2018 | World Finance

Investment Management Awards 2018

Posted on September 18, 2018June 23, 2020 by Max Tomlin

At the most superficial level, the global economy appears to be in relatively good shape. In a June 2018 statement, the World Bank’s outlook was reasonably rosy, predicting the global economy would expand by 3.1 percent during the 2018 calendar year. The estimate was attributed to steady growth in the world’s developing economies and a recovering commodities sector boosting major industries elsewhere. For the world’s investment management firms, this might have been an exciting prospect; gradual growth across a variety of sectors should create plenty of opportunities for significant returns on investments. The reality of the situation, however, is nowhere near as simple.

As well as having to adapt to new regulatory requirements, investment managers are being forced to re-examine their portfolios and investments as a result of global economic instability

Alongside the World Bank’s prediction of growth came a number of warnings. Activity in advanced economies is expected to grow by 2.2 percent in 2018, but an easing of growth to only two percent in 2019 is anticipated. This is largely due to central banks gradually removing the stimulus efforts that were set up in the aftermath of the global financial crisis. Adding to this muted expectation are the many current threats to the global economy: US President Donald Trump may have enacted a significant number of pro-business policies, but his initiation of what has become a trade war with China threatens established global supply chains and will certainly shake up the current economic status quo.

Over in Europe, the deal surrounding the UK’s departure from the EU is still up the in air. Indecision from both sides, further complicated by a growing movement requesting that a second Brexit referendum be held, continues to create doubt as to what the operating environment for Europe’s businesses will look like in the coming months.

For the investment management industry, this complex situation has prompted many difficult decisions. In recognition of the firms best equipped to respond to this uncertain environment, the World Finance Investment Management Awards have sought out the industry’s most adaptable operations. These awards recognise those firms that have shown prescience and adaptability over the past year, but also provided clients with a welcome sense of certainty. Our winners have shown creativity in the face of tough odds and have distinguished themselves as being a step ahead of their peers in the financial services industry.

Rules of engagement
The major challenge facing investment managers is the drastically different global regulatory environment that is threatening to emerge. The EU is already partial to introducing ambitious and sweeping regulations; the UK’s exit from the union brings the potential for even more dramatic shifts in priorities and policies. Additionally, as the US continues a campaign of destabilising the global trade market, there are an untold number of challenges for companies to navigate. In both cases, regulation is altering the way companies can do business. Methods that were tried and true just a few short years ago – even after the dramatic changes prompted by the global financial crisis – could soon cease to be effective.

The EU has already experienced a shake-up this year, in the form of the General Data Protection Regulation (GDPR), which came into effect in May. Despite plenty of warning, many businesses were simply not adequately prepared for the new rules, and the change was met with confusion and disorganisation. In a case reported by The Independent, several smart-home devices such as light globes and thermostats suddenly ceased to function until new terms and conditions were agreed to by customers. The Los Angeles Times, the New York Daily News and the Chicago Tribune all had website outages the day the GDPR came into effect as they failed to meet the new requirements in time. A lack of preparation was the cause in all cases, demonstrating that even with plenty of notice, it is easy for major businesses to get new regulations wrong.

The investment management industry more specifically was tasked with negotiating the EU’s MiFID II framework. For example, Investment Week reported that small-cap fund managers have had to improve their internal research capability to overcome new restrictions surrounding the purchase of research from brokers. More changes like this are likely to occur in the coming year; KPMG’s 2018 to 2019: all change AMRI report highlighted the EU agendas that are set to affect investment managers most. This list included plans to extend the powers of the European Supervisory Authorities, to remove barriers to the cross-border distribution of funds, and to introduce a series of new sustainable finance policies. With several of these initiatives either still in development or in the process of being introduced, investment managers should be prepared to digest, navigate and respond to a lot of changes in 2019.

This is also all before the result of the UK’s exit from the EU is finalised. The outcome of the Brexit vote is still uncertain, and with the March 29 deadline rapidly approaching, firms may have to do a lot of work in a short amount of time to meet whatever regulations are thrown up on either side of the channel. Whereas uncertainty was thought to be the biggest threat ahead of Brexit, navigating complicated and confused regulatory environments may be where more companies stumble.

A line in the sand
As well as having to adapt to new regulatory requirements, investment managers are being forced to re-examine their portfolios and investments as a result of global economic instability. The biggest force behind this has been the trade policies of President Trump, particularly in terms of the US’ relationship with China. Responding to a trade deficit and levelling accusations of unfair practices, the US has imposed steep tariffs on hundreds of Chinese products. China swiftly hit back with tit-for-tat policies in terms of total economic impact. Trade partnerships that were previously certain are now very much up in the air, with both countries locked into a standoff that could drag on for months, if not years.

Asset managers must question how this will affect their portfolio. The obvious outcome is that companies trading between the US and China may have to find new markets where they can be more competitive. While tariffs so far have focused on industrial equipment and agriculture produce, many other industries could be impacted as the battle continues.

However, there are also opportunities to exploit. Historically, the countries that are not involved in a trade war see windfalls as larger powers fight. Their products may become a cheaper alternative that can fill the gaps in the market that inevitably develop. With neither China nor the US willing to back down, investment managers who can identify the industries that have the potential to benefit from the ongoing trade war could make significant profits. Doing so will not be easy; unparallelled insight, adaptability and courage to realise an investment’s full potential will be necessary. Those that can achieve this will be greatly rewarded.

The winners of the World Finance Investment Management Awards represent those investment management firms that are able to find success in unlikely places, while also adapting to complex and turbulent regulatory frameworks. Our panel of expert judges has developed a globe-spanning list of the finest operations within the sector. These businesses know what success looks like, and will navigate the coming year with ease.

World Finance Investment Management Awards 2018

Antigua and Barbuda
Global Bank of Commerce

Argentina
Puente

Armenia
Capital Asset Management

Austria
Kepler-Fonds

Bahrain
SICO

Belgium
ING

Brazil
Bradesco Asset Management

Bulgaria
Compass Invest

Chile
BCI Asset Management

Colombia
Fiduciaria de Occidente

Croatia
ZB Invest

Cyprus
Eurobank Cyprus

Czech Republic
Conseq Investment Management

Denmark
Danske Capital

Egypt
EFG Hermes

Finland
LocalTapiola

France
La Banque Postale Asset Management

Germany
Union Investment

Greece
Eurobank

Hungary
OTP Fund Management

Iceland – equities
Kvika

Iceland – fixed income
Stefnir Asset Management

Ireland
Setanta Asset Management

Italy
Azimut

Kazakhstan
RESMI Finance & Investment House

Liechtenstein
VP Fund Solutions

Luxembourg – equities
ValueInvest Asset Management

Luxembourg – fixed income
BCEE Asset Management

Malaysia
AmFunds Management Berhad

Malta
HSBC Global Asset Management

Mexico – equities
Citibanamex

Mexico – fixed income
SURA Asset Management

Netherlands
APG Asset Management

Nigeria
Investment One

Norway
DNB Asset Management

Oman
Al-Hosn Investment Company

Pakistan
Al Meezan Investment Management

Paraguay
Puente

Philippines
BDO Unibank

Portugal
Sociedade Gestora dos Fundos de Pensões

Russia
Sberbank of Russia

Singapore
Maybank Asset Management

Slovakia
IAD Investments

Slovenia
KD Skladi

Spain
March Asset Management

Sweden
AXA Investment Management

Switzerland
Bantleon

Thailand
UOB Asset Management

Turkey
Garanti Asset Management

UK
Aberdeen Asset Management

Uruguay
Puente

US
BMO Global Asset Management

Vietnam
MB Securities

DEWA invites organisations to participate in the Dubai Solar Show

Posted on September 17, 2018September 21, 2018 by Ashton Wenborn

His Excellency Saeed Mohammed Al Tayer, Managing Director and CEO of Dubai Electricity and Water Authority (DEWA), has invited companies involved in concentrated solar power and solar photovoltaic (PV) technology to participate in the third Dubai Solar Show, the region’s largest solar energy exhibition.

The show, which is organised by DEWA, will run in conjunction with the 20th Water, Energy, Technology and Environment Exhibition (WETEX 2018) and the World Green Economy Summit 2018. It will be held from October 23 to 25 at the Dubai International Convention and Exhibition Centre and will cover approximately 14,000sq m of space and attract 125 exhibitors.

Always improving
“Organising the third Dubai Solar Show highlights the UAE’s leadership in this field, as well as its increasing reliance on solar energy and transformation to a green economy,” said Al Tayer. “At DEWA, we are keen to embrace sustainability in all aspects of our business – environmental, social and economic – to ensure a sustainable future for generations to come.

The Dubai Solar Show is an ideal platform for a number of businesses and institutions to learn about the latest technologies and trends in the growing solar industry

“This goal supports the UAE Vision 2021 project, which hopes to improve air quality, conserve water and increase renewable energy use in the emirate, plus the Dubai Plan 2021, which will establish Dubai as a smart and sustainable city. The UAE Centennial 2071 project aims to improve the economy, education and government in the UAE.

“A number of initiatives have been launched to achieve global leadership in the sustainable development sector. The Green Economy for Sustainable Development initiative, launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, and the Dubai Clean Energy Strategy 2050 both aim to transform Dubai into an international hub for clean energy. By 2020, the hope is that 25 percent of Dubai’s total power output will come from clean resources and 75 percent by 2050.

“Through its participation in the Dubai Solar Show, DEWA will review its efforts in research, development and innovation in the field of solar energy. It will also assess the achievements of the Mohammed bin Rashid Al Maktoum Solar Park, which is the largest single-site solar park using the independent power producer (IPP) model.

“It will produce 5,000 MW by 2030, with a total investment of AED 50bn [$13.61bn]. When completed, the project will reduce carbon emissions in the country by 6.5 million tonnes each year. DEWA aims to engage the community in its efforts to increase reliance on solar energy through the Shams Dubai initiative, which encourages building owners to install PV panels on their rooftops to generate electricity from solar power. Already, 1,145 buildings with a total capacity of nearly 50 MW have been installed. It is hoped that all buildings in the emirate will have PV panels by 2030.”

Understanding the industry
The Dubai Solar Show is an ideal platform for businesses and institutions to learn about the latest technologies and trends in the growing solar industry. DEWA expects to welcome research and education institutions, manufacturers, suppliers, distributors and engineers to the show.

Al Tayer has called on all parties responsible for solar energy projects to participate in the Dubai Solar Show due to the benefits offered to exhibitors and participants. The show enables companies to present their products and brands, communicate with pioneers of solar energy and build relationships with decision makers, entrepreneurs, investors and buyers. Furthermore, exhibitors will gain a greater understanding of the existing and planned solar projects in the region, the latest market trends and legislation set by the authorities.

Yousef Al Akraf, Executive Vice President of Business Support and Human Resources and Chairperson of the Sales, Logistics and Sponsorship Committees at WETEX, said: “The Dubai Solar Show offers exclusive benefits to participants, such as free registration for DEWA’s products, letters of recommendation for products participating in the show and exclusive field visits to the Mohammed bin Rashid Al Maktoum Solar Park.

“Participating companies are able to speak to the public and review products appearing at the show. Organising the show in conjunction with WETEX 2018 and the fifth World Green Economy Summit provides those attending with a unique opportunity to extend the scope of their work to include other forms of renewable energy, water services and green economy projects. In addition, visitors have the opportunity to attend conferences, workshops and specialised activities. They can also meet experts from around the world.”

Top 5 markets for payday lenders

Posted on September 10, 2018February 18, 2019 by Max Tomlin

Payday lending first entered the fray in the early 1990s, as banks reduced their small credit offerings and consumers looked elsewhere for quick-fix cash. These short-term, high-cost loans have risen in popularity in the past two decades, but they aren’t without their pitfalls. Many lenders have come under fire for charging sky-high interest rates, using aggressive debt collection tactics and driving thousands of consumers into unmanageable debt.

As Wonga teeters on the brink of collapse, many payday loans firms will be considering their next move

As Wonga, the UK’s largest lender, teeters on the brink of collapse, many payday loans firms will be considering their next move. Join us as we look at the top five most significant markets for pay day lending, from the strictest to most lenient.

1 – Netherlands
The Netherlands has some of the strictest payday lending regulations in the world. Back in the early 2000s, the country saw a rise in the popularity of ‘Flitskrediet’, or ‘flash credits’, which were essentially unregulated payday loans with APR rates up to 600 percent. At its peak, the Flitskrediet market was estimated to be worth €6m ($6.9m), and because of the small size of the loans, they were not covered by the Authority for the Financial Markets or the Act on Financial Supervision.

In 2009, the Dutch Socialist Party began campaigning for regulation of the payday loan market. The government responded by introducing licensing legislation and interest capping. Payday lenders must now acquire the correct license to operate, and must adhere to the maximum interest rate of the bank base rate plus 12 percent. In 2013 and 2014, the Dutch government enforced this legislation in two landmark court cases in which it fined two firms that were found to be operating outside of these regulations – this included a €2m ($2.3) fine to betaaldag.nl for not adhering to rate restrictions.

2 – US
The US has the world’s largest payday lending industry, despite loans only being legal in 36 states. Payday loans first entered the US market in 1993, when Cleveland businessman Allan Jones, who later became known as the ‘father of payday lending’, founded Check Into Cash. Jones took advantage of bank deregulation legislation in the late 1980s, which caused many small banks across the US to go out of business and led to a severe shortage in availability of short-term microcredit. Check Into Cash and its compatriots stepped in to fill the void and the industry subsequently exploded, accruing a $46bn valuation by 2014.

Today, payday lending is regulated on a national level by the Consumer Financial Protection Bureau under the Dodd-Frank legislation introduced by President Obama after the 2008 financial crisis. That said, local governments can decide whether to legalise or ban payday lending in their own state. In the 27 permissive states, payday lenders are legal and subject to little regulation, meaning single-repayment loans with APRs of 391 percent or higher are commonplace. There are nine further ‘hybrid’ states in which local governments have introduced more stringent regulations. Arizona is one such example – it maintains a 36 percent cap on annual interest rates for all payday loans. The remaining 14 states and the District of Columbia forbid payday lending of any sort.

3 – UK
The UK’s payday loan market is relatively well regulated, but has been mired in scandal in recent years. The first payday lender in the UK was The Money Shop, a subsidiary of the US firm Dollar Finance Corp, which opened its doors in 1992. Unlike in the US and Canada, the UK payday lending market didn’t really take off until the mid-2000s – but when it did take off, it exploded. According to research by Consumer Focus, in 2009 alone 1.2 million Brits took out 4.1 million loans, equating to £1.2bn ($1.5bn). In 2013, that number climbed to 12 million loans, worth £3.7bn ($4.8bn).

Until this point, the payday lending industry had fallen under the jurisdiction of the 1974 Consumer Credit Act, which requires lenders to have a licence from the UK Office of Fair Trading (OFT) to offer consumer credit. However, the OFT did not really function as an industry regulatory body, giving lenders licence to engage in unethical practices – such as aggressive debt collection and irresponsible lending.

In 2014, the Financial Conduct Authority took charge of supervising and regulating the industry. It implemented caps on interest and fees at 0.8 percent of the amount borrowed per day, caps on charges at £15 ($19), and total caps at 100 percent, meaning that borrowers would never have to repay more than twice the amount that they had borrowed, regardless of how late they were in making repayments. Today, the industry’s largest lender Wonga, that occupies 40 percent of the market share, is in administration– but there are plenty of firms ready to rush in and take its place.

4 – Canada
The Canadian payday loan market has become more lenient in recent years, as lending restrictions are decided by provinces rather than central government. Payday loans won favour with Canadian consumers in the mid-1990s, as salary advances became less readily available and workers had to turn elsewhere for access to short-term credit. The industry has expanded to encompass over 1400 payday loan storefronts across the country, and an estimated two million Canadians a year make use of a payday lender.

In 2007, the Canadian government passed legislation to remove payday lending from the jurisdiction of the criminal code and allow each province to decide its own restrictions on fee and penalties. British Columbia has the strictest set of regulations – lenders cannot legally charge more than $15 per $100 for a two week payday loan, and penalties for returned checks or pre-authorised debits are capped at $20. Prince Edward Island is the most lenient, with a maximum cost of $25 per $100 loan and no cap on penalties.

5 – Australia
The Australian government has flexed its regulatory muscles over the payday loans market recently, but there are still legislative loopholes. Like many other countries, demand for payday loans in Australia increased in the 1990s as banks and credit unions pulled back on their short-term lending and consumers turned to other avenues for a quick cash fix. From 2004 to 2014, the small loans market increased twentyfold, and in June 2014, was valued at $400 million.

Payday lending in Australia is now covered by the Uniform Consumer Credit Code, but was previously a wholly unregulated market and there are still a number of loopholes in the UCCC that lenders often exploit. In 2012, the government introduced the Consumer Credit Legislation Amendment Act, which banned loans of over $2000 that must be paid back in 15 days or less, and introduced a cap on loan fees and charges, including a 20 percent maximum establishment fee and a maximum monthly fee of 4 percent.

Diamond Brothers: a market leader in the recycled diamonds industry

Posted on September 10, 2018September 20, 2018 by Ashton Wenborn

Over the last decade, the demand for recycled diamonds has increased rapidly. Indeed, in 2017, it was estimated that trade in recycled diamonds is now worth five and 10 percent of the global market (approximately $1bn). This is partially due to the financial crash of 2008, which resulted in a huge flurry of people trying to trade in their finest pieces in a quest to raise cash quickly. In addition, traditional diamonds had something of a difficult year in 2015, as Chinese demand dropped quickly as a result of an anti-corruption crackdown that slowed economic growth. Reduced oil prices in Russian and the Middle East also had a detrimental effect on demand.

These developments have cemented the recycled diamonds industry in the global arena. One organisation that has consistently thrived in this sector is Diamond Brothers, which was founded in 2014 by LD Gems. It has become a multi-million-dollar business thanks to the combined expertise of its founders, who have over forty years cumulative experience in diamond trading.

In general, Diamond Brothers has found that recycled diamonds brings a whole host of benefits for both company and seller. There are various reasons why people want to do this, whether that’s a break-up, a desire to make a bit of money, or create something completely new out of old diamonds.

Diamond Brothers has found that recycled diamonds brings a whole host of benefits for both company and seller

Diamond Brothers currently buys a range of diamonds – including certified and non-certified diamonds, old cuts, semi-cuts, broken stones, diamond parcels with small stones (melee) – which the company repurposes for new creations.

Selling diamonds is easy with Diamond Brothers. The company regularly travels around the world to meet people who are thinking about whether to sell their items, with announcements on its Facebook as to when and where these free evaluations will be. The other main way in which it evaluates diamonds is through a FedEx service, which picks up each item for free, with insured and reliable shipping. Products are sent across within 24 hours for evaluation, and there is no obligation to sell for those who speculatively partake in the process.

Diamond Brothers also sells certified diamonds that have been graded in a laboratory depending on their qualities of Cut, Colour, Clarity and Carat Weight (the “4 Cs”). The company can source everything from small diamonds to larger stones to fit what a customer wants. These can be the perfect gift for Christmas, birthdays, as well as many other occasions.

Diamond Brothers is highly regarded, overall, for its excellent customer service, commitment to the best prices, and connections to global diamond recycling experts. Diamond Brothers’ head office is based in the easily accessed location of Antwerp in Belgium, and the business can be contacted online, too, at the web address diamondbrothers.com.

To sell or buy diamonds, you can also click on this link.

FTSE stock index remains unchanged for first time since 2006

Posted on September 6, 2018September 19, 2018 by Ashton Wenborn

For the first time in 12 years, the FTSE 100 is set to remain unchanged, with no promotions or demotions announced in the Q3 reshuffle, which will be finalised on 21 September. The index, which lists the top 100 blue-chip companies on the London Stock Exchange, has seen more than 400 changes since its launch in 1984. However, thanks to stable market capitalisations within the FTSE 100, no changes are to be made in Q3.

Reshuffles in the FTSE 100 take place on a quarterly basis. The previous restructuring, which took place in June, saw new entries from sports betting group GVC Holdings and online supermarket Ocado, and exits from Mediclinic and G4S.

Analysts have attributed the current stability to the relatively peaceful summer blue-chip stocks have experienced. Despite this, Laith Khalaf, a senior analyst at stockbroker Hargreaves Lansdown, advised that the market was not a “flat lake with no ripples”. He added: “There’s not a blanket lack of movement – we are seeing movement down in the FTSE 250 and SmallCap, but not enough to remove big names.”

Historical rarity
The lack of change in the FTSE 100 is a rare phenomenon and has only occurred six times since the index was launched in 1984. Previous incidences of such stability include March and June 1995, when a dramatic drop in the rate of inflation and recovery from a deep recession led to a sustained period of economic prosperity for much of the FTSE 100, and March 2006, when a lengthy period of economic growth allowed many key members of the FTSE 100 to cement their positions within the index.

The lack of change in the FTSE 100 is a rare phenomenon and has only occurred six times since the index was launched in 1984

This is also the first time since the 2008 financial crisis and the 2016 Brexit vote that the FTSE 100 is to remain constant. A significant proportion of the FTSE 100 is made up of multinational firms, and 40 percent of FTSE 100 CEOs are not British nationals, making this stability particularly surprising given the international uncertainty surrounding Brexit.

In fact, the index has enjoyed a successful few months, and in January this year hit a record closing high of 7,724. This prosperity would suggest that the FTSE 100 has remained relatively immune to the impact of Brexit. However, Albrecht Ritschl, Professor of Economic History at the London School of Economics, suggests that it is not immunity but rather “paralysis due to considerable uncertainty” that is responsible for the lack of change.

He added: “There is limited movement in any direction; rather, the economy has been moving sideways, or treading water. That’s perhaps reflected in the stable composition of the FTSE. We can expect quite a bit more change once the perimeters of Britain’s future trade arrangements become clearer.”

Although stability in itself is positive, the reasons behind it are not so. An economy that is treading water, as Ritschl put it, can only survive for so long, and while there’s a chance it may progress into a period of economic growth, there’s also a risk that it will head in the opposite direction.

Russ Mould, Investment Director at AJ Bell, warned of an end to the period of stagnation and significant fluctuations to come. “The lack of change shows that the market has been largely directionless over the past few months, but the summer can be a quieter time for markets and three months is a short period of time, so we shouldn’t read too much into it.

“Given this is the first quarter without a change since before the financial crisis, it is unlikely the period of calm will last too long, particularly with the uncertainty surrounding Brexit and global trade wars likely to have disproportionate effects on businesses depending on the sector they are in and where they operate.”

Volatility at the top
Stability in the FTSE 100’s market capitalisation has not extended to its leadership. This year has seen no less than 17 chief executive exits, the most recent being the unexpected resignation of Sage’s CEO last Friday.

Stability in the FTSE 100’s market capitalisation has not extended to its leadership. This year has seen no less than 17 chief executive exits

Stephen Kelly’s departure wiped over £500m ($647m) off the value of the software giant. He claims to have departed over concerns about moving customers to cloud-based solutions. Other significant appointments in 2018 include Mark Read, who succeeded Martin Sorrell as CEO of WPP, and Carolyn McCall, who joined ITV from EasyJet.

Khalaf stressed that the departure of a CEO does not necessarily equate to trouble within the firm: “A CEO leaving can be a sign of distress, or a natural progression.”

FTSE 100 CEOs have come under fire in recent months for exceedingly high salaries, rapid wage growth and the underrepresentation of women. A report from The High Pay Centre and CIPD published last month revealed that the total pay for all FTSE 100 CEOs topped £550m ($711m), and median pay rose by 11 percent between 2016 and 2017, taking the average CEO salary to £3.93m ($5.08m).

The highest paid FTSE 100 CEO in the 2016/17 financial year was Jeff Fairburn of domestic construction firm Persimmon. Fairburn took home £47m ($60.78m), 22 times his salary the previous year.

Safeguarding legacies
Although the current stability in the FTSE 100 is unlikely to be long lasting, it has significant implications for the global economy. The FTSE 100 is a London-based index, but the proportion of global companies within it means it also provides a barometer of the state of international trade relationships.

Not only that, to gain automatic entry to the FTSE 100, a company must reach the market capitalisation of the 90th firm; this is currently £5.5bn ($7.11bn). Demotion occurs if a firm’s value falls to that of the 111th company on the FTSE 250, currently £4.2bn ($5.43bn). For a company in the upper quartile to risk demotion, they would have to suffer significant losses.

Therefore, stability is evidence that key players are standing strong and doing all they can to protect themselves from the potentially damaging effects of Brexit and global trade wars; for many, such future-proofing has included strengthening leadership by appointing a new CEO.

As the November deadline for Brexit negotiations draws closer, those firms on the periphery of the FTSE 100 are increasingly at risk and will be keenly considering their corporate strategy before the next reshuffle.

BNP Paribas Banque Privée encouraging socially responsible investments

Posted on September 3, 2018October 3, 2018 by Max Tomlin

Environmental, social and governance (ESG) matters have become unavoidable in recent years. At BNP Paribas Banque Privée, our awareness of such issues has driven a gradual shift towards more responsible ways of consuming, investing and financing. Banks need to better support their clients – both businesses and individuals alike – in taking these issues into account.

It is not enough for banks to simply commercially support their clients; it is essential that they also hold the conviction that sustainability is necessary

This is the case, for instance, with the Sustainability Leadership Programme, launched by the Cambridge Institute for Sustainability Leadership in partnership with the BNP Paribas Wealth Management, the international network of BNP Paribas Banque Privée. The programme includes an exclusive training seminar designed to help leading entrepreneurs fast track their environmental agenda and boost sustainability in their businesses. The opportunity to meet fellow business leaders and discuss the importance of social responsibility in the wider economy is also extremely rewarding.

Nearly 30 international entrepreneurs from nine countries in Europe, Asia and the Middle East participated in the first edition that took place on March 14, 2018. They acquired in-depth knowledge on how to integrate a sustainable environmental approach into both their decision-making process and the long-term vision of their organisations. The programme responds to a growing concern among business leaders: close to 40 percent of the elite entrepreneurs who responded to the BNP Paribas Global Entrepreneur Report, published in November 2017, consider ‘positive impact’ as a necessary and important performance indicator, compared with just 10 percent two years ago.

Leading by example
There is a growing awareness that banks have a major role to play beyond their corporate obligations. It is not enough for banks to simply commercially support their clients; it is essential that they also hold the conviction that sustainability is necessary. This is why BNP Paribas was among the first enterprises in France to explicitly outline sustainable development objectives in its corporate social responsibility (CSR) policy.

BNP Paribas also broke new ground when it created a company engagement department to coordinate the group’s CSR, sponsorship, diversity and communication platforms. BNP Paribas aims to use all the tools at its disposal to contribute to the achievement of the United Nation’s 17 Sustainable Development Goals. Additionally, the bank is no longer financing certain business sectors, such as controversial weapons (anti-personnel mines, biological weapons, chemical weapons and cluster munitions), non-conventional petroleum, and gas and tobacco.

Individual appetite
The success of a sustainable economy is also linked to investor awareness and their appetite to provide funding. Private banks play a growing and more influential role in this field. Though socially responsible investing (SRI) has long been the prerogative of institutional investors, it is steadily attracting more individuals. Eurosif’s latest biannual study showed that its share of SRI funds rose from 3.4 percent in 2013 to 22 percent in 2015. Increasingly, we are finding that our clients want to give meaning and impact to their savings according to principles that go beyond purely financial aspects. In order to allow them to diversify their investments, we have enriched our SRI vehicles to ensure that they take ESG criteria into consideration. Clients have access to a selection of 12 internal and external SRI funds, including five thematic funds, which are proving hugely successful because they allow for more targeted impacts.

Taking responsibility
The latest Novethic study shows that environmental fund assets under management in Europe have more than doubled between 2013 and 2017. This trend is accelerating and should continue with the launch of new funds, including BNP Paribas’ Green Business Fund, which focuses on ecological and energy transition.

This fund is largely invested in BNP Paribas Asset Management’s SRI environmental funds on themes such as water, the fight against climate change and green bonds. As much as 10 percent of the fund is invested in non-listed companies and is dedicated to the financing of European SMEs with significant activities in energy efficiency, renewable energy, green real estate, natural resources, sustainable transportation, water and waste.

Investors realise that the decisions they make have consequences that extend far beyond their own portfolio. The businesses and industries that they fund could help alleviate poverty, reduce pollution or address social issues. Equally, they could have negative impacts too – investing comes with a great deal of responsibility. Fortunately, just as individuals have come to realise the importance of SRI, so too have financial institutions. At BNP Paribas Banque Privée, we are keen to point our clients in the direction of sustainable assets to ensure that we build a fairer, more responsible world.

24option rolling with the regulatory punches to set the pace in CFD and forex trading

Posted on August 30, 2018September 17, 2018 by Max Tomlin

In 2018, responding strategically to the rapidly shifting online trading landscape has become more critical than ever before. This is due to a raft of stringent regulatory requirements and increasingly restrictive advertising rules that have come into effect, sending tremors rumbling ominously across the industry.

The way brokers react to constantly evolving regulatory and advertising controls is likely to seal their long-term fate

What’s more, the crackdown on brokers’ activities has been gathering serious momentum since the beginning of the year, closing in on the online ‘contract for difference’ (CFD) trading industry from all sides. Internet behemoths such as Facebook, Google and Twitter, major European regulators like the Financial Conduct Authority and the Cyprus Securities and Exchange Commission, and the European Securities and Markets Authority (ESMA) are all tightening their grip on what brokers can and, more specifically, can’t do.

Given this backdrop, industry experts are now debating whether the domino effect of restrictions will take the industry down for good. Alternatively – and fortunately for forward-thinking brokers – this monumental shift could be creating a new and highly resilient breed of client-centric trading powerhouses.

Pivot perfect
Interestingly, there’s an evolutionary type of broker on the CFD trading scene that has an edge when it comes to facing such changes head on – namely, by fluidly pivoting its business model in response to restrictions. One such broker is 24option, which has shown incredible resilience and agility in reimagining its business model and taking change in its stride.

Indeed, 24option is leading by example, by continuing to leverage its proven ability to evolve and adapt to changing market needs. The question, however, now turns to other brokers, and whether they will follow the 24option example or falter, thereby missing the opportunity to take the lead in one of the most unsettling periods in the history of the industry.

Change, in any walk of life – including online trading services – is inevitable, and the way brokers react to constantly evolving regulatory and advertising controls is likely to seal their long-term fate. In the case of 24option, its commitment to staying one step ahead of changes in the regulatory environment is the secret to the company’s well-executed evolution, together with its strong and steady progress as it carves precise inroads into the well-established online CFD trading sector.

There is a saying we often use at 24option, which sums up the three different approaches to the market perfectly: “Pessimistic brokers battle the winds of change and prepare for the worst. Optimistic brokers expect the winds of change to start blowing in their direction. Realistic brokers adjust their sails and let the winds of change propel them onwards and upwards.”

Regulatory changes
One of the major regulatory changes of the year, thus far, has been the EU’s revamped Markets in Financial Instruments Directive, known as MiFID II, which came into full effect on January 3, 2018, along with the new Markets in Financial Instruments Regulation (MiFIR). MiFID II has been seven years in the making, having been conceived in 2011, and aims to increase transparency between all financial market participants, including brokers. The main areas addressed by MiFID II include product governance, best execution, transparency and reporting, among many others.

On March 27, 2018, an ESMA paper outlined measures designed to increase protection for retail investors in the EU, by prohibiting binary options and also restricting CFDs. Thanks to 24option’s strategic move into the CFD market, the company is already well prepared and ready to implement the measures laid out in the ESMA paper.

Specifically, ESMA has set out and agreed to five measures under Article 40 of MiFIR. The first is leverage: limits on leverage under the ESMA ruling will vary depending on the volatility of the underlying asset that a retail trader is opening a position on. At the top end, the maximum leverage available for major forex pairs will be 30:1, whereas minors, exotics, gold and major indices are limited to 20:1. Commodities and non-major indices attract leverage of up to 10:1, and leverage for the most volatile asset class – cryptocurrencies – is set at 2:1.

Margin is the second measure. When it comes to closing out CFD positions that retail clients have opened, ESMA aims to standardise the percentage of a margin required to trigger the close out. The third is negative balance, wherein ESMA aims to further limit clients’ losses by imposing the implementation of negative balance protection on a per-account basis. Fourth, we have incentives: the ESMA paper clearly states that there will be further restrictions on the incentives offered by CFD brokers to retail clients. Finally, ESMA requires brokers and others affected by these measures to display a new, standardised risk warning. The difference between the ESMA risk warning and others used to date is that providers of CFDs must state the actual percentage of losses incurred on their retail clients’ accounts.

When we received the ESMA consultation paper in January 2018, we got to work straight away. This meant that when the March 2018 paper was published, we were already well on our way to being compliant. We anticipate that the measures outlined will become officially binding very soon, and we are willing to implement the necessary changes across our entire operation. That’s what sets 24option apart: we look ahead, we see what’s coming, and we deal with both positive and negative change in a proactive, positive way.

As groundbreaking as ESMA and MiFID II are to the industry, they are not the only instruments of change in play during 2018. Indeed, March was a big month for brokers, with Google adding to the growing list of restrictions – this time on the products that can be promoted using Google AdWords and which countries’ brokers are entitled to target with their campaigns. Effective from June 2018, brokers are no longer permitted to run any ads related to cryptocurrencies or binary options. Brokers offering CFDs must also be certified by Google and licensed by the appropriate regulatory body in the countries they wish to target if they want to advertise trading on forex and other CFDs. The announcement from Google came hot on the heels of similar action taken by Facebook and Twitter regarding bans on the advertising of highly volatile products such as cryptocurrencies.

Know thy client
In such a fast-paced environment, where new or tighter restrictions often materialise overnight, expecting the unexpected comes with the territory. We ensure that the team at 24option is up to the challenge through a client-orientated approach. Essentially, as a business, our clients are the focal point of everything we do. When you’ve instilled such a client-centric outlook in your company’s culture, evolving services to meet your clients’ needs really does become second nature.

As a regulated broker, we want our clients to feel secure, and the recent measures that have been announced will bolster protection for them – which is a hugely positive thing. We are always looking ahead, and over the years we’ve developed a team of highly skilled professionals who are at the top of their respective fields – that means that when needed, we have the power to act quickly and decisively.

The importance of having the ability to catalyse change without any delays or hindrances cannot be overstated. This is an area where 24option seems to excel, as attested to by its timely entry into the world of CFD trading. When it comes to achieving seamless pivots in business models and strategy, agility is everything. We stay agile by getting to know our clients inside and out – what motivates them, what they love to trade, what scares them and what their goals are. By understanding our clients’ needs, we can intuitively sense when it’s time to pivot, and how they will react to changes that are outside our control, such as regulatory and advertising restrictions.

We want our clients to be part of our evolution and to stay with us for the long term. Whatever we do – whether it’s our four-year partnership with Juventus, our dedication to building and retaining the best team in the industry, or delivering the best possible support service to our clients – we take a long-term view. That is the key to our agility: we welcome any change that will take our clients’ trading experience to the next level.

ActivoBank finds the perfect balance between tradition and innovation in Portugal

Posted on August 28, 2018September 10, 2018 by Max Tomlin

Although Portugal was one of the countries hardest hit by the euro crisis, its economy has shown impressive powers of recovery. Today, its job market is growing and its financial sector is stable. This stability allows the country to look to the future with confidence, particularly with regard to digital technologies. This forward-looking outlook can be seen in many of the country’s financial institutions, but none more so than ActivoBank. In 1994, the Portuguese Commercial Bank founded Banco7, the first bank in Portugal to be completely telephone dedicated and available 24 hours a day, seven days a week. Three years later, Banco7 launched the first ‘home banking’ service in Portugal.

Our clients have high expectations regarding the digital solutions we offer and demand constant innovation

In 2001, Banco7 became ActivoBank7, an online investment bank, and in 2010, after rebranding simply as ActivoBank, it began offering a new banking experience: a transactional banking app; account opening in 20 minutes; and debit and credit cards issued within five minutes. It was the pursuit of all these technological innovations that allowed ActivoBank to become one of the most important players in online banking in Portugal. World Finance spoke with Luis Magro, marketing director at the bank, to find out more about the company’s digital strategy and how it manages shifts in customer behaviour.

How does the ActivoBank app simplify the account opening process?
You can open a bank account using our app in hardly any time at all. All you need to do is download our app, fill in some personal data and take a few photos of some documents corroborating that data. The process is completed with a video call that will confirm your identity and authenticate your documents. There are, for instance, holographic features within the Portuguese ID card that can easily be inspected in a video call. During the conversation with the customer, a couple of mandatory questions concerning the intent of the account opening and the assets that the client controls will be asked. After a few minutes, the customer receives an email with their account number and internet access codes. Overall, the entire process takes about 15 minutes.

How have customers responded to the bank’s new digital solutions?
Our customers recognise us as an online bank, therefore they chose us precisely because we offer digital solutions that other banks cannot. In two months, we’ve gained the trust of almost 1,000 online customers, and the numbers keep surprising us.

Our clients have high expectations regarding the digital solutions we offer and demand constant innovation. For this reason, we will soon be able to make use of the Portuguese Government’s electronic services by allowing our customers to open an account using the digital mobile key, which basically converts their mobile phones into an authentication tool.

To use this key, all you have to do is register on a web portal and provide your citizenship card. Then, you connect the electronic signature in the chip with the new system using your mobile phone number or email address. After this process is finished, you receive a temporary password every time a service requires ID verification. Currently, our account opening is only available through our app, but it should soon be available via our website as well, helping to simplify the account opening process.

Has the app also introduced new efficiencies for your staff? How have these streamlined your operations?
Yes, it has, especially concerning the work done in the branches and back office. It was never part of our plans to open many more branches (right now we have 14), but the truth is that as a result of the success we’ve been having, queues were starting to grow in many of our branches. Even though we have the fastest ‘in loco’ account opening process, it still takes about 20 to 30 minutes to open an account. This requires time and people, and instead of being focused on commercial operations, such as mortgages, our colleagues were wrapping up administrative details about the accountsthey had opened.

At the moment, we still have a fairly small team engaged in mobile account opening, and they have been able to handle the workload quite well. They are focused on their task and, in between calls, are able to confirm all the documentation that was sent online by the client, and everything is immediately archived digitally.

What security methods have you deployed recently to safeguard digital customers?
We are certainly keeping up with the biometric security systems being employed by most digital companies, having recently implemented face and fingerprint ID for our mobile app. We also have in place a one-time password implementation that incorporates two-factor authentication. Every time our customers use the app, they have to log in using a pin number of their choice. To confirm the transaction, they have to enter three numbers out of seven from their multichannel code, which the customer chooses and the bank has no access to. Finally, a text message is sent to the customer’s mobile phone with an authorisation code that can only be used for that particular operation before it expires.

Cybersecurity audits within our compliance department ensure that we are communicating with our customers securely via email, and we never include hyperlinks in our correspondences in order to prevent phishing. In terms of incoming emails, we use the latest software protection to filter out malware and dangerous file types. Also, the entire team is very attentive to email attachments they do not recognise. We have constant online training (it is part of our protection policy) on how to keep data secure, and our operating systems utilise the latest security fixes and next-generation firewalls.

What other methods has the bank employed to simplify its operations?
As a company, we have always been mindful of the need to simplify all our operations, and not merely those available on our mobile platform. Our debit and credit cards are issued at the branch within five minutes, allowing our back office time to concentrate on other tasks, and our product portfolio is quite concise.

Our product life cycle is also relatively long when compared with those of other banks. We still offer the same four savings accounts, the same debit and credit cards and the same simple current account as we did in 2010. Furthermore, when new products or services are added, we discontinue the old ones. Another example of our push for simplification is the fact that we don’t have different pricing for different customers. Our price list, our rates and our interest calculation all apply to our entire client base, without exception.

How is ActivoBank meeting the needs of customers who may want a more personal connection than can be provided by an app?
One of our greatest challenges is keeping a balance between offering online products and services, while at the same time maintaining the bond of trust we have with our customers. This challenge is more noticeable if we consider the availability and personal presence that some customers prefer when interacting with us.

In so-called ‘traditional banking’, bonds are created with the account manager, whom we visit, know by name and ask questions face to face. Therefore, in order to deliver the level of interaction demanded by some customers, we have our support line: a group of managers completely available to help with banking products that are more complex, such as loans, mortgages, investments and insurance. Also, for wealthier customers, we have a couple of managers totally dedicated to them specifically. Further, our branches are open Monday to Saturday, from 10am to 8pm.

What services are offered by your ActivoInvest application? How does it differ from the ActivoBank app?
The ActivoBank app offers transactional services for a broad spectrum of clients – essentially, any ActivoBank customers who wish to connect to their accounts, either for increasing their savings, applying for a loan or checking their balance. Regarding the ActivoInvest app, it’s primarily for investors – or at least for those customers who want to keep up with the markets.

ActivoInvest offers functionalities that coincide more with those of the trading area of the ActivoBank website: you can trade in the stock market (stocks, certificates, warrants and bonds), cancel stock exchange orders, view the detail of your securities’ portfolio, look in to the record of your stock exchange orders, and also check the graphical evolution of your intraday securities.

What are the ActivoBank’s plans for the future?
We are already analysing the possibility of using our platforms to provide more services than those of a purely financial nature. We understand that with the loosening of regulations within the European Union, new business opportunities will arise due to the possibility that banks will have to share financial data.

We are also looking to improve the interaction between the human and the digital elements that complement one another within our branches. Holographic chatbots will be of great help to our staff, answering the most basic customer questions and allowing employees to focus their attention on more complex commercial transactions.

PMI recognises the need for strategic aptitude to ensure successful project delivery

Posted on August 24, 2018September 10, 2018 by Max Tomlin

Organisations worldwide are facing increasingly complex challenges as a result of a rapidly changing business environment. Staying competitive, therefore, requires the effective management of projects and programmes. Successful organisations of all types understand the benefits of disciplined project delivery: lower costs, greater efficiency, improved customer and stakeholder satisfaction, and greater competitive advantages. This is why we continue to advocate for organisations to embrace project management as a strategic competency for success. Our latest research demonstrates that while many organisations are listening, there is still a lot of work to be done.

Insights suggest that the majority of organisations worldwide are failing to pay adequate attention to proven project management practices

Research unveiled earlier this year demonstrates that organisations around the world are continuing to waste a significant amount of money on the projects and programmes they are overseeing. In fact, the study revealed that collectively, organisations waste around $1m every 20 seconds due to the ineffective implementation of business strategy through poor project management practices. This equates to roughly $2trn wasted each year.

These findings were reported in 2018’s Pulse of the Profession, Success in Disruptive Times: Expanding the Value Delivery Landscape to Address the High Cost of Low Performance, our annual survey that has tracked the major global trends in project management since 2006. This year’s study showed that, on average, organisations waste 9.9 percent of every dollar – or $99m for every $1bn – due to poor project performance, a slight increase from the $97m for every $1bn that organisations reported having wasted last year. Additionally, our research found that 31 percent of projects are still not meeting their goals, while 43 percent of projects are not completed within budget and nearly half (48 percent) are not completed on time.

Misguided beliefs
Our findings also show that, alarmingly, executive leaders may be out of touch with this reality, as 85 percent of those surveyed said they believe their organisations are effective in delivering projects to achieve strategic results. These factors are leading to significant financial losses for businesses around the world, which also has a significant broader macroeconomic impact.

31%

Percentage of projects don’t meet original goals

43%

Percentage of projects aren’t completed on budget

48%

Percentage of projects aren’t completed on time

Of the geographic regions included in the survey, China reported the lowest average monetary waste on projects (7.6 percent, or $76m per $1bn), followed by Canada (7.7 percent, or $77m per $1bn) and India (8.1 percent, or $81m per $1bn). Conversely, Brazil (12.2 percent, or $122m per $1bn), Europe (12.7 percent, or $127m per $1bn) and Australia (13.9 percent, or $139m per $1bn) reported the highest average waste of project spending.

Insights drawn from the data suggest that the majority of organisations worldwide are failing to pay adequate attention to their project management practices, and are not implementing the project management approaches that allow for the success of specific projects. Consequently, their projects are failing, and money, resources and time are being wasted. It is therefore up to organisational leaders to focus on what matters for positive business outcomes. Results from our Pulse of the Profession report demonstrate that organisations worldwide must take another look at project management as a strategic competency that drives success.

Despite the volume of waste being reported globally, there is reason for optimism. As Pulse of the Profession shows, it is encouraging to see that some regions are making significant progress and experiencing greater success with implementing strategic initiatives and delivering intended project benefits. It is our hope that organisations worldwide will follow the lead of companies headquartered in China, Canada and India.

Today’s competitive business climate challenges organisations daily as they strive to stay ahead of their competition and remain relevant to their key stakeholders. To remain on top, organisations in China, Canada and India must continue leveraging sound project management practices to complete projects that achieve success and deliver on intended benefits. To improve their own standing, organisations in other parts of the world must follow the lead of those in countries that post the lowest average waste figures.

Strategic solutions
Based on our previous research, it’s becoming clear that three strategies in particular are continuing to help organisations save money on their projects. The first is about investing in actively engaged executive sponsors. Ultimately, support for a project is priceless; therefore, it is not surprising that having actively engaged executive sponsors on board is the top driver of projects meeting their original business goals. This is because actively engaged executive sponsors help organisations bridge the communications gap between influencers and implementers, thereby significantly increasing collaboration and support and, in turn, boosting project success rates and reducing risk. Effective project sponsors are also able to use their influence within an organisation to actively overcome challenges by communicating the project’s alignment to strategy, removing roadblocks and driving organisational change.

Globally, organisations report that, on average, 38 percent of projects do not have active executive sponsorship, which points to the need and opportunity for executive leaders to be more engaged in the delivery of strategy. We also found that organisations with a higher percentage of projects with actively engaged executive sponsors (more than 80 percent of their projects) report 40 percent more successful projects than those with a lower percentage of projects with sponsors (less than 50 percent of their projects). The data therefore shows that executive sponsors who can guide a project to fruition are critical to project success.

The second imperative strategy is about avoiding ‘scope creep’. This is the uncontrolled expansion of product or project scope without adjustments for time, cost or resources. It causes money to be wasted, decreases satisfaction and delays project benefits, and it can happen on any project. Essentially, more work is added to the project than originally planned, and this work cannot be absorbed without the project missing one or more objectives. Globally, 52 percent of the projects completed in the past 12 months experienced scope creep or uncontrolled changes to the project’s scope, which is a significant increase from the 43 percent reported five years ago.

One third of ‘champion’ organisations (companies with 80 percent or more of projects being completed on time and on budget) reported experiencing scope creep, versus 69 percent of underperformers (organisations with 60 percent or fewer projects being completed on time and on budget). A continuous requirement-improvement process can help organisations control scope creep by establishing the scope of work to meet customer expectations. As indicated by prior research, the top three reasons for project failure (a change in an organisation’s priorities, a change in a project’s objectives, and erroneous requirements gathering) contribute to uncontrolled scope.

Ensuring maturation
The third strategy involves maturing value delivery capabilities. Value delivery capabilities are the full spectrum of competencies that enable organisations to deliver projects and programmes. Maturing these capabilities allows for quick adaptation to changing market conditions by balancing efficiency and creativity, as well as promoting continuous improvement. This enables organisations to minimise risk, control costs and increase value, while simultaneously using the project management approach that best fits the specific needs of the project and organisation.

Despite its importance, fewer than one in 10 organisations report having high maturity in this area. Two in five organisations, meanwhile, report that creating a culture that is receptive to change, values project management and invests in technology are high priorities. A quarter of organisations consider developing skills for project sponsors a priority, while only 31 percent are prioritising the development of a comprehensive value delivery capability. Again, we see that champion organisations are making the necessary investments and have high delivery capabilities maturity – 87 percent versus the five percent seen in underperformers. Essentially, organisations that develop these capabilities see better project performance. Their goal is to deliver better benefits, adapt to change and achieve customer centricity – all for continuous improvement and better outcomes.

The results from this year’s Pulse of the Profession report continue to show a clear linkage between effective project management and organisational performance. Organisations that are seeing success, with their projects being completed on time and on budget, while meeting business intent and having high benefits realisation maturity, have recognised the critical importance of project management. They also realise that the right project, programme and portfolio management practices give them a competitive edge over others in the market.

Project management is the driver of strategy, but some organisations are failing to bridge the gap between strategy design and its delivery. If your organisation isn’t using proven project management practices to its benefit, your organisation isn’t playing on a level playing field with other organisations that are.

Recall Capital Nordic makes a compelling case for new SME funding model

Posted on August 23, 2018September 6, 2018 by Max Tomlin

According to the OECD, the SME sector is important not only for local prosperity, but for the entire global economy too. It is within this sector that most new jobs are created, a significant proportion of innovation occurs, and many new technologies are developed. Despite the fact that a reliable supply of capital is central to the development of these companies, funding problems persist. Indeed, it remains one of the major challenges within the SME landscape.

When SMEs create their own microecosystem to meet their capital needs, they gain greater control over the pace of capital supply

In recent times, the capital market has changed. It is beginning to react more to how things are perceived, rather than just numbers and facts. As a result of this change, new behaviours have emerged, with investors no longer blindly backing projects due to what they have seen or heard.

Instead, the major focus is now based on how likely a project is to succeed. In order to build an accurate assessment, investors will need to consider the experience and ability of those in management positions, as well as the board’s capacity to convert management’s work into shareholder value. If there are no credible management figures or board members, it is likely that the investment will not be particularly strong, and the investor will probably refrain from committing their hard-earned funds.

Liquidity planning
Although SMEs may have become accustomed to capital markets providing money on a regular basis, once investors start to retreat and investments are evaluated more carefully, the entire SME landscape begins to change – it starts to be a competition for money. This insight is crucial for the continued existence of each SME firm in the capital market, not least for the daily trading of stock, which will begin to decline as a result. Falling volumes affect volatility and risk, which further deteriorates and complicates an SME’s ability to attract new capital.

A number of studies have now established that the trading volume of SMEs is directly related to their value or price. Volatility is also likely to be a decisive factor in the price of the share. There are several tools in the market that aim to stimulate more trade, and yet few of them work well for SME firms. Instead, traditional trading parameters need to be paired with other dynamic aspects and trade patterns to optimise a modern and high-performance trading engine. However, all technical solutions have a weakness: namely, they become too static in their approach, and therefore a human touch is required to ensure that these commercial engines are efficient.

Market developments challenge the existing tools used to manage a company’s capital supplies, many of which have become clumsy, ineffective and old-fashioned. This can often result in a large loss of value for SME shareholders. While it is true that investment tools work well for large companies, SMEs need a completely different type of methodical capital supply – one that has a stronger basis in their own liquidity planning.

A unique ecosystem
SMEs today are completely dependent on the capital market’s own players for their capital procurement. As long as these players have financial interests in particular issues and specific business models, nothing will change without SME companies requesting it themselves. Therefore, it is up to individual companies to take responsibility for their equity supply in a way they have never had to previously. Fortunately, however, there are more alternative investment opportunities available than ever before. These include private debt funds, crowdfunding marketplaces, high-net-worth individuals and many other sources.

First, when SMEs create their own microecosystem to meet their capital needs, they gain greater control over the pace of capital supply. Second, businesses can manage the whole process without interference from external players. Third, everything happens on market terms. Fourth, management can spend more time developing the company instead of constantly seeking new financial solutions to cope with ongoing capital supply. Having a personal capital ecosystem enables organisations to beat the market. The money they raise can then be used to create additional shareholder value, which means that the value returns to the financial market.

This virtuous cycle can continue for as long as the company needs money to develop its business. As long as outgoings are subject to market conditions, the value growth of the company will remain strong. By combining trading engines with their own capital ecosystems, SMEs create the best possible conditions for achieving their goals, and still allow for satisfied shareholders to back their future investments.

Crédit Mutuel ensures new technology works to the benefit of its customers

Posted on August 22, 2018September 4, 2018 by Max Tomlin

Every day, new technologies are promising to revolutionise the way customers interact with their bank. As automation becomes more practical and customers’ expectations rise, new tools and features will become the factors that differentiate banking groups from one another. Many of the tools that have recently entered the market are impressive, but selecting the ones that will best serve our customers is a difficult task. To avoid wasting time and money, it is necessary to have a deep understanding of customers, their needs and how relationships with them can be improved.

Crédit Mutuel Group has long been considered a pioneer in the banking sector, offering a range of high-end services that utilise the latest technology

For more than 10 years, Crédit Mutuel Group has been a pioneer in adopting the latest technology to the benefit of our members. Continuing that legacy of industry-leading development is central to our current focus on improving customer service. By making customers the centre of our innovation efforts, we are using our expertise to address their ever-changing needs, habits and priorities. This will also simplify the bank’s operations, speed up customer interactions and enhance the quality of everything we do. We are not interested in creating virtual, impersonal relationships with customers, but will use technology to augment current services to make them more personal, relevant and meaningful.

The Crédit Mutuel Group’s approach is to give each customer a personal advisor who can be contacted via a multitude of mediums, such as email, video conference calls and in-person at a branch. This system relies firmly on human interactions, with account managers remaining the ideal contact point for members and customers. We see many digital technologies as outstanding tools to facilitate more meaningful, efficient and better interactions with customers. By offering bespoke personal service alongside the best tools in digital banking, the group’s services are tailored for customers’ new behaviours, habits and expectations.

Adjusting to change
Crédit Mutuel Group has long been considered a pioneer in the banking sector, offering a range of high-end services that utilise the latest technology. Long before many of our peers did, we identified fully online banking as a future standard and changed our relationship with customers accordingly. This has prepared us for the current era, with digital transformation picking up even more speed across every sector of the economy, which has in turn led to many changes in the way businesses interact with their customers and partners.

For Crédit Mutuel Group, the introduction of new services, the development of new systems and our support of innovation will enable the group to further strengthen its ties with customers, while also offering the best banking experience possible.

As a customer-focused, technically oriented bank, Crédit Mutuel Group is examining where digital tools can be implemented to assist our members and customers at each local bank and branch. Systems like modern telephone networks, mobile payment applications and digital documents make current services more efficient, while remote service platforms and fintech tools are leading to the development of services that were not available before. The group’s affiliates and subsidiaries have been continuously developing new solutions using these tools, all the while providing participants with the support necessary to negotiate the many changes that are occurring.

By providing diversified and customised services, the group is positioning itself as a true partner in its customers’ lives. We are making every effort to ensure the relationship our customers experience is smooth, bespoke and harmonious. Whether customers do business in person or remotely, all the technology we implement supports the idea of an ‘augmented relationship’ between an advisor and a customer, resulting in better communication on every level.

We see a lot of areas where we can deploy innovative solutions, but communication is a particular focus of ours. Innovative systems are constantly being developed that relate to network tools and services directly offered to customers, which has steered our focus towards Wi-Fi. With this infrastructure in place, we can deploy many exciting services in our branches. Tablets can connect to the bank’s network, allowing customers to securely provide an electronic signature on forms. Customers can access complimentary Wi-Fi at a branch, complete with a personalised portal displaying the Crédit Mutuel or CIC brand. Employees can maintain access to the information system without having to be tethered to a workstation or desk. At our headquarters, Wi-Fi rounds off our existing connection facilities in meeting rooms.

The telephone reception platforms used by Crédit Mutuel Accueil and CIC Accueil have been folded together into a new, centralised solution. This system has improved the quality of our communication, exceeding our customers’ expectations in this regard. In fact, the expansion and virtualisation of our advisor group has enabled employees at a wide variety of sites to take calls from our members and customers. New services are always being added, including a chat service to provide support for customer-members on the group’s websites.

Fintech’s finest
Each year, we introduce a number of new services to make customer relationships more responsive and dynamic. For instance, our implementation of optical character recognition has allowed us to automate the processing of various documents, some of which are generated in large quantities within the business. In particular, the optical processing of invoices significantly shortens reimbursement periods for our insurance customers. This technology has also prompted us to rethink how we collect information from our customers; today member policyholders can obtain an automobile insurance quote using their smartphone, simply by submitting three photos in three clicks.

In 2018, major progress was made on two projects: the redesign of our mobile application, and the switch from SMS alerts to push notifications. Both of these projects will result in a simpler service for both customers and members.

With Avantoo, the group is offering a novel product by bundling mobile phone services with a bank account. This bundle includes a current account linked to a payment card, efficient remote services, access to a personal advisor, and a 50GB mobile phone plan, with or without a smartphone. This offer will gradually be enhanced with new services, such as contactless payment.

All of Crédit Mutuel’s regional groups have developed a significant presence in the fintech ecosystem. In particular, Crédit Mutuel CM11 is the first French banking group to introduce cognitive techniques on a wide scale to support its advisors, using IBM’s Watson solution. It also offers Lyf Pay, a recently launched universal mobile payment solution. Crédit Mutuel Arkéa is also developing the innovative Max services platform, while Crédit Mutuel Maine-Anjou, Basse-Normandie and Crédit Mutuel Océan have joined forces to acquire HelloAsso, an innovative funding platform for associations.

Crédit Mutuel North Europe launched the concept of ‘innovation labs’, which combine imagination, creativity and achievement to address challenges the group is facing. Starting in early 2016, 10 labs were opened and more than 60 lab technicians have worked tirelessly to find and deliver innovative solutions, which have included a recently released mobile recruitment app. We’re excited about the future, especially as many other innovations are also under way.

Cognitive or bust
One area we see as having tremendous potential to improve our relationship with customers is cognitive technology. The goal of our new internal tools developed using IBM’s Watson technology is to improve our services, while also simplifying the work of our account managers. These cognitive solutions, which include an email analyser and virtual assistant, have been in development since 2016. In 2017, we rolled them out to 20,000 employees at 5,000 banks across the Crédit Mutuel Group and CIC branches. After initially being launched across the insurance and savings business lines, Watson is being extended to areas such as consumer credit and rental solutions this year. These new cognitive solutions first and foremost support our advisors, who remain in control of all transactions and act as the single point of contact for the customer.

By providing customised services, the group is positioning itself as a true partner in its customers’ lives, making every effort to ensure the relationship is smooth, bespoke and harmonious

With Watson, we can analyse the 250,000 messages we receive each day from our customers. This solution allows the Crédit Mutuel banks and CIC branches to automatically identify the most common requests, determine their level of urgency, and then assist the advisors to process requests far more efficiently than before. Our advisors also have access to four virtual assistants, which make it easy to quickly provide reliable and precise answers to customers’ questions, even in complex business lines such as automobile and home insurance, savings products, health insurance and pensions. This project represents the first large-scale commercial use of Watson in a business in France.

On the back of these early efforts, the group is pursuing more applications for cognitive computing that will assist employees and customer-members. New email analysers are being developed for specialised platforms, and we are currently investigating where we can utilise voice and image analysers. An internal team that is dedicated to mastering these technologies is being assembled, and will ensure these types of solutions can be developed and supported on a large scale across the company. New positions are being created to facilitate the perpetual improvement of these solutions, and a focus on training will assist our employees whose tasks are becoming increasingly complex as more tools are added.

In the next few years, the scope of cognitive technologies will be extended to many areas of the company: sharing expertise within business lines; customer relations assistance; improving the ergonomics of digital relations; compliance and security.

Complete certainty
Trust is the most important part of any banking relationship, and Crédit Mutuel Group continues to differentiate itself by the extreme requirement of confidentiality and data security of its members and customers. The strengthening of fundamentals and security requirements of industrialisation must accompany progress in innovation. The security of our remote services has always been a top priority for the group and, accordingly, we deploy a range of safeguards to mitigate all risks. All are perfectly suited to the challenges involved in digital banking and are simple for both members and customers to use.

All transactions are processed in a secure mode by SSL encryption at the highest authorised level. We have the highest standards for authenticating customers using usernames and passwords. We also provide a browser extension that allows the customer to verify that they are on the genuine Crédit Mutuel or CIC remote banking site and not an imposter. Alternatively, we can also authenticate users via a ‘personal key-card’ solution that provides secure access to sensitive services, such as adding new beneficiaries for transfers. We also deploy a real-time fraud detection engine that alerts customers to suspicious activity and suggests any security measures that may be necessary.

Our policy of continuous innovation helps enhance the profile of the Crédit Mutuel group. In 2018, we won first prize in the banking sector in the 2018 BearingPoint – Kantar TNS customer relations business awards. This distinction, won for the 11th time in 14 years, is a testament to the trusting relationship that exists in the field and on a daily basis between account managers and customer-members. Crédit Mutuel’s future in a changing world is to keep its values of ‘helping and serving’: we give advice beyond the simple financial product; we personalise services; and we consider changes as opportunities.

BNL-BNP Paribas Private Banking is driving change in Italy’s private banking sector

Posted on August 21, 2018August 30, 2018 by Max Tomlin

Italy’s wealth management sector continues to grow, in terms of both assets under management (AUM) and the number of clients and competitors involved. As such, it is becoming more and more important in the financial advisory sector, with increasingly dynamic models of client management in play. According to Magstat, in 2016 the private banking market in Italy – which refers to clients with minimum AUM of €500,000 ($592,000) – recorded a total value of over €860bn ($1.02trn), along with the presence of more than 14,500 relationship managers. Among them, private banks had a 77 percent share of AUM and a 44 percent share of those relationship managers. It is also important to note that, since 2013, the growth of the country’s private banking market has been around 6.5 percent per year.

Market players are now in the process of developing their value propositions to become more client-centric through the introduction of evolved financial and heritage service

Given this rate of expansion, market players are now in the process of developing their value propositions to become more client-centric through the introduction of evolved financial and heritage services. Meanwhile, the entry of new players and the imminent arrival of next-generation clients are pushing the digitalisation of service models. This scenario of growth and change has reached the interest of financial advisors who, in turn, are evolving their own models, with a particular focus on the retail sector. Thus far, they have already reached around a quarter of the overall share of the private banking market.

Managing transformation
For some time now, BNP Paribas has been working on its transformation plan, which is mainly focused on wealth management, with the aim of increasing customer loyalty. We are also seeking to acquire new clients, especially those of the next generation, by developing particularly innovative services and by providing cutting-edge models. BNL’s private banking arm in Italy is also following this path, with the development and launch of its new service models, which have a strong emphasis on relationship management.

$1,02trn

Value of private banking market in Italy

6.5%

Rate of growth per year of Italy’s private banking sector

The new service models are dedicated to the different types of current and prospective clients. The first is the trusted advisory digital enhanced model, which is dedicated to customers with a need for face-to-face communication with their relationship manager. These types of clients tend to have complex requirements, and also require the timely control of their assets. Then there is the i-Private model, which is dedicated to more autonomous customers that prefer a long distance arrangement with their relationship manager.

It is particularly interesting to analyse how private banking clients in Italy have high-level real estate and corporate assets, with a secondary share of liquid assets. This requires private banks in Italy to have a greater focus on the wealth management approach, which includes advisory services that specialise in real estate, insurance, fiduciary and business.

The relationship model, meanwhile, further enhances the role of the relationship manager and is based on specific, highly digitalised tools that support customer journeys in each phase, while also supporting the skills of the experts working alongside them.

Forging a digital future
Among these new tools is the Private Banking Service Centre, also known as Privilege Connect. Launched on February 12, 2018, the Private Banking Service Centre has support available seven days a week, 24 hours a day, through a dedicated phone line. It also provides direct access to digital platforms and dedicated agents, in addition to information and disposition solutions.

Then there is our new digital platform, which aims to achieve a mutually rewarding relationship between the client and the banker, as well as between the shareholder and client. In fact, the digital platform is a key enabler to new service models. In the trusted advisory model, for example, it is the main visualisation for clients. In terms of the i-Private model, the digital platform serves as the main point of access to private banking, through which the client operates and manages their relationship with the customer. Namely, the digital platform addresses the need for tailored and bespoke advice, both face to face and remotely.

We also have Youmanist, a new onboarding customer journey mechanism to drive customer acquisition based on an end-to-end process that starts with attracting new customers. It includes: an app and a site with content on lifestyle and finding a work-life balance; a simulation-planning tool; premium services; and access to peer-to-peer communities. Youmanist also includes dedicated and personalised advisor services – including financial, wealth, insurance, fiduciary and real estate – as well as a dedicated relationship manager, which has ongoing support from financial and wealth experts, and primary partners in the trust, insurance and real estate sectors.

The activation of the new service models will start in the final months of 2018 and will be supported by an important change management plan to manage all private banking services in Italy. Essentially, we have very ambitious plans in place as we look to the future. However, most importantly, we always maintain as a ‘final objective’ to respect the promises made to customers, and to offer customers an experience of the highest quality. With this in mind, we aim to become the number one private bank in Italy.

Netflix’s success demonstrates the importance of strategic agility

Posted on August 20, 2018August 28, 2018 by Max Tomlin

At the TED2018 conference in Vancouver, Reed Hastings, Netflix’s co-founder and CEO, discussed the $8bn the company will spend on content development this year. The figure silenced the audience, prompting Hastings to quip: “It’s not as much as it sounds.”

For businesses to achieve strategic agility, leaders must accept responsibility for delivering their company’s strategy

Netflix is not the same start-up that disrupted Blockbuster almost two decades ago. It has transformed into a market-leading streaming service and has remained nimble and effective throughout, making it an excellent example of strategic agility. Netflix has consistently worked towards its strategic goals, while also adjusting in order to meet market trends and consumers’ needs. Today, Netflix has more than 120 million subscribers, and is quickly approaching a $150bn market cap.

Founded in 1997, Netflix began its streaming service in 2007, expanding to Canada in 2010. By 2011 it had spread to Latin America. In 2012, the company expanded to the UK, Ireland and Scandinavia; in 2013, the Netherlands; in 2014, Austria, Germany, France, Belgium, Luxembourg and Switzerland. By 2015, the company had made its mark in Australia, New Zealand, Japan, China, Italy, Portugal and Spain; and in 2016 it expanded into even more Asian countries. “You are witnessing the birth of a global TV network,” proclaimed Hastings as another 130 countries were added to the company’s reach, taking the global figure to nearly 200 countries, from Afghanistan to Zimbabwe.

A culture of trust
Strategic agility is probably one of the key topics discussed in boardrooms today. According to a recent Brightline Initiative global survey conducted by the Economist Intelligence Unit, insufficient agility is the third most common barrier to successful strategy implementation. Now more than ever, agility is essential to any organisation’s success.

$144bn

Netflix’s market cap (May 2018)

120m

Netflix’s paid subscribers

$8bn

The amount Netflix is set to spend on new content this year

191 The number of countries Netflix is available in

For businesses to achieve strategic agility, leaders must accept responsibility for delivering their company’s strategy. This is one of Brightline’s guiding principles. Only once leaders take on accountability can they cultivate an environment where employees feel they have the freedom to make the quick decisions that lead to strategic agility. A corporate culture in which employees feel that their judgement isn’t trusted can be a significant barrier that prevents companies from successfully implementing new strategies. This is corroborated by Brightline Initiative’s report, among other studies. As the famous management consultant Peter Drucker once said: “Culture eats strategy for breakfast.”

Hastings has described Netflix as being “anti-Apple”. By this, he means that Apple compartmentalises projects and products while Netflix grants its people the freedom and trust to make decisions. Furthermore, information is shared across the organisation so all employees are involved in each aspect of the company’s strategy. On this policy, Hastings commented: “I find out about big decisions made all the time that I had nothing to do with.”

In an online presentation available at SlideShare that has nearly 18 million views, Hastings explains his company’s unconventional culture. He describes Netflix’s famous ‘no vacation’ policy, which allows employees to choose when and how often they take time off work: “We realised we should focus on what people get done, not on how many days they worked. Just as we don’t have a 9am-5pm workday policy, we don’t need a vacation policy.” He added: “Most companies have complex policies around what you can expense, how you travel, what gifts you can accept, etc. Plus, they have whole departments to verify compliance with these policies.” At Netflix, however, “you seek what is best for Netflix”.

Context, not control
To explain why this uncommon policy works, Hastings proposed a ‘context, not control’ principle. Context is defined as something to embrace, and includes strategy, objectives, clearly defined roles, knowledge of the stakes and transparency around decision-making. This is opposed to control, meaning top-down decision-making, management approval, and valuing planning over results – all of which should be avoided, and are increasingly being shunned thanks to strategic decisions like flexible hours policies.

The company’s values include the expectation that employees will “keep [Netflix] nimble by minimising complexity and finding time to simplify”. By trusting employees in this way, Netflix benefits from a strategic agility that extends throughout the company’s structure.

The right approach
A great strategy is worthless if it’s not implemented correctly. Organisations with agile capabilities are more likely to succeed in implementing their strategic initiatives. Data from Brightline Initiative’s survey shows that leading companies are often faster and more effective at the following three tasks: reallocating funding in strategy implementation initiatives; reallocating personnel in implementation initiatives; and adjusting strategy when implementation reveals new risks or opportunities.

Organisations use many different projects and programmes to deliver their strategic goals. Therefore, adopting one single approach or set of practices to deal with diverse, complex and dynamic programmes will put the organisation at risk. The solution: consider a wide range of delivery approaches.

Take Volkswagen, for example. As part of its overarching goals for strategy, the company recognised that some aspects of its operations required agility, while in other areas there was a need for established processes. As such, different strategic approaches have been taken in each aspect of its operations. The key, according to the Brightline Initiative survey, is that “those in charge of strategy implementation keep everyone headed towards a common destination”.

The ideal solution relies on the organisation’s ability to effectively choose and use the right delivery approach for its strategy. It can be predictive, iterative, incremental, agile or hybrid. According to the Project Management Institute’s 2018 Pulse of the Profession report, Success in Disruptive Times: “Success starts with the right approach to support project delivery. Organisations will continue to use more than one project management approach and combine different techniques to cope with their own distinct challenges. Regardless of the approach used, organisations that use some type of formal project management approach are more successful in meeting their goals, within budget and on time.”

Structural ambidexterity
Organisational ambidexterity is the ability of an entity to successfully operate in the present, but also to anticipate what operational changes might be needed in the future. To achieve strategic agility in today’s business environment, organisations need to create different structures to adapt to various circumstances. Brightline Initiative’s principles focus on this adaptability and highlight the importance of “inspiring and assigning the right people to get the job done”. Given the diverse set of programmes organisations run simultaneously, they must assign the right people to each initiative and develop the structures to run the business day-to-day and change things when necessary.

Take Bosch, for example. In its 2017 annual report, the company stated that it would restructure departments to build “cross-functional purpose teams”. In practice, this means entire departments made up of small teams bringing together experts from completely different disciplines, such as engineering, marketing and logistics.
Volkswagen, meanwhile, is adopting a ‘two-speed model’, where some facets of the business will focus on proven – and sometimes slower – processes that lead to reliable products. In other areas, where the organisation will require faster processes, the firm is adopting agile structures.

To truly achieve structural ambidexterity and successfully deliver strategies regardless of the environment in which the business operates, leaders need to constantly promote and nurture team engagement and cross-business cooperation. It’s critical to govern transparently to engender trust and enhance cooperation, as supported by Brightline’s principles.

Strategic agility does not exist in isolation. It must be thought of as a combination of a culture of trust, the right delivery capabilities, and an ambidextrous structure to help teams work faster and more effectively in varied conditions.

Kaiser Partner recognises the importance of effective and proactive succession planning

Posted on August 17, 2018August 28, 2018 by Max Tomlin

Many wealthy people find it difficult to talk openly with their children about their wealth or about how wealthy the family is. As trustees and advisors, we often have clients ask us when the best time would be to talk to the next generation about their fortune. The guidance we give will ideally initiate a process within the family that addresses its individual needs, so all its members can look to the future with greater confidence.

In difficult times, it’s easy to make the wrong decisions. Family wealth can be put in jeopardy if no succession plans are in place, or if the need for a plan has not been recognised

For many wealthy people, one of the less pleasant sides of their situation is the increasing need for security. A lot of work can be done in the background, like advising on the right structures for the client’s wealth, but external developments can necessitate measures that are clearly visible, which is when plans need a sound justification. Ultimately, such measures are only properly effective if everyone understands and supports them. It may, therefore, be necessary to tell the next generation – at least in broad strokes – about the financial situation.

Tragic events can bring succession issues suddenly to the forefront of family life. In such difficult times, when emotions and time pressure can cloud one’s thinking, it’s all too easy to make the wrong decisions. The family’s wealth can be put in jeopardy if no succession plans have been put in place, or if the urgent need for a succession plan has simply not been recognised. Unless they know the real state of the family fortune, successors might misconceive the situation and make the wrong decisions.

Another external factor that can raise security issues and necessitate action is the threat posed to family wealth by ‘false friends’ of the children. As they grow up, their parents’ influence inevitably diminishes. If the family’s wealth becomes public knowledge, children must learn to understand that their friends could in some circumstances try to profit from their status or money.

Two families, two examples
Various external developments could prompt the conversation you need to have with your children about the family’s wealth. But let’s take a look at two wealthy families: their hands have not been forced by external events, so they have developed their own individual ways of dealing with the issue. Based on publicly available sources, we take a look at what role wealth plays within these families, and how this has affected the children.

Wolfgang Grupp is one of Germany’s most famous entrepreneurs. He is the head of textile company Trigema, which has been owned by his family since 1919. Unlike its competitors, it continues to produce exclusively in Germany. Grupp’s loyalty to his homeland, coupled with his eloquence and trenchant views on economic and social issues, have turned him into a public figure. He goes on talk shows to grumble about bankers and comment on moral questions, and he publicly demands discipline and obedience from his 1,200 employees. He is also a caring patron for them and their families. He and his family view the workforce as the company family, and Grupp always tries to lead by example. The boundaries between family and company have become blurred.

For a long time now, the image conveyed has been very clear: Trigema is a one-man show. But the picture is changing. Even though he remains sharp and full of energy in his mid-70s, Grupp is beginning to think about succession. His two children, Bonita and Wolfgang Junior, have worked at the company since 2013 and 2014. They were often at the company as small children too, but they spent their formative years at boarding school in Switzerland, and then studied for five years in London. Despite the geographical distance, however, the family remained in close contact. Towards the end of their studies, their father asked the children if they would like to enter the family firm, and they said yes.

Grupp has repeatedly expressed the hope that one of his children would one day take over the family business. He does not yet want to decide whether this will be his son or his daughter, but he has absolutely no doubt that he can trust his children more than any manager coming from the outside.

Now they work at the company, the children are finding out more and more about how the business operates. The family has said nothing in public about whether and to what extent this might also extend to the inner financial workings of the company. In their current roles, a comprehensive insight into the finances would not yet appear necessary. In any case, according to Grupp, his wife Elisabeth will still be his representative should anything happen to him.

Far from Wall Street
We move now from rural Southern Germany to the American Midwest. Peter Buffett grew up in Omaha, Nebraska, one of the three children of the major American investor Warren Buffett. In 2011, the musician and writer gave an interesting interview to the podcast Freakonomics, which touched on, among other things, how he learned about his father’s wealth.

Peter paints a picture of a very normal upper-middle-class childhood. His parents’ house is still the one that his father Warren bought more than half a century ago. The three children all went to the normal state school that their mother had attended. Peter experienced his father as someone who read a lot and whose job had an air of mystery. “We really didn’t know what my dad did,” Peter said in the interview. It seems that Warren’s meteoric rise to become a legendary investor had little impact at home. “We didn’t grow up around the exposition of wealth.” His father felt it was more important, said Peter, for his children to follow their interests. “Do what you love. There’s nothing more important than that,” he remembers his father saying.

As a young adult, Peter first received money from his father to invest in a philanthropic project of his choice. Later he got a much larger sum for the same purpose, and he began to wonder where all this money came from. “I was probably about 25,” said Peter in answer to the question of when he first asked his father about his business. Warren sent him information about his company Berkshire Hathaway and willingly answered Peter’s questions. But by this time, Peter’s life had already taken a turn away from the family business: “We both knew that this wasn’t something that I was passionate about.”

Peter said neither of his two siblings wanted to follow in their father’s footsteps either, but he never felt any pressure from Warren. “He wasn’t pushing it at all,” the son said in the interview, before explaining further: “The odds of having a son or daughter that are as passionate, and excited and driven as the founder of a business, or even as the person that took it over, are incredibly small.”

From what we know of the family, it seems that Warren shares this view. We know that he has bequeathed much of his wealth to the Bill Gates initiative, the Giving Pledge. His children have already invested another $1bn of his money in their own philanthropic projects. And what will happen to Berkshire Hathaway? Peter suggested in the Freakonomics interview that there’s no need to worry about succession planning. He doesn’t know the specific details, but he does know that his father plans these things very carefully.

An indirect answer
There is an obvious reason why neither example tells us when the ideal time is to inform children about the family’s wealth: the question has not really come up (yet). Different though their life stories may be, the children of both families have grown up in their families’ value systems and found their own roles within these parameters.
In one example, the children are tied into the family firm, while in the other they have pursued very different careers, showing that value systems can be defined more tightly or more loosely. In both examples, however, non-monetary values help the family members make sense of and find their way in life, while still being flexible enough to develop their own ideas and abilities.

Family values are also a vital reference point for the professionals that advise wealthy people – and not just about succession planning. These parameters help when developing arrangements that are acceptable to all family members. The family’s values and experiences will determine whether it’s right to divide the parents’ wealth according to what individual family members have done, according to their individual needs, or strictly in equal mathematical portions. If the solution accords with the family’s values, it is much less likely to cause the kind of conflicts that can end up destroying family bonds and frittering away family wealth. And both families seem to have such a framework of values in place.

The Buffett family additionally provides an instructive example of how philanthropy can play a positive role for wealthy families. For Peter, philanthropy was the gateway to taking a greater interest in his father’s wealth and business. But philanthropy can also help in situations where the children are not of the same mind, as Philip Marcovici, Board Member at Kaiser Partner, said: “It is sometimes difficult to get the younger generation to work together on a family business or family investments. Where the focus is on helping others, getting family members together can be easier to achieve.”

Confronting the ‘moment of truth’ on which this article centres, it is important to remember that succession planning is a process. Ideally, the next generation should grow into its role, with family values not just forming an important part of family identity, but also defining the parameters for succession planning.

Helping to develop these parameters in line with the individual family situation is one of our advisors’ most important jobs. In an ideal scenario, all the members of the family will share a common understanding of what their family stands for. Ultimately this makes it easier to ensure that the wealth is passed on in a way that satisfies the family and its members. The knowledge that this is the case will allow the next generation to develop positively, regardless of whether they learn all about the family’s wealth at some point or not.

Will the continued rise of automation cause widespread job losses?

Posted on August 16, 2018August 23, 2018 by Max Tomlin

As labour-saving technologies advance, concerns regarding job security will likely rise in tandem. According to a study by PwC, 37 percent of the 10,000 people surveyed across five countries were worried automation would put jobs at risk. The bulk of available evidence seems to suggest there is little reason to worry, as the net effect on employment will likely be small and may, in fact, result in gains. But dealing with the fallout from a large structural shift in labour will present challenges.

At highest risk of being automated are low-skilled jobs, particularly those with repetitive tasks that can easily be replicated by a machine

The jobs at highest risk of being automated are low-skilled ones, particularly those comprising predictable and repetitive tasks that can easily be replicated by a machine. Meanwhile, occupations requiring more abstract skills – those that are harder to codify and copy, and that cannot easily be mimicked in the absence of advanced artificial intelligence – will face a lower risk of being automated.

“One pattern that becomes clear is that there is more erosion at the low end of the skill distribution as opposed to the top of the distribution,” said Grace Lordan, Associate Professor of Behavioural Science at the London School of Economics.

“We do see some erosion at the top end of the distribution, but at the bottom of the distribution, there is going to be much more hollowing out.” According to a study by McKinsey Global Institute, 30 percent of work tasks across 60 percent of occupations could be automated, while between 400 and 800 million people may need to find new work due to automation by 2030.

A report by PwC suggests machines will encroach further on manufacturing jobs as they become more adept at completing physical tasks that require dexterity. The report estimates the resulting job losses could be as high as 44 percent in many countries.

The sky isn’t falling
Despite the high figures in their reports, both McKinsey and PwC maintain the losses will likely be made up for elsewhere in the economy. “[The high estimates of ‘at risk’ jobs] just reflect technological potential, so they tell us how much theoretically could be done by machines,” said Ulrich Zierahn, Senior Researcher at the Centre for European Economic Research. “But the actual employment effect is likely to be very different.”

Factors like the high cost of implementation for firms and labour laws are likely to slow the rollout of automated technologies. Indeed, Zierahn’s research suggests that a task-based approach to predicting the impact of automation, rather than a traditional occupation-based one, could be of greater use.

“Usually researchers say that if the [proportion of automatable tasks] is above 70 percent then you would regard the job [as] at risk,” Zierahn said. “However, being at risk just [refers to] the level of exposure to technological change, whereas the potential employment effect of that exposure is another question.”

Additionally, some research shows that even if automation drives down labour demand in manufacturing, mass redundancies wouldn’t necessarily follow. “We do not find any systematic evidence that manufacturing firms really fire workers,” said Wolfgang Dauth, Assistant Professor of Empirical Regional and International Economics at the University of Würzburg. “What we do see is that they reduce the number of labour market entrants that they would otherwise have hired, so younger people then go into the service sector rather than the manufacturing sector.”

In the past, disruptive events like the Industrial Revolution have often been referenced as instances where naysayers overreacted. Dauth explained: “Throughout economic history there has always been a new wave of automation that made [a] certain kind of work… redundant, but overall we don’t really feel that this time might be different.”

However, the increasing rate of technological advancement could potentially set this era apart from previous ones. “In honesty, my feeling is that it is different,” said Lordan, pointing to the cratering housing market that precipitated the 2008 financial crisis as an example of an unprecedented event that everyone thought impossible. “Things can happen for the first time, and you probably want to encourage policymakers to think about it.”

Smoothing the transition
Net employment effect notwithstanding, public policy will need to reflect the needs of the new job market. Even in a country like Germany, which has a low risk of net job loss and is well equipped to deal with these labour shifts due to its tradition of investing heavily in retraining its workers, there is a gap between those who benefit from automation and those who do not.

“We do see that there are distributional effects of automation,” Dauth said. “[This] means that we will see differences in that higher skilled people mostly benefit from automation, whereas lower skilled people see reduced employment prospects, but on the net there is no overall negative effect of automation.”

According to Zierahn, the structural effects that automation will have are important – specifically, how the shifts between occupations and industries present significant challenges. “We have to support workers in adjusting to the change by getting the right training to get the right skills,” he explained. “It seems that inequality is rising due to technological change because it is particularly the low-skilled workers who are most exposed and who suffer most from the change.”

The economic benefits technology will bring are real, but governments will have to pull off a balancing act between remaining competitive and minimising the impact machines will have on large portions of their workforce.