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Wealth Management

OPPORTUNITIES MISSED? SIXTY-TWO PERCENT OF BRITISH PUBLIC DON’T KNOW WHEN THE ISA DEADLINE IS

Different types of ISA also remain a mystery to majority of Brits

 

The majority (62 percent) of the British public don’t know when this year’s ISA deadline is, despite it being just one week away (5th April).

The 2,000-strong survey, commissioned by peer to peer property lending platform The House Crowd, also shows a lack of ISA awareness throughout the rest of the population, with a whopping 69 percent claiming not to know the difference between cash ISAs, stocks and shares ISAs, and IFISAs. An even larger number (87 percent) said they don’t know what an Innovative Finance ISA (IFISA) is.

 

One in four of the UK’s young adults (aged 18 to 24) don’t know what an ISA is to begin with, let alone the differences between ISA options.

 

Commenting on the findings, Frazer Fearnhead, founder and CEO of The House Crowd, said: “It seems the government needs to work on increasing general awareness of the ISA product set, especially with the younger generation.

 

“Two decades on, the Cash ISA remains a popular option, but average interest rates can easily be eroded by inflation. Innovative Finance ISAs offer returns that are, on average, much higher and much more consistent.

 

“Our research shows only two percent of the British public will be saving £20,000 or more in the next 12 months, which means it’s important they understand their options. Stocks and Shares ISAs increased in popularity in 2017/18, while the amount of money invested in cash ISAs fell.

 

“However, a lot of people are reluctant to invest in stocks and shares due to volatility. The FTSE, for example, has dropped 9.6 percent since April 2018*. That’s why the IFISA is appealing – it’s based on lending, which people understand. What people don’t realise is that even though their investment isn’t protected by the FSCS, it can be secured against a tangible asset like property.

 

“The government decided to introduce the IFISA, so we feel it has a responsibility to educate potential investors on what it is.”

 

The amount invested in the Innovative Finance ISA increased from £36 million (spread across 5,000 accounts) in 2016/17, to £290 million (spread across 31,000 accounts) in 2017/18. This was versus approximately £39.8 billion invested in 7.8 million Cash ISA accounts and approximately £28.7 billion invested in 2.8 million Stocks and Shares ISA accounts in 2017/18**.

 

The research can be accessed in full on The House Crowd’s website.

 

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Wealth Management

INTELLECTUAL PROPERTY IN THE AGE OF INDUSTRY 4.0

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The growth of the digital era and industry 4.0 have fuelled the growth of intangible rather than physical assets, with intellectual property (IP) representing one of the largest asset classes that a company can hold and can include patents, trademarks, brands, databases, software and trade secrets.

James Turner, Director at Company Formation Specialists, Turner Little takes us through the details of why it is important to protect these assets, and how we can do so:

“IP is important, but rarely accounted for, because we most often equate value with money. It’s not always easy to evaluate its financial worth, but it’s important to create a plan to protect it.

“Businesses need to understand the source of the value and the brand of their businesses

“From a commercial standpoint, IP needs to be protected in order for companies to maintain their unique market position, but it can also have financial benefits – as it can be used as collateral for loans or company valuation in the event of a merger or acquisition.

“As industry 4.0 takes hold, we expect there to be a sharp increase in concerns surrounding the protection and ownership of IP rights. Designing the right business structure is an important consideration when protecting a company’s IP from theft, misappropriation, infringement or even potential creditors. For example, companies can limit liability through the use of holding and operating companies, which enables owners to centralise the company’s assets. Offshore companies can also be leveraged in the creation of these structures and can offer additional flexibility.

“That’s where we come in. At Turner Little, we specialise in creating bespoke solutions and structures for individuals and businesses of all sizes. Whether you’re a small business owner or own a large plc, it’s important to ensure that your IP is secure, so you can focus on building a successful business.”

 

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Wealth Management

STOCK MARKET ANALYSTS DISCUSS HOW TO INVEST DURING A RECESSION

  • Online tool looks back at how world markets recovered after the last recession in 2008
  • Analysts take learnings from previous recessions to offer insight on how to invest during a period of instability
  • Certain areas of the stock market can increase in value during a recession

The economic crash due to Covid-19 is a unique event, however stock market experts have taken learnings from previous recessions to predict the stocks that may increase in value during this time.

IG Markets, Europe’s largest online derivatives trading provider, has taken learnings from previous recessions, using historical data and online tools such as Decade of Trade, which visualises world stock market trends over the 10 years since the 2008 crash, to provide predictions about the areas of the stock market to watch during an inevitable recession.

 

Stocks to watch during a recession

Under expansionary circumstances, stocks that have strong growth prospects such as healthcare and consumer staple sectors, for the future typically command lofty valuations and produce high returns, as investors bank on the company’s ability to generate more income as time progresses. This phenomenon typically results in high price to earnings (P/E) ratios like those currently present in some of the market-leading tech stocks.

In the event of an economic downturn, however, these profit-hopeful stocks are often discarded as investors align their income assumptions with slowing growth and lower consumer spending.

On the other hand, stocks with stable – but often more modest – income generation tend to be more insulated from dramatic stock shocks that frequently accompany recessionary periods. These stocks are known as “defensives” and, broadly speaking, include the utility, healthcare and consumer staple sectors. Given their profitability profiles, they become an important collection of stocks to keep an eye on when the broader market encounters a rough patch.

Consequently, a portfolio comprised entirely of equities is remarkably vulnerable in times of recession, particularly at the onset when losses are often steepest. With that in mind, it may prove beneficial to look outside of the equity market for some of the best recession-proof investments.

 

Gold can be an investment during a recession

XAU/USD is widely regarded as a safe haven asset for its stable store of value and tangibility. Further still, gold can act as an inflationary hedge, making it an attractive investment in times of recession and in periods of lower interest rates when inflation may threaten to take hold. Gold has demonstrated an almost innate ability to retain its value during contractionary periods, thus making it an attractive investment in times of uncertainty.

 

The US dollar: an attractive currency during recessions

Sharing similarities with gold, the US Dollar also boasts safe haven attributes. Due to its role as the world’s reserve currency and the backing of the world’s largest economy, the US Dollar is both incredibly liquid and sought after. Issued by the Federal Reserve, the Greenback is arguably the safest currency in the world and has become a quasi-currency of exchange in many nations where domestic currencies have had their purchasing power fall, due to inflationary pressures or other economic woes.

Consequently, holding US Dollars during periods of uncertainty or turmoil is often viewed as an attractive alternative to other assets. Evidenced in the Great Financial Crisis when the United States dragged the rest of the world into a global recession, the US Dollar surged almost 25% during 2007 to 2009 even as the Federal Reserve lowered interest rates to the floor.

The Dollar’s strength was largely owed to the fact that the Federal Reserve possessed ample liquidity and the US economy was soon in a position to recover while others were mired in recessions – some of which have never fully recovered.

Joshua Warner, Anaylst at IG Markets, said: “While there is a strong argument that a global health pandemic like Covid-19 has been on the radar of governments and institutions for decades, the lack of preparedness of most governments and businesses shows how unprecedented the current situation is.

“It is almost guaranteed that the UK will enter a recession in the coming months. The Bank of England (BoE) has said it is likely to be the sharpest one on record, while Chancellor Rishi Sunak has warned it will be a ‘severe recession the likes of which we haven’t seen before’.”

Peter Hanks, Junior Analyst at Daily FX.com, said: “With the benefit of hindsight and the lessons of the three most recent recessions, it can be argued the best recession investments are not stocks at all, but rather assets that retain their value even as growth slips. Therefore, if equity exposure is a must-have in your portfolio, the US Dollar and gold should also be given consideration – particularly for the risk-averse investor or one who suspects an impending recession.”

 

To learn more about the stock market over the last 10 years to understand future trends, please visit: https://www.ig.com/uk/special-reports/decade-of-trade

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