Category: Finance

Finance technology
ArticlesFinance

The History of Finance and What the Digital Future Holds

Finance technology


To understand how the financial world has got to where it is, it’s important to look at the history, in order to gain context. Whilst finance has changed a lot over the years, the broad definition of it has stayed the same.

 

Where Currency First Began

The term of currency is broad, but its roots can be tracked down to the caveman, who could have given someone something they held valuable, such as a shiny rock, for some meat that another had hunted.

In truth, the definition of a transaction has largely stayed the same but has just become more open in what it defines. Eventually, as communities started to form together into bigger groups, such as towns and cities, simple trades wouldn’t really work.

In ancient times it was the Sumerians, one of the oldest civilisations in the world, who realised that they needed another method. This was because of the rise of farming, which meant most people had access to food and had it in abundance, making it pointless to trade. The leaders at the time recognised this need, and invented money to help control how society traded.

 

How the Industrial Revolution Changed Finance

Fast forward a few thousand years, and there was suddenly an abundance of new technologies that were designed to make human life easier. One of the major ones, was steam.

Steam powered technology led to steam trains, which also led to railways and transport that was capable of travelling to different countries much quicker than ever. As you can imagine, this made communication and business more organised, as they could meet quicker and make transactions quicker than ever.

It was around this time that banks started to open their doors for the first time, and with different nations trading more and more, the governments of the world started to mandate and license trading.

 

How Assets Were Important

Physical assets have been important to the financial world for a number of years. When thinking of assets, you can think of gold bars, which are often held by banks and governments in vaults to accrue interest and hold something of value to strengthen their financial capital.

Most people will hold some sort of asset, whether that be something trivial such as vintage memorabilia, or something more concrete, such as property. Property is considered a major asset, as it very rarely declines in value, usually becoming more valuable as work is done and the housing market changes.

One of the worst assets you could hold, is a new car. New cars will lose almost 30% of their value as soon as they drive away from the shop, and after a few years, could lose almost 60% of its initial value. The market of second-hand cars is flooded with stock, meaning new cars offer little value in the financial world.

 

How Digital Assets Have Become Important

Digital assets have become more important to the business world, as it can help them with influencing buying behaviour. These assets can represent a visual product or service, or just be something that you as an individual or corporation hold.

A digital asset can be defined as anything that stores content digitally. Most of the time, it will be something that holds some sort of monetary value, but it doesn’t always have to. For companies, it could be something that is only valuable to them, or it could be something that has nothing to do with them that is used to turn a profit.

Banks often hold many digital assets as of recent years. Previously, they only had vaults of physical cash, but these days they’ve turned their attention towards digital outlets such as cryptocurrencies as they see it as a one-day valuable piece of stock.

You can also get images, photos, videos or any sort of online file or document that would count as a digital asset. Throughout recent history, there have been an emergence of new digital assets. For example, MP3s almost came out of nowhere in the early 1990s, and it didn’t take them long to start dominating the digital space and be shared amongst people.

You can identify a digital asset in three main ways. The first being, it needs to be purely digital, in terms of how you use it and share it. It also needs to be uniquely identifiable in its nature, and not something confusing. Lastly, it needs to hold some sort of value to whoever holds it.

There are many ways you can grow your digital asset portfolio with Unagii and their access to yields across many digital blockchains. Unagii is an automated service, so the hard work is taken off your plate as your organization’s rewards and monetary value is unlocked.

 

Fintech Explained

Fintech stands for financial technology, which as you can imagine, covers a wide range of topics. You could even explain the introduction of Fintech to thousands of years ago, when scales were used to weight money.

Of course, the technology has evolved quite a bit since then, but the core element of it has stayed the same. Aside from other ancient monetary techniques of collecting and counting money, the term became more broadly used in society in the last few hundred years, especially in the 19th century.

This was when money started to be able to move differently around the world, through telegrams or even morse code. This changed the world as it was known back in the day, as it opened up a range of different investment opportunities, and awoke people to the idea of financial technology.

It wouldn’t be long until new financial technologies started to appear in society, through something known as an ATM. Of course, these are very common now, but the first only appeared in 1967, after a switch from analogue to more digital finance.

During the 1970s, the world’s first digital stock exchange opened up known as NASDAW, as well as the society for worldwide interbank financial telecommunications, to help regulate the communication between financial institutions making international transactions.

Digital banking started to appear more commonly from the 1990s onwards, where PayPal was introduced amongst other payment systems. It wasn’t until the financial crisis of 2008, that fintech had to evolve once more.

This is where cryptocurrency was born, and smartphones started to dominate everyone’s life. This meant apps had to be built to help users navigate the financial world, this led to banks creating their own digital banking products and allowed third-party companies to have access to financial data.

The rest, as they say, is history. Contactless payments were introduced and have become a preferred method of payment, through cards, phones and even watches. 

 

What Banking Will Look Like in the Future

With many banks now looking to purchase crypto such as Bitcoin to hold as an asset, you can be sure that banking will look more digital in the future. Of course, global economies were devasted during the recent COVID-19 pandemic, which lost billions across the world due to business closures and lack of cashflow.

This has led to blockchain financial institutions becoming more popular, and this will only continue to expand. Financial technologies are predicted to become smarter, where the ways in which money is collected and managed will change and become more universally accepted across multiple platforms.

Finance
ArticlesFinance

Many UK Financial Organisations are Unprepared to Adapt to Unforeseen Challenges

Finance


Industry research commissioned by nCino surveyed 200 senior executives in financial services on their digital transformation efforts

nCino, Inc. a pioneer in cloud banking and digital transformation solutions for the global financial services industry, today revealed new research on the views of senior executives within financial institutions on their ongoing digital transformation journeys. All surveyed executives plan to increase spend or volume of digital transformation projects over the next 12 months, highlighting the importance for the sector.

“As the banking industry continues to evolve, this research highlights several emerging themes that are accelerating or playing a role in the transformation of both new and traditional financial services,” said Jennifer Geary, General Manager – EMEA at nCino. “We’re excited to see how technology is providing a foundation for change, and that investments are being planned to improve processes that can benefit both consumers and financial institutions.”

 

Transformation to meet customer demands

More than three quarters (78%) of respondents believe their organisation is unprepared to react and adapt to unforeseen challenges. Covid-19 is one such example which the executives surveyed argue negatively affected their ability to service customers. As a result, over one in three (35%) executives are focused on improving their organisation’s resilience to future disruption through implementing new agile technology.

Over half (52%) of consumers now demand a more personalised experience from their bank and, as a result, financial institutions have had to re-evaluate how they tailor the customer journey. However, almost half (47%) of executives say they do not have access to the right information to deliver an exceptional customer experience, with almost two in five (39%) struggling to unify their customer data across platforms and channels.

It is therefore unsurprising that a third (33%) of senior executives expect to increase spend on digital transformation projects that focus on improving customer retention rates. In addition, 31% of executives say establishing a strong customer experience is a significant reason for implementing artificial intelligence and machine learning tools.

 

Investment in transformation set to rise

Transforming their organisation through new agile technology is of paramount importance to all executives surveyed, whereby all state they are increasing investment over the next year.  Investment levels, however, vary. Over a fifth (22%) are looking to increase spending between £1 million and £5 million over the next 12 months. A slightly larger number of respondents (28%) are expecting a £500k-£1m increase. Despite spend increasing across the industry, cost pressures are the main barrier organisations face when looking to implement new technology.

 

Speed at the heart of transformation projects

Improving the speed of delivery of products is the main factor (40%) driving increased spend in digital transformation projects. With customer satisfaction now a top priority and the demand for loans rising during the pandemic, it is paramount that organisations overcome delays in updating their product offerings. For example, when making lending decisions for customers, over a quarter (26%) of senior executives struggle to make timely decisions. The CIBLS loan scheme, which supported U.K. businesses to stay afloat throughout the pandemic, highlighted why it is so important for the loan approval process to be fast to benefit both the economy and customer satisfaction.

 

Transformation benefits are not clear

There is a lack of understanding of the benefits new technology can bring to financial institutions; in fact, 31% of respondents state this is the main barrier for implementing it within their organisation. It is therefore unsurprising that over a quarter (28%) of senior executives feel there is a lack of internal knowledge or expertise around the benefits of new technology and therefore, limited internal desire for new projects.

 

Transform for good

Nearly half (44%) of financial organisations are adopting technology to respond to environmental, social and corporate governance (ESG) trends. In fact, a third of executives (33%) are looking to increase spend on digital transformation to improve their organisations’ ESG efforts. Other areas organisations are focusing on include the reduction of paper consumption (42%), travel (36%), and branches (27%). Over the last year, it has become evident that some financial institutions can easily continue the service provided to customers through replacing paper and regular branch visits with digital channels. This has had a positive impact on the environment and therefore, is being implemented into ESG initiatives. While only 37% of organisations are establishing carbon neutral goals, less than 1% noted they were doing nothing in response to the pressures of ESG.

“Financial institutions need to prioritise between short-term and long-term objectives and work to align their products and services with their clients’ expectations and needs. Having the right strategy is important, but so is having the right partner and technology that can offer the flexibility and agility needed to react, adapt and continue to delight clients through any unforeseen challenges or opportunities,” concludes Geary.

Man in a business suit with a blue notebook against a blue background
ArticlesFinance

3 Viable Financing Options for Small Businesses

Man in a business suit with a blue notebook against a blue background

It’s no secret that traditional lenders tend to be hostile to small businesses. Things are even worse if you’re in a business with a high failure rate. Small businesses are sadly those who are the most in need of a loan. If you’re a new business and don’t believe you have the history needed to get a loan, know that there are many options out there you can choose from. It’s all about knowing where to look and what to do to be an eligible candidate. Here are a few viable financing options for small businesses.

SBA Loans

SBA loans are loans that are backed by the Small Business Administration. We say backed because you will still have to go through an SBA-approved third-party lender.

The requirements are different than with other loans, but a lot of it will rest on your personal credit score. So, this is one is something you should consider if you’re been handling your personal finances responsibly and amassed a respectable history.

If you want to access SBA loans for your business, you also have to be prepared for a long and strenuous process. It will likely take weeks before your application is processed, and you get a response. But if everything is in order and you filled your application correctly, there is a strong chance you’ll be accepted, so we suggest you look into it more in detail.

Invoice Factoring

Invoice factoring is a special type of financing that allows you to borrow money against your accounts receivable. You can borrow money against invoices that are due to you at a later date. The factoring company will take part of that money as a fee and will also collect the invoice themselves.

This is a great option for those who have very poor credit. That’s because your client’s credit, and not yours, will be used to determine if you’re eligible or not. So, if you have a lot of accounts receivable and good clients, this could be an option.

Equity Financing

Then you have the option of offering equity in your business in exchange for money. The stake in your business will usually be proportional to the money that will be put up. For instance, if you have a business that is valued at $100,000, you could ask for $10,000 for 10% of the company.

This also means, however, that you’ll be welcoming new owners on board and will have to split your profits from now on. This can be both a good or a bad thing.

If you bring in someone with expertise in areas that you need, you could end up saving money by not having to hire outside help. They might also help make your business more profitable. On the other hand, you could end up bumping heads with them and they could become disruptive. You could also become frustrated by their lack of participation.

There are also cases where you might have to contemplate giving majority control of your company. Again, this is something you’ll need to evaluate yourself about, as they may be better equipped to run a business. Many will also refuse to give the reigns to someone who doesn’t have a formal finance background, so you have to prepare for that.

These are all financing options that you could explore as a small business owner. Look at each one of those in detail and see which one would be the best depending on your situation.

Investment Portfolio
ArticlesFinance

Different Types of Investment Portfolio

Investment Portfolio

Whether you are new to the world of investing or just looking to diversify your holdings, there are a number of key decisions that must be made. One of the first being which type of portfolio is most likely to suit you during your investment journey. Continue reading to familiarise yourself with the different types of investment portfolio and how to choose the right one for you.

 

Aggressive

Aggressive is one of the most common types of investment portfolio. It seeks out large returns and the high risks associated with investing in them and tends to favour capital appreciation over safety. The type of strategies associated with an aggressive investment portfolio will usually allocate a large number of assets to stocks and little to none in bonds or cash-based investments. They are suited to young adults with small portfolios. This is due to the fact that young investors can sustain market fluctuations and losses much more easily than experienced investors with a lot to lose. Most investment advisors only recommend this strategy if it is applied to a small percentage of your entire investments. If you are looking for a high risk portfolio with an equally high return on your investment, it may benefit you to check out the Golden Butterfly Portfolio.

 

Retirement-blended

With interest rates continuing to decline, the traditional retirement portfolio is almost obsolete. Retirees must lay the groundwork and take the appropriate steps towards building a substantial retirement fund decades in advance. With life expectancy rates surging across the globe, this is now more important than ever. If you are an investor nearing retirement age, you may benefit from a blend of both income-oriented and growth-oriented investments. A common example is stocks and bonds. By taking a step back from alternative investments and sharpening your focus, you can generate long-term growth that is much more likely to grow in line with inflation. This increases your chances of receiving a relatively constant return on investment and softens the blow of equity deteriorations over time.

 

Income

When you invest, your returns can be relayed to you through dividend pay-outs or stock price appreciation. An income investment portfolio is the name given to a portfolio that consists primarily of stocks that pay dividends. Income portfolios tend to generate positive cash flow. Examples of investments that produce income include real estate investment trusts, or REITs, and master limited partnerships, or MLPs. A real estate investment trust, in particular, is a great way to invest in real estate without the commitment of actually owning a property outright. A master limited partnership, on the other hand, is a limited partnership that is traded publicly on an exchange. These companies will pass on a large percentage of their profits to shareholders in exchange for positive tax status. Income investment portfolios can be a handy way of diversifying your current income sources and supplementing your existing retirement fund.

 

 

Speculative

If you are looking for a high risk investment portfolio with high returns, a speculative portfolio may be the best option for you. It is commonly compared to gambling and involves a much greater degree of risk than most types of investment portfolio. Speculative investments focus on market fluctuations and movements. Most speculative investors are uninterested in the fundamental value of an asset or the annual income it may generate. They tend to focus on how much they can sell it on for at a later date. Examples of speculative investments include real estate, stocks, currencies, fine art, currencies, commodities, and collectables. They may also include Initial Public Offerings, or IPOs, and healthcare or digital technology firms in the process of developing a cutting-edge product or service. Most investment advisors tend to recommend that no more than 10% of an investor’s assets are used to fund a speculative investment portfolio.

 

Hybrid

As the name suggests, a hybrid investment portfolio involves a combination of a number of different investments. It offers the greatest level of flexibility and versatility compared to other types of investment portfolio and typically includes bonds, commodities, real estate, and perhaps even fine art. As with income investment portfolios, a hybrid investment portfolio may also include real estate investment trusts and master limited partnerships. Typically, hybrid investment portfolios contain both stocks and bonds and are diversified across multiple assets. This allows investors to balance both risk and return and establish an investment portfolio that suits their own individual needs and requirements. It is also a great option for first-time investors as it exposes them to equity and tends to be relatively low risk.  

 

When it comes to investing, there is a lot to learn. One of the first factors to consider is which type of investment portfolio to opt for. From aggressive and retirement-blended to income, speculative, and hybrid, there is guaranteed to be one out there to suit your knowledge and experience of the investment market.

Investment small business
ArticlesFinance

Investment in Small UK Firms Booms Despite Covid

Investment small business


By Luke Davis, IW Capital.

New data from the British Business Bank has revealed that UK smaller companies received a record £8.8 billion of equity investment in 2020 despite the disruptive effects of both Covid and Brexit. This record growth looks set to continue in 2021, with £4.5 billion of investment reported in the first three months of the year already, while our own research at IW Capital – where we provide vital growth finance for SMEs – reveals that 16% of UK investors are looking to back startups and SMEs in 2021.

The figures come from the British Business Bank who first started to track this form of investment over ten years ago. The Bank was also a key contributor to this record, supporting over 20% of all UK equity in 2020 – the majority of which involved the newly launched Future Fund.

The Fund, launched in May 2020, provides convertible loans, ranging from £125k to £5m to eligible investee companies. Technology and IP-based businesses have so far made up around 40% of the companies receiving investment, with Business and Professional services following at 26% of the firms. This still leaves, however, a significant portion of the market if not uncatered for then certainly under-funded – a chronic problem for UK businesses over the past decade.

SMEs are a vital sector of economies the world over, but especially so in the UK, where firms with fewer than 250 employees contribute over £2 trillion to the economy. They make up 99.9% of private sector businesses and employ around 60% of the workforce, and as such are crucial to the UK economy and its growth. This is a significant portion of the overall GDP and much of it is spent in local communities – something which has come to the fore during the pandemic.

Considered in tandem with the fact that before the pandemic, small firms were hiring at a rate three times higher than large companies, this evidence demonstrates just how powerful SMEs will be in tackling potential unemployment as a result of the end of furlough.

Investment in small firms also almost always comes with advice, guidance and an outside perspective that can prove invaluable to a business looking to grow, scale or simply survive – especially in the current climate. Through angel investment and other forms of private finance, entrepreneurs are offered advice, connections and introductions that can make the difference between success and failure or scale and stagnation.

This investment support comes at a time of record optimism in the SME sector, with three quarters of CEOs expecting overall economic conditions in the UK and Ireland to improve over the course of the next 12 months. The combination of optimism and investment backing could spell a perfect storm for growth in the sector that is so vital to the UK economy.

The economy in 2021 is already heating up, with it set to return to pre-pandemic levels by the end of the year, and its continued growth will be fuelled by the small businesses that provide its foundation.

The record level of investment reported in 2020 is great news and – from our experience through the last year and a half – not at all surprising. There has never been more demand to support SMEs and startups in their growth journey, whether that be through the Enterprise Investment Scheme or any other route to provide funding, and the trend is by no means over.

Our research indicates that a significant proportion of the UK’s investment community are actively investing in these firms. Opportunities in this sector exist not only for great returns but also to make a real difference in the life and growth of a business. something that is becoming more important for investors as they adopt a more altruistic approach.

IW Capital invested in at least six different growth SMEs during 2020 and the majority of them have grown at a rapid pace thanks to our support. The growth of these businesses ranges from sustainable packaging that pivoted to produce plastic-free PPE, to apps making seamless hospitality service possible during a pandemic. The unifying elements they all possess are passion, determination and talent, all qualities that the UK entrepreneurial sector has in spades.

Managing Finances
ArticlesFinance

How to Manage Your Finances More Effectively?

Managing Finances


Even if you think that your salary is not that low, you might routinely discover that for some reason, you have underestimated your monthly spending. Although you are not the only one, it doesn’t mean that you shouldn’t put plenty of effort to ensure that you have some savings that could be much needed when something unexpected happens.

It might be easier said than done, but it doesn’t mean that you are fighting a losing battle. In a moment, we’ll explain how to manage your finances more effectively so that you can live a more stress-free life. It will require a fair bit of self-discipline, but it’s worth the effort.

 

Pay off Your Debts

Once you have determined how much you spend on each category and have set up a budget plan that makes sense for you, make sure that you stick to it and don’t deviate from it unless necessary. If there are expenses that seem unreasonable or unnecessary, try to cut down on them and see how much money could save over time.

If there are any debts that need paying off urgently, then pay them off as soon as possible before they take over your life completely. If the amount you owe is too much for you to repay on your own, you can always consider getting a personal loan, such as the one offered by societyone.com.au. On top of that, consolidating several loans into a single one can help you pay off your debt faster.

 

Track Your Spending

In order to determine your spending habits and see where your money goes, we recommend that you track each and every expense you make. If you are going to use a budgeting app, it will be recorded and calculated automatically. A paper-based system will require more manual work on your part. If you want to be more organized, don’t forget to include recurring expenses such as electricity/water bills, insurance premiums, etc., in your monthly plan.

 

Make a List of Your Expenses

Once you have determined how much you spend on average monthly, you can start making a list of all the things you spend money on. If you are not tracking your expenses, you might have overlooked some of them, while others might appear to be unreasonable. For example, it doesn’t really make sense for a 25-year-old person to spend $800 on groceries every month. This might just be the case if they live with their parents and have a very generous allowance, but it’s unlikely that they earn that much money on their own. Another example is clothing. Let’s say that you spent $500 on clothes last month. If you make $2,000 per month, then this might be a bit excessive.

There are also expenses that you might need to cut down, even if they seem like a necessity. For example, if you spend $100 on coffee every month, it might be time for you to reconsider your priorities or at least reconsider how much coffee you drink every day. Although this is somewhat subjective, we can give you an example of an excellent way to do it. For instance, if you want to cut down on coffee, try to reduce the amount of money you spend on this commodity by a dollar or two each month. Once you have done that for a couple of months, you should be able to stop buying coffee completely. This way, you will slowly start getting used to your new lifestyle, and in the meantime, you will save quite a bit of money.

 

Make a Budget Plan

Once you have determined how much you spend on each category, it’s time to create a budget plan. First of all, we recommend that you try to stick with the same categories as before, but if there are some items that you feel can be moved from one category to another, then go ahead and do it. The second thing that you should do is to look for opportunities where you can cut down on spending without significantly reducing your quality of life.

For example, if you have decided that you don’t need a car because public transportation is sufficient, then think about how much money you would be able to save by not purchasing one. If you are thinking about cutting down on your phone bill, think about how much money you can save by switching to a cheaper provider or changing your plan. This way, it will be much easier for you to stick with your budget plan.

 

Conclusion

You don’t have to be an economics expert to know how to manage your finances effectively. Still, it’s a valuable skill everyone should have! After all, you never know what will happen in the future, and if you spend your money in an unreasonable way, you may be in trouble.

If you want to develop good spending habits, you can start with baby steps. Determining what you spend your money on is a great starting point, and you can use various budgeting tools to help you with that. Ultimately, you can think about establishing an emergency fund and increasing your savings.

Investment market
ArticlesFinanceMarkets

UK Investors Have Their Say

Investment market

Confidence levels are up, Millennials make their mark and interest in ethical investing hits new highs.

Confidence levels amongst UK investors have risen 20 points (62 – 82) in the last 12 months according to new research amongst 1100 UK investors (£10k+).

The Investor Index, now in its second year, is conducted jointly by London-based communications agency AML Group and research agency The Nursery Research and Planning and was launched in April 2020 to assess the immediate impact of Covid 19 on investors and the UK investment marketplace. The first report of its kind to provide an objective overview of the industry based on hard data – the study was welcomed as a barometer of post-Covid investor behaviours.

One year on, and still in the grip of the pandemic, the 2021 study has revealed some significant changes and ‘recalibrations’ amongst investors.

 

Confidence returns – but not to pre-pandemic levels

Over the past 12 months, confidence levels have risen most amongst older investors (55+) up 30 points (54 – 84), investors that are retired up 27 points (57 – 84), those that use financial advisers up 31 points (65 – 96) and investors with a portfolio of £200k+  – up 38 points (55 – 93).

The study has also revealed a disparity in gender confidence levels – with men indicating a 25 point rise over the last 12 months (61- 86) compared to a rise in confidence levels of just 10 points among female investors (65 – 75).

However whilst the results are cause for some degree of optimism – investor confidence levels are still 18 points down from pre-Covid levels.

 

Gen Z/Millennials Vs Baby Boomers – the emerging generational divide

10% of UK investors have started investing since the pandemic began – and of those new investors three-quarters (74%) are under 35s.

It’s a changing landscape with the younger investor bringing different attitudes and priorities to the investor table.

89% of under 35s have changed their investment strategy over the last year vs. 31% of 55+ investors. Younger investors are also increasingly looking to ESG products – with 27% including responsible investments in their portfolio compared to only 4% of investors aged 55 and older. Younger investors are also more focused on the long game – with 30% looking to longer term investments compared to 8% of investors 55+.

When it comes to investment decisions, younger investors are increasingly turning to family (40%), banks (30%) and friends (27%) for advice.

 

It’s a gift – investors demonstrate a change of attitude

57% of UK investors have changed their investment strategy since the pandemic started – with a focus on products offering ‘long term growth’ (46%) over ‘short term growth’ (30%).

Investors are increasingly concerned about their children’s financial security. 70% of investors are aware of the £3,000 wealth transfer allowance with 38% having given £500 or more over the last 12 months – with children the biggest recipients (72%). Indeed the average amount gifted in 2020 was £8087 compared to £5421 pre pandemic (2019) – a 49% increase and a clear indicator of the want for investors to safeguard futures for loved ones.

 

How invested is the UK investor in Responsible Investing?

Investors feel that ethical/socially responsible financial products are more important now than at the same time last year – up 9 percentage points (23% – 32%) with three in ten of those surveyed stating that they believe that these products will be more important in the future – up six percentage points (24% – 30%).

However despite investors acknowledging the importance of ESG/RI there is a continuing perception, despite contrary evidence, that it carries a performance penalty with investors ‘prioritising financial security over wider ethical considerations’ – up five percentage points (23% – 28%).

 

Younger investors look to DIY platforms

Since the start of the pandemic in March 2020, four in ten investors under 35 (39%) have invested more with DIY platforms – compared to just 14% of 55+. And while the younger investor has indicated a ‘happy to do it myself’ attitude regarding financial planning and investments they are less confident when it comes to their feelings about the industry. Just under one-third of under 35s (29%) are confident markets will bounce back compared to more than half (52%) of investors aged 55+.

Perhaps predictably, younger investors are more tapped into trends and news stories connected to investing.

39% of under 35s cited an awareness of the growth in DIY platforms with 44% familiar with the story around Reddit users driving up the share price of Game Stop and 31% aware of the rise in silver prices. Investors aged 55+ recorded significantly lower awareness across all trends.

Digital world
ArticlesFinance

Building An Inclusive Digital Future For Every Child

Digital world

By Sunita Grote, Ventures Lead, UNICEF Office of Innovation & Thomas Davin, Director, UNICEF Office of Innovation

Witnessing the scale of the global pandemic has shown us a paradox: as schools, businesses, and borders closed, our lives went online, children and young people turned to online learning; companies shifted to remote working; and our gatherings with family and friends crossed time zones over video conferencing. We turned to the digital world to deliver our groceries, discover new treasures and experiences, and manage our finances and futures.

The pandemic instigated a mindset shift and accelerated the digital future — but not for the entire world. Half of the world’s population doesn’t have access to the internet.  For many children around the world, the pandemic simply stopped access to lifesaving and essential services like education, healthcare, protection from violence— and the number of children living in multidimensional poverty has soared to approximately 1.2 billion due to the COVID-19 pandemic. It is also estimated that 142 million more children are now living in monetary poverty as parents lose their jobs and income sources.

1.7 billion adults still lack the most basic financial services, leaving them unable to adequately access and invest in their health, education, entrepreneurship – and the chance to protect themselves and their future in the wake of another crisis.

We need to build the infrastructure and systems that enables the most marginalised communities to access digital services. This means closing the current gaps in access, financing, capacity and priority to develop valuable solutions that leverage the latest technological breakthroughs.

 

Closing the gaps to build inclusive digital economies

UNICEF’s Innovation Fund aims to close these gaps by financing early stage, open-source emerging technology with the potential to impact children on a global scale. The Innovation Fund has grown into a $35M+2267ETH+8BTC pooled fund that has invested in 118 solutions across 57 countries, and provides product and technology assistance, support with business growth, and access to a network of experts and partners. Beyond building solutions, the Fund sets out to diversify the community of entrepreneurs that benefits from capital. We put special emphasis on supporting solutions built by the traditionally underrepresented in venture capital – to date, 40% of our investments are in female-led companies. We exclusively support  open source solutions to ensure that these become digital public goods, opening access to them and the value they generate to communities around the world.

The Fund’s investments have generated solutions supporting the global response to COVID-19. These include, for instance, the HealthBuddy chatbot that provides information and addresses misconceptions in 7 languages, built on Ilhasoft’s platform Bothub. UNICEF’s Magic Box platform is able to analyse and develop models based on data provided to us by our partners, predict the spread of COVID-19 and analyse the impact of social distancing measures on children and their families in developing and emerging markets. UNICEF focused our efforts on developing and accelerating solutions that can provide services to and insights on markets that are often neglected by the rapid pace of technological development.

 

Leveraging the latest technological breakthroughs for children

Blockchain-based solutions allow us to rethink how problems are solved.The technology allows for greater transparency and efficiency in systems, better coordination of data across multiple parties, and the possibility for greater community engagement in decision-making that is more difficult with traditional technologies or systems.

In a crisis that required a shift to digital services, we saw blockchain and cryptocurrencies provide value to the COVID-19 response.

We have seen UNICEF’s leadership in establishing a crypto-denominated fund provide new opportunities to new partners,  committing resources toward innovation, including for the COVID-19 response, and toward COVAX efforts. Chainlink, a decentralised oracle network,    contributed to UNICEF’s Innovation Fund and will provide technical expertise to investment companies around smart contracts. Binance Charity donated $1 million in crypto to support UNICEF’s global vaccine rollout and released limited-edition NFTs with proceeds going towards COVAX.

Blockchain-based solutions also have the potential to improve the efficiency of the response. Our portfolio company StaTwig is piloting its blockchain-based app by partnering with the Government of India to track and improve the delivery of rice, supporting their effort to secure food for millions living in poverty – a need amplified by the onset of COVID-19. 

Our newest cohort of investments is building solutions toward greater financial inclusion. The startups are  exploring solutions to make payments to frontline workers more efficient, facilitating cross-border transfers, developing community currency, improving access to saving and lending services, and more. This is the first cohort to consist of majority female-led companies; and expands our portfolio to Rwanda and Iran.

 

Improving transparency and efficiency of our investments

This cohort is also the first to receive equity-free investments in USD and or cryptocurrency through UNICEF’s CryptoFund – a new financial vehicle allowing UNICEF to receive, hold, and disburse cryptocurrency – a first for the UN. The CryptoFund enables us to apply the benefits of blockchain to our own operations and improve our efficiency and transparency at a time when we need to find ways to achieve more with limited resources. We can now make investments in under a few minutes for under a few dollars, all while being fully transparent around where funds are being used.

This flexibility and speed allowed UNICEF to quickly disburse funds and invest further in eight Innovation Fund companies developing features to mitigate the hardships of COVID-19 on children and youth. One of the companies was Somleng (Cambodia), which needed to quickly scale its low-cost Interactive Voice Response Platform to work with the government to send vital information about COVID-19 — and eventually run its Emergency Warning System.  We are now working to bring this flexibility and speed to our government and other public partners – by building and offering digital public goods to manage and track cryptocurrencies more efficiently through our Juniper suite of tools.

 

Building the new digital economy

We now all share the experience of a global pandemic and resulting lockdowns, and those of us with access to digital services found ourselves still interconnected in the “new normal” and able to participate meaningfully – and benefit from – the digital economy. Decentralised systems are generating unprecedented revenues and returns in the current market – with benefits currently going into the hands of few.

COVID-19 has proven that only when access to the benefits of digital systems is universal, can we respond quickly and prepare for – or stay afloat and thrive during – the next crisis. Imagine a world where solutions, data, financing, and talent are instead accessible and more evenly distributed as public goods; where scarce resources are channeled towards solutions that are designed to bring both financial and social value for all.

Emerging technologies and digital public goods offer an incredible possibility to realise this inclusive, accessible world – where the digital economy is distributed so that everyone, even the most vulnerable, holds a key to safety, resiliency, and future growth and opportunities. We must venture into supporting untapped, underrepresented communities in a transparent way so that, together, we can build a digital future for every child and every young person to survive and thrive.

Savings
ArticlesFinanceFunds

The Nation’s Most-Searched Savings Strategies… and How to Access Them

Savings

By Annie Charalambous, Head of Communications at ETX Capital


Britain is pinching its pennies. According to the FT, UK household savings have increased nearly 2 percent in the last quarter as 20 million Brits commit to saving more of their income after the pandemic settles. That being said, many Brits aren’t sure where to start when it comes to managing finances.

We’re taking a look at how the nation is researching its savings options, revealing the UK’s most-searched strategies and we’ll even explain how to take the first steps towards them.

 

1. Premium bonds (368,000 monthly searches)

Premium bonds are a unique, interest-free way to save. You buy the bonds (in this case, a minimum amount of £25, and a maximum of £50,000) from NS&I, and each month you enter a prize draw in which your odds are 34,500 to 1, and you can win between £25 and £1 million. You won’t earn interest on your bonds, but instead, it’s the interest that funds the prizes.

Anyone can buy premium bonds, and this can be done on the NS&I website. Your money is secure in premium bonds and you can cash out all – or part of – your bonds at any time.

 

2. Lifetime ISA (74,000 monthly searches)

Lifetime ISAs are specialised savings accounts designed for those aged 18 to 40 to save for retirement or a first home. They allow you to save up to £4,000 each tax year, and the government adds 25 percent to whatever you contribute.

Anyone within these age limits can open a Lifetime ISA with a bank or building society. They can be paid into until you turn 50, however, money can only be withdrawn once you turn 60, or to buy a first property once the account has been active for 12 months. If you withdraw money before these key dates, you’ll lose your government contribution.

 

3. Savings accounts (74,000 monthly searches)

A savings account is a traditional bank or building society account, which lets you deposit money and earn interest each month. Savings accounts often have a low, if any, minimum starting amount, anyone over the age of 18 can open one, and your money can typically be withdrawn at any time. For these reasons, savings accounts are a common, low-risk approach to saving money.

 

4. State pension (74,000 monthly searches)

The UK state pension is a weekly financial sum for retirees. Anyone with 10 years of National Insurance contributions or more is eligible for some level of the state pension – with 35 years qualifying you for the full amount.

State pensions can currently be claimed once you turn 66, however, this is set to increase to 67 in 2028. The basic state pension is £137.60 per week but you may be able to claim more, depending on your earnings over your career.

 

5. Bonds (49,500 monthly searches)

A bond represents a loan, typically given by an investor to any government or company, which agrees to buy it back at an agreed date, with interest.

Anyone can buy bonds. Savings bonds can be accessed from banks and building societies, while Government bonds can be bought through their dedicated Debt Management Office website.

 

6. Fixed-rate savings account* (14,800 monthly searches)

Fixed-rate savings accounts offer a guaranteed rate of returned interest, on the agreement that deposited funds aren’t withdrawn for a set time. They typically offer higher rates of interest than traditional savings accounts and are also resistant to market fluctuation.

Anyone can open a fixed-rate savings account with a bank or building society, however some institutions may require a minimum deposit amount or set term length, so this may not be the ideal route for everyone.

 

7. Private pension (14,800 monthly searches

Unlike the state pension, which workers automatically contribute to through their National Insurance, private pensions require active entry and payments. Private pensions can include both workplace pensions, arranged by employers (who typically also contribute) or personal pensions.

Anyone of working age can set up a pension. Some, like ‘final salary’ and ‘career average’ pensions will pay out a pre-agreed sum upon retirement, while other pension types may invest your money, meaning you’re able to earn higher interest (at higher risk).

 

8. Child savings account (14,800 monthly searches)

Child savings accounts are similar to regular ISAs but are designed for parents to save for their children (18 and under). These give children the opportunity to learn how to manage and save money, and they can even withdraw money before they’re old enough to open a regular savings account.

Some alternatives to children’s savings accounts include Junior ISAs and Children’s Bonds. These may offer greater returns and tax breaks but often put limits on when and how funds can be accessed.

 

9. Student bank account (12,100 monthly searches)

Some banks and building societies offer specialised savings accounts for those in higher education. These typically act in the same way as a regular ISA but offer sign-up incentives for students, like discount public travel cards and 0 percent overdrafts.

As the name suggests, only active students can open student bank accounts and providers will require savers to prove their identity with a valid student card.

Covid e-commerce
ArticlesFinance

E-commerce In Post-COVID Economy: What Has Changed?

Covid e-commerce


Fintech innovations during the pandemic have been a crucial driving force for businesses worldwide. A number of solutions launched or quickly adapted to aid the growing global payments demand, contributing to growth of the e-commerce sector by 26% globally.

Fintech startups played a significant role in the global financial industry during the pandemic. Payments companies especially, have brought rapid solutions to aid the transition in commerce, which shifted from physical to digital in a matter of months. Many brick-and-mortar businesses began to offer online services, which led to a significant 26% jump in global e-commerce activity last year. That said, the question whether the need for e-commerce-boosting Fintech solutions will remain after the pandemic still lingers.

Payments industry experts expect the increase of Fintech solutions to continue driving the growth of e-commerce for the foreseeable future, citing the change in user behaviour. To further this, Frank Breuss, CEO and co-founder of Nikulipe—a Fintech company creating and connecting Local Payment Methods (LPMs) in the Fast-Growing and Emerging markets—has noted that some challenges, which have undermined e-commerce before, remain unsolved and so the need for Fintech solutions will remain for the foreseeable future.

Breuss explained that the pandemic highlighted one of the main challenges that e-commerce faced for years prior to 2020—the willpower to move towards digital payments. The pandemic restrictions, in turn, have forced many companies to accelerate the implementation of digital payments and virtual customer support in their businesses.

“Prior to COVID-19, many retail companies around the world had been mulling over digital service offerings. However, a relatively small segment of early adopters treated it as an urgent need. The pandemic effectively drove many companies that previously relied on brick-and-mortar stores to explore digital channels to ensure business continuity and survival.”

E-commerce platforms like Shopify, WooCommerce and others allowed even small businesses to make a quick digital switch without going through huge infrastructural investments. They offer easy creation of an e-shop, as well as access to payment gateways and plugins, which enabled business owners to manage essential customer relationship management (CRM) tasks like making appointments, creating a contact list and managing orders in real time.

During this time, Fintechs working in the Payments industry have also introduced various services and solutions to ease the financial burden on consumers during the difficult economic situation. As an example the ‘Buy Now Pay Later’ (BNPL) option, which allows shoppers to pay in installments, was made available to many more customers in recent years. Mobile payments have also shown a dramatic growth, becoming a lifeline for the Emerging markets as mobile phones are more widely accessible than bank accounts. Experts regard this as a giant step towards achieving financial inclusion globally.

According to Breuss, low financial inclusion has been and continues to be a significant impediment to the growth of e-commerce, especially in Emerging markets. As a result, over 2 billion people worldwide are unable to participate directly in global online trading. In Africa, where about 60% of the population remain unbanked, Fintech companies have come to the rescue. Many African countries recorded huge Fintech investments last year, peaking at $1.35 billion by Q4 2020. This is expected to see Africa’s contribution to global trade rise significantly over the next few years.

“At Nikulipe, we are working on meeting consumers’ needs to be able to pay with the Local Payment Method of their choice—not just at their local but also at global merchants. This became even more relevant since the COVID-19 crisis,” explained Breuss. “During the last one and a half years, Fintechs working in the Payments industry came up with a number of solutions to ease e-commerce tool adoption and they still have a significant role to play in the growth of e-commerce and global trends over the next decade,” he added.

As the world begins to make a gradual return to normalcy, e-commerce will have to continue solving the challenges it faces. While the move to digital payments has seen significant progress, a majority of LPMs still exclude global merchants, limiting consumer choice. Financial inclusion has moved forward as well with BNPL and mobile payments gaining popularity, but suitable LPM solutions and internet accessibility remains restrictive to the wider inclusion. Region-specific regulations remain another hurdle to figure out, and these ongoing challenges could be solved only with continued Fintech involvement.

TikTok
ArticlesFinance

Expert Warns Against the Dangers of TikTok Investing Craze

TikTok


By Ben Hobson, Markets Editor, Stockopedia

When users of the online discussion site Reddit banded together recently to bid up the price of shares in GameStop Corp., it showed just how influential – and risky – some online investing communities can be.

But Reddit isn’t the only online resource that’s proving popular with investors. Social media platforms are attracting large audiences looking for ideas – including TikTok.

Videos with the hashtag #Investing have so far racked up over 2.2 billion views on TikTok, opening up a world of investing to millions of younger people. But it comes with big risks – there is a very real danger of losing money if (and when) things go wrong.

 

Ben Hobson, Markets Editor at Stockopedia talks about some of the dangers of the TikTok investing craze and how to avoid the risks…

More and more young people are turning to social media platforms like TikTokto find investments with the promise of life-changing profits. 

Economic turmoil and low trust in financial institutions has left a generation of investors thinking differently about where they invest and who they listen to. In fact, according to brokerage Charles Schwab, 80 percent of millennial and Gen Z investors believe recent economic difficulties are making it harder to get good investment returns.

With social media platforms like TikTok enjoying huge global reach, it’s no surprise that they’re now influencing the investment decisions of millions around the world. 

Earlier this year, the now infamous trading frenzy in US games retailer GameStop Corp, showed how “viral” trends can have a huge impact on individual securities. That was intensified by TikTok videos encouraging viewers to take considerable financial risks in return for what they portrayed as a guaranteed win. For many, the episode simply resulted in losses.

Events at GameStop and other stocks like it have raised fears that apps like TikTok are a new frontier for the kind of stock market manipulation regulators have been battling for decades.

Recently, the Financial Conduct Authority has specifically warned that videos on apps like TikTok are a major risk to young and inexperienced investors.

Part of the problem is that the sense of community on social media platforms can lead to herd mentality. This psychological togetherness is what makes the apps popular. But it’s a huge risk in investing and it’s often blamed for whipping up manias and bubbles.

Sadly, it’s the unprepared amateur investors that are most likely to be left with stomach-churning losses when the frenzy dies down.

 

Beware of scams

Beyond videos that overpromise, there are also outright scams. And TikTokhas been a lucrative target for criminal groups.

These scams range from the notorious ‘Money Mule’ money laundering scam to much more common ‘day trading’ cons and even celebrity-endorsed money-making schemes.

Videos from these accounts often promise high returns for following their advice and signing up for exclusive subscription services to get ‘insider knowledge’ on the markets. 

Users can find themselves enticed to visit websites that often have very little information about the company’s management, location or details about what they do. These are serious red flags and should be avoided at all costs.

 

Be careful who you trust

Social media has created a revolution in the way consumers connect and interact. But the risks for investors tempted by the promise of quick wins are very high.

Excessive promotion, clickbait, herd mentality and even criminal scams are not always easy to detect. So be wary of these risks. 

Always double-check any advice you find on social media using a trusted, independent source. With additional research, you can make an informed risk versus reward calculation to see if something is worth investing in while guarding against false claims or scams.

 

Here are some top tips to remember:
  1. Be wary of users that promote high-return investments. Remember that risk and reward go hand-in-hand, so if what is on offer seems too good to be true, it probably is.

  2. Investigate investment ideas by doing your own research. There is no easy button in investing but doing your homework can pay off. There’s no such thing as a perfect investment, but financial data will tell you what you are dealing with.

  3. Remember the age-old warning about consulting a financial adviser. At the very least, discuss your ideas with someone you trust before parting with cash.

  4. Never open an e-currency account to transfer money to an investment scheme. This is an unregulated space that fraudsters use to avoid detection.

  5. If you’re keen on becoming a successful investor, consider signing up to a reputable investment platform for expert guidance, ratings and portfolio management support.

  6. If you’re in any doubt at all, swipe-up and walk away.

SME Investment
ArticlesFinance

Almost a Third of SMEs Invest to Make Businesses Safe for the Summer

SME Investment
  • Nearly eight out of ten small businesses are confident of a summer boost in trade
  • But over a third are worried about the impact of continued social distancing

 

 
SMEs are increasing their investment in protective measures for both customers and staff as they remain cautiously optimistic that the summer will bring a boost to trade, according to research by Recognise, the UK’s newest SME bank.
Almost a third (30%) of smaller firms told Recognise they would be spending on PPE or protective measures for staff, while one in five (22%) of SMEs said they would be investing in protective measures for customers.
Overall, nearly eight out of ten (78%) SMEs said they were confident of a boost in business in the summer if Covid restrictions were removed completely, an 11-percentage point increase on the 67% of smaller businesses who said they were confident of a seasonal uplift when questioned by Recognise in March this year.
Confidence is highest in the retail sector, one of the areas most impacted by lockdown measures, with 86% of smaller retailers telling Recognise they are confident of increased trade in the summer, compared with 60% in March.
But Covid is still causing concern for smaller businesses. Recognise found that over a third (37%) of SMEs said they were concerned that restrictions, such as social distancing, could hamper trade or reduce customer numbers. The figure increased in the hospitality sector where more than half (52%) of SMEs said they were worried  that continued restrictions would dampen business.
Less than a third (30%) of SMEs said they were worried that customers would be too afraid to shop or do business with them because of the fear of catching Covid-19, compared with 20% in March.
As a result, many SMEs are increasing their spending to ensure they can make the most of summer trading, whatever the circumstances. Recognise found:
  • 41% of SMEs in the hospitality sector had already, or said they were planning to invest in outside seating
  • 35% of all SMEs said they would be investing in new equipment including IT, up from 22% in March
  • 30% of smaller firms said they would be spending on PPE or protective measures for staff, up from 25% in March
  • 22% of SMEs said they would spend on PPE or protective measures for customers, up from 20% in March
 
However, previous concerns around the long-term impact of Covid lockdowns on business seem to have diminished. The number of smaller firms worried about replacing customers lost during lockdown has fallen to 20% (down from 26% in March), while worries that customers will have taken their business elsewhere have dropped to 14% of all SMEs (compared to 18% in March).
According to Jason Oakley, CEO of Recognise, the latest findings reveal the resilience of the UK’s SME sector. He explained: “SMEs remain cautiously optimistic that business will continue to improve as we get closer to the summer. If that means continuing to operate within certain restrictions, you can be certain they will adapt their businesses to welcome as many customers as possible.
“This can-do attitude is shown by the growing number of SMEs planning to invest in their businesses in readiness for the summer. While expenditure on protective equipment is to be expected, higher spending on marketing and promotional activity suggests that smaller businesses are coming out of lockdown with ambition and plans to win customers.”
Recognise’s research found that using cash surplus remains the most popular option for funding the investment in business, as indicated by 20% of all SMEs (up from 14% in March). 17% of smaller firms said they planned to use government loan schemes to fund spending (up from 14% in March), while 15% intended to borrow from their bank (up from 13% in March). A further 6% of SMEs surveyed said they would borrow from a lender other than their bank, the same as in March.
Recognise provides lending to the UK’s SME sector via a network of regional Relationship Managers in London, Midlands, Manchester and Leeds, backed up by the latest cloud-based technology to provide quick lending decisions and fast access to funds.
The bank aims to provide more than £1.5 billion of business lending over the next five years. Business and personal savings accounts will be launched later this summer.
Business value
ArticlesFinanceWealth Management

How To Increase the Value of Your Business

Business value


If there is a possibility that you may sell your business at some stage in its life, no matter whether that is in 3 years or 30, you need to consider increasing its value. By doing so, you increase your chances of securing a more profitable sale in the future.

Selling a business can be tough. If you have put years of effort into building yourself a profitable company, you’ll want to be secure in the knowledge that you will eventually complete a worthy sale.

Here we provide a range of tips that will each help you to not just maintain the value of your business, but steadily increase it over the years up until its sale.

 

Understanding your business’s current value

Knowing where you currently stand in terms of business success and value, is vital. If you have a clear starting point, you have a base in which you can prove your growth in the future to your buyers. It is always worth you finding out the current value of your business in order to identify areas in which you have grown over the following years.

A buyer will be interested in a clear depiction of growth with sufficient evidence being provided – this represents great business value. If you spend a decent amount of time looking into every element of your business and analysing where it provides you with value, you can use this knowledge to your advantage.

 

Taking the right steps towards improving business value

Along with the efforts that you are currently making to ensure that your business is successful, you can follow a few simple steps that will help to secure that value. By doing these as additional steps, you boost your chances of success in a future sale.

  1. Ask for advice

There are plenty of experts out there who can help to advise on improving your business, managing cash flow and keeping financial troubles at bay. Professional help could make the difference between you maintaining value and gaining value.

If you are facing financial trouble, it’s always best to get this under control before you consider selling your business, if you can. A valuable business is a profitable business.

 

  1. Invest and update

Actively investing in new equipment, machinery or whatever it may be that your business relies on in its day to day operations, is important. The more outdated your business operation becomes, the more that your overall value reduces over time.

Spending money on new equipment and technology may seem like a large investment at first, but you will soon see the benefits. Don’t let the initial spending put you off – this is often what causes financial issues within companies. Some businesses will fail to modernise and as a result, become slow in their processes and start seeing losses.

 

  1. Repeat what works

If you know what already works well for your business, you can continue to do this and strive to improve it even further. Spend time assessing where your priorities lie and what you can afford to leave on the backburner.

If a part of your business is running efficiently and doesn’t require much attention, let it continue to be successful whilst you focus on other areas. If you can implement those winning processes in other areas, do so.

 

  1. Keep an eye on cash flow

Buyers will obviously pay close attention to a business’s cash flow. If your future cash flow projections show it being set to increase, you will automatically attract keen buyers. Document this growth clearly and go back to step 1 should you find yourself having problems with cash flow.

Cash flow is clearly important in any business. Make sure that you are dedicating enough time into managing this area before it becomes a major issue.

 

  1. Don’t forget the importance of customer service

Whether you have a large or small customer base, it is key that you keep those customers happy. If you have a good relationship with repeat customers and spend

time getting to understand the needs of new ones, you will please future buyers.

By documenting what you learn about your customer base, you have a valuable document of information that a future buyer will really appreciate.

There are clearly a lot of ways in which you can help improve the value of your business. What is important to remember, is that you need to have future value in mind at all times. If there is a chance that you may complete the sale of your business at some point, you need to be sure that you are offering buyers a valuable and profitable business.

If you can optimise your current processes to help increase value, then do so. It is unlikely that you will lose out by focusing on these areas, so allocate the time you need to really make it work.

ESG
ArticlesFinanceSustainable Finance

With Sustainable Financing on the Rise, Expert Advises How Fintechs Could Step Up ESGs Activities

ESG

 Embedding ESG goals could help fintechs become more immersed in sustainable banking, thus improving their market resilience.
An increasing number of businesses are focusing on how to embed ESG (Environment, Social, and Governance) goals into their strategies. As the notion of sustainability is gaining more ground in the finance sector as well, Marius Galdikas, CEO at ConnectPay, has shared how fellow fintechs could incorporate ESG practices into their business and what impact it could have on fuelling further growth.
ESG investing has skyrocketed over recent years, as more and more investors have started to consider the impact of their money. This shift in attitude is already well-reflected in the market —  last year companies with better ESG ratings had greater returns in almost every month. The finance sector is no exception, with major players boosting their financing goals to trillions of dollars. In the US alone, six largest banks in the country have pledged to eliminate all financing activities related to greenhouse emissions by 2050.
According to Galdikas, although fintechs may not have massive budgets to finance low-carbon initiatives, it should not be a limiting factor to support ESG goals. In fact, neglecting the subject may result in decreased company value and missed opportunities.
“First of all, ESG issues are becoming more important for stakeholders looking to invest long-term. Neglecting the topic may lead to a poor ESG “risk score”, which is closely monitored by business partners and investors. This could negatively impact the company’s reputation, followed by decreased market value, as well as losing the edge against the “more green” competitors,” Galdikas explained.
He also noted a few strategies for how fintechs could become more immersed in sustainable banking and improve their market resilience.
“One of the ways could be setting up “green pricing” for ESG-driven businesses, as in offering tailored pricing options for your services. It could be set case-by-case, taking into consideration how the company operates and what strategies it uses to achieve their business goals. Making sure that they’re consistent in their actions will allow you to sift out potential fraudsters as well,” Galdikas advised.
“Also, take time to overview your current client portfolio. ConnectPay works with digital-only businesses, thus large scale manufacturers or other industries, contributing to high carbon emissions, are not in our client base. Yet fintechs with a wider scope of customers should re-evaluate if businesses they are working with operate with ESG-values in mind.”
Another way to support the sustainability movement is to reorganize in-house processes with a goal to lessen CO2 emissions, for instance, by reducing business trips. “Albeit it may not be as relevant with the ongoing pandemic, which put a halt on international travel, but sooner or later the world will recover, thus it’s important to keep this in mind for future reference.”
While the Environmental aspect usually retains the main focus in the context of sustainability, Social and Governance criteria need to be approached with the same determination. In Fintech, this could be addressed by tackling the gender gap. At the moment, women make up less than 30% of the industry’s workforce. At ConnectPay, however, the team is split almost equally in half, having 48% women and 52% men.
“Diversity in the team inspires new ideas, improves decision-making and leads to higher overall performance, all the while contributing to better integration of ESG goals,” the expert concluded.
Investment
ArticlesFinance

Playing the Long Game: How to be Successful at Long-term Investing

Investment

By Ben Hobson, Markets Editor, Stockopedia 

 

Read the financial headlines and it would be easy to believe that an investment fortune can be made with just one trade.  

 

While it’s true that some people do get lucky with one “magic” stock during their investment journey, most successful investors build their personal wealth and security over the long term. 

 

Investing is mostly a waiting game. Sticking to a predetermined strategy is key to success in this field – while not letting emotions compromise your judgement. 

 

In the modern age of investing, this isn’t easy. New and experienced investors are being bombarded with more information and ideas than ever before. But in all this noise comes the increased risk of mistakes and misinformation – making the idea of getting quick money sound all the more tempting. 

 

That’s why Ben Hobson, Markets Editor at Stockopedia shares his insights on how to manage your portfolio for the long run.

 

 

Have a plan  

 

Investment strategies naturally change over time and making mistakes is unavoidable as markets fluctuate.  

 

Understanding the risks ahead of time and looking at the bigger picture can help you manage the highs and lows so that you stay committed for the long term. 

 

Not only will this give you confidence, but it will help you manage the fear of loss that can lead some investors to throw in the towel.  

 

Everyone is guilty of dipping into savings to fit their needs – whether it be for a treat or a surprise expense – but it’s vital to know precisely how much you’re willing to invest. 

 

For the most part, the longer you remain invested, the more you’re likely to benefit from compounding returns over time. So, being confident that you can afford the amount you have invested today, and in the years that follow, is paramount. 

 

 

A strategic stance 

 

Investors and investment strategies are all different and investing advice takes many forms and can seem confusing to those starting out. Yet the historical drivers of stock market profits are surprisingly consistent.  

 

Keep it simple and create a strategy around the three factors that many professional investors focus on – Quality, Value and Momentum. This way, you’re aligning with factors that have historically driven the strongest performances in the stock market over time. 

Remember that high profitability and cash flows are markers of a strong business and are likely worth looking at. Be vigilant of low or no profits, thin margins, debt and precarious balance sheets – businesses with these are usually worth avoiding. 

 

Valuation is vital when choosing a stock. Unloved shares that can be bought for a snip may offer supersized returns. But paying a fair price for higher quality or promising growth is just as viable.  

 

Finally, looking at trends and history can help you gauge a stock’s performance. Positive momentum is one of the most significant return drivers in investing. Share prices that are rising strongly often continue to do so. 

 

 

The perfect all-weather portfolio 

 

Stocks, sectors and markets move in their own cycles. When one zigs, the other zags, so think about the roles that each investment type plays in your portfolio and how many positions you feel comfortable with managing. 

 

Any investor worth their salt would recommend spreading out finances across a range of investment types and trying out different strategies. 

 

Diversification between different market-cap sizes, investment styles, industry sectors and even international geographies can protect you from being too exposed to unnecessary risks and can smooth out your investment returns over time. 

 

For example, having your money invested in funds and bonds can be less risky than a volatile stock, but having both could help limit losses and increase the chances of a positive return. 

 

 

Keeping a balance 

 

When your portfolio is in place, understanding where to prioritise your attention lets you rest easy at night rather than fretting over small changes. 

 

One or two big winners can quickly dominate your allocation, but those big winners can also be life changing. 

 

Don’t get too caught up in your portfolio performance – you need to let your investments breathe. If anything, getting too caught up in the losses can make you miss an uptick in value around the corner. 

 

Overtrading can not only fuel emotional investing, but fees and charges can quickly mount. Trading fees all chip away at your portfolio, so avoid throwing money at unnecessary trades – especially when you’re bored. 

Foreclosure
ArticlesFinance

A Complete Guide To Foreclosure Investing

Foreclosure


Whether you’re new or a veteran in a real estate business, foreclosure investing is an incredible strategy to pay attention to. It’s understandable to have hesitations. People’s perception of foreclosure investing could easily affect your judgment.

Well, you shouldn’t have to be. Contrary to some beliefs, you can actually use it as your opportunity to start a business venture. You can potentially expand your investment portfolio if you can successfully invest in foreclosed properties. Doing so will also boost your chance to generate revenue.

 

How Foreclosure Occurs

But first, you need to understand why foreclosures happen. It starts when someone decides to acquire a property. One may own a property without paying the entire cost at once in terms of down payment. 

Typically, people can settle the payment for a small portion of the total cost, usually around 3-20% of the price, and borrow the remaining amount. The borrowed amount shall be payable within 2-3 years, depending on the contract term.

Unfortunately, accumulating money needed for the payment may not be easy as allocating thousands of dollars for such may be difficult. Or their earnings may not be enough to meet this obligation. 

Hence, it’ll be stipulated in the loan agreement that the property they’ll buy will also serve as your collateral. If they lose the capability to continue the payment, the lender will confiscate the property. Real estate lien allows lenders to withhold such property if they fail to pay off such debt.

During foreclosure, the lender repossesses the property, and they lose the right of its ownership. The lender will then sell the property to catch up with the amount they lent you. Thus, the lender gets the right to dispose of your property.

 

Should You Buy Foreclosed Property?

There’s absolutely a good reason for purchasing a foreclosed property. As mentioned, these properties can come cheap. Thus, it can create enticing profit margins, which are not common on other real estate properties. Being a new investor, it’ll be a wise decision if you would start with such an investment.

 

Conducting Analysis For Investment Property

No matter how cheap or promising the foreclosed property is, you can’t be impulsive when investing in foreclosure properties. You can ensure a successful investment property if you don’t hurry to buy the first ones you see. Thus, it would be best if you do your due diligence before buying one.

This is in the form of conduct an analysis of the particular property you wish to acquire. When conducting your analysis, you should look for the best properties that could indicate the highest ROI. Hence, the higher the number you can potentially earn, the more promising it becomes for an investment. 

 

Finding Foreclosed Homes

Try to be resourceful if you want to buy a foreclosed home as there are several ways of finding foreclosed properties. One of which is going to the local County Recorder’s Office to check the list of foreclosing homes.

You can also visit websites and read the local newspapers to check foreclosed homes for sale. Furthermore, auction houses which conduct foreclosure sales can also give you a list. You may also seek help from the local real estate agents to help you find foreclosed homes.

 

Additional Cost Of Foreclosed Property

One of the considerations in real estate investment is, buying such properties will generally involve additional costs intended for the renovation. 

The real estate investment strategy concept is to acquire foreclosed properties that require renovations below the current market price. So, you must be ready to settle the additional expenses.

 

Utilizing The Experts

If you’re serious about investing in foreclosures, you must bring experts to your team. One of the people you can trust is a qualified agent. You must understand that there’ll be plenty of tasks that demand time and effort when investing in foreclosures. It’ll be tough for you to carry out everything on your own. 

From obtaining funds to doing the renovations, you’ll need experts to help you. With that in mind, here are some key players you can add to your team:

  • Property Manager: You’ll need a property manager to take charge of marketing your property. Your property manager will also be responsible for collecting the rent and managing the homes for their maintenance once you start using the foreclosed property to generate real estate income.

  • Loan Officer: Loan officers may not be necessary if you have the whole amount ready to buy a foreclosed property. If not, you should find a loan officer to help you with a mortgage or any form of financing so you can purchase the property. You must establish a harmonious relationship with a loan officer when looking for financing, particularly if you ‘e planning to acquire numerous properties.

 

Conclusion

With the great opportunities investing in foreclosed properties, you may want to start now. Gone are the days you’ll feel intimidated by this kind of venture. With the right knowledge about investment foreclosed property, you’ll know you’re doing the best thing.

However, remember this venture doesn’t guarantee success unless you put hard work and exert more time into it. Before you begin with your business, you must equip yourself with a team. Get the best people in your team and maximize their expertise. You’ll soon enjoy high profits from your investments.

Gold
ArticlesFinanceMarkets

Why Gift Premium Bonds When You Can Gift Gold?

Gold


Becky Hutchinson, Managing Director at Minted, an investment platform which allows individuals to buy and sell gold bullion.

In light of the ‘new normal’, parents and grandparents are looking for new ways to gift, virtually or otherwise. But in a climate of stock market volatility and low interest rates, are traditional financial investments still a solid choice, and could gold bullion be a safer bet?

There’s no doubt about it, Premium Bonds have earned their reputation as a safe and steadfast savings option. First introduced by the Government in 1956, these tax-free bonds from the National Savings and Investments (NS&I) agency are now UK’s biggest savings product, with about 22 million people having over £86 billion invested in them. Every £1 Bond is given a unique number and all numbers are put into a computer called Ernie (which stands for Electronic Random Number Indicator Equipment), which draws monthly winners. For years, they have been popular to give as presents to children under 16. The parent or guardian named on the application looks after the Bonds until the child’s 16th birthday, when they are entitled to a gift that will hopefully keep on giving.

In December 2020, however, the prize fund was cut considerably and due to the drop in the Bank of England base rate, NS&I also reduced the odds of winning. As a monthly lottery, the closest thing Premium Bonds have to an interest rate is their annual prize rate, which currently stands at one percent. This is based on the average pay out, depending on the number of bonds owned and, while it isn’t completely accurate, it does allow for an estimated calculation to be made about interest gained in a year.

But winning may be harder than it seems. According to Money Saving Expert, only 30% of people with £1,000 in Premium Bonds win £25 or more per year. And, over five years, someone with £1,000 in Premium Bonds and ‘average luck’ is expected to win roughly £50. While that may seem a lot of money to a child who’s been gifted Bonds, any parent knows that £50 doesn’t go far in today’s society.

When it comes to investment options, however, Premium Bonds are as safe as they get. Operated by NS&I, which is backed by the Treasury rather than a bank, funds are easy to access and there is little-to-no risk of losing money – only a small gamble around any potential ‘interest’. However, while this level of financial security was once a significant perk, all UK-regulated savings accounts are now protected by the Financial Services Compensation Scheme (FSCS) under the savings safety rules. This extends up to £85,000 per person, per bank, building society or credit union – £35,000 more than the maximum deposit allowance for Premium Bonds.

So, is there an alternative safe-haven investment option, with a better interest rate and without a savings cap? There is and it’s far older than Premium Bonds. Gold was one of the first precious metals to be used by humans as a trading commodity and, to this day, remains a stable choice. Many children’s books tell stories of gold – from pirates to royalty – and, in sport, a gold medal has always been associated with winning. From a very young age, the intrinsic value of gold has been ingrained in most people’s minds.

Aside from the glitz and glamour, perhaps the biggest difference between gold and Premium Bonds is that gold is a tangible asset. Investors can handle their physical gold and store it as they wish or even liquidate an asset if needed. Gold doesn’t just sit pretty either; while its price may fluctuate, historically and over the long term, it trends higher. Currently, the average growth rate per year is nine percent, considerably greater than bonds or current interest rates. With this in mind, £1,000 invested in gold could be worth around £1,538 after five years.

With the popularity of the finite resource growing, more user-friendly and flexible tech-focused routes into gold investment are appearing, making gifting the precious metal much easier. Features such as reward points for referring friends and family also provide an incentive for parents to start building up points for their children. With investment platforms like Minted, people can either purchase gold with a lump sum or save set amounts every month, starting at £30. Once enough has been saved for a gold bar, the physical gold can either be stored in a secure London vault or withdrawn – something any child would be proud to own. 

Despite its high-class status, gold is much more than just a luxury good and can be a viable option for every investor, at any age. As markets continue to fluctuate and interest rates drop, the price of gold could remain on its upward trajectory for some time. No matter the state of the current economic climate, the metal will always be a must-have addition to anyone’s investment portfolio and, with growing options to transfer gold virtually, the best kind of gift.

Alternative Investment
ArticlesFinance

Why Choose Alternative Finance?

Alternative Investment


With retail, hospitality and leisure businesses opening again, and demand for suppliers, manufacturing and construction greater than ever, it is important that companies have the facilities to expand, grow and invest in the future. With cash flow becoming one of the main concerns for SMEs in the last year, it’s important to get the balance right, and with mainstream lenders come long waiting times, increased scrutiny and endless criteria, more business are seeing their applications for loans, finance and leasing being rejected than ever before. This level of scepticism has a significant impact on businesses and their operations

However, alternative finance is an option that cannot be underestimated, and has the ability to support suppliers, businesses and their clients in selling more and investing in their products and services. There are many reasons why businesses are turning to alternative finance, and will continue to do so.

 

Common sense

Mainstream lenders have different processes to alternative lenders, and therefore business plans and propositions with genuine strength and durability can be misunderstood or ignored. We specialise in being a common sense lender, listening to your story and finding out how we can make finance work for you, rather than the other way around. Common sense means decisions are made by people who understand your industry and what you want to achieve.

 

Competitive rates

This is, and should be, important for any business owner. It affects your bottom line and how your business operates financially, which is crucial to ensuring you succeed. By offering competitive rates, alternative lending is an attractive option for businesses who may be in doubt about the value for money they can get elsewhere. It’s important for us, and it’s important for you, that’s why we make it a priority to secure competitive rates for your business.

 

Quick

More so than ever the queues have been getting longer, processing time and waiting for decisions is not what you should be doing when trying to secure finance to improve your business. Our team work directly to ensure all necessary steps are completed in an efficient manner to give you the best chance of getting your funds quickly, as we understand how important every second is. Alternative lending means you have a dedicated team working tirelessly to help you and your business, your clients and your customers.

 

Experts in your sector

Knowing your sector and industry gives us alternative finance the edge, because we work closely with suppliers, customers and industry bodies to understand what makes it tick and what’s important. That’s why when you bring us some Quirky Kit that banks or lenders may not see as valuable, we make it our mission to help you secure it. There’s not much we haven’t seen, and it can be frustrating dealing with people who don’t understand why you need your equipment, what it’s for or how it can benefit your business. By specialising in this area of equipment finance, alternative finance has a significant advantage.

 

Improve cash flow

It’s important to keep on top of cash flow, and it can be a dilemma when you want to invest but don’t want to spend. Using alternative finance to secure a loan or equipment finance for your business you can improve your service or product, make it more cost effective, more efficient and increase revenue, allowing you to take care of overheads, bills, wages and other expenditures. This allows you to keep any cash you have for a rainy day, whilst also improving your business. You can find out more on how to improve your cash flow by viewing our guide here.

 

Freedom to grow your business

Another benefit of alternative finance is the freedom to grow your business. This means that we will support you in how you plan to use the loan or finance, as you know your business better than anyone, meaning you know how to make it succeed, and keep to your ongoing commitments. Compare this to mainstream lending which may require more detail and may be more strict with the delegation of your agreement, we want you to have freedom.

 

Whether you’re in manufacturing, engineering, hospitality, leisure, or any other industry, alternative finance can be a great option to support your business in its next stage, helping to increase revenue, decrease costs and improve service to your customers

ROI
ArticlesFinance

5 Renovations With the Best ROI in 2021

ROI


When remodeling your commercial property, one of the most important considerations is the return on investment (ROI). You want to make your property attractive to others so they’ll stop in or use your business. Plus, your clients and other companies see your building often, so you want to portray the right picture to them.

Any time you put money into your commercial property, you want to get that money back or even get more than what you put into the investment. Here are five renovations with the best ROI in 2021 to keep your business booming.

 

Remodeling the Kitchens

Most commercial properties have a kitchen of some sort or even kitchen appliances in a break room. Remodeling a kitchen in any building is bound to increase the property value. Freshening up the kitchen can be affordable, and it will have a great ROI in the end.

Add in some energy-efficient appliances and a new backsplash or countertop for a simple remodel. You don’t have to be fancy with it. Just keep it updated and modern.

 

Going Green

Implementing eco-friendly appliances and systems in your commercial property will lead to savings in energy usage. If your energy system is outdated, it’s time to take it out and invest in something newer and more efficient.

You can get a new heating and cooling system, install low-flow plumbing, put in a cool roof, and upgrade your windows. These investments will help you save money on utility bills and attract customers who have environmentally charged ideals.

 

Updating Safety Features

Older commercial buildings can be hazardous, especially if you haven’t renovated them for many decades. Safety should be your number one priority as the owner or operator of a commercial building if you have numerous clients and employees working there every day.

Safety features might include a fire alarm system, burglary alarms and even a designated shelter for inclement weather. Adding in new safety features will decrease the risk of a worker or visitor getting injured. Safety renovations will save you time and money overall.

 

Investing in Curb Appeal

The outside of your property is just as important as the inside when it comes to return on investment. Curb appeal renovations often bring in the highest ROI. Every time someone comes to your property, the first thing they see is the outside of your building.

Every year, take the time and money to invest in curb appeal. Add new mulch, keep the lawn looking trimmed and green, and add plenty of walking space for clients and customers. It will attract more people to your business when the outside looks just as clean and neat as the inside.

 

Upgrading the Cosmetic Features

Finally, you can boost your ROI by renovating the cosmetic features of your commercial property. For example, old flooring, chipped paint and fixtures that aren’t doing your building justice won’t bring you in as much money as possible.

Take the time to investigate your property and take note of things that could use improvement. Install new flooring, doors, lighting fixtures or anything else that needs to be updated. Keeping things fresh and modern will do wonders for your ROI.

 

Get to Work

Begin these renovations as soon as possible. Investing in your commercial property in these ways will bring you the highest return on your investment this year.

Homebuying
ArticlesFinance

Home buying: Is There Really a Financially Best Time to Buy?

Homebuying


Buying a home is one of the biggest investments we make in our lives. However, while the average house price in the UK is valued at £249,633, the cost of mortgages among other factors means that the total cost of the home-buying process can vary between individuals.

Even then, house prices continue to rise year on year. In England, house prices have increased by 7.6% in the past year. Competition spurred on by the housing crisis may mean that this increase is set to continue. This raises the question: when is the best time to buy?

‘Immediately’ is not always the answer. The true cost of a house will depend on your personal finances when you buy, and it can vary depending on which financial schemes you use to help you on your homebuying journey. Jumping into a sale too soon can cost more than it’s worth.

Here, we explore the options for buying your house, what schemes you can take advantage of, and when to buy your home.

 

Government schemes

On 3rd March 2021, Rishi Sunak unveiled his latest budgetary plan for the nation. Included in this were schemes for home buyers which may make the process of climbing the property ladder easier for many people.

 

Stamp Duty holiday extension

The Stamp Duty holiday extension reduces the tax paid when buying properties. Under this scheme, homebuyers will only pay stamp duty on properties above the value of £500,000. This scheme was set to end on 31st March 2021. However, the Government has extended this until 30th June 2021.

Buying a property within this timeframe could save homebuyers up to £15,000 before the tax break ends.

The sale of properties must be completed before the 30th June deadline. However, the opportunity to save on Stamp Duty could be extended based on your buying choices. One national housebuilder, St. Modwen Homes, has its own Stamp Duty holiday extension which is available on a selected number of homes until 30th September 2021. Buying a new build property with this company can help you save thousands beyond the Government’s June deadline when you buy houses in Eastwood or houses in Newton-le-Willows, among many other locations. The housebuilder has also launched a new ‘Mortgage Paid’ offer for those buying a new-build home. Available on selected homes at developments across the country, the company will essentially pay up to six months of your mortgage. So, if you’re ready to buy now, it may already be the best time! The offer is only available for a limited time, but being six months mortgage free could save you thousands.

 

5% mortgage deposit

A new mortgage scheme has enabled lenders to offer mortgages to more homebuyers with lower deposits from April 2021. The Government-backed 95% loan-to-value mortgage scheme means that first-time buyers and current homeowners will be able to purchase a home with just a 5% deposit.  

The scheme will run until December 2022. So, if you want to take advantage of this new offer, applying for a mortgage before this deadline may be the best time to buy. A lower deposit means that you will have more money in your pocket on moving day to help furnish your new home, or some extra cash to save for a rainy day.

The scheme is similar to the Help to Buy: Equity Loan which is solely available for first-time buyers who are buying a new-build home. So, if you’re a first-time buyer, there’s still plenty of time to save up for a mortgage deposit and buy your dream home.

 

First-time buyer?

As mentioned above, it’s now easier for first-time buyers to get onto the property ladder with help from the Government-backed Help to Buy: Equity Loan scheme. Similar to the 95% LTV mortgage scheme, first-time buyers can also use a 5% deposit to buy their home.

The key difference with the Help to Buy scheme is in eligibility and how the finances are organised.

Firstly, you must be a first-time buyer and be buying a new-build home, and you will need a 5% deposit of the value of the property. The Government will provide an equity loan of up to 20% of the property value (or 40% in London), which is interest-free for the first five years. This means you will only need to borrow 75% of the property value from a mortgage lender.

The total value of the property is capped depending on where you’re buying the house, but they’ll likely be above a first-time buyer’s budget. The regional caps range from £261,900 to £600,000:

 

Region

Price cap

East Midlands

£261,900

West Midlands

£255,600

South West

£349,000

Wales

£300,000

North West

£224,400

South East

£437,600

London

£600,000


This scheme runs between April 2021 and March 2023.

 

Best time to save

If it’s not looking like the best time to buy for you right now, it’s always the right time to save. For those buying their first home, Help to Buy schemes along with various ISAs mean that you can prepare for your homebuying journey.

Unfortunately, you can no longer open a Help to Buy ISA. But those with existing accounts can continue to deposit up to £200 each month. When you buy your first home, the Government will top up your savings by 25%. You can save up to £12,000 and receive an extra £3,000 from the government. This incentive gives you up until November 2029 to save and until November 2030 to claim the 25% bonus.

Another scheme that is open to new savers is the Lifetime ISA allowance scheme. You can put up to £4,000 into your ISA each year and the Government will top it up by 25% at the end of the tax year.

This isn’t a scheme for those looking to buy a home in the short term. The money must be in the account for at least one year. The money must also be used to buy your first home, otherwise, the funds are available to withdraw when you’re over 60. You’ll be charged a 20% withdrawal fee if you withdraw the money before you’re 60.

Remember, the higher the mortgage deposit, the lower the loan amount and, therefore, the lower the repayments.

It can be argued that this is an exciting time for those who are buying a home — especially for first-time buyers. New schemes mean that those with a proactive nose to hunt out the best deals can save thousands when they buy a home. But ultimately, there’s no set date for the best time to buy. It’s up to you and your finances. The new buying schemes will be useful for those looking to buy their home in the near future as thousands of pounds can be saved. But those who are planning ahead should aim to save as much as possible before they buy their home, as in the long term, larger deposits make the mortgage application and mortgage repayments easier.

UK Budget
ArticlesBankingCash ManagementFinance

Budget’s ‘Super-deduction’ Capital Allowance Offers Logistics Sector A Golden Opportunity

UK Budget
By Tim Wright, Managing Director of Invar Systems
Chancellor Rishi Sunak’s Budget announcement of a capital allowance ‘super-deduction’ could be a game-changer for many warehouse owners and operators.
The super-deduction, which will apply for two years, allows firms to claim 130% of their expenditure on approved plant and machinery against their tax liability. There is no list of qualifying expenditure, but just about any equipment that one might install in a warehouse or distribution centre appears to be covered and, importantly, ancillary expenditure such as building alterations and electrical system upgrades to allow equipment installation are specifically included.
The Chancellor’s aim, beyond kick-starting the post-Covid recovery, is to address the UK’s chronic underperformance in productivity growth, which was less than stellar even before the 2008/9 financial crisis (2.3% per annum), and since then has essentially flatlined at 0.4% per annum. Discussing the validity and meaning of productivity data notoriously starts heated discussions amongst economists but in the warehousing sector the issues are very real and quantifiable.
The gorilla in the room is of course the inexorable rise of e-commerce, currently representing 30% or more of trade in many retail sectors, and with similar expectations for on-demand fulfilment of orders increasingly seen in business and industrial purchasing. Clearly, fulfilling two dozen orders for individual items is immensely more laborious than serving the same volume by shipping whole cases or pallets – by a factor of 15 according to one US study – inevitably driving down productivity per hour worked.
E-commerce has also driven up product variety, and, critically, the volume of returns to be handled. Yet this comes at a time when securing and deploying warehouse staff is becoming increasingly problematic: many businesses have been heavily dependent upon European labour, which is unlikely to be earning enough to qualify to work in the UK post-Brexit, while creating Covid-safe working in labour-intensive areas is a major challenge. Along with rises in the minimum wage, this is pushing labour rates up.
In addition, increasing capacity by adding more space is not an easy option – e-commerce operators, and businesses hedging against supply chain disruption are snapping up all the available space in what is generally agreed to be an ‘under-warehoused’ country.
These challenges, although increasing, are not new and nor is the obvious solution ­– automation. But apart from the ‘marquee brands’ such as Amazon and Ocado, who have been able to invest large sums in green-field developments, the warehousing sector has been slow to adopt automation, and where it has, the tendency has been to create unintegrated ‘islands of automation’ at particular pain points.
However, for real productivity improvement a warehouse or fulfilment centre needs to address all its many interdependent activities simultaneously:  KPIs in receiving, in put-away, in picking, in packing, labelling and dispatch, as well as, in health and safety.
Importantly, this means a complete rethink of how the warehouse operates. A particular focus will be a move towards ‘goods-to-person’ operations, rather than having people spending most of their time walking unproductively between locations.
It’s easy to understand why many businesses have been reluctant to commit to change. Until quite recently, warehouse automation was ‘hard engineering’ – it involved not only major investment all in one go, but installation caused disruption, even complete shutdown, and was considered inflexible. Any change in requirements could only be accommodated by further significant investment and upheaval.
Happily, these constraints no longer apply. The development of autonomous mobile robots (AMRs) in particular has been a game changer, as has been the creation of easily reconfigurable sortation systems, re-locatable or even fully mobile pick faces, smart automated packing stations, and a raft of supporting technologies such as pick-to-light, along with Warehouse Management Systems that are becoming ever more capable, yet easier to adapt and use.
Such solutions are scalable and can be introduced flexibly, as funds allow. What’s more, they can be readily reconfigured to integrate with subsequent investments, largely off-line through the software, rather than by disruptive re-engineering that requires shutdown. They are also genuinely scalable – in many cases, simply adding more AMRs to the system can accommodate future growth or extension.
Rishi Sunak’s ‘super-deduction’ capital allowance offers the logistics sector a golden opportunity to invest in performance enhancing automation, giving fulfilment operations the boost to productivity needed to cope with the surge in ecommerce orders. It’s an opportunity not to be missed.
Finance team
ArticlesFinance

Finance Risks Rose 20% Over Past 12 Months: How Finance Departments Have Been Impacted

Ray Welsh, Head of Product Marketing, FISCAL Technologies
Finance teams have been one of the most heavily impacted internal teams over the past year as the COVID-19 pandemic turned the way we work on its head. During this time finance departments in all industries have experienced immense pressure, with their financial priorities rapidly changing; the need to tighten the purse strings and shifting operational challenges becoming the most common changes. While successful businesses have always placed a firm focus on ensuring their finances are in order, this has never been more of a focus than over the past year, while also being more of a challenge.
The pandemic put further pressure on finance departments to ensure their controls were as strong as possible during a vulnerable period that saw existing checks effected by the move to remote working and an increase in fraudulent activity. Learning from these challenges will support the future requirements of greater resilience and agility.

 

The new status quo

While the impact in some areas has been clear to see, there have been other areas in which things may have begun to slip through the system. With this in mind, we recently analysed our UK customer data* from the last two years to understand the true impact the COVID-19 pandemic has had on finance teams. Through this research, we found that finance teams have witnessed a 6% increase in reported input errors during invoice processing and a slower rate in the reduction of other processing errors over the past 12 months.
Crucially, FISCAL’s analysis found that across all sectors, the number of risks detected rose year on year by 20% on average, with the highest rise being 37% in manufacturing. In terms of risk value detected and prevented, the average increase across all sectors was 70% – a total of £240million in the 12 months to 23rd March 2021.
When the first lockdown occurred last year, there was much speculation over what would happen – organisations were worried about processes without access to paper documents and were rightly concerned about how remote working would impact security. But we quickly saw that the finance team is more resilient than first thought and the knock-on impact of the pandemic wasn’t as huge as originally predicted.
However, our data analysis did find that the rapid changes resulted in an increase in invoicing errors. Furthermore, the reduction in other processing errors declined at a 6% slower rate in the 2020-2021 period, compared to the same time the previous year. These insights clearly demonstrate that the move to working from home and a change in processes as a result of the pandemic led to gaps in existing control processes.
 

Filling the control process gaps moving forward

With many organisations now considering more permanent flexible working policies post-pandemic, this is an issue that organisations must address: Protecting the bottom line is always of the upmost importance, and as businesses rebuild and recover following the turmoil of the past year, it’s essential that they have the best measures in place to help them achieve this. Because of the rapid changes that had to happen last year, there will be an element of acceptance of some errors, as the acceptable price to pay for continued operations during the most acute phase of the pandemic response, but now that teams have settled into the ‘new normal’ this will not be acceptable going forward.
Organisations now need to ensure that their finance teams have the right tools to empower them to continuously and proactively protect working capital, reduce costs, and protect their P2P processing efficiency, whilst providing assurance to the business that strong financial controls are in place.
Investing in secure, end-to-end payable assurance solutions is worth its weight in gold when tackling third-party and internal threats. Not only do these solutions identify invoice payment errors before it’s too late, but also offers greater transparency. By offering finance departments a clear picture on any weaknesses or reoccurring issues – businesses are then able to address any inadequacies within their compliance processes.
Forensically analysing compliance breaches or process changes to find risks and where they originate will strengthen a finance department’s trust it has within its procedures. When  tasked with processing thousands of monthly invoices – having continuous, automated checking to validate approved invoice payments prior to the payment run will ensure finance professionals can uphold compliance standards – as well as reducing costs.
Having an end-to-end risk management solution also allows customers to forensically analyse 100% of supplier and supplier transaction data before payment. This is done by applying hundreds of checks using financial logic and sophisticated algorithms to achieve a complex analysis, with AI playing a significant role in making this process more effective. With the analysis taking place in the background, alerting your team only to the high-risk suppliers or transactions, their time is freed-up for higher value-adding analysis and modelling work.
Investing in the latest P2P risk management solutions will help businesses manoeuvre through the months and years ahead which will continue to present challenges that originated during the past year. Doing so will increase flexibility – the ability to make future changes without having to accept an increase in risks as the price to pay. Now that businesses are through the initial period of uncertainty, it’s essential we continue tackling the challenges that lay ahead. This means continuing to adapt, innovate and adjust. 
The prolific risks and demands on the Finance department, and the greater emphasis on saving and protecting working capital, means that forensic insights and protection of finances have never been so important.
*Analysis of 104 anonymised UK customers’ risk detection data over 24 months
Bills
ArticlesFinanceFunds

South West Businesses Piling on Debt, Bills and Overdrafts Mounting During Lockdown


A year on from the start of the pandemic, business finances in the South West have been badly damaged, with many business owners increasingly reliant upon costly sources of borrowing such as overdrafts and credit cards, a Business West survey has revealed.
40% of the 550 businesses that responded to the survey reported a higher level of indebtedness than a year ago, whilst a similar number (43%) had 6 months or less of cash reserves remaining, laying bare the huge financial cost of coronavirus despite extensive government interventions in the economy.
With pressures on firms growing after multiple lockdowns, 28% of businesses seeking out finance opted to utilise the Bounce Back Loan Scheme (BBLS) – a government backed initiative offering favourable interest rates and flexible repayment terms, but this scheme has now ended.
Salisbury-based 365 Linen Hire, which provides tablecloths and napkins to the weddings and events industries, highlights how emergency borrowing has taken the strain for many COVID-19 impacted businesses. Its Manager Richard Gould said that as hopes were dashed of the economy unlocking earlier in the year, the business sought out BBLS funds to gear up for a summer reopening, having “held out as long as possible”.
The use of overdrafts and credit cards by local businesses is also relatively high, at 22% and 19% respectively, considering that these sources of finance are more expensive than government backed emergency finance. They are also more common than the formal government backed Coronavirus Business Interruption Loan Scheme (CBILS), which only 16% of respondents chose, typically larger businesses within the survey respondents. The percentage of businesses borrowing money from family and friends is also quite significant, at 11%.
Bristol-based marketing agency Feisty Consultancy was one of the businesses that complained of receiving a rough ride from their banking provider over the past 12 months.
“During the first lockdown at least, the banks were helpful in reducing/removing fees,” said Feisty Consultancy’s Managing Director Vikki Little. “But this stopped some months ago and hasn’t been reinstated, despite the fact that the situation is now worse for many businesses. I wrote to my bank regarding this and was told ‘tough’ essentially.”
If the increased prevalence of short-term borrowing wasn’t worrying enough for the state of business finances, it is particularly so for the self-employed. Two fifths of respondents identified credit cards as their main source of financing during the pandemic – a finding which suggests that the self-employed (many of whom fell through the cracks of government support schemes) were unable to access cheaper, alternative forms of borrowing.
Against this background, Business West is concerned at a potential ‘finance crunch’ coming for small businesses. With repayments starting on government backed loans and the level of (often high cost) debt from financial institutions and others, the burden of this debt is expected to act as a drag on business recovery.
Unsurprisingly, after a year of lockdown restrictions, almost half of the 550 participants reported a deterioration in their cashflow, taking this to the lowest point in the last 3 years, with responses consistent across both the services and manufacturing sectors. “It is dreadful,” said Val Hennessy of the International House language school in Bristol – one of the businesses speaking out. “Virtually no income and little prospect of a real increase in income in the near future as international travel is banned or the costs of travelling to the UK for students is too off-putting. We cannot risk borrowing anymore because the future is so uncertain.” she continued.
For businesses such as The Zoots band, government financial support has unfortunately done little to make up for the income shortfall of a year ravaged by stop-start lockdown restrictions. Its proprietor Jamie Goddard revealed that he is “currently in £30,000 debt” adding “with SEISS grants of only £2500 that covered about 1.5% of my usual turnover” and hopes they “will get something eventually” to address the situation.
Aside from widespread financial worries highlighted by the survey, the region-wide study also found that almost 40% of South West employers had experienced staffing issues as a direct result of school closures.
Stephen Sage, Managing Director of ACES Ltd – an electronics firm based in Bristol – said that along with school closures: “Social distancing measures have slowed our production along with…home working,” before adding “material shortages have also compounded the problem.”
The cumulative effect of rising debt levels and lockdown restrictions on business growth and performance across the region is plain to see.
Over half of respondents reported that their turnover, profitability and cash flow have been negatively impacted as a result of the pandemic. The percentage of businesses impacted in the retail, tourism, food and drink, and consumer services industries is even worse (over 60%), with many delaying growth plans and experiencing reduced profit margins.
Despite the pain of the past 12 months, businesses are remarkably upbeat regarding the future prospects of the UK economy, with business confidence also showing signs of lifting following government’s announcement of an irreversible roadmap out of lockdown in England. On both measures, this represents a marked uptick when compared to the last quarter’s results.
 
Providing his assessment of the survey findings Business West Managing Director Phil Smith comments:
“Whilst the UK’s successful vaccination programme provides genuine light at the end of the tunnel, it would appear that businesses will have to wait a little while longer before they are able to bask in the glow of a dawning economic recovery.
“There have been few winners and very many losers as a result of the pandemic, a good proportion of whom have taken on added debt to help see them through.
“In the best-case scenario, we will see pandemic related debts repaid quickly as business activity begins to ramp up and accelerate as lockdown restrictions are lifted. In the worst case, a mounting debt burden stymies business growth and proves a long-term drag on the region’s economy.
“To see businesses utilising the flexibility of the BBLS is pleasing. However, the fact that more and more businesses are turning to credit cards and overdrafts to solve cashflow issues is concerning. The reliance on friends and family may also be interpreted as a market failure that government and lenders would be wise in addressing.
“We are worried about small businesses and the self-employed’s access to suitable finance during the recovery period. At the end of March both BBLS and CBILS closed, and CBILS was replaced by the successor Recovery Loan Scheme. However, this is available via commercial bank lending and is only government guaranteed for 80% of the loan. Our findings highlight a looming finance gap for smaller firms, given the particular finance needs of smaller businesses, who appear to not be utilising CBILS, perhaps because it is harder to access this more formal bank form of financing. We think further government finance schemes for these smaller firms may be needed.
“After business’ most challenging year in living memory, it goes without saying that eyes remain fixed on the roadmap out of lockdown, as only then do we have the realistic prospect of healing the wounds inflicted by the pandemic and repairing business finances.”
Hospitality
ArticlesFinance

Post-pandemic Financial Concerns: How Hospitality SMEs Can Make a Change

Hospitality


There’s no denying that the hospitality industry has been detrimentally hit by the events of the coronavirus pandemic. With the UK’s continuous lockdown measures forcing the part-time closure of hospitality and entertainment venues, the economy is faced with the largest recession since records began. Other than being subject to tightening restrictions limiting the regular functioning of hospitality venues, business have also had to invest more into safety equipment such as PPE for staff, cleaning products, and staff training programmes- causing business revenues to be dramatically impacted.

However, with outdoor hospitality having now opened on the 12th April and all indoor from the 17th May, there is now some light at the end of the tunnel for many. In the wake of the darkest days of the pandemic, when the nation experienced several tough lockdowns, this only highlights the importance of SMEs assessing their financial situation during financial adversity and indeed, in preparation for it, should it happen in the future. It’s vital that finance departments recognise opportunities to increase revenues, save on costs, and forecast potential issues that could occur.

With this in mind, Wisteria Accountants take a look at how SMEs in the hospitality sector could transform their businesses finances.

 

Fiscal Control and Financial Planning

Throughout the pandemic, the hospitality sector has learnt that they must prepare for every circumstance. Sudden decisions to protect the public are understandable during these adverse times. For example, last year hospitality venues had been restricted by a 10 pm curfew, further reducing footfall in bars and restaurants. This emphasises the importance of financial planning.

Functioning on an operating budget is expected for hospitality businesses. These budgets include the cost of wages, rent, and products. However, with the volatility of 2020, this budget type may not be thoroughly effective. Businesses have had to find additional money for cleaning equipment and staff training.

To help spark ideas as to how expenses could be saved, borrowing budget templates from other industries could help with this. For example, zero-based budgets create an optimistic perspective on cost-saving processes. Instead of looking for where cuts can be made, this budget allows finance departments and managers to argue why they should spend. In a zero-based budget, department leaders must justify every expense based on their utility and potential to drive revenue.

A 91 per cent majority met or exceeded their financial targets using this approach, according to one survey. The money saved by zero-based budgeting is often reinvested for growth. However, businesses may want to consider saving for future financial adversity, especially considering the pandemic. Each new period requires a new budget, allowing finance departments to understand the effectiveness of each approach and where further investment can be made.

 

Purchase management and cost control

For most sectors in the UK, the pandemic has caused revenue losses. However, this is especially detrimental to hospitality industries. The gross profit margin of a business in the hospitality sector is usually 30 per cent, making it one of the lowest profit margins compared to other industries. Even industries with lower profit margins, including construction and car sales, can alleviate the low margins with higher gross profit. Hospitality businesses cannot do this.

With this said, understanding the balance between a reflective cost and a fair one for your products and services is important. While most businesses will want to offer customers a fair price for food and drink, the finance department should identify the true cost of your service. A reflective cost breaks down expenses.

For instance, it would be important to consider the processes that are used to create your service and how much they cost when setting rates for a hotel room. This includes:

  • Staff wages for receptionist and cleaners

  • Electricity and water

  • Breakfast services

  • Interchange fee

  • How occupancy is affected during different seasons

  • How it may be impacted by the continuing pandemic

It’s a given that other expenses could be discovered too. But understanding how these costs are reflected in your price makes it easier to maintain a healthy profit margin.

To help reduce costs that ensure contracts are reliable and effective, a purchasing manager is advised. Finance departments should negotiate on your business’s behalf, with a quick understanding of how each contract can affect revenue and profitability. For example, some drink suppliers may provide free glasses but may be more expensive overall than suppliers who don’t. How the cost of glassware affects this profitability should be considered.

 

Reviewing your payment methods

When it comes to private sector employment, the hospitality sector is the third-largest sector in the UK. It employs 3.2 million people, producing £130 billion in economic activity and £39 billion in tax for the government. However, it’s important to remember that the sector is broad and variable. Many industries offer different experiences with the unified aim to deliver good entertainment, service, and reception.

However, it’s the expenses and how consumers pay that highlight how the industries differ. For example, you may expect a hotel to receive credit card payments more than a restaurant, who may primarily process more debit cards. A licenced bar or pub may accept more cash than the other examples. These differences have a large effect on your finances. As we move towards a cashless society where card payments are more accepted due to their low contact and hygienic nature, it’s important to understand how your finances may be affected.

For instance, it is a priority that your business reviews if the correct interchangeable fees have been paid after using VISA or Mastercard processes. Interchange fees represent 70 to 90 per cent of all fees paid by merchants to banks. For a sector that has relied on cash, it is clear how the pandemic has changed spending habits and how the increase of card payments will affect your finances.

To help gain a better understanding of the best practices in the sector and to find out what other businesses are paying, companies should speak to their audit accountant.  While auditors will not breach other company’s confidentiality, they will be able to aggregate their knowledge of what is going on in the sector and assist you immensely.

It’s vital that SMEs re-assess their finances since there is so much uncertainty as to how the hospitality sector will financially recover from the events of the pandemic. They need to assess the most effective ways to increase revenue and profitability. Finance departments can be a useful business partner in creating business strategy, whether they highlight future adversity or give a reflection of current expenditure. Your finance department should at the forefront of your business, guiding it through this difficult period.

Businesses reopening
ArticlesFinance

Reopening of Retail Could Create Perfect Conditions for Economic Growth Over Summer

Businesses reopening


Despite Lockdown restrictions and post-Brexit trade disruption, February saw the UK economy grow by 0.4%, according to the ONS. Although not quite a boom, this minor growth in economic output is an important foundation for the months to come, and brings ever increasing optimism that the reopening of the economy through April will bring with it an even better performance. “We’re looking for a 4-5 per cent bounce in GDP in the second quarter,” said James Smith, economist at ING. 

February’s improvement from January’s slump was in large part due to the construction sector, which increased by 1.6% thanks to both new work and repair and maintenance on existing rooms and structures. Lockdown has both provided an opportunity for home improvements, as well as new challenges for the building sector as it adapts to Pandemic restrictions and safety requirements, although Ben Dyer, CEO of Powered Now, added that “restrictions seemed to have had a negligible impact on the construction sector so far.”  

As of September, Santander estimated that three in five (61%) of homeowners carried out a DIY or renovation project during lockdown. To add to the economic activity caused by these home improvements, Powered Now CEO also noted that “the Stamp Duty extension has been a house building bonanza, so growth in the industry is no surprise”.  

Now shoppers can visit their local high streets, it is hoped that the construction sector can pass the torch to the retail and hospitality sectors in driving Britain’s GDP growth. Research by Cornerstone Tax, a property tax firm working with small businesses, illustrates this highly positive consumer sentiment – with 53% of the UK wanting to spend their money at local, independent stores. 13% even want to start their own business. This is backed by PwC, which charts the highest consumer confidence since their records began. At +8, it is an incredible 34 points higher than at the start of the pandemic 

This shows that through the restrictions we have all faced, our tastes have changed. It seems the British public want not just to shop physically, but also want to shop at more specialist and independent stores, hinting at a shift in sentiments. We are now more sympathetic and supportive towards independent stores that are part of a community, rather than part of a corporate chain, and the intrepid entrepreneurs behind them that have survived so far through the Lockdowns. 

We have also seen a trend of deurbanisation in the UK – as people leave major cities to look for cheaper properties, rent and more living space now they can work from home. This has obviously effected house prices, with rural areas seeing the biggest rise and inversely London prices falling. However, it has also distributed more consumers throughout more of the UK, which means more spenders and saving stimulating economic activity throughout more of the UK, and crucially, to regions that have long needed it. 

Discussions around saving the high street are nothing new, and have been a part of the British political landscape for years, cropping up at particular moments of difficulty such as the 2008 recession, and now the Pandemic. It is not just good news for the traders themselves, or the shoppers who get to experience something more special, but also the economy as a whole. SMEs account for two thirds of employment, and half of national GDP; meaning this new focus on the high street is good news for everyone. 

David Hannah, principal consultant at Cornerstone Tax, discusses the optimism felt by business leaders in the UK: 

“It has been a tough year for many, but the light is truly at the end of the tunnel for a nation of shopkeepers who can finally serve the public. The 12th April was a vital first step towards reopening the economy safely, and it has come just in time for many – particularly the hospitality and physical retail sectors that have struggled so much through various restrictions on economic life. 

The news that the economy grew in February, even if only marginally, is welcome news for business leaders throughout the UK. This growth is only expected to go one way: up. If the UK can keep infections low, and the vaccine rollout continues uninterrupted, April should be a month of elation as pounds head to the high street.” 

Property investment
ArticlesFinanceFundsReal Estate

Top Tips to Raising Property Investment Finance in 2021

Property investment


In the UK, property remains one of the most resilient asset classes. From first-time buyers to portfolio landlords, getting established on the property ladder remains a popular way for many to grow their wealth. Depending on an individual’s circumstances and ambitions, Arbuthnot Latham, Private and Commercial Bank, explains the various routes to securing finance for property investment in 2021 and beyond.

 

Property finance for individuals

Many individuals, who have enough capital, will look to supplement their income by acquiring a second or third property on top of the one they live in. This will almost always involve a personal investment of capital and additional funds secured via a loan or mortgage.

The appeal of becoming a buy-to-let landlord is not just the relatively good performance of the UK residential property market, but the fact that the value of the asset can be increased with a proactive approach to property maintenance and improvement. Until now, property has been a very stable asset class, and is one that empowers the owner to increase its value over and above standard market movements. It is important to note, with any asset class, that previous performance is not an indicator of future performance.

If an individual is looking to make this sort of investment, any finance they are able to secure will be contingent on their own circumstances. For example, will they be able to show how they would personally cover a shortfall if rental income doesn’t cover interest payments?

 

Other factors banks consider with individual buy-to-let mortgage applications

Credit rating

Whether they are entering the property investment market for the first time or expanding their portfolio, a clean credit score is an essential part of the puzzle. Small issues like missed payments might not make a huge difference, but County Court Judgements or missed mortgage repayments will be a significant barrier to securing the finance they need.

Minimum income

Most lenders in the UK require a minimum income to consider eligibility, but there are options for those with a lower income threshold, and there are even options available that have no income requirements.

Existing portfolio or assets

What lenders are willing to offer will change depending on if the individual is new to property finance or already own properties. Some lenders won’t consider landlords who own several properties, but this varies across the UK.

 

Property finance for portfolio landlords

Individuals who own four or more mortgaged properties become what’s known as a ‘portfolio landlord’. When they pass this threshold, there are certain expectations on banks regarding due diligence. From here, it’s not just about their own personal circumstances. For example, a bank is required to know the status quo of the rest of their portfolio. They need a deeper understanding of how the assets might interact and will also want to gauge their understanding of the market they’re operating in.

 

Factors banks consider with buy-to-let applications

  • Do they keep accurate records? There are many conditions to satisfy buy-to-let properties (fire safety certificates, guarantees for electrical items, insurance, etc.) More important still for HMOs: annual gas certificates. If they’re disorganised, cannot produce documentation when asked, or their business approach obstructs a bank’s due diligence, this is a red flag when considering a finance application.

  • The bank wants to know that a buy-to-let landlord is competent: aware of their obligations and best practice

  • A portfolio landlord should understand the market they want to operate in. Banks look for investors who have a good handle on their local area. A speculative application – not rooted in a comprehensive business plan – means more risk for the bank and a higher rate of interest.

Portfolio landlords should make sure they chose a lender who is right for them. If the individual are vastly experienced, cheaper rates found on the high street can be the right approach. A note of caution here is that as different lenders’ appetites change, it could result in an ongoing dynamic of regular refinancing to achieve the cheapest rate.

Other investors might move away from -the potentially lighter touch relationship approach of the high street, and opt for a longer-term relationship of consistency where their banker understands their circumstances, has years of sector expertise and can tailor solutions to meet their needs.

This is particularly helpful when circumstances change. The pooled collective knowledge of a real estate finance team can be particularly valuable to help a portfolio landlord adapt when circumstances change.

Start Up
ArticlesFinance

Financial Tips For Starting Your Own Business

Start Up
Stuart Clark, Managing Director at Russell & Russell Business Advisers
If one positive emerges from the miserable pandemic year, we have all endured, it is that the number of people in the UK who want to start their own business – to take control of their own destiny – is on a strong upswing.
And it is not just a case of people who have lost their jobs casting around for alternatives. Recent research shows that one in five adults are planning a start-up, a figure which rises to 34 per cent among 18 to 34-year-olds. Only 6 per cent said it was because they had become unemployed.
So, it would appear, the entrepreneurial flame has not been dimmed by the ravages of Covid, but while the ambition to branch out on your own is admirable, it is only prudent to be aware of the pitfalls as well as the pinnacles of being your own boss.
What kind of business is for you? Where does my reward come from? What about tax? How do I price my services? How do I find new business?
These are all valid questions, and it is vital to set out your stall correctly right away, as getting it wrong at the start can prove very costly.
First, it might pay to dispel misconceptions aired in the national press that self-employed people enjoy more tax advantages than employees. This is just wrong. The self-employed have no option as to how they pay tax on profits. That potential benefit applies to owner managers of limited companies.
And it should be remembered that while directors of their own companies may pay slightly less tax, they also contribute a lot more to the economy through corporation tax, VAT, and employee PAYE – and they enjoyed little Government support during the pandemic.
Here are some fundamentals to consider:
 
STATUS: Limited company or sole trader
Sole trader status may be fine for one-man-bands, but businesses seeking investment will want to be a company. There are also potential benefits that companies are thought to be bigger entities than sole traders, though this is not always the case, with customers and suppliers alike.
In addition, whichever structure you choose will affect how you can treat losses, how you pay yourself and how you are taxed.

 

REWARD: How do I pay myself?
Sole traders are taxed on profits. If you make £50,000 profit and take £2,000 a month in remuneration, you are taxed on £50,000, not £24,000.
In a company, profits are taxed at a flat 19%, then shareholders are taxed at different rates on dividends they may take. Roughly speaking, salary plus dividends will result in greater tax savings than salary alone. In the example of £50,000 profits before tax which are fully distributed to the shareholders, this equates to approximately £6,000 extra cash in hand / cash in the business to reinvest each year.

 

What about VAT?
You need to register for VAT if you have sales of more than £85,000 in a rolling 12-month period, whether you are a company or a sole trader, though there are some exempt sales such as medical services.

 

TAX: How much do I pay?
How long is a piece of string? Everyone’s circumstances will differ. What to remember is that paying tax should be a positive – it means you have a successful business. There are ways that you can reduce your liability.
Also, be aware that the first year you do a personal tax return, you will have to pay 150% of your liability, as HMRC will want you to pay 50% upfront for next year. Sole traders and directors need to complete personal tax returns.

 

ACCOUNTANTS: Do I need one?
Yes. That is the simple answer. Accountants are professionals who are trained to make your business more tax efficient and help you manage your finances. They are impartial, scrupulously fair and, above all, on your side. They should also be an investment NOT a cost. They should help you to save money or grow your business.

 

PRICING: How do I get it right?
Beware of discounting. Doing less work at the right price instead of lots of work at the wrong price can have a positive and healthy effect on margins. You need to know who your ideal customer is and what your ideal price point is. This is where a good accountant can make all the difference.
If you buy something for £70 and sell it for £100 then your gross profit margin is 30 per cent. To make £300 you need to sell 10 units. If you gave a 10 per cent reduction in price this would mean your gross profit per sale would drop to £20.
So, to make £300 you need to sell 15 units. A 10% discount means you need to do an extra 50 per cent more sales to make the same amount of money.
 
BUSINESS: How can I keep it coming in?
You can never make it too easy for your customers to do business with you. Get to know them, understand your ideal customer and where they “hang out” so you can target them, either online or at networking events, and consider partnerships with other businesses and use referral schemes.
Marketing is like a little wheelbarrow. You can put all you want in it, but unless you push it you don’t get anywhere!
 
ANYTHING ELSE?
Insurance. As a sole trader you are personally liable, whereas a limited company’s liability is, yes, limited.
Wills and power of attorney. With luck, your business will become an asset and therefore part of your estate. And without power of attorney, money could be trapped in the business in event of personal misfortune, leaving employees and suppliers unpaid.
Remember, accountants think about all the matters above so that you can concentrate all your energies on building the business of your dreams.
Success is there for the taking. Good luck.
Fintech purchase
ArticlesFinanceMarkets

Fintech Platform Butter Raises £15m

Fintech purchase


Butter, the London based fintech platform that started life as the UK’s first Buy Now Pay Later (BNPL) travel agency, has just closed a £15.8m funding round to accelerate the rollout of its responsible open-banking based BNPL shopping app.

 

Who has invested?

Butter has raised £15.8m via BCI Finance, the credit arm of London based venture builder Blenheim Chalcot, as well as a number of other private Angel investors in order to expand Butter’s offering.

 

What is Butter?

Irritated by the lack of flexible payment options whilst planning a holiday, co-founder Timothy Davis was inspired to build the UK’s first buy now pay later travel agency, enabling travellers to spread the cost of travel arrangements over time, with full payment not due until after the trip.

Together with co-founders Stefan Hobl and Nik Haukohl, Butter achieved full FCA regulated status in 2017, and 4 years later, Butter has evolved into a British fintech platform with over 100,000 customers, offering instalments across every consumer vertical and flying the flag against other sector giants such as Klarna.

Butter quickly established a firm foothold in the travel and tourism industry as the UK’s first BNPL travel agency, providing a flexible, cost-effective way to book travel, with full payment not due until after the trip. A ‘layaway for getaways’.

When the pandemic brought the travel and tourism industry to a grinding halt two years later, Butter adapted fast, launching the UK’s first BNPL shopping app alongside their travel offering, enabling customers to spread the cost of any purchase from any online store.

 

What makes Butter better?

Unlike other BNPL providers, Butter’s unique “over-the-top” (OTT) solution enables customers to spread the cost of purchases with every store on the internet, without requiring merchants to support Butter via a technical integration. Instead, Butter’s in-app universal checkout takes care of paying retailers, with customers then able to repay the costs over 2, 3, or 4 monthly payments.

Popular stores in the Butter app include Amazon, Argos, BooHoo, ASOS, H&M, Zara, Hugo Boss, Sports Direct, AirBnB, Currys PC World, Ao.com, IKEA and more.

As the UK’s first FCA regulated BNPL provider, Butter has successfully developed a unique credit decisioning process with affordability at its core, utilising open banking and machine learning to ensure that lending is responsible and that customers are only able to borrow amounts based on what they can afford.

Timothy Davis, Co-Founder and CEO of Butter, commented: “Our goal at Butter has always been to provide consumers with a simple and responsible alternative to credit cards and loans, enabling them to instantly spread the cost of anything from a takeaway to a holiday over a simple and transparent instalment plan, all within one easy to use account.

We want to remove the stigma surrounding the buy now pay later offering and empower consumers by allowing them to budget and spend intelligently and in a manner that suits their individual financial needs.

We’ve set out to achieve this by building a platform focussed around transparency, responsible lending and the ability to transact on bigger ticket items compared to other providers, whilst also offering more choice to customers through our unique over-the-top solution, which enables consumers to shop any online store in existence with Butter.

The funding that we have secured via BCI will help facilitate the scale-up of our business as we continue to pioneer innovation in the buy now pay later space.”

 

Paul Maurici, Investment Manager at BCI, commented: “Our mission at BCI is to be the funder of choice for UK Fintech’s looking to scale.

Butter is a young and ambitious company, which combines a tech-enabled approach to lending alongside impressive customer delivery capabilities.

With its FCA authorisation already in place, the business is well placed to continue strong growth while assisting its customers in managing their money better.”

Tech company investment
ArticlesInfrastructure and Project FinanceMarkets

Why Investment in Small UK Technology Companies Could Provide Sustainable Returns

Tech company investment

By Andrew Aldridge, Partner at Deepbridge Capital

The UK is widely regarded as one of the greatest places to start an innovative tech company. This shouldn’t come as any surprise given the world-class academia we have to offer, the legacy of innovation and, importantly, the funding opportunities available to entrepreneurs. Of course, we also have a language advantage for global businesses which shouldn’t be underestimated.

There can be a temptation to look to the USA and the glamour of Silicon Valley, and indeed this may be where some companies ultimately end up in order to achieve their ‘Unicorn goals,’ but that doesn’t tell the whole story.

At Deepbridge Capital, we are fortunate to work internationally and all of the aforementioned points are regularly raised as reasons for growth-focused tech companies wanting to be involved in the UK ecosystem, as well as the other sector-focused appeals of the UK.

For example, for medtech companies, the rubber stamp of having the globally-recognised NHS trialing or adopting a device can be of massive significance. Such a testimony opens doors with healthcare providers elsewhere and the scalability that offers.

To a similar degree, fintech can find a natural home in the UK, as a global financial hub, with initiatives such as the FCA Sandbox providing a test bed which can empower fintech innovators to prove concept and showcase innovation.

I could continue by looking at legal tech, biotech, agritech and many more. Indeed, the UK has developed a number of ‘hubs’ across the country to provide opportunities for collaboration and innovation in specific fields of tech. Often these hubs are associated with academia and other influential partners. Outside of the ‘golden triangle’ of London, Oxford and Cambridge, examples of such hubs, include Liverpool as a gaming and virtual reality hub (indeed our investee company vTime is at the forefront of this); Manchester as a digital hub but also the home of graphene (again, we have helped a great company in this sector, Flex-G, create a Manchester base); Edinburgh and Bristol as digital innovation hubs, and numerous less well known areas such as west Wales (working with the likes of the University of Aberystwyth) focussing on agritech.

Naturally, our excitement in all of this is centred on the investment opportunity. As highlighted earlier, the funding ecosystem in the UK is a big reason for the success of tech companies here. This is particularly true in what is often the most difficult funding stage, being the first commercialisation funding or early Series A funding.

The first funding a company received is usually self-funding, or the attraction of funding from friends, family or a supportive business angel. This is usually based on a ‘good idea’ and goodwill towards the founder. This funding tends to be relatively small ticket and, in reality, is an investment ‘punt.’

When you then get to later funding rounds, later Series A and Series B, tech companies are usually expected to have significant recurring revenues and there is no shortage of funding opportunities both here in the UK and elsewhere.

In both of these examples, the UK has a strong track record of funding, but where the UK really excels is at the stage ranging from ‘seed’ funding to early Series A. At this point, a tech company is likely to be beyond the cheque-size which can be offered purely on goodwill, but is unlikely to have the revenues to support interest from the VC, PE and institutional funds looking for a de-risked opportunity.

Historically, this funding gap has been described as the ‘chasm of death,’ as it is often where a company will choke due to lack of funding. However, this is an area where the UK has a significant competitive advantage on international peers; the Enterprise Investment Scheme.

The Enterprise Investment Scheme (EIS) provides the incentive to investors to support growth-focused companies through unparalleled potential tax reliefs. Over recent years, between £1.5bn and £2bn of funding each year has been availed to growth-focused companies under EIS. Founders and investors globally regularly remind us of their jealousy of the UK in this regard – it is important that UK investors and financial advisers are aware of this global envy and the fortunate position they are in.

The tax reliefs offered under EIS provide a degree of risk mitigation for investors, with early-stage investments naturally being high risk, but it is critical that investing at this stage is undertaken with due care and in conjunction with a sector-experienced investment manager.

This stage of investing has great growth opportunities and taking a company from proof of concept through to a significant annual rate of return, can be a significant value inflection journey. At this point of investing, we are looking for companies which have used their initial funding to prove concept and develop initial market traction, with our funding then empowering the commercial growth to subsequently attract large-scale co-funding for corporate growth and then an exit for investors.

There has never been more technology innovation around us and in a digital world it is natural that this is where investment opportunities will lie. If investors are looking for growth, then UK tech is a great place to be and arguably the growth point is exactly where EIS funding is applicable.

We have already seen the shift of tech companies becoming the world’s largest, so it is not a surprise that tech is at the heart of most investment portfolios. However, the long-term growth opportunities often lie at an earlier stage and the UK is a great place to empower this, thanks in part to EIS. And, why wouldn’t investors want tax reliefs, CGT free growth and potential loss relief?

Retail investor
ArticlesFinance

The Rise of the Retail Investor and Armchair Financial Analyst

Retail investor

A perennial gamechanger ever since its influence reached into households, the internet continues to upend industries, disrupt cultural norms, and challenge the status quo. Name your sector – media, retail, finance, etc. – and the internet age has had a lasting impact.
When it comes to finance, nowhere is this more apparent than the rise of the “retail investor” and the armchair financial analyst. Often one and the same, these individuals are determined to make money in the markets and manage capital gains wealth without going through the traditional channels.
With that said, it would be inaccurate to claim these “average joe” investors and analysts are doing it all by themselves. The power behind the Secretlab chair is the myriad of online firms providing reliable financial advice and services at affordable prices and with minimal commitment.
One-stop-shops for financial services seem to be the most popular starting point. Financial service firms like Strategic Consulting offer a range of products and services that customers can evaluate with their specific situation in mind. Virtually everything can be done digitally, which is a significant selling point to those interested in protecting their finances while uncertain about handing the keys over to a fiduciary firm.
The next step for today’s retail investor is to find a user-friendly brokerage firm. The recent drama involving Gamestop and AMC Theater stocks involved an army of these investors utilizing app-based Robinhood broker services, which melted Wall Street several days before pressure forced company leaders to pull the plug.
As a result, users flocked to existing brokerage firms such as TD Ameritrade and E-Trade. That transition was made possible by the user-friendly updates these old school firms have made in recent years.
Despite the backing of qualified services and the demonstration of informed decision-making, today’s retail investors and armchair analysts continue to be considered second class compared to the more traditionally accepted financial professionals. It’s a slight that isn’t lost on these upstarts, many of whom are ex-industry insiders who – for one reason or another – are now hellbent on upending the status quo they once considered the standard of success.
It’s worth noting that amateur investors and hobbyist financiers are nothing new. Lacking the wherewithal to avoid financial ruin, their reckless investment choices were partially responsible for the infamous stock market crash of 1929. Over decades, the difference is the amount of influence this faction has on the overall health and destiny of the markets.
The role of low-rung investors and financiers was almost entirely sidelined in the decades after the Second World War. It was only with the advent of the internet that their significance and influence regained momentum. Setbacks, such as the 2008 crash and ongoing pandemic-related recession, are the only signs of distress when examining the situation in its entirety.
One thing is for certain: retail investors and armchair analysts are here to stay. It’s just a question of how much sway they’ll have over the markets in the months, years, and decades ahead. If the past is prologue, the influence will ebb and flow.
Build credit
ArticlesFinance

How to Get a Jump Start on Building Credit

Build credit


You may not be entirely happy with where your credit score is. However, there might be a few quick ways for you to bring it up a bit. It depends on why it’s down, but you may have the ability to add as many as 100 points relatively quickly. Let’s take a look.

 

Making Payments

Maybe you went on vacation – to Las Vegas, or anywhere really. Say while you were there, you got one of those Las Vegas loans. If you can make a few small payments, known as micropayments, throughout the month, that can assist with keeping those balances down and can lead to a few additional points on your credit score. Making a few payments throughout the month affects what’s known as credit utilization. After your payment history, this particular factor highly influences your overall credit score.

 

Credit Limits

If you get an increased credit limit on your credit cards, yet your balance remains the same or lower as you pay it down, this instantly lowers your credit utilization, and this can lead to a higher credit score. Call the issuer for your cards and ask if they can raise your limit without performing a hard credit inquiry, as this can temporarily make your score go down a bit. If you’ve had an increase in income or added a few years of positive credit history, you may have a good shot at getting your limit raised. 

 

Pay Your Bills

There isn’t a strategy out there that has the power to improve your credit if you’re late paying even just your utility bills. You see, your payment history is the single largest factor that affects your credit score, and making late payments can actually appear on your credit report for as long as seven years. If you make a payment 30 days or more late, call your creditor as soon as you know you’ll be late. Make payment arrangements, and ask them if they’ll consider not reporting the late payment to the credit bureau. The worst they can do is say no. Then, do all you can to bring the account current as quickly as you can.

 

Dispute Errors

Even if you’re making weekly payments on your credit cards, a mistake on one of the credit reports can pull your score down quickly. By the same token, repairing this can quickly make your credit score go up. Everyone is entitled to a free credit report each year from each one of the credit bureaus. Request these reports and make sure there aren’t any mistakes, such as late payments or even negative info that (due to age) should no longer be listed. Dispute any errors you see and make sure they are removed.  

 

Keep Cards Open

If you’re in a hurry to raise your credit score, you need to know that closing any credit accounts can actually make your mission a bit more difficult. Closing even a single credit card will mean that you lose the credit limit on that particular credit card when taken as a part of your overall credit usage. This can actually bring your score down a bit. Keep your cards open and use them periodically so that the card issuers won’t close them on their own.

Finally, mix things up a bit. If you only have loans or credit cards, think about getting a different type of credit that you don’t already have, if only to raise your score. If you improve your mix of credit – say, having both revolving credit and installment accounts, you’ll be giving your score a boost. 

Personal finance
ArticlesFinanceSustainable Finance

Answering the Nation’s 10 Most Common Personal Finance Questions

Personal finance

By Annie Charalambous, Content Manager at ETX Capital

The pandemic has drastically impacted our lives and our savings. Research shows that while lower-income households across the UK have had to dip into their savings to stay afloat, higher-income households have grown theirs.

It seems everyone is looking for new income streams and ways to get more bang for their buck – including navigating the often-complex world of savings and investments – and they’re turning to the internet for advice on where to start.

That’s why we’ve filtered through the noise to give you the nation’s top 10 most commonly asked questions around personal finance – and answer them too.

 

Which shares should I buy (49,500 monthly searches) and how? (9,900 monthly searches)

The shares you choose to invest in will depend on various factors, including the level of risk you’re willing to take, the overall market climate, and much more. Before you do buy (or short) any shares, you’ll want to do your homework on both the company and the industry at large.

For example, if you see ABC Manufacturers’ stock price is up this year, before buying in, you may want to look at how their performance stacks up against competitors like XYZ Manufacturers or view their most recent quarterly report.

There are always opportunities in the market to suit every budget and experience level, but much like picking the winning lottery numbers, there is no winning formula for what to invest in, or when.

 

Which companies are in the FTSE100? (40,500 monthly searches)

The FTSE100 is made up of the 100 largest (qualifying*) companies (by market cap – available shares multiplied by current share price) listed on the London Stock Exchange. The index acts as a major indicator of the UK stock market at large. Its 3 largest constituents are Unilever, AstraZeneca, and HSBC.

*To qualify, a company must meet requirements set out by the FTSE Group.

 

What is an ISA? (12,100 monthly searches)

An ISA, or ‘Individual Savings Account’, is a savings account available to anyone in the UK over 16, without taxing the interest earned on it. Considered a lower-risk investment, the drawbacks are that you can only hold one active ISA per year, and you are capped on how much you place in it (currently at £20,000).

There are two kinds of ISAs: a ‘cash ISA’, whereby you pay into it like you would a traditional savings account to earn interest, and a ‘shares ISA’, where your money is invested in stocks and bonds and neither the interest – nor any profit – is taxed. While the latter has more potential for greater returns, being tied to the stock market also means a greater risk of losing money.

 

What are bonds? (8,100 monthly searches)

A bond represents a loan, typically given to a body like a government or large company, by an investor. Governments may opt to issue bonds to raise money, and then agree to buy these bonds back at a later (agreed-upon) ‘maturity’ date. Bonds are considered a low-risk investment and can be a good way to diversify your portfolio with minimal exposure.

 

What is an ETF? (6,600 monthly searches)

ETFs, or ‘Exchange-Traded Funds’, are an asset type similar to index funds, in that they comprise of different stocks – usually representative of a particular sector – and are typically managed by larger companies (Vanguard, iShares, etc.). However, index funds are connected to exchanges and correlate more with that country’s economy and stock market.

 

What is a hedge fund? (5,400 monthly searches)

A hedge fund is an aggregated pool of money from different investors that is managed by an institution or individual. The hedge fund manager closely monitors the investment and is able to react and adjust accordingly (as per their strategy).

 

What is pension drawdown? (5,400 monthly searches)

Pension drawdown occurs when you continue to invest into a pension whilst simultaneously withdrawing money from it, essentially giving yourself a steady ‘income’ out of your own pension pot.

 

What are dividends? (4,400 monthly searches)

Dividends are a portion of a company’s profits that are distributed among its shareholders.

For example, if you buy 10 shares in ABC Manufacturing and they pay an annual dividend of £5 per share, you’ll be eligible for £50 back in your pocket that year – if you’re still holding those shares at the ex-dividend date.

 

What is cryptocurrency? (4,400 monthly searches)

Cryptocurrencies are digital-only currencies held on the blockchain. Unlike regular ‘cash’ currencies, cryptocurrencies aren’t tied to any central bank and are therefore unregulated, volatile, and considered a high-risk investment.

Those are coincidentally the same reasons for the relatively mass adoption over recent years – as more institutions accept and even integrate the likes of Bitcoin, XRP, Ethereum, and countless others, these assets risk becoming a part of the very world they were created to challenge.

Alternative Investments
ArticlesFinanceTransactional and Investment Banking

Beginner’s Guide to Alternative Investments

Alternative Investments

Alternative investment assets like collectibles, art, cryptocurrency and loans are attracting an increasing number of retail investors by offering low buy-in, high returns and efficient diversification options

Every few years the line between traditional and alternative investment opinions is re-drawn, as many alternative investment options become more and more mainstream. Everything outside the traditional investment options that are typically accessed through traditional financial institutions –  falls into the category of alternative investments. They do not include, what is now considered traditional investment options: ETFs, gold, bonds, pension funds, and others.

Alternatives category may include both physical and virtual assets, spanning real estate, art, fine wines and aged alcohol, rare items, cryptocurrency, loans, private company debt or ownership, and collectibles. There is no limit to collectible investments, as value can be found in designer sneakers, baseball cards, or even Barbie dolls.

Alternative investments can create both long-term appreciation and immediate income streams. One of the most active investor groups in alternative investing is retail investors – in other words individual investors, who want to take an active role in propelling their own financial success.  One of the most active groups, drawn to alternative investments is a millennial cohort, who exert skepticism about the power of pensions to really secure their retirement, as well as a propensity to learn to operate an alternative portfolio. Technology now allows to ensure sufficient diversification with only a few clicks, and to branch out into immediate passive income or short-term high-return opportunities. 

Five most popular alternative asset classes

1. Real estate. Part of the real estate investment market can be considered a traditional asset class – after all, even banks own real estate and hold on to it as a long term investment strategy. It’s an all-time classic to store value and a potential tool to expand earnings during positive market cycles. The biggest disadvantage of real estate are the big upfront costs and relatively low liquidity, if ownership is outright. That said, the modern – alternative investment options have become available in the real estate market, including real estate investment trust (REIT) and partial or fractional ownership ventures. Retail investors can now invest in various real estate projects by owning a part of its development and then receiving interest once it is developed.

2. Art, valuables, and collectibles. Once again, just like property ownership, some collectibles like fine wine or paintings are quite traditional – accessible to exclusive investor circles, with very high-buy in cost. The alternatives that are accessible to a wider audience, like baseball cards, or designer sneakers are easily researched on online marketplaces, like eBay. Some items can be owned outright in physical form, requiring some care and protection. But it is also possible to fractionally own any of the collectibles, including in-game items and virtual goods with residual value. This asset class has unpredictable returns with relatively difficult average appreciation, but can outperform other asset classes as an insurance. Companies like Masterworks and Otis are allowing retail investors to purchase shares in fine art pieces or unique collectibles. 

3. Crypto-assets. A hot and highly volatile asset class, which allows for both passive buy-and-hold strategies, and for trading. The chief advantage of cryptocurrencies is the relatively easy entry, with the potential to operate and hold the assets in a personally protected wallet, instead of relying on brokers or other third parties. Challenger banks, like Revolut, or  payment platforms like Paypal have integrated digital asset trading on their platforms – making it even more accessible. With recent cryptocurrency popularity, a new alternative investment asset class became popular – NFTs (Non-fungible tokens) – which are centered around collectibles, such as digital artwork, sports cards, and rarities. One trending platform would be NBA Top Shot, a place to collect non-fungible tokenized NBA moments in a digital card form.

4. Loans. Interest-bearing investments in packaged loans can bring transparent, predictable returns that outperform traditional investments. While investing in loans gives short-term returns, loans should be viewed as long-term investments. This asset class has a low entry point, while some platforms, like Mintos also sort potential investment in loans with a risk tolerance profile. It is important to diversify investment in this asset class in order to achieve stable income over time.  Investing in loans is also accessible to multiple economic areas.

5. Private company investments. Private equity and company loans are asset classes sometimes reserved for accredited investors. Because of the risky nature of private companies, some of the investments are only available to accredited buyers. Private equity is also off-limits to most retail buyers, due to its riskier nature and the higher barrier to entry. Loan investments can sometimes circumvent this limitation, by offering business loans for partial ownership and relatively low sums. More accessible option, albeit not very liquid, would again be fractional investment, or crowdfunding, which is available through platforms like Crowdcube.

Final thoughts 

Alternatives are bound to grow. Research by Prequin shows robust growth of alternative investments, to as high as $14 trillion in 2023. The Prequin report covers private wealth managers, but alternative investments are also open to retail owners, due to their variety and enhanced technological access.

The growth potential of the alternative investor sector also means adequate liquidity and price discovery will happen as more buyers join in. Fees are one of the hurdles that diminish the real returns of investment, but the more apps and investment hubs pop up, the more competition to offer low fees, increase service quality benchmark and attract investors.

Money mistakes
ArticlesFinance

Don’t Make These Money Mistakes

Money mistakes


Paying your bills and having a little leftover each month to contribute to savings can be challenging. Even working in a well-paying career, it can be difficult to feel like you are making headway with your financial goals. If it doesn’t feel like you are progressing as you should, take a look at these common money mistakes and see if any sound familiar.

 

Paying High-Interest Debt

If you have credit card debt, there is a good chance you are throwing money away. Unless that debt is tied to a zero-interest promotional offer that you know you will pay off before the promotional period ends, you need to look at getting rid of this expense. Cutting expenses and focusing on paying off credit card debt is one way to attack the problem, but there are other options. Consider taking out a personal loan. Check online to see what rate you qualify for and choose an APR that works best for you. Unless you have a great deal on your credit card, you are sure to pay less interest by taking out a personal loan to pay off your cards.

 

Mindless Spending Stemming from a Lack of Planning

If you find that you are frequently stopping to pick up takeout on the way home from work, paying late fees on your bills, and purchasing items to replace something you know you have somewhere, you could easily save money by dedicating some time to planning. Look at your bank statement to see where you regularly spend money on your discretionary income. Pinpoint holes that are easy to plug, like fast food lunches. Packing your lunch saves money and is also generally a healthier choice.

Other questionable expenses may not be as noticeable. Do you regularly throw food out at your home? Make adjustments to your menu to reduce food waste, and you will lower your grocery spending. Do your utilities seem high? Look for easy fixes, such as hanging drapes to block drafty windows and turning your thermostat down a few degrees. Comb your bank statement for subscription services that you don’t use and cancel them. Cancelling can be a hassle, but spending a few minutes doing so can save you money each month.

 

Not Prioritizing Savings

Consider your savings account a bill like any other. If you only contribute money that you have leftover, you are sure to find that your savings aren’t growing very quickly. Instead, transfer a specific amount from your checking to your savings each pay period. Prioritize retirement savings as well. It is tempting to put saving for retirement off when you are young. Your income may be low, and you feel like you have plenty of time to contribute.

All of that is true, but the earlier you start saving, the more time the money has to grow. Your retirement savings will be much greater if you make regular deposits during your 20s and 30s. If, after examining your budget and making changes, you still struggle with having money left to save, consider taking a part-time job. Don’t think of it as a permanent move, just a chance to get out from under debt and boost your savings.

Insurance
ArticlesFinanceInfrastructure and Project FinanceWealth Management

This Is What You Need to Know About the Insurance You Didn’t Know You Needed

Insurance


There is no end to the questions and misconceptions people have about insurance. One of the most common misconceptions is that insurance is intended to be a discount for needed services. Indeed, many people never have reason to question this idea. After all, a visit with the general practitioner costs about $150 without insurance, and $5 or less with insurance. They measure the quality of insurance based on the perceived discount they gain.

However, this confusion drives many people to make bad decisions about insurance due to the fact that they are fundamentally wrong about what it is. Insurance is not a discount service. It is a risk management service. No one sells you insurance for events they know will occur. They sell you insurance for events they believe are less likely to occur. Insurance companies need you to pay them more money than they pay you. The house always wins. When it doesn’t, it goes bankrupt.

That is why life insurance generally costs less for people who are young and healthy. Coverage for lightning strikes is inexpensive in places that don’t have many electric storms. But in Tornado Alley, you might not find a company that offers it at all. It is primarily about risk management. Here are some other factors that will help you decide what insurance you really need versus that which you can do without:

 

Car Insurance

You know you need car insurance because most places require a certain amount of it before you can legally drive. But what about insurance for a car you have that you don’t drive? Do you need insurance on a car that doesn’t run? The answer might surprise you. It is more of a maybe than a yes. But it is more yes than no. Confused? Good. It is a confusing issue.

What happens if your undrivable car is stolen? Do you still expect it to be covered? If so, you are definitely going to need insurance on that parked car. What happens if it gets whisked away Wizard of Oz style? It might not be an act of any god you believe in. But insurance can still cover it. If you don’t want coverage for those things, it still might not matter. If you are paying for the car via a loan, the loan holder determines whether you can end coverage. Hint: You are going to need to keep that coverage. Remember, insurance is about risk management. The loan holder will not be taking a risk on that even if you want to. There are things you can do to reduce your insurance burden on a car that doesn’t run. But at the end of the day, you are probably going to have to carry some type of insurance on it in most states.

 

Renters Insurance

Everyone has heard of homeowner’s insurance. It is advertised in TV commercials. Not everyone knows about renters insurance. Only 41% of renters opt for renters insurance despite the price of renters insurance hitting average lows of $15 per month. It is clearly a type of insurance people don’t think they need. They will have a very different notion of what they need if they find themselves a victim of burglary. Your neighbor can set the building ablaze leaving you holding the bag for losses. Renters insurance might even cover accidental damage of items like smartphones and laptops.

 

Life Insurance

It should go without saying that everyone needs life insurance even when they are young. The problem is that young people feel invincible. So they never consider what will happen to their family if they died unexpectedly. It is even more of an issue if children are involved. When young couples get together, they blow the budget on elaborate rings. Instead of an expensive ring, insist that your partner buy life insurance instead. That is a much better sign of love and responsibility than jewelry.

Insurance is complicated and confusing. The thing to remember is that it is less about discounts for things you know will happen and more about risk management against things you don’t expect. Whether it be auto, renters, or life insurance, ask plenty of questions. And don’t stop until you get the answer you need to make a good decision. 

Consumer spending
ArticlesFinance

Self-Sufficiency Set to Influence Consumer Spending in 2021

Consumer spending


In times of sudden and dramatic change, people tend to react in one of two ways. They either tense up and resist the inevitable for as long as humanly possible or take a deep breath and adapt to the new normal.

Generally speaking, the coronavirus pandemic has forced many of us to decide which way we’re going to react. While many people have chosen to live in denial, others see the pandemic as an opportunity for self-improvement.

For most folks, 2020 was the year when they realized they weren’t nearly as self-sufficient as they thought. In the absence of products and services we took for granted, it became apparent to many that achieving some sense of normalcy would require self-sufficiency.

With most experts anticipating another year of mask-wearing social distancing, it’s safe to say the self-sufficiency trend will continue through 2021 and beyond. With this in mind, investors and wealth management professionals will want to get on board before it’s too late.

Investing in the self-sufficiency industry opens up hundreds of possibilities. That’s because, as a result of the pandemic, the push for self-sufficient living permeates through every aspect of our lives. For example, due to working from home, many people are learning how to make coffee for the first time. Previously, they made a daily stop at Starbucks or Dunkin Donuts on the way to work. Since that’s no longer a feasible option, they opt to brew gourmet coffee at home.

If you’re an investor in early 2021, do you buy stock in one of the nation-wide coffee shop chains or online services sending monthly boxes of gourmet coffee to homes across the country? While the question assumes a false dichotomy (you could hedge your bets and invest in both or invest in neither), it highlights the gut-check security of investing in any business that’s currently selling a do-it-yourself alternative to things we outsourced before the pandemic.

However, investors must know the difference between a gimmick and a pot of gold. Do-it-yourself baking kits? That’s a winner. Do-it-yourself foundation repair kit? That’s probably not something people will want to tackle on their own in any circumstances.

With that said, the current trend towards self-sufficient consumerism doesn’t mean investors need to give the cold shoulder to big business mainstays. While so-called disruptive industries have been the topic du jour among investors for years, the prevailing pattern suggests industry giants will adapt to the new normal. If the new normal is more consumers choosing to DIY things they previously paid others to provide, it won’t be lost on those in control of the world’s largest companies.

2020 was a year to remember for all the wrong reasons. With that said, the pandemic and events surrounding it have led many to make changes to the way they do things. On the consumer side, individuals take on more responsibilities, while businesses are tasked with adjusting to changing consumer trends. While the overarching circumstances are unique, this pattern is business as usual. Investors should take note.