The new world – June 2020

I wanted to write to you to update you on the situation as we see it (the house view) and the world now…

The coronavirus crisis has revealed the fragility of the modern supply chain. Recent data shows the devastating economic impact as week-on-week trade in China, the US and Europe halved because of the crisis. Diverse sourcing and digitization will be the key to building stronger, smarter supply chains and ensuring a lasting recovery.

The COVID-19 pandemic has hit global trade and investment at an unprecedented speed and scale. Multinational companies faced an initial supply shock, then a demand shock as more and more countries ordered people to stay at home. Governments, businesses and individual consumers suddenly struggled to procure basic products and materials and were forced to confront the fragility of the modern supply chain. The urgent need to design smarter, stronger, and more diverse supply chains has been one of the main lessons of this crisis. Source The World Economic Forum.

Just one example of what this crisis has done to highlight the weakness of business and create positive change. As I sit here at home in my Home Office considering local and wider change, it does seem a very different world to the one we were dealing with in February of this year. The sun is shining and the birds are singing and the world continues, but it’s really a different place to exist and work in. I wonder how it will look in 6 moths time when we are all looking forward to the Christmas Holidays??

At Brooks Wealth, we held an online team meeting. We asked the question and over 90% of the staff felt that the home working was preferable to office working. That is a significant shift from the view pre lockdown. There are issues, Dogs Barking when you are in meetings and window cleaners giving you the shock of your life. But all things considered the new world for us, is that we will become a home working company, with an office. This is a relatively big change from an office-based company with home working by exception. That is exciting for us as it opens the door for much faster expansion of our group of companies. It also helps us work out how technology and partnership with Technology companies is the only direction of travel in this new world.

Due to this we are seeing innovation becoming much more the norm and we have several exciting projects underway.

We did not really have an offering for start out savers and for new advisers to join. So, we are launching a Business to support younger people with a simplified service where people can get ISA and Pensions without advice fees. It will be a restricted offering but not a bad one. It will also create a safe environment for trainee advisers.

Defined Benefit (final salary) pension reviews were becoming problematic and very expensive to source, so we are launching a Defined Benefits transfer solution that we believe will survive the test of time. It is an outsourced solution still, but it’s a very good value-added service we can offer to existing and new clients.

We need to work efficiently from anywhere we choose. To solve this, we are taking the journey to the Cloud to offer staff a more efficient way to access central files and information.

We are seeing more and more Emails being hacked and cybercrime is the biggest growing type of crime. We now have new client facing ways to pass information and documentation without fear of the cyber criminals. Technology through APP based, and web-based solutions will make all our lives very exciting and safe.

These are a few new innovations we have for delivery this year.

Moving onto Investments

The markets seem to be as resilient as always and have recovered quite a bit.

Industry continues and while we have seen many people in business suffer from the enforced lockdown, we have also certainly seen others prosper.

Locally, many pubs and restaurants which are getting significant financial help and who have reduced staffing numbers significantly, have done very well I am told. The increase in takeaway services that they have been able to offer (food and beer), especially in the market for Sunday dinners, has meant they have maintained profitability.

Moving to larger corporates, of course large delivery-based companies have enjoyed massive growth in demand. Ocado to name just one. M&S jumping on the tail of Ocado shows how the world has changed with M&S’s strategy director Melanie Smith’s launch of the new venture Ocado Retail and Ocado will start selling M&S food on its website from 1 September 2020. Is this the end for the traditional M&S shop??

The markets are starting to recognise these pockets of growth in profits, but we are now sitting in a subdued situation where we seem to be all trying to second guess a second wave of COVID-19, or some other financial change or disaster tipping away some of the recovery which we have seen. So, it is still volatile out there.

So, what should the future look like? Well in reality we have seen some sectors suffer from a loss of profit this will affect share prices temporarily and dividends for a period. Then they should recover slowly as the profits recover and things should return to normal.

We have reviewed all clients holdings and we are happy the managers are managing well. So for the clients where we recommended a change earlier this year we recommend those positions are maintained, for those clients where we recommended no change that situation still exists. So, we do not recommend that anybody make any big changes now. However we are starting to feel that some of the more passive offerings that we’ve recommended in the past, have moved from a hold pending a sale, to a sell and move to active or active passive splits over the coming months.

The reason for this is simple – the more passive solutions will tend to be less reactive tactically or not reactive at all. This might mean you end up over exposed to the wrong asset, say fixed interest, which remains one of our biggest fears for a subsequent correction in the downward direction. We do understand the risks to share prices if we suffer a sustained recession, but we believe they will be resilient, and they will still produce the best returns over time. However, fixed interest has nowhere else to go once we get into negative yield territory, the only way is down for capital values. Fixed Interest may hold in their present position for some time, but we are nervous around them and our nervousness means that we must recommend the more expensive but more highly managed active funds going forward.

What does that mean?

We now have the Wealthlineinvest Platform and portfolios, as well as access to a range of other portfolios, which offer very active approaches to investments that we would tend to favour. We have re-researched and created a rigorously vetted best of breed list of funds and portfolios to get all our clients through the next few years.

Therefore, at the right time and where appropriate, we will be talking to you our clients, about moving over to new investments (if required) and potentially a new platforms. We will be looking for solutions which offer further oversight and control to gain potential for growth, appropriate stability and importantly safety where it is a priority.

So that will be the project across the rest of 2020, to look to steer you all towards the best investments to keep your capital as stable and looked after as possible in the new world.

I hope that this has given you some useful insight into the markets and the work that has been happening at Wealthline/ Brooks Wealth over the last 3 months. For some people its been a bit of a lockdown holiday, but I am sure you will join me in thanking the team, who have had to actually increase their workload to make sure you all stay informed and advised. One saying I like is that when the tide goes out you see who is swimming naked. I am pleased our team was suitably clothed.

Stay safe, stay well and we will be in contact over the next few weeks.

Andy Brooks.

For help with Investment and Savings and Financial Planning, call us on 01733 314553 or email us at info@brookswealth.co.uk.