A warm welcome to new and veteran readers alike as we present the most recent instalment of our comprehensive compilation of broker industry news. Our prime focus centres on the latest advancements that hold significance for stockbrokers, investment advisers, and wealth managers in the United Kingdom. With our series of easy-to-digest, bitesize news bulletin we hope to share insights to facilitate the comparison of the best UK stockbrokers while ensuring you remain up to date with the ever-evolving landscape of retail investing.
Within this edition, we endeavour to offer a wealth of invaluable details highlighting the most recent occurrences and developments in the industry. By doing so, we strive to empower our esteemed readership with the knowledge required to make informed decisions and navigate the intricacies of the UK stock market with confidence. Those who stay abreast of the best accounts, new products and regulatory changes can stay one step ahead of the rest of the retail investing cohort.
Financial market trends in June 2023: at a glance
- The US stock market rose as payroll data revealed economic resilience to interest rates
- UK inflation rates remained stubbornly high, leading to talk of new rate hikes by the BOE
- Oil prices continued to hit new lows, in spite of fresh Saudi supply cuts being announced
- The best fixed-term interest rates for UK savers hit 5.35% (Tandem, 5 year term)
- US growth stocks saw a resurgence, led by Nvidia riding a wave of AI chip demand
UK Broker News – June 2023
In this month’s breakdown, we’ll be taking a closer look at the following broker news events:
- £36,000 Cash ISA Contribution Loophole
- High yields available on UK investment trusts
How to make £36,000 Cash ISA deposits in a single year
Laura Suter of UK broker AJ Bell has this week revealed a one-off loophole that allows parents to deposit a total of £36,000 within a child’s ISA pot within a 12-month window. Not all parents will be able to take advantage of this shortcut though, as it requires you to have a Child Trust Fund. This specialised junior savings account closed to new customers in 2011.
Here’s a step-by-step summary using the example of a child with a birthday in August.
- Deposit the maximum £9,000 into your Child Trust Fund in July, ahead of your child’s birthday.
- Make a formal transfer of the £18,000 CTF into a Junior ISA, and contribute £9,000 into the JISA prior to the end of the personal tax year on the 5 April.
- The ISA allowance resets at midnight 5th April, opening the door to another £9,000 of ISA contributions thereafter.
- In the period of July – April you have contributed a total of £36,000.
This loophole takes advantage of two key loopholes; the CTF and JISA allowances reset at different points in the year, and contributions into a CTF don’t use up your JISA contribution allowance, despite the fact that CTFs can be closed and transferred into ISA accounts.
Due to the various conditions, you need to meet to make this work for you, it isn’t likely that many parents will be able to take advantage. Of the parents that oversee a CTF, far fewer will have the appetite to actually make £36,000 of contributions in a single year. For context, the average ISA value of an under-25-year-old in 2019-2020 was only £3,910 according to government data.
Interactive investor draws attention to high-yielding trusts on the LSE
Kyle Caldwell at interactive investor says that the markets could be presenting a great opportunity to find bargains, with many investment trusts trading at discounts. The widening of these discounts is a result of interest rate rises and a re-pricing of risk assets. Investors can now obtain decent income from low-risk assets like cash and bonds, making higher-risk investments less appealing. As a result, investment trust discounts have increased, offering a cheaper entry point for investors seeking both short-term and long-term income and capital growth.
Several of the best investment trusts he highlights as potential discount opportunities are trading on yields of around 5% or higher. For those interested in UK equity funds with high yields, he reported that Lowland Ord stands out with a 5% income and a wider-than-usual discount. Diverse Income Trust Ord and JPMorgan Claverhouse Ord were also on his watch list.
When looking beyond the UK, European Assets Ord stands out as an enhanced income trust with an attractive yield. However, investors should be aware that buying a high-yielding trust comes with the risk of lower total returns in the future.
Investment trusts focusing on alternative assets, such as infrastructure and renewable infrastructure, have also seen their discounts widen due to interest rate rises. International Public Partnerships Ord and Bluefield Solar Income Fund are identified as potential bargains in these sectors. HICL Infrastructure PLC Ord is trading on a significant discount as well. Despite the wider discounts, many renewable energy trusts offer yields ranging from 4.8% to over 8% and continue to increase dividends.
Overall, investors looking for income opportunities should consider investment trusts trading at discounts, but it’s important to assess the prospects of each trust before making a decision. This is not financial advice.
Hargreaves Lansdown reflects on whether the US or UK stock market is the best bet
In an opinion-based blog post, Sophie Lund-Yates (lead equity analyst at UK Stockbroker Hargreaves Lansdown), wonders out loud whether recent events put the NYSE ahead of the LSE in terms of investor preference. Here’s a summary of the debate she covers:
The UK and the US face a comparative analysis in the realm of investing and finance. Recent discussions have cast the UK in an unfavourable light, with concerns about its ability to attract and retain exciting companies compared to the US.
Brexit has worsened the situation, adding complexity and costs. The US market, with its larger pool of available investors, holds a competitive edge.
However, investing in high-growth US companies comes with risks, as many lack a proven track record of profitability.
The UK market has struggled this year, while the US market has experienced a bounce-back from previous setbacks. Despite the differences, experts advise investors to focus on selecting the right company rather than being swayed by stock exchange popularity.
In terms of setting a preference, investors could use their preference for capital gains or income to help make a decision, because the US market overwhelmingly prefers to deliver profits to investors via share-buybacks (which result in the price per share increasing).
In contrast, the FTSE constituents tend to focus on dividends, with a forward dividend yield of 4% compared to 2% in the US. Dividends offer flexibility, allowing investors to reinvest, buy shares in other companies, or use them as income.
There is no clear winner in the buybacks vs dividends debate, as both approaches have their merits and cater to different investor needs. Although it isn’t mentioned in Sophie’s article, arguably the method that companies use to pay investors shouldn’t matter to returns.
eToro stands by its crypto offering
Our award-winning broker of the year eToro has reiterated its commitment to the cryptocurrency industry and collaboration with regulators following recent lawsuits filed by the US Securities and Exchange Commission (SEC) against major exchanges Binance and Coinbase, according to reporting from Decrypt, a blockchain-focused website.
An eToro spokesperson stated that the company believes in offering users access to a diverse range of asset classes and is working closely with regulators worldwide to shape the future of the crypto industry and ensure accessibility for ordinary investors. The platform currently supports 80 cryptocurrencies, including some that the SEC has alleged to be unregistered securities.
eToro, originally founded in Israel in 2007 as an FX trading platform before expanding to stocks and cryptocurrencies, has gradually increased its focus on crypto assets. In April, the company announced a partnership with Twitter that enables users to invest in cryptocurrencies through eToro directly from the social media app. The spokesperson explained that eToro has a framework in place to assess the digital assets it offers in light of the rapidly evolving regulatory landscape.
Here’s a back catalogue of previous UK Stockbroker News Bulletins: