What helps keep shoppers awake in the evening? 5 questions for money managers

When non-public buyers talk with money managers about their price range, there’s a common concern at the forefront of their minds: geopolitical potential.

Ed Smith, co-chief investment officer at Rathbones, says the company’s annual survey of clients shows that the threat of spoilage, from cyberattacks to military attacks, “keeps them up at night the most.”

It’s a concern shared by perhaps the wealthiest people around the world. According to an international survey by Swiss money supervisor UBS, offices in the country with an average internet usage of $2.6 billion are “most concerned about the risk of a major geopolitical conflict”.

On the other hand, “How do I protect my portfolio from international catastrophe?” That’s a hard question for money managers to answer – except perhaps the most common recommendation: buy good quality fixed sources of income, gold and effort. Major geopolitical threats are extremely difficult to anticipate.

Smith says his company tries to keep customers prepared by outlining different scenarios. “Each year, as a formal process, we assess what we think are the four deepest geopolitical risks and partner with strategists to monitor them.”

The company’s dire ultimatum includes preventing China from attacking Taiwan; Nuclear warning to Eastern Europe; full-scale conflict between Iran and Israel; And a systemic cyber attack.

However, what do wealth managers say when it comes to the risks and opportunities identified by their clients?

FT Cash polled corporations across the United Kingdom about the most frequently asked questions from buyers. Those are the alternative 4 topics that are coming up in conversation most regularly:

Does FTSE have a month?

The debate over the relative cheapness of UK equities and whether non-public investors should buy them still divides opinion.

“There seems to be some renewed interest in it among some of our customers. , , But there are others who are convinced that UK equities are going the way of the dodo,” says Smith.

What is inevitable is that the United Kingdom’s equity market, once the stalwart of international shares, has greatly diminished in terms of both value and choice of listed companies. This shortfall has been exacerbated by the shift from equities to bonds and defined benefit pensions as payments to retirees over the past few decades to meet their liabilities. This arose from an accounting change in 2000 that led many companies, suddenly, to account for long-term government bonds for any losses.

As a result, the weighting of the United Kingdom reserve market in the MSCI International index has fallen from 10 percent to 4 percent over the past 15 years.

Many wealth managers have subsequently taken publicity away from their consumers. In line with AJ Bell, a funding platform, the Common Balanced Capital Treasury held 55 percent of the equity in the United Kingdom in 2009. It has fallen percentage wise to twenty-five. In contrast, US shares have increased from 12 percent to 39 percent.

St James’s Playground, the United Kingdom’s largest wealth supervisor for people using advisers, is constantly moving UK stocks on behalf of clients. The figures show the value cap under control in UK stocks is about 9 per cent, compared with 21 per cent in 2018 and 30 per cent a decade ago. At the same time, its exposure to global stocks has become higher.

Alternative immense wealth managers have taken an indistinguishable approach. “We have been steadily reducing our UK weighting for several years,” says Caspar Rock, leader funding officer at Cazenove Capital. “People are taking a more global view.”

On the other hand, he said that the environment has started turning against UK stocks. “There are some very cheap opportunities. The prices of mergers and acquisitions show that they are undervalued,” he says.

According to a recent survey by Rathbones, 81 percent of wealth managers and monetary planners are expecting giant and mid-cap UK stocks to rise over the next one year due to their sexy valuations and improved domestic financial outlook. Nearly 70 percent of people believe the UK’s fairness assessment would be in sharp contrast to their US counterpart figures.

Edward Soule, chief asset control officer at Evelyn Companions, says the United Kingdom is now “significantly cheaper than US and continental European counterparts,” and notes that there is a “strong valuation argument” for holding on to some UK shares.

“We believe in making the most of the global opportunity,” says Smith. “But investment flows are coming back into the UK – we are seeing a turning point. ,

Do I need a money supervisor if I’m passively investing?

Wealth managers are increasingly turning to cheap index trackers when investing their buyers’ cash.

Even companies that have long supported large-scale active capital fund managers are now expanding their offerings to include passive investing.

For example, St. James’s Playground’s Polaris multi-asset length has high utility for passives. “The wealth management industry as a whole is adopting and incorporating low-cost investing more than ever before and this will inevitably continue as the universe of index funds continues to grow. , , Expanding rapidly,” says Justin Onuekwusi, Leader Funding Officer at St. James Playground.

Hargreaves Lansdowne, the most important DIY funding platform in the United Kingdom, which has supported actively controlled price limits over time, has introduced a length of multi-asset price limit that puts money into passive trackers.

However, some client champions note that buyers should be wary of paying major fees to a wealth supervisor who selects a tracker price range that only reflects the protected market. “If you’re comfortable using tracker-based funds, you can also do it yourself and save additional costs,” says Andrew Hager, founder of consumer finance website online Moneycoms.

One of the key benefits of index trackers is the affordable rates, which can be as low as 0.1 percent in the future, compared to active budgets, which typically cost more than 0.5 percent.

Wealth managers argue they see no risk. “Inaction is not a threat to money managers, they’re absolutely an opportunity,” says James McManus, leader funding officer at Nutmeg, which invests only through index trackers. He says index trackers are the best way to execute a comprehensive funding selection “at the lowest possible cost.”

Despite the fact that live managers are affected by withdrawals as consumers turn to less expensive passives, stockpickers still have a job to play the game. According to a UBS survey, nearly 4 in 10 country offices globally are more reliant on supervisor diversity and active control to diversify their portfolios.

“Amid rapid technological change, changing rate expectations and uneven growth, the increased dispersion of returns provides opportunities for active management,” says Maximilian Kunkel of UBS International Wealth Control. “As a result, interest in active management seems to be growing again.”

Wealth managers should be aware that buyers are excited by actively driven price ranges and discretionary portfolios considering sustainable or ESG stocks.

The “next generation” in particular “is fully committed to environmental change and wants to reflect its long-term conviction in its portfolio with the same sustainability,” says Frédéric Rochat, managing partner of the Lombard Odier team.

How will the elections affect my cash?

The surprise announcement of the French election in June sent shares in the CAC 40 index down more than 6 percent over the past five days, its worst weekly performance in more than two years.

With a generational election coming up in the United Kingdom, concern is centered on what tax changes a Labor government would potentially make if elected. “A lot of clients are concerned that there will be changes to capital gains tax,” says Poppy Fox, funding supervisor at Quilter Cheviot.

Labor – which is broadly predicted to win a majority – has said it has “no plans” to boost CGT.

However, Nick Ritchie, senior director of wealth building planning at RBC Wealth Control, says this is no longer enough to stop the telephone cries of concerned wealthy consumers. “A lot of people have been silent on CGT,” he says. “The lack of detail puts people off.”

Charlene Young, pensions and savings specialist at AJ Bell, says that over the past few years more buyers have bought assets to place them in a tax shelter, known as “Bed and Isa” transactions. “The CGT allowance is ‘use it or lose it’ and many investors have been motivated to use the CGT allowance while it remains more generous.”

The tax-free allowance has fallen from £12,300 to £3,000 over the past two years. “We had a conversation before the election about CGT because allowances have dropped significantly over the last few years,” says Fox at Quilter Cheviot. “CGT is unlikely to be more favourable.”

Will you be in brand new control in five years?

As mergers and acquisitions increase in the United Kingdom market, wealth managers have become ripe targets. This is partly because, as discussed above, London-listed companies are cheaper, but also because of the prospects for long-term expansion in an industry associated with an aging population. For example, Hargreaves Lansdown acquired acquisition business from non-public equity firms in June, valuing the company at £5.4 billion.

There has already been some degree of consolidation recently, including the acquisition of Investec Wealth & Funding UK by Rathbones, and the acquisition of Brewin Dolphin by Canada’s Royal Storage Facility. Over time Tilney’s acquisitions of Smith & Williamson, Bestinvest and Tory led to the formation of Evelyn Companions.

“Consolidation has a long way to go,” says Rock at Cazenove. “Consolidation will happen because of the cost of technology and regulation.” One of the significant primary law changes in recent times has been the Monetary Transactions Authority’s Customer Responsibility legislation. The law, which went into effect last July to backup consumers getting good business, has significantly increased the workload of money managers.

The shrinking of the business is not without its troubles for clients who are turning away from fewer money managers.

“It is becoming clear that scale matters,” says Smith at Rathbones, noting the benefits range from dealing more effectively with regulatory burdens to gaining access to certain parts of the market at the most efficient cost.

“But of course, there are some downsides to scale – a lack of liquidity for certain parts of the market.” As money managers grow in size, it becomes harder to keep clients’ money in a positive value range, as they make up a larger percentage. This will increase the risk that it will be baked in the sun to be sold outside.

Just as they grapple with political threats and macroeconomic events, money managers are bracing for further consolidation. The next few years could prove crucial in securing their month.