7IM's inBrief - Summer 2018 Magazine

Summer 2018 | Wealth into words

Lifestyle

Pursue your passion Ready to save to gain?

Events

What’s on?

Dates for your diaries

7IM Investment Update

Diversification is key

Planting money in all of your pots Financial Education

Uncertain times & your wealth

Pensions, inheritance and capital gains tax

Announcing 7IM & the FT Weekend Festival 2018

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e’re delighted to again be hosting a marquee at the FT Weekend Festival, on Saturday 8 September 2018 at Kenwood House on Hampstead Heath.

We will be sponsoring the FT Money Stage so look out for us on the day.

More live updates and information for what’s happening during the day will be on our website and twitter: www.7im.co.uk/events @7IM_Private

Want to purchase tickets? Log onto www.ftweekendfestival.com

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Welcome Welcome to the second edition of inBrief. In keeping with its name, we’ve again tried to include articles that are easy to read, about topics that we are discussing with our clients. If we do talk about how we approach our business, it’s because we believe that it helps people achieve their financial goals.

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Topic What I’ve learned from five years of Family Business Road Trips

This is important. Investments can quickly become complex given how deeply personal they are. It matters to us that we try and explain what we do and why.

Paul Andrews, Founder of Family Business United talks about his experiences with family businesses and why they participate in an annual road trip.

Most people think you have to be (very) wealthy, about to retire, really busy or just not be interested before you pay someone to manage your money.

Our experience is different. Our clients come from a variety of backgrounds, and often ‘just’ want reassurance and straightforward advice. We hope, therefore, that our content makes sense. But we would appreciate any comments you might want to make – please just give us a call.

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7IM Investment Update Why currency diversification is key

Ben Kumar, Investment Manager

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Financial Education Managing your wealth in uncertain times

Michael Martin, Relationship Manager, talks about the trials and tribulations that investors may face.

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Events Dates for your diaries

An exclusive look at upcoming events and webinars – we’re looking forward to seeing you soon.

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Lifestyle Doubling your budget to pursue your passion

Sophie Kilvert, Relationship Manager, looks into time in the market versus timing the market.

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Interview A day in the life of...

Mark Endacott, Relationship Manager, gives you a personal insight into the day-to-day life of being a relationship manager at 7IM.

Stewart Sanderson, Head of Private Clients

We’d love to chat to you. Call us or your relationship manager on 020 3823 8678 & we’d be happy to answer any of your queries.

Summer 2018

www.7im.co.uk

@7IM_Private

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What I’ve learned from five years of Family Business Road Trips Paul Andrews, Founder of Family Business United

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t was back in 2014 that our first ever Family Business Road Trip kicked off and, just three years after I’d founded Family Business United, I was travelling the length and breadth of the country. We visited some 40 firms in total, including Champneys, Crocket & Jones, Kent Brushes and Weston’s Cider to name but a few.

My initial aim in running the road trips was to find out what really made family businesses tick (and, if I’m honest, to promote my own business), but what quickly became apparent was that our hosts loved the fact that we were travelling to them to meet them on their home turf. It meant they were able to have many more members of the family and non-family colleagues share their anecdotes and their passion for what they did. Many also generously opened their doors to our wider community at the same time – the more the merrier has always seemed to be a bit of a mantra for our sector.

It truly was a privilege to be invited inside and find out more.

Five years later and we’re still celebrating the success of many of those same firms and a lot more. This year the roadshow lasted for six weeks and we visited 42 firms.

Meanwhile, membership of Family Business United has grown to 300 family firms and we are more active than ever before. We are continually organising more awards, campaigns and innovative events in more regions to share the success stories of our family businesses.

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But, perhaps more importantly, we are also able to share the lessons learned and help others overcome hurdles through owners imparting advice within our community.

Another big reason for the roadshow was using it to get the message out there about how important family firms are. Here in the UK, the family business sector accounts for over five million companies that deliver £1.4 trillion in turnover – that’s almost a quarter of the UK’s GDP – and employ more than 12 million people.

The UK’s 20 biggest family-owned companies on their own generate some £50 billion in revenue. Locally, family businesses can be even more important given their contribution to their communities is often more than just the jobs or money they bring in.

The road trips remain a big deal for me, the business I founded and the firms that we visit. It really reminds me that we have to be out there, day-in-day-out, repeating the level of contribution that these firms make to our economy. We need to continually ring the bell for the best known businesses run by families, as well as highlighting some of the hidden gems of the sector – firms that really do deserve to be better known.

As a result, I’m already planning the 2019 road trip and how it can be better and bigger – both in terms of the trip itself and the spotlight it shines on the sector. And, I am delighted to be working with 7IM to make that happen. It is one of the things that makes us different and celebrates the great contribution that family firms make throughout the UK.

Find out more at: www.familybusinessunited.com

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Keen to find out more?

Speak to your relationship manager or call us on 020 3823 8678.

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WHY CURRENCY DIVERSIFICATION IS KEY Ben Kumar, Investment Manager

“An earthquake in California might hurt Silicon Valley-based tech stocks, but it should have no effect on German bonds or the price of copper.”

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7IM Investment Update

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he intention of diversification is really quite basic. It is also a fundamental principle behind multi asset investing (in which 7IM firmly believes).

Lots of people have incorporated it in one form or another in their investments, by allocating their money across multiple companies, industries, geographies and different types of investments. It reduces the likelihood of a one-off event affecting all of your savings. An earthquake in California might hurt Silicon Valley-based tech stocks, but it should have no effect on German bonds or the price of copper.

This school of thought appeals intuitively to almost everyone, and there should be very few investors now who only own a concentrated portfolio. Instead, it is the breadth of their portfolio that should see portfolio returns delivered and distributed consistently over the long term, in spite of what’s been published in the newspaper.

The only renowned exception to the concept is Warren Buffet. He calls the view “di-worseification”, as he believes it gets in the way of really getting to know a company’s underlying merits.

Having said that, even he has to admit that for 99.9% of people (i.e. unless you are Warren Buffet) broad diversification is necessary. This is because we are mostly unlikely to completely understand all of the complexities of many investments, even if that is simply because we haven’t got the same level of resources to do the research ourselves.

But, while we have all probably bought into the concept of buying different things across different regions, many investors can overlook a major component of their portfolio returns – the impact of foreign currency exposure. It should be blindingly obvious, but in order to invest abroad, you have to convert your Sterling into another currency, i.e. before buying shares in a US company, you have to have the Dollars to do so.

Suddenly, along with what’s happening to the share price, there are changes in the related exchange rates to take into account – something that quickly increases a portfolio’s complexity. If you were to imagine owning a single UK company – let’s say Tesco – adding another holding – such as BP – provides you with two sources of return because you are exposed to the share performance of each of the two companies. If we were then to add a position in Apple, we now have to consider the share price movements of the three stocks, as well as the movement in the US Dollar/Sterling exchange rate.

Buying another international equity, such as L’Oréal, would add two more moving parts to the equation – the new share price itself and the movement between the Euro and Sterling.

Academics have argued that over a very long period of time, currency fluctuations tend to even out. However, in the real world, not taking currencies into account could change your perspective on whether an investment is successful or not.

A fairly recent example for investors can be seen through everyone’s favourite topic – Brexit. On the night of the EU Referendum vote count, the Pound dropped by its biggest percentage in one day in at least 40 years. It was a reaction that we had fortunately anticipated, and our thinking meant we had more investments in US Dollars and lower investments in Sterling than was traditionally the case. Those, together with portfolio holdings in US Treasuries and gold, meant we were able to hold a steady line throughout the turbulence, to the benefit of our clients.

The value of the Pound, meanwhile, has continued to react to any progress (or lack thereof) of the Brexit negotiations, and has also played out in the fortunes of the FTSE 100. Whenever negotiations appear to be moving forward, the value of Sterling rises, while the interest in the UK headline stockmarket takes a dip. When the EU is pouring cold water on UK suggestions, then Sterling starts to lose ground against the US Dollar and Euro. On the flip side, the FTSE 100 starts to see demand increase. Here the currency movements are important because the underlying companies in the FTSE 100 have almost 75% of their earnings coming from overseas. The index by itself should be benefiting from the underlying strength of the global economy, but it faces headwinds because of any movement in Sterling.

The objective of the above points is not to argue whether foreign currency exposure is useful. There is unfortunately no consensus among financial professionals as to the correct approach – whether to hedge out all of your foreign currency exposure, to keep some of it, or to keep all of it. For us, the most important thing is having the ability to do any of these and to change our approach, if necessary, over time.

The main takeaway should be that when diversifying your investment portfolio, it is important to understand all of the additional risks that come with your investments. Having an additional, but largely ignored variable, could turn good decisions into quite bad ones in a short period of time.

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Financial Education

Managing your wealth in uncertain times Michael Martin, Relationship Manager

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s a relationship manager, I get asked a lot of questions as to how people can allay any concerns that they have. And recently, a number of those fears have focused on Brexit and the relative fragility of the current government.

These are tricky subjects to provide information on since they are also quite emotive. Political discussions are always difficult, given personal persuasions are often firmly rooted and aren’t necessarily foregone conclusions. What many might see as right for the country, may not always be the most beneficial for your individual finances.

So, whichever way you voted in the EU Referendum, we would all like to believe that the Brexit negotiations should be settled in the next couple of years. As investment managers, we are already looking beyond that time horizon, given people could be retired for more than 30 years. But we are also working to ensure that we pay attention to what’s happening in markets now. My colleague, Ben, explains this in the article on page 6.

In addition, we are working with clients to plan for a scenario where Jeremy Corbyn becomes elected and puts through the changes detailed in Labour’s 2017 election manifesto, as well as what has been said by key party members.

Based on what’s been published, we flag three areas which could see change: 1. Pensions In the 2018-19 tax year, the lifetime allowance went up to £1.03mn. There is a view that Labour might cut that allowance. National newspapers frequently recommend people putting aside about £300,000 to enable them to receive the UK’s current average wage during retirement. There’s quite a difference between the two.

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2. Inheritance There is the chance that pensions could be changed so that they might not be able to be passed on outside of your estate, and instead would be treated as every other asset. Labour have also stated that they would scrap the double relief that spouses receive on property.

3. Capital Gains Tax The current £11,700 per person means a couple can access £23,400 before they pay any tax. Any income over and above that is then charged at rates lower than the corresponding income tax bands. Labour could cut the allowance and change the taxes to the same rates as income tax.

So what can investors do to help maintain their income if these changes were to take place?

While these changes may or may not happen, the action that we believe should be taking place in any case is diversification. In the same way that investments should be allocated across different types, there should also be a variety of schemes used, so investors can take advantage of all the tax allowances.

Investors should also be looking at using all of their annual ISA allowance (currently £20,000) – an allowance that we believe will remain untouched – as well as putting money into general investment accounts and pensions. You should also be making use of your dividends and savings allowances.

Then whoever gets voted into power – and let’s face it some of the Conservative actions haven’t been entirely popular either – these things should leave you in the best possible position to enjoy the lifestyle you’ve earned.

Time hasn’t run out!

Call us or your relationship manager on 020 3823 8678

Events

Join us in Event

Webinar

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e host a variety of events and webinars throughout the year, dates for your diaries below!

September Saturday 8 – FT Live Weekend // 10:00 – 20:00 Kenwood House, Hampstead Heath, London NW3 7JR The FT Weekend Festival returns with bigger and bolder ambitions. Writers, columnists, designers, artists, adventurers, and, yes, experts, debate the ideas and passions of 2018. 7IM is delighted to be sponsoring the Money Stage. More details to follow soon, so keep an eye on our website.

“As investment managers, we are already looking beyond the Brexit time horizon, given people could be retired for more than 30 years.”

Tuesday 11 – Planning to leave an inheritance // 12:00 – 13:00 7IM research highlights that just under half (47%) of the UK population want to leave behind an inheritance. Meanwhile, the number of wills being contested is on the rise – up by 40% in the latest official annual numbers. What should you be aware of as you plan your finances to help the next generation?

Wednesday 12 – Wealth in a complex world // 18:30 – 20:30 The Cloudfm County Ground, New Writtle Street, Chelmsford, Essex CM2 0PG 7IM will be joined by a panel of experts to discuss our chosen topic. More details to follow closer to the date – please keep a look out on our website.

Wednesday 26 – Panel debate with The Spectator // 18:30 – 20:30 30 Euston Square, London NW1 2FB More details to follow closer to the date – please keep a look out on our website.

October Wednesday 3 – What we’re doing in portfolios // 12:00 – 13:00 A round up of the quarter and what we have been doing behind the scenes.

Wednesday 10 – 7IM panel debate // 18:30 – 20:30 Burgh House, New End Square, London NW3 1LT 7IM will be joined by a panel of experts to discuss our chosen topic. More details to follow closer to the date – please keep a look out on our website.

Thursday 18 – Making better financial decisions // 18:30 – 20:30 Central London venue to be confirmed on our website nearer the time.

Another evening with Greg Davies – but in a different location. Greg, an expert in financial decision-making, will explain the hard science behind how we make decisions. You will learn some practical rules of thumb to help you make confident and informed decisions for your retirement.

Access all our previous webinars by using the link below: www.7im.co.uk/webinars Keep up-to-date with upcoming events and webinars.

Follow us on Twitter @7IM_Private 09

Doubling your budget to pursue your passion Sophie Kilvert, Relationship Manager

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piece of research in 2016 highlighted that some 95% of British adults have a hobby. Of course, the level of passion for it will vary, from the occasional dabble to one pursued day-in-day-out.

Indeed, that same study showed that 26% of those surveyed said that they spent more time on their hobby than they did on their social lives. Meanwhile, for many, hobbies are a means to a social life.

Whether it’s classic cars, game shooting, stamp collecting or the wine, many of our clients (and therefore probably quite a few more people) haven’t thought about how investments can help double their budget to pursue that passion. Investing over the long term can mean that you can sustain a hobby or two long after you’ve retired. A lot of people only start investing after some sort of a ‘life event’ e.g. having children, getting divorced or inheriting some money.

However, the idea of kick-starting some investments because there is something you actually want to do may spell an end to procrastination.

This is good as the more time you spend invested the better, and this is down to the power of compounding. This can be particularly potent if it’s acting on both the returns from your original investment, as well as the pay-outs from owning the investments (i.e. coupons from bonds or dividends from shares).

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Let’s think about Mrs Jones who invested £500,000 in the FTSE 100 ten years ago.

She reinvested all her dividends and is now sitting on the princely sum of £959,853, almost double her initial investment. Now she has retired, she can use this money to fully pursue her hobby of classic car racing up and down the country.

Mr Smith, meanwhile, took out the dividends that he received and spent some of the money on rare stamps every now and then.

The rest sat in cash. His initial investment has also grown and is now worth £657,780 – some £300,000 less. It also means he doesn’t have quite as much money to enable him to collect even more special stamps, now that he has the time to enjoy them in retirement.

If all this makes sense, perhaps it’s time for you to rethink your investments for the long term. Long term means different things to different people and we can all see how the prospect of saving for an unknown lifestyle at some point in the distant future can easily be put off. Now, if you were investing for something that you can imagine doing that’s fun and achievable, perhaps it’s time to make a call.

Lifestyle

Ready to pursue or already pursuing your passion?

Call us or your relationship manager on 020 3823 8678

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Interview

A day in the life of…

Mark Endacott, Relationship Manager

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very working day starts for me at 5:30 as I walk my dog Pepper, come rain or shine. A Miniature Schnauzer, as the breed suggests she’s a relatively small dog, but she’s still a terrier and so needs a good 45 minutes of exercise each day to stay (somewhat) sane.

Then it’s back home, out the door as quickly as I can, off to the nearby train station and into London. By 7:30, I’m sitting at my desk with a large cup of black coffee. Then it’s a case of checking my emails, planning my day – where do I need to be, when and who am I meeting – and thinking through what I need to do ahead of these meetings.

At 8:30, every Monday (coffee gone by then), I’ll attend the Investment Management Update meeting. This summarises what happened in the last week, what we expect to see taking place this week in global financial markets, and what that means for the broader economy. We also review any political news, given how the implications are becoming increasingly entwined with financial markets, and which can in turn affect our clients and their portfolios.

Then I get to the best bit of any day – meeting and speaking with clients.

I love the mix of office time and getting out and about to see people.

My clients are an interesting bunch – from all walks of life and they are an absolute pleasure to work with. I tend to have at least one face-toface meeting a day. This can be with an existing client, updating them on their investments, as well as their bringing me up to date on their current situation and discussing how that might change any plans we’ve put in place. Or I can be introducing 7IM to a new client, getting to know them and their family’s circumstances, and setting them on a path that should help them achieve their financial goals and aspirations.

Once back in the office, I begin implementing any agreed plans, making sure that what my clients need doing, gets done in a timely fashion. The day end sees me probably tucking into a nice Italian meal – my mother-in-law makes a mean spaghetti Bolognese (which is bound to have the purists reading this scoffing), and more often than I should, a nice glass of Chianti or Montepulciano.

By 23:30 I’m in bed to begin the next day fresh and ready for my clients – oh, and Pepper.

Want to talk to someone down-to-earth like Mark?

Call us on 020 3823 8678.

12 Any reference to specific instruments within this document are part of widely diversified portfolios and do not constitute an investment recommendation. You should not rely on it as investment advice or act upon it, and should address any questions to your financial adviser. The value of investments can vary and you may get back less than you invested. Tax rules are subject to change and taxation will vary depending on individual circumstances.

Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority and by the Jersey Financial Services Commission.

Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.

Summer 2018