Cryptocurrency coins in soil symbolising cryptocurrency mining

Cryptocurrencies – a stark reminder of the risks

By | Investments

Whenever clients talk about cryptocurrencies, our response has always been the same – the investments are unregulated and carry significant risk of total loss of the investment. Recent price action in cryptocurrencies, together with warnings issued by leading crypto exchange Coinbase, have only reinforced our view.


Making headline news

Cryptocurrencies have made headline news over recent days as a severe bout of turbulence has knocked the value of the largest coins available, including Bitcoin and Ethereum. The catalyst has been the collapse of the Terra Luna currency, which is supposedly pegged to the US Dollar as a so-called “stablecoin”. The Terra currency lost its peg to the Dollar last week, apparently due to issues in the algorithm that links the price of the digital currency to the US Dollar. The peg was not backed by currency or government bonds, but in other cryptocurrencies, and as the price began to fall, investors rushed to sell the coins, effectively creating a digital bank run. The price of Luna fell over 99% in the space of a week, effectively wiping out investors.


No safe haven

Following the collapse in Terra Luna, contagion has spread to other leading cryptocurrencies. Bitcoin fell below $30,000, to stand over 50% lower than the previous peak of $69,000 seen in November 2021. Ethereum, Ripple, and Cardano also suffered similar heavy falls.

Supporters of cryptocurrencies have often cited the decentralised nature of the currencies as offering protection against inflation and wider economic uncertainty. Given the underlying economic conditions we are experiencing, the recent price action is a clear indication that cryptocurrencies are, in fact, a poor hedge against rising prices.

Quite surprisingly, cryptocurrencies appear to be moving more in line with Equities markets, contrary to supporter’s claims that Bitcoin and others provide diversification away from more traditional investments. A study by the International Monetary Fund (IMF) in January of this year highlighted the much closer correlation between cryptocurrencies and the S&P500 index of US shares since 2020. What has become increasingly apparent is that the cryptocurrencies are just as susceptible to broader weakness in market sentiment as other assets, such as Equities, only accompanied with significantly higher levels of volatility.


Unregulated assets

In addition to the risks of falling prices and contagion from failing currencies, concerns over how safe investor’s crypto assets held on exchanges are, have added to the negative sentiment.

Coinbase, a leading US-based crypto exchange, announced a very poor set of financial results on Tuesday, which showed widening losses and a 19% drop in users over the last quarter. The most important part of the announcement, however, was the admission that should Coinbase declare bankruptcy, the assets held in custody on behalf of customers could become subject to bankruptcy proceedings. In other words, customer’s assets would not be segregated and the customers would become general unsecured creditors of the business.

Unlike UK regulated investments, where investors do have some protection offered under the Financial Services Compensation Scheme in the event that something goes wrong, cryptocurrencies are unregulated, potentially leaving investors without recourse if an investment fails.


Invest in what you understand

As famous US investor Warren Buffett quoted “never invest in a business you cannot understand”. We feel this sage advice is true of cryptocurrencies generally. The premise of Bitcoin and its peers was to create new valid currencies, free from intervention from central banks and governments, that would be accepted more frequently as a currency over time. A limited number of organisations do accept Bitcoin as payment for goods and services, although the use of the currency is hardly becoming mainstream. Furthermore, the high levels of volatility seen in Bitcoin and other cryptocurrencies would make their use for transactions almost impossible.


A move towards regulation

There has been growing calls for the cryptocurrency market to be regulated over recent years, and the recent volatility is likely to increase the volume of calls for more intervention in this market. Some may see this as a positive move, potentially increasing the mainstream appeal of the investment. However, others see increased regulation as a negative, and totally at odds to the premise of decentralised currencies, which could stifle innovation.

Cryptocurrencies have also long been associated with criminal activity, such as scams, malware and ransomware attacks and money laundering, and regulation would aim to reduce the amount of illegal activity that takes place. Another key consideration is the amount of energy expended in mining tokens, with any move towards regulation likely to focus on the industry’s environmental impact.


FCA warning

The Financial Conduct Authority (FCA) produced the clearest assessment of the risks associated in January 2021 when stating “the FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns. If consumers invest in these types of product, they should be prepared to lose all their money.”

Despite warnings such as this, the cryptocurrency market has continued to gain in popularity over recent years; however the gyrations seen over the last week may well serve as a timely reminder of the inherent risks of these unregulated investments.


If you would like to discuss the above with one of our experienced financial planners, please get in touch here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.

Magnifying glass over document reading 'interest rates'

Where next for interest rates?

By | Investments

Central Banks on both sides of the Atlantic made headline news last week, as the US Federal Reserve and UK Monetary Policy Committee both raised interest rates. In a much anticipated move, US interest rates were increased by 0.50%, and in the UK, interest rates were increased by 0.25% to 1%, the first time UK interest rates have hit this level since 2009.


Why have rates increased?

Focusing on domestic interest rate policy, the Bank of England’s UK Monetary Policy Committee is tasked to support the Government’s economic aims for growth and employment, as well as hit an inflation target (measured by Consumer Price Inflation or CPI) of 2% per annum.

As widely reported over recent months, inflation has surged across the world, as a result of supply issues caused by lockdowns during the Covid-19 pandemic, increases in energy and commodity prices, and more recently by the Russian invasion of Ukraine. This has driven inflation far beyond market expectations, with UK CPI standing at 7% over the 12 months to March 2022, over three times the Bank’s 2% target. Furthermore, most economists believe UK inflation will increase further over coming months, with Bank of England Governor Andrew Bailey indicating the Bank’s belief that CPI will hit 9% in the third quarter and go beyond 10% by the end of the year. The anticipated increase in energy prices, as a result of the OFGEM price cap adjustment, in October, may well be the catalyst for UK inflation hitting double digits.


The impact of higher rates

Higher interest rates have a dampening effect on the economy generally, and affect households and businesses alike. The higher cost of borrowing impacts the ability of households to take out larger mortgages, and also increases the cost of loans and credit cards. A likely outcome of a sustained period of higher rates is that house price growth may well be limited, or indeed, could be the catalyst for house prices to fall.

Businesses need to access cheap finance to aid expansion, and if borrowing costs are higher, this could limit business plans to expand, including taking on new staff or premises.


Will the Bank keep on raising rates?

In light of the Bank’s forecast that inflation will rise further over the course of the year, it is likely that the Bank will raise interest rates further to try and bring inflation under control. Indeed, 3 of the 9 members of the Monetary Policy Committee voted for an increase of 0.50% rather than 0.25% last week, such was their concern that more aggressive action was needed immediately.

At present, economists are predicting UK Base Rates will reach between 1.75% and 2.25% by the end of the year, a further increase of 0.75% to 1.25% over and above the current level.

The Bank forecasts are always forward looking and they will be considering the longer term inflation forecasts before taking action. Given that CPI measures price growth over the previous 12 months, unless prices continue to rise at the same rate, the current elevated rate of inflation should begin to ease during 2023.

The Bank of England will, however, be acutely aware of the impact of higher interest rates on economic growth. Raising interest rates generally causes an economy to slow down, and with the UK economy already decelerating from a more promising position last year, the Bank will undoubtedly be considering the impact of their actions on the UK economy, which could be heading back towards recession.

Recent numbers for UK PLC have not been encouraging. UK growth stalled from 0.8% in January to just 0.1% in February, and the April 2022 consumer confidence report (as measured by GfK) showed consumers felt less confident than at any time since 2008. Services and Manufacturing surveys carried out last month also showed a drop in optimism.

Whilst the ongoing conflict in Ukraine underpins the increase in the price of food, energy and other supplies, and the continued Covid-19 lockdowns in China threaten to slow supply chains of key goods for manufacturing, it is difficult to see the current economic situation improving over the next few months.

We therefore feel that the market and economists may be off-target with their projections for UK Base Rates to hit 2% by the end of the year. Should the economic slowdown worsen, and the UK economy contracts, this may well weigh on the central bank’s decisions, and could lessen the need for the Bank to raise rates aggressively over the second half of the year.


What does this mean for investors and savers?

Savers should expect some respite from the very low interest rates that have persisted now for more than a decade. Whilst some banks and building societies have been slow to pass on the base rate increases in their savings products, others have been more reactive, and as always is the case nowadays, savers should look across the market for competitive rates. The bad news for savers is that the increase in savings rates is not likely to keep up with the expected increase in inflation over the remainder of this year. The “real return” (i.e. the return after the effects of inflation are taken into account) from cash savings may well shrink, leaving savers worse off.

Investors can access a wider range of assets that could look to take advantage of the prevailing conditions. Within lower risk assets, inflation linked bonds and alternative investments such as infrastructure could continue to do well, and in terms of equities, taking a global approach, and focusing on companies with strong earnings and attractive dividend yields could produce outperformance.

If you would like to review your existing savings and investments with one of our experienced financial planners, please get in touch here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.

Ratings on bonds

Analysing credit ratings

By | Investments

Corporate and government bonds will form a part of most diversified investment strategies. However, given the high rates of inflation we are experiencing at the moment, it is even more important to select bonds that will perform well in the prevailing conditions. We use a number of tools to select appropriate bonds, and one of the factors we analyse is the bond’s credit rating.


Bond basics

Looking at the broad definition, a corporate bond is a type of debt security that is issued by a firm and sold to investors (although there are a number of different types of bond and other debt instruments in circulation). The company obtains the capital it needs from investors and in return the investor is paid a number of interest payments at either a fixed or variable interest rate. When the bond reaches redemption, i.e. when all of the pre-determined interest payments have been paid, the original investment is returned. In a similar manner, governments issue bonds to finance public spending, which are known as gilts in the UK.


Credit where it’s due

Just as individuals have a personal credit rating based on their financial security, bond issuers are usually evaluated by credit rating agencies to assess the creditworthiness of the bond. There are three main ratings agencies that undertake the evaluations of bond strength – Moody’s, Standard & Poor’s (S&P) and Fitch. Each bond rating agency considers the underlying company and its ability to meet its future obligations, by considering a number of factors, including the strength of the balance sheet, the future economic and business outlook, profit margins, and earnings growth. As a result, the credit rating provides an indication of how likely the company will pay its obligations.

Using the S&P ratings, for example, the highest-graded bonds are graded AAA with all bonds rated above BBB- being classed as investment grade. Any bonds graded BB+ and below are classed as high yield bonds, with the lowest classification being grade D, which means the bond is in default – in other words, the issuer cannot repay its obligations.

Currently, the UK Government is rated AA for its sovereign debt. There are very few governments whose debt is rated AAA, and this select list includes Germany, Norway and Canada. Unsurprisingly, Russia has seen the rating given by S&P to its debt fall to a rating of CC, which suggests a default is imminent.


Risk and reward

Generally speaking the highest graded bonds are those with the lowest chance of default. This would, therefore, make these bonds the most obvious choice for bond investors? Well, not necessarily and indeed in recent times, this isn’t often the case. Given the lowest perceived risk of default, the bonds with the highest credit ratings offer the lowest returns in terms of regular income payments, expressed as “yield” when compared to the underlying bond price. These returns have been very unattractive for a number of years, and with inflation heading northwards, the “real” return offered looks even worse.

Just as the highest-graded bonds offer the highest-perceived security, but lowest yields, those bonds with the lowest grade will need to compensate investors for the increased default risk. Thus low-graded bonds tend to offer attractive yields, although the risk of default is much greater, due to the weaker financial strength of the issuing company.

This is the reason why a portfolio approach is most appropriate when considering bond investment. Mixing a range of bonds with different credit ratings can find the correct blend of income yield and investment risk to suit the particular strategy being adopted.


Are ratings to be trusted?

Credit ratings can usually be a good guide as to the creditworthiness of a bond issuer; however, they are not infallible as the ratings are based on historic financial data. Credit ratings agencies cannot look into the future and material changes in the fortunes of a company can lead to credit ratings being downgraded. This would normally lead to an increase an yield, as investors seek higher returns as compensation for the greater risk. On the other hand, a high yield bond, where the issuing company sees a substantial improvement in its financial prospects, could potentially be re-rated to investment grade, which could generate capital returns to investors in addition to the interest payments.


One tool in the box

Whilst credit ratings are undoubtedly helpful, they cannot be used in isolation to determine whether a bond is worthy of consideration. As we have mentioned above, they look at historic data, and careful analysis of the bond issuer is needed together with regular review of how changes in profits, or economic outlook in the case of a government bond, could affect the credit rating going forward.

At FAS, we use collective investments within our strategies. These are pooled investments where a manager will buy a portfolio of bond investments to offer a spread across a range of different bonds, which will all have different criteria, including credit ratings. By analysing the constituent components of a bond fund, we can determine the average credit rating across the bond portfolio to get a feel for the level of risk the manager is willing to take.

As we have stressed above, bond investment is a complex area, where a number of different qualitative and technical analyses all contribute to the selection process. The economic conditions we are experiencing at present has, in our view, only increased the need for comprehensive due diligence. If you hold corporate or government bond funds or corporate bond investments as part of an existing portfolio, we would be happy to offer an impartial review of your existing arrangements.

If you would like to discuss the above with one of our experienced financial planners, please get in touch here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.


Long term and short term road signs

Define your investment goals

By | Investments

An important part of the financial planning process is defining the reasons why you are investing in the first place. By taking the time to consider the bigger picture at the outset, you can enhance the probability of achieving your desired outcomes, by matching appropriate strategies to your targets.


What stage in life are you at?

Broadly speaking, many investors fall into one of two categories. The first are those who are accumulating and building wealth and assets over time. These clients are often younger or middle aged and are able to save regularly (either via a pension, an investment vehicle, or both).

The second category are those who have already accumulated wealth, and are looking for that wealth to perform a function in later life. This cohort are often approaching retirement, or have already retired, and instead of looking to regularly save towards their goal, they are looking for the accumulated funds to either provide an income (through a personal or defined contribution pension, or investment plan) or achieve further growth (to provide a larger inheritance to family).


Aiming at the goal

Irrespective of which category an individual falls into, it is important to break down your thinking and define short term and long term goals. Both the short and long term goals may well aim to achieve a similar outcome, although sometimes the goals can be very different.

Take the example of a married couple aged 30, with two children. They both earn good incomes and manage to save regularly each month. After speaking to an adviser, they have considered their goals in the short term. Firstly, they want to make sure they have an emergency fund held in readily accessible funds, to provide for life’s unexpected costs. Secondly, they hope to be able to afford private education for their children. They have therefore decided to invest for the medium term by regularly saving into an investment strategy designed for growth to meet the target date at when funds could be needed to fund private education costs, by funding regular withdrawal to meet the expected annual costs.

In the longer term, they want to make sure that they can afford a comfortable retirement and therefore are also committing funds into a pension arrangement, to try and achieve a good level of pension savings from which to provide retirement income.

The three goals (two short term, and one long term) have completely different time horizons, and therefore it would be appropriate to consider investing in a separate strategy for each goal. In this way, the most tax efficient method can be selected, and the choice of investments be tailored to suit the target of each goal. This is certainly a more sensible approach than simply holding a single savings pot, that doesn’t match any of the stated objectives.

For clients reaching retirement, the goal of many is to provide a sustainable retirement income. This can be achieved via a number of methods, using existing pensions, and investments accumulated through life and also possibly through inheritance. For these clients, defining the level of income needed to meet expected outgoings is very helpful in tailoring the strategy to generate the correct level of income. These clients often have other objectives in mind, for example, the ability to pass on wealth earlier to younger family members by way of gift. Again, careful thought and planning can maximise the tax efficiency of these transactions.

Lastly, the longer term objectives may be to leave significant wealth to the next generation in a tax efficient manner. The three objectives identified are likely to impact on each other, and clearly defining goals and targets at the outset can help prioritise your goals and aspirations.


Review and revisit

Whilst giving careful consideration and clearly defining investment goals is an important part of the planning process, reviewing and revisiting those goals is equally important for two reasons.

Firstly, goals change over time. Life is often unpredictable and life events and changes of plan can lead to a clearly defined goal at the outset becoming less important. Let’s look again at the married couple in our example above. They receive an unexpected inheritance that covers the private education costs for their children and therefore they do not need to plan for this expense when the children reach school age. They can, therefore, alter their priorities and focus on their other short and long term goals.

Secondly, it is important to review and consider whether investment goals remain achievable by considering performance of the investments regularly to see whether they are on track to reach their target. If investment markets are underperforming, committing greater savings to the stated goal could help get the plan back on target. Conversely, if investments perform above target, this may allow regular savings investments to be reduced, releasing funds for other uses.


Engage with a holistic financial planner

Planning for investment goals is an important area where holistic financial planners can add significant value. By engaging with a trusted adviser, they can assist in defining investment goals at the outset and work with you over time by regularly reviewing your goals and expectations and whether the strategies put in place are on target to achieve that goal.

At FAS, we always take a holistic view, and really take the time to understand your investment and financial goals. Our comprehensive regular reviews not only cover the performance of recommended investment strategies, but also whether these are on target to meet your goals, and whether any changes to the strategy are needed.

If you would like to review your investment plans to see whether they meet your goals, then please get in touch with our experienced financial planners here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.

Environment social and governance in sustainable and ethical business. Hands holding crystal globe.

ESG in action – the invasion of Ukraine

By | Investments

There is now a growing importance placed on Environmental, Social and Governance (ESG) factors and the risks that these can pose to both businesses and investors. From adapting to climate change to avoid pollution, promoting employee rights and health and safety to considering executive remuneration, ESG considerations can have a range of impacts on an organisation’s financial performance and it’s ability to deliver shareholder value.

More often than not, the environmental impact is the focus on investors’ minds, driving businesses to be more sustainable, with a focus on efficiency, use of renewables, and avoidance of waste. Governance is also a key consideration, in particular when it comes to investments in emerging markets, where corruption and political interference is more likely to occur.

However, recent global events have seen social factors take on ever greater importance. One outcome of the very sad events happening in Ukraine has been to see ESG factors take centre stage, with firms racing to distance themselves from doing business with Russian firms, and close down operations in Russia. From automotive firms such as Ford, to airlines, energy firms such as BP and Shell and food and beverage companies such as Heineken, businesses have generally taken swift action to sever ties with Russia, whether being forced into action as a result of sanctions imposed by the West on the Russian economy, or more often than not, as a matter of choice and ethical stance.

For some, the costs of the withdrawal from the Russian market will be limited. Take Disney for example, who have pulled new releases of its’ films from Russian cinemas. This is likely to have a minimal effect on profitability. For others, such as BP –  who offloaded it’s 19.75% stake in Russian firm Rosneft in the wake of the invasion –  the impact on profits is likely to be more profound and long lasting. Likewise Apple, who announced on the 1st March that they were withdrawing their products from sale in Russia. Whilst Russia is not Apple’s biggest market by any means, the company expects to lose $3m of sales of iPhones per day alone, equating to a cost of $1.14bn annually.

Many companies reached a swift conclusion that the social implications of continuing to provide goods and services to Russian consumers, or trade with Russian firms, would be damaging from a brand perspective, or lead to other companies whom they trade with to question whether the business relationship is right for them. Others have taken a stronger stance, and have been more outspoken, publicly shaming Russia for it’s actions, and aligning their values with a more activist stance.

Where firms have initially been reluctant to take decisions themselves, investor action and negative social media exposure (including #BoycottMcDonalds and #BoycottCocaCola trending on Twitter) have forced the Boards of McDonalds and Coca-Cola to announce their suspension of operations in Russia. Both companies have significant exposure to the Russian market – in the case of McDonalds, this accounts for 9% of it’s annual revenue – not an insignificant amount.

Rarely has investor and consumer activism been seen on such a scale and we wonder whether this marks new ground, where companies will be forced to be more focused on their ethical position and the need to take action quickly in the future to avoid reputational damage or indeed take a stronger moral stance in light of global events.

The outrage at the action taken by Russia, and steps taken to help Ukraine defend itself, have also prompted some to re-consider the definitions of what represents an ESG-friendly industry. Given the role companies have played in aiding Ukraine with weapons and counter-measures, could aerospace and defence companies conceivably be included under the ESG umbrella? Quite clearly, companies with activities in these areas have historically been off limits when ESG-focused portfolios are constructed. However, some ESG managers are now re-considering this broad-brush approach, and questioning whether those companies who help a country defend itself from aggression are, in fact, promoting a positive social impact.

It is clear that from an investment perspective, ESG factors have never been as prominent as they are today, with the response to the Russian invasion of Ukraine spreading the influence of ESG far beyond targeted investment strategies. The ESG metrics used to score investments and funds are however, arbitrary, and as can be seen from the debate over defence stocks, can be open to interpretation.

At FAS, we consider ESG factors when choosing funds we are happy to recommend to clients, and through our Socially Responsible Investment (SRI) portfolios, take this further by looking to recommend a portfolio where the majority of funds pass further qualitative filters. If you hold an existing portfolio of investments, and are unsure as to whether this meets your personal ethical preferences, then please contact one of our experienced Financial Planners who will be happy to review the portfolio for you.

If you are interested in discussing the above with one of our experienced financial planners, please get in touch here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.

Hand holding globe

FAS Market Outlook

By | Investments

The tension between Russia and the West over Ukraine has been building in recent weeks, and Russia’s incursion into Ukraine has clearly escalated the crisis. We explain why investors should stay calm and why we feel there are good reasons to take an optimistic view.


Likely fallout from the crisis

So far, 2022 has seen investment markets give back some of the gains made in 2021, firstly due to higher levels of inflation, and secondly as a result of the increased tensions between Russia and Ukraine. Whilst most global markets have seen modest falls over the year to date, as ever, it is important to take a rational look at events, and consider the bigger picture for investment markets over the remainder of this year and beyond.

As a direct consequence of the increased tensions, oil prices have climbed, breaching the $100 a barrel mark. Higher energy costs are likely to exacerbate the inflationary pressure in the short term; however, our view remains that inflation will moderate as we head towards the end of the year. Naturally, the higher oil price is likely to benefit oil producers and energy companies generally. Likewise, the imposition of sanctions on Russia and Russian interests by the West could lead to further falls in Russian equities, and the value of the Russian rouble. For this reason, we would recommend investors favour developed markets rather than emerging markets in these conditions.


Reasons to be optimistic

To counter the potential downsides of the increased tension, there are a number of good reasons to be positive despite the newsflow. With Covid-19 restrictions easing around the world, the headwinds from the Coronavirus pandemic are starting to subside, which should allow Western economies to continue to grow over the remainder of 2022. Apart from a small number of recent disappointments such as results announced by Meta (Facebook) and Peleton, corporate earnings have generally matched or beaten market expectations over recent months, and forecasted profits remain strong in many sectors of the economy.

Another reason for optimism is that markets have already fallen back over the last six weeks and may, to some extent, have already priced in some of the potential risk from further escalation of the Russian incursion.

Finally, the increased geopolitical risk could potentially lead central banks to take a more measured view over the pace of interest rates increases over the remainder of 2022. Markets would almost certainly view this in a positive light.


Volatility is part of the process

Global markets are digesting a regular stream of news from events in Russia and Ukraine, which is likely to lead to continued volatility in the short term. Volatility is a measure of how much an asset rises or falls in value over a given period of time, and all of our investment strategies focus on limiting investment volatility over the longer term.

It has been noticeable that volatility has not increased significantly over recent weeks and overall levels of volatility are significantly lower than levels seen at the beginning of the pandemic in March 2020. We see this as a positive sign that market participants are prepared to take a measured view of events.


Learning from the past

Many investors will clearly recall the market gyrations seen at the start of the pandemic just less than two years ago. We counselled clients at that time to stay calm and remain invested through the very high levels of volatility seen at the time. Of course, history tells us that this was a sensible course of action to take as global markets had recovered their losses by the end of 2020.

Similarly, we avoided recommending clients take action to try and trade the volatility seen at the time, and this remains our recommended course of action now. To quote an often used market adage “it is time in the markets, not timing the markets” that produces long-term returns.

Furthermore, investment should always be viewed as a medium to long term process, and investor focus should always remain on the longer term goals and outcome, rather than short term fluctuations in market conditions.


Review your portfolio

Diversification is a key part of our investment process, and for many investors should be a cornerstone of portfolio construction. Holding too much exposure to any one area or asset class can lead to greater than expected volatility, which can be reduced by spreading funds across a range of different assets, sectors and geographies. If your portfolio is not regularly reviewed, our experienced team at FAS would be happy to take an impartial review of your investments, to consider how they are invested and the level of diversification.


Stay the course

From a global security point of view, it is clearly unsettling to see the destabilising effects of the military action. However, when it comes to investment strategy we  recommend that investors remain calm and focused on the wider economic outlook. Naturally, the team at FAS will continue to monitor markets closely as the situation unfolds.


If you are interested in discussing the above with one of our experienced financial planners, please get in touch here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.

Graphic of a green globe alongside wooden blocks spelling out ESG

Investing with purpose

By | Investments

Investing for the future has taken on new meaning in this world of climate emergency, the continuing Covid-19 pandemic, and our growing awareness of how our actions might affect current and future generations. Environmental, social and governance (ESG) concerns now underpin many investment strategies, with the goal of minimising harm to the world and its people while also generating returns.

Investing in line with ESG practices is a rapidly growing area of the investment fund market. UK investors transferred almost £1bn a month on average into responsible investment funds in 2020. By the end of September 2021, the figure was £1.6 bn, up to two-thirds of total net retail fund investment in that month.

UK investors now have £85bn in responsible investment funds. Between September 2020 and September 2021, the sector saw 87% growth (versus 17% across funds overall), according to the Investment Association (IA).  So why now?

Three main factors are behind the move to ESG in the past few years:

  • a bigger role by organisations such as the Principles for Responsible Investment;
  • an improvement in ESG performance data and investor tools; and
  • demand from ‘millennial’ investors, now aged 25 to 41, mid-career, and inheriting the reality of climate change and social unrest (87% of high net worth millennials invest based on a company’s ESG record).

In the last year, the Covid-19 pandemic and the COP26 summit in Glasgow have both led to greater interest in the responsible investment agenda.



Ethical investing was once positioned as a choice of principles over returns. A shift in global policy and advances in technology mean responsible funds now consistently outperform non-ethical equivalents. So, one of the traditional arguments against investing with conscience has all but disappeared.

Analysis of funds covering 23 comparable sectors found in the 12 months to 1 July 2021:

  • Ethical funds had produced an average overall return of 19.87%.
  • The average return of funds outside the ethical category was 17.89%.
  • At a sector level, ethical funds outperformed on average in 13 of the 23 sectors.


Defining ESG investment

ESG investing is about choosing to consider the treatment of the planet, people and management structures in order to receive financial returns in a way that is aligned with personal ethics and concerns about the world. This may mean:

  • avoiding certain sectors;
  • excluding specific companies; or
  • picking a theme with personal importance and investing in projects trying to achieve particular goals or change.

ESG investing lets investors align the way they use their money with their principles, often as part of a lifestyle of ethical consumerism that considers the supply chain of everything we use, from plastic waste to modern slavery.


Future-proof investing

Global sustainability challenges are forcing us to rethink traditional ways of working and living. Companies that once looked like solid and stable investments now face new risks to their profits, including from:

  • food shortages;
  • drought;
  • rising sea levels and floods;
  • conflicts over resources and land;
  • data privacy

ESG investing is considered a way of future-proofing returns by investing sustainably, choosing industries concerned for both people and the planet, in order to make long-term profits.

Example: Cleaner energy electric vehicle (EV) sales are expected to grow globally by 27% a year between now and 2030. Add in remote updates to EV functionality and entertainment, and investors get dual returns: consumer demand for less harmful products, and software subscription deals


Your values

Matching investments to your values means deciding what is most important to you. You may need to compromise to achieve all your goals.

The pandemic has made a larger number of investors look at ESG criteria more closely in the context of intergenerational planning and wealth transfer. In a recent survey from Prudential, 61% of participants said they now care more about the environment and the planet than they did before Covid-19. One in five are more worried about ESG issues now they have children or grandchildren.

The report found an increased appetite for ESG investing among:

  • 60% of millennials;
  • 44% of Gen X;
  • 35% of baby boomers; and
  • 45% of all investors now only want to invest in sustainable companies and funds.

However more than a third (36%) of UK adults admit they do not know where their current investments, including workplace and private pensions, are invested.

While interest in ESG investing has increased across the board, a generational divide exists over priorities when it comes to choosing investments. Climate change is a more pressing issue for older high net worth individuals, with 55% ranking it their top ESG issue. Social and governance issues ranked lower; only 9% put diversity among their top three ESG concerns.

Younger investors in the 18 – 34 range, however, prioritised social issues.

  • 45% said diversity should be companies’ top priority;
  • 64% judged companies by their responses to Covid-19; and
  • 60% were concerned by unequal financial and social hardship caused by the pandemic.

This divergence of opinion in ESG investing has the potential to cause friction for intergenerational financial planning. A good financial planner can guide you on how best to find compromise for children or grandchildren.



While ESG investment is currently experiencing a positive surge, as with every strategy, there are some key issues that investors should bear in mind.

To cash in on the ‘green pound’, and jump on the bandwagon of demand for ethical investments, some companies are rebranding as ESG-focused in a way that’s not entirely honest.

Some ESG funds take a liberal view of what they allow to make it easier to achieve returns. This ‘greenwashing’ can make it hard for ordinary investors to choose genuine ESG investments.

Greenwashing can be cynical marketing, or it can be an oversimplified view of a company or sector that fails to take into account hidden ESG risks. Examples include:

  • Fishing, once seen as ‘green’ versus meat, is the largest contributor to ocean plastic.
  • Soybeans are the second largest driver of deforestation after cattle, a fact largely hidden from investors in ETF indexes.
  • The Australian government found modern slavery of Uyghurs in the supply chains of at least 82 well-known global brands.

Remember, just because a company, project or fund is marketed as ESG or ethical or sustainable doesn’t necessarily mean it will turn a profit or achieve anything worthwhile.


How we can help

When researching ethical investment funds for client portfolios, we believe in asking the same clear-headed questions of an ethically focused fund as any other potential investment:

  • What is it doing better than its peer group?
  • What growth has it achieved and what is it doing to achieve more?
  • What problem is it solving and how is it measuring its success at that?
  • Is it good value for money?

At FAS we can help you to understand how to translate the values that are most important to you into a suitable ethical investment portfolio that reflects your principles and financial goals.

So, if you wish to create a financial plan based on your wishes to build and pass on long-term, sustainable investment returns to your children and grandchildren, speak to one of our experienced financial planners who can help you to embrace the world of ethical investing.

If you are interested in discussing the above with one of our experienced financial planners, please get in touch here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstances.

2022 against background of generic investment stats and graphs

A not so Happy New Year? It’s too early to tell…

By | Investments

Compared to the positive market returns enjoyed last year, 2022 has started in a turbulent fashion, with investment markets seeing selling pressure over the first three weeks of the year. Despite the increase in volatility, we feel this is, once again, a time for investors to stay the course.

Since the new year, the mood in investment markets has darkened, with risk assets seeing falls across the board. The catalyst for this weakness is a combination of a number of factors, rather than being the result of a single defined cause. Inflation is remaining stubbornly high and indeed increasing across developed economies. Higher energy costs, increased costs of shipping, scarcity of components, and labour shortages are all feeding into uncomfortable inflation readings. The actions taken by central banks to combat inflation will be watched more closely than ever, although we would hope that the Federal Reserve and Bank of England will continue to take a measured approach to higher prices, and continue to offer markets forward guidance of the path they expect to take.

On top of the concerns over inflation, the tense situation between Russia and Ukraine is also spooking investors. The threat of conflict is rarely taken as a positive by markets, as the risk and potential economic fallout is hard to quantify. In this case, a further concern is the potential disruption to European energy supplies.

Whilst Covid-19 measures are easing in the UK, it is important to note that this is not the case around the World. Omicron variant numbers remain high across the US and Europe and it would be unwise to write off the potential for Covid-19 to wreak more economic damage.

Taking these factors into consideration, it is perhaps not surprising to see markets take a step back in the short-term. It is, however, important to remember the speed at which economies and investment markets have recovered from the worst effects of the Covid-19 pandemic, almost two years ago. 2021 saw gains from most asset classes and sectors, with only a few exceptions, and irrespective of the factors dominating market attention at the present time, a pause for breath and consolidation was always likely to happen.

Despite the gloomy picture painted above, there are reasons that investors should remain positive. Corporate earnings have, by and large, held up very well, and given the waning impact of Covid-19, supply chain issues – which have been ongoing since the start of the pandemic – should begin to ease. Not only will this help industries from many sectors of the economy, but may also help ease some of the inflationary pressures later on in the year. Companies remain cash rich and further merger and acquisition activity remains likely. This is often seen as a further sign of confidence.

Unlike the very high levels of uncertainty seen at the start of the pandemic, we do not believe the price action seen during the first trading days of 2022 is a matter for great concern. Whilst our view could change as events unfold, the global economy is in a better place than it was two years ago, and in any prevailing market conditions, there are always investment opportunities to explore that could lead to outperformance.

Bouts of higher volatility, as we are seeing currently, are not comfortable, but are an essential part of the investment process. In conditions such as those being experienced currently, our recommendation to clients is to remain invested in a diversified portfolio of assets, which offers allocation to a range of asset classes and good geographic spread. It is also worth noting that returns on cash are deeply negative due to elevated inflation and unless central banks take dramatic action to increase base rates, which we feel is highly unlikely, cash returns may well remain deeply disappointing for the foreseeable future.

As always, the team at FAS remain vigilant to the prevailing conditions, and remain on hand to discuss market conditions with our clients. If you are interested in discussing the above with one of our experienced financial planners, please get in touch here.


The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.  The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

A collection of different cryptocurrencies

Crypto – investment or gamble?

By | Investments

Cryptocurrencies are regularly in the headlines and growing in popularity, but are they really investments?

Cryptocurrencies, of which Bitcoin is the most famous (or notorious, depending on your viewpoint), are not currencies in any practical sense of the word.

Think of the pound in your pocket:

  • It has the backing of a state-owned central bank;
  • its value is stable, give or take the longer-term impact of inflation; and
  • it can be easily used in any financial transaction as a method of payment.

Graph illustrating Bitcoin in 2021


According to the Financial Conduct Authority (FCA), in the UK, 2.3 million people own some form of cryptocurrency, with an average holding of about £300 – meaning that cryptocurrencies account for about 0.1% of UK household wealth. Other research shows ownership to be concentrated largely among Generation Z – 45% of 18–29-year-olds have placed some money in cryptocurrencies and half of those have gone into debt doing so. However, 10% of cryptocurrency holders in the UK are over 55, with potential inheritance tax and legacy issues for their estates.

Many of these new investors may believe these virtual currencies are socially as well as personally beneficial. But with the huge amounts of energy required in cryptocurrency mining just one area of controversy, they may not be simply a benign option for those seeking to sidestep traditional investing.

HMRC has recently entered the fray, seeking to contact holders of crypto assets to remind them that they would owe tax on any profit from disposal of cryptocurrencies, whether from sale, exchange, or where used for goods or services in the limited areas available.

Some cryptocurrencies called stablecoins, such as Tether, aim to have a fixed value (often linked, ironically, to a traditional currency). However, most cryptocurrencies have anything but a stable value, as none have central bank backing and it can be difficult or near impossible to buy anything with them.

Despite these factors the cryptocurrency market has grown at a breakneck pace: over the last five years to November 2021 its value has increased from USD $16 billion to USD $2,600 billion. The FCA does not directly regulate cryptocurrencies. However, UK cryptocurrency businesses are required to register with the FCA and comply with money laundering rules. The regulator makes clear in its consumer guidance (see that:

  • Cryptocurrencies are regarded as “very high risk, speculative investments”;
  • purchasers are unlikely to be covered by the main investor protection schemes; and
  • if you choose cryptocurrencies, “you should be prepared to lose all your money”.

Scams, particularly using social media and involving offshore companies, are another high risk of the cryptocurrency market. One international scheme, the subject of an in-depth podcast investigation, operated in over 175 countries to the tune of $4 billion but turned out to be a complex scam with the founder still apparently unaccounted for.

As the Bitcoin graph shows, it is possible to make – and lose – large amounts in cryptocurrencies. With the development and growing popularity of app platforms making ‘trading’ and tracking more accessible and convenient, you may be tempted to join in. But be warned – other, less exotic, and better regulated investments could well be a wiser choice. As always, if you wish to discuss in more detail, please give us a call.

If you are interested in discussing the above with one of our experienced financial planners at FAS, please get in touch here.

The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.  The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Wooden blocks reading 2021 and 2022

2021- the year that was, and prospects for 2022

By | Investments

As 2021 draws to a close, investors can look back on a year that still presented challenges, despite conditions being much more benign than those experienced a year earlier. Following the very sharp recession seen at the start of the pandemic, we have witnessed a broad based economic recovery, fuelled by continued economic support from central banks and governments, which has continued to provide markets with the confidence to move forward.

At the time of writing, the S&P500 index of US shares stands 27% higher than at the start of the year, whereas the FTSE100 stands 12% higher. These increases have built on the strong returns seen during the latter part of 2020. Whilst most investment markets are higher than at the start of the year, there have been areas to avoid. Chinese markets, weighed down by concerns over the debt-laden property sector and government policy, have fallen throughout the year, despite a modest recovery seen over recent weeks. The safest government bonds have also seen disappointing returns, as inflationary pressures bite.

Compared to the wild swings in sentiment seen during 2020, this year has seen more stable conditions for investment markets. Apart from some volatility around the time that the Omicron variant was discovered, investment markets have sailed through much calmer waters than was the case a year ago.

As we progressed through the year, investor attention began to shift away from the pandemic, and the increasing rate of inflation being seen in Western economies became the primary concern. In the UK, the Consumer Price Index hit 5.1% in the 12 months to November 2021, the highest level for a decade. We are not alone in facing higher inflation, with the prevailing rate in the US standing just short of 7% per annum. A number of factors have contributed to the increase in inflation – demand for goods such as building materials and microchips has outstripped supplies, and the cost of shipping goods has also risen sharply. We have all felt the impact of higher gas and electricity prices, and food prices also continue to rise. Spare capacity in the labour market may also lead to modest levels of wage inflation, as certain sectors, such as hospitality and logistics, struggle to hire employees.

The heightened rate of inflation is unlikely to be welcome news for many. Whilst higher rates of inflation are helpful in eroding levels of debt, for households struggling with increasing energy costs, and for those individuals holding cash savings, these are painful times. Central banks would ordinarily be looking to increase interest rates at this point in the economic cycle, to combat the higher rates of inflation. However, they need to tread carefully to avoid damaging the fragile economic recovery. Taking away the support and raising rates too quickly could reverse the economic gains achieved since the height of the pandemic, whereas leaving rates on hold for too long could stoke inflationary pressure further.

The Bank of England was the first to jump, raising rates from 0.10% to 0.25% this month, and we expect most Western central banks to continue raising rates during the course of 2022. The pace of these rate increases is likely to be a key factor in determining how markets perform during the course of the year, and clear forward guidance – such as we are seeing now from the Federal Reserve – will be needed to avoid markets being spooked by unexpected changes in policy.

So where do markets go in 2022, and what is in store for the coming year? Firstly, the emergence of Omicron reminds us that sadly the pandemic is not over. Investors have faced continued uncertainty in the face of the virus since March 2020, and it is becoming clear that Covid-19, and the actions taken by governments to combat the spread, is once again going to dominate market sentiment as we head through into the New Year. As we have seen over recent weeks, governments around the world appear to be keen to avoid the kind of restrictions that could deal a substantial blow to the economic recovery, but they need to balance this with the need to protect public health.

The actions of central banks will also likely have an influence on market confidence. The rapid rise in inflation may well remain a headache for policymakers throughout next year, and tough decisions on removing key support that has been in place since the start of the pandemic could have negative consequences. Inflation may well start to moderate as we move through the next 12 months, although we suspect prevailing inflation rates will stay a little higher for longer, placing further pressure on central banks and savers.

We will be watching corporate earnings closely as we move through into 2022. By and large, profits have held up well and in some sectors have exceeded expectations this year. We do, however, need to be mindful that the valuations of some sectors of the economy are now looking a little expensive.

Finally, in contrast to the calm conditions we have seen through this year, we may well see a little more volatility return as a result of Omicron and the key interest rate policy decisions that will need to be taken. For this reason, 2022 could well be a year when paying careful attention to asset allocation, and maintaining good levels of diversification, are crucial to navigate the prevailing conditions successfully. Rest assured we are here to provide guidance and reassurance whenever needed.

If you are interested in discussing the above with one of the experienced financial planners at FAS, please get in touch here.

May we take this opportunity to wish you a peaceful, happy Christmas with good health and prosperity in 2022!

This content is for information purposes only. It does not constitute tax planning or financial advice.