SKQ Issue 5 by SKFinancial

issue 5

SKQ A publication from

WELCOME to issue 5 Spring is upon us! The Easter holidays are getting closer, here’s hoping for some good weather. We have so missed seeing people. We bet you have too! It’s so strange not being able to be with everyone in the office. It’s not been easy, but we are coping. It’s been good to be busy. We managed to enjoy our annual Christmas party (see final page), but with Covid restrictions it will be one to remember. Secret Santa went postal. We had a competition as to who could dress the most festive, the winner being Tracey, and David was the ultimate Quiz Master in our festive ‘pub’ quiz. Before we closed the office for Christmas, we delivered a variety of home cooked food, cakes and treats to the charity Centrepoint (Cricklewood site) to enable the young residents to enjoy some treats at Christmas. We also have a new addition to the team, Jade Manley. Jade will join us on a part time basis to support the new business administration and help with the client servicing. This issue features articles on mind power, being aware of how we communicate, a Q&A on investment platforms and addressing that multi-billion trend in the market – cybercrime. One of the progressive things we did at SK last year was to set up a Mind Gym. We worked with Nick Elston, an expert on mental wellbeing to help facilitate these sessions. It was really helpful in these uncertain times to get a clearer and candid understanding of ourselves and to be able to listen to others about their thoughts and feelings. On the subject of anxiety, Nick explained that he once wrote down all of the things that he was anxious about. 128 things! How many of them became a reality? None. It just helped him to write these worries down and to think them through. Nick also shares some words of experience around personal health. As always, the SK Team is here for you.

Chloe

Editor chloe@skfinancial.net We encourage you to share our magazine with those you think may find it useful. If you have any feedback or would like to contribute to our next issue of SKQ, send Chloe an email at chloe@skfinancial.net SKQ issue 5 | 2

CONTENTS 4

Only 7%? – Thoughts from Kunle

Quarterly Market Commentary

Keeping all your investments together under one roof

Mind Gym

Be Scam Aware

Get to Know Richard

SK Recommends

SKQ issue 5 | 3

ONLY 7%

thoughts from kunle It’s been another challenging start to a new year. I am buoyed by the fact that Spring is here and the days should be lighter and brighter – no weather predictions here though! I have noticed an increase in email and text communications involving clients, team members, contacts, friends, offers of help and many more. What I have also noticed at times is the length of some of these communications. It then reminded me of the 7% rule - where just 7% of how we communicate is down to the words we choose. How do we truly know in a lengthy email or text message that our communication has been understood correctly by the recipient? Are we aware of how they are feeling when they have received this communication? What time of day was this communication sent? Was the high importance flag to the email necessary? I am not sure about you, but I have misinterpreted emails and text messages. Reading what I wanted to read, understanding what I thought I understood. However, I am a human and not a robot, so why have I become so reliant on these forms of messaging? Ease, efficiency and sometimes being lazy perhaps. In 1971 (what a great year!) Albert Mehrabian published a book entitled “Silent Messages” focusing on how a person says something and the way that person can say so much over and above the words they use.

TONE OF VOICE

RDS

BODY LANGUAGE

55% is attributed to body language 38% is attributed to the tone of voice 7% of our communications are attributed to words Given the “living at work” environment we are experiencing, I feel it’s important to remember Mehrabian’s work. So what have I changed? If I receive a lengthy email, I read it and then request a call with the person to check my understanding. Similarly, if I send a lengthy email I suggest arranging a follow up call. It has helped to check what has been said, what has been understood and “it’s good to talk”. I do enjoy the video calls. I have been trying to do these meetings in 30 minute slots rather than an hour as they can become draining. Often on telephone calls with clients or contacts I choose to do walk and talk chats. It just helps to get the creative juices flowing and can be quite challenging when I am walking up hills. Trying to mix up the scenery as best as possible helps. It also reminded me of what my former coach, Larry Jopp, taught me: “Kunle, always understand who you are talking to.” It’s important to be understood. SKQ issue 5 | 4

“Often on telephone calls with clients or contacts I choose to do walk and talk chats. It just helps to get the creative juices flowing ”

QUARTERLY MARKET COMMENTARY By Chris Fleming, Investment Services Director, Square Mile

Spikes in government bond yields have been receiving close attention recently. Their upward movement does not just relate to UK gilts, but a large proportion of the global government bond market, from US Treasuries to Japanese, Australian and European sovereign debt. Yields on government bonds have effectively been at all time lows since 2008, when huge stimulus packages were pumped into the market and the term quantitative easing first became widespread. However, it was not until 2016 when the yield on a ten-year bond first went below one per cent in the UK and went on to collapse to around 0.5% before gaining ground. At the height of the market sell off last year, we saw government bond yields fall to new lows, tanking to 0.08% in the UK at the ten-year level. Indeed, some parts of the yield curve fell into negative territory as the Bank of England discussed the knotty issue of moving the base rate to below zero. This pattern has been repeated around the globe. Given this recent history, what has caused yields to move north again? In the UK, the Bank of England set the ball rolling in early February when it began to adopt a hawkish response to negative interest rates, marking the point at which yields started to rise. At the same time, the prospect of inflation started to become a concern. Oil prices, which in 2020 were in negative territory, started to climb while OFGEM, the UK energy regulator, raised the energy price cap, followed more recently by the hike in the Consumer Price Index (CPI). Inflation is no friend to a fixed coupon bond as it erodes its purchasing power. All the same, despite the fact that CPI numbers are moving upwards, they are still low by historic standards at 0.6%. We see a similar picture in the United States. The proposed shift to average inflation targets implied that the Fed is willing to let inflation move above its explicit two per cent target. This spooked the market and yields move upwards. This was compounded by a speech by Jerome Powell which, although aimed at providing some level of comfort to markets did anything but that, resulting in yields moving out further. The Fed has since confirmed that they are monitoring this situation and thereby opening the door to intervention should yields move too far.

What does this all mean for investors? Gilts and US Treasuries are widely seen as safe haven assets, or at the very least, the risk-free rate. They are the foundation from which dividend discount models are constructed and provide the basis for credit spreads. As a result, we have seen corporate bond yields shift up. In a balanced portfolio they also have the effect of hedging against a falling equity market. Investors fly to safe haven assets when there is a market sell off, as demonstrated by the seven to eight percent returns we saw from gilts in Q1 2020. However, with UK government debt comes greater interest rate exposure, otherwise known as duration. The duration of the UK Gilt market is about 13 years, which implies that for every one per cent change in yield, investors will experience a 13% swing in price. This figure is significantly lower for US treasuries – more like seven to eight per cent – which is why this market looks more attractive in our view. Given we have just experienced an uplift in UK yields of about 0.5%, investors would have lost 6.5% if they invested in the index alone. This loss is nonetheless around half of that an investor would have suffered from a position in US treasuries. From a relative position, this has been beneficial to lower risk portfolios as they have had significantly lower gilt exposure than their benchmarks. However, in absolute terms, the small government positions held have had an impact on portfolio values. How does this affect our outlook? It is still early to draw any hard and fast conclusions on yields given that we are only now beginning to see them return to their pre-Covid-19 levels last seen at the beginning of 2020. It is very difficult to call which direction they will move from here but we do not believe central banks will let yields move out too far as this will have a severe impact on the cost of servicing their high levels of debt. This is certainly the tone of discussions in the US, where the Fed is keeping a watchful eye. Square Mile’s investment team is monitoring this situation, and prospects for inflation, growth expectations and central bank announcements, very closely. If yields do move up further, we may consider taking tentative positions across portfolios to sit alongside the other diversifying bond assets held. Our thoughts expressed in this update relate only to the portfolios we manage, or advise on, on behalf of our clients and as such may not be relevant to portfolios managed by other parties. SKQ issue 5 | 5

SKQ issue 5 | 6

KEEPING ALL YOUR INVESTMENTS TOGETHER UNDER ONE ROOF By Alexander Iveson, Senior Sales Manager Over recent years, technology has had a profound effect on us all. We’ve grown used to managing our lives through our smartphones, for example, and the way we work today has been revolutionised by the internet. Saving and investment has changed considerably too, with technology facilitating the emergence of investment platforms. But what exactly is a platform? We put our questions to Alex Iveson at Fidelity FundsNetwork, which is one of the UK’s leading platforms. What is an investment platform? A platform is essentially a ‘one-stop-shop’ for investors. They allow you to invest with a range of fund companies all in one place – you no longer have to deal with numerous different companies. They typically offer lots of choice too – Fidelity FundsNetwork, for example, offers over 5,000 investment options from all the leading companies. We also provide a range of tax wrappers, such as ISAs and a pension.

Are there any other advantages of having all of one’s assets on a single platform? Having everything together means it’s much easier to track your investments. Many platforms, for instance, give you access to your account 24 hours a day, 365 days a year, through a secure website. You can see an instant valuation of your accounts and investments, check regular payments and even analyse your portfolio. You also receive consolidated documentation meaning you’re not inundated with paperwork. What are the risks of investing with just one platform? Are there protections in place? Yes, your money is protected by strict regulatory requirements. When you invest in funds through us, for example, they are held by Fidelity using a nominee structure. This allows us to administer your investments efficiently, while ensuring that you are clearly identified as their owner. This means in the unlikely event of Fidelity becoming insolvent, any money we owe will not be paid out with your funds. In fact, your money cannot be accessed by any creditors. Of course, Fidelity is also covered by the Financial Services Compensation Scheme and regulated by the Financial Conduct Authority.

We like dealing with companies that are independently owned. How financially stable is the company? Fidelity is an independent company that was established over 50 years ago. We are still owned by the founding family, senior management and staff. As we remain privately owned by the Johnson family we don’t have to answer to shareholders and so can make long-term decisions on behalf of our customers. As at 31 December 2020, we were responsible for looking after £516.9 billion on behalf of over 2.5 million clients around the world. What’s more, Fidelity has a strong balance sheet and liquidity position with own funds in excess of Pillar 1 regulatory requirements. What are you doing to combat cybercrime? Fidelity takes cyber-security very seriously. We use proven, industry-recognised security tools and processes to protect against fraud and security breaches and regularly upgrade this protection in response to advances in security threats. We are also a member of Cifas, the UK’s fraud prevention agency. Can you tell us about any new developments that have benefitted customers? We are delighted to say we’ve made a multi-million-pound investment in our platform over the last five years. This has enabled us to significantly boost the services we offer to our investors. A particularly popular development has been the introduction of the Fidelity App. This allows anyone who has registered for our online services to view their account whenever they wish and wherever they may happen to be. We’ve also introduced a brokerage service, which allows our customers to trade individual stocks and shares. If you have any further questions about investing through a platform, simply drop us a line at SK Financial.

SKQ issue 5 | 7

MIND

GYM IT'S UNDER THE GREATEST PRESSURE THAT THE GREATEST DIAMONDS ARE BORN...

I've always been a bit of a space geek, a bit of a sci-fi nerd - but especially through lockdown I've been immersing myself in reading, watching and listening to lots of content about space exploration, stars and the planets.

During the recent months especially, I have spoken to many people going through different challenges, personally and professionally.

I was watching a fantastic show called How The Universe Works - it was talking about the theories that when stars die, the extreme heat and pressure created gives birth to a 'White Dwarf' - which in turn will crystallise and forge a planet sized diamond!

You have at least survived it - because you are reading this!

Every challenge you have ever been through has passed.

But a lot of the time we can learn, grow and thrive through the experience and its lessons. •

Where you are right now does not define you.

•

There are lessons in everything, even the 'negative'.

•

Opportunities are everywhere you only need to look in the right places.

•

Ask for help - this will bring a new angle, a new perspective.

•

Compassion and kindness are key - not just to others, but to yourself too.

•

Harness the energy of your experiences as a catalyst for true change.

•

Don't stand in your own way review, forgive, evolve and go forward.

I love that. I think it is a great analogy for life and for business. Could it be that our greatest excitements, successes and achievements - would not have happened if it wasn't for the 'heat' and the 'pressure' of our own adversities, that we experience along the way. That would then stand to reason that if you are experiencing those adversities, those challenges right now - it could be creating an amazing outcome, but we just don't see it yet.

"Your biggest adversity could forge something beautiful, something exciting, something powerful!" Something that never would have existed without you going through your 'stuff' in the first place...your 'diamond'. Keep on keeping on... Nick Elston is a leading Inspirational Speaker on the Lived Experience of Mental Health, creator of unique Mental Health strategies, a Transformational Speaking Coach and Mentor. www.nickelston.com

SKQ issue 5 | 8

SKQ issue 5 | 9

GET TO KNOW: RICHARD

A member of the SK team tells us a bit more about their life, loves and future plans…

I joined SK Financial towards the end of 2018, having provided outsourced Paraplanning services to the firm since 2014. I am blessed with a wonderful partner in Claire who’s put up with me for nearly 30 years, and two beautiful boys Louis and Isaac who are the light of my life. I have been fortunate to experience many beautiful places, and I count an overland tour from Brazil to Chile and back as the highlight. I am a supporter of Bristol City Football Club and hope to return to Ashton Gate once permitted.

SKQ issue 5 | 10

When not hunched over my laptop, I take particular pleasure in reading. I am a bit of a bookworm!

I tend to blitz through authors’ works in sequence rather than choose a book piecemeal. In my twenties it was mainly Tom Sharpe, in my thirties I read practically everything by Ian McEwan, and in my 40’s (and ahem, early fifties) I’ve enjoyed reading Robert Harris. One of my favourites of his is The Fear Index, a thriller amidst the backdrop of high finance. Guiltiest Pleasure – Breaking chunks of Cadburys Dairy Milk Chocolate into the bottom of my Fruit & Nut Muesli of a morning. Shhh! Don’t tell anyone.

SK RECOMMENDS

Each issue we share details of a few of our favourite things:

Neil Recommends

The movie ‘Soul’ on Disney Plus for family viewing, my girls loved it!

Michael Recommends

Podcast – Off Menu, comedians Ed Gamble and James Acaster invite special guests into their magical restaurant to each choose their favourite starter, main course, side dish, dessert and drink.

Chloe Recommends

Gousto Recipe box, all the ingredients you need to make up to 4 meals. As well as improving your cooking skills, the best part is no food is wasted at the end of the week as you’re given the exact amount needed for each recipe.

Richard Recommends

This is Us – Drama Series on Amazon Prime (now in season 6). Epic family drama which really draws the viewer in.

David Recommends

The BBC Drama the Serpent – based on a True Story, eight episodes and a great watch.

Kunle Recommends High Performance podcast presented by Jake Humphrey. He interviews sportspeople and wants to understand how they deliver high performance.

Tracey Recommends Walking various parts of the Thames path - it’s 184 miles, so plenty to choose from! Recently, I have done Tower Bridge to Albert Bridge.

Jade Recommends Original Flava: Caribbean Recipes from Home by Craig McAnuff and Shaun McAnuff.

Emma Recommends Cote at Home, for a restaurant quality meal you can cook at home.

Lesley Recommends Walking the North Norfolk Coastal Path which is rather lovely, if you like walking of course. SKQ issue 5 | 11

“You can't stop the waves, but you can learn to surf.” JON KABAT-ZINN

SKF Trading Ltd trading as SK Financial. SK Financial is directly authorised and regulated by The Financial Conduct Authority.

SKQ issue 5

SKQ Issue 5