04
Welcome
James Roberts, Managing Partner, Partners Wealth Management (PWM)
06
The power of planning
Harjinder Bhatti, Partner, PWM
10
A closer look at the UK government bond market
Richard Carter, Head of Fixed Interest Research, Quilter Cheviot Investment Management
14
Could you be earning up to 4% on your cash savings?
Giles Huston, CEO, Insignis Cash Solutions
I started as an adviser in the last millennium and before the end of the cold war I was studying economic history.
As I look back at the events of ‘my time’ – ERM and Black Monday, dot com/gulf war crash, financial crisis, COVID and now the return of inflation and with it interest rate rises, cost of living concern, political upheaval and almost inevitability strikes and social unrest – two points are obvious. Firstly, uncertainty and change are normal – from the moment we graduate to time of death the only certainty is we will see numerous ‘crises’, so they ought not be shocks but inevitable parts of business as usual.
Secondly, for the organised, a market downturn is not a moment for fear but a moment of opportunity. Broadly there are two types of person a Partners Wealth Management adviser works with – those accumulating wealth during their career for security later in life or those who have achieved the financial freedom of sufficient assets to provide lifetime income and capital and are now ‘retired’ or more often just engaging in different activity –be that economic, entrepreneurial, intellectual or charitable.
If we accept that uncertainty and change are normal, we can make the conscious and rational choice to embrace them. This is a calmer approach and means periods of turmoil are seen as inevitable arrivals in a lifelong wealth accumulation journey. That leads to the obvious but too frequently overlooked point that weaker markets present buying opportunity that higher asset prices do not. Somehow in personal investing the idea that markets have risen breeds confidence to buy, whereas in purchases of any other goods or services, we feel a sense of pride when we buy things that are cheaper than their longterm average. Fear causes many investors to flee when markets are below their average price.
Counter-intuitively, if you are in your accumulation phase with seven or more years to retirement, you perhaps ought to celebrate dips, enjoying the fact that excess earnings channelled into ISAs, pensions or your portfolio are buying assets that are cheap, higher yielding and, in the long-term, going to perform better than assets bought the year before.
For those now living off their portfolio rather than earning income, there are three approaches to a dip in values:
• If you have been successful enough to live off income yield then just ride the fluctuations and ignore markets.
• If you have a split of ‘safe’ and ‘risk’ assets, then consider accessing ‘safe’ parts of the portfolio rather than selling the ‘risk’ parts to avoid selling when they are priced lower.
• If you are actively decumulating – i.e., deliberately running down capital at a controlled rate, then a crisis can cause real concern as to what the sustainable rate is so re-evaluate past assumptions, while still drawing first from safer, lower volatility assets.
For each group though, any downturn is an opportunity to look at one’s own income needs and portfolio position and ask what I term the four calming questions:
1. What assets are cheaper today than they were?
2. What do I have that has held value?
3. Do I have the risk appetite to look to buy more of what is cheap by selling what has held up?
4. If the timing of that call is wrong, can I accept more loss and still meet my lifetime income needs?
Training the mind to examine your feelings and portfolio via the lens of these four questions is the discipline that leads to lifelong control of outcomes.
In PWM our appointed investment managers seek to do that within the risk bandings you and your adviser appoint them to. If you want to review those bandings in the context of value today then your adviser is well-positioned to help you look at your position in the light of your goals and the four key questions that help you evaluate risk versus opportunity.
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If we accept that uncertainty and change are normal, we can make the conscious and rational choice to embrace them.”
In today’s climate, there are several challenges which one must navigate – rising inflation, cost of living, volatile markets, and the impact of the conflict in Ukraine. At the beginning of September, Liz Truss succeeded Boris Johnson as Prime Minister, and less than two months later replaced by Rishi Sunak, we had the sad passing of HM Queen Elizabeth II, the proclamation of King Charles III and a September ‘mini-Budget’ which was then substantially reversed in the Autumn Statement in November. These events in such close succession have never been experienced in British history. In a world where the only constant is change, it is important to ensure you have a solid financial plan.
There are several steps which individuals can take to ensure they are on the right path. This can be challenging because your goals and objectives over the short, medium and long term could look very different. Establishing a well thought out and clear plan can be daunting, but crucial to meeting your financial goals.
Consulting a financial adviser could very well alleviate many of your concerns, while simultaneously opening paths not previously considered. Using various financial tools and structures can also highlight whether your plans are realistic or there is a need for flexibility.
Cashflow modelling can be a very powerful tool. It helps visualise all your wealth and assets assembled in one place. At PWM, with our Lifetime Wealth Model, we use cutting-edge software to build up a clear and detailed
financial model, enabling you to make important strategic decisions about your finances from a position of knowledge. Once the basics are in place, we can add some key events – the ‘what if’ scenarios.
Once your financial plan has been established, it is crucial to regularly review and adapt it (if necessary). A change in personal circumstances could have a major impact on the original outlook, therefore, an ongoing dialogue with your adviser is imperative to remain on track.
There are various financial structures which can be used to help achieve your goals, which includes the following:
Interest rates in the UK have continued to rise, with more increases forecasted. This is welcome news for those that hold larger cash positions, whether personal or business. It is important to have an emergency cash buffer (we recommend 6-12 months of living expenses) to cover any unexpected expenditure. >>
Please note that this article is intended for educational purposes only and should not be taken as investment advice. You must be aware that the value of your investments may go up and down and you could receive back less than you originally invested. Tax rules are subject to change and taxation will vary depending on individual circumstances. Please consult a financial adviser before making any investment decisions.
The current rules allow individuals to access their pension at 55, at which point 25% can be accessed as a tax-free cash lump sum. Based on the current rules, when individuals make a pension contribution, they can receive up to the highest rate of income tax relief providing certain conditions are met.
In the current tax year, each adult and child have an annual allowance to contribute to their ISA. For an adult that amount is £20,000, and for a child it is £9,000 in a Junior Individual Savings Account (JISA). An ISA/ JISA allows the investments (or cash) to grow free from income tax and capital gains.
These tax-efficient investments are issued by companies outside of the UK to invest over the medium to long term. One advantage of an offshore investment bond is it allows withdrawals of up to 5% of the original investment per annum, without being liable to pay an immediate tax charge.
Advice – restricted or non-restricted?
In the age where information is readily available, it can be difficult to digest and process. Information from unregulated or unverified sources makes this a hard task. The ability to cut through the noise can be invaluable and seeking independent and unbiased advice can be crucial to help put you in the best possible position towards your financial freedom. When professional advice is sought, are you receiving the best possible advice and solutions from your adviser? Is the advice ‘restricted’ and the potential solutions based on a limited product range?
The advantage of having an independent adviser is they are not restricted to a narrow range of products and solutions. Adopting a one-size-fits-all approach may no longer be appropriate, because each investor is unique, despite often sharing similarities.
At PWM, we represent you. We maintain a complete absence of bias in financial advice and investment selection because the performance of different investment instruments and groups may vary according to market conditions. We offer investment independence and by maintaining this objectivity, we believe we offer clients the best chance of achieving strong results with innovative solutions.
To find out more, please contact your usual Partners Wealth Management adviser, or contact us on info@ partnerswealthmanagement. co.uk or 020 7444 4030 for an initial conversation.
“ The advantage of having an independent adviser is they are not restricted to a narrow range of products and solutions.”
The Autumn Statement from Chancellor Jeremy Hunt contained a raft of measures aimed at reducing the budget deficit, signalling a clear return to more orthodox fiscal policy for the UK. The muted reaction to the news in UK government bond markets will have been a welcome development for the Chancellor, with the UK 10-year gilt yield ending the week near two-month lows at 3.24%.
The £55bn package of spending cuts and tax increases stands in stark contrast to the expansionary ‘mini’ Budget delivered by Hunt’s predecessor Kwasi Kwarteng less than two months before, with the focus on stability, growth and public services, according to Hunt. This fiscal policy U-turn is one of the most dramatic in history, marking a projected near £100bn swing in UK public finances and a return to austerity in the face of stuttering economic growth.
Since the market fallout from the ‘mini’ Budget the government has been at pains to restore fiscal credibility and the moves in gilt markets in recent months suggest this has been achieved.
This article has been provided by Quilter Cheviot Investment Management. This insight presents their views and underlines their asset and investment methodology.
The wild markets swings following Kwarteng’s September announcement suggested investors were losing confidence in UK assets, with the pound falling to its lowest ever level against the US dollar, UK stock benchmarks dropping to their 2022 lows and the government bond market posting some of its largest daily swings on record. While the “mini” Budget contained the largest combined tax cut in 50 years, around £43bn, or 1.5% of Gross Domestic Product (GDP) and meant the government would have needed to borrow an additional £70bn to fund it and the estimated £150bn energy crisis package, unveiled just a matter of weeks before, the outsized market reaction was clearly suggestive of a loss of credibility. Since then, there have been a series of moves which began to walk back, and ultimately reverse, the package in order to restore market confidence, culminating in Hunt’s austere Autumn Statement.
The Bank of England (BoE) has been clearly impacted by these fiscal moves as it struggles to curb the highest level of inflation in a generation. Rapidly rising price pressures have been the main market theme of 2022 and the central bank has raised its base interest rate aggressively in response. In early November the BoE announced its seventh hike in 2022 with the 75 basis point increase the largest move higher since 1989. This leaves the base rate at 3.00%, up from 0.25% at the start of the year.
The two-year gilt yield, which is largely a reflection of expected central bank policy in the coming years, reached its highest level since 2008 in late September, hitting 4.75% after starting the year at 0.68%. The year-to-date high came just a few days after the “mini” Budget as investors bet that the BoE would have to raise its base rate further and faster, to counteract the additional inflationary pulse forecast from the fiscal stimulus. >>
Richard’s primary role is to provide attractive investment recommendations that will ultimately benefit clients. His main area of expertise is the global bond market, which includes government, corporate and emerging market debt – at Quilter Cheviot we are able to access these areas both through direct holdings and external funds. As part of his role, Richard chairs the firm’s Fixed Interest Committee and he is also a member of the Asset Allocation and Collectives committees.
Richard has worked at Quilter Cheviot for over 6 years and has a total of 16 years of investment experience. In his previous roles, he was a Fixed Income analyst and Fund Manager at Barings and BNY Mellon.
The UK two-year gilt yield has moved sharply highly
Two-year gilt yield (%)
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The two-year gilt yield, which is largely a reflection of expected central bank policy in the coming years, reached its highest level since 2008 in late September.”
The subsequent fiscal policy moves have removed this threat, as can be seen by the terminal BoE rate – the level at which the base rate will peak in the cycle – now put by money markets at around 4.6%, down from around 6.0% less than two months ago. This has seen the two-year gilt yield fall lower to around 3.15%. Still, this represents a further BoE base rate increase of 160 basis points from current levels and along with a contractionary fiscal policy will weigh on economic activity.
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In summary, while it has been a painful year for bond investors, we believe that long-term valuations now look quite attractive.”
Credibility, but at what cost Kwarteng’s decision to omit forecasts from the Office for Budget Responsibility (OBR) for his “mini” budget was widely seen as damaging to its credibility, and Hunt swiftly moved to restore these as part of his about-turn. However, while their return is welcome, they do not make for good viewing. The OBR has forecast that not only is the UK economy already in recession, but the five-year outlook has also taken a hit with cumulative growth between 2019 and 2027 3.4% lower than the OBR forecast in March.
Wherever you look it is pretty grim, with bad news pertaining to the past, present and future in the projections. Previous growth data, largely during the Covid-19 pandemic has been revised lower, the current situation is one of an overheating economy and the potential for future growth has been downgraded to boot. In early November the BoE warned that the UK is facing its longest recession since records began, but despite this rate-setters remain committed to more hikes to lower inflation – the latest Consumer Price Index (CPI) hit a new peak of 11.1%.
Investors should remember that the value of investments, and the income from them can go down as well as up. You may not recover what you invest. This commentary has been produced for information purposes only and is not intended to constitute financial advice. Investments referred to may not be suitable for all recipients. Quilter Cheviot Investment Management is authorised and regulated by the Financial Conduct Authority.
Add to this restrictive monetary policy a contractionary fiscal policy and the outlook for growth is not favourable. Compared to the short-end, longer-dated bonds are typically less sensitive to monetary policy changes and more a reflection of longer-term inflation and growth dynamics.
Like the two-year gilt yield, the longer-dated bond yields have declined. As of 18th November, the yield on a 50-year gilt was 2.87% – 37 basis points lower than the yield on a two-year gilt.
In summary, while it has been a painful year for bond investors, we believe that longterm valuations now look quite attractive. The BoE remains steadfast in its commitment to curb inflation and the Autumn Statement signals the government has learnt its lesson regarding the importance of fiscal credibility in the eyes of global investors with financial markets.
Giles Huston CEO, Insignis Cash Solutions
Is managing your cash savings on your ‘to-do’ list? Are you keen to take advantage of this rising interest rate environment? This month, the Monetary Policy Committee (MPC) announced that the Bank of England base rate has risen to 3.00%1, as Inflation reaches a forty-year high2 This follows the seventh consecutive base rate rise since December 2021, from an all-time low of 0.10%3. How can you take advantage of these competitive interest rates? Especially when many high street banks are still offering only 0.25%4 on savings accounts?
Researching and comparing different banks and their rates can be a daunting task. Combine this with concerns over some institutions and the worry that in the event of a collapse they will take our savings with them. How can we ensure we are maximising our savings and minimising our risk without the hassle of moving funds and completing multiple application forms for new accounts?
The PWM Deposit Service, in partnership with Insignis Cash Solutions tackles this very question, by allowing you to manage your cash savings easily and efficiently. The Insignis platform provides savers access to thousands of products from 38 Banks and Building Societies, all under a single sign-up process. Clients sign up once, removing all the bureaucracy of opening multiple bank accounts to access the best savings rates.
Clients are also able to view their savings deposits as well as add, move, and withdraw funds all on the Insignis Cash Platform, taking away the need to sign into multiple banking interfaces to access funds.
The 38 financial institutions Insignis Cash Solutions partner with range from high-street Banks and Building Societies, which are well known to Clients and within the financial services industry, to challenger Banks which are usually less well-known but offer market-leading rates.
About Giles Huston
Giles Hutson established Insignis in 2015 as CEO after a 20-year career in Investment Banking. Previously he was a Managing Director at Merrill Lynch and Morgan Stanley and has held previous roles at Goldman Sachs and Barclays. He has been responsible for running a large number of financing, payment and risk management transactions across all asset classes.
In addition, Insignis Cash Solutions often has access to leading rates that cannot be obtained if you went directly to the bank, supporting Clients to ensure their cash works harder for them.
Focusing on risk, all of Insignis Cash Solution’s UK-based institutions are protected under The Financial Services Compensation Scheme (FSCS), which is a government-backed scheme providing protection for deposits up to £85,000 per depositor, per UK-authorised institution. This enables Clients to spread their cash across various Banks or Building Societies within the Insignis Cash service while maximising FSCS protection eligibility. >>
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The Insignis platform provides savers access to thousands of products from 38 Banks and Building Societies, all under a single signup process.”
With over 2,500 savings products on the platform, across multiple client types, the solution allows Clients to manage their funds based on their liquidity requirements. This helps with financial planning as you are able to spread your funds over savings products ranging from easy access to five years. All deposits are held with the chosen bank and every Client always maintains beneficial ownership of the funds throughout the process. The service is available to individual and joint accounts, businesses, charities, trusts, power of attorney, court of protection, pensions (both SIPP and SSAS) as well as many others. Furthermore, they offer savings rates for Pound Sterling, US Dollar, and Euro cash holdings.
Many PWM Clients have benefitted from this service. A recent example is an individual who used the service following the sale of a property for £750,000. With their high-street bank, they were earning a rate of 0.25%5 and their FSCS protection would have been just 11% in the one institution after 6 months, once the funds were no longer eligible for temporary high balance FSCS Protection.
When the individual moved their funds over to the Insignis Cash Solutions platform, they were able to view all partner Banks and Building Societies and their associated savings rates, making it easy to compare and find the best rate. They moved funds into nine institutions of their choosing on the platform in products ranging from Easy Access up to one year. The Client’s FSCS protection increased to 100% and their blended interest rate rose to over 4%, equating to £30,000 of annual interest.
The Insignis Cash service allowed the Client to increase their return and reduce risk, something very few asset classes or services can provide.
To conclude, the key takeaways:
• Protecting your cash is important but the hassle of opening accounts is inefficient and time-consuming Insignis Cash offers Client’s access to 38 Banks and Building Societies under a single signup and single interface.
• Insignis Cash has access to leading interest rates, not accessible if you go directly to the Bank.
• All of Insignis Cash’s UK-based institutions are FCA regulated, PRA authorised, and FSCS protected.
• The service helps with financial planning through the range of products it offers and can offer products for various client types and currencies.
Please note that this article is intended for educational purposes only and should not be taken as investment advice. If you are interested in using the PWM Deposit Service in partnership with Insignis Cash Solutions, please speak to your Partners Wealth Management adviser or contact us on info@ partnerswealthmanagement. co.uk or 020 7444 4030.
1 https://www.bankofengland.co.uk/
2 https://www.bankofengland.co.uk/monetary-policy/inflation
3 https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2021/december-2021
4 https://www.barclays.co.uk/savings/instant-access/everyday-saver/
5 https://www.barclays.co.uk/savings/instant-access/everyday-saver/
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It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.
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