June 2021 was a busy month in the PR departments of the best UK stockbrokers. We’ve sifted through all of the announcements, reveals and product launches to bring you the authoritative round-up of UK stockbroker news for the month of June.
Nutmeg to be acquired by JP Morgan
It was announced on 17 June 2021 that the provider of one of our favourite stocks & shares ISAs would be acquired by US banking powerhouse JP Morgan Chase. The size of the deal was not disclosed, but would see Nutmeg become a subsidiary of the banking group.
The two companies have worked together for several years, with JP Morgan providing the asset management services for several of Nutmegs products, including their SmartAlpha products.
The acquisition represents vertical integration of the wealth management sector, as JP Morgan will now own the full client relationship with the owners of the assets it manages. Nutmeg has so far failed to turn a bottom-line profit, despite healthy increases in numbers of clients over the last year.
Inflation fears slip into the investor mindset
Punditry and economic analysis in the financial media has honed on inflation in June.
The UK’s Bank of England ‘shrugged off’ inflation fears (BBC reporting) in their recent meeting, but this has only worried commentators further that any inflation rises will not be tightly managed by the UK’s central bank.
It has been so long since the UK has experienced inflation consistently exceeding the Bank’s official target of 2%, which makes this an interesting topic to revisit. There are few investments that aren’t negatively exposed to a surge in inflation. Besides the fact that inflation erodes the spending power of any £sum, the likely increase in official interest rates to tackle inflation impacts most of the major asset classes:
Investments in shares suffer because an increase in interest rates will reduce the attractiveness of shares at their current price, relative to fixed income investments such as a bank account. This increases the discount rate which investors apply to future dividends to value the present day value of equities, which leads to a fall in share prices.
Investments in corporate bonds suffer because higher interest rates available elsewhere results in a reduction in the value of existing bonds. Bonds have enjoyed capital gains as interest rates fell to record lows in the last decade, but this trend is set to reverse if BoE rates increase.
Investments in property suffer because the cost of finance increases, property values fall as buyers can afford smaller loans to buy.
We anticipate that UK stockbrokers will see a slowing of retail investor deposits during times of higher inflation. While equities have higher returns and therefore help investors to keep ahead of inflation, the downward trend in equity indexes which will likely accompany high inflation will probably sour investor appetite for these securities.
Over the last decade, we have enjoyed a so-called ‘Everything bubble’, in which all major asset classes have performed excellently. One of the indirect causes of this valuation excess is the long term assumption of close-to-zero interest rates. If this assumption is challenged, we could see stock market indices
Read more: Inflation definition.
FCA warns on the AML credentials of prominent crypto exchanges
The UK financial regulator has announced that it is giving a temporary reprieve to crypto exchanges which don’t meet the anti-money laundering (AML) rules set out in the Temporary Registrations Regime. All exchanges accepting funds from UK investors were previously expected to comply with the suite of money rules by 9 July 2021. However, in a recent statement, the FCA has agreed to push this back to 31 March 2022, granting exchanges 9 more months to comply.
The length of this extension signals that the number of failing institutions and the extent of their non-compliance must be so severe that a strict enforcement of the rules on the 9 July 2021 deadline would have otherwise caused chaos.
Read more: The best cryptocurrency books
Why do women invest less than men?
The Independent featured an insightful column into investing psychology, demographic trends and society when it covered the question of why to women invest less than men?
Women earn 19% less than men, so have a smaller post of disposable income left over to save. Given that expenses are generally the same between men and women, a lower income has a disproportionate impact on savings.
A theory goes that UK investing apps, FX brokers tend to target men in their advertising. Anecdotally this is bourne out by just looking at a handful of the video reels played before YouTube videos or billboard adverts to see men prominently featured as ‘traders’, and a distinct absence of women.
The Independent quoted Sarah Coles, (Hargreaves Lansdown – see review) as suggesting that this could also have a psychological element. She explained that “women tend to have a higher confidence threshold – they need to know more before they consider themselves to know enough.”
This is why Financial Expert provides free investing courses to all, to allow new investors to get up to speed quickly and build up the knowledge and confidence required to take their first investment steps.