Malcolm Kerr Independent Consultant
Fare Well
I’ve been on the glide-path for the last five years or so and landed on June 3rd. My 75thbirthday. So, I’m now no longer involved with financial services – apart from my own!
The last 55 years have been very enjoyable and very rewarding. I have met more wonderful people than I can count in the UK and the USA – in particular, at Bevington Lowndes, Julian Gibbs, Albany Life, MetLife, KPMG and EY. I’d love to record all their names, but it would take too many pages. However, one name must be recorded: Jenny Yamamoto. We met at Julian Gibbs in 1979 and have been together ever since.
Since stepping back from financial services, I have written three books which have been published. The first was “Dirty Money, Terrible People”. It’s fiction; not an exposé! But some of the characters and places are based on reality. I’m now working on the fourth.
By the way, I use my friends and family name Calum when publishing my books. https://bryherhousepublishing.com
“Crisis”
In the UK we seem to move from one crisis to another. As I write this we have a salad crisis with supermarket shelves empty of cucumbers, tomatoes, and peppers. Interestingly the independent stall on Chiswick High Road pavement has shelves full of those items. I gather that the big players are having supply problems as they are engaged in a fierce price war and farmers are struggling to get paid enough to make a living. Anyway, I wouldn’t be surprised that by the time I finish this article the supermarket shelves will be full again.
This time last year there was a housing crisis. Prices had “Gone through the roof’ and no one could afford to buy. We now have another housing crisis because prices are falling sharply driven by “high” mortgage rates – high by 21st century rates but low in contrast to 1980’s when rates reached 18%. Interestingly, only 28% of properties are owned with a mortgage, most of which are on fixed rates with a minority close to expiry.
The current “cost of living crisis” is of course a real and present problem for a significant segment of the population. Research suggests that between 20% and 25% are “concerned” but 75% to 80% are not. Data from retail banks throw some light on this. For example: Lloyds 26 million customers have £312 billion on deposit or in wealth accounts. Up £3 billion from a year ago and HSBC’s UK deposits are up from £178 billion to £181 billion. (Incredibly, in the UK there is £1.8 trillion in people’s current accounts!)
Another interesting piece of data is around public finances: Income tax revenues surged 11% and National Insurance by 12% from April 2022 to January 2023. So it seems to me that that many people must be in a better financial situation today than they were before the pandemic.
Wealth management’s underserved segment
I just read an interesting McKinsey research paper. It concluded that as more assets shift into the hands of women, wealth managers need to understand the investment needs and behaviors of this large – but as yet underserved – group of investors.
In Western Europe, women investors now control about a third of total AUM, valued at around €4.6 trillion. McKinsey expect this share to grow rapidly over the next few years, partly because of the rising number of married women taking responsibility for household financial decisions. They surveyed almost 3,000 women and 2,000 men in the affluent, private banking, and high-net-worth investment markets and identified how women’s investment needs differ from men’s, and explored how firms could improve their propositions for female financial decision makers.
The research findings provide a rich perspective on women as investors, as well as insights for firms who might want to cater for their needs. For example, 61% of women and 64% of men share the same primary financial adviser as their partner. But when asked whether they would change their bank or adviser if they were separated from their partner, 40%of women said yes; compared with just 29% percent of men. The message is clear: A sizeable portion of women’s assets under management could be at risk in the event of relationship breakdown or bereavement, unless advisers take steps to improve their offerings across this segment.
A substantial proportion of the women investors in the survey expressed a willingness to receive more advice from their financial advisers, especially through digital channels such as web-based advisory and analytical software and mobile apps. In addition, 28% of women said they would be happy to receive more advice over the phone from experts, compared with 22% for men.Unfortunately, dissatisfaction was common for both men and women. 43% of women said they were not fully satisfied with the quality of financial advice they received, as did an even higher proportion of men (49%).Few investors reported being uncomfortable when making financial decisions in their portfolio, but women were twice as likely as men to say so (18% versus 9%).
It seems to me that this is an opportunity for wealth managers: Develop and market your advisory services to support the different stages in women’s lives, such as managing wealth before marriage and after divorce, planning retirement and bereavement. Build your advisers’ expertise in understanding women’s needs for products, services, and solutions and how these needs change as women’s careers progress, their household or family circumstances alter, and they grow older.
“Terrible Choices: She will do want it takes to close down the County Lines”
The third book in my “Terrible People” series has just been published. Great fun to write. But, as usual, the edit (to be more accurate the edits) and all the other stuff are not so enjoyable!.
The underlying theme of the book is County Lines”. And here is a small extract from the Metropolitan Police press release that encouraged me to write the book.
“Nearly 250 suspects were arrested by the Met Police and dozens of ‘county lines’ networks out of London were smashed as part of a fresh crackdown. The raids ran from 7 March to 13 March 2022. They joined forces across the UK carrying out synchronised dawn raids seizing cash, drugs and firearms from properties used to run drug operations.
County lines is a distribution model that involves urban gangs expanding their markets for crack cocaine and heroin into smaller towns by setting up phone lines through which they sell Class A drugs.”
What could possibly go wrong!
Recently there were rumours that NatWest Bank was studying a bid for the wealth management firm Quilter. My immediate reaction was: “What could possibly go wrong?” Why? Because both parties have made some serious mistakes quite recently. And because most substantial consolidations have failed to generate benefits to shareholders, staff or customers. Standard Life and Aberdeen looks like a good example.
The Quilter mistake was failing to carry out effective due diligence when they acquired Lighthouse Group in 2019. They paid about £46M for the business but since then they have had to make provisions adding up to a similar number in respect of inherited pension transfer business. So, it cost them twice as much as they expected, and I wouldn’t be surprised if additional provisions emerged in the future.
The NatWest mistake was mind blowing. I write crime fiction (under the name Calum Kerr) and if I came up with a plot based on the NatWest story it would be considered too far fetched. If you want to know all the facts, there is a thirty-three page FCA document available but here is the main point: A company called Fowler Oldfield was a buyer and seller of gold. It was a small company owned by a husband and wife. Future sales were predicted to be £15m per annum. This was increased to £30m later on. Cash transactions were £18m.
From late 2013 numerous NatWest branches received cash sums of between £12m and £44m and, I quote, from the FCA document; “ situations which included the deposit of such large sums of cash that they were brought in, in black bin bags which tore because of their weight and sums so large that the bank’s safes were inadequate to store them.”
NatWest were fined £397,156,944,14. But because they pleaded guilty this was reduced to £264,772,619,95. (Don’t you love the FCA feeling the need to include the last decimal points!)
What could possibly go wrong, went wrong. I wish I was surprised!