Opportunity - Issue 16 - 2021

ISSUE 16 • 2021

FEATURED IN THIS ISSUE… OUR NEW CHIEF INVESTMENT OFFICER | PHILANTHROPY POST PANDEMIC | PARALLELS BETWEEN BITCOIN AND TULIPS | WHY IT PAYS TO GO DIGITAL

SAVING THE WOOD AND THE TREES Working in an office, we are all too used to pressing print without a second thought and the pile of uncollected printouts on the printer is a testament to this.

It is estimated the average office worker uses a staggering 10,000 sheets of copy paper each year, and 45% of that finishes up being thrown away by the end of the day. Paper accounts for 50% of the waste produced by businesses and around 26% of landfill waste.

Despite the march of digitalisation, paper usage continues to soar – up over 400% in the last 40 years.

Over two million trees are cut down every day to meet the global demand. From deforestation and the vast amounts of energy and water used in paper manufacture, through to air pollution and waste management – it is a huge drain on worldwide resources.

Despite these statistics, even small changes can start to make a difference. Over the last 12 months, we have introduced a number of new processes as we aim to become a more sustainable business.

DOCUSIGN

SECURE PRINTING

BEING CARBON POSITIVE

This service offers a digital approach to managing client documentation. It has enabled us to replace traditional paper-based agreements with online forms that can be signed electronically on practically any device, from almost anywhere, at any time.

It has provided a quicker, easier and more secure way to manage documents, while also reducing our dependence on paper forms and the post.

This is a new scheme for reducing the paper consumption in our offices. With ‘secure’ printing, documents are only printed off when staff swipe their security cards at the printer. If a stored print is not collected within 24 hours, it is deleted. This not only ensures that staff think before they print, but also that nothing is unnecessarily printed and thrown away.

Not only are we doing our bit to save trees by using less paper, we are also working to plant new forests. Along with our subsidiary company, Nedgroup Trust, we have partnered with a social enterprise called Ecologi. This organisation delivers a carbon offsetting initiative that works by planting trees and investing in environmental projects around the world. It aims to help combat climate change and, in doing so, offer work to thousands of people.

Investing through Ecologi has enabled us to make all our employees carbon positive, which means we are offsetting more than our carbon footprint emits into the environment. Since starting the initiative last year, we have funded over 35,000 trees and offset over 1,900 tonnes of carbon.

Our aim is to plant over 60,000 trees by the end of 2021.

By building awareness in this way, we are actively encouraging our staff and their families to consider their environmental impact on a personal level too. It is only by raising awareness and everyone playing their own small part that we can start to reduce our impact on the planet and begin to address the problems.

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INTRODUCTION Since our last issue, the vaccination programme in the UK has continued to roll out and, with the easing of restrictions, we are gradually learning to live with the virus. As we progress through the rest of this year, I am sure we will continue to adapt, while also taking sensible personal precautions. For a number of our clients that are not based in the UK the picture is, of course, very different, with some countries enduring further lockdowns. Our focus remains on protecting our staff while maintaining the personal service levels our clients expect.

Another key consideration for me is that we continue to play our part with respect to climate change. The article opposite outlines some of the steps we are taking across our offices, but there are three essential elements to our strategy.

Firstly, through our partnership with Ecologi, we continue to support carbon positive initiatives, which most recently include projects to protect rainforest in Peru and support peatland restoration in Indonesia.

Secondly, we continue to approach our investment decisions on a responsible basis. As allocators of capital, the investment management industry can play an important role in encouraging company boards to be more mindful of their environmental and social impact.

This includes areas such as reducing carbon emissions, managing their environmental footprint, improving corporate governance and promoting diversity, together with a considered approach to wider social issues.

Thirdly, for every new service or product area, we challenge ourselves to consider the environmental, social and governance impact to ensure we continue to do good for all of our stakeholders.

For our clients who are approaching retirement over the next five years, we have developed a cashflow review service. This is a critical stage for your finances, where you will move from being income producing (from employment or running a business) to being reliant on accumulated savings to provide financial security for the rest of your life. If you would like us to help you plan for this transition, I would encourage you to get in touch. The earlier you do this, the more choices you will have. I’ve received positive feedback from clients, with reports that the process stimulates honest and open financial conversations, which are particularly helpful where one party in a relationship has tended to manage the finances on a day-to-day basis.

The importance of thinking ahead can never be underestimated.

Many of our clients invest in property to generate rental income and future changes are afoot in the buy-to-let market. From 2025, UK government proposals will require buy-to-let properties to have a minimum energy performance certificate rating of C. This is a higher hurdle than currently exists, which will lead to increased costs that property owners have to comply with. It may also affect the sale values of buy-to-let properties well in advance of this deadline. If you have not already, you may wish to consider how this may impact you.

I hope you and your families stay safe and have an enjoyable summer.

Best wishes

Stuart Cummins, Chief Executive

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INTRODUCING TOM CADDICK Welcome to Tom Caddick who joined us as chief investment officer in March.

We took the opportunity to fire some questions over to Tom about his background and his plans for the role.

Tell us a little about your professional background?

I have spent much of the last decade at Santander Asset Management where I was global head of multi asset and then, most recently, the chief investment officer of the UK business. Prior to this, I headed up the multi asset department at LV Asset Management and was also a lead fund manager at BMO, again within its multi asset division.

What are your responsibilities?

I have overall responsibility for our international investment team and oversee a range of portfolios that invest globally on behalf of clients.

What is your priority now you’ve joined the organisation?

I think it would be impossible to narrow this down to just one thing, but I do see two broad areas of early focus: process and communication. We are now well on our way as an investment team to integrating a new investment process. This is not about dramatic change, but rather an evolution, building on the great work that was done before, establishing a greater focus to our investment work and building conviction. Hand in hand with this is an enhancement to the way in which we communicate, clearly demonstrating positioning and strategy as well as explaining our rationale.

What most excites you about the investment industry right now?

Our industry is constantly changing and evolving and this has always kept things interesting, as well as presenting new opportunities. As I see it right now, the industry is going through something of an existential reawakening — investment firms are re-evaluating their role and, specifically, their impact on society and the wider environment. We might neatly package this up under the heading of ESG (environmental, social and governance) but it represents something

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which, to my mind, could have a quite profound impact on the industry as a whole. Investing, and in particular investing on behalf of clients, carries with it great responsibility. Not just from a fiduciary perspective, but also from a broader stewardship perspective.

What challenges do you see firms and clients facing for the remainder of 2021?

We face a broad asset class challenge currently, where through one lens both equities and bonds are looking reasonably fully priced and yet, in either case, these values could be justified depending on the scenario that plays out as we exit the global pandemic and start to see economies unlock and the wheels of global trade restart. For sure, as we see it, portfolio construction becomes more challenging with higher correlations across traditional asset classes. In other words, equities and bonds behaving in a similar fashion during periods of market stress. The challenge for us, on behalf of our clients, is to determine whether the traditional tools available to us (equities and bonds) are sufficient to meet long-term investment goals, or whether an expanded toolkit is required.

What piece of advice would you give your younger self?

Learn how to program. It will only be a help, never a hindrance, and can support so many areas of investment theory and practice.

What team or personal achievement are you most proud of?

It is always nice to win awards and receive recognition and I have been fortunate over the years to pick up a number of industry accolades.

The one I was most pleased with was the Fund Manager of the Year award several years ago, as this was for both me and the team.

What do you like to do away from the office?

I am a keen runner – which incidentally is not the same as saying I am a good runner – and like to get out whenever I can. It is a great way to relieve stress, clear your head and, of course, offset the otherwise sedentary nature of a desk-based role. And it gives great thinking time. But with four young children, the opportunities to get out are always limited and I find myself getting up and out ever earlier in the morning just to squeeze a run in.

Was there anything in particular that helped you through lockdown?

Red wine and the weather, in that order. But in all seriousness, we are fortunate to live in the countryside with plenty of space around us. All those years of commuting into London rather than living centrally finally paid off.

What luxury item would you want if you were castaway on a desert island?

My Montblanc pen. It would serve no purpose whatsoever on a desert island but it was a present from my late father and makes me smile just holding it.

Do you have any pets and what are they like?

We have a dog. She is a rather beautiful blonde cockapoo but is starting to get rather grumpy and she hates it when I put on my running shoes and grab her lead.

QUICKFIRE QUESTIONS Last holiday?

We spent an idyllic summer in Crete in 2019, but since then the global pandemic has rather got in the way of any plans.

Favourite team?

I consider myself a lover of sport rather than a supporter. That said, one of our sons has become a major Tottenham fan and I have by extension. He is currently learning a valuable lesson in the pain of being a fan and the truth that optimism can only get you so far.

Favourite band?

Pink Floyd, no debate.

Favourite book?

Captain Corelli’s Mandolin. Showing my age but it is a joy to read.

Favourite ice cream?

Salted Caramel, but this sits at the top of a very long list of ice cream preferences.

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THE WHO, WHAT AND HOW OF PHILANTHROPY POST PANDEMIC

By Mary Humphreys, Senior Trust Manager at Nedgroup Trust

The global pandemic has raised the profile of philanthropy and highlighted just how powerful it can be. Whether it’s the launch of community-based initiatives at a local level or the wider funding of diagnostics and vaccine development around the world, philanthropic individuals and institutions have stepped up and responded to the humanitarian need. But can this positive response be sustained as economies move into a post-pandemic recovery phase? In this article, we discuss the three key questions UK clients should ask themselves at this time when the profile of philanthropy is changing.

The word philanthropy is derived from two ancient Greek words: ‘philos’ which means loving and ‘anthropos’ which means man or humanity. Philanthropy is often associated with charitable giving – but where charity has traditionally sought to relieve the pain stemming from a particular social problem, philanthropy is more attuned to addressing the root cause. In reality, the two overlap considerably. After a number of years of donating money to charities on an ad hoc basis, often called ‘chequebook philanthropy’, many clients choose to adopt a more formal approach, for example, by establishing a donor advised fund (DAF) or a charitable trust.

A more formal structure may be suitable if you want to give regularly to a number of causes, if you want to give a reasonable amount as a one-off gift from time to time, or if you want to ask others to contribute to the trust’s funds. Setting up your own DAF or trust provides a framework for planning your charitable giving in a systematic and thoughtful way.

The philanthropic journey for many UK clients begins with them leaving legacies to charities in their last will and testaments. Gifts in wills make up a significant part of a charity’s voluntary income and people in the UK left more than £3 billion to good causes last year. These legacies are often a lifeline to charities, and are now more important than ever because COVID-19 has hit fundraising activities hard.

It should also be remembered in the UK that money left to a charity in your will comes off the value of your estate before inheritance tax is calculated. If you decide to leave more than 10% of your net estate to charity, then the rate of inheritance tax falls from 40 to 36%.

So reviewing your will is an excellent place to start this journey, which may then lead to you considering lifetime gifts directly to individual charities, or maybe establishing a family giving vehicle. Again, there are generous tax benefits on cash donations, including gift aid relief. Donors can also make gifts of shares listed on any stock exchange, or property, to charitable causes. Not only are the gifted shares or land not liable for capital gains tax, but the donor can also claim full income tax relief at their highest rate.

We tend to find clients approach their giving based on personal experiences and family values. Whatever your motivation, your philanthropy plans belong at the heart of your overall wealth management strategy.

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Your philanthropy plans belong at the heart of your wealth management strategy.

If you wish to make philanthropy a part of how you manage your wealth, the first three questions you need to answer are: who, what and how?

1. Who will be the recipients or beneficiaries of your philanthropic activities?

2. What is the theme or topic you will engage on and, more specifically, the cause or issue you want to address?

3. How do you want to approach your activities?

Once you have determined your answers to these questions, there is typically a five-step approach to establish your philanthropic programme:

1. ESTABLISHING OBJECTIVES

Establish clear, personal, charitable or family objectives to articulate what you want to achieve with your giving and to give yourself a benchmark against which to measure the outcomes.

2. DEVELOPING A STRATEGY

Outline how you intend to achieve those objectives – where to focus your giving, what type of support you can offer, and the best mechanism. The range of options will depend on your circumstances.

3. GIVING TAX EFFECTIVELY

Maximise resources and your impact by taking advantage of the different options for tax-efficient giving, which again will be based on your individual situation.

4. SELECTING CHARITIES

Find and choose an effective charity, or charities, based on your interests and objectives.

5. ASSESSING IMPACT

Understand what your money has achieved and whether your objectives are being met. How can your giving be improved or become more effective?

If you want to pursue an effective programme over time, philanthropy should become one of your wealth goals. And by following these five steps, you can make sure it is part of a holistic wealth plan.

If you are interested in establishing a wealth plan for you and your family, which may include a discussion on philanthropy, please get in touch with your private banker.

Nedbank Private Wealth and Nedgroup Trust do not provide tax advice. We always recommend you seek specialist tax advice before making any financial decision.

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CAN CRYPTOCURRENCIES BE CLASSED AS ANOTHER TULIP BUBBLE?

By Karen Bennett, Senior Executive – Client Insights

It can be difficult to follow the cryptocurrency cycle, which over the last 12 months has set records one month, only to be in the doldrums the next.

But what do we think are the long-term prospects? Can it be classed as a bubble, as we first saw with tulips, or are we just seeing the growing pains of a new asset class?

Crypto(currencies) have been constantly in the news headlines over the past few months. The press coverage has followed as investors have pursued a public debate with authorities, mainly via social media, over whether (collectively) Bitcoin, Ethereum, Dogecoin et al. may be deemed to be an asset class or not. Now wealth managers are being asked what they think.

Among proponents, it’s a clear cut argument. If you accept that mainstream crypto is a store of value (no matter how volatile), which has engaged a sufficient critical mass of credible investors and institutions, it’s an asset class. You don’t have to like it, or for it to be easily accessible, for the classification to apply.

Opponents, meanwhile, argue that it’s more complex and that, in order to be seen as a currency (and therefore an asset class), crypto should meet at least four basic conditions. These are: (1) it needs to demonstrate it is a long-term store of capital; (2) there must be sufficient amounts available to meet the needs of international trade in goods and services; (3) transaction costs must be low, with only small differences between bid and ask prices; and (4) there is a stable issuer who will act as a guarantor.

Stating that Bitcoin – the oldest crypto – meets none of these, crypto challengers also flag other reasons to steer clear. These include the central banking/regulatory crackdowns across the world, the environmental concerns, its use by criminals and heightened tax scrutiny.

But what does all this have to do with tulips?

For those not aware, tulips were behind the first investment bubble. The ‘commodity’ rose in value in the 1620s, but could only be sold in bloom (April and May) and during their dormant phase (June to September). By 1634, speculators had entered the market and focused on selling tulip futures, i.e. a contract which could be exchanged for an actual bulb at a later date, but which could be bought and sold (for increasing sums) immediately. By the winter of 1636-37, traders became obsessed and the price of contracts for certain varietals reached astronomical heights. Between New Year’s Eve and 3 February 1637, the future for a Switsers tulip bulb, for example, is known to have increased by a staggering 1,100%.

From peak to trough, it is estimated that investors could have participated in growth of circa 2,200%, although the true figure is lost in the mists of time (and poor historical records), and no one really knows why trade

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collapsed. Speculation includes the threat of the bubonic plague convincing people to stay away from public auction houses.

Sound familiar?

The parallels also won’t sway those who have been convinced by the rationale to invest, or who have already bought in.

Instead they see statistics released by the UK regulator, the Financial Conduct Authority, stating over 2.3 million UK adults hold crypto, around a 20% year-on-year increase, with 53% planning to invest more.

They fear they’re missing out.

For wealth managers, however, while we are committed to supporting clients, we seek to provide a balanced view. Yes, if you are willing to risk a small percentage of your portfolio to pursue the volatile profits, we appreciate why. What we have not bought into is the hype.

Ultimately, the main arguments in favour of crypto tend to be put forward by those heavily invested. It is rare to find an ‘expert’ who is not motivated by money.

And those who are financially driven are not promoting crypto because there is an increase in value in the underlying asset – merely so new investors buy existing investors’ holdings at an inflated value. No income is being generated, but that’s okay for Bitcoin fans because of the “number go up” ideology. Others state that wealth managers won’t invest because we don’t understand the investment. Given this was a key reason for the hype around the DotCom bubble, this isn’t an argument that holds much sway.

And although all investments will go down, as well as up, and you may end up with less than the total originally invested, these returns should be due to a number of ‘real’ reasons. We are not averse to new investments – that our strategies include funds invested in song rights highlights this – but we need something tangible to focus on. At least the investors in the tulip futures were eventually rewarded by a flower.

So, although the thrall of crypto will pull in more investors and some will make money, lots won’t. We’d rather invest in asset classes that aren’t speculative, can hold their value over the long term and are able to provide a return for all our clients.

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WHY IT PAYS TO GO DIGITAL

By Beckie Williams, Head of Client Proposition

The shift to digital payments continues to gather momentum.

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The way in which we make payments has undergone a revolution since the turn of the century. For many, writing out cheques happens only rarely, if ever. Online shopping is the norm for millions around the world and, as more of our spending moves online, card transactions have already overtaken cash.

In the latest published figures for the decade up to 2019, card payments saw the most significant growth and now account for over half (51%) of all UK payments. Over the same period, the volume of cash payments fell by a similar amount from more than 20 trillion in 2009 to less than 10 trillion, although it remains the second most popular payment method, accounting for just under a quarter (23%) of all UK payments.

The last decade has also seen significant technical change and innovation, which has led to a much greater choice of how to pay. One of the key catalysts for this is the smartphone.

Advances in online and mobile banking and contactless payments have all revolutionised the way we manage our money.

This shift has been accelerated by the global pandemic, as people have been locked down at home and actively encouraged to avoid cash for hygiene reasons. The natural successor to cash for many is the contactless card.

Contactless cards were introduced back in 2007, with a £10 spending limit for buying small items. Despite initial reservations about how secure this new payment method would be, they soon caught on. According to the UK’s HM Treasury, the proportion of debit card payments made using contactless has risen from four out of 10 in 2019 to six out of 10 in September 2020.

As a consequence, UK chancellor Rishi Sunak announced in his March budget that the maximum transaction limit would more than double to £100 later this year.

The shift to digital payments continues to gather momentum. We recognise that our clients demand quick, flexible and, most of all, secure ways to make payments and this is why we have enhanced our own digital offering.

Our Online Wealth Services are available as a mobile app or on your desktop computer.

There’s a full range of online banking features – you can make payments, buy and sell currencies, make transfers between accounts, and set up standing orders. Going one step further, our Online Wealth Services also show details of your investment holdings, calculate the performance, and allow you to download statements and valuations.

We believe our Online Wealth Services are the most secure, efficient and quick way for you to make payments. They’re also cheaper – online sterling payments to UK bank accounts, for amounts up to £100,000, are free of charge.

With so many reports of financial fraudsters exploiting the pandemic situation, it makes more sense than ever to manage your finances securely online. Across the financial industry, we are experiencing a big increase in attempted fraud and intercepted emails are one of the greatest risks. According to the Financial Technology Research Centre: “an unencrypted email is like taking that information and putting it in the post, on a postcard. Anyone can read it.”

This is why we have written to all our clients to explain that we will no longer accept payment instructions by email. Our purpose is to protect our clients, advise them with integrity and make their lives easier. If you’re not already signed up for our Online Wealth Services, please talk to your private banker. Or you can contact our client services team at client.services@ nedbankprivatewealth.com or on +44 (0)1624 645000. They can help set you up and get you started with our Online Wealth Services – meaning you can manage your money easily and directly, without any need for emails.

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COMPANY NEWS ANDREW ROBINS JOINS NEDGROUP TRUST

LUCKY NUMBER SEVEN

We are delighted to announce that Andrew Robins has moved across the aisle at our Jersey office to join Nedgroup Trust as a private client director.

Last but not least, seven was definitely our lucky number in March as we were named Best Private Bank for the seventh year running at the 2021 City of London Wealth Management Awards (COLWMA).

Formerly a senior private banker with Nedbank Private Wealth, Andrew has achieved significant success over the past 10 years, and has been instrumental in designing and implementing the corporate trustee strategy for Nedbank Private Wealth.

Initially, Andrew is covering director Katie Bonfrer’s business strategy role while she is on maternity leave. He is also supporting her clients and providing oversight for the administrators in managing these relationships. In addition, he will be actively engaging in the new business function and the management of the client onboarding team.

Both Dan Bisson, managing director of Nedgroup Trust, and David McFadzean, head of wealth management at Nedbank Private Wealth, see this as an important move for Andrew and the overall business as we look to meet our strategic goals in the coming months.

The move will also maintain the momentum behind our integrated One Wealth approach, which provides a consistent client and introducer proposition across both the bank and trust company teams.

Members of the London team attended the virtual ceremony, with Rob Currie, head of private banking for London, accepting the award. The evening was hosted by news presenter and ‘Strictly Come Dancing’ champion, Natasha Kaplinsky.

While the team were delighted to receive the recognition for the service provided to UK clients, it is also a reflection of the work done by everyone in the business, both bank and trust, to provide support for our clients.

This accolade is particularly special to us as it represents an independent endorsement from our clients and professional partners. Votes must be submitted on the COLWMA site and the firm with the most votes wins – quite a challenge given the boutique nature of our operations and the number of peers who had been shortlisted.

The award follows on from the title of 2020 Best Boutique Private Bank in the Middle East and North Africa region, which was awarded by the industry publication WealthBriefing in November last year.

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.

Nedbank Private Wealth is a registered trade name of Nedbank Private Wealth Limited. The parent of Nedbank Private Wealth Limited is Nedbank Group Limited, which is incorporated in South Africa and is regulated by the South African Reserve Bank. The latest audited report and accounts, and details of the credit rating are available at www.nedbankprivatewealth.com. Nedbank Private Wealth Limited is licensed by the Isle of Man Financial Services Authority and is a participant in the Isle of Man Depositors’ Compensation Scheme as set out in the Compensation of Depositors Regulations 2010. For full details, please see www.iomfsa.im. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The Jersey branch is regulated by the Jersey Financial Services Commission and is a participant in the Jersey Banking Depositor Compensation Scheme. See www. gov.je/dcs for full details of the Scheme and banking groups covered. 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. Your eligible deposits with Nedbank Private Wealth Limited, London branch, are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme. Any deposits you hold above the £85,000 limit are unlikely to be covered. Please ask for further information or visit www.fscs. org.uk. UAE representative office in Dubai licensed by Central Bank of UAE. 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. Nedgroup Trust is a registered trade name of Nedgroup Trust Limited and Nedgroup Trust (Jersey) Limited. Nedgroup Trust (Jersey) Limited and affiliates are regulated by the Jersey Financial Services Commission. Nedgroup Trust Limited is licensed by the Guernsey Financial Services Commission under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 to form, manage and administer trusts, companies, pension schemes and gratuity schemes. Company Registration No. 23460. Nedbank Private Wealth Limited is not licensed to take deposits under the Banking Supervision (Bailiwick of Guernsey) Law, 1994 and it is not a member of the Guernsey Banking Deposit Compensation Scheme.