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Opportunities for online investment platforms to drive investor engagement in current environment

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Opportunities for online investment platforms to drive investor engagement in current environment

By Hrishi Rajadhyaksha, Director, Max Biesenbach, Partner and Megan Beattie, Consultant in the financial services industry practice at Simon-Kucher & Partners (www.simon-kucher.com),a leading Strategy and Marketing consulting firm

The economic implications of our current crisis are severe, and investors are wary: a UBS study indicated 60% of investors expect a global recession to hit in the next 12 months – western economies have already registered steep declines in Q1. The future is uncertain to the extent that the question of ‘if’ not just ‘when’ we will return to our pre-crisis level of economic activity, is a very relevant one.

Hrishi Rajadhyaksh

Hrishi Rajadhyaksh

This uncertainty permeates all facets of financial life: in light of government-implemented lockdowns, furlough schemes and mortgage holidays, investors have been forced to ask themselves some of the most fundamental financial questions:  Will I have my job tomorrow? Will I be able to pay my mortgage?Will I get a refund on the trip I booked for this summer? Will I be able to buy the house I have been saving up for?

It is clear that as a result of this crisis, both investor expectations and circumstances have changed, which is increasingly leading to noticeable changes in investment behaviours. But with change comes opportunity. In particular, a very real opportunity now presents itself to investment platforms to consider building long term and sustainable revenue streams.

Changing investor expectations 

If this crisis has highlighted anything, it is that uncertainty compounds volatility: oil prices, which typically move around 2% per day, have been moving on average around 30% per day. At the time of writing, Brent crude hit a 6-day rally with prices up 48%. It is hard to say if the worst is over however; a second wave of lockdowns may send the market crashing down yet again.

As the investment landscape becomes obscured by the effects of coronavirus, investor expectations are shifting. The market stopped dead in its tracks in March, ending an 11-year bull run, leading to some of the steepest outflows from UK funds on record. The shape of the recovery has also been hotly debated with sentiment turning quite gloomy in recent weeks. According to Bank of America’s Global fund manager survey, 74% of managers expect a U or W route back to normality whereas only 15% expect a V-shaped recovery.

Changing investor circumstances 

Megan Beattie

Megan Beattie

Six million workers in the UK have been furloughed, and thousands more have been made redundant as a result of the financial uncertainty generated by coronavirus. Many of these workers now wait in the hopes for a return to normalcy.

Even under these circumstances investment platforms have seen a small windfall: retail investors may be finding themselves in the unique position of having time to invest in a new skill, potentially in need of surplus income, and at a time when many are viewing this as a buying opportunity. Investing is suddenly of newfound interest for many it seems. It is no wonder trading platforms saw nearly triple the account openings in March compared with the same time last year—despite the market performing 20% worse.

Changing investor behaviour

 Following the market crash in March, two leading investment platforms in the UK reported a surge in buy trades, with 60-70% of all trading activity occurring in the ‘buy column’. In a survey of retail investors, one platform cited that their investors would be just as likely to increase their stock market exposure (~45%) as they would to do nothing (~47%)—with the likely aims of either profiting from the discount on quality shares, or playing the long game and riding out the crisis.

 Given these changes, there is clear opportunity for investment platforms to drive higher customer lifetime value. There are three key ways in which platforms can act to do this: first, by widening their total asset base by attracting new money; secondly, by thinking about new ways to engage their existing customer base; and finally, by focusing on retaining their high-value customers.

  1. Expanding the share of the pie 

Targeting new customers is one way in which platforms might secure new revenue streams during these times of uncertainty.To target new customers, platforms might offer 30 minute ‘top tips’ investment sessions —perhaps over Zoom—to help to pique the trading interest of the 18-34 demographic who value social interaction as well as more formal learning. This could be provided in exchange for a referral, or a commitment to purchase a subscription for a package of one, three or six months of investing on the platform. Such a move could secure a larger share of the pie from a potentially underserved demographic.

Further, at a time when future uncertainty also has implications for future investor cash flow and expenditure, re-evaluating the payment frequency of platform services is also advisable. Testing a pay-as-you-go or monthly subscription rate would be aligned to how younger investors think about their billing, and could attract assets which might have otherwise ended up in current accounts. This might be a favourable option for those who are uncertain about committing to an annual platform fee for example. Monthly subscriptions such as Spotify and Netflix are staples of the millennial budget: why should charging for facilitating investments look any different? 

  1. Engagement is key

Along with searching for new audiences, another route to boost revenues is to deepen engagement with existing customers. Some platforms employ a freemium model, where users can learn to trade for free on a ‘play account’ and upgrade for advanced features once up and running on the platform. Charging for value-added features which customers are clearly using and engaging with is a way to monetise differentiated customer preferences on the platform.

Platforms can also increase engagement by introducing a loyalty scheme that rewards long-term investment behaviour. Investors could unlock‘ points’ for healthier investment activities, e.g.: regular monthly investment. This is also a good way to clearly align incentives of the platform (getting a steady stream of investor cash) to those of investors (developing sound investment practices).

  1. Retention is the new acquisition

Finally, to ensure future revenues during times of uncertainty, platforms should pay close attention to their high-value customers. High frequency or high volume investors likely contribute disproportionally to overall revenue. Identifying these high-value customers and zooming in on those at higher risk of churn is the first step in a best-in-class customer base management approach. Conducting proactive reach-outs to such micro-segments with updates or check-ins in times of crisis will go a long way to sustaining their loyalty.

Alternatively, offering customers a special demo of new products, such as a new subscription to a series of financial health-checks available during the crisis, could yield additional revenue from this high value base. Finally, it is crucial to have ‘reactive retention offers’ as a final gambit for selected customers who are considered most crucial.

Max Biesenbach

Max Biesenbach

Building from a position of strength

Investment platforms should re-visit their approach to monetisation. Even during an economic crisis, demand has remained robust and their go-to-market model has not been impacted. This affords them the rare luxury of playing from a position of strength unlike most other industries. Although economic uncertainty seems to be the prevailing sentiment, therein lies opportunity as well for investment platforms.

Changing investor expectations and circumstances have fuelled changes to investor behaviours: from increasing trading activity on existing platforms, to increasing numbers of account openings, investors look to secure more certain futures now more than ever. Investment platforms should put in place targeted measures to widen the asset base, deepen existing customer relationships and strive to retain their most valuable customers in the long term.

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Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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COVID-19 is changing people’s preferences when it comes to BTL investments

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COVID-19 is changing people’s preferences when it comes to BTL investments 1

By Jamie Johnson, CEO of FJP Investment

Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions as a consequence of the COVID-19 pandemic. No country has been immune to the coronavirus outbreak, particularly here in the UK.

Yet even as the country enters another phased lockdown of sorts, demand for UK property has remained strong. After a brief period of suppressed demand after initial lockdown measures were introduced in late March, the UK’s implementation of the stamp duty land tax (SDLT) holiday triggered a rush in demand for bricks and mortar. As a result, both house prices and transactional activity is rising.

With this new surge in demand resulting in an 18-year-high of UK house price growth, according to the Royal Institute of Charted Surveyors, buy-to-let (BTL) investments have also substantially increased in popularity.

It’s easy to understand why. BTL investments offer landlords both long-term capital growth and regular returns in the form of rental payments. And now, as the SDLT holiday deadline beckons closer, investors keen on taking advantage of the comparative discounts on offer must act quickly.

My advice to those considering a BTL investment in the UK is to understand and appreciate the longstanding market changes that have been brought about by COVID-19. Traditional BTL hotspots are being challenged by a rise in tenant demand for real estate in up-and-coming cities and regions.

For example, the COVID-19 pandemic has resulted in the majority of the workforce working remotely from home. Recent data from property listing site Rightmove makes clear the shift in demand away from central London and towards less densely populated regions; with areas like Cambridge and Oxford seeing 76% and 64% more rental searches respectively and searches in areas like Earl’s Court dropping by 40%.

This is the clear result of previously London-based professionals realising the benefits of working from home. As businesses identify the financial drawbacks and COVID contagion risks of having all their staff physically present five days a week, employers will seek out smaller commercial workspaces.

At the same time, we are also seeing workers looking to rent larger, cheaper properties that might be further away from their office. This is due to the fact that they are unlikely to need to commute every working day to their office, even once the COVID-19 outbreak has been contained.

But, where exactly are the best larger, cheaper properties to be found? Where are the UK’s emerging BTL hotspots that need to be on the radar of prospective investors? I explore these pertinent questions below.

Liverpool life

Those who have been closely following the UK’s housing market will know just how primed Liverpool is for BTL investment. As a key recipient of the UK Government’s Northern Powerhouse funding, and with massive developments like Liverpool Waters and Wirral Waters soon to be completed, the city’s housing supply is ready to meet the demands of those taking part in the aforementioned London professional exodus.

With Liverpool constantly ranking No.1 in rankings of UK cities for BTL investment, it’s evident why investors would be keen on completing purchases of Liverpool property before the end of the SDLT holiday. Though even after the SDLT holiday ends, there’re still plenty of reasons to be optimistic about Liverpudlian BTL investment. Prime Minister Boris Johnson’s government is firmly committed to ‘levelling up’ the North of England through regional regeneration, and planned high speed rail connections between Liverpool and other northern cities will only add to the investment potential of the city.

Leeds living

Although Liverpool boasts the highest rental yields for BTL landlords in real terms, Leeds was recently named the most profitable city to become a landlord in the whole of the UK by CIA landlord. By evaluating numerous metrics; including mortgage costs, average rent, average monthly landlord costs and average property prices, they determined that Leeds was the best city for potential buyers to make their first foray into BTL investment.

And, looking at recent trends, it’s easy to see why. Leeds may benefit more from the London exodus than other cities due to its unique position of being a brain gain city’, i.e. one where more students remain after graduation than move away. As a result, it boasts the largest financial services sector in the nation after London, making it an ideal locale for employers in the financial services sector who are seeking cheaper commercial rent outside of London; likely bringing investment and employees with them.

With its strong urban economy likely to be bolstered by its designation as a ‘Northern Powerhouse’ leading business hub, Leeds is ideally positioned for BTL investment over the long-term.

Cardiff’s regeneration

And finally, the capital of Wales brings much to the table when deciding between different BTL investment destinations. With a metropolitan area population of over 1.1 million residents, forecasted to grow by 20% by 2035, demand for property in the city is set to rapidly increase over the next decade. Those able to capitalise on this population growth will be able to access considerable long-term investment opportunities – as recent reports suggest.

Thankfully, it’s unlikely that there’ll be any shortage of housing supply in Cardiff for BTL investors to invest in. Cardiff Bay has emerged as Europe’s largest waterfront development, and the upcoming Central Quay and £500m coastal developments will assist in attracting further investment into the city.

BTL remains a sound investment opportunity

COVID-19 has made evident just how resilient British real estate is as an investment asset. By offering the best of both worlds, namely long-term capital growth and regular rental returns, BTL has successfully remained an attractive and popular investment choice. And, with demand for housing still outstripping supply, the market need for rental accommodation looks set to only grow.

COVID-19 has permanently changed the UK’s housing market and, as explained above, new BTL hotspots are surely due to emerge over the next year. With renters seeking out larger homes in cheaper areas, flexible working patterns will forever change the landscape of the UK’s residential real estate market, and those able to capitalise on it may benefit hugely as a result.

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