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Wealth Management

THE FUTURE OF INVESTMENTS & TRADING

By Seth Ward, Co-founder of PYNK

 

Even before Covid-19 began its global rampage, businesses, investors and traders were exploring new ways to deliver investment. Driven by environmental and social concerns, and sceptical of banks’ fees and integrity following the global financial crash, investors wanted more direct access to investments and businesses wanted to minimise transaction fees.

Following a slight wobble in 2008/9, global alternative investments began growing at seven times that of traditional asset classes, with a number of crowdfunding sites launched around the same time. Crowdfunding and alternative investment markets have continued to grow, reaching market caps of nearly £800m and £104bn, respectively, by the end of 2019.

Ever since coronavirus reached pandemic status, however, the markets have tumbled. Reduced or stopped trading has obliterated profits for the quarter while government bailouts are all that have been keeping some industries, such as airlines, afloat. Fortunately, activity is expected to rebound quickly, with the anticipated transaction value for crowdfunding in 2021 topping £818m.

A recent survey of PYNK members found that 38% predicted that the Dow had already reached its lowest point and 31% predicted that the lowest point would come before August. As such, 45% said that they think now is the best time to invest in startups, providing an opportunity to rapidly grow as the world exits lockdown.

How has coronavirus impacted the investment market? 

Diversification of markets, investment vehicles and investors is, in general, good for the economy. More people have access to investments leading to a more diversified shareholder base. A diverse shareholder base means more reliable and robust financing ‒ no longer do businesses need to bend to the will of a single large investor or risk a run on their shares.

That being said, the coronavirus lockdown has made everything a bit weird and surreal. Now there are anecdotal reports of a 10-year-old struggling to play Fortnite as half his squad are off day trading on Robinhood.

However, trading platforms, like the crowd-led Robinhood, are creating large markets of unsophisticated investors. These investors are then having the wool pulled over their eyes by less-than-scrupulous CFOs, such as the recent case of Hertz.

The car rental company recently declared bankruptcy due to a rapid fall in revenues, yet then sold $1bn in equity to independent investment bank Jefferies who in-turn began selling it on Robinhood, effectively transferring that money from daytraders to impaired debtors.

This led to a jump of over 100% in Hertz share price after the company declared bankruptcy. That means those shares may end up worth 35 cents on the dollar or even completely worthless, with unsophisticated investors bearing the brunt of the losses.

Where will the future of investments and trading take us?

Clearly, in a world where 10-year-olds are taking long positions on bankrupt stock, some strange bubbles are going to appear. Traditional investment intelligence is struggling to adapt, adding more hot air to the bubbles. So how can traders be confident in their investments?

Our answer at PYNK is to turn to the power of AI and Crowd Wisdom. For some years now, AI has been heralded as the answer to accurate investment analysis. The ability of AI to identify patterns in large data sets makes it good at anticipating future events/movements and at making decisions.

AI has already been used to provide automated insights, alternative datasets, growth opportunities, improve risk performance, generate reports and much more besides. This makes information gathering and analysis much quicker and more accurate, yet it lacks the human element.

That’s why, at PYNK, we combine our AI algorithm with the power of crowd wisdom. The idea behind crowd wisdom came about in 1907 when a statistician named Francis Galton asked people to guess the weight of an ox. Galton found that, while individual guesses varied wildly, the median guess was within 1% of the ox’s actual weight.

Since then, statisticians have been finding ways to minimise participant bias and improve the accuracy of crowd wisdom. We incorporate our learning into our AI algorithm, using machine learning to improve results over time.

The results have been startling. One market we’ve been tracking the longest ‒ Bitcoin ‒ is notoriously unreliable and tempestuous. Yet, using the power of crowd wisdom and AI, our platform anticipated every single major movement!

With that in mind, we decided to survey PYNK members to apply the power of crowd wisdom to broader market categories. Key results of the survey include:

  • Energy (24%) and HealthTech (20%) are predicted to be the most promising sectors over the next 5 years
  • 45% said that now was the best time to invest in startups
  • 38% predicted that the Dow has already hit its lowest point
  • 31% predicted that the Dow would hit its lowest point by July-August
  • 34% said that Asia and Australasia was the most overvalued regional market

Source: Survey of 1,471 PYNK members between 27th March and 10th April


Combining the power of crowd wisdom and AI with the rise of a diversified investor base, it seems clear that the future of trading and investment will be much more globalised, democratised and personal. Individual day traders will end up having access to the same information and marketplaces as large banks and financial institutions, while social media and other digital communications platforms will organise traders into nebulous groups.
Ultimately, it will be these crowds which fund the future.

 

Wealth Management

SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS

By Dolana Conco, Regional Executive at Alexander Forbes

 

Losing a loved one is one of the most difficult experiences a person can go through, and during this difficult time, you don’t want your loved ones to have to worry about finances.

Your family will receive a share of your retirement savings and a life insurance pay-out if you die while being a member of a retirement fund. The trustees of the fund have a legal responsibility to make sure that death benefits from the fund are paid to those who are financially dependent on you.

If your death benefit is through a policy that is separate to the fund, then the trustees will not be involved and this benefit will be paid out according to the nomination of beneficiaries’ form that you’ve completed with that specific insurer, or else your employer will decide.

 

What retirement fund members need to do

  1. Keep your ‘Who needs financial support when I die?’ form up to date

This form is so much more important than anyone thinks – even though it is not a last will and testament. The trustees must, by law, find all the people who are financially dependent on you, as well as those whom you love and would want to leave a portion of your death benefit to when you die. Those who depend on you for financial survival are called your dependants. Examples are your spouse or life partner, children (of any age), parents, people you need to pay maintenance to or anyone else in your life who depends on you financially.

If no one is financially dependent on you in any way, you can choose someone else as a beneficiary (family, friend, or even a charity). If you choose to give your death benefit to a charity when you die, the money will first be paid to your estate and then paid over to the charity of your choice. If this form is not up to date, it could take the trustees much longer to identify who should receive a share of your death benefit from the fund.

 

  1. Submit the correct documents

The most common reason for delays in paying an insured death claim is that there are missing, incomplete or incorrect documents submitted with the claim. Your employer can assist with what is needed and can check that the form has been completed fully and correctly before submission. In general, the following information is needed:

  • a certified copy of the death certificate
  • the identity document or passport of the deceased member
  • a copy of a pension-backed housing loan (if applicable)
  • proof of the extent of any financial dependency of the beneficiaries

What your retirement fund needs to do

The trustees of your fund have a legal duty when you die to distribute your death benefit from and through the fund. The trustees must find all dependants and nominees to decide how to share the retirement savings and life insurance pay-out fairly. To make a fair decision, the trustees will consider the following factors, among others:

  1. Age of the beneficiaries
  2. Relationship to the deceased
  3. How financially dependent they were on the deceased
  4. Their financial affairs
  5. Their future earning potential and prospects
  6. The total amount of the retirement saving to be distributed

The trustees can choose to give a beneficiary no pay-out, as the law doesn’t say that every beneficiary must get some money. However, they must consider the needs of each beneficiary and the amount available for distribution.

If there’s information that the trustees may not have considered when they made their decision and the draft resolution has already been prepared, your family needs to contact the trustees urgently. The fund’s administrators will pay the death claim once they get a response from all beneficiaries, or if no response has been received within 30 days of sending the draft resolution document.

There are various reasons for delays in paying a death claim from or through the fund, including the employer not completing the claim form in full, missing or incorrect documents, investigations for the trustee resolution taking longer than expected, outstanding tax issues and beneficiaries not providing their bank account details.

Make sure your family knows what can go wrong and what to do to make the process run smoothly – it all plays a part in leaving a legacy that you can be proud of.

 

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THE COMPLETE GUIDE TO TRANSFERRING SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER

A Demat Account functions like a savings bank account with the obvious difference in the fact it stores stocks instead of money. To be similar to a savings account also implies that a Demat Account can be used to transfer shares from one Demat Account to another Demat or trading account.

Shares are generally transferred from one Demat Account to another for the purpose of changing depositories. However, there can also be other reasons for transferring shares such as merging the investments in different Demat Accounts in a single Demat Account.

Whatever the reason, in order to understand how to transfer shares from Demat Account, it is important to first understand what is Demat Account.

What Is Demat Account?

The most simplified way of answering what is Demat Account is to understand it as a digital platform where investors can store all their shares and other forms of investment in an electronic form. Demat is a short form for dematerialization which refers to the process of converting physical share certificates into the electronic form. A Demat Account can only be opened with the help of a Depository Participant or DP and a depository. A DP is an agent or broker who acts as an intermediary between the depository and investor. A depository is a financial institution in which investors open their Demat Account. Read more about what is Demat Account to understand it in more thorough details.

It is necessary to know about Demat Accounts before attempting other things like transferring shares, etc.

 

How To Transfer Shares From Demat Account

After the meaning of what is Demat Account is cleared, it is time to understand how to transfer shares from Demat Account to another Demat Account. There are two types of transfer:

  • Intra-depository transfer: In this type of transfer, shares are transferred from one Demat Account to another in the same depository.
  • Inter-depository transfer: In inter-depository transfer, shares are conveyed from one Demat Account to another account which is in a different depository.

The two ways in which shares can be transferred are the manual procedure or online procedure.

 

Manual Transfer Of Shares

For the manual transfer of shares, investors are required to ask for delivery instruction slip or DIS from their brokers or DPs. DIS is not just an important but also an integral part of the manual transfer of shares. It contains some mandatory fields which have to be filled to process the transfer of shares.

1.    Beneficiary Owner ID (BO ID)

Beneficiary owner ID (BO ID) refers to a 16-digit ID number of a broker. An investor has to mention in DIS the IDs of both the current broker and the broker to which the shares will be transferred.

2.    International Securities Identification Number (ISIN)

International Securities Identification Number or as it is commonly known ISIN is a unique ID number appropriated to each share of an investor which he holds in a Demat Account. In order for the transfer to take place, ISIN has to be provided to designate which particular shares are to be transferred.

3.    Inter or Intra

This is the distinctive part of DIS where an investor has to choose whether to make an intra-depository or inter-depository transfer. In the case of intra-depository transfer, the column denoted as ‘off-market transfer’ has to be selected. Whereas, in the case of inter-depository transfer, the column designated ‘inter-depository’ has to be selected. An investor should be extra careful while filling this part of DIS.

4.    Signature

Little needs to be said about this part of DIS. Just like any other important document, DIS too needs to be signed. Once an investor has signed DIS, it should be submitted to the broker.

A broker may charge a small fee for the transfer of shares. It usually takes 3-5 business days for the shares to be transferred.

 

Online Transfer of Shares

Central Depository Services Limited (CDSL) has made the online transfer of shares a very easy process. All that an investor has to do is to follow these simple steps.

  1. The ‘Register Online’ option at the CDSL website has to be selected.
  2. There would appear an option called EASIEST which then has to be selected.
  3. A form would generate which accordingly has to be filled.
  4. Once the form fill-up is complete, a print out of the same has to be taken out. This print out is to be submitted to the account holder’s Depository Participant.
  5. The DP will verify the document and once the verification process is completed, a password will be generated.

Using this password, an investor can log in and transfer shares on his own.

Thus, the two ways in which shares can be transferred from one Demat Account to another is not at all complex and can be easily achieved through both manual and online procedure. With a proper understanding of what is Demat Account and how the transfer of shares takes place, an investor can effectively send the shares to another account either on his own or through the help of a DP.

 

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