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HIDDEN COSTS WHEN INVESTING… AND HOW NOT TO GET HIT

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By Annie Charalambous, Head of Communications at ETX Capital

 

According to recent figures, Brits plan to increase their investments by almost a fifth in the wake of the COVID-19 pandemic – with Gen-Z traders most keen to jump on the markets.

But are those looking to boost their profits paying over the odds without realising? A recent study claims UK investors often pay up to six times more in fees than advertised, costing some traders up to tens of thousands of pounds long-term.

ETX Capital is committed to shining a light on common hidden fees that can trip up new traders. Here’s how you can avoid feeling the pinch.

 

Taxing times

New traders are often unaware that profits made on their stocks and shares are subject to tax, in the same way they pay tax on salary earnings.

If your investment earnings are over £12,300 in a single year, you will have to pay Capital Gains Tax. This will either be 10 or 20 percent, depending on your annual income tax band.

However, married couples can ‘pool’ their tax-free allowance – meaning they can collectively earn up to £24,600 in trading profits each year without contributing Capital Gains Tax.

Some alternative savings vehicles also offer a larger tax-free allowance. For example, you can stash up to £20,000 each year in an ISA and earn interest on your cash.

For those looking to diversify their portfolio, many gold and silver coins are also exempt from Capital Gains Tax as they are technically legal British currency.

 

Commission costs

As with any commercial service, fund managers and platform providers that help traders set up and manage their investments will charge fees for their service.

However, the size of these costs can catch out unsuspecting investors. According to research, commission costs average 1.03 percent in the UK – around double the equivalent fees in the US.

While these costs are unavoidable for those who need support managing their investment funds, it is possible to reduce them. Research investment platforms and fund managers to ensure you find the most cost-effective commissions for your assets.

Alternatively, you may be able to avoid commission if you have the knowledge of the markets and are comfortable with the risk. If so, there are plenty of accessible platforms that will educate you on how to manage your stocks, forex, commodities and more. Although, keep in mind that you’ll likely have to pay fees to trade on these platforms.

 

Not that Stamp Duty

All stocks bought in the UK valued at £1,000 and over are subject to Stamp Duty Reserve Tax (SDRT). At 0.5 percent of the asset price, this can soon add up.

This tax is usually absorbed as part of a total fee charged by a fund manager. However, if you manage your own investments, you’ll need to submit details of your assets to the government in good time to skip late payment fines.

While SDRT marks a relatively small fee compared to the rewards on offer for successful investors, many may still wish to diversify their portfolios to avoid mounting tax bills. A common example is adding corporate bonds, which are exempt from SDRT.

 

Farewell feels

Many budding investors starting their trading journey simply aren’t thinking about what happens when you withdraw funds or transfer them to another platform. And for some, this means getting hit with unexpected ‘exit fees’.

These charges are typically written into the terms and conditions of an investment service and while many platforms and brokers have recently agreed to waive exit fees, there are still plenty leaving traders with a shock when the time comes to withdraw cash.

Exit fees are usually charged as a percentage fee of the withdrawn sum, which can represent a significant cost for longer-term investors.

It’s important to check for exit fees, which may also be referred to as ‘redemption fees’, before signing up for a platform or partnering with a fund manager. And those looking to escape these charges should look for providers that simply don’t apply them in the first place – or at least check the expiry date.

 

Finance

In 2024, payments will evolve to broaden accessibility

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Attributed to Roy Aston, COO at Paysafe.

 

As we look to 2024 and beyond, businesses will need to adapt experiences to changing consumer needs and demands, working with payments providers to increase accessibility, offer broader choice, and more.

We break down some the forces driving evolution in payments over the coming years.

Payments need to be available to everyone, everywhere

Regardless of their location or situation, consumers do not want to wait when it comes to payments. The proliferation of smart devices has given users access to everything, all at once, and this is also expected when making transactions.

In 2024, banks and financial institutions will continue to push ahead with this journey to offer smooth, secure payments to everyone, everywhere, delivering services at the lowest possible barrier to entry. This also means ensuring consumers, even those that are unbanked or underbanked, have access to remittances and cross-border payments.

The first step in achieving this goal will be to improve reliability, security and availability, which may see traditional payment methods like debit and credit cards – still the most popular payment methods – become less dominant, while alternative payment methods (APM) like eCash and digital wallets will grow.

This is because, with the right payment provider, merchants can ensure these APMs are available anywhere in the world – eCash, for example, does not require a bank account to use. In addition, digital wallets and online cash can offer swift, secure transactions, helping users overcome security issues by not requiring them to enter their financial details.

Financial companies will embrace collaboration in 2024

While businesses can address consumer payment concerns using APMs, they must also look to bolster their own defences as the threat landscape changes. Increasingly advanced technology, like AI models, are now accessible to far more people, including threat actors.

To combat this escalating threat, it’ll be no surprise to see more financial companies collaborate in 2024 as they seek to improve cyber risk mitigation. This makes perfect sense – and would be a positive step for the industry – though it is easier said than done.

Businesses must share data legally, while aimed toward a positive purpose, rather than for pure profit. For example, if a financial organisation gains intelligence on a cyber group, they could share this with other companies to protect against bad money movement.

Ideally, collaboration could help improve anti-fraud, anti-money laundering, and cyber security measures, and more broadly reduce risk for businesses and consumers alike. But first, thinking around data governance may need to change.

Existing trends will evolve

While exciting new trends will emerge in 2024, we’ll also see the evolution of some that have yet to reach their full potential.

Embedded payments, for example, will continue to develop, with more businesses bringing together financial products with features like loyalty schemes to offer more added value to consumers.

Decentralised finance, too, should continue to build momentum in 2024. While decentralised finance, and specifically NFTs, have faced challenges this past year, it will be no surprise to see companies get to grips with changing regulatory requirements and continue to build in this area.

Open banking could also see a big 2024, with more APIs becoming available, and companies starting to develop new solutions to enhance customer experience and reduce friction in the payment ecosystem.

And while evolution rather than revolution is a necessity in technology, it’s always exciting to look ahead to the big trends that could shape the future – perhaps not in the year ahead, but beyond.

The future is quantum

Quantum computing is a trend that is as exciting as it is potentially frightening. Able to perform computations that are exponentially faster than ever before, quantum computing represents a new frontier and it will be thrilling to see how it is used in the years ahead.

Combined with AI, for example, quantum computing could optimise processes at a speed and scale never seen before – with serious benefits passed onto consumers.

In the nearer term, however, ensuring payments are available and accessible for everyone must remain the focus in 2024.

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Technology

How to protect your business from the rise of sophisticated cyberattacks 

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Suhaib Zaheer SVP, Managed Hosting at Digital Ocean & GM, Cloudways  

In an age where technology drives business operations, the threat of sophisticated cyberattacks looms over organisations of all sizes. From stealthy ransomware attacks to intricately orchestrated phishing schemes, the arsenal of online adversaries is expanding. Cyberattacks were listed as one of the biggest threats to the UK in the 2023 risk register. Added to this, 97 people per hour fall victim to cyberattacks. The threat of a cyberattack not only jeopardises businesses and their valued employees but also poses a significant risk to their customers. A breach of security has the power to decimate an organisation’s hard-earned reputation and impose severe financial distress.

Today, safeguarding your business against the rising tide of sophisticated cyber threats is no longer a choice. This article explores actionable ways to fortify your business’s defences, empowering you to navigate threats with resilience.

Navigating the cybersecurity landscape

Over the past few of years, the widespread adoption of remote work practices surged, consequently exposing businesses, particularly SMBs to elevated cybersecurity risks.

Suhaib Zaheer

Before remote work, businesses could dictate strict rules governing the access points for critical documents. Company computers were tethered to office desks, seamlessly connected to in-house servers. The primary concern for management teams was fortifying the office server and upholding computer security.

Fast forward to today, and the workforce is no longer confined to office walls but spans cities, and even countries. This shift brings a twofold challenge—exposing vulnerabilities in servers and individual computers. Added to this, the intricacies of data protection laws differ in each country. Companies must equip teams with secure technology that provides enterprise-grade security to protect against hackers and sophisticated threats.

The challenge lies in not only supporting dispersed workforces but doing so without compromising the sanctity of sensitive information in a world where data security must align with international legal intricacies.

Fortifying small businesses

Small business owners find themselves particularly susceptible to security and privacy threats due to their limited resources, which often translates into inadequate cybersecurity measures compared to their larger counterparts. Even if resources are limited, business owners can safeguard against security pitfalls by implementing well-defined security procedures in collaboration with their employees – making it everybody’s responsibility.

Building customer trust hinges on the assurance that their information is secure when interacting with a company’s website. Recognising the pivotal role of customer trust in the sales process underscores the critical need for businesses to make cybersecurity a top priority.

Prepare for future threats

Outdated technology remains a vulnerability for businesses, as the repetitive and resource-intensive nature of updating website security opens avenues for human error. Solutions capable of automatically detecting updates, executing secure backups, and enhancing security procedures alleviate this burden, eliminating the need for manual maintenance.

AI is capable of handling laborious tasks as it analyses data for anomalies, swiftly detecting and flagging abnormalities for cybersecurity teams to address. AI-powered solutions also automate time-consuming processes, securely updating websites and backing up data, enhancing overall efficiency.

Critical features for website resilience also include the ability to manage traffic surges seamlessly. Optimising bandwidth capacity minimises friction during peak periods, ensuring responsive handling of heavy traffic loads. Crucially, automated technology that adjusts bandwidth capacity during traffic surges prevents system failures and unauthorised access.

Additionally, businesses can safeguard against security pitfalls by implementing well-defined emergency procedures in collaboration with their employees. The urgency instilled in employees when they receive seemingly urgent demands from their employers creates a vulnerable juncture that cyberattackers exploit, seizing the opportunity to pilfer information and gain access to sensitive data.

Furthermore, business owners must invest in robust security measures, implement secure payment gateways, and educate users on mobile security practices to build trust and safeguard information. Staying abreast of the evolving security landscape and adapting cybersecurity strategies to meet changing customer expectations are crucial for business success.

As we move towards a new year, it is clear that businesses need to ensure that security is a top priority. Cybercriminals will continue to use new technologies to launch ever more effective and creative cyberattacks, so businesses need to ensure that they are working to protect their data with a similar level of ferocity. This will be a key aspect of supporting business growth and success in the future.

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