Capital Markets Corporate

June 14, 2019

Our Weekly Newsletter


Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

P2P limits for investors
The Financial Conduct Authority will ban casual investors from putting more than 10% of their wealth in peer-to-peer (P2P) loans in a bid to tackle bad practice in the sector. The changes, which come into force in December, will also require investors to pass a test to demonstrate they have understood the risks involved. However, those who self-identify as either sophisticated or high net wealth investors will not be affected. (From This Is Money, 4th June)

‘Penny policies’ fail to pay out even a penny
Hundreds of thousands of “penny policies” sold in post-war Britain – products promising to pay lump sums for funerals or retirement costs – are still in force, with The Association of British Insurers (ABI) estimating more than £2bn of these policies have matured but not been claimed. However, even those who do remember to cash in are struggling to get insurers to pay out. (From Daily Telegraph, 11 June)

Securitisation: the fintech blueprint

LendInvest has become the UK’s first marketplace platform to securitise its own assets. The model used by the flexible funding organisation is seen as a common blueprint for fintech companies, with bricks and mortar bank branches being replaced with digital platforms and driving growth through leveraging securitisation to attract funding from all around the world. (From Financial Times, 10 June)

Financial advice eludes millions

Research from Openwork reveals two in five people don’t know where to go for financial advice, with women (62%) typically struggling with this more than men (38%). This comes despite advances in technology, such as robo-adviser services, that are intended to break down barriers to seeking financial guidance. Traditional methods remain most popular, with three quarters saying they would rather seek advice face-to-face. (From Professional Adviser, 11 June)

The true cost of hangover

From a queasy stomach to a painful headache, the costs of a hangover can sometimes feel unfairly high. But new findings from Barclays suggest it’s not just our health and dignity that suffer after a heavy night out: it’s our wallets as well. The average cost of a hangover is said to be £11.60, with 11% of the British population regularly spending more than £30 trying to remedy the night before. (From Refinery 29, 11 June)

Fund industry bracing for Woodford fallout

While the Woodfood saga continues to play out on the front pages, the fund management industry is already considering what happens next and how the fall of Britain’s most famed star manager might affect the sector in the long term.

Other ‘big’ fund managers are already concerned that they may be hit with the contagion. There is little doubt other stockpickers are taking a cold, hard look at their open-ended funds to ensure they will not be next. Even Hargreaves Lansdown, the fund supermarket that heavily promoted Woodford’s funds for many years, is sharing advice on how to ensure your other investments are not hit by the shockwaves created by the fall of the Woodford funds.

Calls for a review of the rules for fund management have begun already, in particular with a focus on regulating how much funds invest in unquoted stock. The Bank of England has also quickly called for more scrutiny on the investment sector and “niche managers”, without calling out Woodford specifically.

Investors themselves are raising concerns about not being able to see what is in the funds that they invest in. A recent investigation by the Sunday Times found that many managers do not make their holdings very public, some do not reveal stock picks at all while others show out of date reports on their websites.

The Woodford fallout has also brought the issue of illiquid stock to the fore. Much of Woodford’s investments were in unlisted or small cap firms that cannot be quickly sold. This has led to MPs to call on the FCA to consider whether there should be rules limiting fund managers from investing in such stocks for the good of those who are otherwise trapped in investments, as has been the case for many of Woodford’s investors.

Further, the FCA is being called on to regulate the use of “best buy” lists by fund supermarkets. Much of the blame for the Woodford fallout has been put on the supermarkets that continued to promote the funds even as they underperformed over a sustained period.

While much of the introspection is focusing on the near term, others are considering the wider repercussions from the fall of Britain’s most famous stock picker. Some are concerned that the headlines will deter millennials from seeking out the old fashioned fund management model to manage their money.

The fallout from Woodford and the alarming headlines will likely continue through 2019, but regardless, all those in the fund management industry should use the opportunity to reassess how best to approach a population jaded after such a high profile issue.

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