THE BUDGET WHICH TRANSFERS WEALTH FROM THE PRIVATE TO THE PUBLIC SECTOR
The long-awaited—and, for many, dreaded—Autumn Budget has arrived. Prime Minister Keir Starmer warned us in advance to “face the harsh reality of fiscal matters,” while newspapers kept the suspense going with bold headlines on tax and pension changes. Now that Chancellor Rachel Reeves has delivered her address and the details are public, what does it all mean? What’s actually changing, and how might it affect you? We’ve rounded up the key points so you can understand how this Budget impacts your finances and if any action is needed.

Let’s take a closer look.

Income Tax

The anticipated two-year extension to frozen income tax thresholds won’t extend beyond 2028, meaning thresholds will begin to rise with inflation starting in April 2028.
The Starting Rate for Savings will stay at £5,000 for 2025-26, allowing individuals with less than £17,570 in earned and/or pension income to receive up to £5,000 in savings income tax-free.

Capital Gains Tax (CGT)

The main CGT rates will increase immediately to 18% and 24% for disposals made on or after 30 October 2024, aligning with the rates for residential property, which remain unchanged. The £3,000 Annual Exempt Amount also remains steady. Trustees and personal representatives will pay the 24% rate.
Two reliefs still provide access to lower CGT rates: Business Asset Disposal Relief (BADR) and Investors’ Relief (IR). The rate for these will increase to 14% from 6 April 2025 and then to 18% from 6 April 2026. The lifetime limit for Investors’ Relief will be reduced to £1 million, matching BADR’s limit. No changes were made to the CGT uplift on death.

Inheritance Tax

Inheritance tax thresholds are now frozen until April 2030, keeping the nil rate band at £325,000 and the residence nil rate band at £175,000 for another five years. Qualifying estates can still transfer unused nil rate bands to spouses, allowing for up to £1 million in wealth transfer without an inheritance tax liability.
Reforms to agricultural and business property relief will start in April 2026. Although 100% relief on qualifying assets will continue, it will only apply to the first £1 million in combined assets; above this, agricultural and business assets will get 50% relief, facing a 20% inheritance tax rate. Unlisted shares will also be subject to a reduced relief rate of 50%.
From 2027-28, the inheritance tax service will be digitalized to streamline tax returns and payments.

Non-Domicile Status Abolished

The government will replace domicile status with a residence-based regime from 6 April 2025, ending offshore trusts’ use to avoid inheritance tax. The remittance basis of taxation will be replaced with a simplified, globally competitive residence-based system. New residents opting in to this regime won’t pay UK tax on foreign income and gains for their first four years in the UK. Rebasing of foreign assets for CGT will also be available under certain conditions. Overseas Workday Relief will extend to a four-year period without needing income to be kept offshore. Temporary Repatriation Facility will also extend to three years with simpler mixed fund rules.

National Insurance (NI)

While individual NI rates remain unchanged, employers’ NICs will increase from 13.8% to 15% from 6 April 2025. The threshold for employer NICs on employee earnings will decrease from £9,100 to £5,000 annually until 2028, after which it will adjust with CPI. The Employment Allowance will also rise from £5,000 to £10,500, with the eligibility threshold of £100,000 removed.

Individual Savings Account (ISA)

Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs, and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030. The British ISA will not proceed.

Pensions

Speculation around reduced tax-free cash for pensions was unfounded. However, starting from 6 April 2027, unused pension funds and death benefits will be included in a person’s estate for IHT purposes, with pension schemes required to report and pay IHT due.

VAT on Private School Fees

From 1 January 2025, private school fees will be subject to VAT at the standard 20% rate, also covering boarding fees. Local authorities funding pupils with special needs will be compensated for the VAT charged.

Stamp Duty

Higher rates of Stamp Duty Land Tax on additional dwellings will rise from 3% to 5% from 31 October 2024. Contracts exchanged before this date won’t be affected by the increase.

Furnished Holiday Lets

From April 2025, furnished holiday let landlords will lose beneficial tax treatment, with restrictions on finance costs, capital allowances, relief on trading business assets, and relevant UK earnings for pension relief.

High Income Child Benefit Charge (HICBC)

No changes to the HICBC structure based on household incomes. Starting in 2025, individuals can pay HICBC via their tax code, and Self-Assessment tax returns will include pre-populated Child Benefit data for non-tax code users.
Corporation Tax
The government has committed to capping the Corporation Tax Rate at 25%, while maintaining the Small Profits Rate and marginal relief at current levels and thresholds.

If you would like to discuss the budget and the impact of it on your personal circumstances please contact us in the usual way. 

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Over 55s cut back to be mortgage free
A significant number of people over 55 are making substantial cutbacks in an effort to be mortgage-free by the time they retire, according to Key Later Life Finance, as the ongoing cost of living crisis continues to strain personal finances.

A survey by the equity release adviser found that 57% of over-55s are making sacrifices in the lead-up to retirement to avoid mortgage payments once they stop working. About 31% are reducing general spending on leisure and entertainment, while 14% are cutting their pension contributions to pay off their mortgage.

Nearly 18% will only manage to be mortgage-free by delaying their retirement age. This comes alongside research from the Financial Conduct Authority, which revealed a 29% rise in people buying their first home in their 50s between 2018 and 2022. Meanwhile, UK Finance data shows that over 60% of mainstream mortgages now extend beyond expected retirement ages, up from 20% two decades ago.

Among those who don’t expect to clear their mortgage before retirement, 70% anticipate making payments for at least two more years, while 13% believe they will be mortgage-free within 12 months of retiring. The cost-of-living crisis is cited as the primary factor preventing people from paying off their mortgages, with 30% having experienced pay cuts.

Over 10% plan to explore later-life lending solutions such as equity release, specialist mortgages, and retirement interest-only mortgages. Chris Bibby, managing director at Key, emphasised the growing issue of retirees still paying mortgages and expressed concern about the sacrifices people are making to ensure they are debt-free. He highlighted the need for more flexible financial solutions and recommended that over-55s seek specialist advice to better manage their finances leading up to retirement.

Anna Griffiths – Clear Technical Manager

Tales of the Top Ten
You will find TENS everywhere………

Anniversaries, speed limits, or recipes, we are used to rounded tens.
Well, the evolutionary reason for this is simple – ten fingers! That means people have been used to writing top ten lists for ages. For example, here are the top ten companies in 1900, it screams ‘Have you heard about the railways?!’

There’s a LOT of focus on the biggest companies in the US at the moment – so it’s helpful context to look at some of the stories of the top ten over the past 120 years.

The bars below show the weight of the top ten as a percentage of the index in the first year of each decade, with 2024 included too.

1. The feast/famine pendulum: The size of the top ten swings about a lot. At some points, the big stocks seem like the only game in town (like the 1960s, or the 1990s) and at others, not so much (1920s, 2010s). There’s no “right” level – but there are periods where things swing one way (lots of small businesses competing, say), and then swing back the other (to a few very dominant businesses). And the pendulum will keep swinging.
2. Speed of change isn’t captured: That pendulum shift can happen very quickly, and the decade-by-decade approach misses some of that subtlety. In 1999, the S&P (Standard & Poors) top ten was FULL of internet stocks (and about 25% of the index), but by mid-2000, the dotcom bust has meant banks, retailers and oil companies were back, and the top-ten had shrunk to 17%. Or take the fact that our tens-focussed approach entirely misses the financial crisis – the rise and fall of big banks is nowhere to be seen.

3. Not so similar: Looking just at weights, the 1990s seem to be similar to today, with the top ten representing more than a third of the entire index. But look under the surface…

The 1990’s top ten list was far more balanced, with eight entirely different industries represented. Big businesses but doing very different things.
2024’s top ten list has a concentration problem and a weight problem. The index today is top-heavy, and in similar areas.

Media as a Friend and Foe to Financial Advisers

Financial advisers are all too familiar with the Pareto principle, the 80/20 rule; roughly 80% of consequences come from 20% of causes. However, when it comes to managing clients’ financial lives, the reality is even more distorted. About only 1% of our clients’ attention is captured, while the other 99% is consumed by mainstream and financial media. Unfortunately, much of this media is filled with investment advice from investing illiterates who lack a deep understanding of clients’ long-term financial goals and investment market history. Based on this 99/1, it’s amazing that clients listen to us; it shows the trust they have  when the noise to the contrary is overwhelming.

Take, for example, the recent “perfectly normal” decline in the global stock market. It was a standard correction, part of the market’s natural ebb and flow, but the media, sensationally, turned it into a dramatic event, causing unnecessary panic among investors. Clients who spent most of their time listening to this noise might have been frightened into making rash decisions, potentially derailing their long-term financial plans.

This is where, real-life financial advisers, come in.  Clients have the advantage of being guided through the tumultuous waves of market noise. The financial media is often bent on sensationalism, which can lead to misguided financial decisions. Advisors are steadfast in their commitment to keeping clients aligned with their financial plans and long-term goals.
In many ways, the financial media can feel like the adversary. They’re the ones creating the fear, causing the distractions that pull clients away from their carefully constructed plans. But ironically, this makes the adviser’s role all the more vital, being the clear, rational voice amid the chaos.

This guidance is often counterintuitive and countercultural. While the media may incite panic, advisers urge patience. This is the real good that financial advisers do: they are the guardians of clients’ financial futures, ensuring that they stay the course even when the media is shouting the loudest. In the end, while the media may be a foe in spreading fear, they also remind us why the adviser’s role is so critical, cutting through the noise, keeping clients focused on achieving their financial goals.

Of axes and air con

The economy is aways the problem to solve for ay government, left or right. Should spending go on fixing potholes or building spaceships? Is this down to financing or training? Should new industries be promoted, or should there be more support for ailing ones?

How and where should a government intervene?

In 1921, the then head of the U.S. Department of Commerce, Herbert Hoover was faced with this question when tasked with ramping up growth in the U.S. economy and was frustrated.

Even though he saw individual ingenuity everywhere, it rarely scaled up into serious companies, so he thought the reason was simple – No-one had any standards.
For example, for chopping down a tree there were 994,840 varieties of single-bit axe for sale. It wasn’t just axes*. There were 90 types of blackboards for use in schools, 33 different lengths of hospital bed, 29 kinds of milk bottle caps!

This lack of standardisation made it almost impossible for real competition to take place. Consumers were unable to tell who had the best blackboard, the best screw, or steel when there were thousands of versions, all slightly different.

Hoover simply told every single industry that they needed to impose standards which the government would track and measure through a newly formed Bureau of Standards.
He did, however, let the industries decide themselves what the standards should be.

This was so successful; Hoover was called at the time ‘the Secretary of Commerce and the Under-Secretary of Everything Else’ and went on to become the 31st President.
This was by letting the people with the most relevant knowledge agree their own rules, and then get cracking!

30 years after Hoover entered the Oval Office, Lee Kuan Yew became Prime Minister of Singapore, and he had similar beliefs to Hoover – get the basics right and then get out of the way!

In 1954 Singapore’s GDP per capita was less than $500, when Lee died in 2015, GDP per capita was more than $55,000.

When asked what the secret to Singapore’s success was, Lee said “Air conditioning. Air conditioning was a most important invention for us”

Before air-con, no-one could work through the middle of the day in Singapore. So, air conditioning was put in all office buildings and productivity soared in the civil service, in banks and in factories.
Get the basics right, and let people get cracking!

And so to today……

Most business leaders in the UK don’t want targeted government help in their industry** They want the basics to be good across the economy, and then to be left alone. Economic history suggests they may be right. Let’s see if the politicians listen.

* The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, Robert J. Gordon
** “73% of business leaders believe that any future changes should be focussed on improving the general business environment, rather than the specific needs of individual sectors” https://www.pwc.co.uk/industries/industry-in-focus/framework-for-growth/pwc-framework-for-growth.pdf

PLEASE NOTE: THE NEXT NEWSLETTER WILL BE ISSUED LATER AS IT WILL BE BASED AROUND THE UK BUDGET ON 30TH OCTOBER AND WE NEED MORE TIME TO DIGEST THE BUDGETS CONTENT.

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What taxes could Labour change in the October Budget?

With a purported £20bn hole in the current budget and commitment not to borrow, Labour need to consider how they plan to raise these funds. Since they committed in their manifesto not to increase VAT, income tax or national insurance there are two main areas that could be under consideration for them. These are as follows:

Inheritance Tax (IHT)

Many people wrongly assume that inheritance tax is only paid by the super-rich. Frozen allowances that have remained in place since 2009 and rapid increases in house prices however have meant that more and more people are paying IHT and this raked in £7.5bn in the financial year to the end of March 2024 for the government.  These receipts are only expected to increase further. To increase revenue even more, Labour could up the tax rate from the current 40% or lower the value you start paying IHT. See graph below for UK IHT receipts:

Capital Gains Tax (CGT)

This is already a good source of revenue for the government and receipts for 2022/23 were £14.4bn. Receipts have been increasing as the annual exempt amount has decreased from £12,300 in 2022/23 to only £3,000 in 2024/25. Keir Starmer has ruled out raising CGT on the sale of main homes. Further revenue could be raised in the following ways:

  • The £3,000 annual exempt allowance could be removed completely.
  • Assets that don’t currently fall under the CGT regime could be included.
  • There has also been speculation that rates could be raised in line with income tax rates.

Please see graph below for UK CGT receipts:

Conclusion

At the moment we can only speculate as to what actions will be taken. This does however highlight the importance of financial advice. At Clear we will always ensure that your investments are structured in the most tax-efficient manner. With careful planning and ensuring that your individual circumstances are taken into account, we can help you achieve your needs and objectives by being flexible and adapting to changing circumstances.

Darren Fuller – Clear Senior Paraplanner

Investing in elections

One of the stories that always comes out of the U.S. in an election year is the idea that a Republican president is better than a Democrat for stocks. Let’s explore this idea.

The following chart shows two ways to invest around US politics since the Second World War, starting with $100.

  1. Only invest in the S&P(Standard & Poor’s) 500 when the President is a Republican.
  2. Only invest in the S&P 500 when the President is a Democrat.

Source: Factset/7IM/Robert Shiller, S&P 500 Price index. Portfolios are either invested in the S&P 500 or return 0%.

There you have it…..Democrats win $2,500 vs $1,500!

BUT look at number 3 strategy:

  1. Stay invested, regardless of who’s in the Oval Office.

Source: Factset/7IM/Robert Shiller, S&P 500 Price index. Portfolios are either invested in the S&P 500, or return 0%

So, $34,000 from $100, without having to do anything! The lesson here is don’t stress about politics.

What happens if you can’t look after the pennies?
In July the Treasury announced that the Royal Mint will not be getting any business this year.
This is the first time ever that zero coins have been ordered, and the economic logic stacks up.

Source: UK Payment Markets Summary 2024, UK Finance
12% of all transactions in 2023 were made in cash, so cash is not going away, but it isn’t growing and there are already 27 billion coins of various types in circulation. There are rumours that 1p’s and 2p’s could be scrapped leaving 5p as the smallest denomination, all prices then in multiples of 5 – nice and neat.
Of course, there are always unintended consequences to thigs like this:

  • What will everyone at the Royal Mint do this year?
  • Think of the cliches! What will we give for someone’s thoughts? What will we spend in the loo?
  • Poor King Charles, finally on the throne and no coins with his head on!
  • What about future archaeologists? You can still find 2000-year-old Roman coins in British soil today. It won’t be so glamorous finding a 2024 Mastercard in a few centuries time!
  • Children won’t be taught about the unfairness of life if we don’t have the 2p pusher machines in arcades anymore.

But there is something more serious about moving away from cash…the psychology of it.

When we hand over cash, we experience a psychological effect called “pain of paying”. We get a real, biological increase in our pain receptors from handing over something physical. It actually HURTS.
And that pain isn’t there with a credit or debit card – because we don’t see or feel the money leave our account.
Quite simply, paying on card makes us more likely to spend more – various studies** have found that people using a card spend nearly twice as much as people paying cash for the same shop. So, to go back to clichés, if we remove pennies from the system, there really is a chance that the pounds won’t look after themselves.

**Greene, C & Schuh, S. The 2016 Diary of Consumer Payment Choice, 2017/ Prelec, D Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay, 2001

Construction activity increases at fastest pace in 26 months

·      Activity rises amid much faster increase in new orders.

·      Employment increases for third month running.

·      Emerging pressure on supply chains signalled.

As the second half of the year got underway growth accelerated in the UK construction sector. In turn, purchasing activity increased and raising staffing levels for the third month running. Greater demand for inputs put pressure on supply chains, and input costs increased at a faster pace. The headline Standard & Poor’s Global UK Construction Purchasing Managers’ Index™ (PMI®) – a seasonally adjusted index tracking changes in total industry activity – rose sharply to 55.3 in July from 52.2 in June.

All three categories of construction saw activity increase in July as work on housing projects returned to growth. Commercial activity increased solidly, but the fastest expansion was seen in civil engineering activity, where the rate of growth quickened to the sharpest in almost two-and-a-half years.


Source: PMI by S&P Global

Market Falls vs. Annual Returns
The “dog days” of summer were blamed on the appearance of Sirius (the dog star) returning to the night sky each year. The Ancient Greeks associate this period with heat, fever, mad dogs, and bad luck. In 600BC, the poet Alcaeus suggested that you “steep your lungs in wine” to cope with it all!
We’re right in the middle of the dog days now, and things are moving quickly, but here is a chart to remind us that market shocks happen as regularly as Sirius appears, they are a part of life.

Source: Factset, Past performance is not a guide to future returns, chart(s)/data for illustration purposes only.

The pink dots show the peak to troughs in the Standard & Poor’s 500 each year.
And then the blue bars show the return over that year. The money you’d have made from staying invested, start to finish.

Two things:

  • This year, the S&P’s 500 is only down 9%. Most years (+60%) see falls of more than that.
  • There will be some years where the overall return is negative (although never as bad as the worst point). In fact, these periods are the RISK that equity investors must bear to get rewarded for
The thing is with market sell offs, there’s always a different thing to last time, and it’s usually something you hadn’t heard of a few months ago! But trading the headlines isn’t a sensible way to live your life – high stress for very little reward.

Well done to our North Yorkshire police fundraisers who completed the walk of the Three Peaks overnight on Sunday 28th July.

So far they have raised £1900 for the charity!



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Students heading to university are heavily dependent on financial support from their parents and grandparents, according to the Association of Investment Companies (AIC)

Data from the AIC reveals that 71% of parents either contribute financially to their children’s university expenses or plan to do so, with an average annual contribution of £8,723. Wealthier parents contribute around £9,626 on average, while less affluent parents contribute approximately £5,639. Additionally, one in four parents report that grandparents also contribute, with an average yearly amount of £4,703, up from £2,455 in 2013.The AIC reports that funding university education remains the top financial priority for parents, with 46% placing it above helping their children purchase property (33%) and buying a car (10%). Students echoed these priorities, with 46% prioritising university costs, 28% prioritising a first property, and 14% prioritising a car.

The research also found that almost half (49%) of parents intend to use some of their cash savings for their child’s university education, and 16% plan to use all or most of their savings. Smaller percentages of parents have used investment trusts (16%), shares (15%), and funds (10%). The AIC noted that concerns about the risk of losing money, insufficient funds, and a lack of understanding of stock market investments lead parents to favour cash savings over stock market investments, despite 52% believing that stock market investments would yield better returns over a ten-year period.

Nick Britton, research director at the AIC, stated, “Millions of parents make significant financial sacrifices to send their children to university, and our research shows that many grandparents are contributing as well. It’s concerning that more parents aren’t leveraging the potential of the stock market to enhance their savings in the long term. While not everyone can afford to save, those who can typically choose cash savings accounts over the stock market, even though most parents acknowledge that stock market investments are likely to outperform cash over a typical ten-year period.”

Britton highlighted that an investment of £50 per month in an average investment trust over the past 18 years would have resulted in a total of £30,668, sufficient to cover the typical parental contribution for three years of university. Students heading to university are heavily dependent on financial support from their parents and grandparents, according to the Association of Investment Companies (AIC).

Data from the AIC reveals that 71% of parents either contribute financially to their children’s university expenses or plan to do so, with an average annual contribution of £8,723. Wealthier parents contribute around £9,626 on average, while less affluent parents contribute approximately £5,639. Additionally, one in four parents report that grandparents also contribute, with an average yearly amount of £4,703, up from £2,455 in 2013.The AIC reports that funding university education remains the top financial priority for parents, with 46% placing it above helping their children purchase property (33%) and buying a car (10%). Students echoed these priorities, with 46% prioritising university costs, 28% prioritising a first property, and 14% prioritising a car.

The research also found that almost half (49%) of parents intend to use some of their cash savings for their child’s university education, and 16% plan to use all or most of their savings. Smaller percentages of parents have used investment trusts (16%), shares (15%), and funds (10%). The AIC noted that concerns about the risk of losing money, insufficient funds, and a lack of understanding of stock market investments lead parents to favour cash savings over stock market investments, despite 52% believing that stock market investments would yield better returns over a ten-year period.

Nick Britton, research director at the AIC, stated, “Millions of parents make significant financial sacrifices to send their children to university, and our research shows that many grandparents are contributing as well. It’s concerning that more parents aren’t leveraging the potential of the stock market to enhance their savings in the long term. While not everyone can afford to save, those who can typically choose cash savings accounts over the stock market, even though most parents acknowledge that stock market investments are likely to outperform cash over a typical ten-year period.”

Britton highlighted that an investment of £50 per month in an average investment trust over the past 18 years would have resulted in a total of £30,668, sufficient to cover the typical parental contribution for three years of university.

Anna Griffiths   – Clear Technical Manager

Diversification never goes out of fashion
What’s the most visible legacy of Covid in everyday life?
The odd mask still being worn on public transport?
A faded sign explaining, in intense detail, how to wash your hands?
A Perspex screen somewhere it really doesn’t need to be?
Or is it something else like office fashion?Pre-Covid office:

Post-Covid office:

The fact is that in the UK, men’s suits were taken out of the ‘representative’ inflation basket in 2022* . No-one is buying them, so they aren’t representative!
Imagine if you had the foresight on this trend in 2022 of the move towards casual and away from formal. Knowing this, if you had the choice of buying shares in athleisure super-brand Lululemon or ‘stuffy’ Marks & Spencer, which would you choose?
Now surprisingly, in the past couple of years, Lululemon’s stock has basically gone sideways, while M&S’s share price has doubled!!

Source: FactsetThe fact is that even if you know exactly what the world is going to look like, it doesn’t always translate to share price performance.

There are a lot of specific reasons Lululemon has struggled – there’s only so much money you can spend on tracksuit bottoms, clothes wear out less quickly at home, other brands have emerged to grab a slice of the market.

But the more interesting case is why M&S has thrived. As a business, it does something we think investors can learn from. It diversifies.
From food to clothing, to homeware, and even finance. So although their formalwear struggled, the rest of the business kept going, giving the fashion side time to adjust, ditch the formalwear, and evolve.

Mind the productivity gap
Productivity! A classic in election buzzwords. Everyone says it needs to be higher in the UK.
Interesting research in recent years comes from the Centre for Cities, which compares UK cities to European cities.Even though Leeds and Marseille have similar populations (800,000), Leeds has an output per worker of £45,000, compared to Marseille’s output per worker of £57,000. Marseille is nearly 25% more productive.This is true across regional UK cities with most underperforming their European equivalents in terms of productivity.

Productivity is simple to define – it’s the amount of output given a certain input.
Higher productivity means making more widgets in a day, or scoring more goals in a match, or selling more ice cream, without hiring more workers, or buying more strikers, or hiring more ice cream vans.
So how do you raise productivity? Basically, you have to make it easier for the same people to produce more! More OUTPUT, same INPUTS.

But how can you make life easier?

One way is to think about why Marseille might tick at a higher rate than Leeds.
Look at the population density maps below, which are on the same scale. Darker colour equals more densely populated:

Source: https://human-settlement.emergency.copernicus.eu/ /7IM
Leeds is a sprawling city, whereas Marseille is compact.

This means that 87% of Marseille’s population can get to the centre in under 30 minutes, using public transport. Whereas in Leeds, only 38% of the population can do the same.

In people terms, that’s 400,000 extra Marseillais who can get to work easily, compared to Leeds. On average, only 40% of a UK city’s population can get into town in half an hour, vs. 67% across Europe.
And that matters hugely, in lots of ways.

  • For individuals, an easy and quick commute reduces stress, which leads to higher productivity and innovation.
  • For government investment, a more connected city wastes fewer resources; e.g.one big hospital is more efficient than ten small ones.
  • And for businesses, access to a wider talent pool in a smaller area allows rapid growth.

If the next government want to close the productivity gap, the public transport gap would be a good place to start …

Clear Team News – Louis Greening

Following on from the investment into Clear from the Swedish company Soderberg Louis has been offered a position with them as Sales Director.

It is a great opportunity for him as Soderberg is on course to be one of the top three Financial Services company in the UK within the next 3 years.

Louis has always concentrated on the investment part of our business and it is a huge opportunity for him to be with a company at the start of their journey. It is with sadness he will be leaving Clear and starting this new position with them. Over the last ten years he has managed Clear’s investment portfolios, continuously outperforming the respective benchmarks that we monitor. He will, however still be influential in our investment process on a consultancy basis with Mark Sherwood who is joining the team.

We are very grateful for his years of service helping to move Clear forward and wish him every success in his new venture.

Mark Sherwood
Mark has 40 years experience in the asset management sector, with a number of high profile firms including Schroders, Mercury Asset Management, Credit Suisse, Cazenove and Bordier & Cie.
The majority of his career has been in the wealth management sector, most recently as the main Board Director at Bordier & Cie (UK) PLC. He also managed the Smaller Companies Fund and the Recovery Fund at Mercury.
He will be a valuable addition to the Clear team.

Well done to our North Yorkshire police fundraisers who completed the walk of the Three Peaks overnight on Sunday 28th July.

So far they have raised £1900 for the charity!



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Clear Minds

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UK General Elections and their Impact on Stock Markets
The next UK election will take place on 4th July and whilst individuals may have their own preferred outcomes, investors will be wondering what outcome would be best for the markets and investment portfolios. Analysis from trading company IG shows how the FTSE all share performed before, during and after recent elections:

Whilst the results are mixed there are a few key takeaways as follows:

  1. Markets prefer predictable elections rather than close calls. Stock markets like certainty and if the latest polls are to be believed, the outcome of this election is not in doubt which may explain recent positive performance.
  2. Trends tend to continue after an election especially where the result was predictable. This seems to be the case in both falling and rising markets.
  3. Elections often cause short-term volatility but in the long-term only have a minor impact. We believe that for long-term investors it is important not to get distracted by short-term noise. Staying invested and focused on your long-term goals will help you achieve your desired results.
  4. To conclude, markets are driven by much more than short-term political changes. Economic cycles, geopolitical factors, world events and technological change all play a part in current and future market performance. Ongoing monitoring and a disciplined approach are key to long-term success.

Darren Fuller – Clear Senior Paraplanner.

A Mean Drive for Clean & Green
Annoyingly it is an accepted truth that we’re often forced to compromise to solve problems. Transport is as example.
Walking everywhere is exhausting. Humans are resourceful,  we started using horses to get from A to B. Unfortunately, that comparative speed meant compromise. In this case with sanitation (imagine the smell of manure in the big cities, and all the insects spreading diseases!). Fast forward. Cars came into circulation more widely – no more manure – but the comfort and cleanliness were favoured to the detriment of the environment (a different kind of emission!).Now riding over the horizon to solve the emission problem are herds of electric cars. The carbon emissions problem is no longer one humans can afford to compromise in favour of. But that comes at a price… the cycle continues.
But what about outside of the easy example of cars? Data is an excellent case study.As artificial intelligence grows meteorically, there is an insatiable thirst for data. The power demand for data centers is estimated to grow 160% by 2030.
But in Europe, increasing demand means the power needs of data centers in the region will equate the current total energy consumption of Portugal, Greece and the Netherlands combined! *That’s a compromise (data over light and heat) that  most residents would sign up to.
However, there is a compromise the data centers can make. Location.
Fortunately, these centers are usually located in the middle of nowhere. Here’s one in Iceland, a country where the number of data centers is quickly growing:

Verne Global. Source: MIT Technology Review

That’s not ideal if you favour a Pret sandwich at lunchtime, but what that does offer is SPACE. Plenty of it. And space is exactly what you need for renewable energy production.

This has noticeably driven demand for energy originating from renewable sources:

Source: Bloomberg.
Amazon thrives on data. It was also by far the largest consumer of renewable energy last year, having bought more solar and wind power than the next three companies combined.
As we and therefore our needs evolve, demand for goods or services impacts the environment around us. Fortunately, data centers don’t make many ‘top 10 places to visit’ lists, so the compromise made in this case feels like one we can live with (…for now).* Source: Goldman Sachs

The Price of Climate Change
British people really are predictable, 9 out of 10 of us have talked about the weather in the past 6 hours.
The following should keep the conversation flowing:Have you noticed how expensive coffee is recently?According to the Telegraph, the price of a medium latte has risen by a third since 2021.
Growing coffee beans requires the right amount of heat, the right amount of rain, the right altitude… see where this is going?
Every few years, the temperature of the sea in the central-east equatorial Pacific goes up. This natural phenomenon, called El Niño, leads to rainfall in southern US and drought in the West Pacific. It affects mostly countries in Africa, Latin America, and South and South East Asia.

Source: NOAA.

Here’s the problem:

The largest producers of coffee beans are Brazil, Vietnam, Colombia, Indonesia… all in areas of potential impact.
Climate change is turning weather phenomena like El Niño much more dramatic. Rainfalls more frequently lead to flooding; droughts more frequently lead to wildfires.

Coffee beans have been severely affected by these conditions and droughts have notably hurt production in Vietnam and Indonesia this year.

As we have found out – painfully – in the past few years, when there is a supply and demand imbalance, it is reflected in the price.
And the price of Robusta coffee beans, which come predominantly from the Vietnam area, are great example of this in reality:

Robusta futures prices (USD). Source: Bloomberg/7IM.

Earlier this month, Robusta futures prices reached a 45-year high on the back of record-low inventories, based on a few factors, but a huge contributor of which was the worsening drought conditions in Vietnam.
Climate change is creating supply uncertainty for coffee drinkers. What we’re paying for our coffees perhaps serves as a small reminder of the price we’re paying for climate change.

The charity is being supported by a number of serving police officers based in Yorkshire who are undertaking the Three Peaks Challenge to raise funds.

On Sunday 28th July they will be hiking, overnight, the mountains of Pen-y-gent, Whernside and Ingleborough.  This is a gruelling 26 mile route, challenging enough during the day let alone at night!

Clear Minds is very grateful to these participants and wish them luck!

Please consider donating to back these guys using the following link or QR code:

Clear Minds

The charity is now working with 15 therapists and supporting 25 clients. All funds raise go directly to pay for counselling for those in long term therapy who find themselves in financial difficulties.

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Dear *|FNAME|*

A slight pull back in markets over the past month as concerns around political results as well as no sign of a rate cut from the Fed this quarter.

However, despite minor fluctuations in European equities this week, overall risk appetite remains positive, with many indices nearing or reaching record highs. US tech stocks continue to lead the market, with the so-called Magnificent 7 up 34% so far this year. However, performance within this group varies significantly – Nvidia has surged 152% this year, while Tesla has dropped 27%. Nvidia alone accounts for 35% of the S&P 500’s gains in 2024. The current market environment is relatively calm, with inflation gradually moving in the right direction and economic growth remaining steady, if not exceptional. Equity markets have effectively adapted to the shift in rate expectations since the start of 2024; initially, there were expectations of 6-7 rate cuts in the US, UK, and eurozone, but now it seems we might see only two.

This resilience reflects robust economies and central banks’ lack of urgency to cut rates. The absence of major market concerns could be a concern in itself, as we have yet to experience a significant pullback this year, and history suggests that markets eventually correct for various reasons. However for now, markets are anticipating cuts in the final quarter of this year and once received it should provide another leg up to what has been a strong year… so far!

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

We feel our portfolio positioning is sufficient for the current climate and through to the next quarter. We continue to believe China can recover having posted a posted a positive return, and the US economy can continue to grow and inflation fall.

Any questions or views, please get in touch in the usual way and have a great week!

Warm Regards

Louis Greening
Investment Specialist

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Retirement planning… Why the past two years have provided uncertainty to the next generation of retirement savers…

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The Fear of Retirement Planning

More than half of UK adults fear their retirement standard of living will be lower than that of previous generations, according to new research by SmartSave.

The digital bank found that 54% of UK adults believe their retirement lifestyle will be worse than their parents’ or grandparents’. Additionally, over a third (37%) of employed individuals expect they won’t be able to financially support their children or grandchildren.

The survey also revealed that two-fifths (40%) of respondents feel financially worse off than they were two years ago, with this figure rising to 46% among those aged 35-54.
Moreover, just over a fifth (22%) expressed that if the cost of living continues to rise, they would be forced to reduce or stop their pension contributions. In the light of these concerns, 23% of people are contemplating retiring abroad to escape the high cost of living in the UK.

Andy Mielczarek, CEO of SmartSave, commented that the traditional idea of a “well-earned retirement” is becoming increasingly uncertain for many. He noted, “Savers are more likely to feel that a comfortable retirement is unattainable compared to earlier generations. The drive to save for both one’s own retirement and the future prosperity of one’s family is a significant motivator for success, so the insecurity revealed by these respondents is concerning. Halting pension contributions to manage living costs is unsustainable, and today’s challenges are clearly affecting future prospects.”
Mielczarek emphasised the importance of giving consumers the freedom to achieve their financial goals, particularly in retirement planning. He highlighted that while there are many saving and investing options available today, the financial industry needs to do more to increase public education and awareness. This will help people make informed decisions and secure their desired futures upon retirement.

Anna Griffiths – Technical Manager

Service sector output growth strongest since May 2023.
  • Activity and new work rise at fastest rates for 11 months
  • Staff hiring remains subdued
  • Input cost inflation highest since August 2023.

There was a robust and accelerated upturn in business activity recorded by UK service providers in April, this was endorsed by a renewed strengthening of order books. Respondents to the survey often commented on a boost to sales from improving client confidence along with signs of a turnaround in underlying economic conditions. But there was only a marginal rate of job creation and the lowest in 2024 so far as firms opted to remain focused on limiting margin pressures.

Higher wages, partly driven up by a considerable rise in the National Living Wage in April, meant a sharp overall increase in input costs since August 2023, Meanwhile, prices charged by service sector firms rose at the slowest pace for three years.

In April the seasonally adjusted S&P Global UK Services PMI Activity index stood at 55.0 which was up from 53.1 in March and above the crucial 50.0 no-change value for the sixth consecutive month. Plus the latest reading indicated the fastest rate of business activity growth since May 2023.
Also new order volumes increased at a fair pace in April and to the largest extent for 11 months. Service providers noted that sales pipelines had improved with stronger business and consumer spending, in part linked to greater optimism towards the broader economic outlook.
Higher levels of new work from abroad also boosted total order books in April, with growth the fastest since March 2023 amid ongoing reports of strengthening sales to clients in the US and Asia.

The (false) geography of listed companies

There’s been a lot of buzz around the FTSE 100 hitting new highs in the past few weeks.
This index contains the 100-largest constituents of the London Stock Exchange, and this has  been boosted by optimism around interest rate cuts and an easing of geopolitical tensions.
This has been noticed by UK papers. A group of London-listed companies doing well is something worth reporting, and “a win for the UK!”
But looking at the businesses that make up the index, Is it really a win for the UK?
The likes of Shell and AstraZeneca have been the source of such growth recently and because they are so big the wider index benefits.But what is the revenue exposure that these companies have to the UK? Very little:

The fact that many companies operate with a more global outreach has removed much of the importance of their listing country. When companies think about growth, they’re less worried about the domestic economy and more interested in sector consolidation and industry-specific needs. It’s much less a matter of geography.

Looking at London-listed mining company Anglo American last week, for example. ASX-listed (Australia) metals and mining company BHP made an £31bn offer to acquire Anglo American. Is it an investment in the UK? No. It’s more to do with some of AA’s major copper mines that BHP wants a piece of, based on how aggressively this metal is in demand for the production of renewable technology.

Whilst a map offers familiarity and comfort, if we had to set our investment compass, we’d be more inclined to measure where we are by sectors and factors rather than borders.

An old holiday spoiler

The Monetary Policy Committee assembled on Threadneedle St last week, to update the market on where interest rates are going. As ever, the event was less about the headline decision – rates held at 5.25%, shock – but the commentary that surrounded it.

The Bank is forecasting inflation to come down to 1.9% in two years and to 1.6% in three years. A key takeaway was governor Andrew Bailey expressing optimism, and even suggesting:
”Rates could come down faster than market expectations.”

But the question this leads to is:
“If inflation is falling and is forecast to drop to below the 2% target, why ‘hold’….what are they waiting for?!”
Good question!

If, like us, you’ve found yourself scanning the internet for a place in the world that has more than 48 hours of nice weather, you’ll have part of the answer…

There are reasons to feel optimistic about the economy, and with prices slowly going down, it’s easy to forget that some pockets of the inflation basket have been more stubborn than anticipated.
Despite being a distant memory, the pandemic squeezed a large number of businesses, many of which sit within in the services sector (including travel!).With this sector trying to meet its needs, prices have gone up by almost 30% since Covid-19 and the Bank said there are still some signs of inflation persistence, with services inflation standing at 5% in March.

As the Monetary Policy Committee grapples with when to stick or twist, it’s worth keeping in mind your summer holidays. Even though travel restrictions are no longer a problem, we can only do so (literally) at the expense of a four-year-old foe!

Interesting Financial summer facts.

Percentage of Brits going on holiday by annual income (%)

We are very fortunate to have a friend of Clear Minds, Jeremy Rushworth fundraising on behalf of the charity by undertaking the Handsling Bike Coast to Coast challenge on 22nd June.

This 150 mile cycle challenge begins at Seascale and ends at Whitby, travelling through the Lake District, across the Yorkshire Dales, the Vale of York and the North York Moors. This is a popular cycling route normally undertaken over four to five days, but this event will take place over ONE DAY!!

Please consider supporting Jeremy on his quest by donating through the following link or QR code.

All funds go directly to pay for counselling sessions for those in long term therapy who are in financial difficulties. The charity is currently working with 15 therapists supporting 25 clients.

Click here to donate

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We believe the Eurozone should cut rates next month, but as for the rest of us who knows!?

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Dear *|FNAME|*

Rate Cuts? 

US = not yet
Eurozone = next month
UK = who knows!

This is the general consensus. The Federal Reserve is grappling with a strong economy as well as stickier inflation, which gives a stronger argument to keep rates steady for now, but the easing inflation story in the Eurozone leaves the door wide open for rate cuts in June.

The UK on the other hand is still feeling the pressure of wage growth. Wages in the UK have grown faster than expected, putting at risk the prospect of a rate cut next month. However, these figures (announced earlier this week) do include bonuses, which is a one off, so we should see some moderation in growth over the next few months. Unemployment does seem to be on the rise, so it really is an unknown as to whether the rate cut will come in June. We shall see…

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

China 

We finally have the response needed to help stimulate a flagging economy. The Chinese government is at last trying to spur lending and investment with the purchase of government bonds. This move has been anticipated by investors since March and confidence is back when it comes to the second largest economy in the world:

As you know it has been a big position in the portfolios for over 2 years, and although we haven’t recouped all of the losses since we invested, the past few months have certainly helped!

We believe a strong US economy and a resurgent China supports our view that we should remain confident, despite a lack of rate cuts.

Any questions or views, please get in touch in the usual way and have a great week!

Warm Regards

Louis Greening
Investment Specialist

Our mailing address is:
[email protected]

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A real issue in society today is long term care and an ageing population…we explore the importance of saving for care in your old age….

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Long-Term Care Costs and Ageing Populations

According to a recent study by Just Group the price of the average home could cover just seven years of care in a residential home. For most relatively young people thinking about potential long-term care costs would probably be fairly low on their list of priorities. As people age, they inevitably start to think more about these issues and if they would like to leave their home to their children consideration needs to be given as to how one may fund any potential long-term care costs.

This issue is only likely to become more pertinent in the future due to increased longevity and changing demographics as shown in the graph below from research conducted by the Centre for Ageing Better:

Even if you do not plan to leave your home to relatives, another issue to consider is the fact that since 2020/21 house prices have risen by 12% whereas care fees have risen by 20% and this trend is expected to continue.

Engaging in open discussions with family members about long-term care preferences and expectations can also be very useful and collaboration with your financial adviser can ensure that your wishes and objectives are taken into account.

In conclusion, saving for long-term care is not just a prudent financial decision; it’s an investment in one’s future well-being and security. Should you wish to discuss long-term care planning for either yourself or a relative please contact the office and we will be happy to assist.

Darren Fuller – Clear Senior Paraplanner

AI – Healthcare needs you

If you have recently been writing a wedding speech or tried to answer a difficult Excel question or maybe summarizing a large chunk of text, chances are you’ve engaged with ChatGPT in some form. There’s a lot AI is great at, and helping with admin is one of them!

Leveraging AI to make ‘industry’ more efficient is a growing theme. In fact, it was referenced specifically in the Spring Budget. The Chancellor committed £3.4bn to the healthcare sector.

What was of interest wasn’t the figure, it was where it was being directed. This money is to be spent on digital transformation – including the expansion of AI capabilities for diagnosis, and lots of digitization of tasks.According to the UK government, “this funding will significantly reduce the 13 million hours of time doctors spend on poor IT, freeing up significant capacity (…)”.  Informed people will run the rule over the accuracy of these numbers, but the theme is an interesting one.

If we look to data away from our shores to make this more objective – then it would appear that there are some striking changes that have occurred over the past few decades.

In the U.S. the number of doctors has doubled since the 1970s, but interestingly the number of admin staff has grown 30 times!

Reports of unreadable, disjointed medical records, and lots of complex, labour-intensive insurance processes mean more people are needed to deal with admin than treat patients. And it’s expensive! But the positive is that technology is already having a tremendous impact elsewhere in the world of healthcare:

If AI can help in the less glamourous area of reducing the admin burden, the posiives could be material. For an ageing population, for workers within the sector… and for investors in it!
Intel co-founder Gordon Moore predicted a doubling of transistors every year for the next 10 years in his original paper published in 1965. Moore’s Law is the observation that the number of transistors on an integrated circuit will double every two years with minimal rise in cost.

 Come on Down!
There really isn’t enough good game shows these days, in our humble opinion.
So, let’s take a trip down memory lane in our inaugural – and possibly last, who knows – GUESS THE CHARRRRT!Clue #1 The below happened during November, eight years ago:

          
Clue #2 This rollercoaster covered just an 18-hour period.Clue #3 This holding plunged by over 5% initially. Sure, these things happen. But the rally came almost immediately after…. and nothing had changed.

Guess what the holding was?

The S&P 500 on November 8th & 9th 2016!

S&P 500 futures on 9-10 November 2016. Source: The New York Times

After pricing in a Clinton White House, chaos then reigned overnight as markets digested a higher-than-anticipated probability of a Trump victory.But upon confirmation of this win – and President Elect Donald J Trump not causing any issues on day one of the news – the index rallied materially, finishing the day up.

We use pictures all the time in the investment industry to illustrate points. Some are more useful than others, but this is the most apt one, for the data above.

Over the same period – 18 hours – if you were to pick the start and the end of the fluctuations, this is what you’d see:

Just another day………….

Ahead of election mania this is a timely reminder that companies, currencies and indexes fluctuate by the minute. It’s a brilliant example of how important it is to ignore the noise and stick to the plan.

The bright light of innovation
Even though the price of energy contributed to the tightening of belts over the past couple of years, we still have it pretty good compared to our ancestors. Back in the 1600s, something that we now for granted – artificial light – would have cost you £16,000! imagine having to account for lighting as a percentage of expenditure in your budget? A lot has changed since then, your home is now probably devoid of candles, unless you are going for the atmosphere. Not only has the price of lighting changed, but also the technology that produces it.
Indeed, by 2006, the price for lighting in the UK had fallen to just £2.89:

Source: Fouquet and Pearson (2012), taken from ourworldindata.org. The price per million lumen-hours in £. 1 lumen-hour is equal to the luminous energy emitted in 1hr by a light source emitting 1 lumen. For comparison, a 100w light bulb emits around 1700 lumen.

Demand, efficiency, and innovation! When there is a desire for something, humans have an amazing ability to solve it. In this case, town gas allowed cheaper lighting in the 1800s, as gas lamps were twice as efficient as tallow candles. When the efficiency of the technology improves, the price of the service falls; gas lamps improved so much that during 1800 and 1900, the price of lighting reduced 30-fold! * You can really see this drop in the purple line above.
Electric lighting only became cheaper than gas lighting in the 1920s, (over 40 years after the introduction of the incandescent bulb). Consumption then kicked on and the rest is history. This is a nice way of looking at the evolution in lighting sources over time:

Commodities are attractive investments to many. You can touch them, they’re easily understood, and some of the short-term fluctuations do offer interesting investment opportunities. But over the long term?
As the lighting example proves, backing a commodity is effectively betting against human ingenuity. We prefer, over the long term, to back humankind’s proven track record of innovation. Will it shock you that a well-diversified portfolio is a good way to do that on aggregate….?

What is good Environmental Social and Governance (ESG) investing?
There is one fundamental problem with trying to solve the problems with ESG investing – what is good or bad.We are victims of it every day. Whether it’s at work, in the pub, at the dinner table… how often do you have to convince someone else that your idea of what is good (behaviours, outcomes, motives…) is the right one?

That’s because other people have different notions of what is good.

In the financial markets, if two investors disagree on the price of an asset (what is a good price for them), one investor can simply sell to the other, and eventually the market decides who was right. In ‘ESG’ situations the market doesn’t get to decide, so things get much trickier. Over to you…

  • Tesla is increasing the roll out of EVs, but is its CEO a shining example of corporate governance?
  • Genetically modified foods: messing with mother nature, or are they ending world hunger?
  • Are mining companies bad for the planet, or are they providing the metals for the energy transition?

Are banks corrupt, or are they the conduit to spur on renewable tech investments?

Not easy, is it…?
The EU has been trying to tackle this problem. Regulation now in force requires EU companies to provide ESG disclosures, covering a broad spectrum of sustainability topics.
EU businesses, including multinational companies with operations in Europe, have to report on ESG issues impacting their business, but they also have to report on how the business impacts a number of sustainability factors.

This is part of the efforts from regulators to create an international uniform standard of reporting, meant to fill the huge gap created by fragmented and inconsistent reporting. *
This doesn’t put philosophers out of their jobs – the fundamental problem of what is good or bad still exists. But when investing responsibly, looking at the same ESG metrics for all businesses through the same lens should give a clearer idea of who’s doing better or worse in the same playing field.

Congratulations and many thanks to Gary Beach and Charlotte McIntrye who ran the Brighton Marathon to fundraise for the charity in a very respectable time of just over 5 hours despite Charlotte picking up an injury!

They have raised £1250 so far with donations still coming in.

You are still able to donate through the following link or QR code.

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We have some exciting news to share with you all…

 

 

 

 

 

 

 

 

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Dear *|FNAME|*

I have pleasure in announcing we have accepted an offer to sell a MINORITY stake in our company from Söderberg & Partners who are the largest financial services company based in the Nordic countries.

This partnership is a strategic alliance designed to enhance our service offerings and expand our market presence. We were particularly drawn to Söderberg & Partners innovative approach and strong market position in financial services, technology and their resources running investment funds, which complements our own strengths and client-first ethos.

Why are Söderberg & Partners Investing?

They are looking to expand into the financial services sector in the UK having been very successful in operating in the Nordic countries for many years.
They are particularly keen to assist and support companies to expand services and the customer base using innovative technology resulting in improved efficiencies.

Will the people I deal with change?

No there are no redundancies, we are not moving or merging offices with other companies.
There will be no change to the personnel at Clear.

How will this affect Clear?

From a clients perspective it should be seamless, however Clear will have additional resources to improve customer experience and offer more services.

Who is Söderberg & Partners?

Söderberg & Partners is a significant player in Nordic financial consultancy, offering a range of services like insurance, investment advice, and financial planning. Founded in Sweden in 2004, it has expanded its operations across the Nordic region and beyond. The company helps clients manage risks, plan pensions, handle assets, and navigate employee benefits. Known for its innovative approach, Söderberg & Partners focuses on delivering customized solutions to meet individual client needs.

Will my costs increase?

There will be no change and certainly no increases, however if you are currently invested in the Clear Portfolios we have now gained access to cost effective model portfolios run by Soderberg. We are likely to advise to transfer into these portfolios with a cost saving of at least 30 basis points over the year. On a £100k investment this equates to a £300 saving per annum.

If you require any further information please do not hesitate to contact me on the office number 0208 669 3828

Our mailing address is:
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