By Gerard Visser, Financial Planning Consultant at Alexander Forbes
Economic uncertainty, political instability, technical recession, Trump and China trade wars, and market volatility – these are just some of the challenges investors have recently been faced with. Listening to the news about poor market performance, these issues can leave investors feeling nervous and cautious about investing their savings.
When clients express concern, I advise them not listen to corridor talk. Many investors might be wondering whether their investments are still in the right asset classes or if a new strategy is needed. You might also be tempted to sell or switch your investment before losing more money, however, many of these issues are nothing new. If you are investing and have a financial plan in place with allocations to asset classes that align with your long-term strategy, you will not need to change anything. In fact, you could be worse off making any changes to your investment plan – especially if it is a long term investment.
When setting up any investment, it is vital to know what the investment is for and for how long you are wanting to invest as this will determine the correct asset allocation to use for the best potential return for that period. Each asset class works differently and yields different returns for periods.
We have had a stock market for more than 100 years, and it’s never yielded anything but uncertainty.
Clients investing in portfolios where there is equity exposure need to understand that these do not do market timing. These portfolios are specifically set up to achieve a targeted benchmark, set out by the asset managers over certain rolling periods. The rolling period is the investment term which will potentially give you the targeted return for that time period.
Equities in portfolios specifically target real growth which gives more growth than just inflation over longer periods. For clients looking to make returns in a short period, perhaps three years or less, must understand putting any exposure in equities for a short period of time is risky, as equities are volatile. Therefore, the investor must take increase risks to achieve slightly higher returns in comparison to safer investments.
Cash and some allocation to bonds are a perfect blend for investors looking at a safe and short investment period in volatile markets, although keeping your money invested in these asset classes might not deliver any real growth over the long term. The allocation to equities for this period will add some uncertainty as the returns are not guaranteed and you can either be better off and the equities can add more potential for real growth, or have the opposite affect and eat all your growth or even into your capital.
We are currently going through a very volatile market and cash has outperformed local equities over a period of five years, meaning that at the moment equities are extremely cheap and it is a good time to increase equity exposure in your portfolios or to set up investments with higher allocations to equities.
At the end of the day it is a risk an investor must take to potentially increase their returns by having exposure to risky assets like equity and property. If these volatile times are not for you as an investor, try to concentrate on paying off your debt as fast as possible.
Have a diversified asset allocation with local and global exposure and understand that you need to be invested for certain rolling periods. This will help with the volatility and decrease some of the risk to bring investors closer to their investment goals.
THE TRIALS AND TRIBULATIONS OF TRADERS TRADING FROM HOME
Steve Haworth, CEO of TeleWare Group
Banks had hoped to keep their London trading floors open amid the worsening coronavirus pandemic, insisting traders were “key workers”. But trading floors were quickly cleared and employees sent to work from home in isolation.
Firms needed to quickly adapt to remote working. This meant recreating the carefully monitored environment of the trading floor at thousands of sites.
With major disruption across the entire sector, it seems the Financial Conduct Authority felt no other choice but to relax regulations on recording calls. But does this measure introduce more problems than it solves?
Why call recordings are regulated
Whilst regulations differ globally, authorities in the UK, US and Hong Kong have long required trading floor phone calls to be recorded for certain activities.
In the UK, the FCA demands financial institutions keep records of all trades and transactions related to certain types of business for at least six months. Recording calls and reporting trades are essential to the regulators’ ability to monitor the markets for abuse, such as insider trading. Requirements to record calls apply to companies that receive and execute client orders to buy or sell in the financial markets.
Each trading floor in a financial firm also has its own set of policies which staff must abide by. For instance, the trading floor manager must ensure that all trade-based calls are recorded and monitored. An often-used policy that still exists is to ban all mobile phones on the trading floor. To enforce this, mobile phones are often stored in lockers and traders are required to use turrets to host calls.
Beyond call recording, most traders and salespeople need to sit together on a monitored trading floor in order to meet regulatory rules. A range of compliance complexities under GDPR, MiFID II and Dodd Frank have meant working from home has simply not been an option for many traders.
The rush to relax regulations
Traders are now required to work from home – if they can. The FCA has said it accepts that some scenarios may emerge where recording calls may not be possible. Adding that it expects companies to “consider what steps they could take to mitigate outstanding risks if they are unable to comply with their obligations to record voice recordings.” If financial services companies are unable to record calls they are then expected to “come up with a plan to fix the problem”.
Yet, trading firms have enough problems to solve without having to decipher call recording requirements. Why should traders spend extra time updating the FCA and coming up with an alternative solution when one already exists?
A smart alternative
Smart solutions – such as mobile call recording which meet global regulations – have perhaps been overlooked as a way to maintain business continuity.
Mobile voice recording technology (MVR) is not new. It has existed since 2011 and includes secure and reliable voice and SMS recording, easy to use conferencing and robust, accessible voicemail. It has matured over the years and proven itself to be flexible and highly reliable.
Technology can keep traders trading from wherever they are. Ensuring they can operate effectively at home while remaining compliant.
STOP THE CONFUSION: HOW TO KNOW IF YOUR BUSINESS MAY BE INSURED AGAINST COVID-19
By Alex Balcombe, Partner at Harris Balcombe
The last few weeks has seen businesses in hospitality, tourism, retail, leisure and more forced to close their doors following the Government’s orders that they should close to prevent the spread of coronavirus.
While this is expected to flatten the curve and reduce the number of coronavirus cases, it will of course have an impact on businesses and employees alike. For small businesses especially, there are many concerns about how they can claim on their insurance to weigh the fall of this impact.
In response to calls to help struggling businesses, the Government has informed the public that companies who are facing turmoil will be able to claim on their business interruption insurance during this difficult time. For most, this is wrong.
The insurance industry has also been extremely vocal that there is no cover for any coronavirus-hit businesses during this tough financial period. This isn’t strictly true either.
How can businesses see through the mixed messaging and best secure their future and their livelihoods and reduce money worries? It’s an extremely stressful time for many companies, and confusion over whether or not they can be covered can only cause more unnecessary stress.
Since it’s a new disease, most businesses will not be covered for business interruption due to COVID-19. In fact, the vast majority of policies do not cover anything related to COVID-19.
That said – don’t rule out the idea that you may be covered. There is a chance that you will be covered against COVID-19, but not know it. This is a very small chance, but your current cover may already protect your business against the consequences of coronavirus, and the nationwide response to it – though those with this cover are unlikely to realise it.
How Could I Be Covered?
Not everyone has business interruption insurance, as it’s not a legal requirement. It is entirely up to the policy holder to weigh up the benefits of having it, and their ability to trade should a disaster happen.
To be considered for cover for COVID-19, there are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:
Infectious Disease Extension
Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover. As it is a new disease, these policies will not have included COVID-19.
Other infectious disease extension policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible that your business may fall into this definition, thus meaning you may be able to make a claim.
However, again, it’s not always that simple. Many policies require the disease to have been on your premises, while others specify a radius from your premises in order to qualify.
Denial of Access Extension (non-damage)
Denial of Access Extension (non-damage) policies may cover you if you’re prevented from accessing your property. This could be due to an event, or by the actions of a competent authority, which could cause your business interruption cover to engage.
If covered by this clause, there are often very subtle differences in wording in your policy. This could depend on the insurer or policy. You may well be covered, but it will depend on your particular circumstances, and the specific policy wording.
It’s clear that the Government needs to do more in ensuring there is clear messaging for businesses, and to help the insurance market look after policy holders. This is an unprecedented situation, and with many people looking to claim on their insurance, we’re already seeing major delays which could have a domino impact.
People throughout the world are understandably facing all kinds of worries because of the current pandemic. Our ways of living have changed, and many business owners will not have experienced a situation like this in their life times. If you own a business and are unsure about whether you can claim for business interruption, or are confused about ambiguous wording, get in touch with a loss assessor.
These claims are not simple, but loss assessors will be experts in business interruption insurance, and will specialise in large and complex claims. They will be able to help and guide you along the way, check your wording and work on your behalf to make sure you get everything you are entitled to.
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