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In with the new

14 December 2018 | Tania Allerton

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I have a feeling that 2019 is going to be a year of change. The big one, of course, is Brexit, but let’s not forget the risk of recession or the one-year ‘going live’ of the Markets in Financial Instruments Directive II (MiFID II).

Whatever your view on any of these events, they are already having an impact and are almost certain to continue to do so. At Vanguard, our preparations for Brexit and MiFID II have been evolving over more than two years.

At the time of writing serious issues remain outstanding on the eventual shape of Brexit, and that will probably still be the case when you’re reading this. We are making no assumptions and preparing for all possible outcomes, including those least likely to happen.

Our first and last care is to ensure the smoothest possible transition for all our clients. In respect of MiFID II, the various permissible methodologies for calculating transaction costs continue to make it difficult for clients to compare like for like, though each approach might be valid on its own terms.

This is frustrating for everyone. We will strive to ensure Vanguard gives advisers the most accurate reflection of actual costs. Where comparison is needed, we urge you to look at net performance relative to risk. For a PlainTalk™ guide to costs and charges, suitable for use with clients, please click here.

Recession? Vanguard’s best thinking is that we won’t have one in 2019 but the risks are rising. Interest rates are edging up, as is indebtedness, while friction over trade is getting hotter. Read our Vanguard Economic and Market Outlook 2019 to find out what you should do. There’s a summary, a couple of short videos and a webinar if you’re pressed for time, or the full report for those looking for some solid holiday reading. Click here.

Is there any good news? Oddly enough, there is!

Good news for some will be the continuing resilience of the Vanguard LifeStrategy Funds. It is only fair to say that this time last year there were questions around maintaining a strategic asset allocation to fixed income in the face of rising interest rates. But – once again – it seems to have been the right decision.

How the year will end, or what next year will bring, I can’t say. But in the 11 months to 30 November LifeStrategy 60% Equity was first quartile, with a return of 0.27% compared to an average return of -2.47% in the IA Mixed Investment 40—85% sector. See below for absolute net performance in recent years. (Of course, past performance does not indicate future returns!) Click here to see our LifeStrategy pages.

Good news all around is that demand for financial advice continues to grow. According to Platforum, assets under advice now total over £521 billion, a seven-fold increase in 10 years.

Is it any surprise? Yields are low but individuals and families face far greater liabilities than they did in the past. It tells me that regardless of events in 2019, our industry can look forward to a bright future.

I hope you have a wonderful holiday season and a prosperous New Year.

Performance summary: Vanguard LifeStrategy 60% Equity Fund

 

October 2013—2014

October 2014—2015

October 2015—2016

October 2016—2017

October 2017—2018

Fund returns net of expenses

6.11% 4.06% 18.17% 8.30% 1.11%

Note: Date ranges are 12 months to 31 October for each of the respective years; returns are GBP, NAV to NAV with gross income reinvested.
Source: Vanguard Global Advisers, LLC

Past performance in not a reliable indicator of future results.

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