Wealthsmiths
™
The Sanlam magazine – Summer 2021
Making the world a cleaner place An orderly transition to a low-carbon society has begun
History’s greatest investment bubbles The rapidly rising markets that were too good to be true
It’s about time Paul Newman’s Rolex and the draw of classic watches
Has happiness changed forever? The Future of Happiness Complimentary virtual event Tuesday 6 July, 11am – 12pm Over the past year, many of us have re-evaluated our lives and asked the fundamental question – what does it really mean to be happy? In the last of our Invested in the Future virtual event series, join leading positive psychologist, Miriam Aktar, as she explores the secrets of feeling good, living well and flourishing. To register, visit sanlamfutureseries.co.uk and choose Happiness. Our Invested in the Future series looks at the issues that will shape the post-pandemic world. To catch up on the series, visit Sanlam UK on Spotify.
The extinction of cash? Economist Stephen D. King discusses the future of money and whether cash could follow the dodo into the history books
Sanlam Wealth Planning and Sanlam Private Investments (UK) Ltd are authorised and regulated by the Financial Conduct Authority.
Welcome Welcome to this Summer 2021 issue of Wealthsmiths magazine. As I write this, with glorious sunshine outside my window, I am conscious of a sense of renewed optimism. Many of us have already been able to meet up with loved ones in a pub, at a pavement café or in our own gardens. Shops and gyms are open and lockdown hair is a thing of the past. And by the time you read this note, restrictions will have eased even further. Restaurants will be open, larger gatherings will be permitted, and many workplaces will be opening their doors once more. You’ll have been able to hug your loved ones. Perhaps you will even have booked a holiday. This past year has been tough for most and tragic for many. But now, as we see the end – or at least the end of the beginning – in sight, there is much to be thankful for and much cause for positivity. The innovation and collaboration of the scientific community and our NHS has seen the Covid vaccine programme roll out at unprecedented speed. Britain’s economy is forecast to see a surge greater than any since 1948. Businesses are getting to grips with the challenging reality of Brexit. At last, we are able to look towards the future with confidence. It’s fitting, therefore, that many of the articles on these pages examine what our world could look like in the years and decades to come. Our cover story on page 7 considers the possibility of a cashless economy; on page 11 we discuss the role of the financial markets in the creation of a low-carbon future; and on page 22 we ask whether society is ready to embrace the consumption of insects for food. I suspect that for most of us the answer to that question will be: not until we’ve indulged in a few more of those restaurant meals we have been missing so much! And so, with that, I wish you a pleasant, healthy and sociable summer, and hope you enjoy reading this issue of Wealthsmiths.
Sanlam has offices across the UK. To find your nearest Sanlam office, simply visit www.sanlam.co.uk/contact-us You can also call us on 0333 015 5600 or email getintouch@sanlam.co.uk We welcome your feedback on Wealthsmiths magazine. If you have any comments or ideas, or if you would like to unsubscribe, please email: wealthsmiths@sanlam.co.uk
John White CEO, Wealth Management
Wealthsmiths is produced for Sanlam by Wardour, Kean House, 6 Kean Street, London WC2B 4AS, United Kingdom +44 (0)20 7010 0999, wardour.co.uk For Sanlam Head of Marketing Christopher Dean Marketing Executive Kate Lovelace Marketing Manager – Private Clients Jolyon Dean Marketing Operations Manager Bhavika Gor For Wardour Editor Andrew Strange Art Director Rob Patterson Production Manager Jack Morgan Senior Account Director David Poulton Senior Account Manager Jennifer Flower Creative Director Ben Barrett CEO Claire Oldfield Executive Chairman Martin MacConnol
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Contributors Paul Bryant – Paul has worked for McKinsey & Company and writes extensively about financial markets and investing for organisations such as the Chartered Institute for Securities & Investment. Jess Unwin – Jess is an accomplished journalist who has written for a range of business and finance titles during his 30-year career. Ray Philpott – Ray is an experienced journalist who has written about topics including financial services for more than 35 years. Jill Insley – Jill is a financial writer who has had work published in The Observer, The Guardian, The Sunday Times and the Daily Telegraph.
Wealthsmiths Summer 2021
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Sanlam UK
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Contents
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11 04 News and analysis The business and economic news you need to know
07 A farewell to cash? An in-depth interview explores the future of money
11 Building a low-carbon world The role of the capital markets in securing a greener future
14 Face value Time is money for investors in classic watches – learn how to get started
17 Thriving in lockdown A look at the strategies adopted by
20 7 famous market bubbles From tulip mania to the real estate bubbles that rocked Japan and the USA, these investments were too good to be true
22 Lovely grub As our mania for meat-eating takes its toll on the planet, could the world be ready to embrace farming and eating insects for protein?
25 Join the army of volunteers Meet the people inspired by the Covid pandemic to take an active role in helping the NHS and their communities
28 Big picture We pay tribute to Prince Philip, Duke of Edinburgh
30 All about tax wrappers Know your ISAs from your GIAs and shield your money from unnecessary tax
32 What if you had to retire early? Preparation can make early retirement a dream come true
34 City on the Tyne Explore the home of Sanlam’s most northerly UK office
family-run businesses that enabled them to weather the Covid storm
Important note Sanlam is a trading name of Sanlam Private Investments (UK) Limited, registered in England and Wales 2041819, Registered Office: Monument Place, 24 Monument Street, London EC3R 8AJ; Sanlam Wealth Planning UK Limited, registered in England and Wales 3879955, and English Mutual Limited, registered in England and Wales 6685913, Registered Offices: One Temple Quay, 1 Temple Back East, Bristol, BS1 6DZ. English Mutual Limited is an appointed representative of Sanlam Wealth Planning UK Limited. Sanlam Wealth Planning UK Limited and Sanlam Private Investments (UK) Limited are authorised and regulated by the Financial Conduct Authority. Past performance is not a guide to the future, investments may fall in value and you may not get all your capital back. Tax rules are subject to change and based on our understanding as at May 2021. The information provided should not be taken as financial advice, and you should always seek professional advice. If you no longer wish to receive your half-yearly edition of Wealthsmiths, please email us at getintouch@sanlam.co.uk to opt out.
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News and analysis See our research on the value of financial advice and find out how we’re helping young rugby players to achieve financial stability
How valuable is financial advice? While this might sound like a simple quantitative question, responses vary considerably. Factors such as a client’s understanding of the service, expectations of success, level of
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wealth, the relatability of their adviser and the quality of the advice they receive can all affect the answer. However, as our recent research shows, there is one driver of value that applies across all
We asked why people valued a financial adviser. The top five reasons were:
✔ Their expertise l ✔ Their reliability l ✔ They help me feel in control l ✔ They make sensible choices l ✔ They understand me l
19%
less confident
Sanlam says: When we dissect overall year-on-year confidence, those that regularly saw an adviser were a massive 22% more confident, showing the importance of the adviser as a coach and sounding board.
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Holistic financial planning is much more than investment advice. It can be used to help kids and grandkids succeed too. Our research shows…
Even more excitement
59% vs 35% 14% vs 24% 13% vs 2%
4
67%
no change
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Sanlam says: As shown above, clients who saw an adviser regularly (at least once per year) were much more positive about their finances than the less frequently advised.
Almost 1 in 5 advised adults are less confident about their finances than they were last year, which is understandable given the pandemic.
14%
We found that regular contact with a financial adviser was the secret ingredient in financial planning. Regular meetings with an adviser led to… Less financial uncertainty
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more confident
Sanlam says: When it comes to planning their future and that of their family, people are rightly cautious. And while ‘helping me feel in control’ and ‘understanding me’ were important reasons why people value their advice relationships, there is no substitute for quality expertise.
More financial confidence
strata of financial advice clients. In the first quarter of this year, we asked 500 advised UK adults about their attitudes to their finances and financial adviser. This is what they told us.
90%
of grandparents say it’s important to provide for children and grandchildren financially
56%
have a plan in place with their financial adviser
Sanlam says: Financial planning should ideally be a family affair, so that advisers can understand and capture the varied needs of their clients’ families. This, coupled with regular conversations and support, should create real value for all.
Wealthsmiths Summer 2021
78%
of those who regularly see their adviser have a plan in place
Insights
A winning team How Sanlam is working with the Rugby Players Association to provide financial guidance to players
Damian Hopley MBE, founder and CEO of the Rugby Players Association
When former England rugby international Damian Hopley MBE’s career came to an abrupt end at the age of 27, there was no place to turn to for relevant support, including sound financial advice. So, he decided to set up the Rugby Players Association (RPA) to guide other professional players at every stage of their careers. Here, Damian tells us about the RPA, and why a partnership that began with Sanlam in 2017 has proved to be a win-win. Wealthsmiths: What is the RPA? Damian Hopley: Essentially, the RPA is a trade union representing athletes who play, or have played, rugby union in England at a professional level. We’re the collective voice of professional rugby players and represent more than 800 male and female current players, and more than 400 former players. RPA members enjoy independent representation, legal advice, personal and professional development, insurance, education, confidential counselling, support as they transition out of playing, and more. In the event of a serious illness, mishap or hardship, members also access support from our official charity, Restart. Since 2004, the RPA has acted as the commercial representative of the England Team. We negotiate the Elite Players Squad contract, England and England A match fees, England team win bonuses and image rights payments with the RFU. W: What’s your role at the RPA and how did you come to it? DH: I’m the CEO of the RPA,
which I founded in August 1998 when I was 27, following a knee injury which forced me to retire from the game. With no funding, I started the organisation from a bedroom at home. The objectives were, and still are, to protect player welfare, to cater for the interests of our players and to encourage players to continue their studies outside of rugby. We have two key stakeholders, Premiership Rugby and the RFU, who fully support our efforts. W: Why does the RPA partner with Sanlam? DH: We aim to provide our members with expert investment and wealth advice. Since they came on board as partners in 2017, Sanlam UK’s expertise and support has been invaluable, especially during the uncertainty of the pandemic.
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Our partnership is built on our shared values around player welfare and education. W: What are the key challenges facing the RPA and your members? DH: Players are dealing with wage cuts, no relegation, smaller squads, and less wage-cap money. Meanwhile, we’ve had to manage ourselves carefully during the pandemic. Fortunately, we’ve been able to retain most of our workforce and maintain contact with players online. W: How are you and Sanlam working together to tackle these issues? DH: We’re raising players’ awareness of all our resources, including initiatives like Gain Line, which helps with player development, and mental wellbeing programme Lift the
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Insights
Weight. Sanlam has been superb in providing financial awareness, work experience and career transition support for members. The RPA and Sanlam co-published the Financial Awareness Handbook and more recently launched Sanlam on Demand, a free financial consultation service for players. W: What are some of the key initiatives you’ve been working on together? DH: Sanlam has always been a very supportive and creative partner – our joint effort to create the Financial Awareness Handbook is a great example. We also co-hosted several sport and business events that included our members and colleagues,
“Sanlam has been superb in providing financial awareness, work experience and career transition support for members” such as the Six Nations preview events earlier this year. Our strong working relationship is testament to how different entities can collaborate to provide better outcomes for all. W: Why does financial literacy matter? DH: Being financially literate, or at least aware, is an important life skill. Personal finance is something that we all have to deal with as adults and knowing the basics
Damian Hopley playing for England in 1993
Photos: Rugby Players Association, Alamy
Hoppers’ vital stats
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Name: Damian Hopley Height: 6’2” Nicknames: ‘Hoppers’ and ‘the vicar of rugby’ (he has a Theology degree) Teams: Wasps, England, England 7s Position: Wing / Centre Honours: Three England caps, 7s World Cup, MBE Test debut: England v Samoa, Durban, 1995 n CEO of the Rugby Players Association, which he founded in 1998 n MBE for services to rugby, awarded in 2021
around spending, saving, investing and tax is crucial. Professional athletes enjoy a high salary at a much younger age, but this may not last. So, it’s important they learn how to manage their money early in their career or know who to turn to for guidance. W: What’s your best advice for rugby players transitioning out of the game? DH: Use your time as a player to develop yourself personally and professionally. Take the opportunity when meeting sponsors to build your network. Spend your spare time improving yourself and getting qualifications that will help you with your next career when you retire from professional rugby. Work experience is a great idea – even if it helps you to decide what you don’t want to do! Some players struggle with moving out of the sport and losing their rugby identity. To combat this, make time and effort to create a new identity for yourself before retiring, and lean on your support networks. W: Can you share a success story? DH: There have been several successes, all worthy of a mention. One player – Luke McLean – inspired by work experience at Sanlam organised by the RPA, went on to gain a tough financial qualification that gave him the right credentials for a job with a US bank. After a probation period, this ex-international landed a full-time contract. W: Finally, as a firm with a South African parent, all eyes at Sanlam are on this summer’s Lions tour. How do you think we’ll do? DH: It’s hard to say! It will be tough for a team that will be short on preparation to successfully take on the world champs in their own back yard. That said, Warren Gatland is an excellent coach and there were some exciting performances in the Six Nations that give cause for optimism. n Visit the RPA at www.therpa.co.uk
Wealthsmiths Wealthsmiths Summer Winter 2020 2021
Interview
A farewell to cash? In the first of Sanlam’s Invested in the Future series of virtual events, financial journalist Julia Edwards talked to renowned economist and bestselling author Stephen D. King about the future of money
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n a wide-ranging discussion, Julia Edwards and Stephen D. King explored the meaning of money, our changing relationship with cash, and how the lessons of the past can help us make sense of our evolving economic future. We caught up with Stephen afterwards to find out more about his thoughts on the future of money and the key themes that are set to shape our world. Julia Edwards How is technology driving the evolution of money? Stephen D. King The payment mechanisms that we
used 20 or 30 years ago – like cheque books – are increasingly redundant now. That’s largely because of electronic transactions. Today, we can make payments in many different ways, and some go outside the conventional banking system, whether that’s through innovative credit cards or via your smartphone. Electronic money helps you to see what’s really going on; in a sense, it creates price discovery. That increase in visibility and transparency should help to bring down financial costs for consumers, particularly in areas such as currency exchange.
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Cash vs Debit Card
Cash
Payment volumes (millions) 2009 to 2019
Debit Card
Number of payments (millions)
25,000
20,000
15,000
10,000
5,000
0 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: ukfinance.org.uk
JE Do you regard cryptocurrencies as an investable asset class? SK Technological innovations have created cryptocurrencies such as Bitcoin, and people have begun to think there might be an alternative to the monetary system that we’ve lived with for so long. However, just because something is innovative, it isn’t necessarily a good long-term store of value. Cryptocurrencies are just currencies; they don’t generate a reliable income over time, and there’s a speculative aspect that might reverse in future. The
Cash as a percentage of all payments
58%
48%
23%
2009
2014
2019
CHAPS payments in 2019
0.1%
91%
of volume
of value
Cheques used for payments (millions)
1,213 2009
627 2014
272 2019 Source: ukfinance.org.uk
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extent to which cryptocurrencies have appreciated in value suggests that some people do regard them as a very valuable asset but it’s important to recognise that rapid increases in value can sometimes be highly risky. JE In an environment of near-zero or even negative rates, what’s the point of cash? SK Cash – in the form of notes and coins – is unique because it always has a minimum interest rate of zero. The closer we move to negative rates, the more attractive cash becomes. But central banks don’t necessarily want cash to be an attractive investment, they’d rather encourage investors to switch into other asset classes that might, in time, help boost economic activity. As we’ve moved closer to the so-called ‘zero bound’, central bank officials have realised that they could run out of policy options unless they have the power to move interest rates into negative territory. If cash prevents that, you can see why central banks might consider abolishing cash – they want greater flexibility to set interest rates at a negative level. JE What happens when people’s faith in money breaks down? SK I’m a big believer in history, and history shows that there’s always a reason for a loss of faith in money. In the 1970s, the Bretton Woods exchange rate system collapsed and the link between the US dollar and gold
“Just because something is innovative, it isn’t necessarily a good long-term store of value” Wealthsmiths Summer 2021
Interview
Growth in Bitcoin market cap Market capitalisation of Bitcoin from 2013 to 2021 (in billions U.S. dollars)
Market cap in billions U.S. dollars
1000
750
500
250
0 2013
2014
2015
2016
2017
2018
2019
2020
2021 Source: Statista
Cash usage by country
2010
Percentage of cash used in total transactions by volume
2020E
Emerging Markets
Mature Markets
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0% Argentina Brazil
China
Indonesia India
Mexico
Japan
Malaysia
Singapore Korea
US
UK
Sweden Finland
Netherlands
Source: 2020 McKinsey Global Payments Report
was effectively broken. Because every other currency was linked to the dollar, people became anxious about currencies in general. As currencies fell in value, inflation picked up; at the same time, gold surged in value because people wanted the reassurance of something they felt was secure. Similarly, in Tudor England, people’s loss of faith came from the debasement of the currency: the precious metal content of coins was too often reduced. Money lost its value. JE In uncertain times, can people still put their savings to work for them? SK It depends partly on whether the individual has the ability to invest in risky assets and can take a long-term
view. Periods of inflation generally tend to benefit stock market investments and real assets such as property, rather than nominal assets such as government bonds. A poor pensioner on a fixed cash income will find that inflation erodes the value of their pension, whereas a wealthy person who’s invested in equities and property could be well placed to benefit from a period of 1970s-style inflation. Over the last few years, inflation has been very low but central banks have attempted to address that through quantitative easing. Although many people warned that this might lead to higher inflation, asset prices have been pushed up instead.
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Interview
Is cash destined to go the way of the dodo?
JE Do you think society can ever be truly cashless? SK Yes and no. How will a truly cashless society cope if its electronic systems break down? From that perspective alone, cash serves a purpose. Monetary systems often break down because of a change in political regime, and there are occasions when cash can become particularly valuable. On the other hand, if cash loses value very quickly – for example, in Weimar Germany in the 1920s – people might move to a barter system as a more efficient way to exchange goods and services. Of course, some people will always want to undertake transactions that aren’t visible to the authorities. While it’s now possible to achieve this via cryptocurrencies, cash is still useful for those who want to avoid leaving a trail behind them. Above all, cash – and money in general – is not determined by governments alone: people are innovative, and money evolves in response to how they want to use it. JE Will rates of change vary around the world? SK Some areas of the developing world are progressing more quickly than advanced economies because they’re not weighted down by redundant technology. The most obvious area is telecoms: most developed nations still have fixed-line infrastructure in place, whereas many parts of the developing world have bypassed fixed lines altogether and moved directly to wireless technology. With money, however, I think it may be slightly different; there’s no reason why a developed country can’t move quickly towards electronic payments. Some
“Change won’t be imposed by governments alone; it will be decided by the interactions of billions of people” countries – particularly in Scandinavia – have already progressed towards becoming cashless societies. Once they’ve become accustomed to exchanging money through electronic means, most people find it very convenient. JE Looking ahead, what’s going to be the stand-out theme over the next 20 years? SK I think the world will become increasingly fragmented. Technology itself may create disengagement as robotics and artificial intelligence allow companies to bring their operations back onshore. This is an idea that I explored in my book Grave New World: The End of Globalization, the Return of History*. In the late 20th century, globalisation was all about the movement of capital in search of cheap labour elsewhere in the world. Today, technology is enabling capital to replace that cheap labour – so the view that technology is driving us towards globalisation isn’t quite true. Ultimately, change won’t be imposed by governments alone; it will be decided by the interactions of billions of people. n
* Stephen D. King – Grave New World: The End of Globalization, the Return of History (Yale University Press, 2017)
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Wealthsmiths Summer 2021
Investing
Building a low-carbon world Capital markets have embraced the transition to a low-carbon economy. They are transforming themselves to ensure an orderly process, writes Paul Bryant
T
he only way we are going to make a real difference to the climate emergency is to simply stop investing in coal, oil and polluting industries altogether.” That was a client’s perspective conveyed to Chris Halliwell of Sanlam Wealth Planning. It is a view from one end of the spectrum – some investors take a more nuanced approach – but it’s not uncommon. But a large and abrupt withdrawal of capital from carbon-intensive industries comes with risks for investors. Sanlam’s Chief Investment Officer, Phil Smeaton, highlights cost and inflationary pressures as vast amounts of ‘brown’ infrastructure gets replaced before the end of its useful life. Some assets are likely to become ‘stranded’ – for example, many coal mines will be redundant as coal gets replaced as a fuel source. Meanwhile, we will still need iron and steel in the future, so abandoning these industries and their supply chains makes little sense. They have to transform, not disappear. Smeaton says capital markets are designed to deal with change. They continually deal with emerging and dying companies and industries. It’s the speed of change demanded by the climate emergency which is an abnormally complex challenge. But markets are adapting. Calls for even faster change The Paris Agreement of December 2015 – a legally binding treaty signed by 195 governments – marked a rapid acceleration in the transition to a low-carbon economy. Reacting to a growing body of research, signatories committed to limit the increase in the global average temperature to ‘well below’ 2°C above pre-industrial levels (1861–1880 was used as the ‘pre-industrial’ base) and to try to limit the increase to 1.5°C. It was found that the risks of global-warming-induced events ramped up significantly
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Capital markets’ rapid response It’s hard to argue that capital markets are not on the case. Between 2016 and 2020, the number of ‘sustainable’ investment funds in Europe grew from around 900 to 3,200, with more than 500 launching in 2020 alone. These attracted new capital of €233 billion in 2020, nearly double the €126 billion of 2019, and ten times higher than 2016. The financial product landscape continues to adapt to deal with the transition to low-carbon. ‘Green bonds’ –
Sir David Attenborough has been vocal on the need to tackle climate change
Global emissions have caused climate change that is melting the world’s icecaps
which provide capital to projects with strong environmental credentials – have become a substantial market over the past five years. At the end of 2015, their cumulative value stood at US$104 billion, which grew ten times to US$1.05 trillion by the end of 2020. ‘Transition bonds’ meanwhile, is a market still in its infancy but with huge potential. These allow brown industries to raise capital with the goal of becoming greener. We are also seeing more nuanced financial indices. While ‘green’ indices (such as ex-fossil fuel or low-carbon) have been around for years – the FTSE Environmental Markets Index Series was launched in 2008 – more recognition is now being given to the importance of a smooth transition. The FTSE TPI Climate Transition Index, launched in 2017, determines a company’s proportion of the index according to criteria such as how much green revenue it generates and its actual carbon emissions. Browner businesses are therefore incentivised to change as they will be assigned a higher weighting of the index as they proceed along their green journey. Dealing with complexity Markets are however having to grapple with the problem of consistency in assessing investments. As Smeaton says: “It’s not easy to work out a carbon footprint. Just because companies produce a number doesn’t mean it’s right or comparable to that produced by another company. And it becomes particularly complicated when you start measuring emissions and the like up the supply chain.” This is also being addressed. When it comes to climate change, the Task Force on Climate-Related Financial
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Wealthsmiths Summer 2021
Photos: Alamy, Getty
if temperature rises approached or exceeded 2°C. These included the rapid degradation of ecosystems such as Arctic sea ice and coral reefs; extreme weather events such as heat waves and heavy precipitation; and climate ‘tipping points’ where abrupt regional climate shifts occurred. Countries committed to submit their climate action plans or nationally determined contributions (NDCs) – mostly plans to reduce greenhouse gas emissions, the primary cause of global warming – in time for the United Nations Climate Change Conference to be held in Glasgow in November 2021 (COP 26). But the plans submitted to date look inadequate. Reacting to an analysis of the NDCs submitted by 75 signatories by the end of 2020, UN Secretary-General António Guterres said: “Governments are nowhere close to the level of ambition needed to limit climate change to 1.5°C … the major emitters must step up with much more ambitious emissions reductions targets for 2030.” While governments might be lacking in ambition, individual investors are not. Halliwell says he has seen a rapid increase in demand for sustainable investments, and he stresses that the demand spans the generations from GenZs all the way to Baby Boomers. “Clients have recognised that it’s probably the most powerful action they can take to influence change.”
Investing
“We now ask our clients about their beliefs and how they want to apply these to their investments”
Former Governor of the Bank of England, Mark Carney, and Christine Lagarde, President of the European Central Bank at the launch of the private finance agenda for the 2020 United Nations Climate Change Conference
Five facts about global warming/climate transition 1. Human activities are estimated to have caused approximately 1.0°C of global warming above pre-industrial levels 2. Global warming is likely to reach 1.5°C between 2030 and 2052 if it continues to increase at the current rate 3. Even at the ‘stretch target’ of the Paris Agreement (1.5°C), extreme temperatures, increases in frequency, intensity, and/ or amount of heavy precipitation, and an increase in intensity or frequency of droughts are expected in some regions 4. Greenhouse gas emissions need to decline by about 45% from 2010 levels by 2030 to limit global warming to 1.5°C 5. Switching pension savings to sustainable, fossil-fuel free investments can, over their working life, reduce an individual’s carbon footprint 27 times more than the combined effect of shortening shower times by two minutes, taking one less international flight per year, switching from car to train travel, and eating only one piece of red meat per week.
Disclosures (TCFD) is the most prominent initiative. It has published (voluntary) climate-related financial disclosure recommendations which are “designed to help companies provide better information to support informed capital allocation”. These include disclosure recommendations around governance, strategy, risk management, and metrics and targets. As of September 2020 nearly 60% of the world’s 100 largest public companies support the TCFD, report in line with its recommendations, or both. Regulation is also starting to play its part with the EU leading the way. Regulation requiring sustainability disclosures for financial products and for financial advisers to ascertain the sustainability preferences of investors is already in force. Additional regulation, such as a taxonomy (which establishes the criteria for determining whether an economic activity qualifies as environmentally sustainable) is in the pipeline (scheduled to apply from 1 January 2023). Halliwell summarises how the above developments have impacted Sanlam’s offering to clients: “We have a much closer relationship. We now ask clients about their beliefs and how they want these to apply to their investment portfolio – from their views on nuclear energy to animal rights. Our portfolio managers can then marry clients’ ethical needs with their financial needs and design a portfolio bespoke to them.” n
www.sanlam.co.uk
Find out more To find out more about sustainable investing, talk to your financial planner or portfolio manager.
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Face value Smartwatches may be able to operate as maps, phones and health monitors, but classic mechanical watches still demand a much higher price at auction, says Gareth Francis
Clockwise from top right: Paul Newman and his Rolex Daytona; World War I Cartier Tonneau; Buzz Aldrin and the lost Omega; Steve McQueen’s Heuer Monaco; Patek Philippe Henry Graves Supercomplication
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Wealthsmiths Wealthsmiths Summer Summer 2020 2021
Lifestyle
Photos: Alamy, Getty, Phillips Auction House, The Swatch Group, Accurist, Omega, Rolex, Patek Philippe
T
he global smartwatch market is booming. Valued at $20.64 billion in 2019, it is expected to rise to $96.31 billion by 2027. Smartwatches can track our steps, play music, be used as a wallet and much more besides. But while they are selling in huge numbers, their individual value still doesn’t come close to certain classic watches sold at auction. The Tag Heuer Connected Modular 45 Full Diamond is the most expensive smartwatch on the market at the time of writing, costing a cool $180,000. Meanwhile, the one-of-akind 2019 Patek Philippe Grandmaster Chime Ref. 6300A010, sold for an incredible $31.19 million in 2019 at the Only Watch charity auction in Geneva, becoming the most expensive watch of all time. It took the distinction from The Henry Graves Supercomplication, made by the same manufacturer. That model had itself broken the auction price record twice in the past, first in 1999 when it sold for $11 million, before breaking its own record in 2014 when it fetched $24 million. The watch was commissioned by banker Henry Graves Jr. It took three years to design and five years to manufacture, and features 24 complications (functions other than time telling), including being able to play the Westminster chimes and housing a celestial map of New York as seen from the Graves’s apartment at 834 Fifth Avenue, New York. “The Henry Graves Supercomplication is the most famous watch in the world and the most complicated watch ever made by human hands without computer-assisted technology,” says Benoit Colson, Deputy Director, Specialist Watches at Sotheby’s. “It is considered the Holy Grail of horology and Sotheby’s had the privilege to sell this masterpiece twice.” But while these pieces sit at the top of the table in terms of value, there are plenty of less expensive options for those considering venturing into watch investment. So, what should potential buyers consider before looking to invest? Put in the hours Colson says that the first step for those interested in watch investment should be to understand one’s own taste. Investors should then research what pieces might also make a worthwhile investment. To do this, he recommends comparing retail prices (original sale prices) and secondhand market prices (auction estimates and results, second-hand dealers’ prices). “After years of passion, you will be able to have a sense of the forthcoming trends and directions taken by the market,” he says. When looking to buy at auction, he recommends focusing on mechanical watches as most collectors today focus on the technical prowess, craftsmanship and tradition embodied by these pieces. Unsurprisingly, scarcity also comes into play when assessing value, with
Patek Philippe Grandmaster Chime Ref. 6300A-010
unique watches, as well as special editions and models with low production numbers, commanding higher prices. Similarly, understanding supply and demand in different markets can help investors spot opportunities. Tony Wooderson, founder of thewatchcollector.co.uk, buys and sells individual watches and builds portfolio collections for investors. He says understanding trends in foreign markets can allow buyers to identify pieces locally that might demand a higher price abroad. “The world is a smaller place than it was, but the marketplace is much bigger,” he explains. “I can send a watch from the UK to Australia in a matter of days. It’s easy for buyers to see the product virtually, and it’s easy to get a watch to buyers globally.” And finally, condition must also be factored in. Two of the same watches can have very different valuations depending on the marks they have. However, signs of age or fade do not necessarily mean a lower valuation. “The pieces which really set collectors’ hearts racing (and are therefore the most highly sought-after at auction) have been well-preserved and cherished by their owners – but also have not been restored or altered, even if this means the features are faded,” says Colson. “Unusual dial patina, for example, is a prized effect in today’s market.”
The first step for investors should be to understand one’s own taste www.sanlam.co.uk
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Lifestyle
Once upon a time… Another key factor – and one that is growing more important all the time – is the provenance of pieces. The story of how a watch was made or who its previous owner was can have a huge impact on value. “A watch which has belonged to a great collector, someone famous or an important figure can fetch much more at auction than the same piece would without the provenance,” explains Colson. A recent example is a Rolex Daytona which sold for $17.75 million in 2017 at Phillips auction house. The watch was originally owned by Hollywood icon Paul Newman, given to him by his wife, Joanne Woodward. He wore the watch frequently, was photographed with it often and the model became known in collecting circles as the Paul Newman Daytona. Even those that had not been owned by Newman were reaching high prices, but the whereabouts of Newman’s own remained a mystery for years. It had been believed to have remained in the family following his death. In reality, Newman had gifted the piece to his daughter Nell’s then boyfriend James Cox in 1984. The potential value of the watch dawned on Cox over the next few decades, with watch enthusiasts admiring it frequently without realising it was Newman’s original. He finally put it to auction in 2017 with the blessing of Newman’s family. Stories like this bring watches to life, but pieces don’t need to belong to such famous names to add value. A Cartier Tonneau, originally belonging to a British captain in World War I, sold for over £15,000 earlier this year. It came complete with scuff marks, likely picked up during its former owner’s time on the Western Front. “When searching for a watch to start or add to your
collection, be sure to find out if the piece comes with its original paperwork and presentation case,” adds Colson. “This account of a watch’s journey and the way it’s been looked after is precious indeed!” Don’t leave it too late Wooderson also warns that, as with any investment, buyers should carefully consider what their exit strategy will look like once they are ready to sell their collection. “It is something that is overlooked by most people,” he says. And he warns that this can be even more challenging for people inheriting a collection. “I get a huge amount of calls from families in a stressful situation where someone has died and they have inherited a box of watches, but they don’t know what was paid for them or what they are,” says Wooderson. “It’s something people need to take more responsibility for, to curate their collection properly. What’s happened is that because prices have gone up so dramatically over the last ten years, a lot of people don’t realise what they’ve got before they die. It’s worth having conversations before that day happens.” Time to choose While money certainly can be made through purchase and resale of vintage watches, simply focusing on turning a profit can be a bad place to start. While many watches retain their value or go up slightly over time, few owners will make huge amounts of profit from them. Colson agrees, and recommends focusing on buying pieces that you truly love. By doing so, you can get use out of it ahead of sale, wearing it day-to-day or on special occasions, but you are also more likely to understand its value to other buyers. n
Whatever makes you tick Whether you are looking for an entry level piece or a piece of history, here are five brands you may wish to consider and some starting prices. Swatch – This Swiss brand has collaborated with artists, designers and other brands to create collectible yet affordable pieces. Boxed vintage models can be found from around £25 on eBay. Accurist – The soundtrack to the swinging 60s could almost have been the tick of the Accurist. Boxed vintage models can be found from around £30 on eBay.
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Omega – Omegas can be picked up for a wide range of price points. Worthwhile vintage models can be purchased for around £1,000. Perhaps the watch with the most potential value in the world is a particular missing Omega Speedmaster; the one worn by Buzz Aldrin when he walked on the moon.
Wealthsmiths Summer 2021
Rolex – A byword for quality. Second-hand models can be purchased from dealers from around £2,000. Patek Philippe – Hand-made finishes make these slow to produce and rarer than other brands. Second-hand models can be found from around £5,000.
Small business
Staycations are more popular than ever, and travellers have been flocking to this Shropshire yurt
Thriving in lockdown Smaller, family-run businesses have been finding ways to not only survive but thrive in lockdown Britain. Jess Unwin finds out more
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andemic-battling national lockdowns have put immense pressure on businesses, but while some have struggled, others have readjusted to stay in busy and even increase their activity. They’ve done so despite the restrictions on people and companies that saw the UK suffer its worst economic slump in three centuries. The challenges remain and to save jobs and help keep companies afloat, the furlough scheme will continue in 2021, as will government-backed Covid-19 loans, which by February this year had already provided £73 billion in much-needed support to 1.6 million businesses. One small business thriving despite recent lockdowns is Frankie Duckworth’s Kinton Escapes in the Shropshire
countryside close to the Welsh border, which provides unique accommodation in a yurt (The Kinton Cloud House), a wooden cabin (The Duck Hut) and a converted horsebox (The Kinton House Box). After the first national lockdown in 2020, the business re-opened and Frankie says she has never been busier: “People were desperate to get out and couldn’t go abroad. The accommodation is self-catering and of course I introduced the necessary enhanced cleaning regime – so it ticked all the boxes for the circumstances.” Running at 93% occupancy rate during four months in the summer and autumn, she recouped enough revenue to help her through the national lockdowns that followed. Frankie hasn’t wasted time during the periods when the
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The team at Klick Business Solutions, which has bounced back to 80% of pre-lockdown turnover
business has had to shut down, completing maintenance work both to the accommodation and grounds. She has also invested in a double-decker bus, which she intends to refurbish as another unique accommodation space. On the difficulties the national lockdowns and other pandemic restrictions have caused, she says: “I’m lucky enough to be in the right business. If I was running a pub or a restaurant or had a lot of staff, I think I would be in a lot of trouble. I think it also helps that the business is small and therefore fairly flexible.” She adds: “I am also fortunate in that I have savings invested in stocks and shares, so if I get short there is a safety net. Ideally, I wouldn’t be drawing down on that because it’s also my pension, but I have had to rely on it at times because of the pandemic shutting down the business.” Frankie’s investments are looked after by Sanlam’s Eleanor Ingilby: “The stock market took a nosedive when Covid first struck but she’s managed my portfolio well since then and it’s bobbing along quite nicely again, so I’m grateful to her and Sanlam.” Bookings at Kinton Escapes should recommence this spring and Frankie’s confident there will be plenty of interest: “I don’t think people are
going abroad and are instead opting for staycations.” She thinks lockdown has helped to promote her business as people learn to appreciate anew the beauty of the countryside. However, she adds: “Anyone can put up a tent and make it pretty, but looking after your guests to ensure they get the kind of experience they want is something I really take pride in.” Klick with clients Many businesses that have performed well have done so because they offer products and services that are suddenly in demand in these extraordinary circumstances. But others, unable to operate in the usual way, have pivoted their business models. Among these businesses are many that are family-run, like Klick Business Solutions, an award-winning specialised tender writing and bid management service located in the West Midlands. The 11-strong Klick team helps companies across the UK – predominantly working in the services sector, including security, cleaning, recruitment, M&E contractors and social care providers – to secure contracts with public
Businesses that have performed well have often done so because they offer products and services that are suddenly in demand
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Wealthsmiths Summer 2021
Small business
Our support for SMEs While the pandemic has meant a temporary shift away from face-toface relationships to more virtual interaction, Sanlam is determined to continue providing a full support service to all our family-run businesses and other SME clients. Eleanor Ingilby, Head of our Harrogate office, is just one member of our team of portfolio managers located across the UK. She looks after a variety of SMEs across all sectors. “We work to create bespoke financial investment portfolios to meet our clients’ needs, whether that be to generate
capital or income, or to apply ethical criteria to their investments. And we grow and adapt those portfolios as our clients grow. She adds: “We also have wealth planners who can help business owners who sell, leaving them with large amounts of capital, and talk them through strategies and plans for that. “We can be there with entrepreneurs every step of the way and have that relationship where we really do understand them and their needs.”
“We can be there with entrepreneurs every step of the way, we really do understand them and their needs”
Photos: Kinton Escapes, Klick Business Solutions
Eleanor Ingilby, Head of Harrogate office
sector organisations. They’re good at it too, achieving a 79% win rate for their clients. During the first Covid-19 lockdown, Klick had to make two staff redundant and furloughed three others but recovered so well from that position that the furloughed staff returned to work and the company has since maintained 80% of normal turnover. What’s more, Klick brought on board 44 new clients in 2020, more than it did in 2019. MD Andrea explains: “In April 2020 at the start of the first lockdown, public sector opportunities for new contracts dried up and some of our competitors furloughed staff and even shut up shop. When the tenders started being issued again, we picked up new clients and we were working flat out.” Klick is not only providing a much-needed service, it has also been able to increase its training offering because of the unique pandemic circumstances. Says Andrea: “So many people from all sectors were furloughed last year and weren’t allowed to work, but they were still allowed to participate in training, so businesses like ours did very well. “We provided online training in writing winning tenders to more than 300 people last year, but there was another benefit because the people we train often realise how difficult and time-consuming it is and decide to ask us to do it for them.” Klick made the transition to working from home 10
days before this became mandatory because Andrea wanted to be prepared for the new way of working. Since then, the company has invested in new communications technology and also in training staff to use social media to promote Klick. Andrea believes the business has found ways to work smarter during lockdown: “When this is all over and we return to the office, I need to make sure we retain the efficiencies we have developed while working from home.” With so much to focus on with her business, Andrea says it’s a big relief to have Sanlam’s Ed Kimpton as her personal financial planner: “He always goes the extra mile,” she says. “I also have corporate insurance protection with Sanlam, which gives me peace of mind.” Although lockdown has created opportunity for Klick, Andrea’s in no doubt about the reason why the company is successful: “We’re a close-knit team and everyone knows how to do their job and is loyal and committed. And, above all, we have a very determined, British mentality to keep calm, pull together and carry on.” n
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Find out more To discuss financial arrangements for your business, talk to your financial planner or portfolio manager or visit www.sanlam.co.uk
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7 famous market bubbles The investment bubbles on this page demonstrate that if something looks too good to be true, then it probably is. Bitcoin, for example, has seen tremendous highs and lows. That’s why we take a pragmatic approach, diversifying and creating portfolios designed to rise with the market but also to be resilient if the market falls.
South Sea bubble In 1720, the South Sea Company underwrote the UK government’s debt and was granted an exclusive charter to trade in the south seas. Shares immediately rose tenfold and the company issued more and more shares to meet the insatiable demand. It issued shares for many different ventures all offering riches, including the ludicrously described venture ‘for carrying on an undertaking of great advantage but no-one to know what it is’. When it all came tumbling down, the executives were arrested, members of the government saw their personal fortunes evaporate and the collapse was followed by suicides.
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Wealthsmiths Summer 2021
Photo: Alamy
Tulip mania In 1634, the world’s first recognised investment bubble began when speculators in the Dutch Republic began frantically buying up tulip bulbs. The bulbs were a highly prized status symbol at the time and the most desirable varieties saw their value surge. At the height of the craze, each bulb cost more than the year’s salary of a skilled worker or a townhouse in Amsterdam. By 1637, things reached a head when even the cheapest bulbs reached absurd prices. Demand soon collapsed and values nosedived, leaving many investors out of pocket and presenting a sobering lesson for today’s investors who may be tempted to get caught up in the latest craze.
Investing
The roaring twenties The raging US stock market of the late 1920s was hailed by many as evidence of a new era of economic fundamentals. The creation of the Federal Reserve, the extension of free trade and anti-inflation measures were just some of the reasons considered to be behind the rapid expansion. In reality, the real driving factor was the increasing use of debt by individuals and companies. The bubble burst on 24th October 1929, which became known as ‘Black Thursday’ and marked the beginning of the Wall Street Crash that ushered in The Great Depression.
Japan’s real estate bubble A surge in the value of the yen triggered a Japanese recession in 1986 and Japan introduced a programme of monetary and fiscal stimulus. This worked so well that it led to unbridled speculation and Japanese stocks and urban land values tripled. At the peak of the real estate bubble in 1989, the value of the Imperial Palace grounds in Tokyo was greater than that of all the real estate in California. The bubble burst in 1991, leading to the years of price deflation and a stagnant economy known as the Lost Decade.
The dot com bubble During the second half of the 1990s internet stocks began to rise rapidly. The NASDAQ rose from 743 points at the beginning of 1995 to a height of 5,048 in March 2000, more than doubling in the final six months. When the bubble finally burst in 2002, the NASDAQ saw 78% of its value wiped away and most shares in internet companies saw their values plummet. The value of the tech-heavy S&P 500 was nearly halved and the shockwaves were felt around the world.
The US housing bubble Some experts believe that the dot com crash led to the 2008 financial crisis because investors switched their money from technology to real estate, believing it was safer. US house prices nearly doubled between 1996 and 2006 but two-thirds of the increase happened after 2002. Even as prices were increasing there were ominous signs, such as rampant mortgage fraud and houses being acquired by subprime borrowers. House prices began to slide in 2006 and the average US house had lost a third of its value by 2009. The ripple effect was felt in mortgage-backed securities and led to the biggest global contraction since the 1930s.
Railway mania In the 1840s, the UK was in the midst of a speculative frenzy as new railways were built. Aided by the British government, which cut interest rates and passed Acts of Parliament setting up a multitude of railway companies, the bubble reached its peak in the early 1840s when rail stocks reached ridiculous prices. It burst in 1845 after a rise in interest rates. In the end only a third of the proposed railways were built and many investors lost out.
Find out more To find out how you can invest your money with confidence in all market cycles, speak to your portfolio manager or visit www.sanlam.co.uk
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Lovely grub The insect farming industry has been steadily growing for many years, and insects look set to be a key food source of the future, writes Milena Bellow
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lthough many Western countries do not have a history of eating insects, entomophagy is common globally – it is estimated that some two billion people include insects as part of their diet. With the world’s population rapidly expanding – it is expected to reach 9.7 billion by 2050, up from 7.7 billion today, according to the UN – food consumption will also grow exponentially. The Food and Agriculture Organization of the United Nations (FAO) projects that food production will need to increase by 70% to meet the needs of the population. This is where insects come in.
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Insects have a far smaller environmental footprint than traditionally farmed animals such as pigs, cows and poultry, as they require less water, feed and land. According to the FAO, crickets require 1.7kg of feed per 1kg of live animal weight – this compares with the 10kg required by beef, 5kg for pork and 2.5kg for chicken. The bee’s knees Livestock production accounts for 70% of all agricultural land use; insect farming, which requires far less space, would free up a significant amount of land and potentially
Wealthsmiths Summer 2021
Lifestyle
slow deforestation. And according to a study by Oonincx et al., mealworms, crickets and locusts produce greenhouse gas emissions lower by a factor of 100 compared with pigs and beef cattle. According to the International Platform of Insects for Food and Feed (IPIFF), in 2019 European countries sold 500 tonnes of insect-based food, and IPIFF projects that production will jump to 260,000 tonnes by 2030. In 2020, French mealworm producer Ÿnsect’s total series C funding reached US$372 million, and the UK government announced £10 million in backing to a black soldier fly demonstrator farm. “If you look at the industry over the past 10 years, it has been growing enormously,” says Arnold van Huis, Professor of Tropical Entomology at Wageningen University in the Netherlands. “If you take the black soldier fly, for instance, one of the insects used in animal feed, in the past two years there have been more publications on it than in the entire 40-year prior period.” Making a meal of it Insects are being used both in animal feed and in products for human consumption. Alan Hernández Álvarez, a Lecturer in Nutrition and Global Health at the University of Leeds, says that at present the real growth area is in the use of insects for animal feed, “mostly for poultry and fish, as legislation is more straightforward than for their use for human consumption.” AgriProtein, an agricultural and biotechnology company founded in 2008 by Jason Drew, is one of the companies leading the way in insect farming. It upcycles food waste into sustainable insect protein for livestock, aquaculture and pet feed, and in 2018 raised US$105 million in funding, the largest such sum in the insect farming sector at that time. Today, it has a presence in nine countries. “In the early days of this industry people certainly thought the concept very odd, but quickly understood that this is a natural process that has been going on for hundreds of millions of years,” says Drew. “The world is long on waste and short on protein – this is a natural technology that once industrialised can bridge this gap.” AgriProtein takes in organic waste that would otherwise go to landfill and hatches fly eggs in it. These grow into larvae, leaving behind compost. The larvae themselves are separated into two feed ingredients: a protein powder and an oil. AgriProtein’s factories can each process at least 350 tonnes of food waste per day. “The industry is still in its infancy,” says Drew. “Given its capital-intensive nature, doubtless some larger global players will emerge.” “The industry has made enormous progress and there are other areas which have not been explored yet, but which
Large scale production of edible insects in Holland
companies are starting to now, such as genetics,” says van Huis. “Insect breeding is relatively new; it’s only been going on for a couple of years. I think the progress that can be made there is significant.” Furthermore, he says, “the big companies are starting to get involved. Nestlé put out a product, Purina, which is a pet food that contains insects. So, I think other big companies will come on board as well.” Hernández Álvarez points to Thailand as a leader in insect farming. “They developed a successful strategy to help rural communities – with the creation of little farms around the country, increased the local insect market and linked insect production with gastronomical tourism. But some industrialised countries are paving the way in insect farming as well, such as the Netherlands.”
“The world is long on waste and short on protein – this technolog y can bridge that gap” www.sanlam.co.uk
Cricket tea? But what about insects farmed for human consumption? Insects are an excellent source of protein: per 100g, crickets contain 69g of protein, compared with 19.4g for beef, 19.5g for chicken and 17g for pork. Crickets are also good sources of other nutrients, such as calcium, iron and vitamin B12.
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HOW INSECTS STACK UP AGAINST BEEF Crickets vs cows
Photos: Alamy, Small Giants
Researchers from Ningbo University in China and University College London looked at the nutritional values of crickets, grasshoppers, buffalo worms and mealworms. Iron is particularly important because a deficiency can lead to problems including reduced immunity and poor pregnancy outcomes. Crickets and beef contained the highest levels of iron, calcium and magnesium. Crickets, however, had the greatest available amount of iron – trumping beef.
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1kg Beef produced
10kg
Japan’s 5.8kg supercentenarian Kane Tanaka is the Edible insects produced oldest person in the world at 117
of animal feed
72%
16%
12%
52%
48%
Protein
Fat
Carbs
Protein
Fat
Hayden Smith, co-founder of The Cricket Hop Co., thinks that consumers are slowly becoming more used to the idea of eating insects and insect-based foods. “They know insects are the future of food and that the way we’re currently farming is unsustainable and damaging to the environment. If I can get my mum and dad to eat them, then the world is definitely changing!” The Cricket Hop Co. specialises in cricket flour, a high-protein product that can be used in many foodstuffs, from smoothies to baked goods, salads and curries. “Our main goal is to make crickets accessible, so I came up with easy-to-make, cricket-friendly recipes for the consumer to easily incorporate our cricket flour,” explains Smith. Based in Guernsey, the company produces in Asia and sells its products worldwide. “I think that in 5–10 years, we’ll see crickets evolve like sushi did – soon, they will just be accepted as ‘the norm’,” says Smith. A study by Sainsbury’s and Eat Grub backs this up. One in five shoppers said they could see the advantages of eating edible insects, and one in four said they would be willing to try insects in the future. Francesco Majno, co-founder of Small Giants, a company that produces savoury insectbased snacks, also believes we will see a huge uptick in people choosing to eat insects in the future. “The demand for alternative protein sources is driving the growth of the edible insect market,” he says. His company is already seeing significant interest from investors, with £130,000 raised in its previous round of investment funding, and £250,000 being raised this time at a valuation of £1.5 million (pre-money).
Fighting the fat Crickets contain just 16 grams of fat per 100 grams compared to 48 grams for 100 grams of beef. Some researchers have suggested that eating insects could be an effective way to combat obesity. Small Giants insect-based savoury snack
Insect-based snacks by Small Giants
Bitten by the bug “Governments across the world have been very supportive to date, but they need to further embrace this industry as one of their core climate management initiatives – like solar and wind for energy,” says Drew. In the EU, things look positive on the regulation side. The IPIFF, which represents the interests of the insect production sector in the EU, has helped to make significant headway in terms of the use of insects for both human and animal consumption. A 2020 study by Meticulous Research estimated that the edible insect market could be worth US$7.96 billion by 2030 and could help to feed both animals and humans. With companies receiving investment and producing new products, and regulatory bodies continuing to take an interest in the sector, it seems insect farming will only go from strength to strength. n
Wealthsmiths Summer 2021
Community
Join the army of volunteers The Royal Voluntary Service (RVS) says Covid-19 has seen vast numbers step up to the plate to help the NHS and their communities, writes Ray Philpott
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uring its long and proud history, the RVS has consistently proved to be one of the UK’s leading volunteering organisations, and never more so than during the Covid-19 pandemic. Founded in 1938 as the Women’s Voluntary Service for Air Raid Precautions, it has once again shown its worth at the country’s hour of greatest need. The charity successfully recruited 437,000 NHS Volunteer Responders to play a vital role in keeping health services going, a welcome and much needed addition to its existing 18,000 voluntary workers. RVS volunteers have been playing a vital role during the crisis, stepping into the breach to help people and communities disproportionately affected by Covid-19.
They provide vital support services, such as delivering medicine to the housebound, running telephone companionship services for worried and isolated people, and driving patients to and from busy hospitals. Rising to the challenge Rebecca Kennelly, RVS Director of Volunteering, says: “Our core aim is simple: to find as many volunteers as we can to support vulnerable and struggling individuals and groups and make it a rewarding experience for everyone involved.” A big challenge during the pandemic has been ensuring our volunteers and clients are able to interact safely within the government guidelines. Understandably volunteer roles have had to adapt and
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By February the RVS had… made more than 286,357 welfare and companionship telephone calls
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made more than 15,225 essential grocery and prescription drops
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distributed over 20,234 free food packs to vulnerable people and NHS teams
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made over 4,406 safe, socially-distanced home and garden visits
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undertaken 18,010 home library doorstep deliveries to keep Britain reading
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arried out over 7,100 patient and community c transport journeys
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istributed over 34,154 activity packs to help d people keep themselves and their children entertained and active at home.
change, and new blood has been needed to step into the shoes of those unable to continue for personal, safety or health reasons. “While we haven’t been able to offer the public our usual face-to-face support, we’ve still provided socially-distanced services like shop and drop, and home library doorstep deliveries and collections.” Kennelly adds: “For practical purposes a lot of our support has become phone-based, such as the hugely popular Companionship service. Some has moved online like our Virtual Village Hall, which helps 32,000 home-based followers stay connected and healthy
The Queen attending a reception given by the Women’s Royal Voluntary Service in London
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The Covid pandemic had a disproportionate impact on some communities
through weekly live and pre-recorded yoga, keep fit and chair-based exercise classes.” Supporting the NHS The charity’s role in supporting the NHS has been critical. Kennelly says: “We’ve strongly supported the NHS since it was created, but the pandemic dramatically increased demand on our services, such as delivering essential testing and monitoring equipment to people’s homes and collecting and dropping off essential prescriptions and food for them.” The new army of NHS Volunteer Responders has acted as a UK-wide safety net for the NHS and really made a difference. They field calls for help and support through the scheme’s Community Response service, contact concerned and isolated people via Check-in and Chat and provide vital transport services for NHS patients and staff, while around 74,000 are vaccination stewards. Coming from all age groups and diverse communities and locations around the UK, they have completed around 1.6 million volunteering tasks during the pandemic. “The response has been amazing, and we think that’s partly because it’s opened up a new, more flexible way of volunteering,” Kennelly explains. “NHS Volunteer Responders can work the hours they want, when they want because we recognise people have a lot of competing pressures on their lives. “This approach has changed the volunteering landscape and going forward, we’ll be offering more flexible and micro-volunteering opportunities to make it easier for people to fit voluntary work into their lives and encourage more to step forward.”
Wealthsmiths Summer 2021
Photos: Alamy, iStockphoto
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Community
The Duchess of Cornwall visiting the RVS Cornhill Centre
Two volunteers share their uplifting experiences Here to chat
Rebecca Kennelly, RVS Director of Volunteering
“Volunteers often describe their work as a rewarding, life-changing and uplifting experience”
For Maz Chefakar, being an NHS Volunteer Responder working on Check-in and Chat is both a highly motivational part of her life and helped her get through the pandemic. The Birminghambased, married mother of two joined the RVS in response to a national TV appeal at the very start of the pandemic in March 2020. As an experienced, semi-retired call centre operator, she’s ideally suited for the Checkin and Chat service. Maz holds friendly and reassuring phone conversations with people who are distressed, anxious or lonely due to the pandemic, referring them to the NHS for appropriate help if needed. She says: “I’d never volunteered before but I’m experienced in telephone work and a bubbly person who loves speaking with people. It makes me very happy to know that just talking with an anxious person who needs to hear a reassuring voice really makes a huge difference to their lives. “You have to be prepared to give up your time, but having the flexibility to work the hours that are best for me means I can easily integrate it into my life. To be honest, I’d say it helped to get me through Covid, because being positive with so many has helped me to be positive too and helped to put my own situation in perspective.”
Book dedication Become a volunteer Kennelly says that volunteers often describe their work as a rewarding, life-changing and uplifting experience – with some saying its effect is similar to the release of endorphins during exercise. “The health benefits are well documented and show, for example, that volunteers have enhanced physical, mental and even emotional health and are more likely to have lower blood pressure, be more mentally agile and even possibly live longer,” she explains. “As we hopefully move into the post-Covid recovery, we’ll continue to need suitable volunteers from all age groups and locations, albeit in different roles, to meet changing needs. So, no matter who you are, or what your experience, skills or personal strengths are, there’s always voluntary work that will be right for you.” If you would like to volunteer with the RVS or make a donation to support its valuable work, please visit royalvoluntaryservice.org.uk or call 0330 555 0310. n
Delivering and collecting books for isolated and vulnerable people in small towns in North Tyneside has been a longstanding passion for retired GP Gillian Parkinson. She never looked back after joining the Home Library Service in 2006 and was promoted to Volunteer Co-ordinator for a team of 10 volunteers in 2016. Gillian says: “As a GP my job was about interacting with people and I wanted to use that skill to continue providing a valuable service to local communities.” Prior to the pandemic, an intrinsic part of the Home Library Service involved lots of interaction and chatting with the 10 or so people on each of her monthly rounds. “Come rain or shine, we ensure customers get their books but it’s the relationship-building that makes it really fulfilling for everyone,” she says. “You get to know all about them and their families and, if you’re happy to share, they’ll take an interest in your life, too.
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“Like the expert carriage driver that he was, he helped to steer the Royal Family, and the monarchy, so that it remains an institution indisputably vital to the balance and happiness of our national life” Boris Johnson, Prime Minister
The loss of the Duke of Edinburgh marks a changing world The death of the Duke of Edinburgh at the age of 99 is another reminder of how rapidly our world is changing. The Duke had been at the Queen’s side for 73 years and was the longest serving consort in British history. Born on the island of Corfu, Prince
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Philip, who once described himself as “a discredited Balkan Prince of no particular merit or distinction”, played a key role in the development of the modern monarchy in Britain. He relinquished a promising naval career to live a life of relentless royal duty.
Wealthsmiths Summer 2021
Photo: Getty
Big picture
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All about tax wrappers Tax wrappers are accounts that shield your money from unnecessary tax. But what are the different types of tax wrapper, how do they work and which ones should you be looking to take advantage of in the 2021/2022 tax year?
Pensions With more than two-thirds of the UK population saving into one, a pension is one of the most accessible and cost-effective tax wrappers around. All pensions are designed to pay you an income in retirement and most are portable, able to move with you to different companies and providers. The government offers several incentives to ensure you use a pension to prepare for life after work, including tax relief on your pension contributions. There are three main types of pension.
Defined benefit
Employer pension
Personal pension
Very few employers still offer these final salary pensions, which are based on your earnings and years of service.
You and your employer pay contributions into a pension scheme, usually arranged via your employer.
Personal pensions, such as Self-Invested Personal Pensions (SIPPs), allow you to choose your investments from a range of assets.
20%
TAX RELIEF
40%
TAX RELIEF
45%
TAX RELIEF
Pensions offer tax relief at 20%, 40% and 45% depending on your tax band. No capital gains tax (CGT) or income tax is charged on gains within your pension. Savings can usually be passed on with no inheritance tax (IHT) or income tax if you die before 75.
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Wealthsmiths Summer 2021
Investing
Individual Savings Accounts (ISAs) ISAs offer tax-free savings and investments so that you can get more for your money.
ISA
JISA
LISA PLUS
£20,000
£9,000
£4,000 25%
Amount that can be paid in per year
Amount that can be paid in per year
Amount that can be paid in per year
ISAs hold cash, stocks and shares or both and don’t attract CGT. You can pay in up to £20,000 a year. Dividends on your ISA investments don’t count towards your £2,000 dividend allowance.
This amount can be invested in a Junior ISA (JISA) for anyone under the age of 18. They can access it after their 18th birthday. It’s a good way to gift money and shelter it from CGT and income tax.
If you’re saving up for a new home you can pay up to £4,000 a year into a Lifetime ISA (LISA) and receive a 25% bonus. This also counts towards your £20,000 annual ISA limit.
BONUS
Bonds Offshore and onshore bonds can be used as tax wrappers by people who have maximised their pension and ISA allowances, or those who might not be able to maximise these due to salary or contribution restrictions.
General Investment Account 20%
0%
TAX
TAX
Onshore
Offshore
With onshore bonds tax is generally paid at 20%. You can withdraw 5% of premiums each year tax deferred and there is no CGT on gains. They are usually set up as life assurance policies and you may pay tax when certain events occur, like when the last ‘assured life’ dies.
Offshore bonds are not liable for UK tax on investment growth but tax may be due if you repatriate funds back to the UK. 5% of premiums can be withdrawn every year for 20 years without immediate tax liability and the bonds can help reduce the IHT payable on your estate.
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A General Investment Account (GIA) is not a tax wrapper but can be used to pay any fees and charges for your investments, leaving the maximum amount invested in your pension and ISA. Investment in a GIA is subject to income tax and CGT.
Find out more To check that you are making the most of your annual tax allowances, speak to your financial planner or portfolio manager.
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Pensions
What if you had to retire early? It’s important to be financially prepared because early retirement is sometimes forced upon us by circumstances out of our control, writes Jill Insley
Prepare for the worst Preparing for early retirement throughout your career not only helps to protect you from unforeseen problems, it also gives you the luxury of being able to decide when and how you want to withdraw from working. Angus says: “If you make sure you are prepared financially to retire in your fifties, then any years that you work beyond that are a real bonus. You can choose whether you want to carry on working full time, gradually reduce the amount you do or stop work altogether. If something happens to force your hand, you will be ready for it financially. As with many things in life, you should always hope for the best but prepare for the worst.” The sooner you start the better. “When you are in your twenties and thirties
retirement may seem to be something that is too far off to worry about, especially if you are saving for a deposit on a first home, paying off student debt or paying for childcare and school fees. But the preparations you need to make, such as budgeting and setting up a cash emergency fund, should be financial objectives throughout your life.” Steps to take The first steps should include building up an emergency cash fund, equivalent to at least three months of net income. Don’t be tempted to lock the money away in an account that you can’t access immediately just because it pays a better rate of interest: if you have an emergency, you will need that money instantly. The same goes for investments, says Angus, who suggests using a mixture of pensions and more accessible schemes such as ISAs. “Pensions offer fantastic tax advantages,” he says. “But you cannot withdraw your money until you reach the age of 55, so it’s also a good idea to invest in schemes that allow you to withdraw cash at any time.” Make an inventory of your income and outgoings, consider what you can cut back on and try to live below your means. Then project forward to work out how much income you might need when you retire. Hopefully you will have paid off your mortgage and any other debts and you won’t have to pay for commuting to work. But on top of basic household bills you might want to travel, buy a new car, join sports clubs and enjoy an active social life. Later on, you might need to pay for social care. According to the NHS, 841,850 people in the UK needed long-term support in 2018/19. The majority of this was paid for by the NHS, but private individuals still spent almost £34.5 billion in 2018. Working out how much you might need to spend at different stages of your retirement will help you gauge how much you need to invest to achieve your goals, whatever happens. It may seem rather early to be doing this, and research by Sanlam indicates that only 12% of people under the age of 55 have set a target for their pension savings.
“As with many things in life, you should always hope for the best but prepare for the worst”
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Wealthsmiths Summer 2021
Illustration: Mark Oliver @ Agency Rush
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etiring early while you are young and fit enough to make the most of your freedom is a dream for many people. But for some, the last year has been a nightmare because thousands of people in the UK have been pushed into unplanned early retirement, regardless of whether their finances could support the move. Research by the insurer LV indicates that the pandemic has resulted in 154,000 people in the UK aged 55 to 64 taking early retirement because of redundancy, reduced income or a desire to reduce the risk of exposure to Covid-19. More than 200,000 people say job loss or reduced income has led them to access pension savings to supplement their income, and the numbers are likely to increase when the furlough scheme ends in September. Being forced to give up work and draw on retirement savings early can have serious implications for your financial wellbeing. “It’s likely that you will have to reduce your living standards, potentially leaving you only able to pay for the essentials but unable to afford the finer and more fun things in life,” says Michael Angus, Wealth Planning Director at Sanlam. “You might even be forced to downsize your home to release equity, which could affect your ability to help your children out later in life.”
Key facts about early retirement The average UK adult would like to retire with an annual income of £34,0001 l You would need £903,000 in pension savings to achieve this annual income assuming you take 25% of your pension as tax free cash and use the remainder to buy an annuity at age 651 l
The average UK target pension pot is £335,000, which would produce just £13,000 a year1 l High net worth individuals would like to retire on annual income of £59,000, but their average target pension pot of £677,000 will produce an estimated £24,800 a year1 l
Planning ahead People in their forties have a decade to make sure their finances are in the best condition to cope with early retirement. They should make sure they are on track to pay off any outstanding debt, especially their mortgage, top up savings and investments and review pension arrangements. “Check that there are no gaps in your National Insurance record and how much state pension you are likely to be paid. If you belong to a company scheme, make sure you are getting the maximum contributions possible from your employer,” says Angus. “By the time you are in your forties you may have worked for several employers and have contributed to multiple pension schemes, so with the help of your financial adviser, work out whether you could benefit from consolidating your pension schemes.” Moving money from several small pensions pots to just one can reduce charges and make management easier, but it needs careful consideration. Some pension schemes may offer added benefits such as generous guaranteed annuity rates or extra tax-free cash, while others may incur penalties if the money is transferred before retirement age.
l
Among 55 to 74-year-olds who retired earlier than expected, 40% blamed health or physical problems, 18% had been made redundant or lost a job and could not find new employment, while 8% said they stopped work to provide care for a family member.2
Once you reach your fifties and sixties you may feel that – thanks to all this preparation and planning – your financial position is strong enough for you to help younger members of your family. Giving money to your family and friends while you are alive is a good way to reduce the value of your estate for inheritance tax purposes. “As with your own savings, the sooner you help your children and grandchildren start saving, the more their savings and investments will benefit from compounding – where earnings are reinvested to grow alongside the original capital,” says Angus. “What better way to set the next generation on the path to early retirement?” n
Sources 1 Sanlam, November 2019 (https://www.sanlam.co.uk/ knowledge-hub/insights/whats-your-number/ saving-for-an-average-retirement-income) 2 Just Group (https://www.justgroupplc.co.uk/~/ media/Files/J/JRMS-IR/news-doc/2020/earlyretirees-three-times-more-likely-to-be-forced-togive-up-work-than-choose-to.pdf)
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Last word
Main image: The Tyne Bridge. Top right: Mo Mowlam and Alan Shearer. Bottom right: The Theatre Royal.
City on the Tyne In the latest in our series on cities where we have an office, we visit the city of Newcastle
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crossing the Tyne in the space of half a mile but it is the iconic Tyne Bridge, linking Newcastle and Gateshead, that is one of the city’s most iconic landmarks. Other landmarks include the medieval castle, Grey’s Monument, a monument to the 2nd Earl Grey built in 1838, and the Grade 1 listed Theatre Royal. Home to the stars Newcastle has been called home by many of the best-known personalities in the UK, from pioneering railway engineer George Stephenson to TV presenters Ant and Dec. Stephenson is known as the ‘Father of Railways’ and his Locomotion No 1 was the first steam locomotive to carry passengers on a public rail line, the Stockton and Darlington Railway, in 1825. Singers Sting and Cheryl also hail from the city, as does comedian Rowan Atkinson. Former MP Mo Mowlam worked as a politics lecturer at the University of Newcastle before becoming Secretary of State for Northern Ireland and leading the talks that led to the Good Friday Agreement and an end to the decades-old Troubles in the province. Rock legend Jimi Hendrix was discovered by Geordie
Wealthsmiths Summer 2021
producer Chas Chandler and is said to have busked in Chillingham Road. And civil rights activist Martin Luther King visited the city in 1967 and was awarded an Honorary Doctorate by the university. Football crazy Newcastle is particularly proud of its football club, which attracts fanatical support. Newcastle United became a member of the Football League in 1886 and has won four top division titles, beginning in 1905, and six FA Cups. It broke the world transfer record in 1996 when it paid £15 million for striker Alan Shearer. There are few people who haven’t felt the influence of Newcastle in their daily lives. Whether you commute to work on a train, have travelled by car in the rain (a Newcastle United fan invented the windscreen wiper after getting caught in a downpour on his way home from a cup final in 1908) or eaten a Greggs sandwich (the baker is based in the city), Newcastle is woven into the fabric of our lives, even if we live many miles from the banks of the River Tyne. Sanlam’s office in the city can be found at Gosforth Business Park in Park Road. n
Photos: Alamy
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nce a powerhouse of the industrial revolution, Newcastle continues to have a profound impact on the world. It is a modern city combining a spirit of innovation with a vibrant popular culture. The ancient city grew from Pons Aelius, the original Roman fort in the area and later took the name of a castle built in 1080 by William the Conqueror’s eldest son. During the 19th century its prosperity relied on shipbuilding and heavy engineering. The River Tyne became one of the world’s largest shipbuilding and repair centres – RMS Carpathia, the ship which rescued the Titanic’s survivors, was built there. But as the world has changed the city has adapted. A former coal mine was redeveloped and became the home of Newcastle Brown Ale. The site has just been redeveloped again to create the Helix, a new 24-acre technology and science quarter. And the Giants on the Quayside will soon be a new destination for leisure, sport, food and drink, built around a giant observation wheel dubbed the Whey Aye, which will stand five metres taller than the London Eye. Newcastle has seven bridges
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The Sanlam magazine – Summer 2021
Making the world a cleaner place An orderly transition to a low-carbon society has begun
History’s greatest investment bubbles The rapidly rising markets that were too good to be true
It’s about time Paul Newman’s Rolex and the draw of classic watches
Has happiness changed forever? The Future of Happiness Complimentary virtual event Tuesday 6 July, 11am – 12pm Over the past year, many of us have re-evaluated our lives and asked the fundamental question – what does it really mean to be happy? In the last of our Invested in the Future virtual event series, join leading positive psychologist, Miriam Aktar, as she explores the secrets of feeling good, living well and flourishing. To register, visit sanlamfutureseries.co.uk and choose Happiness. Our Invested in the Future series looks at the issues that will shape the post-pandemic world. To catch up on the series, visit Sanlam UK on Spotify.
The extinction of cash? Economist Stephen D. King discusses the future of money and whether cash could follow the dodo into the history books
Sanlam Wealth Planning and Sanlam Private Investments (UK) Ltd are authorised and regulated by the Financial Conduct Authority.
Welcome Welcome to this Summer 2021 issue of Wealthsmiths magazine. As I write this, with glorious sunshine outside my window, I am conscious of a sense of renewed optimism. Many of us have already been able to meet up with loved ones in a pub, at a pavement café or in our own gardens. Shops and gyms are open and lockdown hair is a thing of the past. And by the time you read this note, restrictions will have eased even further. Restaurants will be open, larger gatherings will be permitted, and many workplaces will be opening their doors once more. You’ll have been able to hug your loved ones. Perhaps you will even have booked a holiday. This past year has been tough for most and tragic for many. But now, as we see the end – or at least the end of the beginning – in sight, there is much to be thankful for and much cause for positivity. The innovation and collaboration of the scientific community and our NHS has seen the Covid vaccine programme roll out at unprecedented speed. Britain’s economy is forecast to see a surge greater than any since 1948. Businesses are getting to grips with the challenging reality of Brexit. At last, we are able to look towards the future with confidence. It’s fitting, therefore, that many of the articles on these pages examine what our world could look like in the years and decades to come. Our cover story on page 7 considers the possibility of a cashless economy; on page 11 we discuss the role of the financial markets in the creation of a low-carbon future; and on page 22 we ask whether society is ready to embrace the consumption of insects for food. I suspect that for most of us the answer to that question will be: not until we’ve indulged in a few more of those restaurant meals we have been missing so much! And so, with that, I wish you a pleasant, healthy and sociable summer, and hope you enjoy reading this issue of Wealthsmiths.
Sanlam has offices across the UK. To find your nearest Sanlam office, simply visit www.sanlam.co.uk/contact-us You can also call us on 0333 015 5600 or email getintouch@sanlam.co.uk We welcome your feedback on Wealthsmiths magazine. If you have any comments or ideas, or if you would like to unsubscribe, please email: wealthsmiths@sanlam.co.uk
John White CEO, Wealth Management
Wealthsmiths is produced for Sanlam by Wardour, Kean House, 6 Kean Street, London WC2B 4AS, United Kingdom +44 (0)20 7010 0999, wardour.co.uk For Sanlam Head of Marketing Christopher Dean Marketing Executive Kate Lovelace Marketing Manager – Private Clients Jolyon Dean Marketing Operations Manager Bhavika Gor For Wardour Editor Andrew Strange Art Director Rob Patterson Production Manager Jack Morgan Senior Account Director David Poulton Senior Account Manager Jennifer Flower Creative Director Ben Barrett CEO Claire Oldfield Executive Chairman Martin MacConnol
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Contributors Paul Bryant – Paul has worked for McKinsey & Company and writes extensively about financial markets and investing for organisations such as the Chartered Institute for Securities & Investment. Jess Unwin – Jess is an accomplished journalist who has written for a range of business and finance titles during his 30-year career. Ray Philpott – Ray is an experienced journalist who has written about topics including financial services for more than 35 years. Jill Insley – Jill is a financial writer who has had work published in The Observer, The Guardian, The Sunday Times and the Daily Telegraph.
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