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Wealth Management NCB is a leading provider of institutional equities, wealth management and corporate finance services www.ncb.ie Wealth Management Presentation.

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Presentation on theme: "Wealth Management NCB is a leading provider of institutional equities, wealth management and corporate finance services www.ncb.ie Wealth Management Presentation."— Presentation transcript:

1 Wealth Management NCB is a leading provider of institutional equities, wealth management and corporate finance services Wealth Management Presentation to ICAI Business Briefing By Alan Foy, Nigel Poynton & Aoife Lavan, NCB Wealth Management

2 2 Agenda  What is Wealth Management?  An Overview of the Sector  Asset Allocation in Volatile Times  Preparing for Retirement  Questions & Answers

3 What is Wealth Management?

4 4 Wealth Management – What is it?  A professional service which is the combination of financial/investment advice, accounting/tax services, and legal/estate planning.  In general, wealth management is more than just investment advice, as it can encompass all parts of a person's financial life.

5 5 Wealth Management – What is it? Wealth Management Pensions / ARF’s TaxationEstate Planning Business Planning Life Assurance Property Portfolio Management & Investment Advice Finance / Debt Mgt Stockbroking

6 6 Wealth Management: Dimensions for Consideration  Life cycle of earnings  Influence of past behaviour  Growth of economy and productivity  Social security and quality of pension scheme  Uncertainty of future income  Liquidity constraints  Tax effects  Duration of lifetime  Length of working and retired life  Unconventional consumption habits  Needs, requirements and life events

7 7 Life Cycle Concept Education Start of CareerFamilyPre-RetirementRetirement Savings & Investment Financing & Consumption Time

8 8 Integrated Approach to Wealth Management Process Definition of Needs & Goal Setting Analysis of the Customer’s Financial Situation Diagnosis of the Financial Situation Design of Financial Plan Implementing & Controlling the Financial Plan Client

9 The Wealth Management Sector

10 10 Increasing Complexity of Wealth Management Technology Legal Environment Competition, Prices, Globalisation New Financial Services Providers Product Variety Wealth Management Environment

11 11 Many Players / Competitive Advantages & Skillsets

12 12 WM Player Approaches Operational Excellence Mass Customization Relationship Management Partner Technical Advisor Transaction Product Approach Single Bundles Themes Style of Interaction

13 13 Summary & Outlook  It’s not just about products, it’s about understanding client needs – personal, family and business  Increasingly involves an integrated wealth management planning approach for clients  Client service / experience and education increasingly differentiators for WM players  High quality professionals are in demand with relevant skills and competencies – investment, technical and soft  Expect industry consolidation – deal with complexity and the search for AUM growth

14 Asset Allocation- Investing in Volatile Times

15 15 Asset Allocation & Diversification “Whatever the investment objectives, the investor who is wise diversifies”. Burton G. Malkiel – A Random Walk Down Wall Street Vs. “Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing." Warren Buffett

16 16 Picking the right sector and country is easy! Cast your net wider to diversify your portfolio UK Equities are represented by the London Share Price Database as maintained by the London Business School. Thedatabase covers several thousand shares. Source of UK Cash is Dimson, Marsh,Staunton (LBS/ABN AMRO). All otherdata is derived from DataStream as at

17 17 Modern Portfolio Theory (MPT) Harry Markowitz, "Portfolio Selection," 1952, Journal of Finance.  “An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.”  “Our job is not to play a guessing game, but to develop sound, diversified portfolios that should perform well in any economic or market environment over the medium to long term.” Asset Allocation & Diversification

18 18 Asset Allocation & Diversification CLIENT ASSETS CASHBONDSPROPERTYEQUITIESALTERNATIVES ACCESS TERM DEPOSITS RANGE ACCRUALS DOMESTIC GLOBAL PASSIVE ETFs SPECIALIST MANAGERS DIRECT SYNDICATE PASSIVE SPECIALIST MANAGERS DIRECT DOMESTIC GLOBAL PASSIVE ETFs SECTORS SPECIALIST MANAGERS HEDGE FUNDS PRIVATE EQUITY STRUCTURE D PRODUCTS

19 19 Asset Allocation: Typical Irish Investor Source: NCB

20 20 Asset Allocation: Average Pension Fund Source: Mercer

21 21 Asset Allocation: HNW Investor Source: NCB

22 22 Volatility An example of how volatility is currently affecting equity markets: "Let's have a look at what happened in the markets over the last few months (for the purposes of this example we will use the Stoxx 600). Starting on 13th July, the index went down 13% to the low of 17th August. Then bounced back 12% to the high of 12th October. From there, it dropped 11% to the low of 22nd November. This was followed by an 8.6% upswing to the peak of 12th December. The market then saw a decline of 21.6% to the lows of 22nd January. This is not over yet. After that, rising 12% to the high of 27th February, down again 12.4% to the lows of 17th March and lastly up 11% to 7th April. These are 8 moves of which 7 were larger than 10% in the last 9 months". Source: Collins Stewart

23 23 Volatility

24 24 Equities: Global Context

25 25 Economic Cycle – A Constant

26 26 Major Market Downturns Black Monday 1 st Gulf War Long term capital market crisis 9/11 2 nd Gulf War Credit crunch

27 27  “We simply attempt to be fearful when others are greedy and to be greedy when others are fearful”. Warren Buffett  “Financial markets generally are unpredictable. So that one has to have different scenarios….The idea that you can actually predict what’s going to happen contradicts my way of looking at markets” George Soros More Quotes…

28 28 Previous Market Recoveries Event Date of market low point Market rally after low point Following 2 weeks Following 3 years Following 5 years Black Monday31/12/ %22.03%34.92% 1 st Gulf War10/10/ %42.35%38.53% LTCM crisis 9/11 08/10/ /09/ % 11% 37.8% 7.78% 11.5% 38.90% 2 nd Gulf War12/03/200312%70.44%62.50% Analysis of previous market bounce backs:

29 29 Time(in) not Timing!

30 30  Inflation vs Economic Growth  Fears of a prolonged US economic slowdown / recession  housing weakness and poor consumer / investor confidence  Sub prime debt and liquidity issues  Dollar weakness  avoid US consumer, financials and housing related  US stocks had their worst start to a calendar year since 1933 and the second-worst two-month start in history ( )(Source: S&P).  Stronger Asia economic performance – relentless industrialisation of emerging economies - Decoupling?  Bull markets in oil and commodities to continue Equities: Key Themes

31 31 Large blue chip companies (No. 1 in markets):  Favour large over small capitalisation companies  Valuations reasonable  Lower risk as economic cycle matures Defensive sectors (Food/Healthcare/Infrastructure):  Maturing Economic Cycle – care required  Cash flows and dividend yields attractive Energy/Commodity related:  Sustained strength of oil price  Impressive cash flows support dividends  Valuation multiples rising  Companies with strong balance sheets, lower leverage, and greater FCF. Some Preferred Sectors

32 Preparing for your Retirement

33 33 Where will YOU be at Retirement?

34 34  Integral part of Wealth Management – “never too late”  Tax Benefits  Tax relief on contributions  Tax free growth within the pension structure  Ability to maintain your standard of living! Retirement Planning

35 35 Retirement Structures Income TypePension Structure Available Self employed individualsPersonal Pension / PRSA Employees in non pensionable employment Personal Pension / PRSA Employees / Proprietary Directors Executive / Occupational Scheme SSAS/ SSAP (usually proprietary directors or senior executives) PRSA AVC schemes (Including Additional Voluntary Contribution PRSA)

36 36  Significant shift into “self directed” or “self administered” pension schemes at “executive” level  Greater Control  Greater Transparency  Greater Choice  Greater Flexibility  Greater choice of investments & retirement planning vehicles (RPV’s)  “Self Directed” seen as SSAP vehicle for Self-Employed  Pension cap of €5.418m now a target! Recent Retirement Planning Trends

37 37 Investment Planning Trends Contemporary Model Insurance Company ARF / Pension Options Customer Products/Funds Customer Pension / ARF Ins.Co (Self Directed) SSAP Products / Investment Ideas Traditional Model

38 38 Investment Planning Trends - Choices Traditional Pooled Funds Limited Control Personal Portfolio Greater Investment Choice / Control Widest Investment Choice / Control Not Available For Self-Employed Insured SSAPs Self Directed Wrapper

39 39 Taking Your Retirement Benefits Pension Fund Tax Free Lump Sum (TFLS) AnnuityAMRF / ARFAnnuity AMRF / ARF Option 2 - Combination Option 1 Option 3

40 40 Approved Retirement Funds (ARFs)  Proceeds of your pension fund can be kept as a capital sum for certain categories (ARF) -Personal Pension - Self Employed individuals -Executive Scheme - 5%+ Directors -PRSA Holders -AVC’s  ARF vs Annuity Clear Preference for ARF amongst HNW individuals because of : -Personal Wealth -Business Wealth -Inheritances -Property  Opportunity to invest in a ‘bespoke’ fashion  Greater time to dedicate to investment decisions

41 41  Estate planning (on death): - No Tax for spouse - Children <21 C.A.T. (thresholds apply) - Children >21 Income Tax (Standard Rate)  Using mandatory distributions for income  No direct borrowing Approved Retirement Funds (ARFs)

42 42  Provides 3% tax on imputed distributions: –1% on 31 st Dec 2007 –2% on 31 st Dec 2008 –3% on 31 st Dec 2009 and onwards  Doesn’t apply until ARF holder is 60 or over for the whole of a tax year  Does not apply to AMRF holders (apply 31 st December following client attaining age 75) Approved Retirement Funds (ARFs) Finance Act 2006 Changes

43 43 Example 1 What about those who cannot avail of the ARF option? Existing Co. Scheme < 15 yrs service >15 yrs service (AVC only) ARF Leave Service PRSA Certificate of Benefit Comparison may be required

44 44 Example 2 What about those who cannot avail of the ARF option? Existing Co. Scheme Transfer Value B.O.B. New Scheme New Co. 5%+ Director ARF Resign Rev. Approved Leaving Service Options

45 45 Example 3 What about those who cannot avail of the ARF option? Senior Executive Group Co. A Group Co. B Executive Pension Co. B Executive Pension Co. A ARFable Senior Executive Transfer Value Employed transfer employment Ensure Exec is 5%+ director Not a 5%+ Director Not ARFable

46 46 Wealth Management Decisions  Annuity or ARF?  Planning required to avail of ARF options?  Investments – traditional or bespoke?

47 47  Increasing sophistication & complexity among HNWI’s  Asset Allocation  Investment Strategies  Tax Structures  Stage of Economic Cycle  More volatility  Implications for investment strategies  Increasing need for “all-encompassing” advice  Tax and investment  Next generational Wealth  Can one provider/advisor cover all angles sufficiently?  Outsourcing Conclusion

48 Questions & Answers

49 Wealth Management NCB Group : 3 George’s Dock, IFSC, Dublin 1, Ireland // T: // F: // NCB London : 51 Moorgate, London, EC2R 6BH, England // T: +44 (0) // F: +44 (0) //  Alan Foy Executive NCB Wealth Management T: F: E:  Aoife Lavan Executive NCB Wealth Management T: F: E: The information contained in this document has been obtained from publicly available sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. Opinions in this document are based on our judgment at time of publishing and are subject to change without notice. Intending investors should read the detailed literature available before investing. Any people acting on the information contained within this document do so at their own risk. Recommendations in this document may not be suitable to all investors. We recommend you contact NCB for professional advice before investing. We recommend that you take professional tax advice in relation to your investments. Investors should note that past performance is not necessarily a guide to future performance. The value of investments may fall or rise against investor’s interests. Income levels from investments may fluctuate. NCB is a member of the Irish Stock Exchange, member of the London Stock Exchange. Authorised by the Financial Regulator under the Stock Exchange Act  Nigel Poynton Director, Head of Portfolio Management NCB Wealth Management T: F: E:


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