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Investors on the Assetz Capital platform are expecting to feel a negative impact from the UK’s economic situation in the next three months, despite the government lauding growth of 0.8% in Q4 2017.

The peer-to-peer lending platform canvassed the views of its investors in the Q1 Assetz Capital Investor Barometer. Asked how the economic situation would impact their lives in the next three months, only 13% said it would have a positive impact. 51% expected no impact, but 36% thought it would have a negative impact.

When asked how the economy had affected them in the three months prior, investors were again gloomy, with only 15% saying they have felt a positive impact. 60% said it had no impact, while 25% reported a negative impact.

Stuart Law, CEO at Assetz Capital said: “In contrast to the positive outlook which is expected to be announced in the Spring Statement, there doesn’t appear to be a great deal of optimism about the economy at the moment, with a growing number of our investors anticipating a negative impact in the next quarter. As Brexit creeps closer and the reality of a no-deal outcome seems more likely, uncertainty about the future of the economy seems to have taken its toll.

“Interest rates remain low while inflation remains relatively high, so many people are effectively losing money each day. It is no surprise, therefore, that alternative financial investments are continuing to gain traction, as people become willing to take on a little more risk – as with any investment – in order to see potentially fairer returns.”

(Source: Assetz Capital Investor Barometer)

Stock market investors should not be spooked by the return of volatility on US and global stock markets, they should instead use it to their advantage.

This is the message from deVere Group as US stocks fell into correction territory on the first day of the new quarter, triggering a ripple effect to other financial markets around the world.

The turbulence is largely due to investors becoming rattled over rising trade tensions between the US and China – the world’s first and second largest economies – and major tech firms’ recent declines.

Tom Elliott, deVere Group’s International Investment Strategist, comments: “Stock market investors should not be spooked by the return of volatility on US and global stock markets.

“We are emerging from an unusually long period of low volatility, and this makes recent sharp moves in stock prices feel like an important signal when, in all likelihood, it will prove largely irrelevant for long term investors.

“Several themes are being used to describe Monday’s fall on Wall Street: fear that Trump will announce another set of tariffs on Chinese imports, Trump’s attack on Amazon’s low - but legal - corporate tax bill, and consumer and regulatory backlash against those tech companies who harvest and re-sell personal data to advertisers. None of these are sufficient triggers for a major correction outside of certain sectors, with tech looking the most vulnerable.”

He continues: “Indeed, the current correction feels like a continuation of March’s de-rating of tech stocks, as investors revaluate future earnings potential in the sector. Tech makes up about a quarter of the market cap of the S&P500, so it is important. But its problems shouldn’t be bringing down other sectors. Therefore stock price falls elsewhere on Monday – for example discretionary goods and energy - are perhaps best described as ‘collateral damage’.”

Mr Elliott goes on to add: “The sell-off in late January and early February felt more convincing, as a sharp rise in Treasury yields amid some buoyant wage and inflation data combined to convince investors that the days of cheap money are coming to an end. Risk assets, such as stocks, fell in response.

“A trade war with China certainly has the potential to be a trigger for a major sell-off, but we are not there yet. Otherwise Treasury yields would have risen in recent weeks, in response to a likely rise in inflation coming from tariffs and import quotas. Instead, 10-year Treasury yields have remained in the 2.7% to 2.8% range.”

Nigel Green, the founder and CEO of deVere Group, says many investors will welcome this bout of volatility: “Some of the most successful investors embrace some volatility as major buying opportunities are always found where there are fluctuations.

“Fluctuations can cause panic-selling and mis-pricing. High quality equities can then, for example, become cheaper, meaning investors can top up their portfolios and/or take advantage of lower entry points. This all, in turn, means greater potential returns.”

He concludes: “A professional fund manager will help investors take advantage of the opportunities that volatility presents and mitigate potential risks as and when they are presented.

“Many serious investors will be using this turbulence to create, maximise and protect their wealth.”

(Source: deVere Group)

Iwoca has found that female applicants are 18% more likely to repay small business loans on time than their male counterparts. Women-led small businesses make up an estimated 20% of iwoca’s customers and it has supported an estimated 2,400 women business owners in the UK with almost £50 million in lending since its launch in 2012.

iwoca uncovered the data in response to a study by the Federation of Small Businesses (FSB), which found that a quarter of female small business owners cite the ability to access traditional funding channels as a key challenge, with many relying on alternative sources, such as crowdfunding, personal cash and credit, for growth.

While this technology-driven risk platform draws on thousands of data points to make credit decisions, gender is not included. iwoca’s data scientists were able to calculate gender-based statistics on loan repayment rates by checking customer application forms for self-identified female titles and then comparing the approximate default rates for both cohorts.

Christoph Rieche, Co-founder and CEO of iwoca, said: “More can be done to narrow the entrepreneurial gender gap in the UK. Making it easier for women to access business funding would go a long way to achieving that. Sadly, the reality is that banks are withdrawing critical finance from across the entire small business sector and unless the Government takes action to encourage greater competition that will allow alternative providers to fill the hole, women will continue to be at a greater disadvantage from an unfair system, regardless of their higher propensity to repay on time.”

(Source: iwoca)

Finance Monthly speaks to Pierre-Noël Formigé, the Founder and CEO of Swiss company SEQUOIA, about the wealth management and estate planning solutions that his company provides, as well as his tips on maintaining and growing wealth for future generations.

 

Can you tell us about the core services that SEQUOIA offers?

SEQUOIA offers a holistic approach of wealth management thanks to a genuine "open architecture" which includes: wealth management, establishment of funds, management of funds - advice and follow-up, estate planning (trusts, foundations, companies), services of family offices, life insurance, financing (real estate, aircrafts, boats), reports and record keeping, risk management, compliance and regulatory assistance.

 

What would you say are the particular benefits for individuals of having professional assistance in relation to managing their wealth?

There are numerous benefits for individuals that decide to trust SEQUOIA with their wealth management. Our aim is not only to offer financial services, but also a financial experience and networking. Each solution and experience that we offer are specifically and uniquely tailored. SEQUOIA’s modularity and extensive experience allow for easy adaptation to our clients’ expectations.

 

What strategies do you and your team at SEQUOIA implement to ensure that your clients’ goals and objectives are achieved?

At SEQUOIA, clients are in the centre of our decision-making processes - they are our key priority. We have developed a well-informed overview of each of our clients’ financial situation, as well as a better understanding of clients’ goals and limitations.

Every portfolio construction starts with a discussion with the client or its representative, in order to fully understand their objectives and deliver a tailored-made investment proposal, allowing to approach and negotiate with partners. Our team can, at the request of the manager, take on a direct role in the relationship with customers, in accordance with their objectives and needs.

 

In your experience, are individuals fully aware of their assets and worth so that they can take advantage of tax planning?  Which types of assets are usually missed?

SEQUOIA’s clients are fully aware of their assets, however, they might not be fully aware of their tax impact. We ensure that clients have better tax awareness, as it does have the potential to improve individuals’ returns. According to surveys, while many factors impact investors, the majority of high-net-worth investors say that it’s more important to minimize the impact of taxes when making investment decisions, thus we offer the right measures to help high-net-worth clients reduce the taxes owed on income and investment gains.

In order to do so, we put a lot of effort in selecting the right investment products. We try to take advantage of some losses, and implement additional strategies that can help our clients to manage, defer, and reduce taxes. However, sometimes, clients do not mention their real estate assets, which could have an effect on tax planning; we provide advisory services in relation to that too.

 

What solutions do you offer in respect of maintaining and growing wealth for future generations of the same family?

Transmitting heritage built from generation to generation and building a better future for entrepreneurs is the essence of SEQUOIA Group. Our team of professionals provides high-quality services in order to manage our clients’ wealth, taking future generations into account.

From portfolio management - with tailor-made investment solutions matching the clients’ needs, to liability management - which includes heritage planning, distribution agreements, trustee and real estate project management, SEQUOIA provides a cost-effective turnkey solution based on legally compliant practices to deal with the impact of new regulatory landscape and the different legal, technical and operational risks.

 

How challenging is it to work in an ever-changing regulatory environment?

It is obvious that the status quo cannot be maintained in this ever-changing regulatory environment, however, SEQUOIA’s approach regarding this is to constantly adapt and understand those changes to serve our clients better. Choices that have been made in the past may not be completely relevant in today’s environment or vice versa, but our job is to continuously develop strategies that are relevant to our clients.

 

Website:

http://www.sequoia-ge.com

There's no doubt that these are strange times in the digital age. Whilst the advent of technological innovation has made it easier than ever for individuals to access products and launch businesses, for example, stagnant economic growth and global, geopolitical tumult has prevented some from maximising the opportunities at their disposal.

Make no mistake; however, the so-called “Internet of Value” has the potential to change this and create a genuine equilibrium in the financial and economic space. In this article, we'll explore this concept in further detail and ask how this will impact on consumers and businesses alike.

tellhco.com

So what is the internet of value and how will it change things?

In simple terms, the Internet of Value refers to an online space in which individuals can instantly transfer value between each other, negating the need for middleman and eliminating all third-party costs. In theory, anything that holds monetary or social value can be transferred between parties, including currency, property shares and even a vote in an election.

From a technical perspective, the Internet of Value is underpinned by blockchain, which is the evolutionary technology that currently supports digital currency. This technology has already disrupted businesses in the financial services and entertainment sectors, while it is now evolving to impact on industries such as real estate and e-commerce.

What impact will the Internet of Value on the markets that its disrupts?

In short, it will create a more even playing field between brands, consumers and financial lenders, as even high value transactions will no longer have to pass through costly, third-party intermediaries to secure validation. This is because blockchain serves as a transparent and decentralised ledger, which is not managed by a single authority and accessible to all.

This allows for instant transactions of value, while it also negates the impact of third-party and intermediary costs.

What will this mean for customers and businesses?

From a consumer perspective, the Internet of Value represents the next iteration of the digital age and has the potential to minimise the power of banks, financial lenders and large corporations. In the financial services sector, the Internet of value will build on the foundations laid in the wake of the great recession, when accessible, short-term lenders filled the financing void that was left after banks choose to tighten their criteria.

Businesses and service providers will most likely view the Internet of Value in a different light, however, as this evolution provides significant challenges in terms of optimising profit margins and retaining their existing market share. After all, it's fair to surmise that some service providers (think of brokers, for example) would become increasingly irrelevant in the age of blockchain, while intermediaries that did survive would need to seek out new revenue streams.

The precise impact of the Internet of Value has yet to be seen, of course, but there's no doubt that this evolution will shake up numerous industries and marketplaces in the longer-term.

There comes a time in the life of many businesses when owners cast around for ways to borrow money for growth. But those intending to use venture capital and private equity should plan particularly carefully before committing. Many don’t, and the result can be catastrophic.

Whilst the challenge is simple enough: to get the best deal whilst surrendering the least amount of control and equity. How to achieve that is less straightforward.

What goes wrong is poor attention put into the three basics: business plan, motivation, and due diligence.

Usually, the fractures start to appear because the borrowing enterprise has just not prepared itself. Unfortunately, the thought of ‘free’ cash in return for a slice of equity can tempt owners to make growth predictions that overreach reality. But the wise tread carefully and take advice. Without careful execution, the deals turn sour, with original management teams seduced into arrangements that end up with them losing both money and control.

There are horror stores out there. One UK business originally worth £5 million saw a £7.5 million private equity investment turn rapidly from a lifeline to a millstone, as it failed to meet challenging targets to which its owner had originally agreed. The software company now owes its backers £22.5 million in unpaid interest and redemption charges. Only one of the original management team is still in place and their stakes are now worth little.

This particular nightmare is neither the rule, nor the exception, but illustrates what can go wrong.

Private equity and venture capital can positively transform the fortunes of a business, injecting expertise as well as cash to help it grow. When it works, everyone benefits from a deal between risk and reward. But when it fails, the biggest loser often turns out to be the original management team.

In the end, the siren call of ceding absolute control for someone else’s financial support is not for everyone. Clients of mine stepped back from the brink, despite a willing lender. The reason was unease that the lender’s need for a return on their cash over a fixed term was at odds with the more relaxed instincts of the management team to let things in their restaurant chain grow organically.

The business plan is crucial and more than just a calling card. It is the basis on which the institutional equity investor decides how much to lend and what to demand in return. Firms that overstate likely growth to get investment are doing themselves no favours.

This is because valuations, upon which the entire deal will be based, are dependent on cash flow forecasts. Get them right, or better still, set them lower than they subsequently turn out, and everyone is happy.

But if the business has to keep going back to the investor, the lender will gradually wrest away control in exchange for their cash. They will insist, for example, on new agreements that may keep notional share ownership intact, but take control of decisions over fund raising and board membership.

In simple terms, the more a business falls short of an agreed business plan, the more it ends up giving away.

Which brings us to the next important area: motivation. A management team must ask itself what kind of life it wants. Once private equity is on board, a roller coaster ride starts. Demands are made, targets need to be met. The lender’s need to recover cost and secure a return requires growth at an agreed rate. This can be incompatible with watching your children play sports on a Wednesday afternoon, say. Do the soul-searching.

Nothing will be a problem if your business is growing, of course. But if it isn’t, expect a tough life. The management team must be wholly committed or problems start, particularly when targets in the all-important business plan fail to be met.

The final key component to borrowing money is to carry out due diligence on any lender. Examine the portfolio that every equity house lists. Speak to the firms involved and find out their experience.

Borrowing money from a bank is a far more removed, transactional experience than taking it from a venture capitalist or private equity lender. Their loans come with an expectation of involvement, so personal and professional chemistry is important. The process is effectively inviting a new member on to your key team.

Sometimes organic growth is best - not only because it allows more control to be kept by the original owners, but it can also be better as a fit. The culture of a business can be rudely disrupted by the keenly focused financial demands of an agreement with venture capital and private equity funders.

And choose wisely. The ideal lender will treat your enterprise as more than just a risk to be shared amongst many other. But remember: Private equity wants to have your cake. The trick is to avoid being eaten entirely.

Venture capital trusts (VCTs) remain front of mind for both SMEs and investors. In the 2016/17 tax period, fundraising stood at £542m – the highest figure in more than a decade – according to the Association of Investment Companies (AIC). Also, measures in last year’s budget and recommendations in the Patient Capital Review indicate that policymakers continue to see the strong value VCTs provide for both SMEs and investors and so, for 2018, the signs point to another strong year for the sector.

Here, Bill Nixon, Managing Partner at Maven Capital Partners, looks at the growth of VCTs as an asset class, their appeal to investors, and gives his view on the continuing value of VCTs as a source of SME finance.

The success of new share offers by the leading managers over the past few years illustrates how VCTs have increasingly been recognised as a mainstream asset class in investment planning and are becoming a common part of tax efficient and income-focused portfolios. Fundraising across the VCT sector as a whole has climbed steadily in each of the past five years, including a rise by around a fifth in 2016/17.

This burgeoning demand for VCT investments has been driven by strong long-term returns. Research by the AIC last year revealed that the top 20 VCTs returned on average 82 per cent by share price total return (a measure which takes into account both capital returns and dividends paid to shareholders) over the past decade. The very best performers achieved overall returns well into triple digits: for example, Maven’s Income and Growth VCT returned 187 per cent in that period. Top up share offers by Maven VCT 3 and Maven VCT 4 remain open, for both 17/18 and 18/19 tax years, with around £27m already raised from more than 1500 investors.

VCTs are attractive partly because they enable investors to enjoy significant tax benefits when putting their money into smaller, entrepreneurial UK businesses and participating in their growth. Investors in VCTs receive a 30 per cent upfront tax break, as well as tax free capital gains and dividends – provided they are willing to remain invested for at least five years.

The Government's aim in providing these reliefs is to encourage more capital to flow into riskier, early-stage companies. While this investment risk is an inherent feature of VCTs, it can be managed effectively for an investor by carefully choosing the VCT manager. The leading managers have up to 20 years’ experience of VCT investment and will employ a range of measures to achieve significant diversification and robust asset selection. An experienced manager will work closely with every business it backs, providing strategic counsel and operational expertise as the business grows.

Despite some concerns ahead of last year’s Budget that the levels of tax relief might be reduced, it instead adjusted investment criteria to ensure than VCT schemes continue to focus on investment in companies for long-term growth and development, rather than ‘lower risk’ investment primarily aimed at preserving capital. These changes confirm the position of VCTs as a vital means of drawing private investor capital to the SME sector and should ensure that VCTs remain attractive for investors. The continuing availability of long-term patient capital, at what is an increasingly important time for the UK economy, should give comfort to dynamic smaller businesses that they can continue to access vital equity finance, whilst allowing investors a route to participate in their success.

During the past couple of years it had also become clear that significant improvements were needed to HMRC’s Advance Assurance process, which had resulted in unnecessary delays to receiving VCT clearance on a large number of potential VCT deals. Streamlining Advance Assurance had been highlighted by managers across the sector as an important step in more efficiently directing capital to entrepreneurial businesses, and potentially boosting returns for investors. It was therefore encouraging that the Budget also announced that HMRC aims to enhance that approval process during the early part of 2018, which should help to improve the rate of new investments receiving VCT clearance and allow VCT managers to provide funding to the best available companies in a timescale that suits their growth plans.

Overall, VCTs have shown their worth from both an SME and investor perspective and this year’s fundraising is going well, with one or two VCT offers having already closed to investments. In the three years to mid-2017, VCTs had injected around £1.4bn of investor money into SMEs, illustrating their role as growth company funders and their performance and returns should see them further consolidate their position as an increasingly mainstream asset class in tax efficient and income-focused investment portfolios.

Today’s trading days are the middleman’s realm, where platform-based business rule exchanges and trade, removing much control from businesses and investors; but it hasn’t always been like this. Below Finance Monthly benefits from expert analysis from Sascha Ragtschaa, CEO and Co-Founder of Chainium, on the matter of trading control.

Pulling the Trigger

Sourcing information on a global business takes seconds. In fact, the ubiquitous Google now processes over 40,000 search queries every second. This equates to over 3.5 billion searches a day and an almost inconceivable 1.2 trillion searches per year worldwide[1]. However, pulling the trigger to invest in a global business is a whole different ball game.

Expensive, intricate and restricting, buying and selling shares between businesses and investors has significantly fallen behind advancing developments within the wider financial sector. Especially when you compare it to the latest cryptocurrencies, with the famed Bitcoin hitting a high of close to $20,000 in December last year, prior to its recent readjustment.

Disruption of the Status Quo

As one of the most vital areas of the market economy, it is essential the equity market drags itself into the 21st century and puts its businesses and investors in complete control. The simple truth is that when the global equity market was created two hundred years ago with the founding of the London and New York Stock Exchanges, the world was a very different place. Whilst middlemen can help investors identify the most cost-effective option, they can severely lengthen the exchange process and be expensive.

To become relevant for the modern investor, a certain amount of disruption of the status quo is required. The sector needs to ensure that trading becomes a more seamless experience and is put back into the hands of businesses and investors for full control.

Regaining control

The solution for this could well be the blockchain. The technology that underpins the main cryptocurrencies such as Bitcoin and Ethereum has the advantage of being transparent enough to ensure democracy and visibility, whilst being secure enough to protect businesses and investors alike. The technology is an enabling force for removing the middle layers, administration and reconciliation steps required in today’s global equity market solutions. This means that businesses and investors can be connected directly, leading to a rise in empowerment and the eliminating the need for middlemen.

To become truly transformative in 2018, any new equity market solution needs to be built with business and investor control at its core. The recent string of high profile data breaches – coupled with the impending Global Data Protection Regulation (GDPR) which comes into force on 25th May – have heightened the awareness among consumers regarding information security; especially when payments of any kind are involved. Blockchain can not only protect the individual, but also allow for enough transparency to ensure equity decisions, voting and resolutions are fully transparent in the process.

Removing the shackles

In order to be fully accessible, a modern equity network must be well tailored to suit the needs and interests of both investors and business owners. By democratising equity, it can bring influence and power back to the individual investor through de-centralisation, blockchain technology and crypto payments. Meaning the network becomes entirely distanced from traditional stock exchanges, government regulation and the institutional and corporate stranglehold.

Back to basics

This back-to-basics approach to raising capital reduces bureaucracy; with blockchain technology removing duplication and eliminating errors. This allow investors and businesses to exchange digital share certificates for fiat or cryptocurrency in a transparent, tamper proof and immutable distributed ledger. No intermediary or other reconciliation steps are involved in transactions, cutting through hundreds of legacy systems and solutions from the old world.

Business owners, of private and public businesses, can now sell shares directly to investors. Cutting out the middlemen in issuing and trading shares helps to give complete control back to the businesses and investors alike and help them become indelibly linked.

A transformation is needed

Giving trading control back in the hands of the companies and investors utilising the equity market is essential when it comes to promoting innovation and reinventing the processes involved in trading shares. No more trading through banks, brokers and intermediaries. No more share registrars, transfer agents or middlemen.

We have seen AirBNB, Ethereum and Uber all become the pinnacle of digital transformation in their very own industries and with the help of new technologies, we are now seeing the same beginning to happen in the global equity market too. By removing the multiple barriers to investment means that the next Apple, Google or Microsoft won’t be left on the scrapheap, but receive the investments they need to thrive.

[1] http://www.internetlivestats.com/google-search-statistics/

It was an eventful start to February for global stock markets – and here with some pointers for the first quarter and to remind us of why a long-term view is important, is Kasim Zafar, Portfolio Manager at EQ Investors.

Equity markets had a very strong start to the year, continuing their trend from 2017 and supported by robust economic and earnings growth. For the first time since September 2011, all geographic regions are achieving sustained positive earnings growth – and we see this global ‘synchronicity’ as generally being a good thing.

However, with the S&P 500 (as an example) up 7% year to date in mid-January, the magnitude of this momentum was difficult to justify. Subsequently, we have seen some violent moves in markets. In our view this was a long overdue market correction and see volatility as a healthy sign investors are taking account of the risks inherent in markets.

So our current outlook and base case remain unchanged: global growth has improved markedly and inflation expectations in Europe and the US are increasing. This has led to more hawkish rhetoric from central banks – including plans to increase interest rates and rein back on quantitative easing – but in the grand scheme of things they remain relatively accommodative.

Recently, we have marginally increased our developed equity exposure, and remain excited by developments in Japan & Europe where we are overweight our long term benchmarks. Political stability is set to continue in Japan following the re-election of Prime Minister Shinzo Abe. This likely means business as usual and a continuation of structural reforms feeding through into strong corporate earnings and wage growth.

And European growth prospects are now among the most exciting globally, after years lagging other developed markets. Europe is likely to benefit in a similar vein to Asia from ongoing synchronised global growth and its economic recovery is much less mature than that in the UK or the US – with low inflation suggesting that, in spite of strong growth, the economy is some way from overheating.

We still hold a slightly negative view on long duration bonds as inflation may rise in the short term – negatively impacting values. With tight credit spreads we see little value in either investment grade or high yield bonds as an asset class either. So in fixed income we continue to invest in flexible strategies that can take advantage of specific opportunities as they arise.

One impact of globalisation is that corporate revenues and earnings are increasingly spread across the globe. This has a big impact on geographic equity allocation, which has been the basis for traditional asset allocation. In short, it is far less relevant than it once was. As an example, around 80% of revenues generated by FTSE 100 companies (i.e. listed in the UK) come from overseas.

Because of this, and drawing the success of this approach with our Positive Impact Portfolios, the research team are increasingly finding interesting investment ideas from funds that invest in global themes rather than specific geographies.

Healthcare, artificial intelligence and the millennial generation are three examples and you can expect more of this ‘thematic thinking’ in our outlook going forward.

Research from Liberis, reveals that over half of UK businesses are unable to access the funding needed to grow; with the main hindering factor being a lack of education or understanding of their funding options. With falling SME confidence in the economy and mounting concerns over costs given the relative weakness of the sterling, Liberis strongly urges the UK to better support its small business community.

The lifeblood of the UK economy, SMEs contribute more than £200bn a year; with this number expected to grow by almost 20% by 2025. Yet, without a vital cash injection, this 2025 vision will be severely stinted.

Hindering growth opportunities, this lag in SME development may in turn negatively impact the economy. Liberis therefore believes it is crucial to ensure better understanding on how to navigate the perceived minefield of funding options. Small business education is desperately required to increase awareness levels of the process; greatly benefiting both businesses and economy alike. Such movement has been reinforced in a recent report from the British Business Bank, in which the UK Government backed organisation pledges its dedication to a more targeted educational campaign on the topic of SME finance.

While 62% of UK SMEs said they need funding to grow and expand, but 57% of SMEs were unsure which provider to obtain funding from and 53% did not have a set amount in mind when looking to access finance.

Liberis found 22% of businesses require funding to maintain business as usual, while 5% need funding to survive past the first year of business. Speed of funding has been identified as integral to achieving this growth. Other findings of the report showed an increase in the popularity of crowdfunding as a source, with 10% of UK SMEs looking to use this as a means for funding in the next two years.

Commenting on the report, Rob Straathof, CEO at Liberis, said: ‘These findings have opened our eyes to a lack of confidence and awareness among SMEs in how to correctly secure the funding they so desperately need. Funding will continue to be a hot topic for the small business community, but urgent action and collaboration is crucial to prevent resulting damage to the UK economy. Without sufficient financial education and support, the UK’s business ambitions will be severely affected but by ensuring they have the correct financial understanding, we can help secure and strengthen their livelihood; fast-tracking their ambitions.’

Established in 2007, in a space where traditional banking and loan models were finding it challenging to meet the needs of UK SMEs, Liberis provides fair and transparent funding options based on business potential, helping entrepreneurs achieve their goals and ambitions. Through its Business Cash Advance, an innovative form of funding, Liberis links repayments directly to cash flow so businesses only repay when their customers pay them. To date Liberis has helped over 6,000 SMEs, advanced £200m in funding and supported over 24,000 jobs in the UK. Moving forward, the company aims to further empower small businesses, broadening customer reach through strategic partnerships and international expansion.

Complexity often means risk, mess and can easily spell disaster. The fund sector for example, is one that requires constant thinking, innovating and success management; and it’s not always so easy, especially with a myriad of tasks and operations to see to internally. Below Lauri Paal, who used to work with Skype, Microsoft, and is now the Chief Product Officer at KNEIP, discusses with Finance Monthly some things the funds industry could learn from the telecommunications industry, from consumer behaviour to outsourcing and standardization.

Telecommunications has changed significantly in the last ten years. The regulation, technology and approach have all been reviewed and the industry has seen obvious moves. For example, voice to data as well as communications switching to apps. Moving into financial services, I have witnessed complex regulation and, like in the telecommunications sector, this is constantly changing and creating new challenges. However, our approach and business practices have not changed.

From the outside it is easy to think that the reason the telecommunications industry changed is because of the rise of 3G and eventually 4G technology. But the truth is that change is driven by consumer behaviour and I like to believe Skype played a part in how people consume technology today. Skype’s approach to voice services radically changed the market as we focused on lower cost and high quality international calls. To guarantee this standard, in traditional telecoms networks, operators needs to connect to hundreds of networks globally. Quantitative measures are used to monitor performance. At Skype we defined quality of service as a core value. We created a live feedback feature which is used after every call and we built an algorithm which allowed business allocation based on customer feedback. We drove this innovation.

Non-core activities were outsourced to specialist organisations. We did not build local infrastructure as many telecommunications agencies have in the past, we outsourced to partner management operations, including pricing and invoice management. The results were positive for everyone with each industries’ players focusing on their specialist industry, ultimately providing the customer with a better experience.

Now, in the financial services industry, I think there are a number of lessons that we can take from the disruptive approach in telecommunications and change the way our sector operates. Too much of our industry is still reliant on manual operations and systems are not streamlined to free up professionals to work on their area of specialism rather than on back office functions. Just as voice has become a secondary asset to data in telecommunications, so to traditional investment - especially assets under active management - is facing an optimisation drive. We need to find solutions that automate compliance processes, giving better focus to core activities.

I think the industry needs to push for standardised back office functions and compliance process. We have spent months preparing for PRIIPS and MIFID II but this needs to pay off for the end user. These complex regulations have focused on transparency but that is only beneficial if it uncovers inefficient historical processes, and force companies to adapt and innovate, ultimately becoming more effective. The industry, jointly with the regulators, should focus on understanding and enabling technology trends. Markets tend to be self-regulating, driven by customer demand. Perhaps keeping the end customer (or investor) in the centre of the process and making sure initial objectives were met post implementation will ensure processes are improved.

Asset managers currently tend to build a lot of solutions internally. The industry should rather take a step back to determine which tasks are core, such as product manufacture and investment management, and which tasks can be considered as non-core. Doing so could lead to greater business efficiencies and could, given time, lead to a more standardized industry, as we all witnessed in the communications industry.

However, I think the biggest lesson we can learn from the communications industry is the need to put customers in control. We are seeing trends towards younger investors demanding more knowledge of and access to their investment choices. We need to look at systems that allow the end user to understand and put them in control, whether they are an asset manager or an individual. If we can simplify processes, then their needs will define the future of the industry. Customers will decide and putting them in control needs to be our mission regardless of the industry.

Despite a swift comeback from the global stocks chaos last week markets have been shaken up.

Dow Jones closed at 24,601 yesterday, up from the 23,860 low of last Thursday. The plunge happened on the 1st of the month, across the weekend, recovered, and dropped further. Dow Jones is now on a recuperating trajectory. The same drop, recovery and further fall also happened within the same time frame for the S&P 500, NASDAQ and the FTSE 100.

All are on their way back up but fears of increased volatility are floating around. Finance Monthly has collated a number of comments and market responses from experts and economists worldwide in this week’s Your Thoughts.

Phil McHugh, Senior Market Analyst, Currencies Direct:

The switch to risk off in the markets was markedly sharp and severe against an air of positive momentum which ran ahead of the fundamentals. The S&P index fell by more than 4% which was the steepest single day drop since August 2011. The rout continued into Asia markets and the spark was growing concerns that inflation will force borrowing costs higher.

The momentum since the start of the year has been bullish with equities pushing higher and the USD selling off. The honeymoon period for equities has now hit a question mark over potential rising borrowing costs. It can be argued that the bull run had ran somewhat ahead of sentiment with overconfidence creeping in. The higher wage inflation from US payroll data on Friday was the beginning of the doubts and this was enough to encourage some profit taking that has now spilled into a wider sell off.

We have not seen a big correction since Brexit and although we could see further selling pressure it should find support soon on the underlying improved global economic optimism and growth.

In the currency markets the reaction was more balanced but we have seen a defined swing into the classic risk off currencies with the Japanese Yen and Greenback gaining ground.

The pound lost ground after a strong start to the year. The pound tends to suffer in a risk off market and the weaker services data yesterday and concerns over the latest Brexit talks have helped it on its way lower. The next focus for the pound will be the Bank of England meeting on Thursday.

Lee Wild, Head of Equity Strategy, interactive investor:

Just as markets cannot keep rising forever, they must also stop falling at some point, but it’s still unclear whether we’ve reached a level where buyers see value again.

Futures prices had indicated a much brighter start for global markets, but early gains were wiped out in Asia and Europe looks vulnerable. Volatility is back, and investors had better get used to it.

While there’s certainly a case to be made against high valuations, especially in the US, there are lots of decent cheap stocks around. Plenty of investors are itching to bet that concerns about inflation and bond yields are overdone and that any increase in either will be much slower than expected. If that’s the case, a 10% correction in the US looks more like a healthy retracement rather than reason to hit the panic button. Long term investors will be amused by it all and are either choosing to ignore the noise or pick up stock at prices not seen for two months in the US and over a year in London.

There are stark similarities between this sell-off and crashes both in August 2015 and in early 2016 when market volatility reached similarly extreme levels. It took several trading sessions played out over weeks to find a bottom, and it’s likely the same will happen here. Only difference this time is that it’s the tune of US economic data, not China’s currency devaluation that markets are dancing to.

Kasim Zafar, Portfolio Manager, EQ Investors:

Pullbacks in markets are (usually) quite normal and healthy, giving moments of pause where everyone pats themselves over, does a quick sense check and then carries on. In the case of the US equity market it hadn’t fallen more than 5% in 404 trading days (back to June 2016). That’s the longest stretch of ‘uninterrupted’ gains in history, with data back to 1928!

There weren’t enough signs of investor heebie-jeebies around, especially not in January when the US index was up over 7% for the month at one point. That’s pretty extreme and entirely unsustainable.

The equity market has finally taken notice that over the last several weeks bond markets have been reflecting a higher inflation and interest rate environment, so it’s not at all surprising to see some adjustment and a return of some much needed investor fear!

We are going through the quarterly reporting season for US companies currently, which is a good test of what’s happening on the ground. With 264 out of 500 US companies having reported so far, most are reporting positive results for both top line revenue growth and bottom line earnings.

So, as things stand, we see this as a long overdue market correction and if it falls much further we would be looking to increase our equity weightings. Increased volatility is a healthy sign of investors becoming more conscious of the risks inherent in markets.

Ray Downer, Trader, Learn to Trade:

Though you may not knowingly own any shares, there is a high chance that you are paying into a pension scheme which invests in shares and bonds. This means the value of your pension pots is dependent on the value of the investments in it and while investment values increase and decrease all the time and this will have very little noticeable difference to your savings, financially turbulent times like this will impact you in some way, particularly if you’re looking to retire this year.

For now, at Learn to Trade we are looking at this in the context of a correction rather than a reversal. Following this week’s FTSE 100 fall, investors should keep a close eye on the stock markets in the months ahead as the value of the pound has gotten weaker with the sell-off. The Bank of England will announce whether or not it plans to raise interest rates because of this ‘bloodbath’ later this week when it publishes its quarterly inflation report. Should the Bank of England announce a rise in inflation rates, British consumers will have less spending power and will start to feel the pinch of higher costs on imported necessities. The inflation report will give us a clearer picture of how this will impact our everyday spending.

Bodhi Ganguli, Lead Economist, Dun & Bradstreet:

It’s a common misconception that stock market activity is linked to the economy. However, an unexpected and ferocious swing in the stock market is disruptive and can wipe out a significant chunk of wealth from the markets – resulting in economic implications. This week’s activity could mean retail investors could see a significant erosion in their nest egg, which would be bad for future consumer spending.

The latest crash was caused by technical or algorithmic trading, most likely computer-generated as at times the stock market was dropping faster than that can be explained by human intervention. These changes were exacerbated by macro-economic triggers such as the recent US jobs report, which was a strong signal of wage inflation returning. This caused market participants to upgrade their inflation outlook with more Feb rate hikes expected. Bond yields also crept up, setting off a bearish shift in the stock market.

We expect the stock market to stabilise in the near future, but the longer term outlook will be determined by how these fundamental macro-economic triggers interact with each other going forward.

Ken Wong, Client Portfolio Manager, Eastspring Investments:

Currently, the market is going through a much-needed correction as valuations were approaching expensive levels for most markets. In particular, China’s equity markets were up 70% over the past 13 months, and this recent 10% correction from its high is actually not that steep.

Despite the recent market correction, investors in Asian equity markets still seem to be in a better position at a time when corporate America seems more hard pressed to deliver elevated profit expectations while also trading at very expensive valuations. Asian equity markets are trading at a P/B ratio of around 1.7x while US equity markets are still trading at 3.2x P/B after this recent price correction.

Asian corporates in general are still expected to deliver strong corporate earnings and most are in good shape as a result of previous cost cutting and balance sheet restructuring that we have seen over the past few years. Despite the recent market volatility, things are still quite sound in this part of the world, Asian corporates are still expecting to see their earnings grow by around 13% in 2018, with China leading the way with earnings growth expectations of over 20% this year.

For investors concerned about the recent market volatility, they should look at investing in a low volatility equity strategy as we have seen these types of strategies outperform the broader benchmark indices by over 2% over the past few days. The benefits of these low volatility equity strategies is the fact that they have bond like risk / volatility characteristics while providing investors with an enhanced dividend yield and market returns which are more in-line with equity returns.

As long as there is still enough cheap liquidity out in the market place, we could start to see some bottom fishing over the coming days as investors start to look for cheap / undervalued stocks. In particular, investors could look toward those sectors that underperformed in 2017, such as financials, energy and consumer staples.

Richard Perry, Market Analyst, Hantec Markets:

Equity markets remain highly attuned to the threat of the increase in volatility across financial markets at the moment. Equities are considered to be a relatively higher risk asset class, so with a huge sell-off on bond markets, equity markets have also come under threat. The concern comes in the wake of the jump in US earnings growth to 2.9%, a level not seen since 2009. A leap in earnings growth has investors spooked that this will lead to a jump in inflation which could force the Federal Reserve to accelerate its tightening cycle. Markets can cope with gradual inflation but inflation running out of control can lead to significant volatility, such as what we have seen recently. The high and stretched valuation of equities markets meant that was the prime excuse to take profits.

For months, analysts have been talking about the potential for a 10% correction and at its recent nadir, the S&P 500 had corrected 9.7%. So is this just another chance to buy, or the beginning of a bigger correction? The key will be the next series of inflation numbers, with CPI on the 14th February and core PCE at the end of the month. If inflation starts to increase appreciably, longer dated bond yields could take another sharp leg higher, perhaps with the 10 year breaking through 3.0%. Subsequently, equities would come under sustained selling pressure with volatility spiking higher once more. However, if there can be a degree of stabilisation in the bond markets, then equity investors can begin to look past immediate inflation fears and then focus back on the positives of economic growth in the US, Eurozone and China.

Alistair Ryan, Senior Dealer, Frontierpay:

This afternoon’s hawkish approach from the Bank of England came as a surprise; I personally – along with many others – didn’t expect there to be any talk of a rate rise in the UK until at least the end of 2018. The services sector, which makes up around 80% of UK GDP, faltered this month and wage growth is slowly increasing but remains low at 2.4%. Both of these factors suggest a slack economy, so I expect we will see many questioning whether this is the right time for a rate rise.

If we were to see some further improvement in the economy over the coming months, then a rate rise would of course be a possibility, but whilst wage growth and inflation slowly start to correlate, I don’t think we will see any movement on the base rate.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

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