Billionaires do well during the pandemic
Billionaire wealth soared to a record $10.2tn at the end of July. This is according to a report from Swiss bank UBS and accountancy firm PwC.
The plunge in the equity markets in February and March caused combined billionaire wealth to fall 6.6% to $8tn. The number of individual billionaires fell by 43 to 2,058, the report said. But from the end of March equity markets began to bounce back. By the end of July, the surge in asset prices had pushed global billionaire wealth back above its 2019 level.
Total billionaire wealth globally climbed by a quarter (27.5%). It reached $10.2tn, up from $8tn at the start of April. This set a record high, surpassing the previous peak of $8.9tn reached at the end of 2017. The number of billionaires reached 2,189 up from 2,158 in 2017.
Commentators believe Billionaires not only rode a storm but also recovered dramatically because of their discipline and the way they managed their money. The report shows that the billionaire cohort is storming ahead.
What we have seen during COVID is those who are disciplined and captured asset allocation intact were riding the storm and riding the upside. Billionaires in mainland China weathered the storm best. They grew their wealth by a fifth after coronavirus infections receded in the country in March causing equity markets to rally.
Fintech and The Klarna question
The value of “buy-now-pay-later” finance group Klarna has soared past $10bn. This is after investors pumped $650m into the Swedish payments company.
This is a blockbuster figure that makes it the fourth-largest private fintech in the world. Commentators believe the worlds of retail and finance had reached an “inflection point”. The shift to online retail is now truly supercharged. There has been a very tangible change in the behaviour of consumers. They are now actively seeking services which offer convenience, flexibility and control in how they pay.
Klarna is among a wave of fintech firms seducing shoppers on tight budgets. It bills itself as an alternative to credit cards as shoppers can spread the cost of purchases over interest-free instalments.
However, some financial experts fear easy-access digital loans could turn into a debt trap. Unlike traditional high-street credit products, Klarna earns fees from the retailers. Klarna now has more than 200,000 retailers on its books. These include ASOS, JD Sports and H&M in the UK. It also has 90 million customers worldwide. Retailers like the plans because shoppers using them typically spend more, more often.
Investors clearly think the “buy-now-pay-later” model has big potential. The US private equity firm Silver Lake, Singapore’s sovereign wealth fund GIC and BlackRock are among the new investors. This growing worth comes despite the 15-year-old company making its first annual loss in 2019. This was because of a rising number of bad debts, a trend that has continued into this year.
House prices boom, but for how long?
Property prices leapt 7.3% year-on-year last month as Britain’s housing market boom continues. In addition, Halifax is reporting that mortgage applications are at a 12-year high.
Figures from the bank show the average residential home sold for £249,870 ($322,877) in September. This is the highest annual rise since 2016.
Commentators noted political uncertainty had weighed on prices last September. However, say the market had still been “extremely strong” since the first national lockdown eased. Prices were up 1.6% on the previous month in the third month in a row of gains. Growth has lost less steam than expected by analysts, who had predicted monthly growth of 0.6%.
It comes despite the resurgent coronavirus, tighter lockdown restrictions and the ongoing economic crisis. Some experts have called the property boom a “paradox.” There seems to have been a fundamental shift in demand from buyers. Increased home working driving a desire for more space and the stamp duty holiday have been major factors.
Over the past three months, Halifax had received more mortgage applications than at any time since 2008. But experts warn of significant possible downward pressure on house prices in the months to come. Many believe that it is highly unlikely the housing market will stay immune to the impact of the pandemic. The belief is the release of pent up demand and indeed the stamp duty holiday can only be temporary.
Managing your risk of redundancy
It is an unfortunate reality that many more people are going to find themselves at risk of redundancy. Whilst the prospect can be daunting, the best thing to do if facing this situation is to prepare yourself. Three immediate musts are:
You should check your contract to see whether there are any contractual enhanced redundancy pay provisions. If there are, ask for a copy of these.
It is important to know whether there has been a practice of paying more than the statutory minimum in the past. If so, you may be able to rely on this precedent. If not, those with more than two years of service will have the right to statutory redundancy pay.
Notice and time off to look for work
Check your contract to confirm how much notice you are entitled to. Under statute, you will be entitled to at least one week’s notice per year of complete service (assuming you are over 22),. The maximum is 12 weeks. This is the minimum entitlement, and you may be entitled to more.
Those who are under notice of redundancy with more than two years of service also have the right to reasonable time off to look for work.
Your consultation period
You will have meetings with your employers in which you agree on the terms of your redundancy. Your settlement and any time off you might need to look for a new role should be discussed here.
You are unlikely to know exactly when you will have job interviews at this stage. However, you should make it clear that you expect reasonable accommodations to be made when needed. This is especially true if your notice period is a long one.
If your employer has also mentioned supporting you in further training or other provisions, you should get these things agreed at this point.
Equity release concerns
The Sunday Times carried out a mystery shopping exercise with the three biggest equity release companies. This has followed a surge in people considering making use of the lifetime mortgage product.
The ‘paper tried to find out how much a 64-year-old woman would be able to release from her home using calculators on the websites of Sunlife, Key Retirement and Age Partnership. After making inquiries through the companies’ websites The Sunday Times received 28 phone calls (sometimes two calls a day from the same company), 28 emails and 14 letters as the firms tried to persuade the ‘potential customer’ to sign up for a deal. There are concerns equity release is being used to encourage spending that would be unaffordable. This further encourages seeing debt as a way of life. It is, though, a solution that is right in the right circumstances.
Mortgage waiting times increase
Mortgage wait times are soaring, putting homebuyers at risk of losing their dream property.
Before the pandemic started, it took two weeks to get a mortgage offer. Now it can take six weeks. Home working by bank staff has been blamed for causing a massive backlog of mortgage applications. Sources said banks are failing to cope because so many staff are working from their kitchen tables. But now a report which provides brokers with a single view of lenders’ service levels has been launched by Mortgage Brain. It is apparent through conversations with intermediaries and lenders that transparency about expected service levels is vitally important.