perspectives / ashcourt rowan

spring 2013

Taking sTockwHy global turbulence makes a portfolio review a must

Finding incomeHow to boost

revenue from your investments

Family finance wHy tHe bank

of mum and dad is always open

TechnologytHe latest

breaktHrougHs to alter How

we live and work

10 ways to keep your tax

bill down

PERSPECTIVES 3

t: 0800 054 6797 email: [email protected] w w w. ashcourtrowan.com

Contents

perspectives is published biannually by ashcourt rowan plc exclusively for its clients by the river Group. if you wish to discuss any of the products or services mentioned in this publication then please contact your ashcourt rowan adviser or investment manaGer. the opinions and subjects discussed in this publication are for editorial purposes only and do not constitute financial advice. no director or employee of ashcourt rowan plc accepts liability for any direct or consequential loss arisinG from the use of this document or its contents. the opinions expressed in this maGazine are not necessarily the views held throuGhout ashcourt rowan plc.

4G lo b a l i n v e s t m e n t

by stephen walker

we are living in interesting times – which is why an annual portfolio review is more

important than ever

7a lo c a l a p p r oac h

where to find us – a guide to ashcourt rowan’s offices

around the Uk

810 ta x- p l a n n i n G t i p s

by chris williams

making the most of tax-efficient savings is a priority for every

investor… but are there ways you may be missing out?

1 0t h e b a n k o f m u m & da d

by chris williams

planning is the key to providing financial help for your children

1 2t h e pat h to i n c o m e

by stephen walker

with interest rates stuck on ‘low’ where should investors look now?

14d o p e n s i o n s s t i l l

h av e w h at i t ta k e s ?

a reputation for being costly and unreliable means many are

giving pensions a wide berth. but are they right?

1 6t e c h n o lo G y:

t h e f i n a l f r o n t i e r by stephen walker

a look at the developments that are changing the way we live

and work

1 8m e e t t h e t e a m

David esfandi’s investment research team is an excellent

blend of specialists

spring 2013

p8

p14

p4

p16

PERSPECTIVES 3


Contents

perspectives is published biannually by ashcourt rowan plc exclusively for its clients by the river Group. if you wish to discuss any of the products or services mentioned in this publication then please contact your ashcourt rowan adviser or investment manaGer. the opinions and subjects discussed in this publication are for editorial purposes only and do not constitute financial advice. no director or employee of ashcourt rowan plc accepts liability for any direct or consequential loss arisinG from the use of this document or its contents. the opinions expressed in this maGazine are not necessarily the views held throuGhout ashcourt rowan plc.

4G lo b a l i n v e s t m e n t

by stephen walker

we are living in interesting times – which is why an annual portfolio review is more

important than ever

7a lo c a l a p p r oac h

where to find us – a guide to ashcourt rowan’s offices

around the Uk

810 ta x- p l a n n i n G t i p s

by chris williams

making the most of tax-efficient savings is a priority for every

investor… but are there ways you may be missing out?

1 0t h e b a n k o f m u m & da d

by chris williams

planning is the key to providing financial help for your children

1 2t h e pat h to i n c o m e

by stephen walker

with interest rates stuck on ‘low’ where should investors look now?

14d o p e n s i o n s s t i l l

h av e w h at i t ta k e s ?

a reputation for being costly and unreliable means many are

giving pensions a wide berth. but are they right?

1 6t e c h n o lo G y:

t h e f i n a l f r o n t i e r by stephen walker

a look at the developments that are changing the way we live

and work

1 8m e e t t h e t e a m

David esfandi’s investment research team is an excellent

blend of specialists

spring 2013

p8

p14

p4

p16

PERSPECTIVES4


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A chAnging world why an annual portfolio review is so important

PERSPECTIVES 5


ast summer, with the global economy in meltdown and the FTSE 100 plunging towards 5000, optimists were in short

supply. How quickly things change – less than one year later, the investment world looks rather different. The future looks that little bit brighter, at least where stock markets are concerned.

Several factors combined to improve the investment market’s mood. European Central Bank President Mario Draghi can certainly take some of the credit, after his pledge in July 2012 to do “whatever it takes” to save the euro. Sentiment was further boosted by yet more quantitative easing (QE) from the US Federal Reserve and the Bank of England, and looser monetary policy in many other countries, notably China.

As a result, the FTSE 100 benchmark index ended 2012 nudging 6000 and leapt another 6.4% in January, its best start to a year since 1989. Compare that to the doldrums of March 2009, when the financial markets plumbed the depths. Back then, the FTSE had dropped by 40% to around 3500. It felt like the end of the world at the time – but the world is now a very different place.

While it is too early to tell where 2013 will take us, the need to keep the make up of our clients’ investment portfolios under close watch has never been more important. Equities may look favourably priced compared with other assets now, but this dynamic can change quickly in response to the direction of interest rates and government “stimulus”.

p u t t h at c a s h to w o r kIn the wake of the crisis, many people chose the relative safety of cash, avoiding exposure to the turbulence of the markets. But investors who have failed to review their portfolios since those dark days could now be losing out significantly. For those who sat tight after the financial crisis, it

might be time to give their portfolios a dust down and a shake up.

For one thing, cash carries its own risks. Savings rates are pitifully low and there is little sign that they will rise any time soon. The Bank of England could easily hold base rates at 0.5% for another four years or more, and relatively high inf lation means that anybody who leaves too much of their wealth on deposit will see the value of their money fall in real terms, year after year.

So where next for investors? Of course, there is no single solution, but moving with the times is important if they are to harness the current power of the market. The crisis certainly isn’t over yet and stock markets remain volatile, but with the right advice and guidance, there are certainly some very solid opportunities for today’s investor.

t h e way a h e a dWhile markets may take a breather

following their recent exertions, there could be more excitement to come, according to David Esfandi, managing director at Ashcourt Rowan Asset Management. The International Monetary Fund (IMF)predicts that the global economy will grow by 3.5% this year and this could bring even greater upward swings, he says.

“If we get that kind of growth, business will really get to work, boosting capital expenditure, seeking mergers and acquisitions, growing earnings, generating more cash, and paying higher dividends to investors. All this could drive markets higher.”

Consequently, there is arguably no time like the present for considering shifting portfolios towards stocks and shares, says David. “The global economy isn’t going to steamroller ahead – markets will remain volatile, with a lot of ups and downs. Yet some funds and stocks will outperform, which gives us plenty of scope to generate growth.”

Equities remain the best value on a relative basis given the current levels of interest rates. This is fertile ground for adding value by identifying the right stocks - there will be winners and losers and effective research will help keep us on the right side of the fence.

Indeed, he is hopeful that there is good scope to outperform benchmarks this year across our portfolios of direct equities and funds.

g e t t i n g t h e f i t r i g h tNaturally, the style of investment portfolio must always suit the needs, aims and risk profile of the individual – which is why regularly reassessing and reviewing investments with investment managers is vital.

“Our primary aim is to protect the value of clients’ money. The economy could still find itself in a dark place and we’ve positioned our portfolios to survive that, by diversifying,” he says.

There are many possibilities for growth in the current climate, and, says David, a fall in share prices

l

Our primary aim is to protect our clients’ investments. We have

positioned our portfolios to survive

by diversifying

PERSPECTIVES 5


ast summer, with the global economy in meltdown and the FTSE 100 plunging towards 5000, optimists were in short

supply. How quickly things change – less than one year later, the investment world looks rather different. The future looks that little bit brighter, at least where stock markets are concerned.

Several factors combined to improve the investment market’s mood. European Central Bank President Mario Draghi can certainly take some of the credit, after his pledge in July 2012 to do “whatever it takes” to save the euro. Sentiment was further boosted by yet more quantitative easing (QE) from the US Federal Reserve and the Bank of England, and looser monetary policy in many other countries, notably China.

As a result, the FTSE 100 benchmark index ended 2012 nudging 6000 and leapt another 6.4% in January, its best start to a year since 1989. Compare that to the doldrums of March 2009, when the financial markets plumbed the depths. Back then, the FTSE had dropped by 40% to around 3500. It felt like the end of the world at the time – but the world is now a very different place.

While it is too early to tell where 2013 will take us, the need to keep the make up of our clients’ investment portfolios under close watch has never been more important. Equities may look favourably priced compared with other assets now, but this dynamic can change quickly in response to the direction of interest rates and government “stimulus”.

p u t t h at c a s h to w o r kIn the wake of the crisis, many people chose the relative safety of cash, avoiding exposure to the turbulence of the markets. But investors who have failed to review their portfolios since those dark days could now be losing out significantly. For those who sat tight after the financial crisis, it

might be time to give their portfolios a dust down and a shake up.

For one thing, cash carries its own risks. Savings rates are pitifully low and there is little sign that they will rise any time soon. The Bank of England could easily hold base rates at 0.5% for another four years or more, and relatively high inf lation means that anybody who leaves too much of their wealth on deposit will see the value of their money fall in real terms, year after year.

So where next for investors? Of course, there is no single solution, but moving with the times is important if they are to harness the current power of the market. The crisis certainly isn’t over yet and stock markets remain volatile, but with the right advice and guidance, there are certainly some very solid opportunities for today’s investor.

t h e way a h e a dWhile markets may take a breather

following their recent exertions, there could be more excitement to come, according to David Esfandi, managing director at Ashcourt Rowan Asset Management. The International Monetary Fund (IMF)predicts that the global economy will grow by 3.5% this year and this could bring even greater upward swings, he says.

“If we get that kind of growth, business will really get to work, boosting capital expenditure, seeking mergers and acquisitions, growing earnings, generating more cash, and paying higher dividends to investors. All this could drive markets higher.”

Consequently, there is arguably no time like the present for considering shifting portfolios towards stocks and shares, says David. “The global economy isn’t going to steamroller ahead – markets will remain volatile, with a lot of ups and downs. Yet some funds and stocks will outperform, which gives us plenty of scope to generate growth.”

Equities remain the best value on a relative basis given the current levels of interest rates. This is fertile ground for adding value by identifying the right stocks - there will be winners and losers and effective research will help keep us on the right side of the fence.

Indeed, he is hopeful that there is good scope to outperform benchmarks this year across our portfolios of direct equities and funds.

g e t t i n g t h e f i t r i g h tNaturally, the style of investment portfolio must always suit the needs, aims and risk profile of the individual – which is why regularly reassessing and reviewing investments with investment managers is vital.

“Our primary aim is to protect the value of clients’ money. The economy could still find itself in a dark place and we’ve positioned our portfolios to survive that, by diversifying,” he says.

There are many possibilities for growth in the current climate, and, says David, a fall in share prices

l

Our primary aim is to protect our clients’ investments. We have

positioned our portfolios to survive

by diversifying

PERSPECTIVES8

10 ta x- pl a n n i ng t i p s

voiding paying unnecessary tax should be as simple as working through a

checklist of priorities. However, for many people, an interwoven array of financial products and legal thresholds can make it hard to know where to begin. “Products and allowances come loaded with jargon,” says Chris Williams, chief executive officer of financial planning at Ashcourt Rowan. “And, as they go through life, people pick up investments, policies and pensions without a co-ordinated financial plan. They need someone to set out the order in which to address them.

“Most people have a ‘lightbulb’ moment when they realise they need to sort out inheritance and income tax,” he says, “and the earlier they start to plan, the easier that will be.”

Chris’s tips should make tax savings simpler still.

1Pa r t n e r s i n ta xIndividuals have an untaxed inheritance tax

threshold of £325,000. If you’re married or in a civil partnership, you share a combined allowance of £650,000, and will inherit your deceased partner’s allowance. This means you need to keep a clear and accurate record to demonstrate that they didn’t use their threshold when they died. Making a will is also vital.

2G i v e i t away An individual can gift £3,000 a year without tax

implications. Any amount beyond that will remain untaxed as long as the giver lives for seven years after

while tax efficiency is a Priority for most investors, in reality many PeoPle miss out on siGnificant Potential savinGs. PeneloPe Rance talks to

ashcourt rowan’s chris williams

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income after living expenses. This can cover income from pensions and investments, but you need to demonstrate that the income is more than you need to live on. While this can be done at any age, it makes sense to wait until you know you have sufficient funds to live on.

4t h i n k t r u s t sMost people would rather give away their

money than have their children pay inheritance tax. However, the concern is that they don’t run out of funds in the process. The solution could be to put the money in a trust where you retain a right to any income. Ashcourt Rowan can advise on the right kind of trust to ensure financial security.

5t h e b u s i n e s s Business property relief can be useful for business owners

as they can pass on their wealth without being taxed. Private clients can take advantage of this, too, by investing in unlisted or AIM-listed companies (those listed on what was formerly known as the alternative investment market). After two years, the investment is exempt from inheritance tax. However, these investments can be relatively high risk and that the value of your capital can go down as well as up.

6b e c h a r i ta b l e Charitable gifts are exempt from tax, as are donations

to political parties. This can be useful for not paying tax on any money over the inheritance tax threshold.

the gift, otherwise inheritance tax may be payable. Plan early and give on a regular basis, taking advantage of annual allowances and exempt transfers so your liability remains manageable. Property must be given as a full gift – you can’t continue to live there once you’ve made the gift. Also be aware that buying another property creates a new liability.

3e x t r a i n c o m e The income over normal expenditure allowance lets

individuals give away any surplus

most people have a lightbulb moment when

they realise they need to sort out inheritance

and income tax

a

t: 0800 054 6797 email: [email protected] w w w. ashcouRtRowan.com

PERSPECTIVES12


The paTh To incomeooking for income is a difficult game these days. The Bank of England base rate is nearly at rock bottom and there are no

signs that this will change soon. Inflation is high enough to make it difficult for taxpayers to earn sufficient interest to actually make any money from their savings.

The impact of low interest rates is certainly harsh for those with money in fixed-rate accounts that are coming to a close, taking them away from a relatively high rate of interest and into returns that are far less appealing.

After all, the banks are not exactly going hell for leather to get savers through their doors. “Banks don’t offer high savings rates out of the goodness of their hearts,” says Stephen Walker, head of investment research at Ashcourt Rowan. “They do so to bolster funding for lending.” And currently, he says, their need for that funding has diminished.

Firstly, consumer appetite for borrowing has reduced, with more and more people working on paying off debts rather than increasing borrowing. And the government’s Funding for Lending scheme, aimed at encouraging banks to lend to businesses and consumers, means

interest rates are low, living costs are rising, and finding inflation-beating savings is increasingly tough. so where should investors turn

now if they are searching for…

they’d ever get their money back.

“People have realised that just going to the

banks with the highest rates is not the risk-free option they once

thought it was,” says Stephen.But while getting income from your

money isn’t easy, it’s not all doom and gloom. “People who have been religiously putting money away in individual savings accounts (ISAs) over the years will now have access to tax-free withdrawals,” he explains.

Nonetheless, generating income is undoubtedly tough, and

with the cost of living

banks have easier and cheaper access to funds than they have had in the past, leaving them less inclined to call on savers to boost their coffers.

s av v y s av e r s Savers, too, are wiser than they used to be. The days when people headed straight for the highest rates on the ‘best buy’ tables are now gone. Too many people had their fingers burned when table-topping accounts from Icelandic banks, among others, left them wondering whether

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PERSPECTIVES12


The paTh To incomeooking for income is a difficult game these days. The Bank of England base rate is nearly at rock bottom and there are no

signs that this will change soon. Inflation is high enough to make it difficult for taxpayers to earn sufficient interest to actually make any money from their savings.

The impact of low interest rates is certainly harsh for those with money in fixed-rate accounts that are coming to a close, taking them away from a relatively high rate of interest and into returns that are far less appealing.

After all, the banks are not exactly going hell for leather to get savers through their doors. “Banks don’t offer high savings rates out of the goodness of their hearts,” says Stephen Walker, head of investment research at Ashcourt Rowan. “They do so to bolster funding for lending.” And currently, he says, their need for that funding has diminished.

Firstly, consumer appetite for borrowing has reduced, with more and more people working on paying off debts rather than increasing borrowing. And the government’s Funding for Lending scheme, aimed at encouraging banks to lend to businesses and consumers, means

interest rates are low, living costs are rising, and finding inflation-beating savings is increasingly tough. so where should investors turn

now if they are searching for…

they’d ever get their money back.

“People have realised that just going to the

banks with the highest rates is not the risk-free option they once

thought it was,” says Stephen.But while getting income from your

money isn’t easy, it’s not all doom and gloom. “People who have been religiously putting money away in individual savings accounts (ISAs) over the years will now have access to tax-free withdrawals,” he explains.

Nonetheless, generating income is undoubtedly tough, and

with the cost of living

banks have easier and cheaper access to funds than they have had in the past, leaving them less inclined to call on savers to boost their coffers.

s av v y s av e r s Savers, too, are wiser than they used to be. The days when people headed straight for the highest rates on the ‘best buy’ tables are now gone. Too many people had their fingers burned when table-topping accounts from Icelandic banks, among others, left them wondering whether

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PERSPECTIVES 13


rising and people needing to keep pace with inflation, investing for income has never been more relevant. So, if old-fashioned cash savings cannot rise to the occasion, is there anything that can?

i n c o m e h u n t e r s “People are increasingly being driven out of banks and into investing,” says Stephen. “But that means taking certain risks that less-experienced investors are not used to taking and often do not fully appreciate.”

One of the first natural ports of call is bonds, where the investor effectively lends money to a government or company in return for interest.

“There has been relatively high demand for bond funds from investors in recent years,” says Stephen. “But the challenge here is that there are very low yields on government bonds.”

High-quality gilts, as UK government bonds are known, have yields paying perhaps 2% or 3%, and are not tax efficient, warns Stephen.

For higher returns, Stephen believes that corporate bonds could play an important role. “We think high-yield corporate bonds are quite attractive,” he says. “If you hold on to them until maturity, you could potentially be looking at expected returns of 5% to 6%. The outlook for these is fairly positive – and while we have concerns about the economic backdrop, the default risks remain low in our view.”

Plus, if a company goes into liquidation, bondholders will be higher on the list of creditors than shareholders, and are likely to get back more of their investment.

But that’s not to say that UK shares should be ignored when investing

for income. “Equity income can

provide a decent income stream that should grow over time,” says Stephen. “Major blue-chip companies will aim to increase their dividends over time.”

It is important to bear in mind, though, that these dividends are in no way guaranteed, and income can be affected should they cease to be paid.

Another potential downside is that, as shareholders, equity investors take a greater capital risk than bond investors. With bonds, at the end of a set period and in the absence of default, you will get your capital back. With shares, there is no end point and no such promise. Realising your

capital requires you to sell the shares and prices can go down as well as up. There are other areas, though, that could be attractive to income seekers.

c o m m e r c i a l p r o p e r t y In spite of a number of potential disadvantages, this sector could prove profitable. “The fundamentals may not appear to be great as the opportunity for capital growth is limited at present, and those that have a lot of exposure to retail property on the high street have issues,” says Stephen. “But many of the funds that invest in commercial property have an orientation towards offices, logistics or shopping centres. There is reasonable rental yield to be had and over time it

is hoped that this will grow in line with inflation.

Capital value

should also increase. It depends on the UK’s economic outcome, and you might not get rich quick, but it is perfectly possible that in the long term, these funds will do well.”

think outside the box But while investors traditionally look for income in the form of interest or yield, it can be useful to look elsewhere. “There is no need for this to be income rather than capital growth,” says Stephen. “Investors can withdraw from capital and a balanced approach that seeks both income and capital growth may be worth considering if only because, in many cases, tax efficiency will be improved.”

Interest rates also look set to stay low for the foreseeable future, so income investors increasingly need a solid plan in order to reach their goals.

“There is not one solution,” says Stephen, “but a mix of these elements designed to achieve both yield and growth, with income increasing going forward and a capital value that is kept relatively stable goes a long way to achieving what many people need.”

Ashcourt Rowan has a number of lower-risk strategies that could be a good starting point for those looking to invest for the first time. Please contact one of our financial planners if you are interested in receiving advice on your investments. xxxxx xxxxxxxxxxxxxxxxx

Choosing inappropriate or unsuitable investments could put your capital at greater risk than you are willing to accept. The value of your investments may fall as well as rise. High yield corporate bonds can carry a higher risk of capital loss than other fixed interest stocks. Always speak to your adviser before making investment decisions.

high-yield corporate bonds are attractive.

hold onto them to maturity and you could be looking at

returns of 5% to 6%

Toni meadows chief investment officer

2

PERSPECTIVES16


with the advent of online and now

mobile banking, many of us rarely venture

into a physical branch

technological advances have created countless challenges and opportunities for businesses and investors. stephen walker looks at the

developments that are altering the way we live and work

he last 40 years have seen a major revolution in

the way people around the world work, plan, communicate and shop. A step change in the capability of technology and the continued innovation of products, many of which seem unnecessary but quickly become part of daily life, have made this possible.

The influence of technology is everywhere and has impacted all industries. Apple, Microsoft, IBM, Google and Samsung hog the headlines, but technological advances have had important implications for the oil majors such as ExxonMobil, PetroChina and Chevron, which exploit resources that were unobtainable just a few decades ago.

Manufacturing, too, has seen dramatic changes. Thanks to advances in robotics by Japanese companies, many manufacturers are able to automate large amounts of their supply chain, immeasurably improving quality, reliability, productivity and scalability.

Financial services have changed beyond recognition. With the advent of online and now mobile banking, many of us rarely venture into a bank.

Global companies can arrange video conference calls between staff separated by huge distances, allowing them to manage sprawling operations.

The mobile phone means that

remote villages is having a transformative impact on economic development, too.

t h e lo s e r s In most areas, incumbents have adapted to these changes and often prospered, but the relative decline of companies such as Sony, Eastman Kodak and Nokia should be enough to show that technology companies

can also get left behind.However, the area that has

encountered the most challenges is retail, particularly in the UK, with the traditional high street suffering. The arrival of online shopping has divided the retail world in three: those such as Amazon that are online only; those that have developed a powerful online presence alongside physical stores, for example Tesco and Next, and those that are wedded to their physical locations.

The most recent crop of retailers to go out of business (HMV, Comet, Jessops and Blockbuster), share a common theme – they don’t offer anything unique and what they sell changes quickly. From a cost point of view, they can’t compete with virtual rivals with lower overheads, something that handicapped Comet and Jessops.

A bigger problem for HMV and Blockbuster was a failure to adapt to changing trends. Both were iconic

people are rarely out of touch with one another, which has its downsides as anyone trying to get away from the office for a relaxing holiday will tell you. However, on balance they are surely a positive force.

g lo b a l d e v e lo p m e n t Mobile technology is also changing developing economies, enabling them to bypass the time and cost involved in instaling a nationwide fixed-line telecoms network and instead jump straight to mobile.

Bringing banking capabilities to

//:Technology://The Final FronTier

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PERSPECTIVES16


with the advent of online and now

mobile banking, many of us rarely venture

into a physical branch

technological advances have created countless challenges and opportunities for businesses and investors. stephen walker looks at the

developments that are altering the way we live and work

he last 40 years have seen a major revolution in

the way people around the world work, plan, communicate and shop. A step change in the capability of technology and the continued innovation of products, many of which seem unnecessary but quickly become part of daily life, have made this possible.

The influence of technology is everywhere and has impacted all industries. Apple, Microsoft, IBM, Google and Samsung hog the headlines, but technological advances have had important implications for the oil majors such as ExxonMobil, PetroChina and Chevron, which exploit resources that were unobtainable just a few decades ago.

Manufacturing, too, has seen dramatic changes. Thanks to advances in robotics by Japanese companies, many manufacturers are able to automate large amounts of their supply chain, immeasurably improving quality, reliability, productivity and scalability.

Financial services have changed beyond recognition. With the advent of online and now mobile banking, many of us rarely venture into a bank.

Global companies can arrange video conference calls between staff separated by huge distances, allowing them to manage sprawling operations.

The mobile phone means that

remote villages is having a transformative impact on economic development, too.

t h e lo s e r s In most areas, incumbents have adapted to these changes and often prospered, but the relative decline of companies such as Sony, Eastman Kodak and Nokia should be enough to show that technology companies

can also get left behind.However, the area that has

encountered the most challenges is retail, particularly in the UK, with the traditional high street suffering. The arrival of online shopping has divided the retail world in three: those such as Amazon that are online only; those that have developed a powerful online presence alongside physical stores, for example Tesco and Next, and those that are wedded to their physical locations.

The most recent crop of retailers to go out of business (HMV, Comet, Jessops and Blockbuster), share a common theme – they don’t offer anything unique and what they sell changes quickly. From a cost point of view, they can’t compete with virtual rivals with lower overheads, something that handicapped Comet and Jessops.

A bigger problem for HMV and Blockbuster was a failure to adapt to changing trends. Both were iconic

people are rarely out of touch with one another, which has its downsides as anyone trying to get away from the office for a relaxing holiday will tell you. However, on balance they are surely a positive force.

g lo b a l d e v e lo p m e n t Mobile technology is also changing developing economies, enabling them to bypass the time and cost involved in instaling a nationwide fixed-line telecoms network and instead jump straight to mobile.

Bringing banking capabilities to

//:Technology://The Final FronTier

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PERSPECTIVES 17


brands and could have been at the forefront of changing habits. Instead, consumers use iTunes or Amazon to download their favourite songs instantly, and services such as Netflix to instantly stream films or TV shows.

In an attempt to avoid cannibalising their incumbent business, they resisted change and ultimately destroyed themselves. i m p o s s i b l e to r e s i s t If there is one lesson to learn from all of this, it is that companies cannot resist change; the successful ones embrace it. Consumers are under financial pressure but they are still spending, and rather than curse the economic backdrop, retailers should look at themselves.

In the UK, online-only companies such as ASOS and Ocado have emerged while others have married the online and physical worlds successfully. There is still room for good businesses such as Costa Coffee (owned by Whitbread) but what is required is a clear understanding by management of what they are offering, whether who they are competing with and whether they are offering anything unique.

Technological changes have shrunk the world, bringing communities closer together. Over time, they should play a key role in increasing prosperity and enabling more rapid development for emerging economies.

From an investment point of view, those who can leverage technological change to their benefit stand a good chance of delivering strong returns, and fund managers who appreciate this have a better chance of delivering for their investors over time. XXXXXXXXXXX XXXXXXX

t h e pac e o f c h a n g e

gordon moore, a founder of

microchip giant intel, famously predicted in a 1965 paper that

the number of transistors on an integrated circuit

would double roughly every two

years. without worrying too much

about the technicalities,

increasing the number of

transistors is the main driver of the

increased power we have witnessed.

‘moore’s law,’ as it became known, has

persisted longer than the decade he

imagined and

explains a 1,000-fold increase in 40 years

as shown on the chart, below.

as an example, the original 2007 iphone was 100 times more

powerful than a ‘portable’ computer from 1982, weighed 1/100th as much, is

1/500th the size and, adjusted for inflation, cost 1/10th as much.

weight

size

cost

1/100

1/500

1/10

1982 PorTable

2007 iPhone

vs

m o o r e ’ s l aw

1,000

10,000

100,000

1,000,000

10,000,000

100,000,000

1,000,000,000

10,000,000,000

1970 2010

no o

f tr

ansis

tors

stephen Walker, head of market and bespoke portfolio strategy

intel itanium 2 processor

intel itanium processor

intel pentium 4 processor

intel pentium iii processor

intel pentium ii processor

intel pentium processor

Dual core intel itanium 2 processor

intel 486 processor

intel 386 processor

286

8086

808080084004

perspectives / ashcourt rowan

Economy & Finance