21st October 2024

Key Highlights?

?? UK Chancellor Rachel Reeves may borrow an extra ￡80bn over the next five years

?? The UK government is moving forward with plans to regulate buy now, pay later lenders

?? UK inflation fell to 1.7% in September, the lowest level since April 2021

?? Nordic wealth manager, S?derberg buys stakes in four more UK firms

?? Citigroup’s wealth arm more than doubled its net income in Q3 2024

?? Quilter WealthSelect MPS bursts past ￡17bn

?? Tatton reports record inflows as AUM nears ￡20bn

?? Markerstudy will cut approximately 750 jobs following its acquisition of Atlanta

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Macroeconomics

19 October 2024: Rachel Reeves could borrow ￡80bn, say lenders

-????? UK Chancellor Rachel Reeves may borrow an extra ￡80bn over the next five years, aimed at funding infrastructure and green energy projects

-????? Lloyds Banking Group's assessment suggests that this additional borrowing could be feasible if Reeves provides clarity and does not rush into immediate large-scale borrowing

-????? Investors, including those at Goldman Sachs and Amundi, are warming to the idea of investing in UK gilts, provided fiscal rules are clearly defined, excluding certain debts from calculations

-????? The government plans to introduce independent checks, such as an Office for Value for Money, to ensure that infrastructure projects are delivered efficiently without wasteful spending

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18 October 2024: British retail sales beat forecasts to rise for third straight month

-????? Retail sales in the UK grew by 0.3% in September, exceeding forecasts of a 0.3% contraction, with tech purchases like the latest iPhone playing a significant role in driving growth

-????? This marks the highest sales volume since July 2022, helping strengthen the pound against the dollar and euro, and boosting yields on two-year gilts to 4.05%

-????? Supermarket sales declined, as households continued to cut back on luxury food items amid bad weather and budget concerns

-????? Lower inflation, which dropped to 1.7% in September, and wage growth outpacing inflation, are supporting spending power, contributing to optimism for the final quarter of the year

-????? Economists warn that unexpected tax increases in the upcoming October 30 Budget could soften consumer spending, but increased government expenditure may offset this

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18 October 2024: UK ministers seek to reassure bond investors on their borrowing plans

-????? Treasury chief secretary Darren Jones announced new "guardrails" to reassure bond investors as the government plans increased borrowing for capital investments, to be unveiled in the October 30 Budget

-????? Jones emphasized that government quangos and watchdogs, like the new infrastructure oversight body and Office for Value for Money, will ensure investments are well-regulated and fiscally sound, protecting against wasteful spending

-????? This move comes as 10-year gilt yields rose following market concerns, though bond prices have since stabilized due to falling inflation and anticipation of tax hikes to close a ￡40bn funding gap in day-to-day spending

-????? Chancellor Rachel Reeves is expected to relax fiscal rules to enable more borrowing, focusing on long-term investments while ensuring tax revenues cover daily expenses

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17 October 2024: Chancellor to raise CGT on public and private share sales

-????? UK Chancellor Rachel Reeves plans to increase capital gains tax (CGT) on share sales, impacting both public and private company shares, with rates set to rise by several percentage points

-????? Currently, CGT on share sales is taxed at 20%, with individuals having a ￡3,000 annual tax-free allowance. Gains on shares held in ISAs and Sipps will remain exempt from the tax

-????? The tax increase will not affect second homes or buy-to-let properties, with the rate on these sales remaining at 24%

-????? This decision comes amid speculation that CGT could rise across the board, although PM Keir Starmer downplayed suggestions of a significant hike to 39%

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17 October 2024: UK Plans to Bring Buy Now, Pay Later Lenders Under FCA Regulation

-????? The UK government is moving forward with plans to regulate buy now, pay later (BNPL) lenders like Klarna and Clearpay, bringing them under the Financial Conduct Authority (FCA) and the Consumer Credit Act

-????? Under the proposed rules, affordability checks will be mandatory, ensuring consumers can manage repayment responsibilities before being offered loans

-????? The new regulations aim to provide key protections, such as clear loan information and allowing consumers to file complaints with the Financial Ombudsman

-????? Consumer groups have welcomed the move, stating that this change will protect people from excessive debt caused by late repayment fees, which have been a common issue in the sector

-????? The government expects final legislation to be set out by early 2025, with the rules fully implemented in 2026

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17 October 2024: UK small-cap stocks face ‘existential threat’, report warns

-????? Asset manager Abrdn has called for the abolition of the 0.5% stamp duty on shares for small and mid-sized companies, warning that UK small-cap stocks face an "existential threat"

-????? A New Financial report highlights a collapse in demand from UK pension funds, contributing to the delisting of about 600 smaller UK companies over the last two decades

-????? UK pension funds and retail investors have increasingly turned to global portfolios, exacerbating the decline in domestic small-cap investments

-????? Abrdn suggests broadening the Mansion House compact to include small-cap investments and simplifying the UK's ISA system to boost retail investment in the UK market

-????? Despite challenges, UK small-caps, including those on the AIM market, have generated competitive returns over 25 years, in line with the US S&P 500

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16 October 2024: Pound falls as UK inflation declines more than expected to 1.7%

-????? UK inflation fell to 1.7% in September, the lowest level since April 2021, driven by lower airfares and petrol prices, according to the Office for National Statistics (ONS)

-????? The drop was lower than economists’ expectations, boosting speculation that the Bank of England (BoE) will cut interest rates again in November and December following its previous rate cut in August

-????? The pound fell 0.6% against the dollar following the inflation data release, and the yield on two-year UK government bonds also dropped as traders anticipated further BoE rate cuts

-????? Core inflation, which excludes volatile items like energy, dropped to 3.2%, lower than expected, while wage growth slowed to 4.9%, further easing inflationary pressures

-????? The sharp drop in inflation provides a challenge for low-income families as the September inflation figure is used to calculate working-age benefit increases for next spring

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15 October 2024: UK wage growth falls to 4.9%

-????? In the three months to August 2024, wage growth in the UK decreased to 4.9%, down from 5.1% in the previous three-month period

-????? Payroll employment saw a slight decline of 35,000 (0.1%) in August, with hiring slowing down as businesses await the upcoming UK Budget for policy clarity

-????? Despite the decrease in wage growth, real wages still rose by 1.9% excluding bonuses, as inflation also declined

-????? The cooling wage growth and falling inflation support expectations for further interest rate cuts by the Bank of England in November

-????? Declining vacancies and slower wage growth suggest the UK labor market may be returning to pre-pandemic norms, potentially easing pressure on wage-driven inflation

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UK Wealth Management

21 October 2024: Nordic wealth manager buys stakes in four more UK firms

-????? The Nordic private equity-backed wealth manager has invested in four more UK financial advice firms, taking its total UK investments to over 20 firms

-????? S?derberg has acquired minority equity stakes in George Square (with ￡400m in assets under management), Cheltenham IFA (￡290m AUM), Bluezone Capital (￡190m AUM), and Alexander Bates Campbell, which also operates a European private client subsidiar

-????? The firm's CEO, Gustaf Rentzhog, highlighted the UK advice market as a top strategic priority, with plans to continue seeking further investment opportunities

-????? S?derberg’s approach includes providing technology, investment propositions, and financing to help these regional advice firms grow, offering services such as its Seccl-powered platform and discretionary fund manager

-????? S?derberg's UK CEO Nick Raine indicated the possibility of converting these minority stakes into full ownership in the future

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17 October 2024: SJP reveals first details of new advice fee model

-????? St James’s Place (SJP) has revealed the first details of its new tiered charging structure for initial advice fees, set to take effect in the second half of 2025

-????? The new model features a tiered fee structure, where a typical client with ￡400,000 to invest would pay ￡10,500 in initial advice charges. These fees are split between SJP and the adviser, with the adviser receiving ￡6,995

-????? The changes are part of SJP's response to the UK's consumer duty regulations, aiming to make its charges simpler, easier to understand, and unbundle fees for different services

-????? Clients with larger portfolios will benefit from reduced fees compared to SJP's previous maximum initial advice fee of 4.5%, but SJP advisers may face lower upfront earnings, potentially affecting adviser retention and business flows

-????? SJP will also increase ongoing advice fees from 0.5% to 0.8%, to be shared between the firm and advisers

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17 October 2024: ACA Group acquires Effecta compliance group

-????? ACA Group has acquired Effecta Compliance Group, a UK and UAE-based regulatory consultancy firm, to expand its global presence, particularly in the Middle East

-????? This acquisition marks ACA’s entry into the UAE market, broadening its governance, risk, and compliance (GRC) solutions to international clients, especially those in Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM)

-????? The acquisition aligns with the UAE’s growing role as a global financial hub, highlighted by a sharp rise in new financial licenses in 2023 and 2024

-????? Clare Curtis, founder of Effecta, will lead ACA’s UAE operations under the ACA Effecta brand, leveraging her 20+ years of experience in regulatory compliance

-????? ACA Group now has 10 global offices, including new locations in Dubai and Abu Dhabi, complementing its headquarters in New York City and other offices in London, Malta, and Pune

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16 October 2024: Citigroups wealth arm produces punchy Q3 income result

-????? Citigroup’s wealth arm more than doubled its net income in Q3 2024, reaching $283 million, up from $132 million a year ago, with significant gains in the Citigold mass-affluent segment

-????? Private bank total revenue slightly decreased to $614 million, compared to $617 million in 2023, while Citigold revenue rose 13% year-on-year, reaching $1.144 billion

-????? Total operating expenses in the wealth business dropped by 4%, and net credit losses fell by 23% to $27 million

-????? Jane Fraser, Citigroup CEO, highlighted the positive impact of recent changes in the wealth business, leading to a 9% revenue growth, supported by client investment assets and investment fee revenue

-????? Shares in Citigroup dropped more than 1% after markets opened

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16 October 2024: Quilter WealthSelect MPS bursts past ￡17bn

-????? Quilter's WealthSelect Model Portfolio Service (MPS) saw a significant boost in the third quarter of 2024, with ￡1.4bn in gross inflows, bringing total assets to ￡17.4bn

-????? Overall, Quilter's assets under management (AUM) grew by 2% to ￡116.2bn, aided by strong market performance and net inflows of ￡1.5bn, though offset by the appreciation in sterling

-????? Net inflows in the high-net-worth segment reached ￡284m, the highest since 2021, while the IFA channel reversed previous outflows with ￡821m in net inflows

-????? Quilter CEO Steven Levin expressed optimism about the future but raised concerns about potential market instability due to uncertainty surrounding the upcoming UK Autumn Budget and potential changes to the tax and pension systems

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15 October 2024: Tatton reports record inflows as AUM nears ￡20bn

-????? Tatton Asset Management saw record inflows of ￡1.8bn in the six months to September 2024, compared to ￡910m in the same period last year

-????? Total assets under management (AUM) for Tatton reached ￡19.9bn, boosted by ￡0.5bn of positive market movements and including ￡1bn from assets managed by 8AM

-????? CEO Paul Hogarth highlighted the significance of approaching the ￡20bn AUM mark, as the company targets ￡30bn by 2029

-????? Tatton remains the largest managed portfolio service (MPS) provider in the UK, staying ahead of competitors like Quilter

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15 October 2024: Shareholders approve Hargreaves Lansdown takeover

-????? Hargreaves Lansdown (HL) shareholders have approved a ￡5.4bn takeover by a private equity consortium, with 71.3% of shareholders supporting the acquisition

-????? The consortium includes Abu Dhabi’s sovereign wealth fund, as well as European private equity firms CVC Capital Partners and Nordic Capital

-????? The vote passed, but there was significant opposition from smaller shareholders, who criticized the deal as "opportunistic," particularly as HL's share price is currently lower than its historical peak

-????? Peter Hargreaves and Stephen Lansdown, the company's co-founders, supported the takeover, which is expected to be completed in early 2025

-????? Private market firms such as Apollo, Blackstone, and KKR are involved as lenders for the acquisition

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14 October 2024: JP Morgans Wealth, Asset Management Net Income Slipped

-????? JP Morgan's net income for its wealth and asset management unit, including the private bank, fell to $1.351 billion in Q3 2024, down from $1.417 billion a year ago

-????? Net revenue in this segment rose to $5.439 billion, compared to $5.005 billion in Q3 2023, while noninterest costs increased to $3.639 billion from $3.138 billion

-????? Assets under management rose to $3.9 trillion, and client assets grew to $5.7 trillion, both up 23%, driven by higher market levels and continued net inflows

-????? CEO Jamie Dimon highlighted the challenges posed by geopolitical risks, emphasizing the need for preparation amidst economic uncertainty and rising global tensions

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UK Insurance Broking

18 October 2024: Underwriters facing ‘hard time’ due to data increase

-????? Underwriters are experiencing a "genuinely hard time" in the current insurance market, largely due to the overwhelming amount of data they must process, says Mohammad Khan, general insurance leader at PWC UK

-????? Khan highlights that underwriters have access to many alternative data sources, and their ability to assimilate and make sense of all this knowledge is a key challenge

-????? External factors like the Russia-Ukraine conflict, inflation, and global geopolitical risks are complicating pricing models for underwriters

-????? AI and digitization are seen as tools that could help underwriters process data more efficiently; ChatGPT and other AI models are being tested to support underwriting tasks

-????? Khan and Karen Dayal from Aviva believe AI can streamline data processing, but it's still evolving; it could eventually help with complex mathematical tasks

-????? Focus and agility are essential traits for today’s underwriters, as stated by Adam Clarke, chief underwriting officer at Ageas UK, who emphasizes the importance of scenario planning and making quick decisions based on potential future outcomes

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18 October 2024: Markerstudy to cut more than 700 jobs after Atlanta acquisition

-????? Markerstudy will cut approximately 750 jobs following its acquisition of the broking business Atlanta

-????? The company cited duplication of roles as the reason for the job cuts, which will take place over a period of about 16 months, lasting into 2025

-????? The deal was completed in June 2024 after being first announced in September 2023 and was funded by Pollen Street Capital and Bain Capital Special Situations

-????? The newly merged business will transact over ￡3bn in annual gross written premium (GWP) and provide a range of insurance products including home and motor insurance

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16 October 2024: Ardonagh-owned business rebrands after acquisition

-????? Towergate Health and Protection, part of Ardonagh Advisory, has rebranded to Towergate Employee Benefits after acquiring employee benefits business Benefiz on 7 October 2024

-????? The acquisition adds new services, including benefits technology platforms and pension administration capabilities

-????? CEO Iain Laws said this move aligns with the company’s strategy to meet the growing demand from larger businesses for a holistic employee benefits approach

-????? Towergate Employee Benefits will focus on expanding client offerings and investing in talent to support future growth initiatives

-????? The rebrand marks the next step in the intermediary’s broader growth plan to deliver more value to clients

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Sources include Financial Times, Insurance Times, City Wire and Wealth Briefing