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Message from the CEO – Sep 2020

Moving forward

As you will know by now, Friends Provident International (FPI) is now part of International Financial Group Limited (IFGL). As the CEO of IFGL, I am delighted that the transaction is now complete and have the opportunity to speak to you.

There was a high level of scrutiny from our regulators, which means that you can have confidence that this is to the benefit of you, our customers.

Firstly, as an FPI policyholder, please note that you do not have to change anything. Your policy will continue on the same terms, with the same policy number and your email and phone contact points at FPI remain the same. You can also continue to manage your policy online through FPI Portal.

You can be reassured that we understand FPI’s business well and we all share a commitment to help you realise your financial goals. We do this by providing savings, investment and protection solutions, and providing financial advisers around the globe with support and materials to help you make the most of your money.

The Coronavirus pandemic has made many of us reassess our finances, but we strongly believe that there are two key messages which remain important to financial wellbeing:

Think long term

Stock markets have always had periods of volatility and always will. However, our savings and investment products are designed for the long term. If you keep your eye on your long-term goals, such as retirement or a child’s college fund, short-term changes in the market should not need to concern you.

Professional Advice

Keeping in touch with your financial adviser is essential in helping you manage your money. Your adviser knows your personal circumstances, your financial situation, and your long-term goals. By understanding this, they can understand your goals and help you reach them.

Best Regards,
David Kneeshaw
CEO of IFGL

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Playing the long game

Times of struggle can pave the way for new priorities

The pandemic crisis and the imposed limitation of movement made us reflect on what’s more important in life. Now that we are facing a new normal in the way we work, live and play, we are all eager to make sure that our current actions and behaviour continue to be on the right path. More so than ever we want a healthy and safe future for ourselves and our loved ones. This translates to all aspects of life including our finances. You may even be rethinking your current investment strategies – Shall I stay invested or flee the market given the uncertainty ahead?

Head vs Heart

Over the past few months, we have seen governments rolling out supportive policies and plans to revive economies, businesses laying off their workers or evolving their business models to fit current market needs. It is easy to become preoccupied with day-to-day market trends and fluctuations, and to make hasty decisions during volatile periods.

Doubts arise, and we question our investment portfolios – trying to analyse and predict the market. But rises and falls are part of stock market life. Focusing on the big picture rather than short-term noises is important. People feel the pain of losses more than they enjoy the pleasure of gains. One of the most important things is that you don’t overreact and sell stocks and shares when they’re down. Typically when there are periods of market volatility or where prices fall, it’s often a time to consider adding more to your investments rather than selling them.

Warren Buffett famously said that he likes his stocks the way he likes his socks: on sale

A useful investment insight to keep top of mind is that selling funds when they are down is rarely the best approach. We have seen throughout time that staying invested is typically more beneficial in the long term.

Weather the storm & persevere

Every decade or so we see markets resetting and throughout history societies experience global financial crises crippling their economies: the 1929 Great Depression, the Asian financial crisis of 1997, the dot-com bubble crash in 2002 followed by the crash of US housing bubble in 2007. We’ve been through difficult times before, and we’ve seen how timing the stock market is virtually impossible.

The importance of staying invested

Ending wealth values after market decline

Source: Morningstar. Past performance is no guarantee of the future results. This is for illustrative purposes only and not indicative of any investment. The market is represented by the Morningstar US Market Index. Cash is represented by the 30-day U.S. Treasury bill.

As you can see from the chart above, research by Morningstar1 revealed what would have happened to $100 invested in 2000, through the 2008 global financial crisis and up to 2020. If an individual had stayed invested, their $100 would have grown to $311 but by moving into cash, this investor would have lost out on the market growth following the recession. Even exiting the market for a single year, this investor would potentially have lost around $108. You can imagine the significance with larger investments. Typically we have seen that the best policy is to stay fully invested over the long term and to remain focused on long-term investment objectives.

We have also seen that investing a fixed amount on a regular basis into a long-term savings plan can help smooth out stock market movements. This is often referred to as “unit cost averaging”. A good example of such a prudent investment approach is seen in markets such as Australia and South Korea where investors tend to make automatic contributions to their investments and were more successful versus other markets with different investment strategies.2

By saving a fixed amount on a regular basis, individuals are reducing the risk of investing a large amount in a single investment at the ‘wrong’ time.

1 ©2020 Morningstar. All rights reserved. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided as of the date written, solely for informational purposes; and subject to change at any time without notice. This content is not an offer to buy or sell any particular security and is not warranted to be correct, complete or accurate. The Morningstar name and logo are registered marks of Morningstar, Inc. This content includes proprietary materials of Morningstar; reproduction, transcription or other use, by any means, in whole or in part, without prior, written consent of Morningstar is prohibited.

2 December 2019 – Morningstar Mind the Gap 2019 report titled “A Report on Investor Returns Around the Globe”

The cost of market timing

Risk of missing the best days in the market: 1999 – 2019

Source: Morningstar. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. The market is represented by the Ibbotson® Large Company Stock Index.

Stay the course: Look ahead

As dedicated investors, it is normal to have doubts and question our investment decisions at every market movement and trend. We simply want to ensure our investments are protected – why not.

However, it is always prudent not to react too quickly and speak to your financial adviser to review your investment portfolios on a regular basis to ensure they are in keeping with your future goals. You don’t know what prices are going to do next month or next year but one thing that’s guaranteed is that prices are going to move around.

For long-term investors, it is important not to flee the market in a panic, but rather embrace the turmoil as an investment opportunity – you are likely to be better off in the long run.

David Kneeshaw – CEO of IFGL

Message from the CEO – September 2020

Moving forward

As you will know by now, Friends Provident International (FPI) is now part of International Financial Group Limited (IFGL). As the CEO of IFGL, I am delighted that the transaction is now complete and have the opportunity to speak to you.

Find out more

What’s the impact?

Environmental, social and governance (ESG)

Over recent months, there has been much talk of the impact of Covid-19 on the environment. At the same time you may have become aware of the term ESG in the news. Here, international fund manager JP Morgan investigates the importance of ESG.

Covid-19 shows ESG matters more than ever

At the start of the year, sustainability was at the top of the political agenda, with new climate initiatives ranging from the organisation of the COP 26 UN Climate Change Conference to the launch of the Green Deal in Europe. Sustainable investing was on the trajectory to the mainstream, with asset managers prioritising the integration of material environmental, social and governance (ESG) factors into existing investment solutions, while the development of new sustainable investment solutions continued to accelerate.

However, the Covid-19 crisis unfortunately changed the priorities, with policymakers having no choice but to focus on crisis management and to redirect already scarce financial resources to support their economies.

Has the pandemic slowed down the momentum for sustainable investing? Market flows suggest otherwise. In the U.S., for example, Morningstar reported almost USD 10 billion of inflows to sustainable open-end mutual funds and exchange-traded funds in Q1 2020, already over half the total for the whole of 2019.

For investors, we believe the crisis will ultimately accelerate the ESG agenda, with wide-ranging repercussions. Environment is, of course, only one aspect of the equation. The crisis also highlights the importance of social and governance factors, with better governed companies proving to be more resilient so far.

Environment: Loss of momentum outweighs short-term benefits

The first conclusion about the environmental impact of the Covid-19 crisis is often that it is positive. Satellite images show a substantial drop in nitrogen dioxide concentrations in many countries. However, these short-term environmental benefits come with an important loss of momentum in the fight against climate change.

The Covid-19 crisis led to the cancellation of many climate demonstrations and, more importantly, to the postponement of the COP 26 Climate Conference to 2021. This is a significant setback. The US National Oceanic and Atmosphere Administration recently announced that 2020 could well become the warmest year on record. We cannot afford to lose an additional year.

The short-term reduction in greenhouse gas emissions could also be overshadowed by a rapid rise in fossil fuel consumption as economies start to reopen and recover – with low energy prices potentially exacerbating the increase. This was true for the 2008 financial crisis, when emissions initially fell from 32 gigatonnes (2008) to 31.5 (2009) before rising again to 33.2 in 2010.

However, technological advances offer some hope. The cost of producing electricity from renewable power is becoming increasingly competitive, as is the cost of battery storage, which should help to contain the rise in greenhouse gases. In addition, the volatility in oil prices adds to the pressure on oil-dependent nations to diversify their revenue sources, boding well for a greener future.

On the policy front, Europe’s green recovery plan is just one indication that climate risk mitigation policies have only been postponed, and that governments and companies will recognise the need to step up their climate adaptation measures to be better prepared for the next crisis.

Social: Covid-19 magnifies and increases inequality

Covid-19, probably more than any previous crisis, has magnified and increased inequality: between those who have access to efficient healthcare systems and those who have not, between those with the ability to work from home and those without.

This is true both within societies and across countries. Healthcare systems in many poorer countries are less equipped to deal with this crisis. However, it’s probably on the economic front that poorer countries will be hit the hardest, given their reliance on remittances from their diaspora in rich countries.

In addition, measures implemented to deal with the crisis, such as more generous unemployment benefits and furlough schemes, tend only to apply to those with an official work contract. In many emerging economies, most people don’t have contracts, but live from small jobs in the informal economy. For those people, working from home means no income.

As well as the short-term consequences, we expect the crisis to have some significant longer-term implications. One notable example is job displacement due to automation. Estimates suggest that around one third of the global workforce will have their jobs disrupted by artificial intelligence and automation over the next decade. Jobs replaced by automation during the crisis could be gone forever. Governments face the risk that resultant huge disparities among workers will lead to heightened populism. We believe companies will need to step up investment in their human capital through continuous training and health and safety improvements. While these measures will inevitably increase unit labour costs, in the long run a more skilled workforce should help companies to achieve more sustainable growth.

In summary, a wide range of “S” factors are likely to exacerbate inequalities in societies and increase unit labour costs, potentially impacting the speed of economic recovery and corporate profitability.

Governance: Covid-19 shows the value of good governance

This crisis is serving as a large-scale stress test of corporate resilience. The sudden loss of income in many sectors, together with the need to completely and rapidly reorganise value chains and methods of interacting with employees and customers, has proven disruptive for many businesses around the world.

As one would expect, companies with the best governance have fared better. Defensive capital allocation strategies have been rewarded as the level of cash on the balance sheet has suddenly become a more interesting metric for investors than the dividend yield – which in many cases will be reduced anyway due to decreasing earnings and/or regulatory pressures.

As well as navigating the crisis, boards will need to ensure they maintain a focus on long-term sustainability. Companies have good economic reason to retain a higher cash reserve by withholding dividend pay-outs and share buybacks in these unusual times, but ultimately this will hurt income-dependent shareholders. Boards and management will need to find the right balance between shareholder rights and the rights of other stakeholders, and between short- and long-term priorities.

Conclusion

The Covid-19 crisis once again highlights that ESG factors can have significant implications for the economy and for society. Embracing ESG is not a vague distant goal, but something that immediately strengthens the resilience of our societies and companies.

At a time when governments need to reorient their focus towards crisis management, it’s up to private investors to step in and fill the gap to ensure that their long-term savings help to support our long-term goals.

Stricter regulations will further encourage the shift. Indeed, as governments face more financial constraints in achieving their sustainability goals, they may well focus on the regulatory framework to encourage private investors to finance ESG initiatives.

David Kneeshaw – CEO of IFGL

Message from the CEO – September 2020

Moving forward

As you will know by now, Friends Provident International (FPI) is now part of International Financial Group Limited (IFGL). As the CEO of IFGL, I am delighted that the transaction is now complete and have the opportunity to speak to you.

Find out more

FPI Portal

Online banking

According to the International Telecommunication Union (ITU)*, an estimated 4.1 billion people across the world now use the internet, an increase of more than 100% since 2009. During this time, online banking has moved from being a niche area to becoming the norm for millions of individuals around the world.

Today, most of us would not consider making a trip into the city to visit the bank when a simple bill payment or cash transfer can be done online in the comfort of our own home in a matter of minutes. Online and mobile banking has made everyday financial transactions easier and it can also help investment customers who are making long-term savings or investment commitments.

There are many reasons why online access to your investments through FPI Portal is beneficial. Here are just four:

Convenience

International customers are by definition spread around the world. Dealing with an office, possibly in a different time zone, may not be convenient, but FPI Portal is available when it suits you.

Security

While email is an efficient way of keeping in contact, its security is not guaranteed. Secure “2-factor authentication” gives customers a safe way to access their policy details online and even share essential, confidential information through the Secure Mailbox.

Ease

You can keep your personal details up to date, view the latest valuations on your policy and check recent transactions.

Control

With online switching and dealing facilities you can change the investments linked to your policy at any time. This is done exactly as you have instructed, without any need to fill in a form.

Take a look at our FPI Portal Overview for more details.

FPI Portal quick stats

  • 46,399 Active users**
  • 125 New users per week***
  • 2,818 Online switches (in Q1 2020)
  • 4,798 Secure Messages (in H1 2020)
  • 1,929 Change of Details (Change of Personal Details in H1 2020)

Even if your financial adviser looks after your policy, you can still register for FPI Portal in order to manage the basics, such as keeping personal details up to date, sending personal documents to us or authorising requests.

Save time. Go online.

* International Telecommunication Union – Facts Figures 2019

** at 24 Jul 2020

*** 1 Jan 2019 – 24 Jul 2020

David Kneeshaw – CEO of IFGL

Message from the CEO – September 2020

Moving forward

As you will know by now, Friends Provident International (FPI) is now part of International Financial Group Limited (IFGL). As the CEO of IFGL, I am delighted that the transaction is now complete and have the opportunity to speak to you.

Find out more

Critical Illness Cover

The Importance of Critical Illness Cover

In an ideal world, where everyone is healthy and no one is susceptible to any illness, critical illness cover wouldn’t be a necessity. However, the sad reality is that global critical illness statistics are depicting startling numbers and an increased ‘per individual’ risk of being diagnosed with a critical illness at some point in your lifetime.

We are increasingly seeing that it’s no longer about ‘if’ you will get a critical illness, but ‘when’ you will get a critical illness. As a result, not having suitable critical illness protection in place can leave people feeling very vulnerable regarding their financial commitments, at a time when their main focus should be on their recuperation and long-term physical and mental wellbeing.

Common misconceptions about medical cover

Unfortunately, critical illness cover is often misunderstood as providing protection similar to medical health cover or medical insurance. This misconception has resulted in many people opting to rely on their company’s medical insurance scheme, and not exploring or understanding the need for critical illness cover and the additional benefits and security that this product can provide. This was further highlighted through a recent survey conducted by Friends Provident International in the UAE.

We asked approximately 750 of our existing customers (who had no critical illness policy with us), why they didn’t feel the need to opt for critical illness cover. Almost 30% of them believed that their medical insurance was sufficient to look after their requirements (medical and financial) should they be diagnosed with a critical illness or disability. In our opinion this misconception is one of the major reasons why there isn’t sufficient critical illness cover taken up in this region.

Supplementing your medical insurance

Under a critical illness policy a lump sum payment is made direct to the customer on diagnosis of one of the specified illnesses/disabilities covered under the policy. The funds can be used to supplement gaps in cover under medical insurance and the customer can also use the claim proceeds to help cover the cost of daily living and ongoing financial commitments, enabling them to focus on their immediate treatments and long-term recovery.

Historically, a critical illness policy would only cover a small number of catastrophic medical emergencies such as cardiac arrest, stroke and cancer. Today, policies offer more extensive coverage across a range of critical illnesses and disabilities that vary in severity. Our CI and disability benefit cover provides adult protection against 35 different types of critical illnesses including cancer, heart attacks and permanent disability. It also provides protection against 26 different types of illnesses and disabilities under the Children’s Critical Illness and Disability Benefit, offering policyholders free coverage for their children, including any future children.

Protecting you and your family

The types of critical illness policies available in this market are undoubtedly among the best in terms of coverage and keeping the customers’ interests at heart. Friends Provident International is seen as one of the best providers of this type of product in the market with generous non-medical limits enabling customers to obtain large sums of protection without having to undergo any medical examinations.

We are proud to have received recognition for our International Protector Middle East (IPME) term assurance plan, at the International Adviser Global Financial Services Awards 2019.

Today we are witnessing how critical illness cover is becoming of utmost importance. Take a look at our video, outlining how critical illness cover could benefit you and your family

Life changes. Be prepared. Be protected

David Kneeshaw – CEO of IFGL

Message from the CEO – September 2020

Moving forward

As you will know by now, Friends Provident International (FPI) is now part of International Financial Group Limited (IFGL). As the CEO of IFGL, I am delighted that the transaction is now complete and have the opportunity to speak to you.

Find out more

Passing on wealth

We need to start talking about succession planning

The Chinese saying, “Wealth never survives three generations” is an ancient wisdom that is still applicable in the modern world. According to the annual UBS/PwC Billionaires report, 70 per cent of billionaire wealth dropped below the billion-dollar mark once it went beyond the first-generation, and a further 20 per cent was gone by the end of the second-generation.

A recent study by RBC Wealth Management shared that we are about to witness the largest transfer of billionaire wealth worldwide – an estimated USD 2.4 trillion is due to change hands in the next two decades. What’s alarming about this, is that fewer than one in every three high net worth families have established a complete wealth transfer plan.

People procrastinate about succession planning for various reasons. Common reasons include concerns that passing on wealth may leave beneficiaries less motivated or cause a divide in the family. Furthermore, it could be a tricky topic to broach with familial relations, business associates and partners – particularly in Asia, where many believe that discussions about the death of a loved one or the handover of a business can bring bad luck.

If these echo your sentiments, fret not! One possible solution could be to engage a professional financial advisor to guide you through the process.

Without proper succession planning, wealth may disappear

A good succession plan should mirror your assets, covering all bases across estate planning, investment planning, wealth transfer and even charitable giving, and enable an orderly transition process that retains asset value whilst ensuring they get passed on to your chosen beneficiaries. Conversely, lack of planning could leave family wealth and financial assets exposed to probate costs, complex inheritance laws and regulations, leading to the disappearance of wealth. It could also cause emotional distress for your loved ones if disputes and power struggles occur within the family.

Succession planning is a complex process, made increasingly so with the rise of a demographic of mobile individuals with overseas investments and cross-border assets.

To further complicate things, such assets would likely be subjected to multi-jurisdictional legal, compliance and tax issues which could cause value erosion when transferring wealth across generations.

But how should you start? Here are a few important considerations to note as you kick start your succession planning journey:

  • Do you have up to date and professionally drafted wills in place, in all the countries where your assets are based?
  • Have you carefully assessed and chosen investment solutions that can help you avoid situations where probate delays payments to your beneficiaries? Examples of which include FPI’s international protection, savings and investment products which are designed to allow our customers’ assets to be passed seamlessly to chosen heirs.
  • Will your estate be subjected to country inheritance tax on your death and if so, what is your exposure to it?
  • Should you involve your children or other successors earlier on in the process to ensure sufficient preparation time? These may include financial education and practical experiences

Given the complexity involved, succession planning is best done under professional guidance from financial advisers. Financial advisers are trained to help you construct a succession plan that factors in and navigates these issues with ease. As a neutral and independent party, they are also well-placed to work with you and your family to facilitate understanding of the succession line and how assets can be distributed.

Plan early for greater peace of mind

With the right approach and proper guidance, succession planning – as well as conversations about them – need not be uncomfortable or complicated. It is important to factor in succession planning as you plan for your future, and to start thinking about it from an early age. By having clear arrangements in place to protect your wealth and loved ones, you will be free to enjoy life with less worry, secure in the knowledge that your financial planning has been taken care of.

Steve Weston - CEO FPI

Steve Weston – CEO FPI

Message from the CEO – October 2019

Planning for the future

At Friends Provident International (FPI), our business is all about planning for the future. Our customers might be planning for their family’s future, be that for school, university, getting onto the property ladder or for their own retirement.

Find out more

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