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Worth its weight – should I invest in physical gold?

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Worth its weight – should I invest in physical gold?

Investors are increasingly turning to physical gold to protect their assets from the volatile and uncertain political and economic climate. The Pure Gold Company is a gold trader with a consultative approach that provides unique insight into the background and motivations of its clients,42% of whom in financial services. Josh Saul, CEO, talks about why gold is in high demand.

Q: Investors have a lot of options available these days, why are they choosing to buy physical gold?

It’s true there is a lot of choice when it comes to investment, from stocks and bonds to property, cars or fine wine, but they all come with risk. The most seismic is the risk of a financial meltdown, which even the former governor of the Bank of England, Mervin King, believes could be on the cards because of the gargantuan size of private and public sector debt across the world.

Even if there isn’t a massive meltdown, a correction in the financial markets can quickly wipe out stock or bond investments. In cases where a person’s primary investment is their home, the possibility of a property market crash is a sobering and credible concern. Because if rates increase to pre-crisis levels, millions of people who have never see a rate rise in their adult life won’t be able to maintain mortgage payments.

Savings accounts are unattractive because interest rates are at a long-term low, and some choose to eschew this option because they question the robustness of the banking system.

Gold tends to go up in value as other investments fall. It’s true it doesn’t pay a dividend, so buyers rely on price rises if they want to earn a return, but most of the time this isn’t the primary motivation for investing in gold. Instead gold is a used as a hedge against a potential correction in the stock market, or a decline in property prices, or an unexpected banking crisis. And depending on the type of gold you hold, it can be a tax-free investment.

The gold price has been performing well in the first few months of 2018, but remains low compared to its peak in 2011. Even central banks around the world are stocking up while the price is down, believing it to be an opportune time for buying gold.

Q: Why gold, and not another type of precious metal or valuable commodity?

Gold has been traded as a form of currency for thousands of years. In fact, it was goldsmiths during the 17th century who created the banking industry as we know it today. Gold’s rarity and adaptability ensure it’s a tradable currency throughout the world, and the ultimate store of wealth. Central banks and countries are duty-bound to hold a certain percentage of their wealth in gold to protect themselves from financial risk.

In the last century, it has fallen in and out of favour, but even accounting for its ups and downs, gold has held its value far more robustly than the paper currency that replaced it. This intrinsic value is what makes it a safe-haven asset, sought after in times of fear and risk, and there’s plenty of that to go around right now.

Q: But there will always be fears and risk, so why buy now? 

The surge in demand for gold is being fuelled by global political and economic concerns. The level of government debt in western economies has never been higher. After borrowing to claw their way out of a recession, the US and European debt mountains will not be easy to shrink. Some influential commentators think that the sheer size of private and public sector debt across the world could trigger another financial meltdown.

Added to the debt pile, Brexit remains a substantial unknown. Despite the exit deadline looming, key economic and trade decisions remain unresolved, so the actual lasting effects of the UK’s exit from the European Union is a significant risk. Meanwhile some researchers believe Germany may be teetering on the brink of a recession, which would be disastrous for the European countries that rely on its financial backbone when crises hit.

And there remains the possibility of an equity correction, with stocks at record highs but volatility levels up as well. Still more worryingly for people whose main investment is their home, a property slump could occur if rates increase to pre-crisis levels. We’ve already seen signs of a slowing retail market, which affects employment figures and retirees with pensions in companies that collapse. These concerns hit close to home for many of The Pure Gold Company’s customers, who would be directly affected by any market or property slump, and have concerns about their pension investments in an uncertain future.

Q: So why buy physical gold rather than invest in a gold linked fund or a mining company?

The alternatives to buying physical gold are to purchase shares in an exchange-traded gold fund (ETF) or a traditional gold fund, invest in a mining company, engage in spread betting or buy gold futures or Contracts for Difference (CFD).

These forms of investment are better suited to short-term speculation, rather than long-term stability and will not protect you from economic crises or insure your portfolio. They all carry additional risk, for example mining company valuations only partially reflect the gold price. A proportion of their value is derived from mining infrastructure, corporate effectiveness and regulatory strictures in their regions of operation, and they mimic the movements of the market far closer than they do the price of gold. Gold ETFs are a financial product and come with the commensurate counterparty risk (and wouldn’t protect against another banking crisis), and spread betting is notoriously high risk, especially for inexperienced traders.

By contrast owning and investing in physical gold bullion is the safest, most manageable and least taxed way to secure your wealth with gold.

Q: What type of gold are people buying?

The most popular form of physical gold to invest in is the gold coin because of the tax implications. UK gold coins such as the gold Britannia and the gold Sovereign are viewed as a currency, or legal tender. This means when you make gains on investing in UK gold coins, you won’t have to pay any tax.

In addition, gold coins are divisible, meaning that they are easier to liquidate to smaller denominations. This fact makes gold coins a more flexible form of investment than, for example, gold bars.With lower costs, demand is also higher for smaller coins, which can often be reflected in buy back prices.

Q: So how do you go about buying physical gold?

Investors can purchase gold from certified dealers in a variety of quantities and grades, typically in bullion or bars. With The Pure Gold Company, buyers are sold gold that is investment grade (22 karats) or higher.

Investors are then provided with a certificate of authenticity, and the option to either store their gold within a secured facility, (usually a London Market Bullion Association vault)which incurs an annual cost that is usually a percentage of the value, or they can have it shipped to their residence for safekeeping. Delivery is fully insured under the Pure Gold Company’s insurance from point of sale until it is delivered. From then on, it’s at the investor’s discretion to sell or distribute their gold as they wish.

Interviews

Q&A with Clare George-Hilley, co-founder, Centropy PR

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Q&A with Clare George-Hilley, co-founder, Centropy PR 1

Clare George-Hilley is the co-founder of Centropy PR

Global Banking and Finance Magazine recently caught up with Clare George-Hilley, co-founder of fintech and financial services specialist PR agency Centropy, as the company toasts to three years of trading. We asked Clare about what life is like running an agency in the city, the trends she is seeing in the financial services space and what the future holds following the Covid-19 outbreak.

Why did you decide to set up Centropy PR?

I was looking for an opportunity to launch my own agency, both my husband and I had been in the public affairs and public relations industry for over a decade and we thought the time was right to go out on our own.

Clare George-Hilley

Clare George-Hilley

We could see that the financial services industry was surging, with challenger brands and new technology transforming traditional banks and setting new standards of customer service. There was a huge market opportunity to create and launch a PR agency that could provider first class comms support, alongside a deep understanding of complex regulations such as AML, KYC, and the GDPR. Likewise, many traditional technology firms are diversifying their offerings, to tap into the growing market opportunity posed by the fintech boom.

So, we worked on a business plan, designed a strategy for winning clients and officially launched in September 2017. Within a few months we had a growing portfolio of clients and a thriving business, since that point, we have never looked back!

How is Centropy doing now and what are you plans for growth?

The last three years have flown by and our client portfolio has grown and diversified quickly. We now manage PR campaigns for clients on everything from cryptocurrency, wealth management to payments and trading software.

We’ve also hosted parliamentary debates with key industry figures, including Members of Parliament (MPs) on topics such as the future of the financial services industry and the impact of challenger banks on traditional providers. The team is expanding quickly and we’re investing heavily in the latest training and support to ensure our team members are equipped to reach their full potential.

How do you see the next 12 months?

The Covid-19 outbreak has crippled the economy, forcing millions of people to work from home due to the very serious health risks. The knock-on effect of this crisis will lead to companies cutting costs where possible to save jobs, so tech will play a vital role in ensuring many businesses stay afloat.

We are already working with contactless payments specialists and other fintech companies that offer solutions to help companies survive and thrive despite the inevitable challenges ahead.

We aim to continue building our portfolio of expertise, testing ourselves with new challenges and delivering the best possible service to clients

 

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Lessons from past recessions and advice for business owners during the coronavirus pandemic

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Lessons from past recessions and advice for business owners during the coronavirus pandemic 2

By Neil Davis, managing director and co-founder of Sterling Networks

What is Sterling Networks?

Sterling Networks is a professional organisation founded in 2014 which facilitates networking events for businesses across the Midlands, Oxfordshire, Wiltshire and the South West. Over 300 members attend our fortnightly breakfast and lunchtime meetings.”

What is your background prior to establishing Sterling Networks?

“During the 1990s, I worked in the corporate team for Halifax. My wife, Tracey, and I went onto own a manufacturing business, which was also called Sterling, and produced a range of gifts, merchandise and promotional items.

“We soon realised tradeshows were a great way to meet distributors and clients. From there, the business grew exponentially, and we managed to build a network of around 500 distributors. Eventually, we became ground down by the manufacturing business – in part because the local manufacturing sector was being devastated by competition from China – and took the decision to sell the business and relocate to Spain.

“After spending several years living abroad, we moved back to the UK to set up Sterling Integrity (EXPO’S) & Sterling Networks (Networking) We were inspired by a desire to help businesses make meaningful connections with one another, and we haven’t looked back since.”

The UK has recently entered a recession, brought about by the coronavirus pandemic. What have you learned from past recessions and how are these experiences helping you to navigate the current crisis?

“I’ve lived through a number of recessions and have seen the pain that insolvency causes companies on a large scale. It’s taught me that there are those who win and sadly those who lose, and that businesses must adapt to a rise in demand for certain products or services at a time of financial crisis.

“Given the nature of what Sterling Networks offers [an opportunity for business owners to connect and grow together] I decided we could build upon the brand due to the demand for new business during the pandemic. We therefore moved our networking events from face-to-face to virtual via tools like Zoom and have gained a steady stream of new members in recent months, reaching an overall total of well over 300.

“On top of that, we’ve taken new staff on during the crisis and have launched a number of new regional groups across the country. I was determined that Sterling should come out of the pandemic with a head start, so my attitude to the recession has been much more positive than those who are forecasting nothing but doom and gloom.

“We can’t pretend high street retail wasn’t suffering long before the pandemic came along, and thousands of new businesses are sure to start up to meet the demand for the products and services that people require at a time such as this. In order to develop and grow businesses need to focus on where changes need to be made to meet this demand.”

Sterling Networks has been providing emotional support to its members throughout the pandemic. What advice have you been giving to members that could be useful to other business owners?

“I try not to be too opinionated and respect other people’s views when giving advice to members, as there are always two sides to every circumstance. I’ve been careful not to say to people that they should be doing one thing or another, as I don’t know their business and its needs quite like they do. The only thing that I have been telling members is the importance of setting up one-to-ones with one another. By doing so, they can listen to the needs and concerns of other, like-minded business owners and work out ways that they might be able to help one another.

“The pandemic has meant we all have a bit more time on our hands, so the advice I would give to people is to use this extra time wisely. Not having to travel physically from one meeting to another means there is a greater opportunity to connect with more people. It’s important to remember that individuals outside of your business can be just as valuable as those within it.”

What makes you hopeful for the future and are there any words of encouragement you can give to budding entrepreneurs?

“The key events that have happened to this country during my lifetime – whether wars, recessions, or the pandemic – have enabled me to take stock of things. While these experiences are certainly challenging, we all become stronger for living through them, and it gives me great confidence that the world will ultimately improve as a result of the pandemic.

“The whole world is effectively rebooting right now, as is the business community. I like to think entrepreneurs will recognise this opportunity to take better care of their peers, and this translates to greater collaboration between organisations. Speak to as many people as you can, ask all the questions that you need to and do your homework. This might well be a difficult time for us all but planning for the future must start now if it is to become as prosperous as I know it can be.”

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Interviews

Exclusive Interview with Ugo Loser, CEO of ARCA Fondi SGR

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Ugo Loser, CEO of ARCA Fondi SGR

 Arca Fondi SGR is a mid-sized Italian active asset management company. Founded in 1983 by a consortium made up of 12 regional banks, the company has grown in time, expanding its network of distributors and its client base. Nowadays Arca manages Mutual Funds, Pension Funds and Institutional Accounts with total AUM exceeding 30 € bln, reaching more than 100 banks and financial institutions and serving more than 800,000 final clients.

What are the key contributors to ARCA Fondi SGR’s success over the past 35 years?

Arca has always put clients and distributors first. That is to say we have always privileged fair pricing for funds and developing high quality products and services for our customers. This requires constant innovation as an objective and looking for people’s talent to be free to produce its effect

Why are people the founding element of ARCA Fondi SGR and how have you sustained this vision over the years?

We work in small teams, people are young and motivated and can perform duties with a high level of autonomy and responsibility. Innovation is asked to everyone, everyday

What makes Arca Fondi SGR different from other asset management firms in Italy?

Arca is a company focused on doing what it can do very well, that is to say mutual and pension funds, services for clients and banks. We never follow short term trends but always look for long lasting impact on the industry, like we’ve done may times in the past

What products/services has ARCA Fondi SGR pioneered?

Arca has been the inventor of “Arca Cedola”, fixed-horizon, coupon paying funds, which have been with no doubt the greatest product innovation of the past 12 years on the Italian market. This type of funds, at first strictly based on bonds and later as a balanced product, has encountered an enormous success both with clients and distributors due to its simple and effective value proposition. Arca is a market leader also in the “PIR” segment of funds, a range of product focused on mid and small sized companies, that have been the best performers in the Italian stock market for the last few years. In services, Arca is a leader in technology applied to asset management. Our website, app and digital services for clients and banks are award winning, state of the art combination of data, technology and channels, and the best is yet to come on this side.

What strategies do you have in place to sustain your market position and withstand professional competition in the country?

As I mentioned, we do not waste resources on projects with dubious results, instead we constantly invest on people, products and services. The high level of profitability that Arca has been able to maintain even in difficult years for the markets of the banking sector is a further testimony that this strategy works very well

How do you use technology to create meaningful experiences for your customers?

First of all, we have created a whole new division, Arca InnovAction Lab, dedicated to technology, data and processes. This ensures projects are delivered quickly and they are free to leave bad past practices behind. Arcaonline.it, Arca’s website, provides distributors with detailed information on clients’ portfolios, asset under management and subscription/redemption requests. It monitors aggregate selling data offering to our partners a suite functions and analytics to track commercial campaigns. And if the banks branches need assistance, they may ask Sara, our digital chatbot. A broad and timely multimedia production, covering exclusive reports, comments, presentations, videos, webinars and newsletters is also available on the website.

Customers, subscribing Arca’s funds through its distributors’ network, may access Arcaclick, a dedicated area on Arcaonline.it. With Arcaclick the client can easily browse through her portfolio of funds, analyze its characteristics, view transactions and historical funds’ performance in customizable views. Arcaclick is also a powerful source of information on Arca product range: Prospectus, KIIDs and other literature is easily accessible along with news, comments and reports. Arcaclick may also be accessed via Arca Fondi App, a free application for mobiles and tables, running on both iOS and Android. Available 24/7 and in mobility, Arcaclick gives clients the opportunity access information, news and details of their personal portfolio anytime and anywhere.

What key trends will drive pension growth in 2020 and beyond?

The Italian market for pension funds is still very small and therefore there is a great opportunity to grow. Arca Fondi manages the biggest open ended Italian pension fund and it’s been constantly at the top of its rankings. As people and workers are looking for yield and to weather short term volatility, the pension fund is very well poised to profit from this trend.

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