SFA Money & More Magazine

money& more
ISSUE 1/ JANUARY 2021

MANAGING UNCERTAINTY

THE EFFECTS OF THE CORONAVIRUS
PANDEMIC

THE BENEFITS OF A
DIVERSIFIED PORTFOLIO

THERE’S ONE PARTICULAR PIECE OF
TALENT THAT INVESTORS AROUND

THE WORLD LACK

HERE TO SUPPORT YOU

WE’RE PROUD TO HAVE BEEN ABLE
TO CONTINUE OFFERING HELP
AND ADVICE TO CUSTOMERS

INVESTMENT
LESSONS FROM
COVID-19

JOE WIGGINS – HEAD OF PORTFOLIO
MANAGEMENT AT ABERDEEN
STANDARD INVESTMENTS.

CONTENTS

FINANCE 18. INFLATION – WHAT LIES AHEAD?

06. MANAGING UNCERTAINTY The cost of living is rising at a much lower rate than
the Bank of England's target.
The effects of the coronavirus pandemic are likely
to be felt for some time, including economically. 20. THE BENEFITS OF A
DIVERSIFIED PORTFOLIO
08. ACTIVE VERSUS PASSIVE
– THE GLOVES ARE OFF There’s one particular piece of talent that investors
around the world lack.
When it comes to investing – is it better
to take an active or passive approach? 22. KEEPING YOU
INFORMED ABOUT
10. INVESTMENT MARKETS AND
LESSONS FROM YOUR INVESTMENTS
COVID-19
We’ve got online support to help you stay informed.
Joe Wiggins – Head of Portfolio Management
at Aberdeen Standard Investments. 24. SETTING OUR LOVED
ONES UP FOR A STRONGER
14. HOW CORONAVIRUS HAS FINANCIAL FUTURE
CHANGED OUR SPENDING
HABITS We all want our loved ones to prosper in life.

Coronavirus has changed many aspects 26. HERE TO SUPPORT YOU
of our daily lives.
We’re proud to have been able to continue offering
help and advice to customers.

02

WELCOME

W elcome to your Winter edition of Money & More.
This magazine is available exclusively to our ongoing
service customers, to help you with your financial journey
with Skipton.

I don’t need to tell you what a year it’s been. When I try
to summarise the last 12 months it’s hard to do so in only a
few words.

Coronavirus has unleashed changes that seemed
unthinkable only a year ago. Along with the health, safety
and well-being of family, friends and loved ones, our
finances, the world’s economies and stock markets have been
thoroughly challenged.

As an investor you’ll no doubt be aware of the impact
the pandemic has had on the UK’s economy. Stock markets
have faced no end of volatility, and as you’ll have read in
your last quarterly report it’s clear the dust is a long way
from settling.

Of course, keep calm is a message you’ll have heard
several times from us over recent months. But again, in this
edition we look at how you can manage uncertainty when it
comes to your investments on page 6, including an interview
with Aberdeen Standard Investments’ Joe Wiggins, about
maintaining a positive mindset (page 10).

“AS THE WORLD CONTINUES TO WORK
OUT HOW TO MANAGE CORONAVIRUS,
MANY WILL AGREE THAT THE NEW
NORMAL NEEDS RE-THINKING.”

As the world continues to work out how to manage We’ve been in a stronger position than many other
coronavirus, many will agree that the new normal needs organisations who offer financial advice. Not just in being
re-thinking. This includes how businesses need to adapt able to continue helping people make plans, but also to be
to the changing consumer needs that have developed as a there for existing customers like you. To answer and support
result of the pandemic, something we explore on page 14. you with any queries you’ve had about your investments
during this uncertain time.
As a business we have also faced several challenges this
year. On a personal note I’d like to say how proud I am to We hope you find this magazine useful. As always, we’re
have been part of Skipton Building Society during this only a phone call away. So if you’d like to chat to us, call us
difficult time. Many of us have adapted to a new working on 0800 085 0459.
style – whether that be at home or continuing to work
safely at our head office. The ongoing hard work I have Best Wishes
seen implemented across the business has enabled us to
continue to deliver services like this one to you. MATTHEW LEACH
HEAD OF FINANCIAL ADVICE
SKIPTON BUILDING SOCIETY

skipton.co.uk 03

IN BRIEF

70% OF

BRITS PUT
OTHER
THINGS
BEFORE
THEIR
FINANCIAL
FITNESS

2 020 was a year of changing financial priorities, Maitham Mohsin, Head of Savings at
but research that we conducted last July suggests a Skipton Building Society, explains,
lot of us are avoiding talking or even thinking about it.
“WE ALL DEAL WITH FINANCIAL
We spoke to 2,000 people across the UK about the STRESS DIFFERENTLY. SOME OF
health of their finances. 70% told us they are putting US WILL FACE IT HEAD ON WHILE
other things ahead of their own financial fitness right OTHERS FIND IT A CHALLENGING
now – including their mental health (35%), personal life PROBLEM TO FACE, WHICH CAN
(35%), physical fitness (25%), plus social life and day-to- LEAD TO SOME OF US CHOOSING
day plans (18% and 26% respectively). TO IGNORE THE PROBLEM.”

45% of us admit that we hate talking about money If you think your loved ones might benefit from
and finances, with 40% adding they hate to even think help with their financial plans, turn to page 24
about it. 60% choose not to log our day-to-day spending. to find out how Skipton could support them.

Unfortunately, the events of this year have not helped
our money confidence. Over 35% of people surveyed said
they are worried about the current state of their finances.
30% are concerned about their financial future, as they
don’t have everything in order.

04

BEWARE Back to contents
OF SCAMS
IN NUMBERS
T he worry and insecurity most of us have felt
from coronavirus is unfortunately proving 57
a boon for fraudsters. July 2020 research from Aviva
discovered one in five of us have received emails, THE GOVERNMENT HAS
texts, phone calls and other communications that CONFIRMED THAT THE
mentioned coronavirus, which they suspect to be a MINIMUM AGE THAT PEOPLE
financial scam. CAN ACCESS THEIR PRIVATE
PENSION WILL RISE FROM
46% of those who have received a suspected scam
approach failed to report it. When asked why, 41% 55 TO 57 IN 2028.
said they didn’t know who to report it to.
25TH
1 in 12 people surveyed have sadly fallen victim
to a scam. And in 78% of these cases, the victims said OUT OF
the fraudsters pretended to be from a company they
already deal with. 37

At Skipton, we want to help you protect yourself A JUNE 2020 STUDY BY
and your family from scammers. We’ve put together BLACKTOWER FINANCIAL
a special guide called ‘How to spot a scam’ that we MANAGEMENT GROUP OF THE
have included in the email we've sent. We hope you BEST EUROPEAN COUNTRIES
find it useful. TO RETIRE RANKED THE UK

25TH OUT OF 37.

£197,000

OF ESTATES THAT HAVE AN
INHERITANCE TAX LIABILITY,
THE AVERAGE UK TAX BILL WAS
£197,000, ACCORDING TO HMRC
FIGURES FOR THE 2017/18 TAX
YEAR PUBLISHED IN JULY 2020.

skipton.co.uk 05

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MANAGING
UNCERTAINTY

JASON MCKEOWN THE EFFECTS OF THE CORONAVIRUS PANDEMIC
ARE LIKELY TO BE FELT FOR SOME TIME,
INCLUDING ECONOMICALLY. SO HOW CAN YOU
KEEP YOUR LONG-TERM PLANS IN FOCUS?

“ We’re past the peak,” declared heads? And what does it mean for our future
Prime Minister Boris Johnson – both in the short and the long-term?
in early May, during a Downing Street
briefing about Covid-19. “We’re on the We might be past the absolute UK
downward slope.” peak, but the descent can prove rocky too.
75% of mountaineering accidents happen
Going into the winter months, that on the climb back down from the peak,
optimistic outlook has looked in doubt. rather than the hike up. Will the autumn
September and October saw a resurgence and winter resurgence in Covid-19 cases
in cases, leading to all manner of local - and discovery of new variants of the
and national lockdowns across the UK. disease – prove a stumble on the way down
Hopes of an ending have risen with news the mountain, or the beginnings of another
of vaccines being approved to use from serious fall?
early 2021. But with a third national
lockdown implemented in January 2021 as FOR ALL OF US, THIS IS
the government races to vaccine sufficient A TIME TO TREAD VERY
numbers of the population, the path ahead CAREFULLY.
still looks extremely bumpy. How long will
the dark clouds of Covid-19 linger over our

06

MANAGING UNCERTAINTY

THE LONG AND on recognition that we do not know UK FTSE 100, which on 23 March
what is going to happen.” The Brexit 2020 – the day Johnson announced a
WINDING ROAD referendum and rise of Donald Trump national lockdown – had slumped to
in recent times have given us practice below 5,000 points. Its lowest level
Like many other nations, the UK fell to deal with the unexpected – but since 2011.
into recession earlier this year. Recovery in many ways they felt less tangible.
has begun, with promising GDP Something you see on the news. Over the subsequent months, the
over quarter three*. But the return of FTSE began to recover and by early
lockdown restrictions over autumn NOTHING HAS January 2021 was pushing towards
and winter is unlikely to reverse the QUITE HAD THE the 7,000 mark. Other global markets
trend of rising unemployment. Some WIDE-RANGING, have performed even better since their
industries are in a good position, others GLARING IMPACT respective low points.
less so. Markets have ticked upwards AS COVID-19.
since the Spring lows and rallied in As we’ve been sharing in your most
November when news of the vaccine STAYING recent quarterly reports, the recovery of
progress broke – but they remain THE COURSE markets has been reflected in the rising
susceptible to bad news. value of investment portfolios. There
As an investor, you deserve real credit is a very good chance we’ll see further
The world is waiting for effective for getting through the spring market market volatility in the short-term, but
vaccines to be widely distributed. Until storms without giving up. Figures from history repeatedly suggests markets do
then, countries are left managing the the Investment Association (IA) show eventually recover from sharp falls.
balance between installing preventative a record £10 billion was withdrawn
measures and enabling society to by investors in March. It suggests It’s all about sticking to the path.
function. And as part of that delicate many people panicked, but in doing so Hopefully, you can already see the
seesaw, the likes of hand sanitisers, face crystallised their losses. virtues of doing so by how your portfolio
masks and social distancing will remain has performed since March 2020.
a regular feature. “The damage of encashing your
investments when markets fall is not HERE TO
Louise Allott, Skipton Financial just that you lose money, but you could SUPPORT YOU
Adviser, explains, “When it comes to rip up those long-term plans you’ve
your long-term financial needs, this made,” adds Louise. “It could place “There’s no getting away from the fact
current outlook can make the future you further away than you were from we are living in a world of unknowns,
even more difficult to envisage. How realising your goals. And it might be but it’s the long-term outlook that
do you plan for next month, next year, very difficult to fix that. matters,” concludes Louise. “We know
or the next decade – if we’re not even experts around the globe are working
sure what tomorrow will bring? “Sitting tight during market falls around the clock to find solutions to
is very tough. It’s human nature to be the current problems. And if they do,
“It’s why the map you have built, tempted to cut your losses and run. We markets could recover quickly.
with the help of the financial advice can all be guilty of getting too caught
you received from us, is so important up in the present – especially during “Of course, if you are ever feeling
to focus on.” such worrying times – but acting unsure about your plans or a future
in haste makes it almost impossible market development leaves you feeling
LIVING WITH to properly implement long-term concerned, we’re here to support you.
decisions.” We understand just how important
THE UNKNOWNS that extra reassurance can be during
It will take time for markets to fully times like this – and we’re here to
For even the most seasoned investor, recover the losses they endured earlier provide it when you need it. It’s part
the events of 2020 have illustrated in 2020. But they have at least begun of our mission to give everyone the
the stark realities of living through to move in the right direction. Take the right help.”
unknowns.
Past performance isn’t a guide to
Of course, we never truly know future returns. Economic and market
what might be around the corner. conditions experienced in the past
The American financial author Peter might not be repeated in the future.
Bernstein once said, “Survival as
an investor over that famous long
course depends from the very first

*Source: www.internationalinvestment.net/news/4023190/uk-gdp-record-rebound-q3-despite-missing-targets

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ACTIVE VERSUS
PASSIVE – THE
GLOVES ARE OFF

ADAM EARNSHAW

W hen it comes to investing – is it better Meanwhile passive funds are much more
to take an active or passive approach? simplistic. They’re set up initially to mirror
It has been a hot topic and the centre of debates a particular market or index. This means the
for the best part of half a century. make-up of assets is very similar to what
appears in that index. So the performance will
Each approach has its own advantages track how that market does.
and disadvantages. And, in times of market
uncertainty, such as what we’ve seen this year, Passive funds are possibly the cheapest way
the strength of each strategy has come under the to invest in the stock market, as investors don’t
spotlight. Especially as each approach varies in have to pay a manager to research the market
cost, which is an important issue to consider. or make stock-related decisions.

THE GREAT DEBATE A perceived downside may be the lack of
choice available. A passive investor is required
First off, let’s have a closer look at active investing. to accept an index, however constructed, and
Actively managed funds are run by a manager regardless of the quality of the underlying
holdings of that index. During periods of
who will make ongoing investment decisions in market falls – such as the ones seen last year –
response to performance and changes in market there will be little protection. Although passive
conditions. Depending on the objectives of the funds can still hold a wide range of assets,
fund, they will have more freedom to choose rather than just be linked to one market.
from a wide range of assets. This allows them to
take advantage of market opportunities and also
protect the fund during downturns.

With the volatility that took place at the start
of the pandemic, many active fund managers
knew they were in for a battle. After all, this is the
time they really needed to earn their crust, as they
could make changes to reduce the fund’s exposure
to assets that were falling.

This increased diligence inevitably comes with
a higher price though. These greater management
fees are required to pay for the expertise and
resources required. The higher expectation on
active managers is to beat the market, to justify
their higher fees and other expenses.

08

ACTIVE VERSUS PASSIVE

WEATHERING STORMY SEAS

When markets become volatile, the agility and flexibility of
active funds are sometimes seen as a competitive advantage.
With the last bull market favouring passive investing, it was
a good time to be in a low-cost, passive investment that was
participating in the market’s movement.

But when you insert the kind of volatility which we’ve seen
this year, a passive approach may struggle over the short-term.

“IT HAS BEEN AN INCREDIBLY
DIFFICULT TIME FOR ACTIVE INVESTING.”

When we saw the early falls and rises of 2020, some active Kieran Ellis, Skipton’s Technical Research Specialist,
funds did indeed out-perform passive funds. Yet when markets explains, “For most people, the debate over which strategy
were less volatile, passive investments largely out-performed is best is basically moot. This is because in the modern
active funds. This continues a recent trend. Although going all world of investing, there’s actually a time and a place for
the way back to 1986, there have been periods where actively both active and passive investing.
managed funds have done better than passive.
“Having a mixture of both strategies in a portfolio
According to September 2020 research by MorningStar, just offers a greater method to obtain overall balance – both in
under half of actively managed funds failed to out-perform their terms of cost and potential performance. It’s a bit like how
passive counterparts during the first six months of 2020. And a lot of people do their weekly food shop – using budget
that’s before the extra fund management costs are factored in. supermarkets to pick up the essential items, and going to a
premium supermarket to spend a bit more on a few luxury
“It has been an incredibly difficult time for active investing,” items, for their higher quality.”
reveals Joe Wiggins, Head of Portfolio Management at
Aberdeen Standard Investments. “The performance of most When you invested with Skipton’s advice, we would
equity markets has been dominated by a select few large have helped you to develop an investment approach that’s
companies involved in specific industries. For example, US suitable for your circumstances, in the most cost-efficient
equity market returns have been driven by the likes of Apple, way possible. This would have included considering
Amazon and Microsoft. Active fund managers tend to be passive investments, active funds, and perhaps even a
underweight in the largest companies and have therefore mixture of the two. Kieran concludes,
struggled to keep pace with passive funds.
“DURING THE SHORT-TERM
“An advantage of using passive funds to gain exposure to MARKET BUMPS OF 2020 IT MIGHT BE
most asset classes is not only that they come at a low cost, THAT SOME OF YOUR INVESTMENTS
but that you don’t have to predict which companies will be HAVE FARED BETTER THAN OTHERS,
successful. You will always have significant exposure to the BUT IT’S ALWAYS YOUR LONG-TERM
market leaders.” FUTURE THAT REALLY MATTERS.”

THE APPROACH THAT’S Please bear in mind that with both approaches your
capital is at risk. Economic and market conditions
RIGHT FOR YOU experienced in the past may not be repeated in future.

The decision on which approach is ‘best’ is not quite as simple
as you might expect. The fundamental rule for long-term
investing is to ensure the portfolio meets your requirements,
looking at it from both a return and risk perspective. An
important part of this process is to ensure that the underlying
investments fit within these objectives.

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INVESTMENT
LESSONS FROM
COVID-19

JASON MCKEOWN

W hen a little-known virus The early 2020 Covid-19 outbreak
suddenly turned into a global – which threatened to tear up global
pandemic, the startled reaction of stock economies and turn stock markets
markets around the world would have upside down – was a true test of
tested the nerve of every investment keeping emotions in check. Against a
expert. But for Joe Wiggins – Head of backdrop of headlines about markets
Portfolio Management at Aberdeen losing billions of pounds a day last
Standard Investments – it was also a March, how could investors avoid that
case of practising what he has always feeling of panic – and acting on those
preached. fears?

Joe, who oversees the MyFolio For Joe, the message was clear – it’s
Index funds that have been developed all about the long-term. He tells us,
for our customers, has over 16 years’ “Investing for the long-term means
investment management experience. having the patience and resilience to
His passion for investing stretches into withstand the challenging periods of
his personal time, as he writes his own performance that are, unfortunately,
blog about behavioural investment. an inevitable feature of investing.
It’s designed to help investors separate Staying invested is absolutely critical to
their emotions from their long-term successful outcomes.
decision-making, to give themselves a
better chance of achieving their goals. “Given the sharp falls in markets
and the sheer economic damage
“WE HAVE A LONG-TERM wrought by coronavirus it is entirely
PERSPECTIVE WHEN WE understandable that some investors
BUILD OUR PORTFOLIOS.” would withdraw their money; but we
have since witnessed an unprecedented
equity market recovery both in terms
of magnitude and speed. This dramatic
shift in sentiment is a perfect example
of the dangers of trying to time
markets, and why we should avoid it.”

10

INVESTMENT LESSONS FROM COVID-19

During the extremes of the spring market the case of March – but emotional investment
panic, managing our emotions was not easy. decisions tend to be bad ones,” confirms Joe.
By the end of March 2020, the UK FTSE “We have a long-term perspective when
100 had lost 25% since the start of the year. we build our portfolios and we expect to go
The UK had just moved into a full national through difficult periods. Of course, they are
lockdown, with new Covid-19 cases rising impossible to predict, but you can prepare
daily. There was an awful lot of noise. yourself for such scenarios by remaining
diversified and having a consistent approach
“It is so easy to be swept away by the to investment decision making.”
emotion of the moment – particularly fear in

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“THE PROBLEM WITH DROWNING OUT THE NOISE
MOST OF THE NEWS
AND INFORMATION Joe believes that investors who managed to stay invested
THAT WE READ OR through such a difficult period “should be incredibly
HEAR THAT WE proud”. He acknowledges that the rollercoaster is far from
THINK IMPACTS over, especially with governments re-introducing Covid-19
OUR INVESTMENTS related restrictions in autumn and winter. And whilst more
IS THAT THE VAST market volatility looks inevitable in 2021, the short-term
MAJORITY OF events need to be kept in perspective.
IT IS ENTIRELY
MEANINGLESS OVER “The problem with most of the news and information
THE LONG-TERM.” that we read or hear that we think impacts our
investments is that that the vast majority of it is entirely
meaningless over the long-term. Things that can feel
incredibly important at the time, can seem like a blip as
we extend our time horizon.

“It is important to remember that the long-term
returns from equity markets includes manias, panics, wars
and various crises. People think that it is these events that
matter to our investment outcomes, but it is how we react
during these events that has the greatest influence.”

12

INVESTMENT LESSONS FROM COVID-19

THE NEW NORMAL? STICKING TO THE PATH

One of the most important Investment So how should investors manage the
Behavioural lessons to keep in mind right now uncertainty ahead? “Somewhat counter-
is the dangers of extrapolation. This is having intuitively, doing nothing is one of the hardest
an assumption that the way certain things are things for an investor,” Joe continues. “We
now will remain the case forever – and to base are constantly bombarded with market and
our decisions on that. In the case of Covid-19, economic news and the temptation to act can
in our darkest moments we can all fear that the be overwhelming.
virus will never go away. That life will forever be
as restrictive and difficult as it has been in 2020 “We tend to do things that make us feel
and early 2021. better in the short-term, but which come at a
long-term cost. If we have a prudent investment
From an investment perspective, Joe plan, we don’t need to engage with markets or
explains, “We always tend to think that what our portfolios every day. One of the simplest
has happened recently will continue into the and most effective steps investors can take is to
future. In recent years we have experienced check their portfolios less frequently.”
very low bond yields and consistently strong
performance from US equities. When things For many investors, that means accepting
have performed well and there is a strong story there might be periods of losses ahead in the
supporting it, we tend to behave as if these short-term, without losing sight of the potential
trends will persist forever. long-term rewards. Joe concludes, “2020 was a
reminder that investing in risky assets such as
“We only have to think back to the start of equities and high yield bonds will come with
the last decade to see why this type of thinking difficult periods of performance. One of the
can be dangerous. In 2010, everybody was reasons that such assets offer higher returns
extremely positive on emerging market equities is because they can suffer from severe short-
– although nobody admits it now. They had term losses. Accepting this and being able to
outperformed developed markets by a huge manage our behaviour through these periods is
margin and there was a powerful narrative absolutely crucial.
around the attractive demographics and high
levels of economic growth. Ten years on, and “There remains a great deal of uncertainty
emerging market equities have underperformed around the path and impact of the coronavirus
developed markets significantly. pandemic, so we should not be surprised if
there are more bouts of volatility. Withstanding
“The main danger of extrapolation is that such periods is one of the toughest challenges
we become very concentrated and exposed to we all face as investors, but it comes with the
the things that have performed well and forget largest rewards.”
the benefits of diversification.”

“QUITE SIMPLY, WE DON’T KNOW WHAT IS GOING
TO HAPPEN TOMORROW. ALL PREDICTIONS
FOR 2020 WERE UPENDED BY THE CORONAVIRUS
PANDEMIC. SENSIBLE INVESTMENT IS ABOUT
MAKING SURE THAT YOU BUILD A PORTFOLIO
THAT IS RESILIENT TO A RANGE OF DIFFERENT
SCENARIOS AND ABLE TO MEET YOUR OBJECTIVES
OVER THE LONG-RUN.”

The views expressed by commentators must not be construed as financial advice.
If you wish to discuss your investments, please speak to your financial adviser.

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14

HOW CORONAVIRUS HAS CHANGED OUR SPENDING HABITS

HOW CORONAVIRUS
HAS CHANGED OUR
SPENDING HABITS

ROBYN PINDER

CORONAVIRUS I f you cast your mind back to spring/
HAS CHANGED summer 2020, when many countries
MANY ASPECTS across the globe were in lockdown, the first
OF OUR DAILY lot of notable changes in terms of how we
LIVES. AND spent our cash began to emerge – although
HOW WE SPEND we didn’t entirely have much choice.
OUR MONEY IS
NO EXCEPTION Many industries suffered as lockdown
TO THAT. measures restricted what we could spend.
Shops downed their shutters, hospitality
and leisure was brought to a standstill and
most air travel suspended.

As people across the globe learn to live
with the reality of coronavirus sticking
around for a little while longer, there’s
a multitude of new spending themes
emerging – some of which could be here
to stay.

Of course, with changes that impact
how the economy operates, stock markets
will react accordingly. As always, there will
be winners and losers from these changes.
We take a look at some of these emerging
trends and what it might mean for the
investment landscape going forward.

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IT’S ALL ABOUT THE AN INCREASE IN

ESSENTIALS IN LIFE ONLINE SALES

The economic consequences of the There’s no question that coronavirus
pandemic mean that many have has accelerated changes that were
been less willing to spend, mainly already taking place, most significantly
in anticipation of a reduced level of the shift to online shopping. Figures
income over several months. from the Financial Times show that
ten years ago less than 7% of retail sales
It appears the main focus for were done on the net. By the start of
spending has turned to the essentials, 2020, this figure had risen to nearer
such as grocery and household 20%. Come May last year – owing to
supplies – whilst products that fall into the circumstances we found ourselves
discretionary categories have taken in – this number leaped again to 33.4%.
a hit, including items like clothing,
footwear and travel. Delving deeper into the figures
shows the number of online sales (non-
Many people are expecting the food) rose at an annual rate of 42.4% in
pandemic to negatively affect their August 2020 – with nearly 40% of sales
finances – as well as their daily routines (non-food) completed online in this
– until spring of this year. As a result, month. In contrast, in-store sales of
it appears we’ve become a little more items (non-food) shrank 17.8%.
mindful about what we’re spending.
Changes to our shopping habits In fact, more than half of UK
include buying less expensive products shoppers would now rather buy online
and varying where we shop. than go into a store – even if that store
has reopened.
“THE MAIN
FOCUS FOR In addition to online shopping,
SPENDING other digital and contactless services
HAS TURNED such as click and collect, delivery and
TO THE drive-throughs have also seen much
ESSENTIALS, higher adoption rates. While some of
SUCH AS these methods – such as ‘stay at home
GROCERY AND afternoon teas’ – were at first seen as
HOUSEHOLD quirky work-arounds to lockdown
SUPPLIES.” measures, the consumer uptake on
many of these solutions has been well-
received, and it’s likely some services
will be here to stay.

This means that brand loyalty is “MORE THAN HALF
taking a hit. For example, only 12% of OF UK SHOPPERS
consumers say they are “very willing” WOULD NOW RATHER
to pay for a well-known brand name BUY ONLINE THAN
instead of a generic one – with 37% GO INTO A STORE.”
favouring the more generic brands.

It seems that if shoppers cannot
find their usual brand on the shelves,
or can no longer afford the big
names, they are simply changing their
behaviour – whether that be trying
a different brand or shopping at a
different retailer.

16

HOW CORONAVIRUS HAS CHANGED OUR SPENDING HABITS

A CASHLESS SOCIETY THE FUTURE WINNERS

Speaking of contactless, over the OF SHOPPING AND LOSERS
pandemic we have become a society
averse to paying with cash, and the Whilst some of the new trends to Changes to consumer trends are
majority of in-shop transactions are now emerge may reverse on the other side an inevitable part of life – with
completed via apps and cards – with of the pandemic, it would be foolish to or without a global pandemic. It’s
45% of people saying they are much less think that all of them will – especially likely the circumstances of the
likely to use cash after the crisis. those that do make our lives a little last 12 months or so have only
easier. accelerated certain changes that
Aside from feeling ‘safer’, were poised to take place in the
convenience is the main driver for the Going forward, perhaps the biggest near future.
move away from cash. Paying by card challenge will be faced by high street
used to involve much more effort than retailers, who will need to find new ways Ultimately, the asset classes
it does these days. The introduction of to re-build brand loyalty and deliver an most affected by these developing
chip-and-pin technology put an end to outstanding experience that will entice trends are most likely to be shares
that and has swiftly been followed by customers away from their computer and fixed income (corporate bonds).
contactless payments using cards, mobile screens and back through shop doors. If a fund has shares or a corporate
phones and even watches. bond invested into a company that’s
A lot of this may involve embracing not reacting well to these changes,
Recent figures have found that new technology within shops. New the fund’s overall performance is
66% of all transactions in the UK are innovations are emerging which could going to start feeling the negative
now contactless. Many businesses that help – like virtual 3D mirrors which effects of the company’s failure to
previously didn’t accept card payments show a customer what a garment looks respond.
have been forced to do so by the like without them needing to try it on.
pandemic. It’s likely this is a trend that On the other hand, if you have
is only set to dig in its heels and stay, Ultimately, the high street was in a portfolio that has assets invested
especially owing to the benefits it’s trouble before coronavirus reared its ugly in a company which is successfully
perceived to have on society as a whole. head. And it may be that 2020 was just embracing the new normal, and
the nudge companies needed to reinvent as a result seeing profits, then this
the shopping experience as a whole. will be reflected positively in the
portfolio’s performance.

Whatever happens with certain
companies, these trends won’t be
going unnoticed by businesses and
fund managers. It’s likely that at
the moment the main goal is to
closely monitor how these changes
in consumer spending habits will
impact businesses, economies and
stock markets, but there’s no doubt
there will be future planning in
order to avoid being left behind.

Economic conditions of the past
may not be repeated.

skipton.co.uk 17

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INFLATION –
WHAT LIES
AHEAD?

ROBYN PINDER

UK INFLATION HAS
BEEN SUBDUED FOR
SOME TIME NOW.
SO MUCH SO, THAT
NOVEMBER WAS THE
16TH MONTH IN A ROW
THAT THE CONSUMER
PRICE INDEX (CPI) WAS
BELOW THE BANK OF
ENGLAND’S 2% TARGET.

18

INFLATION

T he near-five-year low of 0.2% SO, WHAT NEXT WHAT DOES ALL
reached in August 2020
is somewhat a reflection on the FOR INFLATION? THIS MEAN FOR
extraordinary action taken by the
government to try and get the UK Although it’s believed August’s figures INVESTORS?
back spending. The August fall are as low as inflation will go this year,
was overwhelmingly the result of it’s unlikely we’ll see numbers hit the In terms of stock markets, there are
the Eat Out to Help Out scheme Bank of England’s 2% target in the assets that benefit from high inflation
and the temporary VAT cut for the near future. For example, by November and those that struggle. For example,
hospitality sector. (the latest data available at the time of growth stocks – such as tech companies
writing), CPI stood at 0.6% – a long – tend to prosper in a low-growth
However, even amid the schemes way short of 2%. environment, which is part of the
put in place to cut the cost of living, reason they have done well over recent
these lower rates don’t come as much As with a lot of economic factors times. Whereas value areas – such as
of a surprise. At the start of the at the moment, gazing into the crystal oil and gas – usually struggle with
March 2020 lockdown, the Bank of ball to see how things might play out falling demand.
England predicted inflation would over the long-term is proving difficult.
fall to nearly zero. After all, the Lower inflation over the short
virus triggered a supply and demand Going forward, more defensive to medium term has been factored
shock seen like no other before. supply chains, greater protectionism – in to markets and for the majority
the restricting of imports from other of investors it is something that is
countries – and more government seen as more desirable. Lower rates
spending could push prices higher as increase the purchasing power of your
the economy spends the next few years investments over the long-term.
repairing itself from the consequences
of the pandemic. Of course, the reason it’s so hard
to predict the path of inflation comes
There’s also the government down to the fact there is no instruction
borrowing to think about. It may be manual to follow for the coronavirus
interest rates are kept low and inflation pandemic. The circumstances and the
is allowed to rise slightly in order measures taken by the government
to erode the real value of the debt across 2020 and into 2021 is something
somewhat. the economy has never had to digest
before.

Like with many things, as this year
progresses into the next few, it’s likely
to be a case of watching closely on how
the economy and all that comes with it
– including inflation – develops.

“IT’S UNLIKELY WE’LL
SEE NUMBERS HIT THE
BANK OF ENGLAND’S
2% TARGET IN THE
NEAR FUTURE. IT MAY
EVEN BE THAT RATES
REMAIN CLOSER TO
0% FOR SOME TIME.”

skipton.co.uk 19

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THE BENEFITS
OF A DIVERSIFIED
PORTFOLIO

ADAM EARNSHAW

“IT IS ALL T here’s one particular piece of
ABOUT talent that even the very best,
STRIKING most knowledgeable investors around
A GOOD the world lack – the ability to predict
BALANCE the future.
BETWEEN
RISK AND At the start of 2020, no one could
RETURN.” have foreseen the global impact of
a little-known virus that had been
identified in a city in China. Or the
way it would cause stock markets
around the world to fall so drastically.
The organisation owned by the
legendary US investor, Warren Buffett,
lost $50 billion over a quarter, for
example. Equally, with the outlook
looking so bleak, few would have
predicted that markets would have
recovered as quickly as they had by
the summer.

There was really no avoiding
some of the market effects from the
pandemic. But if you have a diversified
portfolio of assets, the negative impact
on your investments probably wasn’t as
bad as you might have feared. That’s
because it would have offered you some
protection from the volatility. Meaning
that – compared to others – you weren’t
as exposed to the market losses.

20

DIVERSIFIED PORTFOLIO

A BALANCED APPROACH portfolio can help to absorb the
shocks during a market downturn.
CAN REDUCE THE RISK The risk is spread out when
investing in different asset classes.
YOU TAKE
Mark Butterworth, Skipton’s
We’re all familiar with the saying about eggs Head of Financial Advice –
in a basket. But it’s a really useful philosophy Planning and Research, states,
to follow when it comes to investing. By “Not everyone feels comfortable
maintaining a diversified approach to investing in taking up a high-risk strategy.
(putting your eggs into different baskets), you A lot of investors want some stability
can reduce the overall risk you’re taking – but still in their portfolio, and diversification
have the opportunity to achieve higher returns. can help do just that, by ensuring some
protection of their investments. You might
When you invested with our advice, we would still lose money at times – as most investors
have recommended a portfolio of assets that suit did last Spring – but it can limit the losses
your personal circumstances. This would have compared to other investors who were
included helping you to consider how diversified invested into one asset class.
it’s appropriate for you to be.
“The reality is that a lower risk, diversified
It means your money isn’t just exposed to approach will limit your ability to achieve
shares, your portfolio will also feature the likes of higher returns compared to someone who is
corporate bonds, cash and even property. Even if ‘all in’ on riskier assets. But you’ve also got less
your risk appetite is higher and you are invested chance of losing capital.”
in one asset class, you can take a diversified
approach by having holdings in different sectors It is all about striking a good balance
and parts of the world. Each type of asset can between risk and return, so that you can earn
perform differently, at different times. And as good returns without worrying constantly
market conditions fluctuate, this approach can about your portfolio. A diversified portfolio
help you achieve a smoother level of returns. offers you the best chance to do that – as
recent events continue to demonstrate.
Diversification can prove a very effective way
of reducing investment risk. A well-diversified

skipton.co.uk 21

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KEEPING YOU
INFORMED
ABOUT MARKETS
AND YOUR
INVESTMENTS

JASON MCKEOWN

W e’re committed to keeping you up to date with
how your investments are performing – and what’s
driving recent returns. As well as this magazine and your
quarterly reports, we’ve got online support to help you
stay informed.

TRACKING YOUR INVESTMENTS

It’s easy to check the latest performance of your
investments through our customer portal. It’s available at
www.skipton.co.uk/financial-advice/investment-login

When you first invested, your adviser will have
provided you secure access to log on and start using
portal. Just give us a call if you’re having any difficulties.
• The customer portal features up-to-date

investment returns.
• You can check on your overall holdings –

including details of your assets and liabilities
you shared with your adviser.
• Your secure portal account features a record of
documents relating to your Skipton investments.
• It’s even easier to contact us, through the portal
secure messaging service. This includes the
facility to send and receive documents.

22

KEEPING YOU INFORMED

KEEPING INFORMED
OF LATEST NEWS
AND INSIGHTS

In a fast-changing world, you can
keep up to date with key market
events. We offer Skipton Insight email
updates – exclusive to our ongoing
service customers.

These topical news updates
cover the latest market developments.
Skipton’s in-house experts offer their
insight on these key events, and what
they might mean for your investments.
We steer clear of financial jargon
to share what you need to know in
plain English.

If you’ve not already signed up
for Skipton Insight, it’s easy to arrange
for future editions to be sent straight
to your inbox. Just give us a call to
find out more.

We promise not to bombard you
with emails. Or send information
that isn’t relevant to you. If you decide
you’d prefer not to receive them, you
can quickly unsubscribe whenever
you wish.

FOR HELP LOGGING
ONTO AND USING PORTAL
– OR TO SIGN UP FOR
SKIPTON INSIGHT – CALL
OUR PREMIER SERVICE

TEAM ON 0800 085 0459*.

skipton.co.uk 23

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SETTING
OUR LOVED
ONES UP FOR
A STRONGER
FINANCIAL
FUTURE

ROBYN PINDER

W e all want our loved ones WHERE TO START
to prosper in life – especially
when it comes to money matters. That’s Financial planning is essentially about
why getting into a regular habit of setting short, medium and long-term
discussing finances with your children goals and putting together a plan to
or grandchildren could help set them up meet them.
for a more successful financial future.
We often don’t realise how vital
Now could be a better time than any these goals are to our finances as we
to start having those conversations. It continue to move through life. But a
seems the pandemic has given younger regular focus on objectives could help
generations more time to think about loved ones stay committed to reaching
their money. Research by Aegon has their long-term goals.
found that 18-34 year-olds were more
likely to have organised their finances It may even help for your loved
during lockdown than those aged 55+. ones to make a record of their aims, as
we are 42% more likely to reach goals
Whatever stage of planning your if we write them down.
loved ones are at, a few extra tips could
go a long way. These might even be a
helpful reminder for yourself.

24

A STRONGER FINANCIAL FUTURE

WHERE DID ALL A FREE FINANCIAL
THE MONEY GO FITNESS REPORT

Without setting a budget and regularly With finances being such a hot topic
monitoring their spending it’s unlikely your this year, here at Skipton Building
loved ones will be able to keep up with their Society we’ve launched a new service.
newly organised finances. And it could just be the extra help your
loved ones need with their finances.
One of the biggest sources of financial stress
is being unsure what we’ve actually spent our All they need is around 30 minutes spare
money on. If your loved ones get into the habit to speak to a member of the team about their
of monitoring their spending, the process could current financial arrangements. After the chat,
make them more mindful of the money choices Skipton will provide them with a free report
they make. about the health of their finances.

There are several budgeting apps available to It’s theirs to keep and use however they like
help us keep a closer eye on our spends. afterwards.

MAKING SAVING A HABIT This chat isn’t financial advice. And they
won’t be pressured into doing anything they’re
During the March 2020 lockdown much of the not comfortable with. However, if there are areas
UK used their newly found spare time to take on where Skipton feel your loved ones could benefit
a new hobby or develop a new habit – the most from speaking with a financial adviser, they’ll
popular being to learn a new language. suggest setting up a meeting – it’s completely
up to them if they go ahead with this.
Lockdown also saw the UK increase their
savings habits. To find out more, visit
www.skipton.co.uk/financial-advice/financial-fitness-report
In fact, according to think tank the Centre
for Economics and Business Research, the “ACCORDING TO WHICH? TO
average person in the UK was able to put aside ACHIEVE A COMFORTABLE
a record £1,434 between April and June 2020. RETIREMENT, WITH £169,175
IN A PENSION BY THE TIME
It might even be that your loved ones want YOU REACH STATE PENSION
to think about investing to reach their goals. AGE, A PERSON AGED 20 WITH
Monthly contributions are generally the route NO PENSION SAVINGS WOULD
taken by people who don’t have a large amount to NEED TO SAVE £213 EVERY
invest at one time and could be a great method of MONTH. WHEREAS A PERSON
building a sizeable nest egg over the long-term. AGED 50 WITH NO PENSION
SAVINGS WOULD NEED TO
LAST BUT NOT LEAST SAVE £647 PER MONTH*.”

For your loved ones to get the income they want
during retirement it’s important they make
regular contributions to a retirement fund.

According to Which? to achieve a comfortable
retirement, with £169,175 in a pension by the
time you reach state pension age, a person aged
20 with no pension savings would need to save
£213 every month. Whereas a person aged 50
with no pension savings would need to save £647
per month*.

Whilst it’s probably not at the top of their to
do list, it’s vital your loved ones understand why
they should be saving into a pension at as early
an age as possible.

*Source: www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p 25

skipton.co.uk

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“SKIPTON
LINK REALLY
HELPED ME,
AS I NEEDED
TO SPEAK TO

SOMEONE
NOW.”

26

HERE TO SUPPORT YOU

HERE TO
SUPPORT
YOU

JASON MCKEOWN

D uring a period that has been challenging for If you have any questions on your financial
people and businesses, at Skipton we’re proud plans and would like to discuss them with
to have been able to continue offering help and advice our dedicated team, we’re here to help.
to customers.
YOU CAN CALL US ON
Our branches were only open for essential
transactions earlier in the pandemic, but we’re slowly 0800 085 0459* TO SPEAK
getting back towards normal by offering more in-
branch appointments again. TO A MEMBER OF OUR
TEAM OR TO ARRANGE
In the meantime, we’ve supported customers like AN APPOINTMENT VIA
you through telephone and video-based appointments. SKIPTON LINK, OUR
The latter – known as Skipton Link – has proved very AWARD-WINNING
popular with customers. It offers all the benefits of a VIDEO SERVICE.
usual face-to-face appointment. The only thing we
can’t offer you is a brew!

Joan Murray, a Skipton customer, told us,
“When it was clear I couldn’t meet someone face-to-
face, I was offered Skipton Link, which sounded like
a good option for me.

“It worked really well on my iPad, as my Financial
Adviser could share figures and graphs on the screen,
that were useful to help me have an overall big picture.

“It also gave me a buzz and lifted my mood
knowing that I’d learnt how to use different technology.

“It really helped me, as I needed to speak to
someone now, rather than wait until everything had
calmed down.”

skipton.co.uk 27

*To help maintain service and quality, some calls may be recorded and monitored. Calls to 0800 numbers are free from BT landlines and mobiles.

Skipton Building Society is a member of the Building Societies Association. Authorised by the Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority, under registration number 153706, for accepting deposits, advising on and arranging mortgages
and providing Restricted financial advice. Principal Office, The Bailey, Skipton, North Yorkshire BD23 1DN.