Building Personal Financial Futures SPRINGJOURNAL/SUMMER|2022
CONTENTS3FINANCIALPERSONALBUILDINGFUTURES 04. MY CLIENT WANTS TO USE WHATSAPP – WHY AND WHY NOT? 17.12.09. ETFS LEFT IN UNPRECEDENTED POSITION32.28.24.20. EMPLOYERS CAN DISMISS WHISTLEBLOWERS BY SEPARATING THEIR CONDUCT FROM THE FACT THEY ARE A WHISTLEBLOWER BEST PRACTICES FOR MODERNIZING CLIENT MANAGEMENT PIMFA’S UNDER 40 FORUM FINDS STARK GENDER DIFFERENCES AND A PRESSING NEED FOR FINANCIAL EDUCATION IN NEW RESEARCH MASTERING THE CUSTOMER EXPERIENCE IN INVESTMENT MANAGEMENT SMALL COMPANIES WILL HAVE TO FILE P&L ACCOUNTS UNPACKING FIVE COMMERCIAL PROPERTY MYTHS ARE YOU RESILIENT TO A RANSOMWARE ATTACK?36. WHAT DO WEALTH MANAGEMENT CLIENTS EXPECT IN 2022?40.
Banks and financial institutions have been warning staff and clients of these risks, deploying secure email, portals, requiring call-backs for any transactions and regular cyber training to ensure the security of communications. But all these workarounds have created huge friction for the users, resulting in clients (and staff alike) asking why professional communications can’t be as simple as using WhatsApp. So why can’t WhatsApp be used? It is secure after all (as it is encrypted) - or is it? Could recording these channels be enough?
PIMFA.CO.UK MY CLIENT WANTS TO USE WHATSAPP –WHY AND WHY NOT?
However, email still remains the main communication tool in the business world with 333 billion emails sent every day, despite becoming unfit for purpose. 85% of emails are spam clogging up users’ inboxes but, even more importantly, email is the biggest vector of cyber fraud and phishing attacks with 92% of all attacks starting from this channel. Other usual business channels are not faring much better. “Scam Interceptors” on BBC 1 has been an eye-opener for many viewers showing how fraudsters target these unauthenticated channels (i.e. users are not verified) to obtain sensitive data and commit their crime.
Over 100 billion messages on WhatsApp will be sent today alone. WhatsApp and other social chat platforms have changed the way we communicate with our family and friends and across generations. It has effectively replaced email in our personal lives as it is so intuitive and convenient to use.
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2,000%
DID YOU KNOW?
INCREASE IN WHATSAPP SCAMS IN THE LAST 12 MONTHS
328%83% OF ORGANISATIONS HAVE EXPERIENCED SUCCESSFUL EMAIL-BASED PHISHING ATTACKS INCREASE IN SMS-BASED SCAMS 69% OF COMPANIES SUFFERED VOICE (VISHING) ATTACKS
Unfortunately, encryption alone does not ensure the security of professional communications. You first need (1) to know the identity of the participants at all times and (2) that the information is accurate and has not been modified. According to an analysis conducted by Lloyds, the number of WhatsApp scams has rocketed by 2000% in the last 12 months. With over 2 billion users Worldwide, it is hardly a surprise that it is a target of choice. The most common WhatsApp scams remain impersonation fraud from a bank, the police or HRMC, fake supermarket vouchers to redeem or having your own account hijacked.
To achieve the high standards we require, the app has been engineered from the ground up to ensure each user’s identity is verified & trusted, their privacy maintained, uses bespoke and confidential engagement rules, with business data kept secure and protected in line with regulatory requirements.
QWIL
REQUIREMENTSUSERWHICH“WHATSAPP”DESIGNEDSPECIFICALLYTOBETHEALTERNATIVEMEETSBOTHANDPROFESSIONAL 1 https://www.thetimes.co.uk/article/jp-morgan-fined-200m-over-staff-using-personal-devices-for-work-messages-3vflthfsb 2 https://earthweb.com/how-many-emails-are-sent-per-day/ 3 https://www.themoneyedit.com/consumer-advice/whatsapp-scams 4 https://venturebeat.com/2022/02/22/22-very-bad-stats-on-the-growth-of-phishing-ransomware/ 5 https://www2.deloitte.com/my/en/pages/risk/articles/91-percent-of-all-cyber-attacks-begin-with-a-phishing-email-to-an-unexpected-victim.htmlSPRING/SUMMER6 JOURNAL | 2022
QWIL MESSENGER www.Qwilmessenger.com
LAURENT GUYOT CHIEF REVENUE & FINANCIAL OFFICER
Our platform approach, with one unique instant messaging app and entry point for both clients and staff of multiple firms and their brands globally, is supported by complex and proprietary technology design. This allows us to deploy our servers rapidly across multi-jurisdictions and host to almost any data centre, in any location (or locations), at low cost and with instant scalability. Qwil Messenger also has 50 end points to fully integrate within firms’ IT and client management systems with out of the box connectors to Salesforce, IO and AD.
Businesses, clients and close partners do not work in silos. Like the phone, email or face-toface meetings, everyone needs to be seamlessly connected via a global, secure and trusted communication channel. This is the premise of Qwil Messenger. One single chat app making chat safe and compliant when it matters most. Unlike other internal enterprise chat solutions, Qwil Messenger’s single app (both web and mobile) allows us to provide a superior, branded chat experience that is both convenient and familiar for staff, clients and partners. At the same time, we can also safely maximise the benefits associated with what is the most popular and fastest growing form of electronic communication globally.
QWIL MESSENGER SOLVES THE CHALLENGE OF MAKING CHAT SAFE AND COMPLIANT WHEN IT MATTERS MOST So, effectively, none of the information is verified, protected or can be trusted. Like email, or phone calls, everyone can be anyone on WhatsApp, and contact other users.
Firms may consider recording WhatsApp conversations to meet regulatory requirements of keeping an audit trail and avoid the risk of fines such as JPMorgan’s $200m (£149m) for allowing staff to use personal devices and services such as WhatsApp to send work messages. The fact remains, no sensitive information should be shared on this channel. Clients may be asking to use instant messaging technology as it is more convenient, but they also want the channel to be useful and safe (i.e. be able to transact). It is therefore the responsibility of every firm to provide the professional tools to securely (and in full compliance) communicate, internally and externally. This is one time where the client is not right. MESSENGER HAS BEEN
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More detail: Under whistleblowing law a worker, which is a wider category than simply employees, must not be subjected to any detriment by their employer on the grounds that they have made a protected disclosure. In addition, if the main reason for an employee's dismissal is the fact that they have made a protected disclosure, that dismissal will be automatically unfair. When considering what the main reason was for the dismissal, the Tribunal will, as a general rule, only look at the motivation of the decision-maker. However, in 2019, the Supreme Court held that there is an exception to this rule. Where a person in the hierarchy of responsibility above an employee determines that the employee should be dismissed for a reason but that person hides this reason behind an invented reason which the decision-maker adopts, the reason for the dismissal is the hidden reason, rather than the invented reason.
The Court of Appeal has recently heard a case which looks at this issue. While we await their decision, here’s a reminder of the current position.
A whistleblower who was dismissed for criticising a colleague was not automatically unfairly dismissed. The Employment Appeal Tribunal (EAT) confirmed that when determining the reason for dismissal, only in very rare instances will the motives of anyone but the decision maker be attributed to the employer.
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EMPLOYERS CAN AFROMSEPARATINGWHISTLEBLOWERSDISMISSBYTHEIRCONDUCTTHEFACTTHEYAREWHISTLEBLOWERSummary:
Lessons: Employers who are contemplating dismissing an employee in the context of whistleblowing complaints should still proceed with great caution. The line between dismissing someone for whistleblowing and dismissing an employee for their conduct while they are whistleblowing can be a very thin one. Employers should always carefully document the reason for dismissal and if possible the decision to dismiss should be taken by someone who has not previously been involved in the situation that led to the dismissal.
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In this case, Ms Kong was an employee of Gulf International Bank (UK) Ltd as Head of Financial Audit. She raised concerns about a legal agreement relating to a new investment product. She set out her concerns in a draft audit report which she emailed to the Head of Legal, Ms Harding (who was responsible for the agreement) and to others. It was later accepted in the Employment Tribunal that, in raising these concerns, Ms Kong had blown the whistle. She was therefore protected by whistleblowing legislation. Ms Harding disagreed with Ms Kong’s concerns. She went to Ms Kong’s office and confronted her. During this conversation, Ms Kong questioned Ms Harding’s legal awareness about the relevant issue. This was followed by exchanges of emails. Ms Harding thought that Ms Kong had impugned her integrity and raised the matter with the Head of HR and others. She said that she was very upset, she could not see how she could continue working with Ms Kong, and declined mediation. The Head of HR, the CEO and the Group Chief Auditor came to the collective view that Ms Kong should be dismissed because of her manner and behaviour. Ms Kong was dismissed and brought claims in the Employment Tribunal. Ms Kong’s claim of ordinary unfair dismissal was successful. A claim of whistleblowing detriment would have succeeded, but it was out of time. She also claimed that she had been automatically unfairly dismissed for whistleblowing. This claim was unsuccessful and she appealed to the EAT who dismissed her appeal.
Mrs L Kong v Gulf International Bank (UK) Limited EA2020-000357-JOJ.
EMPLOYMENT APPEAL
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IMPORTANT POINTS
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DAVID PARTNER,SIMSLONDON EMPLOYMENT DAC BEACHCROFT ww w. dacbeachcroft.com DAVID PARTNER,SPEAKMANLONDON EMPLOYMENT DAC BEACHCROFT w ww. dacbeachcroft.com
The managers had considered that her unacceptable style of interaction had now manifested itself in an incident that was so serious in its impact on a senior colleague, with no prospect of her mending her ways, that she had to go.
KHURRAM SHAMSEE PARTNER, HEAD OF FINANCIAL SERVICES & LONDON EMPLOYMENT DAC BEACHCROFT www.dacbeachcroft.com IN THE TRIBUNAL (EAT) AND TRIBUNAL’SEMPLOYMENTJUDGMENTS
ARE THAT: It is still the general rule that only the decision maker’s motivation when dismissing a whistleblower will be attributable to the employer. It will be highly unusual for the exception to this rule to apply. Here, the decisionmakers had not been materially misled about what had occurred by Ms Harding “inventing” the reason that she was upset, nor was she seeking Ms Kong’s dismissal or in the hierarchy of responsibility over Ms Kong. The exception would therefore not apply. Ms Kong’s whistleblowing disclosures could, in this case, be separated from her conduct. Ms Kong argued that she had in effect been dismissed for whistleblowing because she had questioned Ms Harding’s legal awareness or integrity, which was inseparable from the whistleblowing. However, the EAT and Tribunal considered that what had motivated the dismissing managers was not Ms Kong’s whistleblowing but the way in which she had conveyed personal criticisms to Ms Harding. Ms Kong had been involved in similar incidents before, but no action had been taken.
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Picture a financial services company that gives its clients access to their own branded portal where they can call or text advisors (skipping the hold music), initiate trades, schedule meetings, sign legal documents electronically, and do anything else related to their business needs. Additionally, they would experience the added benefit of full insight into the history of interactions. This paves the way for creating a better service experience. In high-touch businesses where personalized relationships are paramount, client accounts need to be managed for quality service delivery, and with an all-in-one platform for account onboarding, servicing and exception handling, organizations can manage the entire client lifecycle.
• Keep every employee who interacts with a client informed about that client’s needs
Digital strategies give executives and business owners a level of insight and control over their business that simply isn’t possible with antiquated systems.
PIMFA.CO.UK LEARN TIPS AND BEST PRACTICES TO TRANSFORM YOUR CLIENT-FACING ORGANIZATION FOR THE DIGITAL WORLD. BEST PRACTICES FOR CLIENTMODERNIZINGMANAGEMENT
By managing the entire client lifecycle in one platform, businesses can completely transform their processes to reduce costs, retain clients, and dominate their market COMPANIES CAN ALSO TIE TASK LISTS TO ANY ACCOUNT TO:
3. With workflows, organizations can automate routine tasks to better streamline the full client lifecycle.
• Spot gaps in processes to optimize them
That’s good news for innovative leaders, because:
Streamline Processes with Client Interaction Workflows
• A one-stop straightforward digital transformation offers tremendous return because it improves the client experience, while also enabling companies to streamline their internal processes for more efficient organizational practices. Automated Workflows With a digital workflow-centric solution for managing high touch client interactions, organizations can orchestrate both structured and unstructured communications. By customizing workflows as it pertains to their operations, businesses can automate routine tasks and processes, thereby streamlining the entire client lifecycle to meet deadlines. Additionally, on-demand automated workflows eliminate human error for procedural processes. With exception handling and the ability to escalate high-touch interactions as necessary, organizations can deliver just-in-time personalized service while maximizing efficiencies.
• Streamline their service efforts
Client-facing digital experiences have been very much integrated into consumers’ day-to-day lives, but for high-touch service experiences, client interaction workflows can enhance the entire end-to-end business lifecycle.
1. It’s easier than ever for organizations to modernize their management practices through digital technology
Unprecedented Transparency and Efficiency
2. Digital transformation can revolutionize business processes, making organizations more transparent, more efficient, and better able to serve their clients—outcompeting the late adopters and absorbing their market share.
• Identify practices that improve client retention (and double-down on what works)
According to Forbes, 87% of business leaders think digital will disrupt their industry, but only 44% feel they’re prepared for the impending transition.
Digital transformation makes it easier for clients to connect and do business with companies, but that only represents half the equation. Digital gives organizations an unprecedented level of transparency and efficiency. However, disparate, disjointed technology creates more chaos and is difficult to track and manage, so a comprehensive one-stop approach for managing client business from end-to-end.
The on-demand model can be a drain on resources, as clients don’t always need an immediate response to their inquiries. With a just-in-time service experience, organizations can automate workflows so clients can access routine service at their own time, giving clients access to escalate to representatives when needed, without exhausting resources. Clients can reach in whenever they need to access the business and receive just-in-time, individualized Moreover,responsiveness.since management has access to every conversation, every request, and every unanswered inquiry, they can use this data to optimize service. The result is an efficient, seamless, just-in-time service that improves the client experience and supports client retention.
MOXO www. moxo.com
The just-in-time approach is extremely effective in clientcentric service industries, such as banking, healthcare, and other high-touch sectors. Clients in these industries have inquiries and requests around-the-clock, but it’s usually not economically feasible to staff companies 24/7.
On-demand Service vs. Just-in-time Service
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Just-in-time for Service Industries
Even during normal business hours, demand for client support waxes and wanes. Significantly reducing or eliminating hold-times would require over-staffing much of the time. Yes, customers could have their questions answered on demand, but staff would have nothing to do during the downtimes and the cost would be prohibitive.
Just-in-time delivery is a model commonly used in manufac turing and logistics, but its reach is much broader than that. A retail store, for example, could use historical data surrounding product sales to order JUST the right amount of a certain item to keep up with consumer demand, without over-or dering items that won’t sell or inventory that will go to waste (e.g., perishables at a grocery store). This reduces costs and improves their bottom line.
Digital Management and the Just-in-time Model
One of the more pronounced effects of the pandemic has been the significant increase of interest in all things Environmental, Social and Governance (ESG) which has predominantly formed the basis of this year’s new research by the PIMFA Under 40 Forum, returning after a two year, Covid-induced gap.
The younger demographic also reported higher levels of confidence when investing, but evidence suggests that many are making use of unregulated information and are holding investments in new and highly volatile products such as cryptocurrencies, suggesting there is still some work to be done on educating them as to the value of both traditional investments and regulated advice.
UNDER 40 FORUM FINDS
Across the spectrum, age played a significant role in shaping the primary concern of respondents. Younger people appear more aware and concerned with netzero, while older age groups (65+) are more concerned with the affordability of clean energy. This is highlighted by results showing that 72% of investors between the age of 18 and 25 say that all or part of their existing investments aim to positively impact the environment and society, whilst just 29% of 56-75s and 21% of 75+ can say the same.
In fact, financial education has particular resonance, with the younger cohorts highlighting the need for this from an early age; no less than 82% of respondents, in an even split across genders and across socioeconomic groupings, believe that school and college/ sixth form is the most effective time to begin learning about investments and savings. This belief is especially prevalent in younger investors and is clearly a strong argument for the investment of time and money into furthering the financial awareness of school children.
PIMFA.CO.UK
PIMFA’S STARK GENDER DIFFERENCES AND A PRESSING NEED FOR EDUCATIONFINANCIALINNEWRESEARCH
Along with a low-cost professional advice service and the importance of future tech-enabled offerings in the investment market, the PIMFA Under 40 Forum research also takes a closer look at the sometimes starkly differing behavioural patterns of men and women when it comes to their investment decisions.
Recent research from the Centre for Social Justice backs this up, with the startling findings that 24 million adults are not confident handling their money day to day, and that early intervention financial education is absolutely critical in preventing financial poverty and vulnerability later in life. Alongside this, a separate report from the Organisation for Economic Co-operation and Development found that an astonishing 96% of teenagers worry about money every day. Surely this is a wakeup call as to just how vulnerable the average UK family is in terms of financial wellbeing, and how much financial education can help in ameliorating this.
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Whilst their report highlights a number of key indicators as to how best to address both the ‘advice gap’ and the stimuli required to get different generational groups investing with confidence, one of the key objectives of this research was to better understand how age impacts upon opinion, specifically in relation to investments and broader ESG concerns. Of particular interest is how the five basic generational groups differ in their responses to the Environmental and Social categories of ESG.
OR TO REGISTER FOR THE FREE PIMFA ESG ACADEMY,
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Whilst this research shows an overwhelming desire by women for wealth to provide meaning, it also illustrates a significant gap between men and women with respect to their levels of confidence and knowledge when it comes to investment decisions – results indicates that 37% of women do not invest in anything, whilst this figure drops to 26% for men.
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Put together, this research highlights two huge opportunities for our industry, firstly to harness ESG investing as a catalyst to capture and significantly increase the market share for female investors and, secondly, to use ESG as both an educational and a practical tool to stimulate a much broader culture of savings and investment in the wider market, in turn addressing the ‘advice gap’ which so hampers our industry. We look forward to utilising the ideas and innovations from this next generation of talent in our sector to help futureproof our industry and allow its clients to grow and thrive.
By 2025, 60% of Britain’s wealth will be in the hands of women (Barclays, 2020), indicating women’s wealth is growing faster than it ever has done before. With current male life expectancy nearly four years shorter than women’s and whilst most men over 80 (53%) live in a couple, this is the case for just 14% of women in the same age group. Therefore, many more retired and/ or widowed women than men will be caretaking the household income for their offspring at the later stages of their lives.
PIMFA have developed our ESG Academy for both Wealth Managers and Financial Advisers to help them have more effective ESG conversations with their clients, cutting the fluff and de-mystifying the ESG jargon to provide you with a practical commercial appreciation of the issues, regulation and legislation of the ESG arena. FOR MORE INFORMATION, PLEASE CLICK HERE.
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Education around ETF liquidity has been a big focus for the industry since the coronavirus sell-off in March 2020 when fixed income ETFs started trading at all-time high discounts to net asset values (NAVs). At the time, the benefit of the secondary market was clear to see. With securities in the underlying bond market hardly trading, ETFs acted as a source of a price discovery and reflected changes in market sentiment faster than the NAV, which is calculated at the end of the day or not at all if the underlying market is closed. This occurred during the Greek debt crisis when the Athens Stock Exchange was closed between 26 June and 3 August 2015 but ETFs still acted as a source of price discovery as they were able to trade on the secondary market. When the Moscow Stock Exchange closed on 25 February, ETFs continued to trade on the secondary market and revealed the true extent of the carnage in Russian equities. The benefit of ETFs is they can trade on both the primary and secondary market. In the primary market, authorised participants trade the ETF for a basket of shares/bonds in what is known as the creation-redemption process. Meanwhile, the secondary market is where market makers match ETF buyers and sellers and trade the existing supply of ETF shares. In the secondary market, liquidity is generally a function of the value of ETF shares traded while in the primary market, liquidity is more a function of the value of the underlying shares that back the ETF. This is the key difference between mutual funds and ETFs. While a mutual fund trades only on the primary market, ETFs trade both on exchange and on the primary market giving them an extra layer of liquidity. However, by 9 March, the situation had become so illiquid that exchanges across the globe had halted trading of Russia ETFs until further notice, shutting off the secondary market for the first time in history, cutting ETFs off as a form of price discovery and leaving them in a limbo normally reserved for mutual funds.
www.etfstream.com
If there is a de-escalation in the Ukraine war and sanctions are lifted then ETFs could resume trading when the Moscow Exchange re-opens. However, this scenario assumes a peaceful resolution with a complete reversing of the west’s sanctions on Russia which many geopolitical commentators believe is no longer feasible.
The second option is Russia ETFs are delisted and subsequently closed. This is a more likely scenario than the first, especially if sanctions continue and the underlying securities are no longer trading.
With the secondary market closed, it remains unclear what will happen to Russia ETFs in the long term; however, there are a number of potential outcomes.
As Monika Dutt, director of passive strategies for Europe at Morningstar, said: “Right now, we are in a situation where investors might not want to hold Russia, either from an ESG or sanctions-compliant perspective. If there is no investor demand then asset managers will have to make a decision as to whether they want to offer Russia ETFs and if it still aligns with their overall investment philosophy.”
What is clear is the ETF wrapper has landed in an unprecedented position and one that is not likely to be seen again anytime soon.
While the structure has proved its resilience over the years, Russia ETFs provides a useful case study into what can happen when liquidity vanishes entirely from a market that is under sanctions and at war with another sovereign state.
TOM ETFEDITORECKETTSTREAM
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Understanding the nuances of customer experience
MASTERING THE MANAGEMENTINEXPERIENCECUSTOMERINVESTMENTSPRING/SUMMER24 JOURNAL | 2022
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Investment and wealth management is going through a period of rapid transformation, requiring client relationships to be more insight-driven than ever before. High-net-worth individuals are increasingly looking to wealth advisors to proactively bring them new, innovative and cutting-edge ways to invest and count on them to understand changing dynamics of family relationships, wealth transfer planning and the changing attitudes across Millennials and Gen Z.
The role of customer experience in the wealth sector is therefore centred on ensuring relationship managers have the right insights at the right time, so that they are enabled to deliver a highly personalised and valuable return on the time investment of the relationship they are nurturing.
The role of technology Advisors have a powerful role to play in establishing the customer’s relationship across the franchise. By having a complete picture of the customer’s relationship across the bank, advisors can tailor and personalise the experience for their clients.
An effective customer experience programme will also serve as a discovery engine for wealth advisors, giving them the digital edge and enabling them to have more eyes and ears on their portfolio – resulting in reduced administrative time and a higher quality level of service. With technology underpinning a continuous discovery process, advisors can keep up with the ever-changing needs and demands of this market.
Offering a personalised and seamless customer experience is crucial in any industry – but in a space as highly referral-driven as wealth management, it is of the utmost importance.
Research shows that companies which offer a superior customer experience generate nearly six times more revenue than ‘laggards’. When money is on the table, even one negative experience can drive clients to competitors, so identifying at-risk clients and prioritising the efforts of client recovery are key.
For this reason, advisors must have a pulse on any new life events impacting their clientele, for example, selling a business, selling stock, or matters of inheritance. Due to their overly expansive portfolios, changes can happen quickly, and if you’re not on the front foot, and don’t have a good relationship with your client, you may miss out on a potential windfall.
When firms combine data from customer relationship management tools with experience data, they can create a 360-degree view of the customer and give advisors a competitive information edge in managing relationships. In particular, experience management technology is key to improving visibility and control over three key areas of client relationships. Firstly, it can be used for referral management, as a sort of operational tracker. When an advisor creates a new account, they can ask the client if they have been referred, creating an analytics basis upon which further business can be acquired.
So, how can a customer experience programme help wealth and investment managers turn detractors into promoters and carve out a competitive edge?
The asset-growth process must first start with understanding the client in a much more personalised way in order to provide the customer experience they expect and demand. Clients, especially those who fall into the bucket of High Net Worth and Ultra High Net Worth, expect firms to be proactive in how they engage them and require the requisite amount of time to be spent in understanding them and their investment appetites.
Equally, if advisors feel the company’s technology stack THREE AREAS WHERE CUSTOMER EXPERIENCE TECHNOLOGY PAYS DIVIDENDS: KEEPING UP WITH CLIENT PRIORITIES TO DELIVER ADVICE 1 REFERRAL MANAGEMENT
2 CLIENT RECOVERY
The modern realities of wealth and investment management require carefully-crafted experience management programmes that allow organisations to understand client needs and priorities in a holistic manner and empower advisors to drive positive change in moments that matter most for customer retention, loyalty and Throughgrowth.acontinual focus on optimising and developing valuable relationships with highnet-worth clientele, organisations can identify areas of friction and be alerted to early warning indicators that signal costly relationship churn, whilst pinpointing new ways to create memorable experiences that ultimately lead to greater return on investment.
WILLIAM PERRY HEAD OF SERVICES UK
Finally, customer experience management platforms come with a set of tools that help advisors keep up-to-date and even ahead of client priorities. This is done by keeping a pulse on client relationships, and also, by aggregating insights across client segments to devise a wider strategy around them. Advisors must be aware of and be able to navigate the impact of life events where changes in the client’s personal relationships or lifestyle result in wealth transfer. Certain life events lead clients to want to get involved in charitable giving or ESG investing. Equipped with the right tools, advisors can map out key trends in relevant markets to suggest the investment that will best resonate with the client’s values and objectives. Similarly, they can gather feedback from those benefiting from the client’s funds to demonstrate transparency and credibility. In both cases, technology acts as a discovery tool. Taking customer-centricity to the next level Next, to elevate their customer-centricity, firms should evaluate KPIs and benchmarks for continuous improvement. They may want to use a combination of metrics – indicators of trust, advisor response times and client churn – to build an accurate picture of where they are now and where happier, more loyal customers can take them. Sustainable growth is one of the main reasons why wealth and investment firms prioritise the employee experience so highly. By celebrating milestones and listening to the voice of their advisors, they can set them – and their clients – up for success. Technology again can help here to gather insight.
Client recovery and attrition are another area technology can help with, offering early warning signals based on digital behaviours, so that advisors can take proactive action to avoid loss of the relationship. With most of the wealth-in-play trading hands, rather than being created anew, advisors need to ensure they have all the information to retain or win back business easily. When a client decides to leave a firm, or consolidate from multiple advisors to just one, chasing the relationship can be futile. Instead, firms can collect feedback – including signals such as underlying behavioural markers –through an ‘exit interview’ style interaction with the client and re-evaluate the relationship six months down the line.
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MEDALLIA www.medallia.com
VALUABLE
Focus on customer-centricity
FINANCIAL
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doesn’t adequately support them or align with the level of service they provide to clients, they will be inclined to take their talent and relationships elsewhere. Management teams can ensure that advisors’ needs are met by creating a continuous ‘feedback loop’, where any friction in employee journeys is remedied before any breakdowns in relationships can occur.
Advisors, just like customers, leave behind traces of ‘experience signals’ in their journey with an organisation. Unfixed IT problems or lack of effective coaching and performance reviews can leave advisors feeling unheard and unvalued.
Because Companies House aims to become fully digital, directors will have to file digitally tagged accounts, using iXBRL. Once information is tagged it can be easily searched and cross-referenced with data by HMRC. If you are setting up a company or making filings, you will have to have a verified identity with Companies House (no more Fred Flintstone’s listed as directors then!). There will also be restrictions on the use of corporate directors and officers, to maintain a direct link to natural persons.
Perhaps the most noticeable changes proposed for small and micro-entities will be the increased transparency required in annual filings. Evidence has suggested that data from micro-entity filing is of little value as it does not contain sufficient information to give a true and fair view of the financial position of the company. This fact also means that micro-entity filing options are attractive to fraudsters. There is also complexity in the filing options, as many of you will fully appreciate, so the government will simplify the filing regime. There will be filing options for micro and small companies, but the options for abridged or “filleted” accounts will be removed.
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Companies House reforms will help combat economic crime, but micro and small companies lose options for abridged or filleted accounts and will have to report profit and loss (P&L) statements.
To implement these changes Companies House aims to become a fully digital organisation. To increase transparency in annual filings there will no longer be options for abridged or filleted accounts for micro and small companies, removing some of the privacy previously enjoyed by these entities.
It is incredibly simple to set up a new company in the UK and there is no requirement to verify the directors’ identities. It is also incredibly simple to file almost anything, including micro-entity accounts, whether entitled to do so or not. In order to identify suspicious activity we need to know more about these companies.
Transparency in annual filings
SPRING/SUMMER JOURNAL | SMALL2022 COMPANIES WILL HAVE TO FILE P&L ACCOUNTS
The government is accelerating the planned changes to Companies House, having now issued its corporate transparency and register reform whitepaper with the detailed proposals, accompanied by a draft economic crime bill (at last).
ARE YOU READY FOR THIS CHANGE IN COMPANY REPORTING RULES?
Russia’s invasion of Ukraine is a humanitarian disaster, but it also reminds us of the potential impact of sanctions, anti-money laundering regulations and the role of Companies House.
Digitisation, powers and identity verification
The impact of these proposed changes on those who are not money launderers – but just law-abiding business people with registered companies – is potentially significant.
Simplicity vs privacy So, a win for simplicity, as the accounts to be filed will be exactly those that have been prepared for shareholders. It is also a win for companies that need credit as, under the current regime, credit rating agencies can rarely gather sufficient information from Companies House to form an opinion on a small or micro-entity’s credit worthiness. The downside for many is the loss of privacy due to the publicly filed profit and loss accounts, which will become another price of limited liability.
Abridged and ‘filleted’ accounts
Results of the reform and necessary actions
Where all the shareholders agree, small companies can currently take advantage of the ability to abridge their accounts. This reduces the detail in the accounts that both shareholders and Companies House receive, compared to the basic small company provisions. The option for abridged accounts will now be scrapped. Current requirements permit a small entity (including a micro-entity) to omit the profit and loss account and related notes, together with the directors’ report, when filing at Companies House. Removing this filleting option means that all companies will have to file a profit and loss account as well as a balance sheet and small companies will have to file their directors’ report. Micro-entities will retain an exemption from the requirement to prepare or file a directors’ report, however.
It is probably a good idea to consider the impending changes and their impact on your business sooner rather than later.
Having all of your financial information in one place will benefit your business and reduce your accountancy fees.
The speed of implementation will vary, with economic crime issues likely to be rushed through given the current global situation, but with changes to the accounts taking longer.
JEREMY GREENE HEAD OF SUPPORT AND QC MYREGDATA www.myregdata.co.uk
Using accounting software is a quick way to get on top of your business finances, especially if you are handling it manually or using spreadsheets. MyRegData is a Cloud software package, built on an accounting system, with the ability to file RegData returns to the FCA, VAT returns direct to HMRC, and produce management accounts.
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While some uncertainty will continue within some commercial real estate sectors, as the world adapts to a new normal post pandemic, the negative forecasts for the sector as a whole appear overblown.
Yet despite the potential long-term benefits of including commercial property in a diversified portfolio of assets, misconceptions may deter some investors from allocating to real estate.
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WE EXPLORE SOME OF THESE COMMON MISCONCEPTIONS AND EXPLAIN HOW COMMERCIAL REAL ESTATE INVESTMENT CAN BE A VALUABLE ADDITION TO A PORTFOLIO FOR TODAY’S LONG-TERM 1INVESTORS.INVESTINGIN COMMERCIAL PROPERTY IS UNPREDICTABLE POST-COVID-19
The global pandemic created uncertainties for the future of commercial real estate. As companies were forced to move to home working, there were predictions that this model would become permanent. However, hybrid working appears to be the favoured approach as the world emerges from lockdown, and commercial property is still very much in demand. In the UK, the Q1 2022 RICS Commercial Property Market Survey shows a 30% increase in demand for office space compared to the end of 20212
There have been commercial real estate winners borne out of the pandemic. Real estate sectors, such as logistics, have benefitted from structural changes within the retail market, picking up the lost revenue from the high street. Sectors that are less cyclical, where demand is less influenced by the economy, have also seen continued performance. These include healthcare and social housing, which all continued to operate throughout the pandemic, as the services and care provided at these properties are essential. Such sectors are indicating long term trends, highlighting increased demand in the future and are also heavily undersupplied in terms of quality real estate available.
UNPACKING SPRING/SUMMER32PROPERTYCOMMERCIALFIVEMYTHSJOURNAL|2022
Policymakers are attempting to tackle the corrosive impact of inflation rates, which are predicted to pass 8% in 20231, with the Bank of England recently announcing that interest rates would increase to 0.75%; with many analysts expecting rates to increase further in the coming months. In such challenging times, it is understandable that investors seek a flight to safety, abandoning volatile assets such as equities in favour of real assets. Real assets such as property have also proven to be a reliable hedge against inflation, with many sectors historically outperforming inflation over the long term. Some sectors like commercial long income have leases that commonly include inflation-linked rent increases.
REAL ESTATE SECTORS, SUCH AS LOGISTICS, HAVE BENEFITTED FROM STRUCTURAL CHANGES WITHIN THE RETAIL MARKET, PICKING UP THE LOST REVENUE FROM THE HIGH STREET.
Geopolitical tensions and the ongoing recovery from the global pandemic continue to create significant uncertainty for investors.
Low interest rates, as a result of tight economic policy following the global financial crisis, helped prop up real estate. However, it does not follow that as interest rates start to rise, the commercial property markets will be negatively affected. Property yields and interest rates have a relatively low correlation, as seen after the financial crash of 2008 when interest rates fell, property yields did not follow the same path3
2 RISING INTEREST RATES MAKE INVESTING IN PROPERTY LESS PROFITABLE
INVESTING IN PROPERTY TIES MY MONEY UP FOR THE LONG TERM Property investments can be illiquid. At certain points in the economic cycle, the ease with which you can buy or sell property will vary. Market shocks and other events can mean it costs more to withdraw from property investments, as we saw during the financial crisis and post Brexit. However, liquidity varies across the assets within real estate and the markets in which they are based. By investing in a diversified portfolio of real estate assets through a fund, it can be easier to access listed real estate securities, as well as investing in direct property.
4 COMMERCIAL PROPERTY INVESTMENT REQUIRES A LOT OF CAPITAL Deposits and mortgages for commercial properties are higher than those for residential. Investors looking to make direct investment may need substantial capital. However, investing through a commercial property fund could mean making a minimum commitment of just £5,000.
5 COMMERCIAL PROPERTY IS NOT COMPATIBLE WITH AN ESG INVESTMENT STRATEGY
Properties boasting verifiable green credentials offer attractive investment opportunities in not just the commercial real estate sector, but also residential.
The UK’s built environment is responsible for 25% of the country’s carbon emissions4, which might suggest that the sector is not suitable for investors trying to manage climate change However,risk.in the last two decades, emissions have reduced by 30% as the efficiency of current building stock improves and are replaced by greener alternatives, and policymakers are placing a huge expectation for buildings to be net zero by 2050.
KEY RISKS OF THE FUND INCLUDE: Investment risk The value of shares in the fund can go down as well as up and is not guaranteed. Investors may not get back the full amount invested. Liquidity The underlying assets are illiquid assets when compared with other asset classes such as listed equities or bonds. This fund is intended for investors who can accept the risks associated with making potentially illiquid investments in direct property. Therefore, at times it may be difficult to make investments/sell assets to meet investors’ requests to buy/sell shares in the fund over short time periods.
1 https://researchbriefings.files.parliament.uk/documents/ CBP
For more information on the risks of the fund, please see the fund’s prospectus or KIIDs. 9428/CBP
At the same time, investing in commercial properties with a social purpose – affordable housing, schools and hospitals for example – can also meet investors’ ESG targets while delivering long term value. Far from being mutually exclusive, commercial real estate investment offers a genuine opportunity for investors to make a long term return, alongside making a real difference to society.
9428.pdf 2 https://www.rics.org/uk/ 3 BNP_Paribas_REIM Property yields and interest rates.pdf (bnpparibas.com) 4 https://www.ukgbc.org/climate change 2/ ROGER SKELDON FUND MANAGER TIME INVESTMENTS www.time-investments.com
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AV is the software application that is designed to stop malicious software getting a foot hold on your devices and to prevent bad actors (hackers) taking control of your systems.
3 WEB BROWSING CONTROLS. These controls are designed to stop or warn users they are about to visit a dangerous or fraudulent website. To get around the AV software, fraudsters will often take unwitting staff to fraudulent websites. This risk can be minimised by correctly setting the controls in the browser, the AV and the operating system.
We’ve seen too many business owners having to endure it. The awful realisation that digital criminals are inside your firm, stealing and encrypting confidential personal and business information and using it to blackmail you.
You know for sure that your business is going to be severely damaged, and you’re going to have to explain yourself to the FCA, ICO and your clients.
One of the attackers’ favourite ways into a business is via an email. Setting your platform up correctly can make sure that employees are protected from this route in.
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2 EMAIL SECURITY FILTERS.
In the end-to-end journey of a successful ransomware attack, AV will have several opportunities to halt progress. Cyber criminals will attempt to switch it off as early in the journey as they can. Make sure it is centrally controlled, configured by a security specialist, kept up to date and on every device as a minimum.
PIMFA.CO.UK37ARE YOU RESILIENT TO A ATTACK?RANSOMWARE
1 ANTI-VIRUS (AV) SOFTWARE.
Email platforms have filters that check incoming emails for malicious software, dodgy links and if they came from an untrusted origin.
To help you avoid this, here are our top 10 areas firms need to address to stop ransomware.
Ransomware attackers take-over users’ accounts and the more privileges that a user has, the more damage the attacker can do. So an approach of least privilege should be followed.
6 AUTHENTICATION. When working at a non-work location (e.g. at home) how do you tell business systems who you are and how do they authenticate that? Username and password are no longer good enough protection for remote connection. Adding another method of authentication would stop a significant proportion of ransomware attacks.
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SPRING/SUMMER38 JOURNAL | 2022 4 SECURITY PATCHING.
LEAST PRIVILEGE. Every user on your system is assigned privileges that define what they can control, run, and amend.
REVIEW
TAKE A LOOK AT MITIGO’S FULL SERVICE OFFER AT FORWWW.PIMFA.CO.UK/FIRM/MITIGO/MOREINFORMATIONCONTACTMITIGO ON 0208 191 9913 OR EMAIL PIMFA@MITIGOGROUP.COMMAILTO:
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DAVID FLEMING CHIEF TECHNOLOGY OFFICER MITIGO https://mitigogroup.com
10 BACK-UP. This is the process by which your business takes a copy of the systems, applications, and documents for use in an emergency. This is rarely configured correctly, which means that scarily few back-ups survive a ransomware attack, with everything ending up encrypted. Get yourself confident that yours would survive. There is of course more to do, but if you do this top 10 well, it will dramatically reduce your risk. If you do not understand any of the above, please contact us.
The controls and administration of your IT systems have alerts that warn you something is not right. An incident response plan is a rehearsed set of steps that ensure businesses respond effectively to a cyber incident. If you prepare these two things correctly you will have a chance of stopping a ransom attack in its tracks.
REMOTE
ALERTING AND INCIDENT RESPONSE.
7 ACCESS MANAGEMENT. This relates to the documents, files, and folders that your system allows individuals to access. There is a generic setting of “Everyone” in many systems. This means that everyone connected to the system can get to the documents, you do not even have to be authenticated. Access to documents should be defined by role.
PIMFA has partnered with Mitigo to offer member firms a trusted cybersecurity solution to help them protect against cyber-attacks and business disruption.
Software providers like Microsoft or Google (Chrome) issue regular software updates that patch (fix) known Cybervulnerabilities.criminals will use bugs in software to compromise your defences and this is often used in ransomware attacks to get control. The simple discipline of updating these patches is probably the most neglected.
Yet, most clients still yearn for human interactions with their financial advisers. In an industry that has a tradition of personalised relationships and professional meetings carried out over coffee, this is hardly surprising. The experience of the pandemic has intensified this feeling among investors. In the UK, over half of the youngest investment demographic reported a loss of faith in roboadvisers when grappling with the uncertainty caused by the global situation (Capgemini).
PIMFA.CO.UK4141PIMFA.CO.UKWHAT DO EXPECTCLIENTSMANAGEMENTWEALTHIN2022?
These shifts have translated into a mass affluent market made up of a larger cross-section of investors than ever before. And while this presents avenues of opportunity for advisers and firms, incumbent institutions must get to grips with the digital expectations of the incoming wealth management audience.
Even established banks like Goldman Sachs have struggled to draw the attention of mainstream investors, despite an otherwise stable performance in the wealth space (Institutional Investor).
JOSTLING FOR THE MASS AFFLUENT MARKET
With digital as the driving force of industry change, firms that utilise digital technologies to augment their human resources will be in the best position to capture new client segments.
The past few years have seen a rapid acceleration of digital across all sectors. In the wealth management industry, this is a complex paradigm that has conditioned client preferences and financial institutions themselves.
As ever, this starts with an understanding of the definitive shifts in the industry today.
The following article and analysis is drawn from Unblu’s newly released report “The Digital Wealth Management Outlook 2022”, available to download here.
In wealth management, a ripple effect of the digital wave has been the democratisation of investing. An influx of digital players has lowered the barrier to access, generating buzz around robo-advisory and start-ups at the lower end of the market. Meanwhile, the emergent transfer of generational wealth is ushering in a new client demographic—one that will largely consist of Millennial and Gen Z investors.
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From global banking leaders, we’re hearing about a similar demand for security and transparency. The executive of a wellknown wealth management firm told Unblu that, in the wake of the pandemic, the bank’s chief objective was to protect investments and get closer to clients through extended channels.
THE CX IMPLICATION OF NEW CLIENT NEEDS When it comes to wealth management client experience, the solution isn’t quite as simple as migrating each interaction into the digital realm. If client-centricity is truly the objective, digital capabilities should be the means—not an end in itself. In fact, the external shocks throughout the pandemic created a double-sided effect. It accelerated the nascent demand for digital services, but it also reinstated the value of human interactions. In the context of wealth management, the personalised aspect of the client-adviser relationship remains Forindispensable.oneofUnblu’s major private banking customers, the ability to combine different digital capabilities to support client journeys has been vital in upgrading online interactions. Having previously faced challenges with the integration of various CX platforms and tools, implementing Unblu has given the firm a suite of connected features that enhance the quality—and continuity—of client-adviser interactions.
TRANSFORMING WITH THE INDUSTRY, AND WITH CLIENTS Stand-out client experience means transforming with the industry. By taking cues from their clients and anticipating upcoming demands, firms will affirm their relevance in an increasingly saturated market. Digital developments are permeating the industry in every sense. Now, wealth firms should think carefully about how they will locate and leverage the available technology to foster high-touch, human experiences.
The fact that many of today’s investors are coming from tech and digital media businesses is an additional layer of the demographic shift (Capgemini). Among this newer client base, an important pattern is the evolution of interests and value orientations. Because many are digital natives, the expectation for advice on cryptocurrencies and digital assets is steadily becoming more prominent. What’s more, the zeitgeist of responsible business has driven up demand for sustainability scoring in the investable assets. This is true among both individuals and corporate clients. Now that startups and specialist digital platforms are catering to these profiles, established firms should be willing to expand and refine their service offerings.
SPRING/SUMMER42 JOURNAL | 2022 42 Standing before a financial climate riddled with rising inflation rates, staying competitive in a reformed wealth management landscape is no easy task. Honing in on digitally-enabled advisory services looks to be a sound investment in the expanded mass affluent market.
43 DANNY DIRECTORBAGGSOFMARKETING UK UNBLU www.unblu.com
Within the current CX climate, multiple touchpoints are vital for serving clients on their terms. Through an integrated omnichannel approach, wealth management journeys give clients the autonomy to engage with financial advisers at the necessary step. It is only by crafting hybrid, hyper-accessible experiences that firms can expect to meet their clients where they are.
NEW CLIENT DEMOGRAPHICS, NEW DEMANDS
PIMFA WealthTech has been created as a next generation digital marketplace and industry network to drive innovation and enhance collaboration between WealthTechs and wealth management and advice companies, fulfilling one of the key objectives set out in PIMFA’s manifesto to enable digital business transformation through the development and adoption of market-leading technology.
#PIMFAWEALTHTECH | TWITTER: @PIMFAWEALTHTECH | LINKEDIN: PIMFA WEALTHTECH Visit the page here - PIMFAWEALTHTECH.COM 45 DIVERSITY & 2022AWARDSINCLUSION #PIMFADIAwards22 BOOKINGS NOW OPEN Join us on October 19 to celebrate all the great work being done in the industry to celebrate diversity and inclusion Packages will include: • Drinks reception • Delicious 3-course dinner • ½ bottle of wine per person • Fantastic networking opportunities & entertainment Table of 10 £2,750 + VAT Half-table (5 seats) £1,450 + VAT To book your table contact the events team on events@pimfa.co.uk LIMITED AVAILABILITY SO BOOK EARLY TO AVOID www.pimfadiawards.awardstage.comDISAPPOINTMENTPLATINUMSPONSOROFFICIALNETWORKINGSPONSORGOLDSPONSORS SILVER SPONSOR
PIMFA WealthTech is the new centre for advice, intelligence and insight on the latest technologies and trends impacting the industry, providing fast-track market research, expert forums and Tech Sprints.
The platform draws on the expertise and resources of digital service providers and is working with Morningstar as our principal strategic partner to support this industry-wide digital transformation.
SPRING/SUMMER46 JOURNAL | 2022 Alongside updates from PIMFA, the Journal includes several useful inputs from our associate member firms. These articles are an excellent opportunity to gain interesting insights into the wider industry and to learn more about PIMFA associate members. If you are an associate member who is interested in contributing to future editions of the Journal then please contact: Richard Adler, Director of Strategic Partnerships (richarda@pimfa.co.uk) or Nigel Ross-Scott, Copyright & Publications Manager (nigelrs@pimfa.co.uk) WOULD YOU LIKE TO CONTRIBUTE AN ARTICLE? @PIMFA_UK www.pimfa.co.uk Journal design by Cicero/AMO Forcicero-group.commoreinformation about design please contact: Miglena Atanasova, Head of Design, Cicero/AMO (miglena.atanasova@cicero-group.com) PIMFA.CO.UK47
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