SUR

A crisis for health, but not for investment

The pandemic has affected every area of our lives, but despite initial concerns and volatile markets, the impact on the financial sector has not been as severe as feared and there is even some optimism about what is to come

Debbie Bartlett
DEBBIE BARTLETT

It would be so nice to report on something which has not been affected by the coronavirus pandemic, but unfortunately Covid-19 has touched every area of our lives and investment is no exception.

That is not to say that it is all bad news - in fact some experts are very positive about a speedy recovery and investment opportunities in the short-term - but at present, with economies affected all round the world, many people are still feeling concerned and uncertain.

One thing which has become very clear is the importance of taking reliable professional advice, rather than trying to go it alone. From this aspect, investment advisers say the lockdowns have not affected their relationships with their clients. This is an industry which is used to technology, and where investors are used to picking up a phone or communicating by email, so not a great deal changed in that respect, and meetings by Zoom, Skype and Gomeeting managed to fill the gap. Now many offices are open again and clients are able to visit their adviser for scheduled meetings.

However, it was inevitable that the volatility in the early days of the pandemic would cause a certain amount of concern or even panic among some investors.

Tim Govaerts of Blacktower Financial Management said his company knew it was vital to keep clients updated and reassured at that time.

«During the pandemic our advice did not change and we mainly told our clients to stay put and not make any hasty decisions. News headlines often showed high volatility and steep drops in global stock markets last year, because of which some clients indeed panicked, but it is then that we offered reassurance of the quality of their funds and that the diversification within their policies smoothens this volatility. In the end this has proven very successful as 2020 turned out to be a very good year for investors with the MSCI World Index (the most common used benchmark for global equities) returning 16.50%. It shows that you cannot predict or 'time' markets, because what happens in the world and how markets react to that can be very different,» he says.

«There were strong winners and losers, and probably the divergence between those two has rarely been wider. The losers were the obvious ones such as transport and tourism related companies etc. The winners that have driven growth in the markets last year were mainly growth companies in the technology sector».

A source at Blevins Franks agreed about the problems of trying to predict the market.

«Markets will move around over shorter time periods - often quite dramatically as we saw at times in the last 12 months or so - but if the portfolio is diversified and fits the client's risk characteristics and suits their needs, then the maxim 'time in the market' rather than trying to 'time the market' is so important to bear in mind,» he told us.

«Concerns for clients remain focused on preserving the wealth they have built up during their lifetime, how to ensure that wealth lasts and makes a positive impact on the next generation in their family, how to pass that wealth on, what to do if they decide at some point to return to the UK, and how to legitimately limit the tax they need to pay here in Spain and in the UK. Each client's situation is different but those are the things we focus on in our meetings and ongoing review process with clients. Getting the bigger picture right (and reviewing it with the client each year or so) allows the different elements and building blocks to fit together well for the particular client and their family. The pandemic has not changed those fundamental needs,» added the representative of Blevins Franks.

Opportunities

No experts have the ability to predict the future in terms of investments and markets, so it is no surprise that opinions differ about how quickly economies will bounce back from the coronavirus pandemic.

The importance of reliable professional advice has been highlighted during the pandemic, as some investors panicked at the prospect of how their investments would be affected

Some believe it will be quicker than expected, because people who have saved money during the pandemic will be keen to spend it. As Blevins Franks says, «We do know that there is clearly a large amount of consumer savings potentially available to spend as conditions improve and that will help some sectors of the economy (and so may positively impact markets).»

However, they are aware that caution is needed. This pandemic will be with us for quite a while to come, in which case markets could be affected by new bouts of economic and social restrictions.

There is general agreement that the pandemic has created some unexpected investment opportunities. These arose as a result of technological, social and medical changes which have taken place, as well as the massive increase in online shopping. There has also been a major advance in the use of digital technology, which has spread into different environments much faster than it would otherwise have been expected to.

The lockdowns and their notable impact on the environment have also led to increased interest in investments focusing on climate change and the so-called green energy.

This came as no surprise to Tim Govaerts of Blacktower Financial Management: «I do believe that as a result of the pandemic there has been a shift in investment advice with a much stronger focus on the so-called ESG (Environmental, Social and corporate Government) principles. Think of companies with a small carbon footprint, less plastic waste, shorter supply chains, renewable energy etc. With the fact that we have been forced to push the 'pause button', many people and consequently companies have had time to self-reflect on how we are misusing our planet. These funds years ago often lagged performance to other funds, but we find now that the contrary is true and these funds were last year among the strongest performers,» he says.

With so many factors to take into account it is evident that investment is a highly complex and specialist field. Investment is about people's money and, in many cases, their futures, and that is why objective, competent, professional advice from trustworthy advisers is so often recommended. Nevertheless, careful research is always needed: check the company's credentials and reputation and individual advisers' qualifications and experience, and never be rushed into taking decisions. Remember: a good adviser will want what is best for you, not the best way for them to make money.

And then there was Brexit, too

Of course, there has not only been the pandemic to contend with: on 31 December 2020 the Brexit transition period came to an end and this has had certain consequences for UK citizens living abroad. Has it had much impact so far in terms of investments and tax?

Blevins Franks says that taxation (one of the biggest threats to people's personal wealth) has not been affected as Spanish taxation and UK taxation are independent of the EU. However, «it is likely the tax demands that governments put on us will have to rise to fund the cost of the pandemic, so careful planning will become even more important for the future».

Tim Govaerts says people need to take off their UK glasses and look through their Spanish glasses at their assets to see how they are treated and taxed in Spain. «This has now become even more important postBrexit, since Brits that live here but were still using their UK advisers are often in a situation where their UK adviser is not allowed to advise them anymore for several reasons,» he warns.