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Making time for advice

2019 marked the 25th anniversary of the opening of our Jersey office. David McFadzean takes a look at how the world of finance has changed since 1994.
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Published 3 December
4 mins

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)

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we can help you manage your investments, please contact us on the same number as above, or complete the contact us form using the link below.

Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or security mentioned may be included in clients’
portfolios. They are referred to for information only and are not intended as a recommendation, not least as they may not be suitable. You should always seek professional advice before making any investment decisions.

about the author

David McFadzean

David McFadzean

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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