits that this has with combatting the real issue of loneliness as well as the legal benefits of being able to deal with probate matters expediently. Recruiting our own national network of highly qualified Independent Social Workers has also enabled us to have access to better quality information about our client’s circumstances. This, enables us, to be able to make better supporting decisions with our clients. Daily money management can often be a real catalyst for better outcomes for a client’s circumstances and quality of life.

Summary The combined growth of the organisation coupled with a social care landscape that has fundamentally changed in the past few years has presented challenges to us as an organisation. At the same time, it has provided a driving focus for us to adopt a strategy that was needed to provide necessary change. This strategy is now delivering in both commercial efficiencies and market knowledge and expertise. The thought leadership that we provide in respect of daily money management continues to be recognised and we look forward to continuing our strategy of focusing on core business and partnering well.

FINANCE

Bywater Properties

e believe in investing with integrity. We believe that the prevailing culture of the money management industry should be challenged – namely fund managers who are disproportionally incentivised not on how much value they create, but rather on how much of other people’s money they can spend. Richard Walker, Chairman

London-based Bywater is a young and ambitious property company with a environment. We apply real local and specialist knowledge, skill, experience and commitment to deliver market-beating returns by identifying the right investment opportunities and actively managing our portfolio. As a private company with strong entrepreneurial instincts, unconstrained by rigid investment criteria, we can move quickly to exploit opportunities, while never losing our focus on long term value creation. At Bywater, unlike mainstream money managers, we don’t get rich by charging fees: these cover only our basic costs. We have a single-minded focus on generating profit. We put our money where our mouth is: 90% of the net worth of the senior team is invested in Bywater companies, so if our investments do not perform we have sleepless nights about it.

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A young and ambitious property company with a distinctive mission

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distinctive mission: to create true value for investors by enhancing the urban

AT A GLANCE

likeminded people to join our cause, that’s great. We have assembled a circle

»» Specialist investor and manager, adding value to real estate in cities we know and love

of High Net Worth individuals and professionally advised Family Offices who all

»» 15-year track record

share in our values, enabling us to scale Bywater to seek out even bigger and

»» Committed to investing with integrity, generating rewards from profits not fees

This ethos has proved very successful – over the past four years Bywater has produced net returns in excess of 175% for our investors. If we can find

better opportunities.

Enhancing the urban landscape There is no ‘typical’ Bywater investment: each scheme is assessed on its individual merits. Some deals we may hold for long-term income; others we may sell on immediately after development. However our common theme is to add value to real estate, across all urban sectors and focused on cities that we know, love and understand. Examples of successful recently completed projects include the conversion of a lowquality vacant office tower in Reading into 96 award-winning serviced apartments for students at the university.

»» 90% of principals’ own net worth is invested in Bywater companies »» Determined to create developments and buildings in which we can take pride »» Seeking to enhance the urban landscape by making existing property assets work harder »» Net returns in excess of 175% over the last 4 years.

We have redeveloped a high street site in West Norwood to provide nine high quality apartments for working professionals. BYWATER PROPERTIES

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Highlighting best practice Through the retail and restaurant backgrounds of some of our investor base we have a unique insight into the food and beverage sector, which we use to create new and fashionable destinations. In many cases, we can bring to such developments our specialist knowledge of the owner, agent, neighbours, or current and potential occupiers – and often a combination of all of these.

Bywater’s Senior Management Team

In Belfast we have purchased several under-utilised sites, including a two acre plot in the centre of the city that we plan to regenerate into a 350,000 sq ft mixed use scheme of Grade A offices, residential apartments and flagship retail stores.

Making buildings work harder

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Over the last four years Bywater has produced net returns in excess of 175%

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BYWATER PROPERTIES

We firmly believe that there is massive latent potential to create new homes, workplaces and social spaces from existing, unused commercial space within Britain’s cities, and that this is far preferable to allowing further urban sprawl through new developments that encroach on the countryside. The Economist magazine recently published an open letter we wrote to them defending the Green Belt. We have particular expertise in reinvigorating existing buildings and developments by investing to change their use, whether that be from industrial to offices or leisure, or from offices to residential. Our commitment to beautiful contemporary architecture and design plays a critical part in creating new ways of living and working with genuine popular appeal.

Currently we are working on urban regeneration schemes that aim to breathe new life into sites we own or advise on in central Belfast, London and Birmingham. In Liverpool we are repositioning the Metquarter, which we strategically purchased as an underperforming shopping centre with a vision to transform it into a luxury leisure and dining destination, complete with a new premium cinema and restaurant venue to complement the existing high-end retail tenants.

Pedigree and prospects Bywater was founded in London in 2002. From late 2005 to 2009 Bywater’s strategic focus was on investing in commercial property in Poland, where we saw greater value opportunities than in the then overheating market in the UK. Since 2009 we have seen value return to the UK, and have disposed of our Polish assets to reinvest in the UK and Ireland. That focus was further strengthened in 2012 by the establishment of Bywater Capital, and today we have £130m of assets under management. The current, exciting third stage of our development is Bywater Gamma, a £100m Jersey-based investment scheme that intends to target larger deals, principally in London.

FINANCE

Smith & Pinching

mith & Pinching forges its own path: I won’t accept the limitations of being reliant on the big insurance companies that have dominated the financial services industry. We find better ways to ensure that we can provide a coherent and complete service for our clients. I don’t believe in compromise when it comes to our clients’ best interests and am proud to lead where others follow. David Hughff, Managing Director

The firm has been providing independent financial advice to clients in East Anglia for over 40 years. This longevity gives us a solid foundation: we have strong links with other professionals in our region and have the confidence – and loyal client base – to hold out for quality rather than earning a fast buck. We were one of the first to introduce a retained income model in the 1990s, basing our income on agreed annual remuneration rather than hitting the client with a large initial charge (as was traditional at that time). We were also first in the region to introduce fee-paying discretionary asset management, offering clients a proactive service to adjust their investment portfolios within agreed parameters to reflect market changes. It was 10 years before the majority of firms followed suit with retained income and most are still not offering discretionary management.

Chartered status We were the first firm in the area to be awarded the Chartered Firm designation. In addition, many of our advisers hold individual Chartered status. I firmly believe that the Chartered standard should become required for firms and individuals across the sector within the next 10 years. Quality of advice together with a strong ethical compass should underpin every firm and we cannot expect to win the respect of the wider professional circle without it.

In-house investment management We have our own team of investment managers rather than relying solely on outsourcing to City fund managers. We work with external fund managers too, if the client’s circumstances make that more suitable. The key is choice for the client: I am committed to maintaining and improving the range and quality of the service we bring to our clients.

The Smith & Pinching ethos Professionalism is our watchword. We’re a sound, consistently forward-looking business and I believe that strong leadership and constant evolution are key elements of our success. We are always looking to grow the business and to finding the next edge.

ABOUT DAVID HUGHFF »» Joined Smith & Pinching in 1988, became a Director in 1992 and Managing Director in 1995 »» Combines running the company with advising a core number of clients »» In his early career, spent ten years working as an analytical chemist »» A family man, his greatest passion is cars – both as a driver and a Formula One spectator.

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Highlighting best practice AT A GLANCE »» Based in Norwich and serving clients throughout East Anglia and beyond »» Founded in 1973 by Barry Pinching and Gerry Smith »» Barry Pinching’s son, Scott Pinching, is now the Finance Director of the firm »» David Hughff and Scott Pinching are the controlling shareholders »» Employs 84 staff »» Has around 7,500 clients across a spectrum of services with approximately £900 million of assets under influence »» Achieved Chartered Firm status in 2009 »» www.smith-pinching.co.uk

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We were the first firm in the area to be awarded the Chartered Firm designation

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We invest in our staff at all levels. I believe that every member of the team should be given the opportunity to grow and develop with the business and we encourage appropriate study for everyone. We have worked hard to create a common vibrant culture: with the creative and dynamic people we have on our team this can sometimes be a challenge but putting a backbone in place that everyone can believe in has been one of my highest priorities. I’m proud that Smith & Pinching is a good place to work and that clients find our people professional and supportive.

Growing the business Our growth over the past 40 years has mostly been through building our client base organically, by word of mouth referrals and by making ourselves known to potential clients through effective marketing. However, we have recently acquired two local firms, adding their business and clients to our overall bank. We have also developed joint ventures with other professional firms to extend the range of client services we can offer.

» S M I T H & P I N C H I N G ’ S S E R V I C E S

»» Personal financial planning – Investments and investment management – Retirement planning and pensions – Life and health protection – Inheritance tax planning – Equity release – Care fees planning – Mortgage advice – Property insurance »» Corporate financial planning – Workplace pensions – Staff benefit schemes – Business protection – Directors’ strategies

Independent advice There has been much discussion in the Financial Advice sector about the value of independent advice. I firmly believe that the continued availability of truly independent advice is fundamental to the future financial well-being of individuals throughout the UK. We are living proof that the independent model can and does work. The Financial Advice sector has changed greatly over Smith & Pinching’s 40 year history. We are better qualified and better equipped to provide advice and the public is better protected against the rare occasions when things go wrong. Our regulatory framework is robust and demanding with all firms required to provide evidence of suitability of advice and transparency in charging structures. This is all to the good, but the cost to advice firms of supporting the regulatory framework has escalated in recent years. Our greatest challenge is to meet the cost of regulation but continue to provide affordable advice. Our strength and commitment to quality will ensure that we can remain at the top of our profession, despite the challenges ahead.

FINANCE

Willis Owen

s Managing Director of Willis Owen, an online financial services firm, and also as a financial services consumer, I regularly read (it would seem daily) articles relating to ‘robo-advice’ in the financial services industry press. Robo-advice allows consumers to select investments online and receive some ‘advice’ on the purchase, from an automated digital process. I get asked if this is a concern to Willis Owen, especially with some very large players either thinking of launching, or indeed have already launched, a robo-advice service. This interest will, I hope, create interest from consumers. However, let’s explore how we got here, to understand if we, as an industry, are truly solving the problem of improving engagement with consumers. To understand the rise of ‘robo’, the term adopted by the UK financial services industry as a label for anything that remotely resembles an automated process, it is worth going back to the early 80s when financial services firms called ‘discount brokers’ started to appear. Back then, we were asking consumers to buy products without the need for a financial adviser – often known as a DIY investor – and discount brokers allowed consumers to do this. There were arguably 100 -150,000 sales people on the road from banks, building societies and life assurance companies. Not all were good, very few actually lasted, and, through the 80s and 90s, regulation of these individuals became heavier and more expensive. By the mid 00s many financial institutions had already scaled back or removed advisers altogether. So where did they all go? Many left those rich companies and went off to start their own business as regulated advisers, or hitched themselves to a network/national firm (firms which provided support services to them, ranging from compliance and governance, to marketing and new customers). The slow demise of the latter due to regulation and costs (again) saw fewer than 35,000 advisers remain by the time the Retail Distribution Review (RDR) landed in 2012. This regulation made sweeping changes to the way financial services customers were charged. I’ll come back to the RDR later. Pre-2012 most financial services firms who manufactured products (e.g. Prudential, Aviva) concentrated on the advisers. However, the age of the DIY investor was already beginning. These savvy investors were encouraged to send off newspaper vouchers with a discount (hence the discount broker title) from the normal initial fee, to the brokers themselves, who, in turn, sent it to the fund managers to arrange the investments the customer wanted.

Jason Chapman, Managing Director

AT A GLANCE »» In 1982 we began helping people take the first step into their financial future »» We have acted as an intermediary for over 150,000 customers and hundreds of millions of pounds worth of investments »» Our service extends beyond the Web, with friendly experienced UK support a phone call away »» Willis Owen offers ISA’s, JISA’s SIPP’s and General Investment Accounts »» Within the products, you can hold Funds, Investment Trusts and ETF’s, and also Shares »» However, it’s our attention to our customers that makes us different, as it’s about what money does, not what money is that changes your financial future

Because it was getting easier to bypass advisers, the RDR was seen by many as the demise of the advisory population. I did not. What has led to diminishing adviser numbers is the fact that offering a truly personal advice service, personal in a WILLIS OWEN

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Highlighting best practice way that you, as a client, divulge the innermost secrets of your financial and personal life to a trusted individual, is expensive. It costs money at the start and for every year you have a plan; in fact like most things in life that are bespoke. Additionally, if things go wrong you should be able to seek recompense from the adviser, or the regulator. It is not surprising then that financial advice is for the few, and is expensive to deliver at volume.

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Does technology shape the way financial services are delivered?

While all this change was happening, the one thing missed was the changing consumer. The consumer was now buying (and selling) products on the internet. They researched, did cost analysis, compared firms, looked at reviews… they were becoming all digital on us! Eventually the industry saw the flight to on-line investing as the next big change. The perfect storm seemed to be brewing – a lack of advisers, more choice of financial products and a digitally-savvy consumer. The FinTech industry started to grow. Since the Retail Distribution Review we have seen further changes to how funds are priced and, as I write, the Financial Conduct Authority are working on a raft of changes from our European friends. The UK is seen as market-leading in financial regulation, with layers of change directed at the industry to try and protect the consumer.

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So where is the consumer in all this? We have turned full circle on adviser distribution, with the number of advisers down to around 23,000. Are consumers now better served? Are they now digital investors? There is no doubt that consumers are embracing more online purchases and this has awakened the financial services industry to the potential, but perhaps we need to pause before developing face recognition technology or robotic humanoid advisers.

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A recent survey by Willis Owen found that although consumers want to use technology to save time and to ensure accuracy, they still want to hear a human voice. We must remember that, for consumers, financial services products support their security in retirement, or their children’s future. We are not, and should not, become another Amazon. Bill Gates famously said: ‘We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten’. Looking ahead to the next decade, we have fewer advisers able to support the needs of customers going through some of the biggest financial changes we have ever encountered: pensions; freedoms; the turmoil of both the UK decision to exit the EU; an explosive US Presidential election; and our own political uncertainty at home. We also have the Pensions Dashboard on the horizon, which will allow consumers to see all their retirement savings in one place. Is the industry engaging? Are we truly looking at the problem the right way? If we don’t engage, regardless of distribution talent or tech wizardry, we will not create interest. The robo industry face a difficult problem, as without considerable engagement and investment, their relationship with consumers will have a short shelf life. If, as an industry, we focus solely on the technology or the product we will lose the ability to inspire consumers to take action, either to start planning, or to improve their financial future Let’s hope that those with a talent for technology and those with their finger on the pulse of the consumer come together soon. If they do, the possibilities are very exciting indeed.

FINANCE

TEAM Asset Management

ersey based TEAM Asset Management provides a unique, innovative and disciplined service, designed to consistently grow client assets over the longer term. Rather than blindly following benchmarks, we consider it more important to build wealth and look to achieve long term positive returns in all market conditions. I created the Company in 2005 after I became disillusioned with an industry increasingly obsessed with short-termism and a benchmarking process designed more to protect the Investment Manager than the client itself. Asset allocation is the main driver of long term investment performance and investors need complete flexibility to achieve consistent returns. Strict adherence to benchmarks can put talented investment managers into straightjackets.

Ben Shenton, Managing Director

A portfolio that achieves a consistent 4.5% return will out-perform one that is up 20% one year, and down 10% the next. Yet in today’s industry the investment manager that does not follow the market both up and down risks being sacked, or at least heavily criticised, during any short-term periods of underperformance. If you were blessed with a time-machine and were asked to construct the perfect portfolio to achieve the maximum return over 10 years only the investment manager unconstrained from being tied to an index would be able to achieve this aim. Those with an arbitrary benchmark would alter asset allocation during shortterm period of under-performance or be constrained by some random minimum or maximum asset class figure. The danger to the industry, after a long bull-run in equity and bond markets, is that many of the current investment processes have been designed in a bull-market environment. Do investors really want to be committed to a 70% equity weighting during a long bear market? If you require income do you buy bonds or equities? Will markets always come to the rescue of Investment Managers? In 1999 I reduced the proportion of equities held within the portfolios I managed. In other words I reduced risk, due to the over-valuation of the market. This led to very short term under-performances against the main equity indexes and some clients moved their account as a result, usually on advice of an independent Company that monitored the performance of the portfolio. The effect of the stock market crash (2000-2002) on the wealth of the clients that moved to chase the index was devastating – and the decision to move was a breathtakingly poor decision based on a short-term, rear-view mirror, benchmark chasing approach.

AT A GLANCE »» Providing a bespoke investment management service since 2005 »» Benchmark agnostic – portfolios are tailored to match exact requirements »» The flexibility that only a boutique firm can offer »» Single point of contact – you will have a dedicated relationship manager

I was pleased to be invited to write for The Parliamentary Review as I have a political background myself – serving for six years as Senator and holding positions such as the Jersey Minister for Health and Social Services, and Chairman of the Public Accounts Committee. This experience helps me to better understand politics and look beyond the crowd and determine what is going to happen. As an ex politician, I knew that President Trump would hit huge obstacles in implementing his election promises, and often election promises have unintended consequences. TEAM ASSET MANAGEMENT

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Highlighting best practice The primary aim of any politician is to get elected, and often policies are devised to achieve this aim in the knowledge that actual implementation can be deferred or conveniently forgotten. Yet the investment industry encourages firms to follow blindly short term reactions to political events – protecting the investment manager by benchmarking to an arbitrary index.

Our Premises, Royal Court Chambers in the centre of St Helier

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Rather than blindly following benchmarks, we consider it more important to build wealth and look to achieve long term positive returns in all market conditions

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» J A R G O N

M A D E

Independent ‘outside-the-box’ thinking is the cornerstone of TEAM’s investment philosophy. We think differently and we act differently. We construct personal portfolios for clients based on their unique circumstances and backed by our investment views. No two adults, aged 42 and married with two children, will have exactly the same investment requirements – so why should they have exactly the same investment portfolio? The problem with this personalised approach is that it is more intensive to manage monies in this manner and less profitable for us as we look to keep charges at sensible levels. To grow their businesses many investment managers simply have 3 model portfolios – conservative, balanced and growth. Our view is that a tailored suit will always fit better than an off-the-shelf creation, and produce from a small farm shop is often better quality than produce from a large supermarket. Can you imagine a clothing industry that only produces ladies clothes in sizes 6, 12 & 18 so that the quality and size of garments can be better monitored, and factories can operate more efficiently.

E A S Y

Benchmark A benchmark is a feasible alternative to a portfolio against which performance is measured. An equity investor may wish, for example, to measure performance against the FTSE100 Index if this is perceived to be similar to their investment goal. Asset Class The five main asset classes are equities, fixed interest bonds, cash. property, and commodities.

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Not many women would suit these sizes, the majority would have to makedo with an ill-fitting inappropriate garment that is either too big or too small. Yet because the benchmarks are sizes 6, 12 & 18 they would be reassured that their ill-fitting garment is actually the correct size. In line with our questioning philosophy we do not disclose assets under management as, in reality it is a rather meaningless figure. Quality of service is often better in boutiques than large organisations and the size of assets managed has little correlation with the ability to manage. Of more importance is our ethical approach, lack of borrowings, strong regulation, and commitment to mutual benefit. There are a number of head-winds facing the industry. Brexit negotiations create uncertainty. Jersey is extremely pleased with the pro-active and positive soundings coming from the UK Government as it negotiates on behalf of the Crown Dependencies. We did not have a vote on Brexit as we enjoy a special relationship rather than membership. You cannot vote to leave or remain within a body that you are not part of. The UK Government have recognised that we provide significant benefits to the UK economy and our continued prosperity is aligned to their own longer term aspirations. Having been involved in the finance industry for almost 40 years I know that Jersey is a well regulated, compliant safehaven in an uncertain world. Our UK clients are drawn to TEAM by the personal and professional service that we offer and there is full exchange of information with the UK. The level of expertise and depth of knowledge within the jurisdiction is impressive. Jersey is, in some respects a miniature City of London that benefits from stability, heritage, geographical advantage, and high ethical standards – long may that continue.

FINANCE

Synaptic Software

Head Office of Synaptic Software

n Q4 2016 the level of savings in the UK achieved a 50 year low at just 3.3% of earnings1. According to a recent report2, despite a recent increase, the average level of income in retirement (including the State Pension) is just £10,800 per annum, and, according to the charity Age UK there are 1.9 million pensioners living in poverty3. If this situation does not improve, there could be dire social consequences. The Treasury initiative known as the Financial Advice Market Review (FAMR) published its report in 2016. The thrust of recommendations are to encourage savings in the ‘squeezed middle’, whose constituents have not traditionally prioritised saving, nor accessed advice. There is a well-recognised demographic dimension to the challenge, given constrained public resources and the arrival of the baby-boomer generation in retirement. Record numbers will need financial provision at a time when public spending is growing faster than tax revenue. Never has the role of advice and guidance been more important. Synaptic Software (headquartered in Whiteley, Hampshire with a turnover of £6.5m) develops software that is used by Financial Advisers in the UK. The purpose of the software is to enable advisers to perform the due diligence and rigor ahead of providing recommendations to their clients.

Adam Byford, Managing Director

FACTS ABOUT SYNAPTIC SOFTWARE LIMITED »» A successful FinTech business with nearly 100 employees based in Whiteley, Hampshire and Birmingham »» Used by over 10k Financial Advisers for: Due Diligence, Risk Assessment, Goal Planning and Cost Analysis »» Infrastructure that supports over 10 million transactions per month is hosted by UK Cloud »» Synaptic facilitates over 20% of all Protection policies sold in the UK.

Office for National Statistics. Aegon UK – published 4th April 2017. 3 Age UK – published 16 March 2017. 1 2

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Highlighting best practice

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Thanks to Osbourne’s ‘Pension Freedoms’ one can now choose to withdraw one’s pension savings as a lump sum (which would be considered for income tax liabilities) or remain invested. The increase in complexity of planning in retirement should not be trivialised.

Good research is the safeguard of the nation’s finances

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Screenshot from the Synaptic Comparator tool: ‘Reduction in Yield’ calculation.

»» Sustaining an income throughout retirement »» Funding care in later life »» Minimising tax exposure »» and where possible planning a legacy There are hazards investors and retirees are exposed to relating to the control of costs and investment risks. Costs can destroy any investment returns and so can inappropriate levels of risk exposure. Another current risk comes under the banner of ‘pension unlocking’ and it is robbing many unsuspecting victims, it is imperative that a firms regulatory status is understood before you hand over your hard earned savings. Increased automation is being encouraged by the FCA (see Project Innovate), and we are very supportive of this. It is worth considering however the power of these new capabilities. ‘Big Data’ is now powering the evolution of retail, media and if you believe the press coverage, an American election result.

The world of savings traditionally arrives late in the technology cycle, but we must be alert to the extraordinary events that are likely to occur in the targeting, messaging and technological delivery of leveraged, derivative based, high risk offerings. A simple online search will often return websites looking to attract savers’ funds with claims of fantastic returns. These are often established overseas and are at times fraudulently run. The regulator in the shape of its thematic review FCA 16/1, brings together several key themes and sets out a very clear vision of the role and nature of advice. The paper states (regular and repeated) Research, Risk Profiling and Cost Control as the 3 key areas needing improvement.

Costs The first of our critical points of proof is cost. The industry has established the concept of the ‘total solution cost’, this shows the drain on investments caused by the layers of fees that the investor is exposed to. It is crucial that consumers know what they are paying and can judge value for money. In the example below the investment is expected to achieve growth of 3.25%, however the costs incurred by the customer amount to 1.65% meaning that the real return the customer will see is just 1.6% Screenshot from the Synaptic Comparator tool: ‘Reduction in Yield’ calculation. Amazingly, only Synaptic collects and verifies (with the providers), the multi layered charges that are often applied at all of these levels: »» Fund (where the money is being invested); »» Product (eg ISA / Bond / Pension); »» Platform (the technological solution that is used as an administration aid and reporting tool); »» Adviser (fee for their advice and guidance) levels.

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FINANCE

Whether online or face-to-face, automated or advised, it is equally important that value for money can be determined. Synaptic Software Limited tools give advisers the means to achieving this. A typical Synaptic price comparison is the result of over 1 million calculations (such is the extent of the variables), the expectation of a DIY investor to do this is unrealistic.

Risks The second major due diligence proof point is risk, assessed through a triumvirate of measures. ‘Attitude’ toward risk is the assessment of how one considers investment risk (i.e - is it necessary to achieve ones objectives or is it something that frightens me?). This can be assessed using the Synaptic software tool via a short psychometric questionnaire, designed to address all the key investment issues for consideration. ‘Capacity for Loss’ assesses one’s ability to absorb losses along the way. For example if you were to lose a quarter of your savings in a bad year, would that cause undue financial distress or could you maintain perspective of your investment journey? ‘Tolerance for Loss’ is a measure of willingness to accept losses, beyond ‘Capacity’. Both concepts are regulatory.

Risk Profile: Attitude to Risk Questionnaire

Risk Profile: Capacity for Loss

Risk Profile: Tolerance for Loss

Multi-faceted Risk

Investment portfolio construction Investment is not speculation and modern portfolio recommendations must be optimised to capture the performance of the market over time. A portfolio should be diversified geographically and by asset type (equity, fixed income, property etc). In order for this to happen, you need a model that can predict the future, not a crystal ball. This can only make sense if it is a probability based model and therefore ascribes a probability to all possible outcomes. Synaptic Software achieves this with a mathematical simulation method known as a stochastic modelling. Our research equips the customer with all the insights into the dynamics of investment that they need know to understand their own situation. Whether the research is delivered automatically or by a trained adviser, it is the quality of the research and the informed consent that is achieved that is the key. If investment decisions are guided by use of accurate and comprehensive data, embedded in consistent due diligence and research, such as that offered by Synaptic, then the financial health of the nation will be protected.

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A typical Synaptic price comparison is the result of over 1 million calculations (such is the extent of the variables), the expectation of a DIY investor to do this is unrealistic

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The ‘self-service’ market may be a window to a more automated future (there are about 1.5m – 2m DIY investors in the UK), here the individual takes on this responsibility for their own research and due diligence. However, it is dwarfed by the ‘Advised’ market, which represents a further £1.1 trillion assets under management in UK (Investment Association figures).

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Review of Parliament A snap election On the 19th April 2017, having repeatedly insisted that she had no intention of calling a snap election, Prime Minister Theresa May sprung a complete surprise when she summoned the press to Downing Street to announce she would seek a Commons vote to go to the country on June 8th 2017. The announcement, made as Parliament returned from its Easter break, had the force of a thunderclap in Westminster. Quite unexpectedly, MPs and parties were plunged into election mode. The immediate effect was to turn what were now the two remaining Prime Minister’s Question Times of the Parliament into de facto leader’s debates – especially since it was made clear that Theresa May would not take part in the kind of televised debates held in the 2010 and 2015 elections. The Prime Minister stated her case: ‘There are three things that a country needs: a strong economy, strong defence and strong, stable leadership. That is what our plans for Brexit and our plans for a stronger Britain will deliver... The Right Hon. Member for Islington North (The Labour Leader, Jeremy Corbyn) would bankrupt our economy and weaken our defences and is simply not fit to lead.’ To Conservative jeers, Mr Corbyn counter-attacked: ‘She says that it is about leadership, yet she refuses to defend her record in television debates. It is not hard to see why. The Prime Minister says that we have a stronger economy, yet she cannot explain why people’s wages are lower today than they were 10 years ago or why more

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households are in debt. Six million people are earning less than the living wage, child poverty is up, and pensioner poverty is up.’ The two leaders traded more accusations with Theresa May warning that ordinary working people would face higher taxes and lost jobs under Labour while Mr Corbyn claimed the Prime Minister’s priority was ‘tax giveaways to the richest corporations while our children’s schools are starved of the resources they need to educate our children for the future’. Brexit emerged as one of the Prime Minister’s main campaign themes: ‘every vote for the Conservatives will make me stronger when I negotiate for Britain with the European Union. And every vote for the Conservatives will mean we can stick to our plan for a stronger Britain and take the right long-term decisions for a more secure future for this country.’ Later that afternoon, the Commons voted to call an early election, by 522 votes to 13.

Prime Minister Theresa May sought to strengthen her position before negotiations with the EU began

FINANCE

The Queen’s Speech to negotiate for the support of the Northern Ireland Democratic Unionists ... and as the first debate of this new Parliament began, that support had not been secured. Mr Corbyn could not resist the open goal. To triumphant Labour laughter he noted that ‘the latest coalition may already be in some chaos’.

The Queen’s Speech announced the government’s legislative plan for the coming Parliament

What a difference. Theresa May and Jeremy Corbyn’s final Commons confrontation before the election had seen the Conservatives limbering up for a triumphal campaign which would culminate in the inevitable smashing of their Labour opponents. When the diminished, battered band of Conservative MPs reassembled, minus their parliamentary majority, for the state opening of Parliament on June 21st, they were chastened and uncertain, while euphoria gripped the occupants of the Labour benches. When they came to speak in the traditional debate on an address thanking Her Majesty for the Queen’s Speech – the new Government’s legislative programme – the dynamic between the two main figures had changed completely. Mr Corbyn seemed a far more confident, assertive parliamentary performer, relishing the opportunity to throw back the taunts that had been hurled at him during the campaign. A Government which had warned that he could only gain power in a ‘coalition of chaos’ with the SNP and the Lib Dems had been forced

‘Nothing could emphasise that chaos more than the Queen’s Speech we have just heard: a threadbare legislative programme from a Government who have lost their majority and apparently run out of ideas altogether. This would be a thin legislative programme even if it was for one year, but for two years – two years? There is not enough in it to fill up one year.’ That was a reference to the Government’s decision to declare a two-year Parliamentary Session – a procedural move intended to ensure ministers could push through vital Brexit legislation in time for the exit date in March 2019. Mr Corbyn mocked the Prime Minister for dropping a series of election promises that had not found favour with the voters: means-testing the winter fuel allowance and replacing the triple lock on pensions among others. On Brexit, Mr Corbyn stuck to Labour’s careful positioning in favour of a deal with the EU ‘that puts jobs and the economy first’. He called for full access to the single market and a customs arrangement that provided Britain with the ‘exact same benefits’ as now. And in his final flourish he warned the Prime Minister that Labour were now ‘not merely an Opposition; we are a Government in waiting, with a policy programme that enthused and REVIEW OF PARLIAMENT

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Review of Parliament engaged millions of people in this election, many for the first time in their political lives. We are ready to

offer real strong and stable leadership in the interests of the many, not the few.’

Grenfell Tower The fire that destroyed Grenfell Tower, a social housing block in the London Borough of Kensington and Chelsea, seemed to some to crystallise the issues that had driven the ‘Corbyn Surge’ in the General Election just days earlier. Accusations about the neglect of social housing tenants, chronic underinvestment and official incompetence were flying, even while the pall of smoke still hovered over the capital and the horrific images of the blaze were replayed on TV. So potent was the symbolism that it became intertwined in the debates on the post-election Queen’s Speech - but the Government also committed to keep MPs informed about the aftermath, the efforts to identify casualties in the wreckage of the tower, to re-house and assist those who had lost their homes, and to set up a public inquiry. So it was that the Communities Secretary, Sajid Javid, came to the Commons on July 3rd to announce £2.5 million had been distributed from the special £5 million fund set up to help the residents. Mr Javid said the public inquiry and the criminal investigation had to be allowed the space to follow the evidence wherever it took them, and everyone should be careful not to prejudice their work. Responding to the Labour MP, David Lammy, who had lost a family friend in the fire, he added that although it was for the judge to determine the scope of the inquiry, he expected it to be ‘as broad and wide-ranging as possible’.

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Mr Javid also dealt with the key issue of the authorities’ inability to say exactly how many people had died: ‘There has been much speculation about who was in Grenfell Tower on the night of the fire, and it is vital that we find out. The Director of Public Prosecutions has made it clear that there will be no prosecution of tenants ... who may have been illegally sub-letting their property, ... There may have been people living in flats that were illegally sub-let who had no idea about the true status of their tenancy. Their families want to know if they perished in the fire. These are their sons, their daughters, their brothers and their sisters. They need closure, and that is the least that they deserve.’ The Government was also taking urgent action to avoid another tragedy in buildings with architectural cladding similar to that which appeared to have been a factor in the Grenfell fire.

Tributes for the Grenfell victims came from across the country

FINANCE

Last rites on the Brexit Bill Back in March, when an election seemed a distant prospect, parliament’s main focus was on the European Union (Notification of Withdrawal) Bill. This Bill, which would give Theresa May the authority to begin the UK’s divorce from the European Union, was forced on the Government after a Supreme Court ruling that Parliamentary approval was required to begin the process. David Davis, Secretary of State for Exiting the European Union since July 2016

Despite fears that the Bill could be watered down or even reshaped to reverse the Referendum verdict, it passed through the Commons unscathed. All attempts to amend, or add, to its 136 words were voted down. Predictions of a major rebellion of up to 50 Conservative Remainers proved unfounded, and only a handful defied the party whip. But when it moved on to the House of Lords, where there is no Government majority and a large concentration of proEU peers, the Bill was amended twice.

One change guaranteed the rights of EU citizens living in the UK, and the second promised Parliament a ‘meaningful vote’ on the final Brexit deal. That meant the Bill had to return to the Commons because both Houses of Parliament must agree on the final wording of legislation. After much debate, MPs rejected both Lords’ amendments, the Bill was sent back for immediate consideration in the House of Lords, where David Davis came to watch his Junior Minister, Lord Bridges, call on Peers to drop their opposition. And while the Liberal Democrat, Lord Oates, did urge Peers to continue defying the Government, support for the amendment melted away, and the attempt to throw it back to MPs was once more rejected, as was the attempt to keep the ‘meaningful vote’. The final form of the Bill was settled – and it was sent off for the Royal Assent, un-amended.

Article 50 is triggered on the Referendum verdict and formally trigger Britain’s departure talks with the EU.

Theresa May meets with European Council President Donald Tusk in Downing Street

The passage of the European Union (Notification of Withdrawal) Act cleared the way for the Prime Minister to act

She was greeted by cheering Conservative MPs when she announced, on the 29th March, that the process had begun: ‘A few minutes ago, in Brussels, the United Kingdom’s permanent representative to the EU handed a letter to the President of the European Council on my behalf confirming the Government’s decision to invoke Article 50 of the treaty on European Union. The Article 50 process is now under way and, in accordance with the wishes of the British people, the United Kingdom is leaving the European Union.’ REVIEW OF PARLIAMENT

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Review of Parliament She added that she wanted to build a close partnership with the EU: ‘We want to continue to buy goods and services from the EU, and sell it ours ... Indeed, in an increasingly unstable world, we must continue to forge the closest possible security co-operation to keep our people safe. We face the same global threats from terrorism and extremism.’ Jeremy Corbyn warned against leaving without a trade agreement: ‘the Prime Minister says that no deal is better than a bad deal, but the reality is that no deal is a bad deal. He said the debate had now moved on to what a post-Brexit Britain would be like: ‘There are Conservatives who

want to use Brexit to turn this country into a low-wage tax haven. Labour is determined to invest in a high-skill, high-tech, high-wage future ... Labour will not give this Government a free hand to use Brexit to attack rights and protections and to cut services, or to create a tax dodger’s paradise.’ The eurosceptic Conservative, Jacob Rees-Mogg, quoted the Elizabethan hero Sir Francis Drake: ‘’There must be a begynnyng of any great matter, but the contenewing unto the end untyll it be thoroughly ffynyshed yeldes the trew glory’ ... I wish my Right Hon. Friend good luck and good fortune in her negotiations until she comes to true glory and is welcomed back to this House as a 21st century Gloriana.’

A terrorist attack on Parliament On the afternoon of March 22nd, as MPs were engaged in a routine vote of the Pensions Bill, a man drove his car into pedestrians just outside, killing two people and injuring dozens more, before stabbing to death a police officer who was guarding the gates to the Houses of Parliament, and he was then shot dead himself. The sitting of the Commons was suspended and MPs were held in their Chamber for several hours, before being escorted away. When they returned the next day, they began with a minute of silence. Then the Speaker opened proceedings by expressing ‘our heartfelt condolences to the families and friends of the victims of this outrage. A police officer, PC Keith Palmer, was killed defending us, defending Parliament and defending parliamentary democracy.’ The Prime Minister was heard in silence as she updated MPs: ‘Yesterday, an act of terrorism tried to silence our democracy, but today we meet as

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normal, as generations have done before us and as future generations will continue to do, to deliver a simple message: we are not afraid, and our resolve will never waver in the face of terrorism. We meet here, in the oldest of all Parliaments, because we know that democracy, and the values that it entails, will always prevail.’

The attack on Westminster was one of several terrorist attacks in the UK during the year

FINANCE attacker, and to pay the ultimate price; a response that says to the men and women who propagate this hate and evil, “You will not defeat us.” Mr Speaker, let this be the message from this House and this nation today: our values will prevail.’ The Labour Leader, Jeremy Corbyn, said people should not allow the voices of hatred to divide or cower them – adding that PC Keith Palmer had given his life defending the public and democracy.

PC Keith Palmer, who died trying to stop the attacker, was given a full police service funeral, and praised for his heroism

She gave an account of the previous day’s events and ended by declaring that the best response to terrorism was to act normally: ‘As I speak, millions will be boarding trains and aeroplanes to travel to London and to see for themselves the greatest city on Earth. It is in these actions – millions of acts of normality – that we find the best response to terrorism: a response that denies our enemies their victory, that refuses to let them win, that shows we will never give in; a response driven by that same spirit that drove a husband and father to put himself between us and our

Watching impassively in the crowd of MPs standing at the Bar of the House, in the area across the Chamber facing the Speaker’s Chair, was the Foreign Office Minister, Tobias Ellwood. He had tried to save PC Palmer’s life by giving him mouth-to-mouth resuscitation. Many MPs took a moment to exchange a word with him as they passed or pat him on the arm. And many of those who spoke over the next hour praised his actions. Tributes and thanks came from all the Party Leaders – the SNP’s Westminster Leader, Angus Robertson, the Liberal Democrats, Tim Farron, and the DUP’s, Nigel Dodds. The Conservative MP, James Cleverly, had served with PC Palmer in the army spoke movingly and implored the Prime Minister to ‘posthumously recognise his gallantry and sacrifice formally.’ Theresa May promised that she would.

President Trump This year more than most, US politics had a bearing on our own. Not only were many MPs looking across the Atlantic for a trade deal and an enhancement of the ‘special relationship’, following the decision to leave the EU. But the American people themselves had managed to

outdo the British electorate when it came to delivering the most surprising democratic decision of 2016. As recently as January 2016, a small number of MPs had gathered in Westminster Hall to debate whether or not Donald Trump should be banned REVIEW OF PARLIAMENT

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Review of Parliament from entering the UK altogether. His comments about Muslims, among others, had led to an online petition for him to be considered a ‘hate preacher’ and therefore banned from British soil. Even those who supported the motion knew there was little chance of such a ban being implemented. But few would have suspected that, just 13 months later, Parliament would be discussing the appropriateness of a state visit from President Donald Trump. One of the first acts of the new US President was to order a blanket ban on people from a list of Middle Eastern countries travelling to the US. In the Commons, the former Labour Leader, Ed Miliband, and the Conservative, Nadhim Zahawi, joined forces to ask the Speaker for an emergency debate – and it was held that day. Mr Zahawi, born in Iraq to Kurdish parents, arrived in the UK as a nineyear-old refugee from Saddam Hussein’s regime. He is now a British citizen, but because he was born in Iraq, he believed he came under the Trump ban. He told MPs his place of birth already meant he had been required to go through an interview at the US embassy, to secure the right to travel to America, under rules imposed by President Obama. But the new restrictions were much tougher. The US Government has since clarified that people with British passports will not be affected by the ban, whatever the country of their birth, but Mr Zahawi still thought the ban was ‘wholly counterproductive’. He described how it was already being used by pro-Islamic State social media accounts as ‘clear evidence that the USA is seeking to destroy Islam. They have even called it the “blessed ban”’.

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Labour’s Yvette Cooper, who chairs the Home Affairs Select Committee, was ‘deeply worried’ that the Government had already invited the new President to make a state visit to Britain: ‘It will look like an endorsement of a ban that is so morally wrong and that we should be standing against.’ The Conservative, Sir Simon Burns, disagreed: ‘I think it is absolutely right that the British Government continue the work of the Prime Minister to build bridges with President Trump so that we can, through engagement, seek to persuade him and to minimise or reduce the danger of his more outrageous policies ... I believe that very little would be achieved by cancelling a state visit to which the invitation has already been extended and accepted.’ The emergency debate was on a formal motion that MPs had ‘considered’ Donald Trump’s travel ban, so no call for a policy change was voted on.

Nadhim Zahawi MP strongly criticised the Trump administration’s travel ban on certain Muslim countries

Westminster Publications is grateful to Mark D’Arcy and Anthony Harrington for their contributions to this publication.

COPYRIGHT © WESTMINSTER PUBLICATIONS 2017 All rights reserved by Westminster Publications. No part of this publication may be reproduced, stored or transmitted in any form or by any means without prior written permission from Westminster Publications. Westminster Publications warrants that reasonable skill and care has been used in preparing this publication. Notwithstanding this warranty Westminster Publications shall not be under liability for any loss of profit, business, revenues or any special indirect or consequential damage of any nature whatsoever or loss of anticipated saving or for any increased costs sustained by the client or his or her servants or agents arising in any way whether directly or indirectly as a result of reliance on this publication or of any error or defect in this publication. Westminster Publications shall not in any circumstances be under any liability whatsoever to any other person for any loss or damage arising in any way as a result of reliance on this publication.