The UK versus international\bond conundrum
Editor Kirsten Hastings introduces the October edition of <i>International Adviser</i>
Welcome to the October 2018 edition of IA Digital. The fourth quarter of the year is in full swing and it looks like it will be a sprint to the finish.
I was delighted to see so many familiar faces at International Adviser’s Fund Links Forum on 11 October. We closed a fantastic day of presentations, discussions and debate with two award ceremonies.
Following rigorous and independent judging processes, our Best Practice Adviser Awards UK and inaugural Global Financial Services Awards recognised some of the biggest players across the industry.
Abacus Financial Consultants’ Kay Pindoria took home the International Young Talent award, while Ailo’s Alan Morgan-Moodie was recognised for his Outstanding Contribution.
Due to retire after an incredible career, we would like to thank Alan for being such a big champion of the life industry and wish him a long and happy retirement.
But the treadmill doesn’t stop. We have launched three initiatives in the past month: NRI Adviser; CPD Corner; and our subscription model.
One thing that will not change, however, is our commitment to bringing our readers the latest news, views and content.
Details on how to subscribe will be available on the IA website.
Kirsten Hastings, editor,
A raft of regulatory changes at home \and abroad have caused a ripple \rather than a tidal wave in terms of impact \in Dubai, writes Richard Hubbard
‘The risk of future client detriment within this critically important part of retirement planning is, in our view, too severe’
Sam Instone, chief executive, AES International
Regulatory changes from abroad and locally have rippled through the Dubai financial advisory world during the past month, although the impacts have not been earth-shattering.
Tighter rules in the UK on defined benefit (DB) pension transfers resulted in advisory group AES International changing the terms of business with advisers using its Spanish-based transfer valuation service, IPTS.
A risk too far
IPTS provides legally-required technical advice to non-UK residents who are considering a transfer of DB scheme pension rights, and other forms of pension rights that carry guarantees. It generally works with investment advisers and pension trustees.
The company has decided that the risk of working with investment advisers who may potentially switch investments, post-transfer, into offshore life insurance company bonds, structured products and esoteric investments was becoming too great.
Sam Instone is chief executive of AES International, which has offices in the Dubai International Financial Centre (DIFC) and Business Bay.
He said “The typical commission rates, lack of flexibility and high-risk nature of certain investments used by many overseas advisers means the risk of future client detriment within this critically important part of retirement planning is too severe.”
In place of an advice and pension-transfer processing service, IPTS will switch to an introducer-only service for international advisers who think someone has a genuine reason for considering a DB transfer.
‘We see these as appropriate changes to support the growth of the DIFC’
Bryan Stirewalt, chief executive,
Dubai Financial Services Authority
Closer to home, the DIFC regulator has tightened anti-money laundering and counter-terrorist financing (AML/CLF) rules in line with international standards.
Legal firms, accountancy groups and other businesses linked to the centre’s core tenants, such as banks and asset managers, will now have to register with the DIFC regulator and meet all AML/CLF regulations.
If found in breach of the rules, they would lose this licence and cease operations there.
Bryan Stirewalt, the newly appointed chief executive of the Dubai Financial Services Authority (DFSA), said the move was an important step towards enhancing the AML and CTF regime.
It’s not clear if the changes were related to issues surrounding DIFC-based private equity firm Abraaj Capital, which the DFSA has announced publicly it is investigating.
“We see these as appropriate changes to support the growth of the DIFC and to continue to position it as the financial hub of choice for international firms in the region,” said Stirewalt.
Following a recent government announcement, one change that is now unlikely to have as much impact is the shift to allow 100% ownership of local businesses.
In May, the UAE government approved long-term visas for international investors and talked about a law that would allow foreigners to own companies outright in the Gulf state. It indicated that this could be ready by the end of the year.
Foreign companies operating in the UAE outside the free zones currently must have a local partner that owns 51% of the business. Only companies based in free zones like the DIFC can be owned 100% by foreigners.
Few details of the new law have emerged since May but news agency Reuters recently reported that Raed Safadi, chief economic adviser at Dubai’s Department of Economic Development, had said it would only apply to “strategic sectors” of the economy.
The reasoning behind this decision was so that it would not damage the interests of UAE citizens who currently benefit from acting as silent partners in foreign-invested businesses, Safadi told Reuters.
Fahad Al Gergawi, chief executive of the Dubai Investment Development Agency, was also reported as saying: “We are not targeting the sleeping partners’ businesses because these are small businesses.
“We are targeting strategic businesses that will leave their fingerprints on the economy and have a meaningful impact on jobs and technology, and boost imports and exports.”
Dubai’s free zones could have also been affected by the regulation as they would lose one of their unique advantages.
Safadi said, however, that Dubai’s free zones had unique business models that made them individually attractive, and they were adjusting to “structural pressures” presented by the new law.
Taking the initiative
The introduction of a retirement visa, a product comparison platform and the opening of a Middle East and Africa office for the Chartered Insurance Institute are some of the big stories across the UAE in the past month
Comparison platform aims
for complete transparency
Two former senior Citibank executives who left to set up an insurance broker business have launched a platform to enable clients to choose from a wide array of banking and insurance products in the UAE.
DJ Sengupta, who was Emea head of insurance for Citibank, and Kirtan Desai, previously credit cards portfolio head at the group, co-founded the BankOnUs platform as a key offering for clients of its established Insurance Authority-regulated firm, Capstone Insurance Brokers.
Dubai-based Capstone has a mainly non-resident Indian and Philippine client base.
Sengupta said: “One thing we want to change in the financial advisory industry is the lack of transparency that leads to advisers recommending products based on revenue and not on the needs of the customer.
“Our model helps change that. The customer goes through the product discovery and comparison phase in the digital platform with no revenue biases.”
The platform enables clients to compare insurance policies, credit cards, loans and bank accounts, as well as hosting a financial education section.
The customer journey comprises three steps: product discovery; pricing comparison and advisory; and purchase of the products.
For life insurance products, the first two phases happen in the platform, while at step three, in 100% of cases, qualified financial advisers are involved, according to Sengupta.
“As a customer goes through the product discovery for other products such as car, health insurance and credit cards, it gives us an insight into his financial needs. This helps when one of our financial advisers meets the client face to face.”
The financial adviser then ensures the customer understands every risk involved before they finally sign up.
“At this stage it is impossible for the adviser to change product recommendation based on revenue dynamics. This is a big change,” Sengupta added.
UAE unveils retirement visa for expats
The government of the United Arab Emirates has approved a law that allows expats to extend their residency visas long after they retire.
The law, due to come into effect in 2019, means any expat can qualify for the long-term visa if they have an investment in a property worth AED2m, savings of not less than AED1m, or have an active income of not less than AED20,000 per month.
If an expat retiree meets these requirements and is over 55, they can apply for a five-year visa, which would be automatically renewed.
The retirement visa is part of a series of attempts to diversify away from a dependence on oil and oil-related services.
Lawmakers have already approved a 10-year visa for investors, innovators and talented specialists in the medical, scientific, research and technical fields, and have plans to introduce a law that will allow foreigners to own companies outright.
The government has also introduced a six-month visa for jobseekers, removing the requirement to leave the country just to re-enter it in order to extend a visa.
Nigel Green, founder and chief executive, Devere Group, said the visa would make the UAE a more attractive location.
“Dubai and Abu Dhabi are perennially popular destinations for ambitious expats looking to embark upon or further their careers,” he said. “But they will become even more attractive, thanks to the government passing these new laws that allow expats to stay on in the UAE long after they retire.”
CII hub serves Middle East and Africa region
The Chartered Insurance Institute (CII) has appointed Gaenor Jones as regional director of its new Middle East and Africa (MEA) office.
Formerly of Globaleye and Takaud DIFC, Jones moved to Dubai 10 years ago with Lloyds Bank International. She is a certified Islamic banker and holds the diploma for financial advisers.
The CII said it was opening an office to cover the region in response to “growing demand for the raising of professional standards”.
“As insurance and financial services providers continue to grow and invest in Mea, there is increasing demand for the CII’s professional qualifications, training and CPD in the region,” a spokesperson said.
“The CII already has established links with the regulators and financial companies based in the UAE and this new hub will help serve the region more effectively.”
On dry land: from 2019, retiring expats can stay on in the UAE if they meet the requirements of the new visa
Clarity \of vision
With challenges and opportunities on the horizon, Paul Thompson, group CEO of LCCG, discusses how the Group’s Utmost Wealth Solutions business is progressing and its ongoing focus on meeting the needs of professional advisers and their clients
Utmost Wealth Solutions has been highly acquisitive over the past two years. What has been your strategy for growth?
We have a clear focus on being the leader in the creation of sophisticated wealth solutions for the international mass-affluent, high-net-worth (HNW) and ultra high-net-worth (UHNW) markets.
During the past two years, we have been putting in place the building blocks that deliver the right platforms, the right geographical locations and, most importantly, the right people.
We are in a business where relationships are paramount. Having the people who understand that, and who can deliver the right products, technical support and service, is critical to our success.
We are very much an open-book business and are achieving both organic and
inorganic growth. Where we acquire businesses, we assess where we can create efficiencies by, for example, adopting a common IT platform across the group of companies. This ultimately drives value
‘We are in a business where relationships are paramount. Having the people who understand
that is critical to our success’
Is it the case that you are attracted
by the profits available?
Of course, profitability is a major consideration. Businesses that remain profitable create both sustainability and financial strength.
Sustainability ensures we will remain in business and enhance the financial strength that provides our policyholders with the reassurance that their wealth, and that of their heirs, is held by a business that takes its governance and responsibilities seriously.
Working within tighter regulatory
solvency requirements, sound financial strength gives us the platform to invest in new developments that may not be available to less robust businesses.
You have acquired businesses that were major household names. How smooth has the transition been?
We have successfully raised the profile of the Utmost brand in the specialist markets within which we operate.
While losing the Axa name in the UK may have been a challenge, we are now at the point where business levels written under the previous Axa companies exceed those written prior to the rebrand to Utmost.
This is testament to the quality of our award-winning products, the service we provide and our people.
The acquisition of Generali PanEurope in Ireland, now Utmost PanEurope, has provided geographical diversification but still within the specialist market of wealth management solutions for HNW and UHNW clients. While we now have representation throughout Europe, our main market is Italy.
Losing the Generali name in this key market could have been difficult but the benefit of being a specialist has come to the fore, with professional advisers understanding our focus. This has been helped by continuity of frontline and servicing staff.
This is not a sideline to a large corporate portfolio; this is what we do and do well.
‘Working within tighter regulatory solvency requirements, financial strength gives us the platform to invest in new developments’
Do you have further expansion plans?
In the short term, further geographical diversification is on the horizon with the acquisition of Generali Worldwide in Guernsey, which is due to complete in
the first quarter of 2019. This will give us a truly global footprint and will add an enhanced regular contribution capability
to our future portfolio.
Some may say the Generali Worldwide product line is not a natural fit with the current Utmost portfolio. While this may be true to some extent, we are signalling a clear move to use the regular contribution platform of what will become Utmost Worldwide, moving the product line to fit within the Utmost approach to business, which is value for policyholders.
A consideration here is the move within the Isle of Man regulatory regime in respect of commission disclosure. We are fully supportive of this development and consider it to be a significant increase in transparency for customers and one that can only be followed in other jurisdictions.
Longer term, we are always considering opportunities that may help us develop our specialism further.
How are you factoring Brexit uncertainty into your growth plans?
Who knows at this stage whether it will be a hard or soft Brexit, whether those who want a second referendum will get their way and if Brexit will happen at all.
While it is impossible to provide cast-iron guarantees, with bases in the Isle of Man and Ireland, Utmost Wealth Solutions is better-placed than others. This dual-jurisdiction hedge has enabled us to consider an array of solutions to provide continuity of service to advisers and their clients.
We watch with interest as the Brexit negotiations continue. However, we are clear that our focus and experience as specialists in developing wealth management solutions for HNW and UHNW clients, positions us well to react to whatever happens on 29 March 2019.
With the UK Office of Tax Simplification carrying out consultation on IHT and the taxation of savings income, are you concerned about the impact of this?
What has been constant in our market is continued change. It’s a cliche but it is as equally valid today as it has always been. We work in a dynamic marketplace where there is a greater focus on legitimate tax planning and treating customers fairly.
We welcome such changes, provided they deliver against these two tenets. We comply fully with our regulatory obligations and will continue to do so. In addition, our technical teams are fully conversant with the relevant issues and are actively involved in assessing the impact of possible future changes.
‘We have a defined strategy for growth but with a clear focus on specialist wealth management solutions’
What sets you apart from your competitors?
We have a strong heritage, with the fleet-of-foot of a new brand. Youth and experience.
We have a defined strategy for growth
and geographical diversification but
with a clear focus on specialist wealth management solutions for the HNW/
Importantly, we are independent.
This gives us the ability to set our
own course and focus on the quick
delivery of client-focused wealth
We are specialists. We are entirely investment agnostic in that we don’t have our own fund range.
Our expertise lies in the tax wrapper
and our technical support. With around
200 discretionary fund manager
relationships we support considerable investment flexibility.
In addition, all our business is entirely intermediated. We don’t compete with advisers and leave the provision of advice to these professionals.
We are Utmost Wealth Solutions – one platform, one service, one brand. We are a leader in our market focused on building the number one brand.
As the world of financial advice needs to evolve to meet a host of new challenges it is time to unleash the superpower that already exists within each and every business
In the first article of this series we underlined the challenges facing the industry. With time against us, the profession needs to find the single thing that could tackle – or even eliminate – some of these global game-changing challenges. Our understanding and depth of engagement with the new world of financial planning can help us do this. So, what is this new world?
Think about your typical client’s journey and the key stages you go through as a team. You will recognise that, in one way or another, most of these stages rely on you as the financial planner.
This dependency has come about because of a lack of good support. Do you have the right people in your team so you can effectively delegate and/or let go of some of the less critical stages of the process?
Perhaps in the past you could just about pull this off. But now, with new clients, the increase in administrative demands and the greater intimacy your clients require, it is simply too much.
Brave new world
We have to change the way we work. First of all, the sale becomes the job of the business. Selling is not a dirty word. The business needs a marketing plan that promotes the brand of the business, not just the brand of the individual financial planner.
Building and nurturing relationships becomes the job of the whole team, whether that means face-to-face, by email or telephone. At the very least, each team member should have a profile on the business website.
I believe the role of the financial planner, when carried out in isolation, will become an unregulated/unauthorised role. It does not need high technical abilities or qualifications.
Life seems to be getting busier by the day, meaning your clients need much more than just money; they need mentoring, support and guidance without prejudice.
The task of moving the pieces around the chessboard of the client’s life takes a different kind of thinking from that of a financial life coach or a financial planner. This approach is more logistical and factual. This role has traditionally required the skills of only a financial adviser but I believe this is where the shift will happen.
Compliance has increased, and the need for knowledge about a broader range of products and solutions is rising. Regulators require you to do more checks and provide more illustrations, comparisons and reports. You are under more pressure to demonstrate the technical thinking behind the recommendations and advice you are offering.
‘Do you have the right people in your team so that you can effectively delegate and/or let go of some of the less critical stages of the process?’
This is where I believe the paraplanner comes in. This is the new role that can be your superpower. It is the paraplanner that will come up with the solutions you need to satisfy all the objectives, dreams and aspirations of your clients.
Paraplanners know everything about every product provider, solution and strategy. They are geniuses in their area and they love processes. They are very happy to work from the office, but do not, under any circumstances, expect them to sell. Any hint that this is on the cards and they will leave before you have time to blink.
Their skills are specific, and in some countries they may even be regulated and authorised to give advice and provide recommendations directly. Paraplanners may in time replace the role of the financial adviser, clearing a path for financial planners to concentrate on helping their clients.
Now I bet you can recognise people within your professional circles who fit this profile. In fact, you probably know financial advisers and maybe even financial planners who fit the bill, too.
The engine room
Administrators generally have a high level of organisational skill, some basic technical knowledge and are reasonably IT literate. These are your client services assistants and your business administrators. They love paperwork, organising filing systems and typing letters. They are driven to complete every task they start.
These are the people who do all the background work and get stuff done. They have a general understanding of products and providers but it is general and relatively low level. These people are good all-rounders who can turn a hand to most things, and your business would be lost without them.
These are not your paraplanners. For many of you, most of your current team members – excluding financial planners and advisers – would fall into this category.
Think about this new way of working as a business relay race where one person/role starts the job and then hands over to the next. It is this collaborative approach to the delivery of financial planning and advice services that will make the difference.
A hand-picked, highly skilled team, working together by design to deliver positive outcomes is what is going to transform financial services. So many of your current team are in limbo. If you don’t believe me, ask them to describe their role.
For decades, financial planners and advisers have been justifiably celebrated. The relationships you have built with your clients are remarkable but while we have been telling the world how great you are, we have also been suggesting that anyone who isn’t a financial planner or adviser isn’t worthy.
Hence administration is still considered as a second-class role and is totally misunderstood. If you are an administrator and you don’t want to be a financial planner or adviser, what does the future hold for you?
For the moment, there are no other roles or opportunities on offer. This is a tragedy which, considering the global changes upon us, will only compound this problem if we don’t embrace the new role of paraplanner and the opportunities it uncovers.
My dream is to build a global marketplace of paraplanners, all certified to a new international standard and all working to a consistent role profile at the same level of professional excellence.
They would support financial planners and financial advisers across the world, enabling them to do the job that they came into this profession to do, and that is to change the lives of their clients.
Without a high level of support for, and clarity about, the roles within your team, this is merely a pipe dream. As much as you want it, you won’t get it by simply hiring more of the same type of people doing the same tasks.
Without the right team, a business will never achieve its true potential on its own. It is time for the change to happen.
For more information go to: http://standardsinternational.co.uk/ certification/theparaplannerstandard/
‘A hand-picked, highly skilled team, working together by design is what is going to transform financial services’
A clean sweep
In the second article of this two-part series, Mike Foxall explains how the dusting off of the long-neglected 50-year-old rules around international wealth insurance offers IFAs an opportunity to help UK resident non-doms
For many of the reasons outlined in the first article last month, such as changes to remittance basis charges and the concept of deemed domicile, some leading private client lawyers and international accountants are now looking to use a long-ignored, but particularly effective, wealth planning structure: international wealth insurance, more commonly known in the UK as an offshore bond.
Focus on the positive
The insurance structure of this bond has a number of very positive attributes when working with UK resident non-domiciles (UK RNDs) and with wealthy individuals who are internationally mobile.
Wealth insurance has a very specific tax regime in the UK – chargeable event legislation – that was first introduced in 1968 and most recently updated in the Income Tax (Trading and Other Income) Act, or ITTOIA 2005, chapter 9, part 4.
These rules have been reviewed several times during their 50-year history and each time have been reinforced and re-embedded into the legislation.
Crucially for this client segment,
civil law jurisdictions also have very clear regulation around wealth insurance, delivering tax deferral, reducing the longer-term tax burden and, in some countries, reducing succession taxes.
Nothing says, ‘I have made plans to leave’ more than a structure that is fundamentally understood and has known regulatory and beneficial tax positioning in just about every other country in Europe and across much of the globe.
‘Accountants are now looking to use a long-ignored, but particularly effective, wealth planning structure’
Structure and function
The insured structure negates the need for multiple segregated accounts to hold various incomes, gains and capital. All gains are offset by losses as they occur.
Wealth insurance also removes the need to avoid investing in UK situs assets, which is better for ‘UK PLC’ and carries less risk of an accidental remittance tax issue.
However, care is still needed with regard to the underlying investments and how these are selected. To avoid a highly personalised bond structure, if the client/policyholder wishes to select the underlying assets, they will be restricted to choosing from open-ended collective funds only.
Alternatively, they can agree a clear mandate with an appropriately qualified asset manager who will then select from a much wider pool of assets but at their total discretion and without influence from the policyholder.
By itself, wealth insurance does not reduce UK inheritance tax (IHT). This is why the establishment of a protected trust for a UK RND, prior to becoming deemed-domicile, is still a crucial part of their planning.
But combining the trust with wealth insurance will provide a much greater capacity to later transfer the policy cross-border and, where necessary, remove the trust structure while still maintaining a recognised tax deferral vehicle in the new jurisdiction.
It is also important to recognise all taxable withdrawals from the insurance structure are on the arising basis of tax and fall within the income tax regime, even for UK RNDs.
The remittance basis of tax is not applicable here but it does mean that if a UK RND’s offshore assets are liquid and investable they might choose to hold them via the insured structure and so avoid paying £30,000 or £60,000 to claim the remittance basis of tax.
The Finance No 2 Act 2017 also introduced two transitional arrangements or relief opportunities: (1) Those who become deemed-domicile for all tax purposes as at 6 April 2017 can rebase directly held assets, effectively revaluing these assets for CGT purposes at 5 April 2017; and (2) there is an opportunity, open to all UK RNDs but only until 5 April 2019, which offers the chance to ‘cleanse’ or untangle mixed/tainted assets by identifying originally clean, or rebased, capital and then switching into a new clean account.
Both of these arrangements offer the possibility for UK RNDs to uncover pockets of clean capital that might then be best managed via an offshore insurance structure.
Indeed, any separated ‘income’ might also be placed into a separate policy, for ongoing tax deferral and potential opportunities to slowly lose the unremitted tax charges.
Given the additional complexity, there must be early consideration – ie soon after arrival in the UK – of wealth insurance for UK RNDs intending to remain in the UK for any period exceeding several years.
‘If UK advisers are willing to grow their knowledge
around UK RNDs, a clear opportunity awaits’
Regulated products, regulated advisers
While the tax and legal professions are now turning to the offshore bond as part of the ongoing planning for their wealthy UK RND clientele, its introduction causes them an administrative problem.
Under FCA rules, the offshore bond is a regulated product and must be positioned by an adviser with suitable permissions. Few, if any, have these permissions.
While in the past they may have
simply turned to a cross-border insurance provider, a combination of RDR, Mifid II
and the Insurance Distribution Directive means they need to align with top-quality financial advisers in order to deliver
There are a small number of EEA passported specialist advisers already interacting with some of the larger firms but, if UK IFAs are willing to grow their knowledge around the cross-border aspect of the offshore bond structure and the needs of UK RNDs, including deemed domiciles, a clear and attractive opportunity awaits.
Home or away?
The choice between international and \UK bonds is a complex one, and the weighing\ up of an individual’s needs is vital
The most fundamental question around investing in a bond is jurisdiction. Should clients invest in the UK or internationally? There is clearly no right or wrong answer; it all comes down to the needs of an individual.
Both UK and international bonds have their strengths, which vary from full open architecture to the 20% tax credit on UK bond gains, among other things. To help choose between international and UK jurisdictions the experts at Canada Life have put together a straightforward guide comparing the options.
What is the taxation position?
From an international perspective, investments can grow free of UK income tax and capital gains tax. It may not be possible to reclaim withholding tax suffered on some foreign income received.
On the UK side, the underlying fund pays 20% corporation tax on any interest, deemed capital gains and any realised gains. UK dividend income is not subject to tax in the fund. On some funds and assets the actual tax paid in the fund may be less than 20%.
What are the investment options?
International bonds can be open-architecture, offering policyholders access to almost any permissible collective fund, which can appeal to more sophisticated investors.
They can also be used with investment platforms or investment managers and offer the ability to invest outside of the normal range of permissible investments.
UK bonds generally only offer a fettered fund range available from the providers. This can cover a wide range of asset classes and fund types.
Are there any cost considerations?
The costs of an international bond generally are higher. There could be an initial charge, ongoing administration charges and usually a fixed quarterly fee that is reviewed annually.
There are also transaction fees when the provider is involved in switching between investments. In contrast, the costs for UK bonds are usually lower and more transparent, involving a wrapper and a fund charge.
What about insurable interest?
Whether insurable interest is needed depends on the jurisdiction. For example, Isle of Man legislation does not include any requirement but the policyholder will need to provide death certificates. For a UK bond insurable interest should exist at outset between the policyholders and the lives assured.
These are the fundamental questions around investing in a bond but they are by no means the only questions.
The needs of the client must be at the heart of the decision and you must take into account all of their circumstances.
New model army
Fears over robo-advice are receding as we approach a watershed moment \in adviser acceptance of new technologies and online platforms
In an age where everyone is connected and information is at the touch of a button, it is no surprise that we are now seeing the international adviser community increasingly adopting technology and doing business online. Technology for this community should serve to speed up transactions, improve efficiencies and ultimately create better outcomes for clients.
The Retail Distribution Review (RDR) in the UK demonstrated the central role that online adviser platforms can play in helping to transition an adviser’s business model towards more efficient, repeatable advice. This is due to the rigorous process and client reporting that it enables.
More and more we are seeing offshore platforms aiding international advisers with the same processes. While the pace of change differs across global regions, it is inevitable that online platform adoption will continue to increase, perhaps until almost all new business is through platforms in the international advice market.
‘A digital presence is now an essential requirement’
The viewpoint that technology will have a positive impact is shared by the vast majority of the international adviser community. A recent survey, commissioned for Old Mutual International, of 180 respondents from across the UK, Europe, Middle East and Asia, found that only 2% of advisers believe technology does not help their business.
The survey also showed that advisers are placing more business via providers’ online platforms. A sizeable 41% of international advisers are currently placing new business directly through providers’ online platforms, with the majority of advisers (55%) believing there will be an increase in the use of online platforms in the next 12 months.
While these results show that platform adoption in the international adviser community has some way to go, little by little the merits of doing business using an online platform are starting to shine through.
Indeed, the advantages of using platforms do seem to be widely understood.
For example, when advisers were asked what kind of benefits platforms could bring to their business, 76% said that technology makes it more efficient to manage clients on a daily basis, helping with tasks such as valuations, dealing and withdrawals. Ease of portfolio management (62%) and client online access (54%) were also seen as very beneficial features of providers’ platforms.
‘Online platform adoption will continue to increase, until almost all new business is through platforms’
All of this indicates that we may be at something of a watershed moment. Forward-thinking advisers are seeing the benefits of an online platform to build value in their businesses by aiding repeatable advice to segments of clients and to provide a better experience and more consistent outcomes.
Advisers are also supporting shifting customer expectations, which have moved so fundamentally that a digital presence is now an essential requirement.
The growth of online banking – and mobile banking in particular, which is set to overtake online banking in the UK in 2019, according to financial services analyst CACI1 – may mean other financial sectors have to step up to cater for the 24/7 access that clients require.
In the UK, much of this growth is now driven by older consumers in rural areas and coastal towns. However, this also translates to highly mobile international investors. For them, technology can prove to be incredibly efficient, by streamlining the decision making process and getting them closer to their investments at their convenience.
The wider industry backdrop is the growth of fintech markets globally, and the possibilities undoubtedly have a long way to run. Today, the main success story for integrating fintech into advice – so called ‘robo advice’ – has been in the US.
Hybrids of robo and face-to-face financial advice have emerged as investors increasingly require the convenience of technology alongside the intimacy and personalisation of advice in person. This is a model advisers are well placed to replicate globally.
The typical view is that, as technology becomes more and more ingrained in everyday life, we lose the valuable face-to-face contact that can provide better results and, by and large, is favoured by clients.
I believe that the adoption of online platforms by advisers can actually have the inverse effect, by allowing greater automation of services to free up more time to spend face-to-face with clients.
There are now systems able to significantly reduce the amount of time taken to carry out a wide range of tasks, including identifying and agreeing client objectives, performing risk profiling and suitability assessments, researching and selecting products and executing transactions.
The end result is that advisers’ core competencies, such as customer service, behavioural finance and building clients’ trust, come to the fore as the most important attributes. It is still a people business – but a clear technology strategy will be an enabler of business growth.
1Source: The future of digital banking: how
changing behaviours will impact the channels your customers use, CACI
Clients in Ireland are increasingly\ looking for international capability\ in their adviser, according to\ OpesFidelio Ireland owners\ Nick and Rachel Reid. Will\ Grahame-Clarke finds out more
Nick and Rachel Reid’s financial
advice firm, OpesFidelio Ireland,
is very much a family affair, which gives them an immediate rapport with other family-run businesses.
The couple divides the company’s
domestic and foreign duties between them, with Rachel handling the domestic clients and Nick looking after those that have cross-border needs.
Nick’s father Robert Reid founded the business in Dublin in 1990, which was originally known as Home and Overseas. He retired in 2006 and Rachel came onboard shortly afterwards.
More recently, Rachel’s younger brother Colin Hudson joined the business, further augmenting the family connection.
In 2017, the company became an independent member of the OpesFidelio network, which is owned and managed by financial planning firm Aisa.
Aisa Group, which operates a fee-only payment structure, was founded by James Pearcy-Caldwell with business partner Clive Tutton in 1999.
Asked if being a couple has its advantages
in the workplace, Nick admits they stick
to mutually agreed ground rules.
This includes never mentioning work when they are at home.
Nick and Rachel’s respective client groups are also quite different, which helps.
The couple united through an ambition to continually improve their client offering, in how they go about their work and the solutions they offer.
“We spend a lot of time thinking about how our clients are going to reach their goals and how we can work together in a partnership,” says Rachel.
A family affair: Nick and Rachel Reid are directors, and Rachel’s brother, Colin Hudson (right), is an adviser
To that end, they brought in advice consultant Eamon Twomey, who has
helped them focus on their core
offering and articulate their proposition
“We’ve seen a lot of changes in the industry over the years,” says Nick.
“The international aspect of the
business was something that I inherited
from my father.
‘More people are transitioning jobs to other jurisdictions. You can’t offer one-size-fits-all advice anymore’
Rachel Reid, director, OpesFidelio Ireland
“In the early days I travelled a lot but now we have things like Skype there is less of a need to do so. However, we always seek to meet new clients in person during the onboarding process, and try to build a recurring advice-led income.
“We’ve always tried to mirror the UK advice model and we continue to do that with an emphasis on building a long-term relationship with our clients.
“Over the past two years we have seen a shift of emphasis from traditional offshore bonds to platforms, because of the transparency in charges but also our ability to provide clients with end-to-end wealth management that can consolidate all their assets within a cost-effective structure.’’
For Nick, it is a question of upholding his father’s principles and the ethical model he established for the business.
“His example was to be honest, act with integrity and to earn the client’s trust over the long term, while being open in everything you do,” he says.
“The more open we are with our clients, the more open they are with us about their money and what they want to achieve. This ensures we are in the best position to be able to help and advise them.”
Nick also believes his career as a commissioned officer in the Princess of Wales’ Royal Regiment stood him in good stead. In 1995, he set his sights on becoming an adviser, spending time with Irish Life International and Clerical Medical in the Isle of Man.
“I enjoyed the work and the travelling,” he says. “Meeting new people continues to be a tremendous experience.”
Rachel met Nick shortly after his move to Dublin. Her background is in the domestic advice business, having worked at Prudential and the Bank of Ireland in technical services and subsequently as a financial planner.
It turned out to be a match made in heaven for the company, which has thrived on the complementary skills.
“I am quite specialised in what I do, particularly in relation to pensions,
‘The more open we are with our clients, the more they are open with us about their money’
Nick Reid, director, OpesFidelio Ireland
but it has proved very useful to the business,” says Rachel.
“More people are transitioning jobs to other jurisdictions. You can’t offer one-size-fits-all advice anymore.”
The ability to work with like-minded individuals was one of the main reasons
Nick and Rachel decided to join the OpesFidelio network.
Being able to share knowledge with advisers that are based in different jurisdictions has been a huge benefit.
As a member of the network, they have access to professional expertise from financial advisers all around the world.
For example, while they may know very little about pension and tax implications for a specific client in Spain, Rachel would have the expertise to look after a client resident in Ireland or a client based overseas holding an Irish pension.
This is where her specialist knowledge comes into play within the network, and the same is true for other members.
The trade stand-off between the \US and China has weighed heavily \on Asian equities this year but there \are still a number of markets in the \sector that have bucked the trend
Asian equities were subdued in the third quarter, as the MSCI AC Asia ex Japan Index delivered a loss of 0.35% in GBP terms compared with a return of 5.57% of the MSCI AC World. The performance was weighed down by China as escalating trade tensions dampened risk appetite.
Donald Trump has intensified his trade war with China by imposing tariffs of $200bn on Chinese goods, while China hit back with tariffs on an additional $60bn of imports from the US in retaliation.
There was a reversal in fortunes during the quarter as Chinese tech stocks, such as Tencent, Baidu and Alibaba, the market darlings of 2017, underperformed year to date. Indian equity was the next-worst group, losing 1% in the quarter, as the Indian rupee plunged to an all-time low versus the dollar.
Bucking the trend
Elsewhere, Thailand’s stock market did well, thanks to its lowest perceived currency risk and higher oil prices. The Philippines benefited from the central bank’s decision to raise interest rates as the market welcomed the attempt to relieve inflationary pressures.
Consumer sentiment in Malaysia improved due to the cutting of the Goods & Services Tax rate to zero. South Korea’s economic growth remained on a solid upward trend, benefiting from steady growth in industrial production as well as resilient external demand.
Most commentators believe Asian markets will remain volatile, given geopolitical uncertainties and shifts in monetary policy. Trade tensions between the US and China will weigh on investors’ minds. They will also be watching how major central banks will manage liquidity and currency fluctuations. That said, this environment should provide opportunities for talented active managers.
‘Asian equities were subdued as escalating trade tensions dampened risk appetite’
• Stewart Investors Asia Pacific Leaders has been managed by David Gait (pictured above) from July 2016 following the retirement of Angus Tulloch. Gait is an experienced investor who joined the group in 1997 and has built an impressive track record on the Stewart Investors Asia Pacific Sustainability Fund, which he has run since 2005.
The approach builds on the Stewart Investors house style, which targets high-quality companies that offer predictable earnings growth but emphasises names that are able to benefit from the sustainable development of the countries in which they operate. The fund holds a Morningstar Analyst Rating of Silver.
• There has been a recent change at the top for Schroder ISF Asian Opportunities.
Robin Parbrook relinquished his lead portfolio manager duties in December 2017, after having steered the fund since October 2010.
Toby Hudson (pictured right) stepped up to take his place.
Hudson has 25 years of investment experience and worked on this strategy via its various institutional mandates with Parbrook during the past decade. He uses the same well-established, rigorous bottom-up stock-selection process that focuses on quality and growth. The fund has a Morningstar Analyst Rating of Silver.
• Investec GSF Asian Equity has been managed by Greg Kuhnert since 2005. Kuhnert uses Investec’s trademark process, based on the 4Factor model, a proprietary quantitative screen. The model assesses value, quality/strategy, earnings momentum and share price momentum.
The approach combines the objectivity of the 4Factor process with fundamental analysis. Kuhnert has been able to successfully execute the approach, which has led to strong risk-adjusted returns over the long term. The fund is rated Silver by Morningstar.
• Invesco Asian has a strong record versus peers and the benchmark. It is managed by William Lam (pictured) who officially became sole manager in May 2017, although he had
co-managed the fund alongside Stuart Parks from 2015, responsible for stock selection and idea generation.
Parks is due to retire in July 2019 and although he has been responsible for providing macro input for the team’s portfolios, we don’t believe his departure should have a significant impact, given the fund’s emphasis on bottom-up stock selection. This fund is rated Bronze by Morningstar.
• Fidelity Asia Pacific Opportunities has been managed by Anthony Srom since its launch in 2014. The process applied here is best described as high-conviction and contrarian, with no demonstrative style or market capitalisation bias.
The key features are fundamentals,
market sentiment and valuation. In assessing fundamentals, consideration is given to a firm’s financial strength, industry structure, management expertise and accounting
quality. The fund tends to have between
25 and 35 names with wide latitude
at sector and country levels. It is rated
Bronze by Morningstar.
• JPM Asia Growth benefits from veterans Joanna Kwok and Mark Davids, who each have more than 20 years of investment experience. The deep resources of the emerging markets and Asia Pacific team at JPM provides the managers the support they need.
The process follows the same quality/growth bias as the firm’s equity-based strategies managed across the region. The team looks for structural growth ideas – firms with quality franchises, consistent earnings streams and solid returns on equity. The fund has a Morningstar analyst rating of Bronze.
• Newcomers within Asian ex Japan equities include Matthews Asia Funds Asia ex Japan Dividend, which is managed by Robert Horrocks, Sherwood Zhang and Yu Zhang, with the support of other members of the Matthews International capital management team. The overall team is experienced and benefits from a wide variety of Asian expertise. Morningstar highly rates a number of Matthews strategies.
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