From Brexit negotiations to cybercrime, we take a look at some of the month’s top IFA and Wealth Management-related news:
‘No-deal’ Brexit: wealth managers urged to implement contingency plans
Amidst the uncertainty surrounding Brexit, the UK’s asset management trade body is advising its members to authorise their contingency plans for the country leaving the EU without a withdrawal agreement. According to New Financial, 43 wealth managers currently make up almost 300 companies who, regardless of Brexit negotiation outcomes, have chosen to transfer their staff to an EU base in order to ensure the undisturbed continuity of operations.
Chief Executive of the Investment Association has commented, “Since the Brexit referendum, British savers have taken nearly £19bn out of UK equity funds, which reflects broader concerns about the strength of the UK economy. A no-deal Brexit will only serve to further dent investors’ confidence in the UK economy, and every effort must be made to avoid it.”
The decisions being made to move operations to Europe strengthen suspicions that the UK’s position as Europe’s financial centre is in jeopardy. The most effective result may be to hold fire and wait to see where banks are looking to branch their networks before making any a decision to apply for a Markets in Financial Instruments Directive (MiFID) licence and follow suit in order to have a greater presence in Europe.
Brexit Hedge: The IFA that is sticking with Woodford
Neil Woodford has been making news recently. After months of disappointing performance, it’s been reported that many IFA clients are moving away from Woodford, yet director of Rowley Turton Private Wealth Management, Scott Gallacher is sticking with him. Despite Woodford’s reputation as a great fund manager in the past, Gallacher believes he has the only way out of the trap he has fallen into is through a good Brexit deal. This is due to Woodford’s holdings being small-cap UK domestic stocks rather than being dependent on overseas sales. A good deal, therefore would see the pound lift and affect companies with international operations.
Gallacher said his main worry, however, is that Woodford could have lost impartiality over the likelihood of a deal being struck in the Brexit negotiations. “However, as part of a larger balanced portfolio, the Woodford fund is arguably a good hedge against a good Brexit deal. A good deal is likely to see the pound recover and the value of the international holdings in a well-diversified portfolio fall,” he says.
We believe the problem with this ‘Brexit hedge’ is that the results of the Brexit referendum, as proved, cannot be predicted. What’s even more difficult, is being able to predict the market reaction that comes after the result. Woodford’s previous strengths were based on investing in companies that paid dependable dividends, however, after his latest controversial swap deal, it now seems that his ventures and strategies are muddled.
Cybercrime posing a greater concern for wealth management clients
With the growing complexity and sophistication of cyber threat, a recent report by GlobalData has discovered that just 40% of wealth managers and nearly 60% of their clients are concerned about impending cybercrime and data breaches. The nonchalant attitude towards cyber threat needs to change – with the digital sphere growing at an exponential rate, the industry will have to adapt to meet this changing landscape and future generations, with robust cyber security precautions firmly in place. Sergel Woldemichael, wealth management analyst at GlobalData, commented, “The typically paper-based and male-dominated wealth industry is beginning to experience client demand for technology and demographic changes.”
Wealth managers and legal firms hold a plethora of sensitive client data, making them a prime target for cyber attackers with dire consequences. IT security must be therefore moved higher up the priory list as this threat grows. Clients are increasingly recognising the importance of cyber security and are basing their decisions to work with legal advisors on the robustness of their defence, and the way in which their data is handled and kept secure. It is imperative, therefore that legal firms are investing in, and demonstrating the processes they have in practice to guard against cybercrime in order to retain the confidence of their clients.
Discover how you can stay one step ahead in the IFA and Wealth Management industry with Ortus Group. Get in touch.