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HOW TO HELP CLIENTS OPTIMISE THEIR WEALTH MANAGEMENT STRATEGY WHEN MOVING ABROAD

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Ben Barratt, Head of Investment at Arlo Group

 

The growing list of green and amber destinations has made international travel a real possibility with many in the UK thinking about their travel prospects. But while a holiday abroad might come as a long-awaited grasp of freedom, the pandemic will have caused others to reassess completely whether the UK remains where they want to stay more permanently. The greater outdoor space and larger homes, which can be found more affordably abroad, is more than ever an extremely attractive option for many people across the country.

As the number of people looking to move away internationally increases, it is key for advisers to be adequately equipped to help their relocating clients consider how this might affect their finances and financial plans. This includes preventive moves such as assessing existing assets, savings, and investments; carefully considering tax; planning to keep bills to a minimum, and ensuring they are compliant with legislation both in the UK and the country to which they wish to move.

How can advisers best help their clients optimise their finances when moving abroad?

 

Cross border legislation

As a first step, it’s crucial for advisers to be aware and make their clients aware of the legislation between the country of origin and destination nation, which is likely to vary. Helping clients to establish themselves in their new country is an important part of the role, but they should also ensure that clients remain within the legal parameters of both systems throughout the full process.

In that respect, a key consideration for any client looking to move abroad is tax. Without the right preparation ahead of the departure, clients could potentially face a few unnecessary and costly complications, including cross-border financial issues and tax overpayment.

It’s the role of advisers to ensure their clients are aware of the legalities surrounding primary and secondary residences for example, as well as how this might affect their tax payments. Capital Gains Tax (CGT), for example, differs considerably between primary and secondary residences. Therefore, a client who is not aware that spending more than six months abroad will mean their UK residence is no longer classed as their primary residence in turn making it eligible for Gains tax when selling, might have to bear unnecessary tax payments as a result.

 

Product suitability

Carefully assessing which products are available and relevant to each country is of paramount importance. These should be tailored to the clients’ needs as certain products, such as ISAs (Investment Savings Accountants) are not available in certain countries (Spain in this case). Advisers should ensure clients are aware of the full range of options and alternatives which are available to them and an adviser should ensure a client is aware of their full range of options, and alternative which are tailored to their circumstance.

Furthermore, clients looking to make investments overseas will look for open and honest conversations regarding the feasibility and worthiness of their proposed venture. Choosing and advising options for clients should be made with transparency and with the overall financial wellbeing of the client in mind. As an indicator, with general investment might incur anything up to 20% CGT, it is important for professional to consider other options such as offshore bonds which might be a better use of the client’s money.

 

Getting the full context

Understanding the clients’ personal objectives, and pondering it against any savings, investments, assets, and expenditure will allow for a holistic service which has the best result. This is necessary to grasp the full extent of a client’s financial goals and projects and reduce any liability or risk. Clients should be aware that if they decide to move back to the UK some financial tools may be irreversible.

People having recently reached retirement age often look to move abroad in the following months, however, it’s common that they change their mind due to family concerns or fear of separation and wish to return home. If a client goes ahead and places money in an offshore bond but ultimately decides not to move away, withdrawing the money back may have tax implications. Ensuring they are cognizant of whether they are committing to something permanent or changeable is then crucial.

 

Taking account of external factors

Factors such as Brexit also play a significant role in the financial advice clients will seek as regulations will only become more divergent between the UK and the EU. Clients wishing to move abroad must be aware of how changing regulations will affect their finances and advisers should recommend products that are up to date with British/EU regulations. In the same way, if moving into the EU clients should deal with someone who is regulated in the EU and can advise them with the right type of product accordingly. If that is not the case, asking for guidance from a colleague might be welcomed.

Increasingly, prospective expats are also being approached by unregulated advisers from countries whose regulatory framework differs from the UK. This can in turn lead to unnecessary charges and payments if the right framework is not applied. Financial advisers should discuss the implications of accepting unregulated advice with clients, including the financial consequences that may incur if they are not helped by a professional that has international credentials. Advisers need to reassure clients about their existing international credentials and should not be scared of getting multiple people involved in order to deliver the best comprehensive expert service.

Financial advisers should create an approach where their objective is to find solutions to their clients problem with on overall understanding of their finances rather than just trying to sell a specific product. Providing clients with a 360-degree view of their options will help them to make informed decisions about their finances when relocating and enable them to be discerning in their expatriation project.

 

Banking

How are Variable Recurring Payments set to revolutionise the future of banking?

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Sean Devaney, Vice President of Banking and Financial Markets at CGI UK

 

The adoption of Variable Recurring Payments (VRP) for Sweeping – ­the automatic transfer of money between a customer’s accounts – is set to take off in 2022. An evolution of Open Banking, VRP has the potential to move the uses of Open Banking beyond the gathering and aggregation of account information and delivery of one-off payments into a much broader set of use cases.

It’s something many of us in the industry have been working toward, but what can businesses and consumers expect from the VRP rollout ahead of its industry launch later this year? How can we encourage consumers and users to buy into it and what will it mean for the future?

 

The real-world benefits of VRPs for consumers

Following years of experience analysing and implementing tech solutions across the banking sector at CGI, to me, it feels evident that the long-term success of banking and financial technology depends on its relationship and acceptance by users and consumers. It can seem obvious, but often a lack of understanding can lead to mistrust which takes years to dispel, can lead to the prolonged use of legacy systems, which in turn puts data and customers at risk.

VRP has been purposefully developed with the consumers’ experience front of mind like no other industry technology has, by allowing an account holder to set up a repeating payment authority with a degree of control and flexibility that has not been seen before. It puts the power back into the hands of the consumer and opens an inclusive world of banking for those potentially excluded.

 

What sets it apart from direct debit?

One of the biggest questions we are asked about VRP is, how does it differ from alternative payment methods like direct debit? Well, several features of VRP set it apart. For example, while the destination of the payment remains fixed with VRP, there are clear parameters around the amount that can be paid out, either as an individual payment or during a given period. At CGI we believe that this will put consumers at the heart of the financial ecosystem, as VRPs are dedicated to creating a seamless and, importantly, frictionless experience for customers and businesses across the UK. This set-up will provide customers with more options to manage customer payments for a range of services like subscriptions and utility bills.

 

But is it as secure?

This is a critical question, and one that should be taken with care when answering, but it is in fact more secure than many alternatives.

VRP will offer users additional security benefits through automated payment processing by allowing the user to set limits on the amounts of any payment taken as well as on the duration of any instruction. As with all new technologies introduced across this industry, security is of the utmost importance. VRP is focused on protecting consumers as well as helping them to lead healthier financial lives. For example, if a person has insufficient funds in one account, VRP can transfer money over from another account without needing permission for each repeated payment. This could potentially save a person time and money by preventing them from unwillingly entering an unarranged overdraft and dealing with the associated costs.

 

How does it impact businesses exactly?

The benefits for individual businesses are much of the same. As VRPs provide them with the option to collect recurring payments from a customer without needing separate permissions for every payment. Businesses can also benefit from ‘sweeping’ possibilities too. Sweeping allows businesses with accounts with multiple providers to transfer money from one account to another. For businesses and consumers, there are many examples of when this could be used such as sweeping funds from a current account to a savings account automatically.

With added security, consumers and businesses can also benefit from more transparency and flexibility across their accounts and individual payments too. Set payment parameters, decided by the consumer, limit the amount of money that can be taken from an account and also allow an end date for the mandate to be set. There is hope that this might support more people with their everyday finances, as VRP is a more inclusive offering with easier access and more day-to-day uses. Also, enabling users to authorise a series of payments rather than having to authorise each individual transaction separately should encourage more people to use VRP. As we face the current cost of living crisis, consumers are demanding easy-to-use technology that automatically helps people manage their debts and build their savings. This is where VRP comes in.

 

What does the future hold for VRP?

Technology in banking has the potential to open efficient delivery channels as well as new products and services for the industry; providing the framework to meet evolving demands and challenges in the competitive market. We are already seeing this across the industry. For example, Artificial Intelligence is widely implemented across UK banks today to assess risks and improve processes within the digital banking space. At CGI, we predict that VRP will also become a wider-reaching and integral part of the banking industry later this year too.

VRP’s future is promising, with experts and consumers alike already looking toward broader use cases for the technology in the future. There is a conversation to be had on the ways VRP can go on to play a key role within the “cashless society”. To reduce types of financial crime as well as to support more consumers with their everyday banking. As banks have developed sweeping, they have also created the infrastructure needed to support first-party to third-party transactions. Meaning that in the future VRP could potentially be used for broader e-commerce purposes too.

Overall, the future of Variable Recurring Payments is an exciting one, with many big banks and businesses already sharing some of their plans for VRP in the future. The days of innovative technology solutions across more mainstream banks are on the horizon and I am excited to see the role VRPs will have in this development.

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Energy Storage Represents Latest Investment Opportunity in the Clean Energy Transition

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By

Alan Greenshields, Director of Europe

The ongoing transition to clean energy has spurred new technologies, new markets and new opportunities for investors seeking to invest in a sustainable future and earn solid returns on their investments. Energy storage, a critical component of the clean energy future, is gaining notice by utilities, large-scale energy users and investors. Today, as the world reels from energy shocks stemming from Russia’s invasion of Ukraine and grapples with the ongoing consequences of global warming, investors seeking opportunities in the clean energy space are moving towards the massive opportunity presented by energy storage.

The UK Government recently published its “Energy Security Strategy” which established a target of 95% low carbon electricity by 2030. Achieving this target will require not only significantly more wind and solar generation, but Long Duration Energy Storage (LDES) solutions that can economically store and release clean energy over 10+ hours to balance the inherently intermittent nature of renewable resources like wind and solar. LDES technologies store valuable renewable energy when it is plentiful and ensure that energy is available when it is needed, eliminating the need for fossil fuels.

As the clean energy transition gains momentum, the rapidly growing need for LDES is already driving a new market with ample opportunities for investment.

 

The Decreasing Cost of Renewables Enables the Clean Energy Transition

Since 2010, the cost to deploy wind and solar energy has declined substantially. Today, they are among the lowest-cost options for new generation capacity. Meanwhile, recent geopolitical upheaval has driven up the price of fossil fuels and underscored the volatile nature of global energy markets. Gas prices have skyrocketed, and the UK energy price cap increased by 54% in April 2022, with speculation that the cap could increase by a further 30-50% in October.

Due to its low costs and both environmental and geopolitical developments, the transition to clean energy is proceeding rapidly. According to the International Energy Agency (IEA), the renewable energy sector is expected to grow 50% between 2019 and 2024.

However, even with improvements in technology, wind and solar remain intermittent sources of electricity. For the successful transition to renewables, the UK will need to couple wind and solar with energy storage to fully utilize these renewable energy resources and replace fossil fuels.

 

The Opportunity for LDES Technology

Today, the energy system is increasingly supplied by intermittent renewables and primarily balanced by fossil fuel generators which are able to augment the variation in wind and solar generation to maintain grid stability. With Lithium-ion (LI-ion) technology as the incumbent, most battery energy storage projects built to date have durations below four hours.  While these can help smooth brief fluctuations in generation, they lack the capacity needed to provide baseload renewable energy and fully replace fossil fuel generators over longer timeframes.

With these projects built on Li-ion technology, the same technology that powers most cell phones and EVs, they suffer from a number of operational and practical drawbacks which make them poorly suited for grid-scale storage. Risk of fire, reliance upon critical minerals and capacity fade, as you have likely observed with cell phone batteries, are just a few of the constraints presented by Li-ion technology.

New long duration technologies are now available which offer advantages over existing battery systems. For example, iron-flow batteries, such as those manufactured by ESS Inc., are now commercially available and offer a number of advantages over their Li-ion predecessors.

The new LDES systems on the market are ideal for long duration, (4 – 24 hour) energy storage. Where Li-ion system costs increase roughly in proportion to storage capacity, iron-flow batteries rely upon a low-cost electrolyte made of iron, salt and water, which is not only non-toxic and fully recyclable, but allows the cost-effective addition of capacity. At long durations, iron flow batteries are the most cost-effective form of energy storage. And, the technology is not theoretical: Iron flow batteries have already been successfully deployed at a number of utility and commercial sites.

Demand for long duration energy storage is already growing with over $3bn invested in technology providers in the last five years. These investments represent a start, but much more LDES capacity will be required in coming decades. According to McKinsey & Co., the world will need between 85 and 140 TWh of long duration energy storage by 2040 to achieve carbon neutrality.

 

Sustainable Energy Systems

Investments in the energy transition will enable society’s shift towards low-cost renewable energy to minimize climate change and deliver returns for years to come. LDES will be the lynchpin of that clean energy future, enabling wind and solar to provide baseload power and fully retire fossil fuel generators. The opportunity is commensurate with the need for LDES solutions as LDES technologies attract unprecedented interest from governments, utilities and transmission operators. This sector presents both short and long-term benefits which will deliver not only a return on investment, but a lower cost, more sustainable and more secure energy system.

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