Starting with the myths, I was chatting to a client the other day about news in the financial world and the conflicting information that we continue to see, and he really capped it all by saying really, “nobody knows”, which in many ways, I think is the case.
One of the big problems when considering financial markets and what might be in store just round the corner, very often these things are driven by sentiment and expectations looking ahead several months as to where markets might be, rather than where they are today.
Markets can appear to be very fickle at times in not reacting to bad news and yet, overreacting to short term issues and relatively benign events.
When I pass on my thoughts and express my views, my main objective has always been to steer away from the extreme views of both doom and gloom on one extreme and unrestrained bull market optimism on the other, because of course, there is no one answer to every situation.
We saw this clearly demonstrated in 2022 when most market sectors, including global Stock Markets and Bond markets (Government debt like UK Gilts and US Treasuries) all suffered greatly and yet the FTSE 100 Index appeared to outperform. This was largely because the Index was driven by Companies in the oil, gas and armaments sectors, who were beneficiaries to the impact of the war in Ukraine and associated inflation of energy prices.
It is therefore as difficult as ever to forecast the route that markets will take from here, although in recent days, we have seen quite a rally globally, largely due to the “sigh of relief” breathed following the US avoiding a debt ceiling crisis and associated default on Government debt.
Even though inflation may have peaked, it remains stubbornly high and as a result of which, we are likely to see further increases in interest rates that may in turn, peak higher than previously anticipated. Slowly the higher rates are filtering through to investment accounts, but the major impact has been on the mortgage market, particularly in the UK, with many borrowers now facing significant increases in their repayments. Much of this is yet to filter through the system and so I think it’s fair to say that we’re likely to see volatility continuing for the foreseeable future, but as one Fund Manager put it to me the other day, flat markets create little potential whereas volatile markets, whilst more challenging, can deliver greater opportunities.
On the personal scene, 2023 is a milestone year for us with Chris and I celebrating our golden wedding anniversary last weekend and naturally enough, it makes you reflect on how things have changed over that time.
Our wedding reception was a buffet lunch at a local pub for around 30 people at a cost of £1.50 each plus drinks and our honeymoon took us to the west country, where we were paying £1.25 a night for bed and breakfast! I also recall that £1’s worth of fuel, would put around 3 gallons in the tank!
Mind you, to put it in perspective, I was earning £13.50 a week!
As part of our celebration this year, we’ve recently been on a family holiday to Egypt, taking on some of the historic and cultural sights in Cairo and Luxor in addition to 7 nights on-board a cruise ship going down to Aswan.
The sheer scale of the monuments that we saw, and the number of statues created, in particular for Rameses II and the quality of some of the tombs that have been preserved in the Valleys of the Kings and Queens were all really quite spectacular.
Egypt as a country is very reliant on the revenues derived from tourism and therefore, the last 2 – 3 years have been particularly painful for them.
Egypt is certainly a country of contrast as well, with a huge desert reclamation programme underway south of Aswan, where many acres of wheat are now being grown in what was previously unproductive land. By comparison, you see people living in conditions that are reflective of Biblical times, with many small parcels of land being farmed with hand tools and oxen still being used to pull the ploughs.
I thought our Egyptologist and guide captured the sentiment very well when he said that going back in history, Egypt had nothing and achieved everything, whereas today, they have everything but achieve nothing. Whilst that’s not quite true, given my comments about the desert reclamation programme above, it is without doubt a country of huge extremes, but a great place to visit nonetheless. We came back with over 2,000 photographs – don’t panic, I won’t bore you with them all, but here’s just a couple to share.
Returning now to the theme of milestones, by the end of July 2023, the Financial Conduct Authority will have fully launched the Consumer Duty initiative, which comprises a complete overhaul of the way that financial advisory firms, conduct themselves, deliver their services and have to be mindful of a whole raft of new requirements and standards.
I am pleased to say that many of these disciplines we have in place already, but over recent months, we have been completing a thorough review of those practices and ensuring that they are fully compliant with Consumer Duty.
We have also joined the Consumer Duty Alliance, which is a not for profit organisation, specifically established to ensure that the intended improved outcomes for clients of advisory firms are achieved and maintained going forwards.
The Alliance introduces a Code of Professional Standard that we agree to abide to and is summarised below.
The Consumer Duty Alliance
Code of Professional Standards
These seven underlying principles of professional advice are designed to help consumers understand the standards and behaviours they should expect from an Alliance Member.
Members of the Consumer Duty Alliance shall:
In addition, we are also committed to the Financial Vulnerability Task Force Charter, which is a further development in recognising where changing circumstances can create vulnerability and how this needs to be recognised and handled. The following link will take you to the Consumer Guide, where you can read more about the Charter and its objectives.
Financial Vulnerability Taskforce consumer guide (260kb)
Rather than Consumer Duty being a finishing line to reach, it is actually a new milestone and the starting point for a completely new approach in the industry, which we full embrace.
If you have any questions about Consumer Duty or any other points raised, please do let us know, otherwise stay safe and best wishes from all at ABC!