Month: September 2020

klarna
ArticlesCash Management

18-24’s Owe £225 to Buy Now Pay Later Schemes

klarna

18-24’s Owe £225 to Buy Now Pay Later Schemes

Under-25s are increasingly likely to seek help for debt, according to debt charity StepChange with Buy Now Pay Later schemes cited as problematic for young shoppers.  

The Shop Now Stress Later Study from money.co.uk reveals that 18-24-year-olds owe a third more (£225 each) to Klarna-like buy now pay later schemes (BNPL) than the average UK shopper (£176).

How big is the fast fashion debt problem for 18-24-year-olds? 

The study found that 18-24-year-old shoppers owe £225.44 to BNPL on average, which is 28% more than the average UK shopper, who owes £176.   

The amount owed to popular BNPL schemes by 18-24-year-olds:

  1. Openpay – £360.50
  2. Zilch: £356.00
  3. Laybuy – £318.32
  4. Payl8r – £282.54
  5. Zip – £200.29
  6. Clearpay: £188.26
  7. PayPal Credit – £137.92
  8. Klarna: £122.16

The report also analysed 10 fast fashion brands based on how many times BNPL is mentioned throughout the shopping process, with Nasty Gal, Boohoo, and Pretty Little Thing the worst offenders when it comes to promoting them.  

Fashion Retailers Ranked by BNPL Promotion Mentions

  1. Nasty Gal – 46*
  2. Boohoo – 42
  3. Pretty Little Thing – 41
  4. Next – 40
  5. Nike – 40
  6. JD Sports – 38
  7. Clarks – 32
  8. Levi’s – 32
  9. Adidas – 31
  10. ASOS – 26

*Each brands BNPL score for mentions and how prominent BNPL is on their websites 

Over the past few years, Klarna, alongside other schemes such as Clearpay or Laybuy, has become a popular way for millennials and Generation Zs to buy clothes. The schemes offer the option to delay a payment or to split payments into installments. 

But debt advice charities are increasingly worried that BNPL is encouraging young consumers to spend more than they can afford.

These stores are all fostering a smash-and-grab mentality among young shoppers today. Many of them are buying their clothes purely online, often speculatively, and end up returning items that don’t fit or suit them later.

Shoppers aged 18-24 are more than twice as likely to use a payment platform (52%) than going into their overdraft (20%), but 25-34 are the biggest BNPL users. Over two-thirds have used a BNPL payment scheme like Klarna, Clearpay, or Laybuy. 

Almost a third of UK shoppers cite social media as a contributing factor (29%) in their decision to use BNPL and two thirds (55%) of shoppers aged between 18 and 34 admit to buying with the intention of returning, making millennials the most prolific returners. 

There are concerns young people might be encouraged to take on debt just to afford some new make-up or a dress for a night out.

Fast fashion is based on fleeting trends that may last no longer than a few months. Trying to keep up with such a quick turnover can be difficult, so young people turn to payment schemes to be able to afford them. 

Social media platforms, such as Instagram, exacerbate this as influencers post daily pictures in different outfits, never being seen twice in the same one, which puts pressure on young people to keep up. 

Under-25s made up 14% of those seeking help from the charity Stepchange in 2018, with an average outstanding debt of more than £6,000.

Retailers sign up with Klarna or similar BNPL schemes as it encourages more people to buy and some shoppers that use the service probably shouldn’t be. 

Impulse buying and online shopping can be very addictive. If you are thinking of using a BNPL scheme to purchase your items, think about whether you would purchase the items if you didn’t have the option to spread the cost. 

The full Shop Now, Stress Later study can be found here: https://www.money.co.uk/guides/generation-debt-trap 

business investment
ArticlesTransactional and Investment Banking

Post COVID-19 Trends: 31% Of Wealthy Individuals Intend to Support the Economy by Buying A Small Business

business investment

Post COVID-19 Trends: 31% Of Wealthy Individuals Intend to Support the Economy by Buying A Small Business

Brown Shipley, a Quintet Private Bank, has announced the results of a comprehensive research study of the nation’s wealthy. The survey of over 4000 UK consumers included a representative sample of over 800 of the nation’s ‘wealthy’ – defined as those with more than £100,000 in assets that they can readily access, 350 of whom have more than £250,000 in assets.

The research looked at how the wealthy had amassed wealth and what they want to do with the money they have, with some surprising results. Perhaps of most interest in the times of uncertainty with COVID-19, one in five (19%) of those with more than £250,000 in assets said they intended to buy a small business in the future to keep themselves busy, and a further 35% said they are planning on investing in a new business to help kickstart the economy post COVID-19.

Just under half of those wealthy individuals surveyed said they would leave an inheritance (48%). This increases slightly to 53% of those with more than £250,000 of investible assets. The research suggests that 1 in 5 (c10 million) UK adults fall under our definition of ‘wealthy’, which suggests that 5 million families may not receive an inheritance.

For those with more than £250,000 in assets, apart from leaving an inheritance, the other plans for their wealth include:

  • One in two (52%) will use the wealth to spend money on themselves, for example on  holidays; whilst one in six intend to buy luxury items, such as an expensive car or yacht (17%)
  • This is almost the same as those that wish to support a worthy cause (19%)
  • Almost six out of ten (59%) will use their wealth to fund their retirement

Whilst half plan to leave an inheritance, four in ten (39%) plan to gift some of their wealth to their families.

Regardless as to whether the wealthy plan to leave money when they pass on – the lack of planning for the future is of concern.  Only four out of ten (40%) say they had plans in place to pass on their wealth to minimise the tax paid by beneficiaries.  One in three (34%) say they will put in place plans in the next five years to minimise tax on their beneficiaries; whilst one in five (22%) say they never will.

Commenting on the research, Alan Mathewson, Chief Executive Officer of Brown Shipley said, “Whilst it is great to see that there could be significant reinvestment by the wealthy in UK businesses post COVID-19; it is worrying that so many haven’t made plans for their estates.  Solid financial planning is about wealth preservation today and having a wealth plan to meet future needs and we believe all can benefit from putting their estate in order, today.”

The research also reveals how today’s wealthy gained their affluence.  One in three (30%) of the nation’s wealthy credit an inheritance for contributing to their wealth; whilst 56% cite earnings from salaried work; and one in five (18%) say it is down to their entrepreneurialism.  Perhaps surprisingly one in twelve (7%) say that a lottery win; or gambling has helped them become affluent.  Other factors that the wealthy say have helped them amass financial assets include the performance of their pensions (44%); and investments (34%); whilst one in four (27%) have been helped by the property market.

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ArticlesBanking

Consumer Opinions Towards Digital-Only Banks Fall Almost Three Times the Rate of High-Street Banks’ During Lockdown

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Consumer Opinions Towards Digital-Only Banks Fall Almost Three Times the Rate of High-Street Banks’ During Lockdown

Customer sentiment towards 10 of the UK’s biggest high-street and digital-only banks fell by 7 percentage points (pp) during lockdown, according to new research from personal finance comparison site finder.com and social analytics specialist BrandsEye.

This leaves overall consumer sentiment for the banking industry at -24% on a possible scale of +100% to -100% for the period between 1 March and 31 July.

However, over 800,000 social media posts from customers revealed that digital banks saw a sentiment decline of almost three times that of high-street banks during the pandemic. On average digital-only banks’ customer sentiment fell by 14pp compared to just 5pp for high-street banks, compared to the previous 6 months (August through to the end of February).

While this is a blow for digital-only banks, it should be noted that high-street banks had, and continue to have, a much lower overall sentiment (-13% vs -35% currently). 

When asked, over half of high-street banks’ customers (52%) said that they felt negatively towards their bank throughout lockdown with customers saying that savings rates are what frustrated them the most (29%). 

Following this was poor customer service both online (14%) and in-branch (14%). The third most common customer criticism was their lack of communication during the pandemic (11%).

The story was very similar for digital-only banks – 53% of customers felt negatively about their provider during lockdown and savings rates were again the main problem (21%).

Customers’ main method of interacting with their digital-only bank is through an app, so this is perhaps why customers’ second biggest issue was around their bank’s app (15%). 

Poor customer service appeared to be a running theme with 14% of digital-only banks’ customers complaining about the level of customer service they received over the phone and digitally.

The bank that experienced the biggest decrease in sentiment was Monese, with sentiment falling from -0.1% to -19%. Currently, Atom bank has the highest customer sentiment of 9%, however, this is a drop from 11% pre-lockdown. 

Customer sentiment towards Barclays, Lloyds and NatWest actually improved during lockdown, with Lloyds bank experiencing the largest rise in sentiment from -36% to -33%. Despite this increase, these banks still sit in the bottom three positions for overall sentiment, with Barclays having the lowest score of -42%.

The full paper, Banking in lockdown: Is the honeymoon over for challengers?, includes expert commentary from industry leaders and can be viewed and linked to here.

 

Commenting on the findings, Jon Ostler, CEO of personal finance comparison site, finder.com, said: 

“Digital-only banks have enjoyed a golden period where dissatisfied consumers of traditional banks have flocked to them, attracted by market-leading apps, innovative features and a more human way of communicating to customers. 

“Now these digital-only banks are becoming recognised players in the industry, it is natural that they will start to be held to a higher standard. This is especially true during a crisis like COVID where people are relying on their bank more than ever – some banks have handled the situation better than others.

“Digital-only banks are still comfortably ahead in the sentiment stakes compared to the incumbents but perhaps it was inevitable that the high street banks would claw back some ground. The challengers will be hoping this fall in positive sentiment is just temporary and not the start of a bigger trend.”

 

Nic Ray, CEO of BrandsEye, noted that social media is growing as a platform for customer service and continues to be a rich source of consumer insight:

“As the adoption of digital banking services accelerated during the pandemic, the industry can expect an increase in digital conversation that includes social media customer service requests and customer feedback. Swiftly identifying and responding to service requests, and surfacing valuable feedback from within all of the noise of social media will be critical to improving customer experiences and building long-term customer loyalty for both digital and high-street banks.”

 

Sentiment pre-lockdown

Sentiment post-lockdown

Atom

11%

9%

Starling

12%

-1%

Monzo

2%

-2%

Monese

0%

-19%

Revolut

-18%

-29%

HSBC

-31%

-30%

Lloyds

-36%

-33%

Santander

-21%

-33%

Natwest

-40%

-37%

Barclays

-22%

-42%

 

house prices
ArticlesCash ManagementReal Estate

September Revealed as The Best Time to Buy A House

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September Revealed as The Best Time to Buy A House

New research suggests the stamp duty payment holiday isn’t the only reason Brits can make a saving on a property this month.

Watch and sunglasses specialist, Tic Watches, has conducted research and worked with experts to reveal the best time of year to find a bargain for high value products including homes, cars and holidays. The experts have compared prices to the peak time of year shoppers are searching for and buying products most frequently, to highlight how much people could really save with the right timing.

Here are the best times of year to find a deal:

January – Watches and sunglasses
  • Peak search time: 22nd-28th December
  • Potential savings: 70%

The January sales are a great time to pick up bargains on fashion items such as watches and sunglasses. Danny Richmond, Managing Director of Tic Watches, said: “For watches, the cheapest times of year to buy are generally Black Friday and January. This is when we run our biggest sales with discounts of up to 70%.

“For sunglasses, January sees the biggest discounts, of up to 40%. This is because it’s the period of lowest demand for summer products, so it’s a great time to get a bargain!”

February – A wedding
  • Peak search time: 28th July-3rd August
  • Potential savings: 50%

February sits in the middle of the wedding low season, which runs from November to April. This is generally seen as an undesirable time to get married, so as a result there are huge discounts available. In some cases, you can have a Saturday wedding in winter for half the price of the same in high season.

March – New cars
  • Peak search time: 10th-16th March
  • Potential savings: 25%

For new cars, the best time to buy is usually March and September because of bi-annual targets, although deals are to be had at the end of each quarter, depending on individual targets and stock availability.

April – Mattresses
  • Peak search time: 29th September-5th October
  • Potential savings: 53%

Dale Gillespie, Marketing Director for bed and mattress retailer, Bed SOS, said: “Retailers  tend to release their new lineups in April, so early spring is the best time to find the biggest discounts. Buying in early April, you’ll find some great value deals as retailers clear old stock to make way for the new ranges.”

May – Winter shoes
  • Peak search time: 24th-30th November
  • Potential savings: 70%

Buying shoes out of season will allow you to find the best value deals. May is a great time for this as there will be discounts on winter footwear such as boots, wellies and walking shoes, allowing you to buy good quality products for a fraction of the price. Similarly, the best deals for summer footwear can be found in autumn and winter.

June – A gym membership
  • Peak search time: 29th December-4th January
  • Potential savings: 20%

The start of summer tends to offer some of the best deals on gym membership, with January being another good month for discounts. 

There are often plenty of deals available through voucher websites such as Hot UK Deals, but if you’re signing up in person, a handy tip is to go at the end of the month. Sales staff likely have targets to hit and could be open to negotiating if they want to get their bonus.

July – An engagement ring
  • Peak search time: 29th December-4th January
  • Potential savings: 50%

July to August is the peak of the wedding season, and with all the focus on weddings, sometimes you can find big discounts on engagement rings. Also, as it is not close to any big holidays, jewellers use this time to lure in consumers with discounts.

August – Holiday clothes
  • Peak search time: 30th June-6th July
  • Potential savings: 75%

With summer drawing to a close, retailers look to clear as much seasonal clothing stock as they can. 

This is a great time to snap up bargains on items such as swimwear and shorts, which can see discounts of up to 75% for bikinis and 43% for shorts, although it’s worth saying that stocks go quickly, and there will be less choice than earlier in the summer.

September – A house
  • Peak search time: 2nd-8th February
  • Potential savings: Subject to negotiation 

Ross Counsell, Director at property firm, Good Move, said: “The best time to buy is August or September. The majority of buyers start searching at the beginning of the year, waiting until the end of summer, when there are fewer looking, you’ll have less competition.

“You’re also more likely to get a better deal, as with fewer offers on the table, sellers may well be more likely to accept a lower price.” 

October – Home appliances
  • Peak search time: 15th-21st December
  • Potential savings: 44%

Many manufacturers unveil new models in October, so older products will often be discounted. For products such as fridges, buyers can save as much as 44% at this time. 

November – Technology
  • Peak search time: 24th-30th November
  • Potential savings: 50%

Claire Roach at Money Saving Central, said: “Without a doubt, November is the best month to get deals, particularly on tech. A lot of people make the mistake of waiting for Black Friday – when the better deals are likely to be earlier on in November because retailers try to compete with Black Friday giant, Amazon.

“eBay, in particular, was 2019’s best place for tech deals, and the people who waited until further on in the month were left disappointed. Prices weren’t any better and stock was limited on highly sought after items such as the Nintendo Switch.”

December – Used cars
  • Peak search time: 17th-23rd November
  • Potential savings: Subject to negotiation 

Tim Barnes-Clay, Motoring Expert for Euro Car Parts, said: “Nobody thinks about buying a car at this time of year, as most people will feel the pinch over the festive season. With some forward-planning though, December can be a great time to get a good deal on a used car. 

“This is purely because dealers will be more inclined to get sales under their belts and therefore may be more willing to offer you a deal or negotiate.” 

Danny Richmond, Managing Director of Tic Watches, said: “It’s clear from the research that bargains can be found all year round, with the best deals coming at periods of low demand.

“It’s always best to plan your purchases ahead of time to maximise your savings. Don’t wait until winter to buy your winter coat and consider buying a new phone at the start of November, rather than waiting until Black Friday. Doing so could mean huge savings!”

For more information on when the best savings can be found, visit: https://www.ticwatches.co.uk/blog/2020/03/when-youll-get-the-biggest-savings/

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Natural CatastropheRisk Management

AIM Dividends Set to Fall By At Least A Third In 2020 Following A Record 2019 As Covid-19 Crisis Bites into Company Profits

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AIM Dividends Set to Fall By At Least A Third In 2020 Following A Record 2019 As Covid-19 Crisis Bites into Company Profits

Having reached a new record in 2019, AIM dividends flatlined in Q1 2020 on the back of a weak UK economy before succumbing to the Covid-19 recession in the second quarter, according to the latest annual AIM Dividend Monitor from global financial administrators Link Group.

The second quarter usually marks a seasonal high point for dividends, so what happens in this period is very important for the whole year. It was also the quarter when companies began to react to the chilling effect of the government’s lockdown policy. Q2 AIM payouts fell by an unprecedented 33.6% on a headline basis to £266.8m. Special dividends supported the headline total. At £33m, they were almost five times larger than Q2 2019. Excluding specials, dividends fell 40.6% to £234.3m, a level last seen in mid-2016. The £107m decline was exaggerated by the promotion of Diversified Oil & Gas to the main market, and the takeover of SafeCharge and Manx Telecom, but on a like-for-like basis the decline was still over 33% year-on-year.

Two fifths of Q2 AIM payers cancelled their dividends outright, while another tenth reduced them year-on-year. Not all of these were due to Covid-19 however. For example, the biggest impact came from Eddie Stobart group, which was saved from administration late in 2019 by a capital injection from investors, but which naturally will not pay dividends during its turnaround period. The group was one of AIM’s top payers in 2018 and 2019 and accounted for one sixth of the total decline. Central Asia Metals also scrapped its payout for reasons of tough trading unrelated to the pandemic. Burford Capital, the second largest payer in Q2 2019, scrapped its dividend and reallocated the capital saved to its financing arm.

AIM dividends fell less in the second quarter than companies on the main market (where payouts halved) and a smaller proportion of companies made reductions. Two-fifths of companies reduced payouts on AIM compared to three quarters on the main market.

A culture of dividend paying has been growing on AIM. In 2019, 290 companies distributed cash to shareholders, up from 263 in 2018. The proportion paying has grown from 26% in 2012 to 35% last year. This compares to 80% on the main market. 2020 will see a break in this trend as the pandemic wreaks its historic disruption to all walks of life. It will take time for a full recovery to take place, but we would expect 2020 to mark only a temporary low point.

According to our most recent UK Dividend Monitor, the main market will yield 3.6% over the next twelve months if Link’s best case materialises, or 3.3% if Link’s worst case does.

AIM is a lower-yielding market, even in normal times. Over the next twelve months, Link expects AIM shares to yield 1.1% on a best-case basis or 0.7% on a worst-case basis. This figure is artificially distorted by the two thirds of AIM companies that do not normally pay dividends. If these are excluded (but not those that only dropped out in 2020), then the best-case yield is 1.9% and the worst case 1.1%.

Link expects total AIM payouts to drop by 34% on a best-case basis to a headline £873m in 2020, slightly better than Link’s best-case scenario for the main market (-38%). This would reduce AIM’s dividends to a level last seen around the middle of 2016. The worst-case scenario sees them falling by 48% to £698m (worse than the main market at -42%), a level last seen in late 2014. The greater uncertainty over the response from AIM companies explains the wider range between the best and worst case than for the main market.

Susan Ring, CEO Corporate Markets of Link Group said: “Even before the pandemic struck, late 2019 and 2020 were set to be different. The UK economy had already weakened significantly by the end of 2019. AIM companies tend to be more sensitive to the economic cycle because the sector complexion means defensive firms are relatively under-represented. Industrials, financials, and resources companies feature prominently on AIM. These groups find their profits rising and falling with the fortunes of the wider economy more than, say, tobacco or food producers, whose earnings are relatively insulated. On the main market, roughly half the total payout comes from defensive sectors, but on AIM just one quarter does. The rest are more exposed.

“The fact that AIM dividends fell less than the main market must be seen in the context of long-term AIM underlying dividend growth of 18% per annum. The change from an increase of that size to a sudden decline of one third is consistent with the magnitude of main market dividend cuts we have reported in our main UK Dividend Monitor. What’s more, only a minority of AIM companies pay dividends at all, and those that do will tend to be the ones with deeper pockets. Lower payout ratios in the first place play a role too, as growth companies tend to pay lower dividends in the early days. We think it likely that AIM companies may also have simply been slower off the mark than larger UK plcs which reacted with lightning speed in cancelling payouts. This may well mean a delayed impact over the coming quarters, not least as the impact on profits becomes a reality rather than a prospect.

“2020 will take the biggest hit. Our estimates come with a health warning, given the relative lack of visibility in AIM dividends and the unusually large uncertainty in the wider environment. AIM’s payouts will certainly bounce back in 2021, but even if they return to trend growth thereafter, they are unlikely to top 2019 until 2022 or 2023 at the earliest. This AIM recovery will be faster than on the main market, where it will take time to make up for the loss of £7.8bn from Shell alone.”

Issues

Q3 2020

Welcome to the Q3 edition of Wealth & Finance International Magazine. As always, every issue we endeavour to provide fund managers, institutional and private investors with the very latest industry news in the traditional and alternative investment spheres.

This issue has a firm focus on providing an insight into recent developments in the wealth and finance industries – after all, you might be of the opinion that the world has been spinning its wheels, eager to start moving forward once more. But, as you’re about the find out, that has certainly not been the case. While many of us have been holed up at home, businesses around the world have been quietly making strides and driving advances -always moving forwards, even while in the midst of a pandemic.

As such, many of the issue’s inclusions have emerged from the situation stronger and more resilient than they were at the beginning of the year. Some have moved ahead with growth plans, launched new services, or entered new markets. Others are now gearing up for large marketing campaigns, ambitious and restless after the relative dormancy we’ve faced over the last 6 months.

So, do read on and enjoy the businesses that have showcased an exceptional ability to weather uncertainty and stay – always – on schedule with their achievements.

In the meantime, I hope you all stay safe and well.

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ArticlesWealth Management

5 Retirement Planning Mistakes To Avoid

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5 Retirement Planning Mistakes To Avoid

Retirement planning is one of the most important financial goals, and the stakes couldn’t be higher. For a successful and secure retirement, Granville Turner, Director at Company Formation Specialists, Turner Little, shares his five retirement planning mistakes to avoid:

 

Don’t underestimate the value of a clear plan:

Whilst retirement doesn’t necessarily mean stopping work completely, for most people it does mean spending less time working. It’s important to understand what you want from your retirement, consider priorities and how you would like to spend your time, as this will most certainly affect your finances.

 

Don’t underestimate the cost of retirement:

Research suggests that 48% of individuals haven’t calculated how much money they need to save for retirement. You may think you will spend less when you retire, but whilst your commuting costs might go down, other expenses could increase. Planning is crucial. Think about your day-to-day spending and factor in other expenses such as holidays – budgeting is a key part of retirement.

 

Don’t rely solely on your pension:

Pensions have traditionally been the primary way of funding this stage of our lives, and still remain the cornerstone of good planning. But pension funds and the contributions you can make have limits, so make sure you consider income from a range of sources from the State Pension, personal or workplace pension schemes, savings, investments or even property.

 

Don’t underestimate the importance and need for diversification:

Creating a diversified portfolio of assets blended across asset classes is a winning strategy as it reduces the risk of any single asset dragging down your portfolio.

 

Don’t cash out your pension:

30% of individuals accessing their retirement pot under pension freedoms are depositing their cash straight into low-interest bank accounts. The loss of returns aside, withdrawals can have significant tax implications, so it’s important to assess your options before taking the money out of your pension.

To discuss your specific requirements with a specialist team of experts, click here.