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Holly's Blog: Welcome to Wonderland

9 Oct, 2020

This week we’re having a little dive into Wonderland. First we fall through the August data – pretty glum. But even despite the slow-coach data, the FTSE100 once again refused to stick to the script...

Welcome to Wonderland

This week we’re having a little dive into Wonderland. First we fall through the August data – pretty glum. Growth was slower than forecast and we’re still about 10% of pre-pandemic levels. But even despite the slow-coach data, the FTSE100 once again refused to stick to the script, and this morning stuck two fingers up at this and opened higher. “Curiouser and curiouser”, thought Alice.

Judging risk at the Mad Hatter’s Tea Party

Our journey continues to Westminster, packed full of Queens of Hearts and Mad Hatters making daily decisions about risk. In fact 2020 has been an evolving and constant process for all of us in balancing physical, mental and financial risks with limited certain inputs to our equations. From an investment perspective it remains hard to know what lies ahead.

People are feeling financially nervous. One manifestation of this is the Savings Ratio which is at frankly weird highs. It’s about 29% at the moment – which loosely means we’re saving 29p out of every £ we earn. Normally, it trundles along at levels of nearer 7p to 12p for every £. People are anxious and metaphorically stockpiling cash under the bed.

We check in with 1,500 investors every three months – and last week you echoed these nerves. Over 6 in 10 think that the UK economy will get worse over the next 6 months (it was half of you 6 months ago) and 2 in 10 think it will stay broadly the same. And 4 in 10 think that the FTSE will fall over the next 6 months – 3 in 10 think it will stay the same. Confidence abut both the broader economy and the stock market has fallen.

A moment of calm?

Against this backdrop of nerves, one area I expect to see change and growth is in those products which offer more cash-like, lower-risk sustainable products.

I’ve been having a look at Triodos – a sustainable bank which offers so-called Impact Investments and has a new bond fund coming up for imminent launch. What I find quite interesting about this group is that they have common standards across every product – and it feels as though their proof points are clearer than many. For example their pledge is that they will not invest in anything which makes money from weapons or nuclear, or more than 5% of revenues from tobacco, gambling, petrol, oil, gas, coal, unsustainable cotton, fur or leather, fishery products and/or beef that does not comply with international standards. That’s refreshingly clear really. And you could argue that most of us don’t really need to know much more than that?

I am very conscious that I have written quite a lot about sustainable investing recently. Social media is always full of financial advisers who want to tell me what a wally I am. Sometimes they are of course right and they help me to learn and improve. And a minority of them are miserable old so-and-sos who can’t bear anyone doing anything without them. IMHO. There’s still a large cohort who think I have fallen for the ‘latest fad’. But our broader data sets suggest that people are indeed much more interested in investing sustainably than advisers think.

Please take a second to share your view on our unedited comment board. (Well – we do take out words that rhyme with ‘duck’. ) Do you get irritated when I talk about sustainable investing? Is it just common sense? Is it fundamentally important or crashingly boring?

The White Banky Rabbit (not to be said at speed after wine – try it!)

The next leg of our journey takes us back to the High Street (whatever that means anymore) and I’m casting the banks as the White Rabbit– “I’m late, I’m late.” Despite their huge audiences, the banks have been late to the online investing party, failing to convert their cash savers into investors. And not really having much success in tabling a frank discussion about risk with those who see investing “like gambling”.

Barclays, HSBC, NatWest and Santander have led the charge on developing investment solutions for their customers, developing simpler ‘ready-made’ solutions for those who don’t want the responsibility of too much choice and want someone to do it for them. And they’ve been getting better. Most of them will now offer digital advice – they will help diagnose the best choices for you, based on some simple questions which you can answer online.

NatWest made headlines this week by cutting their costs on DIY stocks and shares ISAs quite aggressively. From just over 1% to just over 0.7% - that’s for all admin and investments. For that you get a pretty limited choice but you do get a relatively low-cost stocks and shares ISA, you can see this along with your current account, and they put it together and monitor it for you. I’m not sure that this is a battle which will be won on price – but it will be interesting to see how the other banks respond? Will they spring into competitive action? Or make like The Dormouse?

I opened a test account with Santander last year. I’d actually recommend the onboarding journey for anyone less confident and interested to explore or learn more about what their attitude to investment risk is– and what their tolerance and capacity for loss is. For a fixed fee of £20 you get a suitability report and will gain a good understanding of the right questions to be asking – and how to map investment products to your personal situation. Whether or not you then go on to open an account with them or not. (Existing customers only).

Have a great weekend everyone. Time to hit the jam tarts and the hookah!?

Holly

Do you get irritated when I talk about sustainable investing? Is it just common sense? Is it fundamentally important or crashingly boring?