Future rate rises, past crashes and 'the private banker in your pocket' - here's our weekly heads-up on the financial stories that may have caught your clients' attention over the weekend …
Are you ready for an interest rate rise?
With Bank of England governor Mark Carney hinting last week inflation had further to climb, this Financial Times article considers the personal finance implications of any interest rate rise that could soon follow. Rates on savings accounts may have ticked up an average of 34 basis points in September, according to Moneyfacts, but the piece notes investing in the stockmarket has tended to offer the best chance of a real long-term return.
According to figures from Fidelity - ever the advocate of ‘time in' as opposed to ‘timing' the market - £15,000 invested in the FTSE All-Share index 10 years ago would now be worth £26,273, compared with £15,604 from the average savings account. The piece also argues investors should consider targeting companies and funds with high exposure to international earnings.
The financial services sector is already largely factoring in a potential rate rise, the piece continues, going on to quote Seven Investment Management manager Tony Lawrence as saying: "The inclusion of two short-dated bond funds in the top 10 [of fund purchases for the latest quarter] is interesting - advisers are clearly looking to protect investors from potential interest rate rises."
Should investors worry about a potential big correction?
Three decades on from the shock of Black Monday, this Mail On Sunday article considers the extent to which investors should worry about a big market correction in these uncertain modern times - particularly in light of Brexit uncertainty, financial imbalances in China and Donald Trump's unconventional approach to leadership.
The piece also highlights investor experiences after previous crashes - pointing out £10,000 invested in the FTSE All-Share just ahead of the 2008 financial crisis would now be worth some £17,000 - excluding reinvested dividends - despite initially almost halving in value. Similarly, while the same amount invested just ahead of Black Monday would have fallen to £6,000 within weeks, it would be worth £35,000 - again without dividends reinvested.
Hargreaves Lansdown senior analyst Laith Khalif stresses that people with an investment horizon shorter than five years should put their faith in cash but those comfortable with a longer timeframe should persevere with the stockmarket. The piece concludes that a fully diversified portfolio exposed to different sectors and countries and invested for the long term, with dividends reinvested, should pay off "whatever the external environment".
The private banker in your pocket
This Sunday Times article offers a glimpse into the future as it envisages a time not so far away when consumers will be able to see all their banking information in one place, regardless of the number of accounts they have. The piece highlights new rules coming into force on 13 January that mean, if customers give permission, third parties will be able to access their data, paving the way for new apps that aggregate personal finances. Loans, credit cards and mortgages are expected to be added later next year, it adds.
The article also forecasts bank branches will begin to close and be replaced with "super branches" it expects to be "big and glossy" and offer access to free wifi and iPads for customers to register for online services. Consultancy firm PwC is quoted as suggesting some banks will slash branch numbers by up to a quarter by 2020.
The piece's most ‘sci-fi' prediction is that bank customers will soon use their eyes to access their account at cashpoints, rendering debit cards and pin numbers unnecessary - much like TSB customers with a Samsung Galaxy S8 can unlock the banking app on their phone using only their eyes. According to First Direct and HSBC - which have replaced passwords and memorable phrases with voice to access phone banking - the technology has stopped more than 1,500 cases of fraud, totalling almost £4m, since it was introduced last year.
Our weekly heads-up for advisers
The Financial Services Compensation Scheme (FSCS) declared 11 adviser firms in default between 1 August and 31 October.