ESG investing means using environmental, social and governance factors to assess investment opportunities. It may also be referred to as impact or socially responsible investing (SRI).

I believe that the Covid-19 pandemic has changed the way we think and behave for some time to come, and hopefully forever. The behavioural effects of this global health and economic crisis, in culmination with the imminent rise of the Millennials and Gen Zs, will inevitably have consequential changes to the way we consume and invest.

I examine below three key factors that will likely accelerate the momentum behind the ESG investment movement:

• Consumerism – we are not able to take for granted that those companies we like to consume from will survive this crisis. Many of us are being much more mindful about the way that we spend our money. It is true that by the time that this is all over, most of us will have spent far too much on online shopping sites, like Amazon, but as the economy reopens many of us will seek to spend our money where it matters. Returning to our independent stores will be vital if we wish to retain our high street outlets. Many of us with money to spend will seek out the family run restaurants, pubs, cafes and garden centres which we treasure and rely so heavily upon us. Hopefully the cost of the furlough and other income support teams will have been worth it when we can all do our bit to rebuild our economy.

• Investment – we have seen that in general the Ethical, Social Governance (ESG) and Impact funds have held their own against the volatility of the stock market so much better than the mainstream funds – largely due to the absence of the exposure to the large oil companies. It will hopefully not take investors long to realise that ESG investing does not necessarily mean a compromise to return. The post-Covid 19 world will care more about the ethicality of a company, and will perhaps support better those companies who behaved in a socially responsible manner. I hold a light up to Timpsons, for example, who have paid their employees 100% of their wages (from their own coffers) whilst enduring the lockdown, and compare it to companies which simply let go their staff when the crisis hit. Ethical companies need to be well capitalised companies because they need to make decisions based on what is right for their employees, clients and stakeholders, and not just what is right for their balance sheet. Better capitalised companies, with principled and loyal employees and clients, will be less risky companies.

• Millennials & Gen Zs (born since 1983) – we are entering a new era where the younger generation are coming to the fore. They are finding their voice. The economic dominance of the Baby Boomers will start to dwindle as they enter the last decades of their lives and as they get older they start to spend less, or their spending habits change – it’s now about more healthcare, less holidays and entertainment. They start to think about estate planning and passing down wealth to children and grandchildren. The Millennials care, much more than their grandparents’ generation , about such things as climate change, environment, sustainability and ethical corporate behaviour. A recent report by Deloittes describes the Millennials as a “generation disrupted” by societal discord and technological transformation. “Millennials and Gen Zs, in general, will patronise and support companies that align with their values; many say they will not hesitate to lessen or end relationships when they disagree with companies’ business practices, values, or political leanings.” They are a societal force to be reckoned with, and effectively use social media and technology to spread their activism. When this generation inherit the wealth of their parents and grandparents low betide any company that does not have corporate governance high on its agenda.

• Product Innovation and Regulation – Fund management companies have been innovating in this area for some time but care needs to be taken in distinguishing between the investment houses who are paying lip service (“greenwashing”) to those that are committed to the sector and have long track record. Whilst the funds have been available for some time financial intermediaries have not been prolific in spreading the news. With an EU push, the regulation will require all Financial Advisers to ask clients about their requirements for ESG investing in their fact finding process. The advisers are educating themselves and preparing their service proposition for the inevitable shift.  As retail investors become more aware and educated in this area, the demand for ESG investment increases this will in turn trigger a response by corporates to behave more responsibly and sustainably, which in turn will create a greater demand for the shares of such companies and aid their growth – it is a self-perpetuating cycle.

There are several more reasons why now, more than ever, the investment horizon will start to shift, but in the interests of brevity I have focused only on these four areas.

If investors are empowered by the thought of their money having positive impact in this world, that needs it now more than ever, we can hopeful and positive about finding our way out of this current crisis, and all the other blips in the performance charts that will inevitably occur from time to time.

In summary: Sustainable = Resilient

The opinions expressed here are my own, and do not in anyway, constitute personal financial or investment advice. It is recommended that you discuss your financial planning needs with a trusted Independent Financial Planner or Adviser, who will seek to provide a bespoke financial plan suitable for your personal circumstances. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

ESG Investing

What is ESG and why is it gaining traction?

Once again defying the polls, Donald Trump unquestionably did better than predicted, but it looks like Biden may have controversially pipped him at the post.

It seems that this is the second consecutive Presidential election that the winner has not obtained the most votes and the third time this has happened in the last six elections. (Before then, it hadn’t happened since 1888).

So, what does this all mean for us in the UK and for investors in general?

Well, concerning the UK, we clearly remain in limbo until we understand exactly who we will be talking to, going forward. Boris Johnson has intimated many times that there is a US/UK trade deal on the table at present. Whether this remains so if Biden wins is another matter, but at present, no more can be done with that until the Presidential result is confirmed. Therefore, will this delay affect our negotiating position with the European Union as we head to deadline day at the end of the year? This depends on how long the delay is, of course, but all we can do is wait and see.

Biden is not a great friend of the UK, due to his Irish heritage and the potential Brexit implications for Ireland. Biden has already implied that there would be no trade deal if there is a hard Irish border. He also favours European unity. Does this naturally point to a Donald Trump win being better for the UK? Frankly, I don’t know.

However, that is the important point. Stock markets will simply do what stock markets do, irrespective of US Presidents. The likes of Mr Trump may generate short term movement with comments about this or that, but ultimately, history has shown two things.

Firstly, the performance of global stock markets is affected much more by matters outside the White House than inside. Whilst the general feeling is that a Republican President will offer a better return, the performance of the US stock market was better under Barack Obama’s first term than it has been under Donald Trump’s. However, that is surely much more to do with circumstances and timelines than anything else.

Secondly, and more importantly, irrespective of who lives in the White House, my view is that the most suitable circumstances for any form of long-term investment is a multi asset, risk rated portfolio. Our mantra continues to be ‘time in the market’, NOT ‘timing the market’.

Naturally, as a firm, we will continue to have conversations with our Investment partners concerning the implications of both the result and any delay in this result, but we remain committed to long term multi asset risk rated portfolios.

As a nation, we are having to manage the implications of a worldwide pandemic at present, so surely the small matter of another bizarre US Presidential election over the pond is the least of our problems.

In the meantime, if you have any questions concerning this or any other matter, please do not hesitate to contact us.

The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

NS&I were due to reduce their rates in May but in April they put off the reduction as a result of the pandemic.  This caused NS&I to become the market leading rate provider in a few instances and as a result, they are well ahead of their target on raising capital.  NS&I say they must “strike a balance between the interests of savers, taxpayers and the broader financial services sector”.  However, it appears they have swung the pendulum a long way so that many of their products will now become very uncompetitive.

NS&I Income Bonds have been hardest hit.  The rate reduces from 1.15% to a mere 0.01%. However, other accounts have also been hit hard, with the Direct Saver Account reducing from 1% to 0.15% and the Standard Investment Account from 0.8% to 0.01%, and the Junior Isa interest rate has been more than halved from 3.25% to 1.5%.%. Premium Bonds average prize draw has not been as hard hit, reducing from 1.4% to 1%, but this does mean the chances of a £1 Bond number winning a prize has reduced from a one in 24,500 chance to a 1 in 34,500 one.

The rate offered on Fixed Term products will also reduce by a similar margin for those maturing after 24th November, making these uncompetitive as well.  If your product matures before then, however, you may consider locking in to the current rate for a further period – while you still can.

This is unusual for NS&I.  Up until now they have always avoided attracting investors with competitive rates only to drop the rate when they have reached their investment targets, such as normal High Street Banks traditionally have done. However, it now appears that NS&I have gone down the same road. 

As mentioned above, their competitive interest rates do not reduce immediately. NS&I is still a safe haven for monies, particularly those investors that have far more than the £85,000 afforded by the Financial Services Compensation Scheme. NS&I is backed by Government (HM Treasury) and is fully protected.  However, better rates can be found elsewhere, and it will now pay investors to source alternative accounts and move their holdings, albeit the advice is always to not exceed £85,000 per person per registered financial institution. 

This may also be a good time to look more closely at your overall cash holding. In difficult times, the natural instinct is to run to a safe haven yet this large rate reductions announced by NS&I highlights how difficult a decision it is to remain in a cash-type asset for the long term.

As a broad ball park guide, your cash holding should consist of three constituents:

1)      Day to day money in a current account

2)      Six to twelve months income held in an instant access account, sometimes known as ‘rainy day’ or emergency money.

3)      Cash should be held for a purpose, for example, purchase of a new home, payment of school fees, holiday or car purchase or perhaps some building work, where these are to occur within a short to medium term frame.

After that, any excess cash that is held in accounts paying a rate lower than inflation is guaranteed to be losing money in real terms and you really should consider a more suitable investment strategy for this investment that still fits with your risk profile.  

During times like these, the biggest threat that savers face is lethargy. Yet, failing to review your cash holdings and/or doing nothing will be very expensive.  A word of caution, however, because at times like this scammers are lurking to take advantage of this low interest environment, so please remember that if a proposed interest rate  or investment return sounds too good to be true – it probably is. Extra caution please.

Equity investments do not afford the same capital security as deposit accounts. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

If you wish to discuss this matter in more detail, please do not hesitate to contact me, Emily Pool on 07786 854048.

National Savers - Beware the Cliff Edge

NS&I are dramatically cutting their interest rates. This article explores how the rates have been impacted and what you can do about it. It also looks at why you should hold cash and for what reasons. Click here for the PDF document.

Don’t Forget Your Digital Legacy

When we think about what we leave behind when we die, the majority of us take an approach that gives little regard to the vast amount of digital assets we hold. We write wills, take out life insurance policies, plan our funerals and arrange to leave some money aside for those we care about. All of these steps make things easier for your family at an emotionally difficult time.

However, most of us neglect our digital legacy. Few of us have measures in place to take care of our digital assets, something that has the potential to cause great problems for our friends, family and colleagues.

It used to be that people’s estates could be settled in a standardised way: a search through the deceased’s filing cabinet would yield most of the information necessary to put their financial affairs in order. Their letters would still arrive through the door, allowing their family to take care of their communications after death and, where appropriate, advise their contacts of their passing.

Nowadays, much of our financial life can take place online – with traditional paper bank statements fading into oblivion. This can make it difficult for an executor to know what accounts you hold and where to find them. What’s more, your email and social media accounts could become inaccessible and any information on them will be lost. Inaccessible social media accounts mean that the deceased’s family are unable to close the account or inform friends of their relative’s passing. If we don’t plan for these matters, we can cause our family a logistical nightmare which, on top of the emotional stress of bereavement, may be overwhelming.

Therefore, there are important steps you can take to help your family wind up your digital affairs smoothly. Keep an inventory with a close friend or relative that includes the location of any digital devices you own. This should also contain a list of all your social, personal, financial and business account details. This should include usernames, but do avoid writing down passwords and security question answers. Some form of password storage system may be more sensible.

Finally, some of your online accounts have features in place for the account holder’s death. Google, for instance, gives you the option to set up an “Inactive Account Manager”, a trusted contact with access to certain aspects of the account, such as Gmail or Google Drive. Features such as these give a trusted person a level of control over your digital afterlife and can lessen your loved ones’ distress at a crucial time.

Also, Facebook offers the ability for a for your profile to become memorialised by a nominated contact. You can nominate someone in the General Account Settings. Your nominee can request memorialisation and will have to provide Facebook with a copy of your death certificate. This means the profile will essentially be frozen in time. Your photos and posts you've shared will stay visible, and they can deal with friendship requests. Having a place where your grieving loved ones can “virtually meet” can be a great comfort to them after you have gone.

Should you wish to find out more concerning this matter, further information is available here.

https://www.funeralguide.co.uk/help-resources/managing-your-estate/digital-legacies

Should you wish to discuss an update to your will or other areas of estate planning, please do not hesitate to contact me, Emily Pool on 07786 854048.

The Rise of ESG

What does ESG stand for? Why is it gaining traction? And who are the Millennials? Click here for the article in PDF format

Sadly, as we live and work through the Pandemic, cyber criminals remain active and we continue to hear of some distressing cases. Financial Scams look and sound legitimate, which is why it’s easy to be tricked. We urge everyone to be on their guard and remain vigilant. If you are concerned about anything you receive by email or phone relating to your finances that you don’t recognise or aren’t expecting, please do not hesitate to contact us for advice. It may also be a good idea to remind those in your family network who may be more vulnerable to such an attack. 

Financial Scams take many forms and could be about insurance policies, pensions transfers, or high-return investment opportunities, including investments in crypto assets.  Scammers are sophisticated, opportunistic and will try many things. More recently, we have become aware of some people receiving phone messages from individuals claiming to represent Amazon, who have concerns that somebody is trying to scam their Amazon account. They normally then encourage you to download some software to your phone or computer which will then provide them with the information they require to scam you. Interestingly, Amazon themselves actually have a section on their website about such a situation, highlighting how seriously they are taking this. 

The Financial Conduct Authority (FCA) have a website called ScamSmart https://www.fca.org.uk/scamsmart

which has been set up to help people who have any concerns regarding their finances, or concerns about a firm that may have approached them about a perceived opportunity. 

There is now a link on the website that specifically looks at scams linked to the virus. These include the following:

• Exploiting short-term financial concerns, scammers may ask you to hand over an upfront fee – usually between £25 and £450 – when applying for a loan or credit that you never get. This is known as loan fee fraud or advance fee fraud.
• ‘Good cause’ scams. This is where investment is sought for good causes such as the production of sanitiser, manufacture of personal protection equipment (PPE) or new drugs to treat coronavirus
• Using the uncertainty around stock markets, scammers may advise you to invest or transfer existing investments into high return and high risk investments.
• Clone firms - firms must be authorised by the FSA to sell, promote, or advise on the sale of insurance products. Some scammers will claim to represent authorised firms to appear genuine. In particular, be aware of life insurance firms that may be cloned.
• Scammers may contact you claiming to be from a Claims Management Company (CMC), insurance company or your credit card provider. They may say they can help you recuperate losses by submitting a claim, for the cost of a holiday or event such as a wedding cancelled due to coronavirus. They will ask you to send them some money or your bank details.  
• Cold calls, emails, texts or WhatsApp messages stating that your bank is in trouble due to the coronavirus crisis, and pushing you to transfer your money to a new bank with alternative banking details.

With so much happening at present, it is important to remain vigilant and our advice remains the same.

1)      If you are unsure of anything about your finances, speak to your adviser

2)      Don’t do anything in haste. If in doubt, put the phone down or delete the email.

3)      Never provide any personal information such as a PIN or password.

4)      Ensure you use a strong password system.

Finally, help spread the message about scams. Feel free to pass on this advice about scams to others. Everyone is vulnerable and cyber criminals sadly are, and will remain, active. By being aware of the signs to look out for, you can not only reduce your risk of becoming a victim but can also support those who may be more vulnerable than yourself.

Wham Bam! You've been scammed

Learn about how scammers exploit your vulnerabilities and find out how to stay vigilant. Click here for the article in PDF format.

Twelve months ago we were suffering dry January, joining gyms, lamenting the increasing numbers on the scales, buying up self-help books and making New Year’s resolutions in the hope that this year might just be different – we might just stick to them!

We are halfway through January 2021, and this year it does feel different, don’t you agree? Last year we didn’t have our fill of luxury holidays, our wardrobes are looking very “last year” (because is there really any point in worrying about fashion?), you can’t remember the last night you had a night out, and restaurants? What are they? This year social media posts asking about new year’s resolutions are met with comments of “Haven’t we been through enough!”, “a dry Jan is NOT conducive to home schooling”, and “I am just wanting to survive”. I can see their point! It seems bizarre to make resolutions out of habit.

This global pandemic has changed us, or at least some of us, and hopefully for the better. In the same way that we are re-prioritising our goals, we are re-thinking what is really important. We are starting to get used to a pared back lifestyle because we just haven’t had the opportunity to consume in quite the same way. How does that make you feel? A friend of mine, whose business has been badly affected by the pandemic, admitted that early on she undertook a budgeting exercise so she could cut out the unnecessary expenditure. Afterwards she said she felt purged, that it had suddenly hit her just how obscene some of her spending was – on frivolities that just don’t really matter, not in this new world.

As a Financial Planner I am asking my clients to take this new perspective and apply it not only to their budgeting and their everyday lives, but also to their longer-term financial plans. It is a great time to evaluate your goals: are they still as important to you? Ask yourself why and if you cannot come up with a good justification then perhaps think again.

Many people jump on the New Year resolution bandwagon, but goals must have a purpose, or they will be incredibly difficult to achieve. A purely financial goal of “I want this investment to grow to £x by y date” may not be impossible (as long as it is realistic) but is pointless if it has no purpose. How about living a life where each penny spent, and each pound saved or invested has a purpose in enriching your life?

A plan to retire at a certain age should also be considered and analysed. Not that there is a right age to retire, but in choosing this age are you just adhering to a social norm or do you have a bigger plan? Do you have visions of travelling or taking up a new hobby? Many people still have the energy for a part time role in their sixties and seventies, be it voluntary or paid. I even have a client who is setting up a new business in her sixties. It’s time to review the bucket list.

Life is not a dress rehearsal and this pandemic is certainly a crude reminder of this fact. Do we not owe it to all those who have not or will not survive this crisis, to make our lives really count? To live with as much purpose as possible, for the moment, and without reproach or regret?

It is not for you to ask your financial planner “What can you do with my money?”, but your planner should be asking you “What do you wish your money to do for you?”.

Research undertaken by Prospect, trade union, reported that the “gender pension gap” was around 40% in 2018-19, whereas the “gender pay gap” (amongst the full time employed) was around 18% - it is now around 15.5%. The “pensions gap” is a very large part of “the wealth gap”, but again just a part of it. The wealth gap includes all assets including property, cash, investment and pensions.

There are many contributory factors to the wealth gap.  Women, generally, take more time out of work to have and look after children, their requirement for part time/flexible work means they are lesser paid and promoted, much reliance is placed on building their husband’s pension provision but should divorce occur, women are more likely to retain the family home rather than take a share of the family pension – despite the latter sometimes being more valuable.

There is further factor though, and probably the more impactful one, but it is also solvable. I believe that the financial education of women will be a real game changer.  Perhaps because the financial services industry is accustomed to marketing to men, and perhaps because traditionally girls are not taught about business and investing, women generally do not participate in investment in the same way as men. Given the choice women like to play it safe.

As a Financial Planner embarking on a new client relationship, amongst all the “getting to know you” questions is the Investment Risk Profile questionnaire – a psychometric test of multiple choice questions that will reveal how much risk you are comfortable taking. More often than not, in any meeting with a couple, the male partner will have the higher risk profile. There are exceptions, though in my experience this is rare. It natural to be scared of things that we know little about and do not understand.

If someone asked you to jump off a cliff, I am willing to bet that you would say “no”. Now, what if I told you to jump off a cliff but first we would give you a medical examination, train you the right way to jump, that we would attach a parachute to you, and there would be a safety net to break your fall? I am sure then, that you would not find my suggestion quite so ridiculous. The change of opinion is due to you having more information about what the challenge entails.

The role of a Financial Planner is not just to tell you where to invest your money. It is our job to explain how the markets work, to tell you about volatility, to explain the different types of assets you can invest in, to make sure you understand why diversification of a portfolio is important and to explain all the risks relating to any recommended investment strategy. A good Financial Planner will tell you all this in language you understand and make you feel like you can ask any question without looking foolish. There is no such thing as a stupid question. The aim is to make you to feel in control and be confident in the decisions you are taking.

As women I believe we unknowingly self-sabotage. We tell ourselves to keep our money safe – even when safe (i.e. cash) means an almost certain devaluation of 2% per year (of whatever the annual inflation rate happens to be). We cling to the stories of loss, rather than focus on the more optimistic outcome of long term growth.

It is our regulatory and moral duty as Financial Planners that we give you the risk warnings – that past performance is no guarantee of future performance and that capital is at risk. Life carries risk, but if we remain risk averse with our savings and pensions we will struggle to close the gender wealth gap. Risk is related to reward.

I have a new female client who came to me and said “I want to invest, I know I should invest, I want to be more “risky” but I need an adviser to come on that journey with me. I need to know that someone has my back.”

As a female Financial Planner, experienced in helping women at all stages of life,  I know you may have many questions and concerns, but rest assured whilst I can make no guarantees, I do have your back.