This business blog has been supplied by Architas ahead of their presentation at Round 2 of Bankhall’s Professional Development Days 2017. Read on to discover how current political, economic, social and technological factors are impacting the financial services industry, and to understand what this could mean for your business.
At Architas we like to keep our eye on what’s happening regarding political, economic and technological themes for the year. This not only affects our asset allocation views but it influences product design and what we communicate to our investors.
Political and economic upheaval
On a global basis politics and economics are becoming ever more intertwined. Brexit, the Trump effect and European and UK elections are just a few political examples affecting market returns. In addition we have the baton being passed from central banks to governments to stimulate the economy. In the current low interest rate environment, diversification benefits between traditional asset classes have declined. Simultaneously, market stress, inflation worries and volatility have increased.
At Architas in recognition of the potential risk that changes in politics and the economy could bring and because our preference is to protect portfolios on the downside rather than chase only the upside, we have been thinking defensively, looking for ways to enhance the portfolios’ resilience to potential weakness.
What this means in practical terms is adding defensive assets such as gold or cash, or diversifiers in the real assets space. We have been slightly increasing cash across most of our portfolios, from low levels at the beginning of this year to as much as 5% today. The markets have performed strongly since Trump was elected and we thought it prudent to take some profits given the potential time lag between policy proposals and implementation.
In the UK the average age is climbing and the Office of National Statistics has forecast that between 2015 and 2020, the general population is expected to rise 3%, but the numbers aged over 65 are expected to increase by 12%. This improved life expectancy is a great achievement but providing for old age could become one of society’s biggest challenges. Making sure that your client has a sustainable level of retirement income is key, which raises the question: is the 4% “retirement rule” still relevant?
On the technology front there has been a secular shift to digital which has already fundamentally changed the landscape of many industries, and has now set its sights on ‘disrupting’ the financial advisory market in the UK. As such, both advisers and clients alike are busy contemplating how financial advice may evolve over the next few years including the active versus passive debate.
What does this changing environment mean for investors?
Markets have been distracted by these short-term events, but we think it is unlikely they will have a long-term impact. We think that right now the underlying economic factors still support a global recovery.
In times of market stress, patience and discipline become even more important, as does remaining diversified and not losing sight of the fundamentals. As such, we continue to believe in the basic principle of diversification across asset classes, currencies, regions and investment managers or in other words, not putting all your eggs in one basket. Find out more
To find out more about the political, economic, social and technological factors impacting our industry in 2017, join us at Round 2 of Bankhall’s Professional Development Days 2017, where Architas will provide insight on the key things you need to know.