Invest magazine - Issue 1

Invest magazine - Issue 1

Invest The Latest Provider Support Offering insight into market conditions and adviser opportunities “Everything Special Feature Other Features Formerly Connect

issue 1 / winter 2020

is going to be alright” J pages 4 & 5

The future of State Pensions J pages 6 & 7 Up Close & Personal – Meet Sarika Dhanjal, Head of Training & Mentoring J pages 8 & 9

Can clients benefit from advisers working remotely? J pages 10 & 11 Tenet Online Events Programme J page 12 & 13

Adviser

Also with this issue Fund Spotlight adviser.vitality.co.uk/simpler

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Invest The Latest Provider Support Offering insight into market conditions and adviser opportunities “Everything Special Feature Other Features Formerly Connect

issue 1 / winter 2020

is going to be alright” J pages 4 & 5

The future of State Pensions J pages 6 & 7 Up Close & Personal – Meet Sarika Dhanjal, Head of Training & Mentoring J pages 8 & 9

Can clients benefit from advisers working remotely? J pages 10 & 11 Tenet Online Events Programme J page 12 & 13

Also with this issue Fund Spotlight

*The Brewin Dolphin Voyager fund range does not feature on the Tenet Panel. Tenet Network Advisers should obtain off-panel approval prior to recommending one of these funds.

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Editor ' s Forew0rd Hello and welcome to the first edition of our Invest magazine. Aimed at all areas of the marketplace with contributions from Internal departments

M&G’s Alex Araujo, describes why he believes the calls for a ‘green’ recovery will only accelerate investment in solutions that support the low carbon transition. Full article on page 23. After a long period of weaker performance from value and smaller companies, Liontrust’s John Husselbee highlights encouraging signs for both in recent months, including an apparent re-emergence of the small-cap premium. Full article page 25. With uncertainty still in the air, volatility continues to be a key feature of financial markets, exposing opportunities for the agile investor. Paul Causer, Co-Head of Fixed Interest at Invesco, explains the benefits of a flexible bond mandate on page 27. Over the next decade £1 trillion of assets will flow to future generations. 80% of financial advisers believe that this is a significant business opportunity but only 9% are facilitating these conversations. Are advisers well positioned to maximise this opportunity? Find out more from Schroders on page 28. As global investors scramble to digest paradigm shifts like digital acceleration, another change of seismic scale has gone under-noticed in a year full of twists and turns. Paras Anand, CIO Asia Pacific, unveils what area of the Asian market has not received enough attention from international investors. Full article page 29. I hope you find this magazine a good read and after the difficult year that we have all had, I’d like to wish you a merry Christmas and a peaceful New Year.

keeping you abreast of activities within Tenet and showcasing our provider partners who deliver thought leadership, support, ideas and opportunities. We open this first edition of Invest with Caroline Cochrane, Managing Director of Verity Financial Planners Ltd and member of the Network Focus Group. Caroline gives us her view of how this year has been for her and many others in the Financial Services Industry, how we’ve supported each other, what Caroline has missed, how adept we’ve all become at working from home and the benefits of investing the time in technology to help businesses move forward. Many clients may be unaware of the constant changes to the state pension and still consider this income as a core part of their retirement plans. The latest article from our Technical Services and Research team highlights some of the major issues on the horizon and the importance of ensuring these changes are factored into your clients’ retirement plans. Read more on pages 6 & 7. As the urgency to move towards a zero-carbon economy has grown, the requirement for new and improved infrastructure has come into focus.

Cristina Giovanelli Marketing Consultant

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“Everything is going to be alright” Before we all started working from home I used to pass the Scottish National Gallery of Modern Art as I travelled daily to the office.

Invest - Issue 1 | 5

Gallery One is a grand neo-classical building which (in typical Edinburgh fashion) used to be a school for fatherless children. Above the columns which frame the entrance is an installation by Martin Creed. In bold neon lighting are the words “EVERYTHING IS GOING TO BE ALRIGHT” and I think about that statement often. We have now spent nine months working in what has variously been described as “the new normal” and “unusual circumstances”. The first question we ask people is how they are coping with the current restrictions and are they ok. My own view is that to the best of our abilities we adapt and adopt, we cope, we look after one another. When we first went into lockdown, and we faced not knowing the effects of COVID 19 on us, markets became very volatile. We took the decision to stop any new investments or transfers and worked hard at persuading clients not to react to uncertainty by selling their funds. This didn’t mean that we stopped being in contact with clients, indeed we sent a clear message that we were there for conversations, to reassure, and to give to the best of our abilities our views on how markets and investments were going to react and perform. Gradually as markets steadied, we were able to resume our usual practice and now I believe we are back to the position in terms of referrals, new business and portfolio values that we were in pre-COVID. However we are still very much in the dark about the long term effects of COVID 19, both in terms of potential eradication and lingering effects on those of us who caught and recovered from the virus. So I am more aware that although we are more settled with investments we have to be alert to any signs of market decline and so part of my week is catching up with fund and portfolio managers via weekly email newsletters, webinars and zoom meetings – it all counts for CPD too! In our recent experience building risk targeted portfolios broadly works, stockmarkets, especially FTSE 100, have not recovered since the end of February yet investment portfolios seem to have returned to these values. Clients are relieved that they have not lost

It would be wonderful if all clients adopted video conferencing, opened emails with links to dynamic planner ATR’s, could use PFP or open password protected pdfs but we all have clients who are either not able to learn how to do those things or do not wish to do so. So we must adapt and adopt, telephone more often, completing a review over several calls, sending confidential information by registered post and visiting them when we can rather than asking them to take public transport. I used to enjoy travelling to see clients and although it is more time efficient for us if clients visit the office a home visit is very much appreciated and often comes with a scone and a cup of tea. Financial advice and how we provide it has always evolved. Those of us who have advised for a long time will remember a much different world than we work in today. I believe that we will work through the changes required in our lives to keep us safe and still be able to provide the service to clients we are all proud of. Yes I miss the Friday afternoon gin and tonic with colleagues, the gossip at PDM’s, the camaraderie of the NFG pre-meeting meetings but these things will eventually return and in the words of Martin Creed “EVERYTHING IS GOING TO BE ALRIGHT” .

(much) asset value and delighted when they have made small gains. Clients have become remarkably adept at using zoom or Microsoft team meetings or any of the other video conferencing tools and they seem to like the immediacy of it. Sometimes it’s a wee bit difficult to read something they’ve held to their cameras but I have been surprised by the ease of such meetings. I’ve learned how to share screens with clients, how to mute (always handy) and I think even after we are able to visit and have clients in the office on a regular basis that this will be an ideal way of conducting reviews or initial meetings. I do find that face to face can still be invaluable when signatures are required and we work within the government requirements for this. I would expect this approach to extend to our commitments with Tenet (to a large degree) and also in our meetings with providers and fund managers. Technology works and we should invest more in it. We set up VPNs to our office server and remote desktops to our office PCs and work on laptops at home with no real disruption. Our next step is a cloud based server with log in from anywhere (using a 2 stage verification process like iO) and we will have this by the end of the year. After a year of iO we are seeing the benefits of client information which can be updated rather than rewritten and what we now know of the system compared to 12 months ago is huge (although we are still along way from fully using the system). Working from home, unable to meet colleagues and friends other than in small groups or potentially not at all, has pushed us to rely on new ways of keeping in touch but I have learned that I very much miss that contact and a wave at the end of a zoom call is not the same as a goodbye hug.

Caroline Cochrane FPFS Managing Director Verity Financial Planners Ltd

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The Future of State Pensions

The state pension is once again in the headlines as the age at which people start to receive it has now officially reached 66 after increases in the qualifying age in recent years. With millions of people reliant on their state pension in retirement, it is important to ensure that your clients are aware of these changes and the impact it may have on their retirement planning.

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Rising State Pension Age

The age at which you can receive your state pension has been rising with the state pension age (SPA) recently increasing to age 66 for both men and women. These rises have been controversial, especially for women born in the 1950s, who have seen a significant rise in their pension age. For women, the SPA has risen rapidly from 60 in March 2010, reaching 65 two years ago in October 2018, with a future planned increase to age 67 to be completed by 2028 for both men and women. Whilst it was originally proposed that a future increase to SPA to age 68 would be phased in from 2044, this has been brought forward and will now be phased in between 2037 and 2039. The government has also committed to regularly review the SPA, raising the prospect of further increases with speculation that workers under the age of 30 may have to wait until 70 before they qualify for a state pension. There have been significant legal challenges, most notably from the Women Against State Pension Inequality (WASPI), who claim the rise in SPA should be considered unlawful discrimination, with many people’s retirement plans thrown into disarray as a result. Given the cost of providing a state pension, governments are often willing to overlook the strength of feeling from campaigners, with an increase in the SPA of just one year believed to reduce net government spending by around £3billion per year. The Impact of Coronavirus It is notable that these changes are occurring against the continued backdrop of coronavirus, with older workers at risk of suffering serious and persistent consequences from the economic turmoil arising from the pandemic. Studies from the Institute of Fiscal Studies have shown that unemployment shocks, such as those currently being experienced as a result of the pandemic, have persistent effects on the employment and incomes of older workers. This often results in them being unable to secure re-employment, or struggling to find a job on a similar wage to their previous earnings Clients who have lost their job in the years leading up to their intended retirement age may look to bring forward their retirement and rely on any existing pension provision or savings that they have accumulated. However, losing your job in the years leading up to retirement can have serious financial implications, with individuals unable to save as intended in the final years of their careers and potentially draining their accumulated savings and pension funds much sooner than anticipated. Coupled with the increased SPA and the longer wait to claim the state pension, unplanned unemployment in later life can have significant consequences for retirement plans.

The Future of the Triple Lock Since its introduction in 2011, the triple lock guarantee has attracted some controversy with state pensions guaranteed to grow annually by the larger of either 2.5%, the rate of inflation, or average earnings growth. Prior to this, state pensions increased in line with the retail price index, which was often seen as unfair as it was consistently lower than the annual rise in earnings. Given the current economic climate, it came as no surprise when it was announced that state pensions would increase by 2.5%, the lowest possible increase, which equates to an extra £228 per year for those in receipt of the full basic state pension. At the time of its introduction, the general expectation was that the triple lock would be approximately as generous as earnings indexation, provided inflation remained at the targeted 2% and nominal earnings growth was steady. However, the guarantees baked into the triple lock makes it look extremely generous in times of economic downturn, with state pensions receiving full protection from losses but participating fully in any subsequent recovery in earnings. During periods of economic volatility, this can result in pension payments increasing out of line with general economic growth, with the state pension looking to benefit massively from any post crisis bounce back in earnings in April 2022. Given the increasing cost of providing this guarantee, it comes as no surprise that

numerous think tanks and commentators have stated that the triple lock is unsustainable and that an alternative solution must be found. Despite the political appeal of retaining the spending power of pensioners, it is likely that the coronavirus pandemic has brought the triple lock firmly into the sights of Whitehall and perhaps made it a target. Planning Ahead Many clients may be unaware of the constant changes to the state pension and still consider this income as a core part of their retirement plans. However, an over reliance on this income may leave an individual’s retirement plans at the mercy of economic and political decisions outside of their control. A significant number of clients will probably wish to retire before age 70 and it is important that they have sufficient private provisions in place to enable them to do so. It is therefore vital to ensure that your clients are aware of these changes and that this is factored into their retirement planning. Clients should be encouraged to actively consider their long-term retirement plans in order to reduce the reliance on the state pension and enable them to meet their retirement objectives.

David Lloyd Policy Manager

8 | Invest - Issue 1

Up Close & Personal Under the spotlight in this issue is Sarika Dhanjal Head of Training & Mentoring

We caught up with Sarika to find out a bit more about her work and home life, as well as why she enjoys working at Tenet.

Can you give us a brief history of your career to date? After studying Computer Science at the University of Leicester, I graduated with a 2:1 and realised that computer programming was just not my cup of tea. I applied for a job as a Personal Banking Adviser at Abbey National and moved to Leeds. It was then I realised that I enjoyed chatting to people and building relationships. After 2 years at Abbey, I was ready for my next challenge and to build on what I had already learnt. I applied for a role as a Financial Planning Manager at HSBC, where I began my journey into regulated financial advice. I left the advising industry after 7 years to have my daughter. In 2014, I joined

Tenet and have had various roles in my 6 years here, each one a little more exciting than the last. I am currently Head of Training and Mentoring, which is an exciting opportunity to review our in house courses and look at developing the adviser- learning journey. What do you enjoy most about your role at Tenet? I am lucky enough to have an amazing team that I work with. They are on board and regularly suggest ideas to enhance the adviser experience. I am able to put these ideas into practice and see the success, which I find very rewarding.

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What have you most enjoyed about working from home? I have enjoyed spending time with my kids. It is so true that they grow up so fast. My little boy started school this year. By working from home, I was able to drop him off and pick him up during his first week. It was a joy to see how well he had settled in, saying good morning to the teachers, messing around and playing with his new friends. My daughter is now in Key Stage 2 and it is lovely to see how vocal she is about the new things she learns at school… teaching her mum a thing or two along the way! What are your hobbies and interests outside the office? Food…I love to try new foods and eat out at new places. I’m not sure if this is actually a hobby but I am always the one that tries something new from the menu, whereas my husband plays it safe. Not quite as exotic as a bush tucker trial, but I do like something a bit different. I also enjoy days out with my kids and travelling. Most of my holidays have been based in Europe, but after venturing out further last year for my 10th wedding anniversary to Mexico, I would love to visit a few more places a little further away. What kind of music gets your toes tapping? Being married to a Sikh, I can’t help but like bhangra. For those of you not familiar with this kind of music google “Panjabi MC, Mudian to bach ke” (“Beware of the boys”) and I am sure

What’s the biggest lesson you’ve learnt in life?

you will recognise the tune. I also do like a bit of 90’s RNB and Garage.

What book are you currently reading?

Don’t be scared of making mistakes, it’s the fear that will hold you back. Mistakes are how we learn and develop ourselves. Be passionate about what you do, work hard and be persistent, to meet your goals. You will get there by having courage and confidence in yourself. Is there anything you’ve become more grateful of as a result of the pandemic? My family. Unfortunately, my parents don’t live close and so I am not able to visit them as frequently as I have before. This pandemic has made me realise how important the small things are in life and how you can take for granted a lot of things in life without even realising it.

Although I enjoy reading, I don’t get much time to with work and the kids, so I tend to listen to audio books or podcasts. I am currently listening to Principles: Life and Work, by Ray Dalio. This audio book is great as Ray Dalio shares his experience and knowledge over the course of his career. There are lots of areas within the book, which I can implement into my way of working. What’s your favourite film of all time? I love crime films and horror films. I am a big fan of Columbo. More recently, I have watched “Get Out” and “Us”. Jordan Peele is a brilliant director and these films really make you think. I love how clever the story line is and the twist at the end. Definitely worth a watch. If you could meet any famous person, dead or alive, who would it be and why? This was a really hard question. I think I would want to meet Michael McIntyre. I love how his comedy is based on real like dilemmas and scenario. I went to watch him live at the Birmingham NEC recently; it was amazing how much the jokes about his kids ring true with my own experiences of being a parent to my little ones.

And finally, tell us an interesting fact about yourself…

Whilst at university, I was the anchor for a music program which was broadcasted on the local Asian channel. This gave me the taste for fame, and so since then, I was on the front cover of Professional Paraplanner and had an article published in the PFS magazine.

10 | Invest - Issue 1

Can clients benefit from advisers working remotely?

Many employees relish the opportunity to work from home. The lack of commute saves us time, money and the all too often inconvenience of being stuck on a train or in traffic. For many of us it can also help to achieve a more desirable work/life balance – more easily fitting the school run, or an actual run, around our day job.

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Technological advancements have enabled more people to work without leaving their homes. The fact that so many of us could easily switch to remote working has kept a great number of businesses going during the pandemic.

meetings in the evening or at the weekend, as one adviser commented, “Flexible working hours (around family and choice) will enable an out of normal office hours response to clients with the ability to share screens and provide advice.” The move could also be good news for the future of the profession itself, broadening the adviser pool and widening client choice. Two fifths (43%) of respondents feel remote working will encourage diversity, driven by improvements to work/life balance. Over a third (36%) believe it will attract more new young recruits to the profession: less time spent in the office could reduce overheads and in turn free up funds to recruit and train budding advisers. Moving on to the second benefit, reduced fees, six out of 10 respondents (60%) expect massive cost savings due to spending less time in the office, with one adviser stating,“[Remote working] will put further downward pressure on fees.” As a result of the pandemic, over a quarter (28%) of those surveyed are considering overhauling their proposition to suit remote servicing. Many respondents suggested the cost savings of managing clients through digital, rather than face to face, channels could provide an opportunity to narrow the advice gap by creating a cost effective way to service those with lower investible assets. As one respondent said, “[It means we] can afford to service

If a similar crisis had occurred a decade ago, when working remotely en masse would have been much more difficult, it would’ve unquestionable have had far more serious implications for firms and the economy as a whole. In general, financial advisers have been able to quickly adapt during the Coronavirus crisis to ensure client needs can be met without breaching social distancing restrictions, with many turning to video technology such as Zoom, Teams and Skype as an alternative to meeting in person. And the enforced move to remote working could actually offer lasting benefits to advised clients. Intelliflo recently conducted a survey among over 200 advice firms looking at the continued impact of Coronavirus and the future of the office. The results uncovered three broad client advantages: greater choice, lower fees, and better service. Let’s focus on greater choice first. More than a third (38%) of advisers believe working remotely on a long term basis could allow them to develop a more nationwide service that isn’t tied to a physical office. According to the comments given in the research, moving to a proposition based on virtual meetings is a serious consideration for some firms, with one respondent expecting, “Servicing calls by video conferencing will become standard practice,” with another similarly suggesting, “Clients default offering may be online via Teams / Zoom”. Another aspect of greater choice is that remote working may create more flexibility for clients over meeting times. Some advisers working from home may be more willing to offer virtual

clients with lower net worth”. In particular, online reviews are expected to increase in popularity, which is seen as particularly suited to low value business. One adviser commented, “An online review only can save costs and be a cheaper proposition for less wealthy clients.” Turning to the final benefit, better service, three fifths (61%) believe that reduced commuting times will mean more time spent on clients. One respondent said, “Our clients have found virtual meetings a great option and therefore reduces travel time for them and they are still benefiting from financial advice”, while another similarly commented, “Increased use of video conferencing reduces travel time and [creates] more time to focus on clients”. In addition, nearly a third (31%) felt offering a more digital service would lead to the emergence of ‘gamified’ tools, creating a more engaging experience for customers than an office-based proposition, while simultaneously drawing out the client’s behavioural tendencies, risk tolerance and objectives, which can be matched to financial solutions. So, the overriding sentiment among advice professionals is that remote working could have clear benefits for themselves, their clients, and the sector, underlined by the fact that 93% of advisers feel clients are satisfied with being serviced remotely using technology. It seems that many of the changes forced by the pandemic could be here to stay, and that’s a good thing. For further information... For further guidance on how Intelligent Office can help, please email [email protected]

12 | Invest - Issue 1

Tenet Online Events Programme 2020

We’re pleased to announce that our online events programme was a success throughout 2020 and will continue into 2021… watch this space for all upcoming events. We encourage you to attend as many online events as possible, not only to satisfy your CPD requirements, but to keep your awareness,

comprehension and understanding of industry changes and developments at the highest level. All of our events are free to attend, and open to advisers, paraplanners and administrators.

On-Demands Available to Watch at Any Time

This year we have hosted a range of online investment and protection events. All of which are now available to view on-demand at a time to suit you. We introduced our online events programme back in April, enabling us to continue supporting adviser development, offering the same CPD that you would expect to receive at our live events. To view our library of online content visit https://events.tenet.co.uk/ADP2020

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Protection Events On-Demand

These events focus on the protection market. With Tenet and the industries focus in this area, they are designed to meet advisers’ development needs and provide a valuable insight into this market. All of the sessions at these events offer IDD CPD, and are open to advisers, paraplanners and admin staff. Our Provider partners also look at other ways you can obtain further IDD CPD. Protect Two - CPD Available: 4 hours & 30 minutes IDD Protection Seminars - CPD Available: 2 hours & 55 minutes IDD CPD

Recent LV= Webinar http://webinars.tenet.co.uk/ webinar-10-2020/

Webinars On-Demand Get 30 minutes of CPD for each webinar you view!

Unum - ‘How to Write Group Risk Business’ Presented by James Lawley, Business Development Consultant Presented by Adam Aldred, Business Development Consultant Presented by Laura Bilgic, Business Development Consultant http://webinars.tenet.co.uk/webinar-7-2020/ Vitality – ‘Living an Unhealthy Life Expectancy’ Presented by Paul Craven, Protection Specialist http://webinars.tenet.co.uk/webinar-8-2020/

Throughout the year, Tenet are hosting a series of 10 webinars on the morning of the last Friday of every month with a single Provider, Fund Manager or Lender. You will have the opportunity to view the webinar and interact with the speakers, asking any questions you may have.

Watch On-Demand: https://events.tenet.co.uk/ADP2020

Webinars available to watch on-demand

LV= - ‘Change is the only constant: Are you generation future-proof?’ Presented by Marcus Primhak, Business Protection Product Manager http://webinars.tenet.co.uk/webinar-3-2020/ Zurich - ‘Why Protection Should Be a Keystone of your Clients’ Plans’ Presented by Andy Woollon, Retail Specialist Presenter http://webinars.tenet.co.uk/webinar-5-2020/

Invest Events All of our Invest Online events have concluded for 2020 however you can view them on-demand using the links below. These events focus on investments and pensions. The events are designed to meet advisers’ development needs and provide a valuable insight into the current markets. Specialist Investment Two Total CPD Available: 4 hours & 30 minutes structured & 45 minutes unstructured http://webinars.tenet.co.uk/specialist- Investment-2

Invest Two Total CPD Available: 4 hours & 5 minutes structured & 55 minutes unstructured http://webinars.tenet.co.uk/invest-two-2020 Specialist Investment One Total CPD Available: 3 hours & 30 minutes structured & 35 minutes unstructured http://webinars.tenet.co.uk/specialist- Investment-1 Invest Business Focus Events Total CPD Available: 5 hours & 30 minutes structured & 55 minutes unstructured http://webinars.tenet.co.uk/BFE-Invest-1

Invest One Total CPD Available: 4 hours & 30 minutes structured & 45 minutes unstructured http://webinars.tenet.co.uk/invest-one-2020

14 | Invest - Issue 1

Tenet’s Adviser Recruitment Service If you’re looking to expand your business, let us help you take the hassle and cost out of recruiting professional advisers and support staff. We’ll advise you on the best way to get the people you need and organise a strategy to do that from writing role profiles, advertising and proactive headhunting to vetting the candidates on your behalf.

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“I used Tenet’s Adviser Recruitment Service to find my first employee at REMOUK. I received excellent advice and support at each stage of the recruitment process from identifying and defining the requirements of the role to my new employee joining on their first day. Austin was on hand throughout the process to help with screening and presenting candidates and gave expert on-boarding support and advice at every step. This completely took the headache of recruitment away for me and I’ll definitely be using the service again next time” Samer Belal – REMOUK

Key benefits •  Role profile writing service to help you define your requirements; • Promotion of our vacancies on our website and professional online job boards; • Candidate vetting, including professional telephone screening and interviewing; • Assistance in completion of forms when on-boarding successful candidates; • Training and support for new recruits from our in-house training team.

Why use the Adviser Recruitment Service?

What does the service include?

You’ll have the support of an experienced HR and recruitment specialist. We have significant experience in recruiting for a range of financial services, HR, compliance and administration roles and can do all the legwork for you, from advertising the role on our website and on respected, professional online job boards, through to candidate vetting and interviewing on your behalf. But, the thing that makes this service so attractive is that we do all this frommembers of Tenet Network Services completely free, saving you up to £5,000 in recruitment agency costs, as well as freeing up your time so that you can concentrate on giving advice to your clients.

We’ll help you to define and develop an attractive recruitment proposition to draw the right calibre of people to your business. We’ll also arrange for the role to be advertised and will screen the best candidates to your specifications, recommending the ones which fit your needs. To register a vacancy or just to find out more please don’t hesitate to contact us on 0113 239 0011 (ext. 2232) or email [email protected]. To view our current list of adviser and other jobs, please visit https://recruitment.tenet.co.uk

Invest responsibly today

Make a better world tomorrow

We’ve put environmental, social and governance (ESG) factors at the heart of our investment process for almost 30 years, to target investor financial goals and create a fairer, healthier world. aberdeenstandard.com/future

For professional investors only. Capital at risk The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amounted invested. Issued by Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10 Queen’s Terrace, Aberdeen, AB10 1XL, and Standard Life Investments Limited registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Both companies are authorised and regulated by the Financial Conduct Authority in the UK. GB-250920-129874-1

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The annuity market opportunity for advisers

When pensions freedom was introduced in 2015, it marked a change in how consumers look at their pension choices – and, consequently, a decline in the annuity market. At Aviva, we have seen signs that the market is starting to recover, and we believe the opportunity for advisers is only growing. The annuities market Our customers buying annuities largely fall into two key groups: 1. Our largest group of customers – accounting for around two-thirds of annuities – generally have pension pots of under £100,000. They have lower financial confidence, valuing certainty and simplicity over income. These customers want a quiet retirement, but with changes to state pensions they struggle to work out what age they can comfortably retire. This group come to us directly, or through annuity specialists with non-advised sales journeys. 2. Our remaining third of new annuity customers are very different in terms of wealth and mindset. They usually have pension assets over £200,000 and see themselves as financially confident. Most are retired professionals who may take some time to transition into retirement, often choosing to continue to work full- time or part-time, changing career or starting a business. They are willing to take some risks and may take an annuity alongside other products. These customers come to us direct, through non-advised distributors or via financial advisers. In addition to these two groups, we are starting to see the emergence of a third: customers who used to rely on drawdown,

but realise they are becoming more risk averse and less able to make financial decisions well as they age. The ageing mind The emergence of this third group is supported by recent research commissioned by the Financial Conduct Authority (FCA) around how older consumers engage with financial services, which found that cognitive ageing can create challenges. Although financial decision making reaches optimal performance when people reach their mid-fifties, it then steadily starts to decline. By the time someone reaches their late sixties to early seventies, the decline becomes steeper. Furthermore, the FCA’s research described a ‘confidence-reality gap’: where customers do not acknowledge their declining cognitive abilities, or hide it with coping techniques. Meaning it may be difficult for advisers to recognise a client’s vulnerability. This is important to consider, as pension freedoms have created a need for customers to make ongoing decisions around complex retirement products such as equity release, investments and annuities – often involving The customer landscape is changing, and we believe that annuities may well become an area for growth. By 2025, the first group of customers to reach pensions freedom in 2015 will be in their seventies – an estimated 1 million people. According to ONS statistics, they may expect to live for a further twenty years, making annuities an attractive option. It’s clear that annuities continue to play significant sums of money. The future of the market

an important role in today’s market. For more information and resources, visit our adviser site.

There’s more to suitability than meets the eye

Suitability is a difficult concept to define adequately. We know what something unsuitable looks like – a client who has a very short investment time horizon, a very low risk appetite and a very low capacity for loss shouldn’t be in high-risk single-strategy equity funds, for example. Turn that on its head, though, and it’s much more complex. Even COBS 9.2, which contains the rules financial advice professionals must follow on assessing suitability, is relatively silent on what is suitable; it has much more to say about what isn’t. In the investment world we look for tangible, objective, observable demonstrations of suitability. But the softer factors, which can be overlooked, also have an important role to play. When it comes to selecting centralised investment propositions (CIPs) for clients, here are five softer factors which might be reasonable to consider: 1. Value for money What we are talking about here is more nuanced than the value for money (VFM statements) fund managers must now produce. At an overall level, do you feel that the provider of the CIP solution you are allocating client capital to is working hard enough to earn their fee? At its heart, VFM is experiential and subjective; if you feel that Provider A simply goes the extra mile in a way that Provider B cannot or chooses not to, then – all other things being equal – you may decide to favour Provider A. As long as you are clear on your reasons – including the fact that there is a subjective element – this fits perfectly well within a suitability framework. 2. Transparency Transparency is more than a regulatory requirement. It is a mindset; a way of working. It understands that the burden of assessing suitability lies with you, the adviser; the better informed you are, the more everyone benefits. It is hard to measure transparency – though some including the Transparency Taskforce do try – but we all know it when we see it. It seems logical that if two propositions are equally suitable on the surface, but one arms you as the adviser with considerably more information than the other, you’ll select that one – it simply makes ensuring ongoing

4. Service and cultural fit While you may not rely on CIP administrative servicing in the same way as you do those from product providers and platforms, it is reasonable to expect a response to your queries and requirements. If a client asks challenging or complex questions to which you don’t have the immediate answer, it’s unacceptable for the investment solutions provider to be backwards in coming forward to help; this will destroy the trust both you and your client have in the solution. To this we can add the intangible element of ‘cultural fit’ – does the provider share your values and aims? Not just in the mandate of a fund or a portfolio, but in a wider business sense. 5. Communications Finally, it is very easy for those at the asset management end to feel estranged from the sharp end. Nonetheless – and this works with the transparency point too – if you and your client are to be reassured that the solution they’re in is suitable on an ongoing basis, high quality, timely communication is crucial. You should know that your CIP or multi-asset fund provider can give you the information you need, when and in the format you need it for your own client relationships. The key here is that all our areas require a skilled, experienced and expert guiding hand to assess. Suitability is everything in our market; these softer areas can help to ensure great decisions and hopefully great outcomes for your clients – and help them understand the immense value you bring as advisers. Brewin Dolphin’s approach At Brewin Dolphin we understand completely the market in which you work and the challenges you face. We have been serving intermediaries for a long time, and our award-winning Model Portfolio Service (MPS) now has £4.5 billion under management as at 31 March 2020. We are passionate about transparency and about helping firms understand what’s going on inside our portfolios and funds. We love working with advisers and think that we achieve a great partnership and great fit with firms over time – but of course, it matters less what we think than what you think. If you haven’t looked at Brewin Dolphin’s solutions for intermediaries – whether our MPS or our new Voyager Fund range – we would encourage you to do so. But when you do, look at us in the round – measure us on the numbers for sure, but also include these softer factors where so much of suitability resides. For more information, please contact your local Business Development Manager: www.brewin.co.uk/financial-advisers/meet-the-team or call us on 020 3201 3520.

suitability easier. 3. Commitment

It’s not enough for a provider to say that they’re committed to servicing you and your requirements; they have to evidence that on an ongoing basis through their actions. Again, this is a soft criterion; it’s hard to mark a provider out of ten for commitment. You may find that your peers have words to say about their experiences, or you may have prior knowledge of the firm. But a core element of ongoing suitability has to be your level of confidence in the provider; that it won’t cut and run when things become challenging.

Brewin Dolphin Limited is a member of the London Stock Exchange, is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Jersey Financial Services Commission. Registered office 12 Smithfield Street, London EC1A 9BD. Registered in England and Wales – company number: 2135876. VAT number: GB 690 8994 69. The value of investments can fall and you may get back less than you invested. Past performance is not a guide to future performance. No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us. The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.

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Invest - Issue 1 | 19

Generate new business with tax-efficient investments

Jessica Franks Head of Tax

A recent Fidelity 1 report finds more advisers are seeking new clients than before the coronavirus pandemic, with 77% looking to grow their client bank.

But can advisers find untapped opportunities among existing clients? This article looks at generating new business by spotting clients who could benefit from tax-efficient investments. Estate planning An ageing population means the demand for inheritance tax planning is high. Business Property Relief (BPR), a longstanding relief from inheritance tax, has an important role to play. Towards the end of 2019, an Octopus survey found nine out of ten advisers had clients reluctant to give up access to capital as part of their estate planning 2 . BPR can be a useful tool to move estate planning discussions forward, because it allows a client to retain control of their wealth. Knowing that using BPR-qualifying investments to plan for inheritance tax can be reversed often gives clients peace of mind. Because the investment stays in the client’s name, the investor can sell some or all of the investment at any time, subject to liquidity. Existing client referrals You may want to consider using a family tree to help uncover family connections and the impact of planning. This helps make the planning ‘real’ for your client, bridging the gap between cold numbers and emotion-driven life goals. It can be an opportunity to discuss estate planning, and potentially receive referrals. An example of how that might work is by asking two indirect questions. The first: “Might you need to help your parents?” This reinforces the idea that planning has real world consequences and usually gets the response no, the client’s parents are comfortable.

These are high-risk investments that put capital at risk. The value of these investments, and any income from them, can fall as well as rise. Investors may not get back the full amount invested. In addition, the shares of smaller companies can fall or rise in value more than shares listed on the main market of the London Stock Exchange. These types of investments are long-term and liquidity isn’t guaranteed. Investors also need to be aware that tax treatment will depend on their personal circumstances, and tax rules could change in future. Tax reliefs also depend on the portfolio companies invested in maintaining their qualifying status for the relevant relief. 1. How the advice sector is adapting to the coronavirus crisis’, Fidelity International, June 2020 2. Unlocking Estate Planning: How Business Property Relief is opening doors for advisers, published by Octopus Investments, February 2020 Our investments are not suitable for everyone. Any recommendation should be based on a holistic review of your client’s financial situation, objectives and needs. We do not offer investment or tax advice. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: October 2020. CAM010298-A. BPR relief is not on Tenet’s panel, please follow the specialist approval process

The second question: “Might your parents want to help their grandchildren, perhaps with school fees or their first property?” Often unsure, the client often realises it’s a possibility. After all, grandparents are famously doting, so almost always they’ll say yes. This creates a natural reason to speak to the client’s parents. The same goes when discussing inheritance. Rather than ask clients if they expect to receive anything, which could make them feel greedy, consider a shift of focus. “Might your parents want to leave something to their grandchildren?” “Maybe.” “Then it’s important I speak to them to make sure that happens as efficiently as possible.” This indirect approach is also effective when looking to engage with beneficiaries, who may themselves become clients when they inherit. The Octopus document ‘What I Own and Where I Keep It’, available from your Business Development Manager, helps executors easily locate the deceased’s will and assets. It’s a natural opener for suggesting you speak to beneficiaries, as they’ll often be the ones using this document. Tax-efficient investments are high risk It’s important to consider all the risks before recommending a tax-efficient investment.

Worth a watch to learn more about estate planning Available to watch now Octopus Online Show focuses on estate planning. Tune in for useful tools and tips, fresh planning ideas, and specialist know-how. Register to watch at octopusinvestments.com/octopus-online-show-6/

Invest - Issue 1 | 21

Financial planning in a COVID-19 environment

regardless of any other income they may have. Any additional gains that fall within their basic rate tax band, they are taxed as low as 7.5% • Interest on cash savings - potential of up to £6,000 tax-free income in 20/21 - Starting rate for savings – clients can potentially receive up to £5,000 of interest without having to pay tax on it. The more income they earn from other sources, the less their starting rate for savings will be (they won’t be eligible at all if income exceeds £17,500) - Personal savings allowance – clients can potentially receive up to £1,000 of interest without having to pay tax on it, subject to which tax bracket they’re in. It’s also worth remembering that cash savings of up to £85,000 (£170,000 for joint accounts) held with a UK authorised bank, building society or credit union are protected by the Financial Services Compensation Scheme. Of course, these allowances will naturally be considered when planning an income for your clients, but I think it’s useful to revisit how helpful they can be in these challenging times. Important information: This is for investment professionals only and should not be relied upon by private investors. Please note that with pension products your client will not be able to withdraw their money until they reach age 55. Tax treatment depends on individual circumstances and all tax rules may change in the future. The value of investments and the income from them can go down as well as up so your client may get back less than they invest. Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, FundsNetwork™, their logos and F symbol are trademarks of FIL Limited. UKM1020/32360/SSO/NA

unused annual allowances from the three previous years. Certain conditions do apply – the client must have used this year’s allowance in full and have earnings of at least the amount they wish to invest. They must make use of any unused allowance from the earliest year first, and care must be taken if the tapered annual allowance applies. Carry forward is unavailable if the Money Purchase Annual Allowance has already been triggered. As a reminder, FundsNetwork’s new Pension Summary report can help identify clients who may be able to utilise carry forward. It shows, for example, a client’s gross pension contributions for the current and previous three tax years. Other valuable allowances to be considered One concern when the pandemic hit was that older savers may make up for shortfalls in their income through flexibly accessing their pensions. In fact, a HMRC report highlighted that pension withdrawals were actually down in the second quarter, suggesting that clients showed common sense during this uncertain time. While pensions can be used to boost income, we shouldn’t forget that other allowances can provide more tax- efficient options: • Capital Gains Tax allowance – clients can realise up to £12,300 of gains in 2020/21 without incurring a tax charge (if reinvested into an ISA, any resulting income will be tax free). Where additional gains fall within their basic rate tax band, they are taxed at 10% • Dividend allowance – c lients can receive the first £2,000 of dividend income at 0% tax,

Donald Manning Retirement & Savings Development Manager for FundsNetwork

This year has been a truly historic one with the Coronavirus pandemic creating an unprecedented environment for us all. From a financial perspective, the FTSE 100 index was down at one point by over 30%, interest rates cut to a new all-time low and we’re now in a recession. Thankfully, we’ve seen a remarkable market recovery since the lows of March, and it seems clients heeded the advice to remain calm over this volatile period. Indeed, research conducted in May revealed that, since the start of the outbreak, 56% of investors had taken no action concerning their investments. In fact, 23% actually invested more money while only 2% had sold all their investments. A crisis coinciding with tax year end Of course, the initial phase of the pandemic occurred when year-end tax planning traditionally takes place. The market turmoil and the wider disruption to our daily lives caused many to overlook some valuable 2019/20 tax breaks. It’s a case of ‘use it or lose it’ for most allowances but not so with pensions given the ‘carry forward’ rules. As you’ll know, most clients can tax-efficiently contribute up to £40,000 into a pension in this tax year. However, they may be able to contribute more by carrying forward any