Jacqueline Lim’s Post

Where the next financial crisis could emerge by John Plender of the Financial Times should be mandatory reading... quick summary: 1) Private markets are booming: Private markets have grown significantly in recent years, fueled by low interest rates and investor appetite for alternative assets. Now a large portion of the economy is becoming less transparent - disclosure requirements are largely a matter of contract rather than regulation. 2) Regulatory loopholes: Tighter regulations on banks after the 2008 financial crisis pushed lending towards less regulated private credit funds, making it harder to track risks. 3) Private credit risks: Private credit funds pose systemic risks due to their connection with banks, opaque loan terms, illiquidity, and potential maturity mismatches. And asset managers are seeking to attract rich retail investors. 4) Concerns about returns and capital allocation: High fees, opacity, and the shrinking of public markets could dilute returns and lead to capital misallocation in private markets. 5) IMF warning: The IMF has warned that the rapid growth of private credit could lead to lower underwriting standards and increased risk of future credit losses, potentially triggering the next financial crisis. The full article is here: https://lnkd.in/eFsatVdC

£430 billion. That’s the size of the UK advice gap. 🤯 This recent research from Barclays' highlights three barriers to investing: CHOICE PARALYSIS 21% feel they don’t know enough. 24% find investing too complicated. INABILITY TO COMPARE PRODUCTS 74% want clear investment guidance. 63% need help comparing options. FEAR OF RISK 43% fear losing all their money. 66% think ‘risk of loss’ means losing everything. These problems aren’t new. They’ve been around for decades. I've seen this first hand at Finimize, we ran ‘Zero to Invested’ workshops for hundreds of UK newbie investors. The biggest determining factor for those who became regular, long-term investors vs those that didn't? Just starting. Opening an investment account changed everything. Those who didn’t were overwhelmed by questions: Which app? What happens to my money? What’s my risk profile? Those that did, learned by doing and built confidence over time. Despite fintech innovation, the masses of data available and the volume of information at retail investors fingertips, we’re still stuck. Here’s the exciting part. Barclays and others are pushing regulators. They want to fix the advice gap. Their ideas focus very simply on removing friction and making investing easier: CLEAR ENTRY-LEVEL PRODUCTS: Barclays recommend an FCA badge to flag to consumers a set of 'safer' investments that are intended for less experienced investors. MAKE IT EASIER TO INVEST Reducing the friction for customers to sign-up. Less paperwork, fewer warnings, reduced declarations. 'PEOPLE LIKE YOU' SUGGESTIONS Think Amazon’s recommendations, but for investments. There are complexities to how this recommendation is put together but it would certainly help reduce the cognitive overload on what to choose. GUIDANCE TOOLS Barclays is also encouraging the Money and Pensions Service to create an online tool that helps guide people to a set of investment products to consider.  COMPARISON TABLES Simple tables to compare investment products side-by-side. It's not just Barclays, the smartest banks and fintechs right now are putting a lot of effort into re-thinking how we tackle the advice gap effectively. I never thought I'd say this, but in 2025 regulation could be the catalyst behind the most exciting innovation for investing the UK. All eyes on 'targeted support' 👀 I've added the Barclays research in the comments 👇

1. Growth of Private Markets: Private funds dominate financial activity, with assets reaching $13.1tn by mid-2023, growing at nearly 20% annually since 2018, outpacing public markets. 2. Transparency Concerns: The rise in private markets results in a larger portion of the equity market being non-transparent, relying on contract-based disclosure rather than regulation. 3. Challenges in Current Environment: Rising borrowing costs and regulatory shifts create difficulties for private equity, with institutional investors still showing strong interest despite potential risks. 4. Economic and Regulatory Impact: The shift is driven by post-crisis bank regulation, posing systemic risks through non-transparent private credit funds and challenging investors' ability to achieve substantial returns. 5. Potential Risks: Growth in private credit may lead to deteriorating credit standards, posing risks to the financial system and possibly indicating where the next financial crisis could originate.

The Investment Hack Everyone’s Talking About: Private Credit! 💰 In today’s fast-changing financial world, investors are looking for safe options that provide steady returns. Private credit is becoming a popular choice, offering solid yields of 7–8%, often doing better than traditional investments. 🌟 Here’s why private credit deserves your attention: 1. Steady Returns Private credit investments provide predictable income streams, making them an attractive option in volatile markets. Even as central banks adjust interest rates, private credit remains a reliable performer. 2. Wider Spreads, Reduced Competition With public markets facing increased uncertainty, private credit offers wider spreads. This creates opportunities for better returns, especially for investors willing to navigate this specialized market. 3. Resilience During Rate Shifts Unlike many traditional investments, private credit has shown remarkable resilience. Whether rates rise or fall, private credit continues to deliver competitive returns, ensuring stability for your portfolio. Private credit is more than just an alternative investment; it’s a strategy for navigating today’s unpredictable market. By including private credit in your portfolio, you can diversify your assets, enhance income potential, and mitigate risk. 💡 Ready to explore this exciting opportunity? Follow us for expert investment insights and updates on market trends. Stay ahead and grow your wealth with confidence! 🔑 Don’t let this moment pass. Start capitalizing on private credit today! #PrivateCredit #SmartInvesting #FinancialFreedom #AlternativeInvestments #WealthBuilding #InvestmentTips #wholeliving #wholelivingbusiness

With interest rates unlikely to return to previous ultra-low levels, the wealth management industry faces huge challenges, writes Charles Jewkes, CFA , Head of Global Wealth at Aviva Investors in this article. Read the full article: https://bit.ly/3Bk4RYj #Wealth #InvestmentManagement #Markets

Worth reading below from Max Rothery and couldn’t agree more with the statement: ‘in 2025 regulation could be the catalyst behind the most exciting innovation for investing in the UK. All eyes on 'targeted support' 👀’ TS will be underpinned by sound financial planning principles and data to personalise outcomes, connecting the worlds of guidance and advice more than ever before. #AGBR #advicegap #helpgap

At InvestiFi we believe in empowering credit union Members to build a secure financial future. Our path is through an informed and educated self-directed investing journey. With that being said, and according to the J.D. Power 2023 U.S. Self-Directed Investor Satisfaction Study, a significant opportunity lies ahead for credit unions to support these investors! Recent findings reveal that while younger investors, including Gen Z and Millennials, are keen on digital advice, there remains a lack of understanding when it comes to how these technologies operate. Only 22% of investors utilizing robo-advice services say they fully comprehend how the technology manages their portfolios. This knowledge gap presents a prime opportunity for credit unions to step in and provide the much-needed education and support that investors are seeking. “Self-directed investors are still looking for human support when it comes to onboarding, answering technical questions and resolving problems. Human support also plays a key role in providing greater transparency and trust in digital advice,” the study stated. At InvestiFi, we believe in empowering credit unions to bridge this gap by offering members the ability to engage in trading stocks, options, bonds, ETFs, and cryptocurrencies directly within their credit union's existing platform. By leveraging InvestiFi's tools and support, credit unions can equip their members with the knowledge and resources they need to make informed and confident investment decisions. Join us in seizing this opportunity to enhance the digital advice experience and cater to the unique needs of self-directed investors. Let's work together to elevate financial literacy and empower members to achieve their investment goals! For more insights from the J.D. Power 2023 U.S. Self-Directed Investor Satisfaction Study, click the following link: https://lnkd.in/dh32ccRj #InvestiFi #SelfDirectedInvesting #DigitalAdvice #InvestmentSatisfactionStudy

https://lnkd.in/gZNMAJbU "Much of the dynamic behind the shift to private markets is regulatory. Tougher capital adequacy requirements on banks after the financial crisis drove lending into more lightly regulated non-bank financial institutions.This was no bad thing in the sense that there were helpful new sources of credit for small- and medium-sized companies. But the related risks are harder to track. According to Palladino and Karlewicz, private credit funds pose a unique set of potential systemic risks to the broader financial system because of their interrelationship with the regulated banking sector, the opacity of the terms of loans, the illiquid nature of the loans and potential maturity mismatches with the needs of limited partners (investors) to withdraw funds. For its part, the IMF has argued that the rapid growth of private credit, coupled with increasing competition from banks on large deals and pressure to deploy capital, may lead to a deterioration in pricing and non-pricing terms, including lower underwriting standards and weakened covenants, raising the risk of credit losses in the future. No prizes for guessing where the next financial crisis will emerge from." .

The private credit sector, valued at $1.7 trillion, is experiencing a shift as major investors, including pension funds, are growing wary of rising interest rates. This caution is evident in reduced allocations and extended fundraising timelines. Concerns stem from the potential strain on borrowers' ability to meet debt obligations, exacerbated by limited private equity deal opportunities. While some investors remain optimistic about the sector's double-digit returns, others are adopting a more conservative approach, reflecting uncertainty about future interest rate movements and their impact on default risks. In this evolving landscape, prudent investment strategies that balance potential returns with risk mitigation are paramount for investors navigating the private credit market.