Katharine Wooller, Managing Director, UK and Ireland Dacxi,
Owning cryptocurrency can feel a bit like riding a roller coaster. It goes up, it goes down, and just when you think things are calm, round again we go. The volatility is framed by the media as the bogeyman: every time crypto goes up solidly, the underinformed and poorly researched journalists in mainstream media vociferously protest “BUBBLE” at the top of their lungs, and anytime crypto corrects you’ll hear at similar volume “BUST” with mock horror.
Recently months have certainly seen some hairy times for crypto. Between the 26th October, and the 8th January, bitcoin climbed a phenomenal 200% to an all-time high, to then correct, over a fortnight, by 27%. Much nail biting ensured, but frankly after such stratospheric gains one would expect some correction – indeed we have, at the time of writing, bitcoin has recovered around 13%. Frankly, I would still be thrilled with this return over a 3-month period over the high street returns! Whilst I concede the risk profiles are light and day, it does illustrate why many retail investors have been diversifying into blue-chip cryptos.
But how this volatility occurs, and how we should conceptualize it warrants further discussion. Corrections are an expected part of any ecosystem, and crypto is no different; personally, I cannot see crypto volatility going away any time soon. Indeed, declines in excess of 10% have happened nine times in the last two years. More interestingly, they are often followed by periods of strong growth – there is a solid trend after the March 2020 price crash that helped bitcoin reached its record highs of $41,900.
Let us also not forget that the fact that crypto shows poor correlation with traditional assets is exactly its appeal. Further, it is not fair to suggest that traditional markets are immune to price swings; indeed, the major Western stock markets all lost c. 30% almost overnight, in March last year, as the impact of coronavirus became clear to global investors. The dual prescription of tighter regulation and increasing institutional investment is often proposed as the fix. Whilst I am not convinced this has eliminated volatility in other markets, a Goldman Sachs exec claims that institutional investor are “key” to ironing out bitcoin volatility. I think this is a simplistic viewpoint; Fidelity estimates 30% of institutions are exposed to crypto already. More importantly “whales” are taking advantage of buying in the dip, as data analysis shows that number of addresses with at least 1,000 or more bitcoins increased last week – an indication that large institutional buyers are taking advantage of a short-term correction. I felt the analysis of Delphi Digital, was more nuanced, seeing recent corrections as “shaking out profit takers and ‘weak hands’ is necessary for BTC to make strides upwards”
In conclusion, I concur with legendary investor Bill Miller who sees volatility as “the price you pay for performance”. Dacxi is one of the few crypto exchanges intended for those seeking to build wealth through crypto, and are interested in medium term holding, rather than trading. For most of our platform users, any dip is a buying opportunity, and no more than a blip on a positive trend over a 12–24-month period. Hold your nerve, don’t panic sell, and have “dollar cost averaging” as your mantra! I also want to give a nod to the other cryptos that suddenly seem significantly calmer, particularly Ethereum which increasingly is stepping out of bitcoin’s shadow. Whilst crypto is not for those who cannot endure some volatility, the growth over 2020 and 2021 are a solid argument in favour of the pain being worth the gain!
THE EFFECTS OF JOB HOPPING ON YOUR RETIREMENT OUTCOME
By Neli Mbara, Certified Financial Planner at Alexander Forbes
Job hopping – defined as spending less than two years in one position – is a very controversial subject. It can be an easy path to a higher salary but can also be a red flag to prospective employers, not to mention your future financial goals if you are cashing in your retirement fund every time you make a move.
When changing jobs, whether it be once a year or once every decade, one has to make decisions regarding career growth and retirement plans which affect one’s long term financial plans. One of these decisions is ‘what to do with my retirement fund?’
For many people, the first thing that comes to mind is using their pension money to pay off their debt. Alexander Forbes Member Watch statistics show that 91% of members do not preserve their retirement savings when changing jobs. As we are living in times where most household income is used to finance debt, most people use job hopping to gain access to their retirement funds, and use this money to pay off debt. However, a quick fix and instant gratification comes at a price, which in this case could be a delay in your retirement plan.
Your retirement savings are simply for that, your retirement, to pay you an income once you stop working.
Early access of your retirement fund can result in:
- Not having enough money at retirement – this is simply because most of us are already not saving enough for retirement
- Robbing yourself off the compound interest you could have potentially earned from the investment.
- Never making make up for the lost benefit
- Creating a bad habit that will delay you from achieving your retirement plan and desired income at retirement
It is easy to cash in your money from a retirement fund at resignation but it is much harder to make up for the lost benefit (capital cashed in plus interest). Calculations show that for you to make up the lost benefit depending on your retirement age and investment time horizon, you will likely need to invest more than double your contributions towards a retirement fund.
Since only 6% of the South African population are reported to have accumulated enough to retire comfortably, without having to sacrifice their standard of living, you will most likely have to invest much more towards your retirement fund to make up for the lost savings.
Therefore, leaving your retirement fund invested and preserved in a preservation fund is the recommended option when changing jobs, as this keeps you committed to your retirement plan.
Changing jobs is a life-changing event, and it is therefore important that you seek advice from a professional financial adviser who will guide you in your retirement planning ensuring that your retirement needs are taken care of, by providing solutions that help you to ensure your financial wellbeing.
DISRUPT TO SURVIVE IN FINANCIAL SERVICES, BUT BEWARE: YOUR TEAM MUST BE IN SHAPE FIRST
Michael Chalmers, MD EMEA at Contino
COVID is forcing extraordinary change in the financial services industry. It’s happening fast, already uprooting insurance, transforming payments and changing the way we interact with our customers across the industry.
But for the 4000 UK financial services providers who are at critical risk due to COVID-19, these tales of success should come with a warning. Disruption in the industry certainly won’t come overnight.
Only the most interconnected web of people, technology and culture can produce effective disruption at this critical time. Discover below the key trends we’re seeing in financial services, and how to upskill, empower and equip teams in order to create the organisational impetus for this transformation and disruption, in an industry known for its monolithic ways of working.
Top Technology Trends in Financial Services for 2021
As we enter another year of uncertainty, financial services organisations–and their customers–are looking for technology solutions that promise above all, flexibility.
Partnerships between retailers and payments companies that can deliver greater flexibility for consumers as well as increased reliability for retailers will boom in 2021. Even before the pandemic, we saw the flourishing of partnerships between retailers and Klarna, the ‘buy-now-pay-later’ online payment processing firm. With the impact of the downturn likely to continue well into 2021, add-on services that offer more options to support merchant resilience will be essential.
Many companies have embraced ‘fluid’ payment ecosystems capable of handling multiple digital payment solutions but only those capable of capturing data insights to drive their product innovation and sales strategies will reap the full benefits. Real-time user profiles, fraud anomaly detection and personalisation, are all enabling marginal gains for payment providers that will differentiate them from competitors in 2021.
But don’t run before you can walk
Before businesses can jump on new technology trends however, it’s critical to ensure they have an innovative culture in place. This will form the foundation for effective disruption. Here are my four tips for building a solid foundation.
1) Focus on data, with the customer at the centre
Customer experience is the central element to all disruption in the financial services today. Respond in real-time to customer queries. Better still, anticipate the customers’ next need before they’re even aware of it. All of this is made possible through a connected view of data.
Businesses should continue to embrace technologies such as AI and ML to harness customer insights and respond to customer needs–whether that’s approving a loan or recommend a new offer.
From answering customer queries and personalising banking experiences to revenue accounting and trade settlement dashboards, advanced data capabilities will continue to be critical.
2) Be realistic about what your team can achieve–and up-skill if need be
In my own work, I’ve seen that digital transformation is most effective when it factors in the abilities of the existing team–but that doesn’t mean leaving them on their own.
First, collaboration is key. IT and data teams must form internal partnerships in order to get plugged into the business side of things. Critically, they must be present in the boardroom. For many years, those with technical skills have been left out of planning meetings. But their knowledge is absolutely critical, especially when it comes to choosing the right tech stack to enable innovation.
If it becomes apparent that the team is lacking in the necessary tech capabilities, outsourcing is extremely valuable. But beware: it is essential to focus on building up internal capability in order to create long-lasting change–and scrimping on the upskilling for cost reasons will only result in greater expense. Bring in fully trained teams to both implement tech and upskill to foster stronger teams internally.
3) Enable innovation in a worry-free environment
In order to remain competitive in the modern marketplace, and to ensure long-term survivability, financial services organisations must transform their business models to focus on digital innovation and customer expectations.
It’s no secret that the cloud enables organisations to innovate at speed and scale. However, before teams can get stuck in, it’s crucial to ensure they have safe cloud environments in which to explore and innovate.
Developers must be given the freedom to evaluate new technologies and to make any necessary changes to enable rapid creation of business value. Having this flexibility and foresight when implementing and rolling out your public cloud solutions means that ideas can truly come from anywhere in the organisation.
4) Don’t just get the cloud, get the cloud right
The adoption of cloud is now widespread, but those who can optimise it will be reaping the rewards in speed, efficiency and, ultimately, customer satisfaction. Cloud shouldn’t just be a platform to build in–it should help to inform decisions and facilitate new ways of working, ultimately producing something greater than the sum of its parts. Building out cloud-native engineering, culture and operating models will future proof the capability of financial services organisations.
Finally, cloud capabilities should be rolled out right across the organisation. Contino research shows that, while 77% of organisations have adopted the public cloud, only a tiny proportion have actually scaled this out across the organisation. To do so means you’re able to share data across every department, to every person, creating a data-driven culture which will hugely benefit all decision-making going forward.
Prepare the ground and seeds will grow
Disruption is achievable for every financial service organisation in the UK market today – yes, even legacy brands. But the saving grace for those that are struggling at the moment needn’t be the debut of an exciting new product or pipping a competitor to the post with a partnership. It will be the construction of a collaborative and creative culture from which innovative ideas can grow – without being choked by unavailable data, the fear of upsetting day-to-day operations, or restrictive team structures. Innovation is what will pick today’s struggling financial services providers up and get them out of danger.
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