There are lots of websites promoting the past performance of best funds and where to invest to “make money”. However, we think it is equally as important to focus on where not to invest in 2017
Fundamentals are key in 2017
At a time where so much is changing people are nervous and cautious, wanting to avoid risk. I aim to briefly explore the key aspects, and impact, on advisers and their clients connected with tax, banking, and regulation in 2017. I will consider the outlook for the products and the services that advisers offer, and the prospect for business models. This piece was called where not to invest in 2017 and is aimed at making readers think.
Where not to invest in 2017 is going to be based around the climate of change that we are enduring. Let us examine that in more detail.
Where not to invest in 2017
When investing money on behalf of clients, one of the main concerns is avoiding those areas of total uncertainty. However, 2017 starts with uncertainty in the USA, UK, rest of European Union (rEU) and China with banking, inflation, government debt, and the highest worldwide trending word of 2016, Brexit. With Dutch, French and German elections it is fair to say that with so many things all changing, it would be a fool’s errand to predict the global macro picture over the next 24 months.
So, as an example, what can we say about the EU for the year ahead?
- 1. Little is expected to change during 2017 in the EU banking system, an area largely ignored by news agencies since Brexit. Generally, European banks are under-capitalised, with liquidity issues. The banking crisis has happened, and yet, is still waiting to conclude! The rEU has largely failed to address the systemic issues in the banking sector and seems to lack the conviction to do so. At a time when the UK and the rEU need each other, Brexit makes co-operation less likely, leading to increased risk. Will there be any single winner post-Brexit?
- 2. Tax is interesting, honestly! Just tell yourself this, every morning five times before breakfast, and you will possibly eventually believe it. In the mature economies, governments have woken up to the fact that corporations have found creative ways of avoiding tax. I anticipate the EU continuing to pursue large corporations and HNW clients. The UK, looking to leave the EU, will continue its transformation into a low tax business economy; an open market policy will drive it to be even more competitive which, post-Brexit, creates issues for rEU economies like Ireland. Tax in 2017 will be newsworthy at corporate and government level throughout the EU in a way it has not been for years.
- 3. Moving onto likely regulatory changes. Brexit may result in some countries attempting to harden rules like “equivalence” whilst focus on consumer driven legislation may be lost or delayed. Ironically, long discussed new proposed regulations have already largely been applied in the UK but “passporting” between states will be a key discussion in 2017 although little will change quickly; one to watch in the future?
- As the head of OpesFidelio operating in several EU countries, having met many different regulators and having debated with them on stage, there is simply not the will, nor the capability, for many regulators to follow the UK model quickly, although talk of RDR is worldwide.
- 4. Last, and most importantly for investors, there is one certainty in 2017. Products and services are undergoing a transformation in the rEU. Investors and advisers are becoming more aware of the benefits of transparent, lower-cost, service based propositions, even though some believe it will never happen. However, irrespective of regulators enforcement, firms such as mine are providing the demanding service driven UK proposition on a profitable basis; and at competitive rates for investors. OpesFidelio recognises the considerable opportunities in the rEU, as do the financially powerful platforms/custodians that operate highly scalable, low charged, clean fund offerings with low cost currency FX.
Although commission is not banned in the rEU, and transparent charging may not be paramount in the EU, the internet and social media is fuelling consumer awareness and knowledge, which flows through to regulators. Interestingly, proposed fiduciary rules in the USA (we are regulated in the USA) appear to be based on concepts of RDR from the UK. Will Trump reduce regulation though?
Once the majority of consumers become aware that they can obtain a full investment service, regulated compensation, no tie-in periods with surrender penalties banished, and they can do all of this for half the price of the non-transparent commission model, then what will happen?
Where not to invest in 2017
So, this article has created the thought patterns that you will need when making investment decions in 2017. It is not just about Where not to invest in 2017 but also where is the lower risk for greatest returns.
Certainly, when Brexit happens, throughout the UK and the rEU, there will both be winners and losers in different areas, and consumer awareness is likely to be heightened by uncertainty. The arguments at the moment are too one-sided and confrontational to be accepted, with too much self-interest from those who will have to change (e.g. Banks). We should remember that change can be good however, and when investing clients’ money, we should always look through the rhetoric and focus on the fundamentals. My team will do this, and we urge you to do the same.
The key is, if you are lucky to be in a stellar performer, to take at least part of your profits as 2017 begins. The same is true if you are in a dud, make a stop-loss and get out! The real stars in the long term investors’ portfolio are those funds that outperform the average consistently, and they do not have to be the best or top-quartile. The biggest lesson you can take from trying to chase performance is that it is a fool’s game.
Who are we?
Aisa and their network OpesFidelio recently won “ Best Practice Adviser” and “Best Client Services” in the European Best Practice IFA category of the International Adviser awards for 2016 and intend to bring this high equivalent level of service to South Africa financial advisers.
They have also won multiple other awards for their advice and service based principles since 2009, and been finalists with various publications from the FT through to Moneyfacts in the UK.
OpesFidelio offers the ability for individuals and firms who want to transition to a fee based culture in the EU to work with Aisa Group.
Where not to invest in 2017 End
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article.
This article was published on 24 January 2017
See various video’s about this at our channel TAILORMADE FUTURE.
- MiFiD 2- A gamechanger or a showstopper?
- International Adviser Awards 2016
- South Africa Financial Advisers
- EU Advice for British Expats post-Brexit
- Brexit Investment Strategy
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