Wealthsmiths Winter 2020

Wealthsmiths

™

The Sanlam magazine – Winter 2020

Social posts that shook the markets The influence of reality stars, pop icons and presidents

Why women could face a bleak retirement Tackling the huge gender gap in pension savings

The Commonwealth and its ‘secret sauce’ How it could benefit a post-Brexit Britain

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It takes expert knowledge and careful research to manage your investments during the pandemic

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Masks and the markets 20

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Welcome Welcome to another issue of Wealthsmiths magazine. I hope you and your loved ones have remained safe and well during the Covid-19 emergency. We are all facing uncertainty in our lives because of the ongoing coronavirus crisis, looming Brexit deadline and the acrimonious US election, but there is still plenty of good to be found if you know where to look.

I was proud of the response of the whole nation as the pandemic took hold. The weekly clapping for NHS workers, the furloughed staff volunteering to deliver food to hospitals and the selflessness of millions of people, epitomised by the fundraising efforts of centenarian Captain Tom Moore, were all inspirational. On page 10, we’ve asked an expert to explain what it is about a crisis that makes us all pull together.

While the uncertainty has certainly affected the financial markets, there are good things there too if you have the knowledge and time to do your research. We’re focusing on investing in essential services and companies likely to do well in this environment. Most people know that big digital and pharmaceutical companies are likely to be resilient but there are many other less well-known examples.

When you’re investing in difficult times, it’s easy to be influenced by news items and social media. On page 16 we’ve taken a look at some social media posts that have had a big impact on markets and company valuations. From reality TV stars and pop icons to presidents, anyone with a big social following can make markets move. That’s why successful investors need to understand the true underlying value of companies.

Whatever the economic environment, planning for a pension is a high priority for most of us. On page 18 we’ve looked at the shocking pensions gender gap and what women can do to ensure they can enjoy a comfortable retirement. And on page 29 we’ve taken a look at how financial planners are using new software to model their clients’ cash flow all the way to 100 – that should give you food for thought as you plan for your later years.

I hope you enjoy this issue of Wealthsmiths and please do look after yourselves as we find a way through the current crisis.

John White CEO, Wealth Management

Sanlam has offices across the UK. To find your nearest Sanlam office, simply visit www.sanlam.co.uk/contact-us You can also call us on 0333 015 5600 or email getintouch@sanlam.co.uk We welcome your feedback on Wealthsmiths magazine. If you have any comments or ideas or if you would like to unsubscribe, please email: wealthsmiths@sanlam.co.uk

Wealthsmiths is produced for Sanlam by Wardour, Kean House, 6 Kean Street, London WC2B 4AS, United Kingdom +44 (0)20 7010 0999, wardour.co.uk For Sanlam Head of Marketing Christopher Dean Marketing Executive Kate Lovelace Marketing Manager – Private Clients Jolyon Dean Marketing Operations Manager Bhavika Gor For Wardour Editor Andrew Strange Art Director Rob Patterson Production Manager Jack Morgan Senior Account Director David Poulton Senior Account Manager Jennifer Flower Creative Director Ben Barrett CEO Claire Oldfield Executive Chairman Martin MacConnol

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Contributors Ray Philpott – Ray is an experienced journalist who has written about topics, including financial services, for more than 35 years.

Jess Unwin – Jess is an accomplished journalist who has written for a range of business and finance titles during his 30-year career.

Ruth Jackson-Kirby – Ruth has been writing about personal finance for a decade, specialising in pensions, mortgages, investment and tax.

Paul Bryant – Paul has worked for McKinsey & Company and writes extensively about financial markets and investing for organisations such as the Chartered Institute for Securities and Investment.

Wealthsmiths Winter 2020

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Sanlam UK

@SanlamUK

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Contents

Welcome Welcome to another issue of Wealthsmiths magazine. I hope you and your loved ones have remained safe and well during the Covid-19 emergency. We are all facing uncertainty in our lives because of the ongoing coronavirus crisis, looming Brexit deadline and the acrimonious US election, but there is still plenty of good to be found if you know where to look.

I was proud of the response of the whole nation as the pandemic took hold. The weekly clapping for NHS workers, the furloughed staff volunteering to deliver food to hospitals and the selflessness of millions of people, epitomised by the fundraising efforts of centenarian Captain Tom Moore, were all inspirational. On page 10, we’ve asked an expert to explain what it is about a crisis that makes us all pull together.

While the uncertainty has certainly affected the financial markets, there are good things there too if you have the knowledge and time to do your research. We’re focusing on investing in essential services and companies likely to do well in this environment. Most people know that big digital and pharmaceutical companies are likely to be resilient but there are many other less well-known examples.

When you’re investing in difficult times, it’s easy to be influenced by news items and social media. On page 16 we’ve taken a look at some social media posts that have had a big impact on markets and company valuations. From reality TV stars and pop icons to presidents, anyone with a big social following can make markets move. That’s why successful investors need to understand the true underlying value of companies.

Whatever the economic environment, planning for a pension is a high priority for most of us. On page 18 we’ve looked at the shocking pensions gender gap and what women can do to ensure they can enjoy a comfortable retirement. And on page 29 we’ve taken a look at how financial planners are using new software to model their clients’ cash flow all the way to 100 – that should give you food for thought as you plan for your later years.

I hope you enjoy this issue of Wealthsmiths and please do look after yourselves as we find a way through the current crisis.

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10 04 News and analysis The business and economic news you need to know

07 Investing in a pandemic The challenges and opportunities of the new investment landscape

10 Bringing out the best in us What has made us kinder and more

selfless during the Covid-19 pandemic?

John White CEO, Wealth Management

13 Charging forward The number of electric vehicles reached 7.2 million last year

Wealthsmiths is produced for Sanlam by Wardour, Kean House, 6 Kean Street, London WC2B 4AS, United Kingdom +44 (0)20 7010 0999, wardour.co.uk For Sanlam Head of Marketing Christopher Dean Marketing Executive Kate Lovelace Marketing Manager – Private Clients Jolyon Dean Marketing Operations Manager Bhavika Gor For Wardour Editor Andrew Strange Art Director Rob Patterson Production Manager Jack Morgan Senior Account Director David Poulton Senior Account Manager Jennifer Flower Creative Director Ben Barrett CEO Claire Oldfield Executive Chairman Martin MacConnol

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Contributors Ray Philpott – Ray is an experienced journalist who has written about topics, including financial services, for more than 35 years.

Jess Unwin – Jess is an accomplished journalist who has written for a range of business and finance titles during his 30-year career.

Ruth Jackson-Kirby – Ruth has been writing about personal finance for a decade, specialising in pensions, mortgages, investment and tax.

Paul Bryant – Paul has worked for McKinsey & Company and writes extensively about financial markets and investing for organisations such as the Chartered Institute for Securities and Investment.

Wealthsmiths Winter 2020

16 7 social posts that rocked the markets A reality TV star wiped $1.3 billion off the value of Snapchat

18 Narrowing the gender pensions gap Women in their 60s have on average less than a third of the pension savings of men

21 Trade ties that bind As Britain bows out of the

EU, what does the 54-nation Commonwealth have to offer?

24 Big picture President-elect Joe Biden has won the US election but can he unite the nation?

26 A mixed bag Handbags are the latest luxury

29 The science of retirement New software can model your

cash flow to the age of 100 and make sure you won’t run out of money in retirement

32 Stepping up for charities Charities in the UK are facing a £10.1 billion funding gap just as their services are needed more than ever before

34 Welcome to the smallest cathedral What makes the tiny city of St Asaph in Wales so fascinating?

investment, with one selling for US$386,000 last year

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Important note Sanlam is a trading name of Sanlam Private Investments (UK) Limited, registered in England and Wales 2041819, Registered Office: Monument Place, 24 Monument Street, London EC3R 8AJ; Sanlam Wealth Planning UK Limited, registered in England and Wales 3879955, and English Mutual Limited, registered in England and Wales 6685913, Registered Offices: One Temple Quay, 1 Temple Back East, Bristol, BS1 6DZ. English Mutual Limited is an appointed representative of Sanlam Wealth Planning UK Limited. Sanlam Wealth Planning UK Limited and Sanlam Private Investments (UK) Limited are authorised and regulated by the Financial Conduct Authority.

Past performance is not a guide to the future, investments may fall in value and you may not get all your capital back. Tax rules are subject to change and based on our understanding as at November 2020. The information provided should not be taken as financial advice, and you should always seek professional advice. If you no longer wish to receive your half-yearly edition of Wealthsmiths, please email us at getintouch@sanlam.co.uk to opt out.

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News and analysis All the insights you need as you work with your investment manager to navigate the world of Covid-19

Market highs and lows We live in uncertain times, as we continue to feel the effects of the Covid-19 pandemic across society.

As countries see spikes in infections and re-enter lockdown, it is clear that this situation will play out for some time to come and that we cannot yet predict the final effects of the pandemic on both a human and economic level.

Governments across the globe

have promised financial help on a scale not previously seen. And initiatives such as the European Recovery Fund demonstrate nations’ ability and willingness to work together to mitigate the effects of the pandemic.

As the chart below shows, we have always come out of past crises stronger, as worrying as they may have seemed at the time. The

2008 financial crisis had a huge impact worldwide, but economies recovered and ultimately surpassed past growth.

The current crisis may also lead to innovation in various fields.

A Covid-19 vaccine, for instance, will not only bring about a world-changing cure, but is likely to result in related scientific discoveries as well.

Historic highs and lows of the MSCI World Index 2012

2000

Speculation about Greek crisis contagion causes markets to fall

Excessive speculation in tech firms causes a bubble that eventually bursts

2,000

2020

1987

Covid-19 causes a sudden drop in the markets

Black Monday sends a sudden seismic shock through the markets

A tsunami strikes Japan causing severe supply chain disruption

2008

1979

1983

1,000

2011

The global financial crisis sends stocks plummeting

1987

1991

1995

1999

2003

2007

2011

1,500

2015

500 Index points

2019

Source: MSCI World Index Past performance is not a guide to the future, investments may fall in value and you may not get all your capital back

Best and worst performing sectors e-commerce

As consumers were forced to change their buying habits due to Covid-19 and resulting lockdowns, e-commerce has taken market share, and looks set to hold onto it as buying habits alter for the long term.

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Online gaming

For some, lockdown has meant having more free time. Many have turned to online gaming for the first time; something they would not have done without the pandemic.

Life science

No one knows who will be successful in producing a vaccine or the best testing product. However, the race is on, meaning that those companies providing the equipment to those trying have great prospects.

Airlines

The airline industry is famous for its small margins at the best of times, and the pandemic has been disastrous for it. With business travel potentially permanently impaired, it could be many years before airlines recover.

Wealthsmiths Winter 2020

Brewers

It has been a tough time for global brewers, as lockdowns and social distancing have heavily reduced drinking occasions.

For a recovery here much will depend on a vaccine.

Insights

Edmond Byrne and Adi Toch collaborated on a sculpture reflecting on the importance of time

Alchemy: where the worlds of art and wealth management converge Art and wealth management are as similar as they are disparate. Our materials might be different, but we both use skill and collaboration to transform something ordinary into something meaningful and of real value.

The definition of alchemy As lead sponsor of the 2020 Collect Open Award at the International Art Fair for Modern Craft and Design, we had the privilege of meeting some inspirational and innovative artists. Like our portfolio

managers, financial planners and other investment experts, these artists have spent many years honing their craft and developing their skills, enabling them to create something beautiful and of lasting value from simple materials.

Our appreciation of this craftsmanship and a desire to support the arts – particularly amid these difficult times – led us to commission Edmond Byrne and Adi Toch to collaborate and create a sculpture that would reflect an idea that is poignant for

A great deal of craftsmanship went into the copper and glass sculpture

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us all: ‘The Importance of Time’.

While time is infinite, for each of us it is finite. Without it, we can’t realise our dreams or achieve our ambitions. But we also know that time can be cut short when we least expect it, or our plans can be impeded by the unforeseen, and we need to protect ourselves from that. The pandemic brought this home to us all. Time is the most important commodity we have. Time with family, time to think, time to love, time to grieve and time to reflect. For each of us, time is precious.

The sculpture is a metaphor for this idea. Through careful manipulation of copper, an understanding of the properties of molten glass, and an appreciation of how the two materials interact, Edmond and Adi have crafted and filled three copper bowls to different levels, signifying the accumulation of wealth and experience over time – each spilling over into the next life stage.

Their beauty and craftsmanship will forever remind us of the importance of time.

Learn more at www.sanlam. co.uk/importance-time

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Listening to you: Sanlam UK 2020 client survey In March, the UK announced restrictions to combat Covid-19, which were expected to last three weeks. Three months on, with many lives lost, tumultuous markets and billions invested to preserve jobs

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and businesses, it was clear that the pandemic was more than a shortterm setback. We wanted to know how these circumstances were affecting you and how to direct our efforts to support you. So, we carried

out a survey focusing on: the impact of Covid-19 on your life and finances; your experience and perceptions of Sanlam; your confidence online; and your appetite for increased use of digital technology by Sanlam.

We asked what aspect of the pandemic was worrying you the most?

56% Health

40% Personal finances

76%

Wider economic impact of Covid-19

10% Other

Sanlam says: We found that 85% of you were worried about the effect the pandemic was having on the lives and livelihoods of your family and friends. The figures above drill a little further into your concerns.

The ‘other’ section features verbatim responses dominated by concerns about future job and business prospects for younger family members.

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We have maintained regular communication with clients throughout the pandemic, such as our market updates and this magazine, and we asked how useful you found them.

3%

25%

I don’t like receiving them

13%

I don’t find them useful

I find them very useful

54%

I find them slightly useful

6%

I don’t remember receiving communications like these

Sanlam says: In this difficult time, you need our service to be at its absolute best. We keep in touch regularly to help ensure that it is. We are proud that 87% of you said that your perception of Sanlam and our service had improved or remained constant.

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With online services providing a vital lifeline, we asked how you used them.

Sanlam says: One challenge that lockdown has presented is the need for greater reliance on digital services. We asked you about your propensity to use and feel comfortable with online services and found that age was a factor. Among those under 60, 68% said their use of online services was medium or high.

That number fell to just over 23% for the over 80s.

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Using digital channels appropriately during Covid-19 is important to stay in touch. We asked you if you had taken part in a video call with your Wealth Planner or Portfolio Manager and what the experience was like.

Sanlam says: Only 9% of you had had a video call at the time of the survey, although this has since increased.

But among those of you who had, 83% said the experience was just as good (62%) or better (31%) than the usual faceto-face meetings.

HOW ARE WE IMPLEMENTING YOUR FEEDBACK? Video calls These are now part of our service to you. Ask your wealth planner or portfolio manager about this.

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Monthly newsletter Our new Curated newsletter keeps you updated with news that affects your investments.

Sanlam on Demand We’ve created this service for friends or family who would like complimentary, no obligation, financial guidance.

Virtual events These aim to keep you informed and entertained in lockdown and include our Royal Academy masterclass series.

Wealthsmiths Winter 2020

Your feedback doesn’t end here and nor do our efforts to offer you a better service. Please email getintouch@ sanlam.co.uk if you have any feedback.

Investing

Investing in a pandemic There are challenges and opportunities for investors as they navigate the markets during the Covid-19 crisis, writes Andrew Strange

P

erhaps the most recent example of a pandemic on the current scale is the Spanish Flu that began in 1918 and few people alive have ever faced an investment landscape like the one that is apparent today. The Covid-19 crisis has brought about fundamental changes, from the enforced closure of businesses and the

‘rule of six’, to expansive government intervention in financial markets.

In March, the FTSE 100 recorded its biggest quarterly fall since Black Monday more than 30 years ago, with shares in the UK’s biggest companies plunging 25% as lockdown halted economic activity. There were record

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designed to deal with volatile environments and our analysts swiftly identified and quantified our exposure to the crisis, allowing action to be taken where required.

We are focusing on sectors likely to be resistant to the impacts of the pandemic and carefully assessing which companies will be able to cope if even stricter restrictions are imposed on their operations.

“We’re very focused on essential services and on businesses that shouldn’t be affected or disrupted too much by what’s going on,” explains Chief Investment Officer Phil Smeaton. “And where we are invested in companies that are having to deal with new rules and changes, we’re looking at whether they have strong enough balance sheets to get them through difficult periods.”

Critical infrastructure

outflows from retail funds as investors took fright, yet the following three months saw confidence return and £11.2 billion ploughed back in – more than in the whole of 2019. Then, amid warnings of a second wave and new restrictions, the market fell again in September.

In the face of the difficult economic conditions caused by the virus, countries around the world have committed huge sums to economic stimuli to protect jobs and businesses – in July, the UK Treasury announced such measures had already cost the country £190 billion. Some governments have gone so far as to intervene in the bond and interest rate markets, and some central banks have purchased equities and high-yield bonds to stimulate the economy, but the impact on the markets when such schemes are rolled back remains unclear.

The erratic stock market and the unpredictable response from governments and regulators will undoubtedly persuade some nervous investors to take their money out and wait for better times before they return. This could mean missing growth opportunities in a market rebound, however, and severely impact their long-term returns.

Simply missing the 10 best days in the S&P 500 in the 20 years to December 2019, for example, would have seen a $10,000 investment grow to just $16,180 instead of $32,421.

Experience tells us, therefore, that managing investments carefully through the pandemic and seizing opportunities when they arise is likely to be the best option for long-term growth. Sanlam’s investment process is

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Constructing portfolios

Smeaton says that success in the current environment requires carefully constructed portfolios that are designed

Wealthsmiths Winter 2020

Demand for housing remains, even during a global pandemic

Photos: Alamy

Children wearing face masks during the 1918 Spanish Flu pandemic

Critical infrastructure and essential property that provides key services for society are likely to be among the most resilient investments. These include the buildings that house internet servers, roads, hospitals and renewable power plants, as well as residential housing. “The need for housing doesn’t go away because we’re in a pandemic,” says Smeaton. “You might not go on holiday any more but you are still going to need somewhere to live. Student accommodation could be a good investment for example.”

And while the economy may have suffered under the pandemic, certain companies with offerings suited to the ‘new norm’ have done extremely well, such as Amazon, Google and Facebook. Microsoft has also seen the widespread adoption of its video technology with Microsoft Teams. And beyond these well-known examples there are a host of others, including healthcare companies like Roche and AstraZeneca, or gaming companies such as Electronic Arts and NetEase.

Investing

Calm in a crisis Sanlam experts have a great deal of experience of navigating the markets and manage client portfolios in a way that most individual investors would be unable to do, because of either a lack of time or knowledge. Here are five key steps they are going through during the pandemic.

1. Identifying investments that are likely to be Some digital services have thrived during the Covid-19 crisis

to ride out a difficult market and are poised to take advantage of opportunities. This requires every asset to be carefully chosen and to have a specific role to play. Sanlam, for example, may include some assets that are a drag on performance in the good times but if the economy suffers, they will provide protection, reducing risk by rising when other assets fall.

“In the pandemic, investment is extremely complex and the issues are very difficult for individuals to assess,” says Smeaton. “It’s easy to get swayed into some opinion about one of these risks by a news headline without being able to fully assess the true impact something might have. It would be really difficult for an untrained investor with limited research time to do that kind of analysis on those risks by themselves.”

Of course, if a vaccine were developed it could allow investors to get back to normal. “A number of our holdings are either developing a vaccine or developing tests for Covid-19,” says Smeaton. “Johnson & Johnson is very big in that regard and Roche is working on developing tests and we are obviously very supportive of the work they do.”

But there may be multiple mutations of the virus and we don’t know yet if a vaccine will work on all strains. This uncertainty means that Sanlam is likely to be focusing on businesses that can operate successfully in a pandemic world for some time to come.

resilient during the crisis, such as essential infrastructure and residential housing.

2. Researching which companies are likely to thrive through the pandemic, from Amazon to Microsoft and many more.

3. Identifying which companies will be able to cope if they are forced to close because of an outbreak of Covid-19, paying careful attention to company balance sheets.

4. Understanding the risks posed by government interventions, from printing money and purchasing bonds to providing loan guarantees to banks.

5. Creating portfolios of diverse assets designed to be resilient in a variety of scenarios, whether the market rises or falls.

Investors should focus their attentions on staying safe and well and should seek expert advice to see their portfolios through the effects of Covid-19 on the financial markets. There will be better times ahead for investors and society – even the tragedy of Spanish Flu eventually came to an end and ushered in the boom times of the ‘roaring 20s’. n

Find out more If you have questions about your investments, ask your financial planner or portfolio manager, or email us at getintouch@sanlam.co.uk

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Bringing out the best in us

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cross the country the vast majority of people have been making real efforts to support each other since the Covid-19 crisis struck.

Whether it was clapping for carers every week, doing shopping trips for vulnerable neighbours, or taking part in impressive charity fundraising activities, thousands have stepped up to the plate to help others.

This upsurge in thoughtful, kind-hearted behaviour has been likened to that generated by the ‘Blitz spirit’ of World War II, which prevailed as the nation faced some of its darkest days. So, what is it about a crisis that seems to bring out the best in people and motivates them to go the extra mile?

Choices and decisions There are various reasons why greater levels of caring behaviour emerge in situations like the pandemic, according to leading psychiatrist Dr Chi-Chi Obuaya,

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an expert in understanding human behaviour under extreme stress.

“During lockdown, everyone was forced to slow down. The rhythm of our lives was disrupted as we faced a very real threat to ourselves, our friends and families,” he explains. “In extreme situations like this, people are forced to make a choice. They can be inward-looking, adopting a bunker mentality and primarily thinking about themselves – as exemplified by panic-buying, hoarding resources and fleeing to boltholes.”

Alternatively, adds Dr Obuaya, “they can choose to be positive and outward-facing, recognising that we all live in communities where we’re mutually dependent on each other and may need someone else’s support to survive.”

For a significant proportion of the population, being bound together by a common enemy generates

Wealthsmiths Winter 2020

Photos: Alamy, Furloughed Foodies

The pandemic has galvanised many people to help the vulnerable and elderly during the Covid-19 crisis.

Ray Philpott finds out what motivates these actions

Lifestyle

“Our community was facing an enemy we needed to fight collectively and there was an opportunity to act” a natural urge to reach out to people and act collectively.

Consequently, offering time, resources, knowledge, money and physical help to others increasingly feels like the right thing to do for many, but not all.

Other factors “When the rhythm and structure of life are disrupted by a crisis it undermines some people’s sense of purpose, identity and self-worth. Some seek to reclaim fulfilment and direction by giving their time to help others,” says Dr Obuaya.

Altruistic behaviour can also be motivated by a reaction to what others are doing. This may involve ‘social proofing’ – where people copy others’ positive actions and behaviours to be seen positively – or sheer inspiration, as epitomised by the impressive fundraising efforts of centenarian Captain Tom Moore, which drove many others to do more.

Dr Obuaya concludes: “Whatever the motives behind all this activity to help others, the amazing thing is it happened organically in so many different locations in so many different ways.”

Top image: ‘Clap for carers’ in action Left: Captain Tom Moore

Furloughed Foodies One community support success that made headlines was Furloughed Foodies, a donation-funded voluntary organisation making and delivering free meals for NHS staff battling to save lives in pandemic-hit London.

At its height, it boasted 800 volunteers (most of whom were furloughed but some were still working), who were distributing 30,000 homemade meals a week to 16 hospitals. The movement even had its own highly active website and social media channels. But what inspired founder Floris ten Nijenhuis to start this ambitious programme?

“Back in March, my late mother was seriously ill with cancer and I’d been watching brilliant doctors in Italy look after her for 18 months and couldn’t just stand by – I felt compelled to do something,” he explains.

“I was between jobs and delivering meals locally but didn’t feel that was enough. Then a doctor friend of mine said it was possible to deliver meals to hospitals and I knew lots of furloughed people who would help.

The rest is history.

“Our amazing volunteers had many different reasons

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for taking part, I’m sure. However, judging from the huge responses to any posts about delivery activities on our WhatsApp groups, it seems a common theme was the desire for a sense of community, with something to share and chat about together in the grim depths of lockdown.”

Taking control For lawyer Pranav Bhanot, it was the urge to take control and unite people against the common enemy of Covid-19 that drove him to found the Chigwell Coronavirus Action Group. The group brings together the diverse vocational skills of more than 60 local volunteers to benefit the wider community in lockdown in hugely varying ways. It disinfects local public spaces, provides free legal advice to those who have lost jobs or had events cancelled, and offers free food and medicine delivery and even counselling for Covid-related anxiety.

Initially launching with just family members and a very small group of close friends, the number of volunteers grew rapidly as word about the group’s activities spread over social media.

Bhanot says: “I felt the pandemic basically took away our control of our own lives. Personally, I wanted to make a difference, to take back control and do something constructive to limit its impact.

“I particularly wanted to mobilise healthier and younger local people to assist those in the area who are elderly or more vulnerable. Our community was facing an enemy we needed to fight collectively and there was an opportunity to act because people felt motivated and took decisive action.” n

Above: Many firms and individuals made PPE to donate to the NHS. Left: A Furloughed Foodies volunteer cooks up a storm

How Sanlam responded to the Covid-19 lockdown Keen to help people whose social and working lives were being disrupted by the pandemic and lockdown, we ran a digital events programme that was open to everyone and virtual summer work experience sessions for young people across the country, who had been disadvantaged by cancelled internships and unpaid training opportunities.

Between April and June we ran a series of entertaining and informative web-based activities presented by Sanlam staff and senior managers. These included mobility and exercise classes, a pub quiz, master classes in selfportrait painting with artist Eileen

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Cooper, cooking with MasterChef semi-finalist Christian Day and virtual cocktail mixing under the guidance of Joyce and Raissa de Haas, the owners of mixer brand Double Dutch.

“We invited clients, professional partners and colleagues to take part in each of these events and others covering financial planning sessions and social media training,” explains one of the organisers, Business Analyst James Taylor.

“Some of the most popular digital events were the Future Leaders webinars for 18 to 25-year-olds and we built on that to deliver a week-long, interactive

Wealthsmiths Winter 2020

work experience event for more than 60 young people.

“Senior managers gave tutorials and lectures covering everything from marketing and wealth planning, to starting a career in financial services.

Participants were divided into virtual teams and asked to complete two projects, followed by a presentation on each to a panel of experts.”

He continues: “Through these events, we’ve been able to give something back to people that was entertaining and useful and, based on the positive reception they received, we plan to run more in the future.”

Lifestyle

Charging forward A new report shows sales of electric vehicles across the world are growing significantly. Jess Unwin finds out why this has happened, who the big players are and what the future holds

S

ales of electric vehicles (EVs) are moving into the fast lane and many analysts believe they will overtake those of conventional cars – powered by petrol or diesel – by the end of this decade.

According to the International Energy Agency’s Global EV Outlook 2020 report, just 17,000 EVs were on the world’s roads in 2010, but by 2019 that number had swelled to 7.2 million, nearly half of which were in China.

The report shows an industry in rapid growth mode: electric car sales topped 2.1 million globally in 2019, surpassing 2018, which was already a record year.

Covid-19 may bring a slowdown but only temporarily.

Ram Chandrasekaran, of global research consultancy Wood MacKenzie, echoes other analysts when he says the pandemic “has left a dent in the EV sector, but it’s a scratch on the paintwork, not a big repair job”.

This year really does seem like the year of the EV – we’ve seen the launch of flagship electric models with

familiar names, such as the Mini, the Vauxhall Corsa and the Fiat all-electric 500. And for the next five years, the automotive industry has announced plans to release another 200 new electric car models.

Electric car renaissance Yet EVs aren’t new – they outsold internal combustion (IC) cars at the end of the 19th century. And the fastest early cars were also electric: the Belgian-built La Jamais Contente set the world land speed record at 66mph in 1899.

A century of dominance for IC cars began in the early 1900s with advances in their engines – in particular, the use of electric starters – and mass production of cheaper petrol and diesel vehicles. Only in the late 20th century did concern about their environmental impact and fears about diminishing oil supplies lead to renewed interest in EVs. There were false starts in the race to produce viable

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View of the construction site for Tesla’s Grünheide plant in Germany. Starting next summer, the US electric car manufacturer plans to produce up to 500,000 vehicles annually in Grünheide

La Jamais Contente

The Citroën Ami electric car

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EVs – moves in 1990s California to push for loweremission vehicles prompted US and Japanese automakers to develop electric models but these were all eventually withdrawn from the US market.

The real renaissance in EVs came with technology advances like the invention of the lithium-ion battery, and it was Californian company Tesla that in 2008 delivered its Roadster model, the first highway-legal, all-electric car to use lithium-ion.

Mass production EVs like the Mitsubishi i-MiEV soon followed, with the Nissan Leaf eventually becoming the world’s best-selling EV – a title it lost to the Tesla Model 3 in spring 2020.

Technical advances Professor David Greenwood, who leads the Advanced Propulsion Systems team at University of Warwick’s WMG department, agrees one reason EV sales are now moving up a gear is batteries that are both 10 times cheaper and able to store twice as much energy as a decade ago.

He adds: “At the same time, there’s political momentum to mitigate climate change, which has seen regulatory measures like setting limits on the amount of CO2 produced by automotive manufacturers.”

A number of countries have announced goals to ban the sales of petrol- and diesel-powered vehicles, including the UK, China, India and Germany by 2030.

Wealthsmiths Winter 2020

Electric vehicles

“The signs are encouraging for EVs but there need to be more factories making EVs and batteries before we have a significant volume” Incentives to promote EVs include tax credits and subsidies – in the UK, for example, there’s a £3,000 grant for buying an electric car and schemes to help pay for a charging point.

But let’s not get too carried away. The IEA report reveals that EVs still only accounted for 2.6% of global car sales in 2019. Dr Colin Herron, CBE, who has more than 40 years’ experience in the automotive industry, including 18 years with Nissan, says: “The signs are encouraging for EVs but there need to be more factories making EVs and batteries before we have a significant volume. I think that’s still five years away.”

Photos: Alamy, Citroen

Manufacturing challenge Although Tesla has attracted many of the headlines around EVs, nearly all the major car manufacturers are now also producing them. Professor Greenwood believes new players could yet establish themselves: “New names are emerging, like Rivian in the US, but it’s going to be difficult for any company that can’t produce in volume.”

Dr Herron, who’s also the MD of Zero Carbon Futures, which works to support the growth of the EV industry, believes Tesla does have one clear advantage: “The older car companies have 100 years of history to bin before they can recreate themselves with factories working in a different way, while Tesla doesn’t have that baggage. It’s a challenge the established manufacturers will meet but, in the process, we could see more consolidation in the industry.”

He continues: “The big question is whether the Chinese will make cars to sell in Europe and other markets. At the moment, it’s expensive to convert their cars for export so I think the demand in China will keep them occupied for the next five years.”

Price parity Whoever is making EVs, Professor Greenwood is convinced sales will overtake IC cars in the next decade, especially as he sees EVs having price parity with IC cars by the mid to late 2020s.

Looking at other future trends, he says: “At the moment, the push is towards EVs with long range because the charging infrastructure is still quite sparse. But when that changes, most cars will drop to a range of 150 miles. After

Electric dreams The electric vehicle industry attracts a lot of investment, which is enabling it to scale up rapidly towards a cleaner future. At Sanlam we applaud this and the important role it is playing in the transition towards a lowcarbon economy.

From an individual investor’s point of view, though, EVs are a far from simple investment.

EVs represent an investment risk because of the speed at which the technology is changing. And while lots of manufacturers are investing in EVs, the automotive industry is fiercely competitive and it’s uncertain who the winners and losers will be.

Phil Smeaton, Chief Investment Officer for Sanlam, says: “There is a growth opportunity tailwind behind EVs, but our investment strategy is more rounded than that. We look at companies that not only make profits but can defend those profits for a meaningful length of time. That’s about the quality, uniqueness and competitive edge of the business.”

In fact, if you want to make a difference, the best approach is to talk to us about your aspirations and we can help to guide you towards the best investments to both do good and increase your wealth.

all, 98% of journeys in the UK are less than 50 miles.

“Home charging will be sufficient for most people, but for that once-in-a-while long-distance drive, or for those who don’t have off-street parking, there will be public stations where charging will take just as long as it takes to get a coffee or go to the loo.”

Dr Herron predicts further improvement in EV technology, including the introduction of solid-state batteries that could prove to be smaller, cheaper, safer and have higher storage capacity.

Both men believe buses and light commercial use vehicles will also transition to electric power during the 21st century but accept there are challenges in finding a viable petrol replacement for the largest commercial vehicles.

While there may still be practical issues to solve and some years to go before all road traffic is electric, it seems the direction of travel is towards EVs. n

Find out more To learn more about ethical investing, speak to your financial planner or portfolio manager or email us at getintouch@sanlam.co.uk

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7 social posts that rocked the markets The rise of social media means that rumour and opinion can spread around the world in seconds and cause the financial markets to rise and fall irrespective of the underlying strengths or weaknesses of the listed companies. Without sound advice, it’s easy to find yourself making investment decisions based on the opinions of celebrities, politicians and hackers. Here are seven examples of posts that moved markets.

#1

#2

Reality star sends Snapchat tumbling

The President rocks Boeing Donald Trump

Kylie Jenner

US President Donald Trump knows how to use social media to rattle corporations. In 2016, he launched a savage attack on aircraft manufacturer Boeing over the proposed $4 billion cost of a new Air Force One commission. The President tweeted “costs are out of control” and “cancel order!”, appearing to cast doubt on the future of the contract and causing Boeing’s share price to fall by around 1%. In a separate incident in July of this year, Trump also contributed to a 3% fall on the FTSE 100 after he suggested the US election could be delayed.

Reality TV star Kylie Jenner wiped $1.3 billion (£900 million) off the stock market value of Snap, the software company behind Snapchat, with a single tweet in 2018. Kim Kardashian’s half-sister tweeted: “sooo does anyone else not open Snapchat anymore?” The criticism reached her 24.5 million followers and was retweeted more than 60,000 times, causing a 6% drop in Snapchat’s value on the day.

A nervous investor might have sold the stock but the company’s share price quickly recovered and Jenna sounded a more conciliatory note, tweeting: “still love you snap… my first love.”

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#3 ‘Gangnam Style’ boost for IP Corp Back in 2012, South Korean pop star Psy helped to double the value of his father’s software firm when the video of ‘Gangnam Style’ went viral. Gangnam Style was the first Korean hit to top Apple’s music download chart. Psy’s father, Park Won-ho was the Chairman and controlling shareholder of semiconductor company DI Corp, which saw its market capitalisation surge to more than $100 million on the main Seoul bourse by late September 2012, according to Time magazine.

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Wealthsmiths Winter 2020

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Psy

Investing

#6

#4

Clinton attacks drug pricing

Hackers send markets spinning

Hillary Clinton

In 2013, hackers sent a tweet from the Twitter account of Associated Press, saying: “Breaking: two explosions in the White House and Barack Obama is injured.” Wall Street panicked and around $200 billion was briefly wiped off the market’s value, according to USA Today.

Associated Press quickly announced that the tweet was a fake and the White House issued assurances that the then President was safe. “The President is fine,” spokesman Jay Carney said.

“I was just with him.” Stocks rebounded quickly – the Dow ended the day up 152 points. The attack was claimed by the Syrian Electronic Army, which had previously hacked into the Twitter accounts of BBC Weather and CBS.

When Turing Pharmaceuticals acquired the drug Daraprim, which is used to treat patients with weakened immune systems from diseases like AIDS, and increased the price from $13.50 a tablet to $750, the then presidential hopeful Hillary Clinton wrote a 21-word tweet saying she would lay out a plan to tackle such price gouging. It helped to set off a sharp decline in the pharmaceuticals sector, which saw the iShares Nasdaq Biotechnology ETF drop by more than 4%. The attack sparked by Turing, a start-up owned by a former hedge fund manager, knocked the Nasdaq into the red on what had been an otherwise positive day for US stocks.

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#7 Going out of fashion Donald Trump

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#5 Oprah boosts Weight Watchers Oprah Winfrey

Chat show host Oprah Winfrey sent Weight Watchers shares soaring by 20% when she tweeted “Eat bread. Lose weight. Whaaatttt? #ComeJoinMe”. Winfrey herself benefited from the surge thanks to her 10% ownership of the business. She paid $43 million for her stake in Weight Watchers in 2015 and went on to become one of its biggest cheerleaders. Winfrey was able to influence the markets because of her huge Twitter following of 41.6 million. She is reported to have made $12 million in just over an hour after the publishing the tweet.

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And finally, back to Donald Trump, whose use of Twitter has sparked debate across the world.

In 2017, high-end department store chain Nordstrum saw its stock tumble by 1% within a minute of a tweet from the President who claimed that his daughter Ivanka had been treated unfairly by the company, which had dumped her fashion label, citing poor sales. While some said this was an abuse of the President’s power, the White House said that Mr Trump had every right to tweet about the issue, since it wasn’t about promoting a family business but defending his daughter against attack.

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Narrowing the gender pension gap A typical woman in her 60s has less than a third of what a male counterpart has saved in his pension pot, writes Ruth Jackson-Kirby

Multiple factors “The serious financial disadvantage women face in old age cannot be attributed to any one factor but is a combination of societal, health and financial factors stacked against them,” says Sian Fisher, Chief Executive of the Chartered Insurance Institute (CII).

“Women are living longer; however, care costs them more at the end of their lives. Women are succeeding in the workplace and the gender pay gap is hopefully closing but caring for family, even for just a few short

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years, significantly impacts a woman at retirement. It is the culmination of all these factors that is potentially driving women towards poverty in old age.”

The gender pension gap may be a real and depressing threat to a woman’s retirement income, but it can be overcome. There are a number of steps women, and their partners, can take to close the gap and put themselves on course for a comfortable retirement.

“The earlier women start to plan their financial future and retirement the better,” says Natalie Jaques, a Wealth Planner at Sanlam. You might not know what your retirement income needs to be when you are in your early 20s but the longer you can contribute to your pension pot, the more funds you will have in retirement and you will also create more flexibility regarding the age you can stop working.”

Start saving The key to any successful retirement planning is to start saving early. This is particularly important for women.

Start saving in your 20s and you can build a pot that will have 40 years to grow. This is also the time when you have the fewest financial commitments so can afford to save a healthy amount into a pension.

Saving just £100 a month into a private pension from the age of 22 to 30 could amount to a £184,000 pension pot when you hit 65, assuming annual growth of 7%.

Figures show that the gender pension gap is at its narrowest when we are under 30. In our 30s the gap grows as women take time out of work to look after children. But this doesn’t have to be the case.

“During paid maternity leave for the first 26 weeks,

Wealthsmiths Winter 2020

Photos: Alamy

W

e all know about the gender pay gap.

Fifty years may have passed since the Equal Pay Act became law, but women still earn 17.3% less than men, according to the Office for National Statistics. This has a huge impact on women’s financial lives but one area that is often overlooked is the gender pension gap.

The gender pension gap refers to the significant difference between the value of the average man’s pension pot – and subsequent retirement income – and the average woman’s pension savings. Women in their 60s have an average £51,100 pension pot, according to the Pension Policy Institute (PPI). In contrast, the average man in their 60s has £156,600 ready to support them in retirement.

There are numerous reasons for this. The PPI believes time away from work to raise a family or care for older relatives and working part-time account for half the gap, with the gender pay gap accounting for another 28%.

It is a complex problem that won’t be solved overnight – it is expected to take at least another 20 years to close the pay gap alone.

Pensions

“Caring for family, even for just a few short years, significantly impacts a woman at retirement�

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Five steps to a comfortable retirement 1. Start saving early – the younger you

Facebook’s Chief Operating Officer Sheryl Sandberg is among those championing pay equality

employer and employee contributions will continue to be paid,” says Jaques. “Even if you are receiving no income you can still make a pension contribution up to £3,600 per annum and you may also be entitled to National Insurance Credits which will count towards your State Pension. It’s worth exploring all your options when looking at your family expenditure during this time.”

Partner contributions It is also worth remembering that your partner can make contributions into your pension as well as their own.

Just be aware that if they are a higher rate taxpayer, they can’t claim back extra tax as the level of tax relief on a pension is set by the tax position of the person who the pension belongs to.

Another way women can narrow the pension gap is by taking more of a risk with their pension investments.

Traditionally, women are more cautious investors than men and this has a knock-on effect on their pension pots.

“If you are further away from retirement, say 15 to 20 years, you could take a higher degree of risk with your pension funds as they will be less impacted by short-term volatility and you will benefit from long-term growth,” says Jaques.

“As you are getting closer to retirement, within five to ten years, start to reduce the risk of your pension funds as if there were to be a market crash your funds would have less time to recover from their fall in value.”

Finally, make the most of your State Pension. “The State Pension is a weekly guaranteed income, which, for now, is index-linked and payable for life,” says Jaques. “It might not sound much but to look at it in a different way, for a 66-year-old to receive a pension of £175.20 per week for life increasing each year with inflation, buying an annuity you would need a lump sum in excess of £300,000.”

In order to receive the full State Pension, you need to have 35 years of National Insurance Contributions. If you took a career break to raise children and claimed child benefit you should have received National Insurance Credits to cover that time. However, you could have gaps in your National Insurance record for other reasons.

You can top up your National Insurance with voluntary

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are when you start saving for retirement the easier it is to build up a sizeable pension pot.

2. Take risks when you are young – when retirement is a long way off you can afford to take more investment risk in order to enjoy more growth.

3. Keep up contributions during career breaks – even if you have no income you can still pay up to £3,600 a year.

4. Make the most of your state pension – make sure you get National Insurance credits when you take a career break to care for family members.

5. Don’t forget about pensions if you get divorced – pensions are a married asset and should be divided between both spouses in the event of a divorce.

contributions, just make sure it is worthwhile doing so before you part with your cash.

It is also important not to forget about pensions if you get divorced. The average divorced woman has a pension pot of just £26,100 compared to £103,500 for a divorced man, according to the PPI. And while a pension pot is often the second most valuable asset in a marriage after property, the organisation says that seven in ten divorce settlements don’t include pensions. n

Find out more This article provides general guidance only. When considering your own pension arrangements, talk to your financial planner, or visit www.sanlam.co.uk

Wealthsmiths Winter 2020

Lifestyle

Boris Johnson meets Canadian Prime Minister Justin Trudeau

Trade ties that bind Brexit has cast a spotlight on Commonwealth trade. It could be time to ramp-up an extraordinary economic opportunity, writes Paul Bryant

I

n 2015, economists at the Commonwealth Secretariat – the intergovernmental organisation which co-ordinates and carries out much of the Commonwealth’s work – discovered a ‘secret sauce’ that somehow boosts trade between Commonwealth countries.

They found that trade between members was 20% higher than that with non-member countries, and foreign direct investment flows were 10% higher1, on average. And they couldn’t explain these elevated levels of economic activity with ‘conventional’ trade drivers – for example, the Commonwealth isn’t a formal trading block with tariff preferences between members.

According to Brendan Vickers – Adviser and Head, International Trade Policy at the Commonwealth Secretariat – an equivalent force is at work, dubbed the ‘Commonwealth Advantage’, and it results in trading costs between Commonwealth countries being 21% lower than

between member and non-member countries, on average.

Further studies concluded that the advantage arises from the deep historical and cultural ties between members, the widespread use of English, similar legal and administrative systems, and economically active diaspora communities2.

Vickers says: “We are absolutely convinced this is an untapped opportunity and that countries can exploit this advantage to their benefit. They can use it as a tool to grow trade, create trade resilience, and promote recovery from the Covid-19 economic shock.”

It’s fair to say the UK has been slow to exploit the Advantage. While across the entire Commonwealth, intra-Commonwealth trade has grown from 12% of Commonwealth countries’ total trade in 1998 to 18% in 20182, the UK’s intra-Commonwealth trade has remained roughly static as a share of its total trade over the same period – at around 9%3.

But it’s probably also fair to say that this situation is

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The Commonwealth heads of state meeting in 2018

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likely to change. Couple the Commonwealth Advantage with the UK’s new post-Brexit trade-policy flexibility, the greater importance placed on non-EU trade, and the attractive trading profile of the Commonwealth – 54 countries, many of them growing rapidly, digitising rapidly, with a combined population of 2.4 billion people (60% under the age of 30)4 – and the extraordinary economic opportunity becomes obvious.

the production and execution of strategic plans.

Vickers says that since highlighting the Commonwealth Advantage, trade-led economic development has moved up the agenda: “It proved to be a catalyst. Senior trade officials started to meet, and intergovernmental processes focused on trade and investment cooperation kicked off with renewed vigour, culminating with Commonwealth trade ministers meeting again after many years.”

A multi-lateral force The earliest guise of the Commonwealth emerged in 1926 when Britain; plus Australia, Canada, India, the Irish Free State, Newfoundland, New Zealand and South Africa – all Dominions, or semi-independent countries at the time – established the British Commonwealth of Nations and agreed that they were all equal members of a community within the British Empire (but still owed allegiance to the British king or queen).

As Dominions gained independence and rejected allegiance to the British monarch, this community adapted and in 1949, the London Declaration provided for new republics to be part of a re-named Commonwealth of Nations.

Membership has grown steadily to today’s 54 (with a few exits over the years as well) and even includes states which were not part of the British Empire – Rwanda and Mozambique.

Today’s Commonwealth describes itself as: “A voluntary association of independent and equal sovereign states …

Our members work together to promote prosperity, democracy and peace, amplify the voice of small states, and protect the environment.”5 Priority areas of work are agreed at Commonwealth Heads of Government Meetings, held every two years. Operational activities are then co-ordinated by the Commonwealth Secretariat, including

Practical opportunities From a UK perspective, free trade agreements (FTAs) with Commonwealth countries are obviously high on the agenda now that it has left the EU. Lord Marland, Chairman of the Commonwealth Enterprise and Investment Council (CWEIC), a business network, says some FTAs should be relatively easy to conclude – particularly with the developed markets which already have fairly ‘open’ economies, such as Australia, New Zealand, Canada and Singapore.

In contrast, an FTA with a huge developing market such as India has enormous potential upside but will be very difficult to conclude – chiefly because of the imbalance in market ‘openness’ – and is unrealistic in the short term.

But he cautions against over-emphasis on new FTAs: “Ultimately, businesses need to create trade; government can’t do it – it can only provide a framework. Businesses need to visit potential and existing trading partners regularly. And there has understandably been a reticence by some British businesses in the past, particularly small and medium-sized enterprises (SMEs) to go into pastures new. But in a post-Brexit world, with the Commonwealth being home to a third of the world’s population with strong demand for British products, I think we’ll see a lot more activity.”

A key area of opportunity is technology and digitisation.

The Commonwealth Trade Review 2018, points out

Wealthsmiths Winter 2020

International trade

“We are absolutely convinced this is an untapped opportunity”

“The signs are encouraging for EVs but there needs to be more factories making EVs and batteries before we have a significant volume”

that access to broadband is low in many Commonwealth countries, and that achieving a ‘pragmatic target’ of countries below the world average doubling their present broadband coverage, and countries above the world average achieving near-universal provision, would contribute around US$ 600 billion to the GDP of the Commonwealth – including through reduced trading costs, increased access to e-commerce and other multiplier effects.

Lord Marland suggests that, as the leading technology hub in Europe, the UK should be taking advantage of these opportunities; for example, in the fields of medical and financial technology. He says: “With over 60% of the Commonwealth population under 30 years of age, technology is going to be vital to how these people transact in the future.”

Mohammad Razzaque, Research Director at The Policy Research Institute of Bangladesh (previously Adviser & Head, International Trade Policy at the Commonwealth Secretariat) thinks the primary opportunity for the UK is to use targeted direct investment as a ‘gateway’ to boost exports.

He says: “Consider a Commonwealth country like Bangladesh. It has recently been granted tariff-free access to China for 97% of its products. But it has limited capacity to exploit this market access. UK companies could be considering investing in new facilities in Bangladesh and then exporting to China, tariff-free. Remember, it is not uncommon for China to impose tariffs of 25–30% on imports, so this is a huge advantage. There is also a large Bangladeshi diaspora in the UK which can help facilitate this. How wonderful an opportunity is that?”

Lord Marland thinks 2020 is a clear inflection point for UK trade with the Commonwealth: “Covid has set people back and many Commonwealth economies have taken a big hit. But businesses know there is going to be a re-drawing of the trade landscape post-Brexit. They have hopefully taken time to reflect – and realised the compelling reasons why many Commonwealth countries present such great opportunities.” n

Commonwealth trade in numbers billion: Total intra-Commonwealth trade in goods and services (all countries)

l US$705

billion: Total intra-Commonwealth greenfield investment (announced projects) in 2019

l US$27

billion: Cumulative value of intraCommonwealth greenfield investment (announced projects), 2010–19

l US$419

billion: UK exports to Commonwealth countries (fifth largest intra-Commonwealth exporter), roughly the same as to Germany

l £65

billion: UK imports from Commonwealth countries (largest intra-Commonwealth importer), roughly the same as from Germany

l £64

Share of UK’s total Commonwealth trade from five countries (India, Canada, Australia, Singapore, South Africa)

All values for 2019 unless otherwise shown.

Source: Commonwealth Secretariat, House of Commons Briefing Paper, June 2020

Photos: Getty, Alamy

l 72%:

Sources 1 Commonwealth Trade Review 2015 - The Commonwealth in the Unfolding Global Trade Landscape 2 Commonwealth Trade Review 2018 - Strengthening the Commonwealth Advantage 3 Statistics on UK trade with the Commonwealth – House of Commons Briefing Paper, June 2020 4 Commonwealth Enterprise and Investment Council 5 TheCommonwealth.org

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A new dawn for the United States Joe Biden and Kamala Harris celebrated winning the US election, a victory that will bring an end to the controversial presidency of Donald Trump. But unity remains elusive in the world’s biggest economy. The pair inherit a divided nation in which Trump and his supporters have alleged widespread electoral fraud.

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Photos: Press Association

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Last year, a Hermès handbag sold at auction for six figures.

The collectors’ club of handbags is growing, but does the temptation to wear and use these luxury assets make them a good investment? asks Lulu Trask

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Wealthsmiths Winter 2020

Photos: Getty, Alamy, Hermès, Christie’s Images Ltd. 2020

A mixed bag

Lifestyle

T

he 2020 edition of The Wealth Report included handbags in its Luxury Investment Index for the first time, joining the likes of art, classic cars, fine wine and rare whisky. For good reason, too. The asset value of Hermès handbags (the leader in the secondary handbag market, according to Christie’s auction house) increased by 13% in the past 12 months alone – more than any other luxury asset in the Knight Frank report. In 2019 alone, handbag sales at the top five auction houses totalled £26.4 million, according to the Luxury Handbag Report 2020.

For a truly collectible handbag, you can still be looking at six figures – in 2019, a Hermès sold in Hong Kong for the equivalent of US$386,000. But a handbag tends to be more affordable than a rare piece of art or a classic car, which means we’re starting to see more of them. “A handbag is very Instagrammable,” says Andrew Shirley, Editor of The Wealth Report. “They’re becoming more popular because of the rise of social media. It’s much easier to know what the trendy people are wearing, so if they’ve got the latest Hermès bag, other people will want it.”

Christie’s held its online Handbags sale in June. Bidders from 39 countries across six continents participated, one of whom secured a rare Hermès Birkin for £125,000 (estimated at £60,000–£80,000). In July, the auction house held its London Handbags & Accessories auction, where the sale of 120 pieces totalled over £1.8 million. In other words, more investors are turning to luxury items, like handbags, as serious investment pieces.

Canny investors “People are just as interested in a Banksy print or a Ferrari as they are in a Gucci bag,” explains Sebastian Duthy, Managing Director of Art Market Research, the company behind The Wealth Report’s data and producer of the Luxury Handbag Report 2020.

Duthy attributes the luxury item’s success to a combination of “the canny younger investor” (a third of participants in Christie’s handbags auctions are Christie’s first-timers), for whom a handbag averaging five figures might be slightly more affordable than a classic car or rare whisky, and the eagle-eyed auction house. “Auction houses are brilliant at creating markets where there’s potential,” he says. “They spotted that luxury is a big growth area, particularly in secondary markets.”

Outside of London and New York, Christie’s also has a sales site for handbags in Hong Kong. The Far East has for a long time been a key driver behind the success of luxury markets. The rise in whisky recorded in The Wealth Report in 2019 was down to Chinese and Hong Kong buyers, and in 2020, the performance of handbags is no different.

A growing middle class has meant more people can

Top: Actress, Jane Birkin, who lent her name to the Hermès Birkin bag. Left: Victoria Beckham with a Birkin bag. Above: a Birkin bag at auction.

afford to invest in these luxury accessories; while Christie’s estimates and sale prices can reach six figures, estimates can also come in below £100.

Data from the World Economic Forum estimates that two billion Asians are members of the middle class, and that this could increase to as much as 3.5 billion in the next decade.

“The growth of the middle class has been a significant factor in China. Having these assets is important to

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Hooray for handbags In July, the Christie’s New York online sale of Handbags and Accessories: Summer in the City totalled $2,266,750, the highest ever for an online handbag sale at Christie’s. While there were strong prices for other designers, it was Hermès that dominated the bidding, with sales reaching:

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$300,000 for a Hermès Diamond Birkin

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$200,000 for a limited-edition Hermès

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$150,000 for a rare

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$56,250 for a

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Bleu Marine Faubourg Birkin 20 matte white Hermès Himalaya Birkin 30 Hermès Mini Picnic Kelly 20II

Top image: Hermès Mini Picnic Kelly.

Left: Hermes Bleu Marine Faubourg

them, and as long as that demand and the trajectory of the Chinese economy stays on track, the people will pay high prices,” says Duthy. There are, for example, 126 Hermès stores in Asia, compared with 113 in Europe and just 40 in North America. Demand in this part of the world is high, which means becoming a VIP Hermès customer and being able to get your hands on a limitededition or brand-new bag is tricky. For most, the best entry point is the secondary market.

Unusual styles There’s no hard and fast rule on what makes a good handbag investment – as well as Hermès, Christie’s also represents names including Chanel, Louis Vuitton, Gucci, Dior and Fendi – but the market is starting to favour the more unusual styles. “We are seeing trends

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towards unusual vintage styles and rare and limitededition pieces in bright colours,” says Rachel Koffsky, Christie’s Head of Sales, Handbags & Accessories, London, who adds that the sustainability conversation, which has resulted in a number of designers saying goodbye to animal skins in their design (Chanel, for example), is driving demand for these no-longer-inproduction models, and adding a significant price tag to those available on the secondary market.

For these Instagrammable investments, there is one thing that really drives the highest prices. “The real holy grail is condition,” says Koffsky. “Pieces which appear untouched by age and use are highly coveted by collectors.” The Luxury Handbag Report reveals that 23% of Hermès Birkin bags in the report’s index were less than two years old when sold at auction. So, if you’re investing to sell on, Koffsky recommends investors “keep your pieces stored properly, use gently and take to the spa when in need of a refresh”.

But there’s something different about investing in a handbag compared to a piece of art or the rarest whiskies. Chances are, you’re collecting handbags because you’re truly passionate about fashion and you want to wear your investment. “It’s a fascinating market. It’s not just about the handbag, it’s about lifestyle and the way people are thinking about what they’re collecting,” says Duthy.

Koffksy, who cites handbags as her “greatest passion”, agrees. “Handbags are treasured, functional objects that should be worn and loved,” she says. “The price appreciation happens to be a great added benefit, but the most important aspect is to buy what speaks to you, what represents your style and lifestyle.”

No guarantees But even for those collectors who have no plans to sell, sometimes the price tags these luxury accessories are achieving at auction are too much to resist. More and more of these items are selling at far beyond their estimate. In 2020, Christie’s sold a 2019 Hermès Limited Edition Bleu Zellige Swift Leather Quelle Idole with Palladium Hardware for £50,000 – five times its estimate.

“Collectors are passionate and they say that they’ll never sell what they’re collecting, but this can change if they’re seeing the right price on the market,” says Duthy. But, like any asset or collectible, there’s no guarantee.

The combination of affordability and functionality makes the handbag a unique investment proposition. A handbag is an item that its owner can use – and, being on the more affordable end of the luxury spectrum, its owner might be more inclined to do so. But each time that handbag is used, the further away it gets from being in that holy-grail state of near-new condition that affords it that coveted price tag. n

Wealthsmiths Winter 2020

Pensions

The science of retirement Software that can model retirement income decades into the future is being used to help people ensure they can enjoy the later life they hope for, writes Andrew Strange

R

etirement planning has become something of a science. As government support for later living has been rolled back, final salary pensions scrapped and lifespans extended (there were 13,170 centenarians in the UK at the last count) every citizen is being expected to take more responsibility for their later years.

Nevertheless, it can be extremely difficult for individuals to save enough to pay for the lifestyles they want for a 20, 30 or even 40-year period. Research by the Pensions and Lifetime Savings Association in 2018 warned that 30 million people were at risk of running out of money during their retirement.

To help people solve this complex puzzle, financial advisers are turning to technology, supplementing their

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own financial expertise and knowledge of their clients’ individual circumstances with software that models cash flow for decades ahead. It ensures that people will have enough money to spend, even if they live for a very long time indeed.

“We use sophisticated cashflow modelling to forecast our clients’ future finances”

Modelling cash flow Sanlam Wealth Planning Director Michael Angus says: “We use sophisticated cashflow modelling to forecast our clients’ future finances. It shows us in real time how much money they could have in the future and whether they are on track to achieve their goals. We plug in the numbers in terms of the assets someone has, such as the pensions they are contributing to, their investments and their business assets, and anything else they have that could provide them with an income. We then factor in things like the State Pension and make sure they will have enough to live the best life possible with the money they have.”

In fact, the software is sophisticated enough to handle everything from ISAs and unit trusts to buy-to-let properties and even assets like a classic car collection, although it can be difficult to calculate how much such an investment will grow in the future. “It could be assets we can’t really advise on, using classic cars as an example,” says Angus. “But if we know you’re planning to sell them in five years and may get £200,000, we can factor that into your overall plan.”

The technology helps advisers future-proof retirement income. It takes into account inflation, expected growth rates and likely expenditure to the age of 100, but such a long time horizon doesn’t have to mean money is tight in the early years, particularly as people often need much less spending money when they reach a great age. But it does provide peace of mind and plans are usually reviewed at least every year and can be adjusted to meet changing needs.

“The last thing we want is for someone to get to retirement and be too scared to enjoy their money” 30

Wealthsmiths Winter 2020

Photos: Alamy

With careful planning you can enjoy the retirement lifestyle you want

Pensions

The software can help advisers as they guide you towards reaching your retirement goals. “The key thing before we get to how much money, is what would you like to do with the rest of your life?” says Angus. “Once we’ve discovered what our clients would like to achieve, we can assist by putting a monetary value to their goals, and then we’ve got a target to aim for. If you want to retire early that’s great, but when will that be and how much income will you need? If you want to help out your family in future, that’s also fine, but what does it mean in black and white?

“Some people have high salaries in their working lives and want to continue with a high income when they retire.

What we do is make sure what they want is actually viable and realistic. If someone says, ‘my objective is to spend £100,000 a year in retirement at age 60’, we will run a scenario to see if they are on track to achieve that based on their current situation.

Discussing the options “If it turns out that they are potentially heading for less than this then we can discuss their options to make up the shortfall. For example, can they afford to invest more now, will they definitely need £100,000 every year or just in the early years of retirement, will they look to downsize at retirement and release capital from their property, and what if they retired a couple of years later?”

If you’re lucky enough to have a defined benefit, or final salary pension that gives you a guaranteed income for life, that would also become an important part of your cash flow in retirement. You may be offered what seems like a very large sum to give up the guaranteed income and this can appear very attractive. Angus explains: “That would form an important part of the discussion. In most cases we know that a defined benefit pension will give you so many thousands of pounds in income a year and maybe some tax-free cash as well. As there are so few guarantees in life, it can be very valuable to have guaranteed income in retirement.”

Amalgamating pensions If you have several pensions, amalgamating them so that they are easier to manage can seem like the right the thing to do. But Angus warns that even this has to be very carefully considered because different pension schemes offer different benefits and you run the risk of losing some of these without a proper review.

Some older pension schemes may have guaranteed annuity rates that are two or three times higher than what you could get today, while others could allow you to take more tax-free cash than the 25% currently allowed. On the other hand, some may have been set up to buy an annuity and wouldn’t give you the opportunity to take advantage of the new pension freedoms.

Planning for retirement means working out the costs that

7 steps to pensions planning A financial adviser will go through some key steps to help you make sure you have enough money in retirement:

1. Discuss with you how much you think you’ll need to spend each year to enjoy the lifestyle you want.

2. Find out from you when you want to retire and what your lifestyle aspirations actually are (i.e. do you want to travel around the world?).

3. Understand all the assets you have, from pensions and investments to buy-to-let properties and classic cars.

4. Use cashflow modelling software that will factor in assumed growth rates as well as inflation and other costs to work out possible income up to the age of 100.

5. Advise you of any action you need to take to reach your goal, such as saving more or changing your planned retirement date.

6. Discuss with you whether you should amalgamate your existing pensions.

7. Help you understand what you should do with any defined benefit pensions that could offer you a guaranteed income.

are likely to arise. It’s fairly easy to predict such things as council tax and heating but travel can be a more complex issue. Some people want to enjoy one big trip around the world and others want two or three foreign holidays every year. And then there are pre-retirement costs that can eat into your savings, such as a child’s wedding or helping a son or daughter onto the housing ladder. Making substantial gifts to a child can attract a tax charge and that, too, has to be considered when planning for a long-term retirement.

While retirement planning is a complex task, the combination of human expertise and empathy, together with the latest software can really help people enjoy their later years, explains Angus: “The last thing we want is for someone to have worked all their lives, built up their assets and then get to retirement and be too scared to enjoy their money. I’ve had quite a few clients who are almost afraid to spend their money. With effective ongoing planning we can give them the peace of mind that they can afford to do the things they enjoy with their hard-earned money, without the fear of it running out in later life.” n

Find out more This article provides general guidance only. To plan your post retirement finances, speak to your financial planner, or email getintouch@sanlam.co.uk

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Stepping up for charities After the Covid-19 pandemic closed charity shops and shut down other income streams, charities are facing stark financial realities, writes Bethan Rees

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K charities are facing a £10.1 billion funding gap over the next six months as a result of the Covid-19 pandemic, according to analysis published in June 2020 by Pro Bono Economics. And while the funding gap grows, some charities are seeing an increased demand for their services due to debt, redundancy, bereavement and homelessness, to name a few.

“Lockdown and social distancing measures mean that many charities have had to cancel all of their planned fundraising events and activities for the year at a time when demand for their charity’s services has never been greater,” says Hannah Page, Marketing and Communications Manager of the Association of Charitable Organisations (ACO), the umbrella body for charitable organisations helping people in need. “Many of our member charities had to launch emergency appeals instead as a result to help fund grants to support individuals impacted by Covid-19.”

According to recent research conducted by the ACO, there was a 122% increase in applications for support to grant-giving charities between the beginning of lockdown and July 2020, compared to the same period in 2019.

Charities supporting employees in industries particularly hard-hit by social distancing measures, such as the hospitality industry, travel agents and theatre workers, have seen a huge increase in requests for advice and financial support, Page adds.

Devastating impact Marie Curie, a charity that provides support to people with terminal illnesses and their families, has been deeply

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Damien Hirst’s 22ft bronze charity collection box sculpture, entitled ‘Charity’

Wealthsmiths Winter 2020

Charities

Sanlam’s charities service Our portfolio managers have been managing charity portfolios for over 40 years but in September we launched our enhanced charity proposition, with a dedicated team, which will help these organisations protect and grow their money in these challenging times

and beyond. Our national network of portfolio managers allows us to understand the unique circumstances of each charity we partner with and to provide a highly bespoke service. It also enables trustees to direct capital in a socially responsible way, so that

impacted by the pandemic. “It has had, and continues to have, a devastating effect on our fundraising and income – income which we rely on to provide vital care for dying people and their loved ones,” says Michelle Martin, Director of Development and Communities at Marie Curie. “Just as our hospices, community nursing services and support line were needed more than ever as part of the national Covid-19 response, our income was decimated.”

The economic impact of the pandemic and the uncertainty this brings has also been felt at Marie Curie, with the decline in housing and share prices, which hurt funding levels. It also anticipates that its legacy income stream – legacies are gifts of money, property or other assets left to an organisation in a will – could decline by 19%. “Legacies account for the largest share of Marie Curie’s voluntary income, and this is just one significant example of the anticipated economic impact on our fundraising,” explains Martin.

The Trussell Trust, which aims to end hunger and poverty in the UK and supports a network of food banks, says that throughout the pandemic, there has been a spotlight on rising food bank use. “We’ve seen an incredibly positive response from the public and from organisations in supporting our work in all kinds of ways, including by providing much-needed funding,” says Matthew van Duyvenbode, Chief Strategy Officer at the charity.

investments are aligned with each charity’s values. We also help with income forecasting (profit and loss forecasting) for charities, so organisations can better manage their future commitments. Sanlam’s charities service cares, and is ready to help.

the level of support we currently can offer.”

Martin says: “Marie Curie requires £2.5 million in voluntary income each week to continue to run our essential frontline services and our finances indicated that if we took no action, we would lose approximately £33 million in income towards our vital work.”

A physical presence is important for a lot of charities, in terms of fundraising and both Marie Curie and The Trussell Trust have taken their efforts to a virtual platform. The Trussell Trust has been running virtual events and campaigns, such as Step Up September, where volunteers walked across the country, clocking up miles alongside other members of Team Trussell, and crossed the virtual finish line together on 30 September.

“Marie Curie requires £2.5 million in voluntary income each week to continue to run our essential frontline services”

Rising need However, it’s important to note that this is against a backdrop of a huge rise in need. “The number of people being forced to turn to food banks for emergency food has been rising dramatically over the last 10 years, but during lockdown we saw it surge by 89% compared with last year,” says van Duyvenbode. “We’re going to have to work hard to ensure we have the finances to continue

Emergency appeal Marie Curie launched an emergency appeal at the start of lockdown, which to date has raised over £6.1 million. In order to boost the emergency appeal, and to provide some light relief to the nation, it launched a series of online celebrity-hosted quizzes. Famous faces including Mel Giedroyc, Chris Kamara, Alison Steadman, Jim Carter and Imelda Staunton hosted the quizzes, which raised over £85,000 in total.

Financial support will continue to be crucial to helping charities meet the rising need. “This is needed now more than ever, as we face the reality of a global recession, which will likely exacerbate the gaps between those who experience destitution and the rest of society,” says van Duyvenbode.

While redundancies are starting to occur across the charity sector, we may see some charities close their doors or look to merge in the coming months. “It is, therefore, vital people continue to support charities, as they have never been more needed to support people from the after-effects of this pandemic,” concludes Page. n

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Last word

Main image: Interior of St Asaph cathedral.

Top right: Ian Rush. Bottom right: image of St Asaph town

Welcome to the smallest cathedral As part of our series on towns where Sanlam has offices, we’ve taken a closer look at historic St Asaph

City status As the seat of a medieval cathedral St Asaph was historically considered a city and was referred to as such

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in the 1911 Encyclopaedia Britannica.

But the government clarified that St Asaph was actually the only one of the 22 ancient cathedral dioceses in England and Wales not to have been awarded city status. The town applied for the status in 2000 (for the Millennium) and 2002 (the Queen’s Golden Jubilee) but was unsuccessful.

It was finally given city status in 2012 for the Queen’s Diamond Jubilee.

St Asaph plays an important part in the cultural life of Wales. At its secondary school Ysgol Glan Clwyd all lessons (except English) are taught in Welsh and the city hosts the North Wales International Music Festival each year. The cathedral is home to: ‘The Naked Christ’, a thoughtprovoking sculpture by Michelle Coxon; the Spanish Madonna, said to come from the Spanish Armada; and the William Morgan bible, which was the first bible to be translated into Welsh.

Some surprising characters spent their early years in St Asaph, including Ian Rush, Liverpool Football Club’s all-time leading scorer, who was born there in 1961.

Journalist and explorer Sir Henry Morton Stanley was raised in the Wealthsmiths Winter 2020

Union Workhouse in St Asaph and is perhaps best-known for his search for the missionary and explorer David Livingstone, whom he greeted with the famous line: “Dr Livingstone, I presume.” The workhouse later became the HM Stanley Hospital and although now closed it remains the headquarters of the Welsh ambulance service.

Further back It is thought that there were people living in the area long before the cathedral was established and some historians believe it may stand on the site of the Roman fort of Varae.

The earliest inhabitants of the Vale of Elwy lived at the nearby Palaeolithic site of Bontnewydd, which was excavated in 1978. In 1981, teeth and part of a jawbone were excavated and dated to 225,000 years ago. They are thought to have belonged to a group of Neanderthals who hunted game in the Vale of Elwy and the area is now considered of international importance.

In 2016, Sanlam’s North Wales office relocated to St Asaph Business Park after more than 30 years in the nearby seaside town of Rhyl. n

Photos: Alamy

T

he picturesque city of St Asaph in north Wales is home to the smallest cathedral in Britain but despite its size, it has played an important part in the religion and history of the region over the centuries. It has been an important ecclesiastical centre since AD560, when the cathedral was founded by Scottish saint Kentigern, who left his disciple Asaph in charge when he returned to Scotland.

The city stands in the Vale of Clwyd on the River Elwy and has found itself in the path of invading armies over the centuries. The cathedral was twice destroyed by fire and has an often-violent history.

It was destroyed by the soldiers of Henry III in 1245 and again by the armies of Edward I in 1282. It was rebuilt between 1284 and 1381, only to be burned by Owen Glyndwr’s Welsh troops in 1402. Then, in 1715, the tower was completely demolished in a fierce storm.

Sanlam has offices across the UK. To find your nearest Sanlam office, simply visit www.sanlam.co.uk/contact-us You can also call us on 0333 015 5600 or email getintouch@sanlam.co.uk We welcome your feedback on Wealthsmiths magazine. If you have any comments or ideas or if you would like to unsubscribe, please email: wealthsmiths@sanlam.co.uk

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The Sanlam magazine – Winter 2020

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