For politics watchers, Clinton and Major were, respectively, US president and UK prime minister and Nelson Mandela was elected as president of South Africa, ushering in 25 years’ of ANC rule. On the popular culture front we had the launch of TV shows Friends and The Vicar of Dibley, and Wet Wet Wet topped the UK charts for 15 consecutive weeks with ‘Love Is All Around’, from the soundtrack to the film Four Weddings and a Funeral. Even the band was reportedly sick of the song by the end of that summer!
Unless you were an investor at the time, you are unlikely to remember anything special about 1994 from a financial markets perspective. Yet that year global bond market investors lost around $1.5 trillion. As a comparison, the US Federal Reserve’s entire balance sheet reached a peak of $4.5 trillion in 2015 as a result of its quantitative easing programme; so this is a very big number. Most people know about the stock market crashes of 1929, 1987, 2000 and 2008 yet the ‘great bond massacre’ of 1994 – as Fortune magazine, a publication aimed at ‘wealthy and influential people’, called it – passed most of us by. Time magazine’s (Fortune’s sister publication) front cover stories, famous for defining a year, include the death of Nixon, the OJ Simpson trial, the National Hockey League (NHL) lockout and Mandela’s election, but nothing on ‘the worst bond market loss in history’ – another Fortune quote from the time.
This news would not be confined to the financial pages today. There has been a significant democratisation of financial market participation in the last 25 years. In part this is indirectly via the much more widespread provision of pensions and the switch to defined contribution schemes, where the investment choice is with the individual rather than their employer. Much of this has been prompted by government intervention, for example the UK government’s automatic enrolment initiative which was phased in from 2012. Many of us are now investors perhaps without being really aware of it.
Direct investor participation has also spiralled, fuelled by the enormous growth of trading platforms for individual investors. This has largely been enabled by technological advances, in particular online and mobile access. Hargreaves Lansdown, a well-known UK platform, has doubled its client base in the last five years, recently reaching the milestone of one million customers. Over 82% of its deals are now placed online, compared to less than 20% just five years ago. Almost 20% of deals are now placed on mobile apps. This would have been unimaginable in 1994 when estimates suggest that only 300,000 – 600,000 people in the British Isles had any form of internet access at home and mobile phones were the preserve of early adopters.
Alongside this rise in participation, there has been an increase in regulation, and indeed a few new regulators, in an effort to protect consumers. Snappy acronyms such as UCITS, RDR and MiFID II hide vast swathes of directives designed to ensure transparency, liquidity and professional management. Although broadly successful in achieving these worthy aims, they have also been criticised for some unintended consequences, including increased costs and unnecessary complexity.
Within wealth management, which provides banking, lending, structuring and investments, there have also been significant changes. Recent innovation has focused on providing a more efficient service with many firms placing emphasis on ‘robo-advisers’ where clients engage in many of their interactions without contacting a human. Although we do have a very user-friendly mobile app, at Nedbank Private Wealth we prefer to maintain a more personal touch by using new technologies to enhance the service and advice we are able to give our clients; perhaps bionic advisers would be a better description!
The value of this type of advice cannot be downplayed. Clients in a diversified portfolio in 1994 would have seen their equity assets grow by around 5.5% that year (MSCI World Index in USD terms), at least partially offsetting their bond losses. More importantly, those persuaded by their wealth manager to hold their nerve would have seen their 10-year US Treasury bonds return a whopping 23.5% in 1995.
It is obvious that much has changed within the financial markets over the last quarter century and the value of professional advice tailored to an individual’s requirements is even more important today than in 1994.
Who knows what the next 25 years will bring? Big data, machine learning and artificial intelligence are already starting to make an impact. Whatever happens, our commitment to protect our clients, advise them with integrity and make their lives easier will remain.
(This article first appeared in the Jersey Evening Post on 20 June 2019)
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David is responsible for spearheading the growth of our wealth management business across the company’s international jurisdictions. Prior to taking on his current role, David was integral in developing the bank’s investment proposition for high-net-worth individuals, trustees and investment consultants. He is also a member of the bank’s executive committee.
He has over 25 years’ experience working for global blue-chip companies in both London and Jersey, and providing investment solutions to a wide variety of clients around the world. Prior to joining Nedbank Private Wealth, David spent 15 years with RBC Wealth Management where he held several senior roles, latterly leading the investment business as managing director and head of discretionary investments in Jersey.
David is a Chartered Fellow of the Chartered Institute for Securities & Investment and a Chartered Wealth Manager.
David is responsible for spearheading the growth of our wealth management business across the company’s international jurisdictions. Prior to taking on his current role, David was integral in developing the bank’s investment proposition for high-net-worth individuals, trustees and investment consultants. He is also a member of the bank’s executive committee.
He has over 25 years’ experience working for global blue-chip companies in both London and Jersey, and providing investment solutions to a wide variety of clients around the world. Prior to joining Nedbank Private Wealth, David spent 15 years with RBC Wealth Management where he held several senior roles, latterly leading the investment business as managing director and head of discretionary investments in Jersey.
David is a Chartered Fellow of the Chartered Institute for Securities & Investment and a Chartered Wealth Manager.
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The week of 26 April saw markets start off relatively strongly on the back of positive news on exit strategies and potential treatments. However, by Friday, the tide had turned due to weak corporate and economic data filtering through, while Trump sought to re-escalate tensions with China.
The week of 20 April again saw mixed market sentiment. The negative news focused on plummeting oil prices, disappointing trial COVID-19 treatment results, US travel restrictions, poor corporate earnings and weak economic data. The positive stories centred on further talk of exit strategies and a general slowdown in global case numbers.
David McFadzean was joined by Andrew Yeadon to talk through the main Q1 2020 news driving markets, portfolio positions and what we expect may take place in Q2 2020 and beyond.
The week of 14 April saw mixed market sentiment as the impact of the COVID-19 weighed on corporate earnings results and economic data releases, while further talk of exit strategies and progress on a possible treatment provided some relief.
Last week – the week of 6 April – saw positive market sentiment and markets rise in value with the narrative focused on the slowing rates of growth in the number of new COVID-19 cases in parts of Europe and the US, enabling attention to shift to possible exit strategies from the lockdown and economic activity being kick-started. Unfortunately, we believe markets are being overly optimistic. Economies will struggle to reopen fully anytime soon given the need for increased hospital capacity, widespread testing, improved patient treatment, and, ultimately, the delivery of a vaccine.
Financial markets have always been prone to react quickly, sometimes intensely, to news flows as they try to price in potential disruption to or support for economic activity.
With the coronoavirus pandemic, the focus for many people is on the short term. Retirement planning is still important, but why is now actually a good time to think things through?
The week starting 23 March saw governments and central banks around the world continue to take further steps to counteract some of the impact of the economic shutdown stemming from coronavirus.
During our 19 March webinar, David McFadzean, our head of investments, discussed recent events linked to the coronavirus pandemic with Simon Watts, our senior investment analyst. Due to the number of questions asked during the webinar, we have put together this Q&A, grouping questions together where possible, and using the information available at the time.
2019 marked the 25th anniversary of the opening of Nedbank Private Wealth’s Jersey office. Your memories of 1994, if any, are likely to depend on your interests or predilections at the time or since.
Investment performance is sometimes reported before fees and charges are taken into account and sometimes after everything has been paid, i.e. net of fees.
We publish our total expense ratio to flag to investors exactly what they pay when investing in our portfolios. However, we include costs that others don’t always include.
We operate in a really competitive industry. It’s one of the reasons why some people find it difficult to choose an investment manager – there’s such a huge choice! We believe there are five key points you need to consider when making your selection.
Unlike tossing a coin, portfolio management is not a game of chance and the risks are not usually 50/50. There is a huge range of potential investments to choose from and a professional wealth manager should be able to demonstrate consistent results over a long period with a greater success rate than 50%.
The news flow on the COVID-19 coronavirus took a more negative tone over the weekend of 22/23 February, and we have started this week with a sizeable risk-off move.
The week starting 9 March saw markets opening in disarray, with investors reacting negatively to news that the OPEC+ talks had broken down and the Saudis had sparked an oil price war with Russia over its refusal to cut production. That led to a 30% fall in the price of oil. The biggest impact will be in the energy sector, but it was also taken badly by the broader market.
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