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Wealth Management

DIGITAL NATIVES CAN BE THE DRIVING FORCE BEHIND THE BIGGEST TRANSFORMATION IN INSURANCE

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Sam Vickerman, Practice Director, Insurance & Retail, Grayce

 

Often referred to as digital laggards in the finance sector, insurance companies are renowned for being slow to adopt new technologies. Held back by legacy systems and old-fashioned business models, the industry also lacks the technology talent required to speed up innovation. According to Deloitte, just 4% of millennials want to work in insurance, with many more being drawn to exciting roles in technology, consulting or other financial companies instead. Insurtech start-ups are beginning to emerge, who are focused on developing software for the sector. Yet the gap between these fledgling firms and traditional insurance companies is growing. Exacerbating the problem further is the impact of Covid-19 on the sector, with customer demand for more digital products and services growing. If insurance companies are to prosper in the post-pandemic world, they need to find ways to adopt digital technologies at a faster rate. And that must start with changing the next cohort of workers’ perception that the industry is dull and dusty and finding ways to attract and retain this talent.

 

Attracting digital native talent

Immersed in technology since birth, millennial and Gen Z workers are confident in and capable at using digital tools – it’s argued that the brains of digital natives are actually wired differently to ‘digital immigrants’ (those who have adapted to the new world as adults), due to vastly different kinds of early learning experiences. In the workplace, this translates to differing communication and information-gathering styles, and according to Forrester, these workers prefer greater mobility, tech autonomy and software diversity compared to their older counterparts. Insurance firms must find ways to tap into this talent pool more widely if they’re to digitalise their operations and compete with the emerging start-ups in the sector, and they should start by employing individuals that show a curiosity and willingness to continuously learn. These individuals can act as digital champions for their organisations, helping them to embed the latest technologies into their operations and shape the future of their business.

Sam Vickerman

Here are a handful of those technologies that could drive widespread transformation of the sector.

  • Highly personalised services through IoT and social media – traditional risk assessment relies on datasets that consider a range of factors such as the customer’s age, gender, location, marital status and so on. But today, endpoint devices and social media can provide much more personal insights into the individual – in a model that is beneficial to both the insurer and the customer. Wearables, for instance, provide deep insights into a person’s physical health, measuring factors such as blood pressure, temperate and number of steps per day. The business gets a more accurate risk assessment, and the customer gets a more tailored policy that suits their needs. This model is growing in popularity, with a recent study by Accenture finding that more than three-quarters of consumers are willing to share their personal data in exchange for more personalised insurance offers and cheaper coverage.
  • Digitising paper records – the insurance sector is a heavy user of paper-based records, with firms typically keeping thousands of files in paper archives, gathering dust. If files are digitised, analysed and stored in the cloud, documents can be automatically reviewed, helping to reduce inconsistent information or errors.
  • Internal workflow automation with RPA and Machine Learning – automation enables firms to reduce the time spent on routine paperwork and administrative tasks, freeing up employees to focus on more creative, value-add work with their clients. Robotic Process Automation (RPA) can help address repetitive work, including preliminary assessment of each claim, data entry and payments. In turn, this results in more efficient decision making, reduced call times to customer service teams and far greater accuracy of data entry.
  • Automated resolutions through AI-powered chatbots – customer service agents spend thousands of hours on the phone, often supporting clients with simple requests. Chatbots can help automate many of these conversations, using AI to filter through the chats and route priority customers that require urgent attention through to human service agents. This can drastically cut costs in customer support and sales.
  • Blockchain implementation – according to PWC, blockchain implementation could cut costs by $5-10bn for reinsurers worldwide. Key benefits include reducing verification and validation time, eliminating errors and minimising reputational risks. Blockchain enables all required parties to be connected by smart contracts, meaning reinsurers don’t have to interact with the insurer to get access to the client’s data.

 

Dusty to digital-first

The insurance sector is in much need of a revamp and companies risk falling behind if they do not start investing in digital innovation today. However, by giving ambitious digital natives licence to research and embed new technologies, they can transform their operations and compete with new market entrants. Technology is driving several disruptive trends in insurance, such as personalisation, automation and real-time based assessments. If insurers can get digital adoption right, they will benefit from cost reduction, better communication with their customers on the channels of their choosing and more accurate risk assessment. The next generation of workers can help drive this change – shifting the perception of insurers from dusty to digital-first. It’s time for insurance companies to start investing in these individuals now.

 

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An Entrepreneur’s Guide to Investing in Bitcoin

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By

Marcus de Maria, Founder and Chairman of Investment Mastery.

 

Over recent years, Bitcoin has been steadily growing in popularity among today’s investors. At the same time, there has been a lot of debate about Bitcoin, and other cryptocurrencies, and their value.

Its supporters argue that it is the future of currencies and investment; its critics are adamant it’s not all it’s cracked up to be and might not make the big profits people are expecting.

To better understand its true stature in the market, we need to look at recent developments. For instance, Bitcoin’s valuation has risen by more than 763% in just one year, easily surpassing the rise in the traditional stock market.

With more and more people buying Bitcoin, it is now gaining the attention of the mainstream financial institutions and platforms, when once Bitcoin was derided, joked about and said would never last.

Marcus de Maria

Fast forward twelve years since its’ launch, and we have Tesla and SpaceX mastermind Elon Musk recently announcing that his car empire will not only buy $1.5 billion-worth of Bitcoin, but will accept cryptocurrencies as payments in the future.

And well-known FinTech companies such as Square and PayPal have also announced their intention to support Bitcoin in the future.

Despite this, the most important Bitcoin development is, perhaps, the recent initial public offering (IPO) of Coinbase Global, Inc. (NASDAQ: COIN), today’s leading cryptocurrency exchange platform.

There is no doubt: Bitcoin is gaining momentum. Recent developments have contributed to the sharp rise in the value of Bitcoin, and asset proponents believe this is just the beginning.

 

Bitcoin background

Bitcoin was created in 2008 by a programmer, or group of programmers, under the pseudonym “Satoshi Nakamoto”. Twelve years on, and the true identity of Bitcoin’s inventor is still unknown, adding a little mystique to this already enigmatic entity!

Essentially, Bitcoin is a cryptocurrency. A cryptocurrency is a virtual “coins” or “tokens” and used in digital cryptocurrency systems instead of physical cash.

Similar to physical fiat currencies, digital coins have no intrinsic value, and are not backed by gold or silver.

Bitcoin is one of the most widely used of the thousands of cryptos now available to the investor.

Considering that the great attraction to crypto is that it’s a decentralized currency, thousands of different types of coin in “circulation” is a big giveaway to how popular it is among users and investors.

What gives Bitcoin its value is the fact that there will only ever be 21 million bitcoins “minted” or “mined” to give its proper definition (more on this in the future).

It’s this scarcity that provides the value, although one Bitcoin can consist of multiple denominations, the smallest being a “satoshi” which is 0.00000001 of one Bitcoin (or BTC as it is also known).

 

Bitcoin & The Blockchain: How does it work?

Bitcoin exists solely on the “blockchain” in “wallets.”

A wallet is the digital equivalent of a traditional bank account for fiat currencies such as dollars, sterling, yen, etc.

The blockchain is a public ledger that is totally transparent and accessible to everyone who uses the blockchain and bitcoin, and now any crypto that is in existence.

Transactions on the blockchain are “peer-to-peer”, meaning the transaction doesn’t go through a “middleman” (i.e. third party that would normally charge a fee for making the transaction).

Crypto transactions also undergo thorough verification and confirmation.

Crucially, every transaction and record of bitcoin activity is encrypted which means no one knows who owns any one bitcoin or where it goes to and from, unless they publically declare it (although the identities can eventually be detected under special police powers in cases of suspected fraud).

Only the transaction itself is recorded and is made visible to anyone.

That is why Bitcoin is a cryptocurrency (or crypto), because it has an extremely high level of privacy to it via cryptography.

“Crypto” comes from the Greek word “kryptos,” meaning hidden.

Bitcoin wallets operate via secret key.

This key is used to “sign” transactions. It provides mathematical proof that the transaction has come from your wallet (or owner of the transacting wallet).

This secret verification stops the transaction from being tampered with once it has been issued.

All transactions are confirmed and appear on the block chain network within 10-20 minutes.

It is this security and the fact YOU – and not the banks – are truly in control of your digital money that is so appealing to users and investors alike.

 

What to consider when investing

Firstly, and arguably most importantly, is risk-factor. Investing in Bitcoin as an individual is a lot less risky than investing as a business.

The mentality must be, ‘this is my business’s money. I won’t speculate with my business’s money, and I am not going to risk my employee’s livelihoods. Yes, I would be crazy not to invest but it would be crazier to risk it all.’

It’s very easy to go all-in and invest a large sum of money when you have it, but that is not really a sensible strategy.

So, to start with, entrepreneurs and business leaders should consider the risks, diversifying their portfolio and starting small.

 

Other Bitcoin Investment Options

There are different options when it comes to investing in Bitcoin.

First, you can invest in a company that uses Bitcoin technology so you will be exposed to it without purchasing it directly. When the value of Bitcoin goes up, the company shares go up too, providing a return on your investment.

I can’t invest in Bitcoin through my ISA, but investing in a company such as Block (previously known as Square) means I have an indirect tax-free investment opportunity in Bitcoin. Investing in a company that utilizes Bitcoin can be more volatile than Bitcoin itself, so more money can certainly be made.

Investing solely in Bitcoin is different, as it doesn’t move so much in value, but the individual company using Bitcoin can go up and down sometimes by 80%.

Buying Bitcoins directly from an app like Coinbase allows investors to “physically” own the asset.

This is an important distinction to make, as Coinbase allows investors to actually buy Bitcoin and store it in their own crypto wallet. That way, investors will be able to gain access to the coin’s price performance and use it as the currency to make other trades.

Owning a standalone Bitcoin is no different from owning any other currency, except for the incredible fluctuations in value.

 

To invest directly into Bitcoin here’s how to get started:

  1. Sign up to an Exchange
  2. Enable two-factor-authentication for security
  3. Get a Bitcoin wallet
  4. Connect the wallet to a standard fiat bank account
  5. Place your Bitcoin order
  6. Manage your Bitcoin investment

When the set-up is complete, what you really need to consider is, how much do you know? I am a firm believer in spending at least 20 minutes a day educating myself on investing. I’ve seen too many beginner investors ignoring that advice and rushing in without understanding how it all works.

Surround yourself with people that understand crypto investment and dedicate time to reading up on strategies and tips that will benefit all investments you make.

Bitcoin is certainly a crypto asset you should be investing in alongside a diversified portfolio. It is certainly a highly volatile asset with large and rapid price swings, which in turn can offer the potential for large returns but also carries a high level of risk.

Before making any decisions, it is critical that you learn how to invest in Bitcoin responsibly and utilise proven, reliable strategies. Once you feel confident with your approach, take that first brave step.

As Warren Buffet once famously said, “Be fearful when others are greedy, and greedy when others are fearful.”

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Wealth Management

Has London’s IPO market run out of steam?

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Rhys Merrett, Senior Account Director, The PHA Group

 

The UK’s transition out of lockdown was approached with a degree of caution. The disruption caused by the pandemic instilled permanent changes to the way in which businesses operate. It also brought economies to a standstill, with the financial services sector attempting to navigate uncertain circumstances.

Positively, the months following the lockdown were marked by a visible surge in investment and spending. Pent-up investment capital was injected into the financial markets via private equity and venture capital funds, while on the merger and acquisitions (M&A) side, domestic and outward M&A deals were on the rise. After navigating the economic uncertainty brought on by the pandemic, the financial services sector bounced back with a hive of activities in H1 2021.

Move forward, 12 months and it seems as though the immediate optimism sparked at the beginning of 2021 has started to wane. A host of new challenges face the UK, some a consequence of the pandemic like rising inflation while others a consequence of actions on the geopolitical stage. As a consequence, there are fears that instead of a full blown recovery from the pandemic, we could instead be on the verge of a recession.

Rhys Merrett

Such a forecast should not be assumed and requires careful assessment. The fact that analysts are beginning to question the health of the economy stems from recent trends. One of these has to do with the number of Initial Public Offerings (IPOs) taking place in the UK.

IPOs are a positive reflection of a healthy market geared for growth. They achieve this by fuelling the growth of economies and broadening the number of investment opportunities on offer for both domestic and foreign investors. IPOs also facilitate innovation, create jobs, promote productivity and provide incentives for private companies to consider a public listing in a particular jurisdiction.

However, a new analysis from KPMG’s UK Equity Capital Markets has revealed that IPO activity in not only the UK, but globally, has drastically dropped. Only 11 companies listed in London in the opening six months of 2022, raising £0.5 billion. This is a huge drop from H1 2021, when there were 40 listings which collectively raised just under £10 billion. Given this 95% decrease, it is necessary to question not only why this has occurred, but whether this is the beginning of a long-term trend for IPOs in the UK?

 

The future of IPOs in post-Brexit Britain

One theory is that the UK’s rules and regulations linked to IPOs are pushing companies to other stock markets, like Amsterdam. Part of this has to do with the long-term future of the UK post-Brexit, and the extent in which it can retain its position as global hub for investment. It will have to deal with increased competition. Scheduled for later this year, the EU listing act will introduce new proposals that give founders the ability to retain more control of their companies while being able to use dual-class share structures.

Another issue has to do with valuations. High profile IPOs of high-growth tech companies like Deliveroo have suffered a significant loss, with the company’s value down 75% since first being listed. Finally, questions over the country’s political leadership have stalled planned public offerings. Most recently SoftBank announced it has stopped working on a London IPO for chip designer Arm as a result of the Conservative leadership contest.

Despite these challenges, it is wrong to assume that the UK is no longer the finance and investment hub it was pre-pandemic, and indeed, pre-Brexit. In reality, all economies around the globe are dealing with the aftermath of the pandemic, including pandemic. There is also potential fallout linked to geopolitical events, such as the Russian invasion of the Ukraine.

Taking a long-term perspective is crucial. For example, research by Datasite, a SaaS provider for the M&A industry, shows that the outlook for dealmakers in the UK is positive. Seven in 10 (71%) are anticipating an increase in activities over the coming 12 months. Looking at the type of deals, half (50%) expect the biggest increase to be in debt financing, while 43% identified transformational acquisitions or mergers.

The fact of the matter is that financial markets are in a period of adjustment. If we look at cryptocurrencies, price volatility and radical swings have resulted in significant losses from the peak prices recorded during the pandemic. The most prominent of these has been Bitcoin. While some see these price swings damaging the long-term usability of decentralised finance, others see this as part of cryptocurrencies evolution as it becomes integrated into the global financial system.

For now, it is difficult to tell what the future has in store for the UK when it comes to IPOs. Once the leadership contest is over, the government will have the opportunity to put together a strategy which ensures London can remain a top destination for public listings. Competition is rife, and should London be able to tackle these challenges head on, it can remain a global hub for not just IPOs, but financial services and financial technology.

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