Opportunity - Issue 14 - 2020

ISSUE 14 • 2020

FEATURED IN THIS ISSUE… FAMILY FINANCE PLANNING | CLIENT SURVEY RESULTS | SUSTAINABLE INVESTING

INTERNAL APPOINTMENTS TO SENIOR MANAGEMENT TEAM Our senior management team has recently been strengthened by two internal appointments. David McFadzean has taken on the new role of head of wealth management, while Andrew Halsall has become head of private banking in the Isle of Man. The moves form part of a recent restructure designed to enhance our client offering across the organisation.

Reporting directly into chief executive, Stuart Cummins, David is now responsible for spearheading the growth of our wealth management business across all our international jurisdictions. He leads our client-facing and specialist teams with a focus on growing our client base across our full suite of wealth planning, investment management and private banking services. We know his track record of successful leadership and business growth across multiple geographies will be invaluable in this role. David has also joined the bank’s executive committee.

David McFadzean

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Since he joined us, David has been integral in developing and leading our investment specialist function. Prior to this, he spent 15 years with RBC Wealth Management where he held several senior roles, latterly leading the investment business as managing director and head of discretionary investments in Jersey. David has over 25 years’ experience in financial services, working for global blue-chip companies in both London and Jersey, and providing investment solutions to a wide variety of clients around the world.

Andrew now heads up the private banking team in the Isle of Man, reporting into David. He has been with the Isle of Man office for 15 years and has extensive experience of working with high-networth individuals and their families. His focus is ensuring clients are provided with the highest level of service at all times.

David McFadzean’s new appointment is subject to final regulatory approval.

Andrew Halsall

INTERESTING TIMES “Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind.”

This quote from a speech made by Robert F Kennedy in 1966 seems strangely prescient of our current situation. We are certainly living in unprecedented times, but in the midst of this global pandemic, people are adapting to new ways of living and working.

All of our offices are currently closed to visitors and suppliers, but it is business as usual, albeit with a few changes to how we work.

Although no small task, our recent investment in enhanced technology has enabled us to manage a smooth transition to home working. Over 90% of our staff are now working from home, and we have reviewed and updated a number of our processes so we can continue to offer our full range of services with our normal high levels of care and security. Our private banking and client services teams are available to assist you as usual with your day-to-day investment, banking, lending and wealth management needs.

You can still contact us by telephone, email, or via our secure chat platform, Qwil Messenger.

However, we also encourage you to use our mobile app or online banking service for payments, transfers and foreign exchange. This is the fastest and most secure way of transacting.

If you don’t already have access to these services, our client services team can help you set them up.

Under lockdown, you’re probably finding you have more free time than usual so this could be an opportunity to review your financial goals for yourself and your family. On page 4, John Williams, our head of wealth planning, discusses intergenerational wealth planning and the benefits of having a robust financial plan.

Thank you to all of you who took part in our client survey which was finalised at the end of last year.

On page 6, Beckie Williams, our head of client proposition, reviews the key findings.

Our investment specialists have been exceptionally busy through this period of unusual market volatility, with our investment committee meeting daily. We hope the steady stream of investment updates, articles and webinars on our Insights website has helped to reassure you that we’re closely monitoring the coronavirus situation, and managing your portfolios in response to market events.

Staying with investments on page 8, Martin Ibanez explores the environmental and social changes currently taking place around us, and the impact these could have on the sustainable investing sector.

Finally on page 10, in line with UK government advice to “stay alert”, we take a look at cybercrime and how we can work together to prevent it. All our staff are being extra vigilant in respect of potential fraud attempts in light of the current crisis.

Our overriding priority remains the health and safety of our staff, clients and communities.

Since the start of the coronavirus pandemic, we believe our staff have been inspirational in their commitment, resourcefulness and adaptability, in order to ensure there is as little disruption as possible to normal service. We are here to accompany you through this difficult period, and offer comfort and confidence when needed. If you have any concerns you wish to discuss, please do not hesitate to get in touch.

With best wishes to you and your family,

Stuart Cummins, Chief Executive

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TALKING ABOUT THE GENERATIONS John Williams, Head of Wealth Planning

Back in the 1960s, English rock band The Who raged against the older generation in one of its most famous songs, My Generation. Part of the post-war baby boom, born between 1946 and 1964, their generation now makes up a significant portion of the world’s population. They have benefited from a time of increasing affluence and prosperity, with asset appreciation, particularly property, and defined benefit pensions meaning they now also hold a significant proportion of the world’s wealth.

In contrast, the younger generations today are faced with a different set of challenges. Low interest rates mean little return on their savings, while high rents and increasing house prices make it difficult to get a foot on the property ladder.

According to the UK Office for National Statistics, home ownership among 25-34 year-olds has fallen substantially over the last 20 years, down from 55% in 1997 to 35% in 2017.

The great wealth transfer The numbers vary wildly, but it’s estimated up to US$68 trillion could be passed down from one generation to the next over the next 30 years.

However, according to recent research, only half of wealthy individuals have actually thought about how they want to achieve this.

Ensuring your loved ones can benefit is often a priority - whether it’s helping your children get on the property ladder, or paying for your grandchildren’s education. But with life expectancy increasing, you also need to consider your own needs and your future plans - for a retirement that could last for decades, and potentially include longterm care.

How can you balance these conflicting goals and ensure your wealth survives the generational transfer?

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Lifetime gifts While there are a number of ways to achieve this, the most straightforward is an outright gift during your lifetime. In the UK, if you make a gift and live for seven years afterwards, it will be free from inheritance tax. However, if you pass away within three years of making the gift, it will be liable for inheritance tax at the full 40%. If you pass away between three and seven years after making the gift, tax may be charged on a sliding scale known as taper relief.

You can give away assets or cash up to £3,000 every tax year without the beneficiary having to pay tax on the gift. This is known as your annual exemption and does not form part of your estate for inheritance tax purposes. If your allowance from the previous year is unused, you can carry it forward one year to allow a gift of up to £6,000.

Gifting gives you the opportunity to see your family benefiting from your wealth, but also runs the risk of the wealth being diminished if the recipients are inexperienced and unable to handle it.

Managed giving Careful planning can allow you to retain some control over how your wealth is invested and how it should benefit future generations. A good UKbased example is to set up a trust, which will enable you to decide who manages the money (the trustees) and who the money goes to (the beneficiaries). Family investment companies and family limited partnerships can also be used. These kind of structures can be complex so it is important to seek specialist advice to ensure they are right for you.

Consider your own needs

Make time to plan

If you are concerned about giving too much money away, paying into a pension can provide flexibility and reassurance that your own needs will be met before any of your wealth passes to the next generation. You can put up to a maximum of £40,000 a year into a pension (although a reduced amount applies to those with taxable income in excess of £240,000 a year), and this drops to £4,000 a year once you start taking money out of your pension pot. Along with the well-publicised benefits of tax relief on your contributions, and the fact your pot can grow largely free from taxes, a pension can also offer significant advantages when it comes to efficient wealth transfer, as it does not form part of your taxable estate. If you die before you are 75 and there is money left inside your pension, it can pass to your family free from tax on the lump sum or any income taken, providing they are paid within two years of your death. If you are 75 or over, any withdrawals will be taxed as income at the beneficiary’s highest marginal rate.

The earlier you start thinking about succession planning and talking with your family, the more opportunities there are to do it tax efficiently. If your family situation is particularly complex or involves different jurisdictions, it will also pay to take specialist advice. This is where we can help you to make more informed decisions. Our experienced team together with state-of-the-art cash flow modelling can help you plan and adapt to real life events by highlighting the best course of action to meet your objectives - for your own generation and the ones to follow.

To find out more about our specialist wealth planning service, please contact your private banker or our client services team on +44 (0)1624 645000.

Nedbank Private Wealth does not provide tax advice. The levels and basis of taxation are dependent on individual circumstances and subject to change. You should always consult a specialist tax adviser before engaging in any transaction.

Life insurance Although not a means to transfer your wealth, life insurance can play an important role in providing the immediate money needed to pay any inheritance tax due, therefore ensuring your estate can be distributed, and is distributed in full to your chosen beneficiaries.

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SAY WHAT YOU WANT

By Beckie Williams, Head of Client Proposition

If you don’t ask, you’ll never know. This is the reason we have been conducting independent surveys of your views since the year 2000 – although we always welcome your feedback at any time.

We have now completed our most recent client satisfaction survey in conjunction with the research team at AON, and we would like to thank all those who took part.

Finalised at the end of 2019, it is the first UK wealth management benchmark survey for client satisfaction, with 10 UK wealth managers asking clients to answer the same set of questions. The results were collated by our research partner to give an overview of satisfaction across the UK wealth management industry, as well as provide individual results for each firm that participated.

100% 90%

94% 85%

88%

Satisfaction levels are high across the UK wealth management industry The results revealed that, in the main, clients are happy with their providers, with the overall level of satisfaction in the industry being high.

Our results tell us what you believe we do well, while the benchmark helps to guide us on where we can improve, as we search to continually deliver the highest possible standard of products and services to you. We are very proud that this year we achieved very high satisfaction ratings in all the areas covered, and that so many of you took the time to provide us with in-depth feedback, which we can act on.

Below is a summary of the key findings with the benchmark and Nedbank Private Wealth scores shown side by side:

96%

83% 84%

80%

Overall Satisfaction asked the question about how respondents feel generally about Nedbank Private Wealth.

70% 60%

Product Satisfaction looked at overall satisfaction with the Nedbank Private Wealth products that respondents use.

50% 40%

Outcomes explored a number of questions around how our products and services meet repondents’ individual needs and goals, and if they are in line with their risk tolerance. It also asked whether our products and services offer good value for money.

30% 20% 10% 0%

Overall Satisfaction

Product Satisfaction

Benchmark

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Outcomes

Nedbank Private Wealth

100%

95%

97%

95% 89%

90%

86%

84%

80% 70% 60% 50%

Client Centricity explored to what extent Nedbank Private Wealth, and more importantly your private banker, acts in your best interest, rather than putting the company first. It is comforting to know that the vast majority of respondents believe that we act in their best interests.

Value for Money was a question included in the Outcomes section opposite, and here we are delighted to have received the highest score across the industry.

40% 30% 20%

The Portfolio Review question looked at our process for reviewing investment portfolios, and revealed that we scored slightly lower than the benchmark in this area.

10% 0% Client Centricity Benchmark

Value for Money

Portfolio Review

Nedbank Private Wealth

Our priorities for 2020

Thank you

Our senior management team has reviewed the insights you have shared with us through the survey, both in the scores and in your comments.

As a result, we have decided to focus on two areas over the next year:

As a thank you to all those who completed the survey, we made donations to the Red Cross Children’s Hospital in Cape Town and London’s Great Ormond Street Hospital - both world-class centres of excellence for the care of and research on children’s health.

•

Improvements to our client review process

•

Further enhancements to our online and digital systems

We look forward to sharing more information about these commitments with you in due course.

An annual survey and an invitation We will be in contact again at the end of the summer to invite you to share your views again.

We are working on a number of initiatives this year to enhance our client proposition, and would welcome your input. If you would like to participate in additional research with us, please let us know.

We promise that any invitations will respect your valuable time.

Once again, thank you.

Your views and opinions are very important to us, serving to continually drive improvements that benefit all our clients.

If there is anything further that we can do for you, please let your private banker know.

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SUSTAINABLE INVESTING IN A DIFFERENT LIGHT

By Martin Ibanez, Private Banker

Although it is hard to find positives in a global pandemic, the sudden and widespread slowdown in human activity has had a very visible effect on the planet. With the coronavirus forcing many countries into lockdown, prompting factory closures and massive reductions in road and air travel, we are suddenly seeing the earth in quite a different light.

Climate scientists have confirmed that the skies really are clearer and a deeper shade of blue without the normal layer of haze created by air pollution. While satellite images of China and the northern region of Italy have shown dramatic drops in airborne nitrogen dioxide emissions as a result of the economic slowdown.

In Venice, the usually murky waterways have become so clear with the reduction in water traffic that fish have been seen for the first time in years.

The global pandemic has definitely highlighted the world’s environmental issues, but it has also drawn attention to many economic and social issues. From a social perspective, many businesses will be remembered for how they behaved during the ongoing crisis. Are they treating their workers fairly? Are they protecting jobs or furloughing staff, while still paying dividends and executive bonuses? In contrast, some companies are taking a proactive role by repurposing their manufacturing facilities to produce personal protective equipment, hand sanitisers or ventilators.

It’s not hard to name the companies which appear to be doing the right thing by their employees, customers and communities.

These previously unimaginable times will give many of us a fresh perspective on life, and bring about new ways of living and working. They could also bring increased awareness of different ways of investing. Research already suggests awareness of investing for a positive impact is higher than ever and recent events are likely to strengthen this view.

In its first Global Sustainable Fund Flows report, Morningstar revealed that sustainable funds across the world attracted almost US$46 billion in net flows during the first quarter of 2020. This figure is even more remarkable when you consider that US$385 billion flowed out of global investment funds in the same period. In Northern Europe ethical investing is the norm, with managers offering an array of ethical investment choices.

The industry has moved on from the traditional exclusion approach, simply removing potentially controversial companies, such as fossil fuel, tobacco or weapons manufacturers, from portfolios. It is now investing in a positive way with sound environmental, social and governance (ESG) principles in mind. These ESG principles look wider than well-publicised environmental issues and take a more subtle approach, focusing on the sustainability credentials and management of the companies they invest in.

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Environmental – focuses on the planet and the impact that companies have on the environment and climate change.

Social – is people focused. Taking into account not only how a company treats its employees and customers, but also wider community issues such as human rights, health and safety, and child labour.

Governance – relates to how well a company is run, and includes issues such as executive pay, equal opportunities, diversity and transparency.

Considering ESG issues alongside regular financial metrics had become much more prevalent, even before the pandemic. This proactive approach means choosing forward-looking companies, industries and technologies that are benefiting and growing on the back of the decarbonisation process, such as renewable energy companies, battery producers or electric vehicle manufacturers. These are companies that are looking to the future and adopting good corporate governance practices to ensure they will be around for the long term.

As a multi-asset manager, we have no one size fits all approach to identifying sustainable investments, but we work with managers that have either signed up to the Principles for Responsible Investing (PRI), or invest in social care or environmental assets. Backed by the UN, these principles are linked to the UN’s Sustainable Development Goals – 17 goals with a 2030 deadline that include climate action, gender equality, decent work practices and economic growth.

The effects of this global pandemic and the social and environmental issues it has raised will underline the importance of sustainability to the investment industry.

A company’s long-term success is dependent on its ability to adapt to the challenges and financial risks it faces, and the coronavirus crisis will be a test of those that are strong enough to survive.

In May, the Financial Times reported data from MSCI that showed corporate bonds and equities with high ESG ratings had markedly outperformed the index, even during the current global crisis. This backs up various academic studies which also identify a link between sustainable investing and positive long-term returns.

We believe using a valid ESG methodology designed to support a multi-asset portfolio is an approach that can be beneficial to investors. If you are interested in taking a more sustainable approach to your investing, just get in touch and we can explain more.

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STAY SAFE ONLINE Ever the opportunists, cybercriminals are taking advantage of the fear and uncertainty surrounding the coronavirus pandemic to prey on unsuspecting companies and individuals.

Phishing emails with coronavirus subject lines are specifically designed to trick people into engaging with them, in order to acquire personal details, passwords, or money directly.

We are committed to doing all we can to protect you from cybercrime and on the next page we suggest some of the steps you can take to protect yourself and your systems.

A recent report from Action Fraud, the UK police’s fraud reporting and investigative unit, estimated over £2 million had been reported lost by 862 victims of coronavirus-related scams, and they had received 3,621 reports of coronavirus-related phishing emails. These are just the numbers reported, so it’s likely the true number will far exceed this.

If you suspect that someone has accessed your security details, or there’s been suspicious activity on your account, please call our fraud hotline as soon as possible on +44 (0)20 8167 3223.

Fraudsters are adept at using any personal details they can obtain, through unsolicited emails, texts or phone calls, or even shared social media posts.

Armed with just a little personal information, they can appear much more credible and find it easier to extract more details from an unsuspecting individual. Once they have sufficient information, they can then pretend to be you and attempt to access your online bank accounts, or apply for further accounts or loans in your name.

We all became familiar with the notoriously fake emails from ‘distant relatives’ wanting to transfer millions into our accounts, but criminal tactics are becoming increasingly sophisticated, and the view that it is only the elderly or careless that get caught out is no longer the case. According to the fraud protection service, Cifas, nine out of ten identity frauds are committed online and all age groups are at risk.

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More detail on how to protect yourself from fraud and cybercrime can be found in the ‘Security Information’ link on our website. If you have any specific concerns you would like to discuss, please contact your private banker or our client services team on +44 (0)1624 645000.

WHAT CAN YOU DO TO AVOID FALLING VICTIM TO CYBERCRIME? Always be suspicious of unsolicited messages and calls Traditionally, phishing or fraudulent messages could be easily spotted, but criminals are now much more sophisticated.

You should always be wary of any message requesting personal details, or asking you to click on embedded links or attachments.

At first glance, they may appear to come from your bank or an organisation you recognise, like the police or HMRC. However, by hovering your cursor over the sender’s name you may find it shows a different underlying address.

If in any doubt, contact the organisation directly by a different means to verify the message. Don’t use the reply address or any details given in the message.

You should never share your personal security details with anyone, either in person, over the phone or via email.

We will never call you and ask for your whole password - you will only ever be asked for specific letters or characters to identify you.

Stop and check before you do anything, only criminals will stress a sense of urgency or insist on immediate action.

Tips for keeping your systems up-to-date and protecting yourself Always use strong passwords – longer phrases. A blend of letters, numbers and characters works best.

Don’t store your password or personal security details on your computer or mobile phone.

When software developers identify vulnerabilities in their programs and applications, they will send out an update or ‘patch’ for users to download. Having the most up-to-date version of the software means you are using the most protected version, this also includes the applications and operating system on your mobile or tablet.

Using reputable security software, and keeping it updated, is vital to protect your devices from malicious software, known as malware.

Turn on automatic software updates to ensure your software is always up-to-date. On computers running a Windows operating system, this is usually found in the Control Panel.

Use our mobile app or online banking service for your payments, transfers and foreign exchange. This is the most secure and fastest way of transacting.

If you don’t already use these services, contact our client services team.

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NEWS FROM THE RED CARPET From the Oscars and Emmys to the Golden Globes and Grammys, the red carpet has been rolled out, and the worlds of business and finance are no exception.

Best private bank for sixth year running In March, we were delighted to be named Best Private Bank for a remarkable sixth year running at the 2020 City of London Wealth Management Awards (COLWMA), which were held at The Guildhall, London. Members of the London team attended the gala dinner and collected the award from the host for the evening, news presenter and ‘Strictly Come Dancing’ champion, Natasha Kaplinsky.

Rob Currie, head of private banking in London, was quick to point out that this amazing accolade is an independent endorsement of the efforts everyone in the organisation makes to support the business and our clients. It reflects the work done by the private banking teams in each jurisdiction and the specialist teams supporting them across wealth planning, investments and banking operations.

The COLWMA awards aim to promote those companies in the wealth management sector that deliver exceptional levels of service. The winners are decided by a public online vote so we appreciate

that so many of you took the time to nominate and vote for us again. This year over 33,000 votes were polled, which is a new record. Let’s hope we can make it a lucky number seven next year.

Still a great place to work In February, a team drawn from all our offices attended The Sunday Times 100 Best Companies 2020 event at the Battersea Evolution in London, where Nedbank Private Wealth and Nedgroup Trust were together named as one of the best companies to work for in Britain.

We have an impressive track record over the years, having appeared in The Sunday Times supplement for 15 out of the past 16 years. We remain the only private bank and trust company on the list, which results from Britain’s largest ever survey into workplace engagement. This year, 402,903 employees across all industry sectors were surveyed.

We are always delighted to receive such a positive endorsement from our employees. We appreciate they are our most important asset and we actively encourage strong collaboration across all our teams, departments and offices. Our overriding aim is to protect our clients, advise them with integrity and make their lives easier, and we understand that a fully engaged workforce is crucial to achieving this.

This publication does not constitute an invitation or inducement to buy or sell any investments, nor does it constitute any advice or personal recommendation. The value of investments and the income from them can fall, as well as rise and you might not get back the original amount invested. Exchange rates may affect the value of investments. Past performance is not necessarily a guide to future performance. Nedbank Private Wealth and Nedgroup Trust do not provide tax advice. We always recommend that you seek specialist tax advice to suit your individual circumstances. The opinions in Opportunity are those held by the authors at the time of printing. All data herein is sourced from local exchanges via Reuters, Bloomberg and other vendors. The information herein has been obtained from public sources believed to be reliable. Nedbank Private Wealth makes no representation as to the accuracy or completeness of such information. Should you no longer wish to receive this publication or any information about Nedbank Private Wealth’s products and services, please advise us in writing. Also, should you no longer wish to receive information about our group companies’ products and services, please advise us in writing. Nedbank Private Wealth is a registered trade name of Nedbank Private Wealth Limited. Nedbank Private Wealth Limited is licensed by the Isle of Man Financial Services Authority. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The Jersey branch is regulated by the Jersey Financial Services Commission. The London branch is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registration No: 313189.

UAE representative office in Dubai licensed by Central Bank of UAE. Licence No. 13/191/2013. Representation in South Africa is through Nedbank Limited.

Registered in South Africa with Registration No 1951/000009/06, an authorised financial services and registered credit provider (NCRCP16). Nedbank Private Wealth Limited is licensed by the Financial Conduct Authority to provide regulated mortgages in the UK.