MONEYWEEK 8October 2021 moneyweek.co
Wealth management isagrowthmarket. Rathbone Brothers
should beaprime beneficiary–and lookscheapT
hewealth-managementindustry
tendstokeepalowprofile.So
manyinvestorsmaynothavenoticed
thatwhileseveralpartsofthefinancial
sectorhavebeenunderpressurefrom
competitionanddigitalisation,the
subsectorthathelpspeoplepreserve
andgrowtheirfortunehasmanaged
tokeepgrowingatastrongrate.
Areportbyinvestmentbank
MorganStanleyandmanagement
consultantOliverWymanpredicts
thattheindustrycouldmanage
$1 04 trnofassetsgloballyby 2024 ,up
from$ 79 trnin
2019 .Soaring
assetprices
meanthat
thereismore
wealthtopreserve,whileanageing
population(aswellasthegradual
demiseoffinal-salarypensions)
producesmorepeopleinneedof
financialadvice.
Onewealth-managementcompany
thatlooksparticularlyattractive
isRathboneBrothers(LSE:RAT).
ItspecialisesinprovidingbespokeStash the family cash
investment-managementadviceto
individualsandcharities;italso
runssomeofitsownfunds
throughitsRathboneUnitTrust
Managementsubsidiary.
Thegroup’sotherservicesinclude
financialplanningforthosewith
moremodestportfolios,andbanking
andloansforitswealthmanagement
clients.AfewmonthsagoRathbone
tookoverSaundersonHouse,which
hasagoodreputationforproviding
specialisedfinancialadvicetolawand
accountancyfirms.Fendingoffrivals
Thereisalwaysthethreatthata
low-costprovider,suchasindex-fund
pioneerVanguard,coulddisruptthe
wealth-management
sectorbydriving
downfeesand
stealing market
share. Indeed,
in April, Vanguard launchedits
ownbargain-basement finan cial-
advice service. However, thetype
of specialisedadvicethatRathbone
provides makesitmuch less vulnerable
to such competition. Rathbone has
also earned itself astrongreputation
in environmental, socialand
governan ce (ESG)investing.With“Anageing population
means more people need
financial advice”Trading techniques...
do oil and stocks mix?
Oneofthekeymarkettrendsthisyearhasbeenthe
dramaticreboundinenergyprices.Duringthefirst
fewweeksofthepandemic,USoilfutures
collapsedfrom$5 0 abarrelandbrieflyturned
negativeforthefirsttimeinhistory.Theysoon
roseabovezero,butevenbylastautumntheyhad
onlyreached$35.Sincethentheyhavedoubled,
reachinglevelsnotseensincelate 201 8.Whilethis
maybebadnewsforthoselookingtofilluptheir
petroltank,doesitprovideanyhintsastothe
futuredirectionofthestockmarket?
Oneviewisthatrisingenergypricesshouldbe
negativeforthestockmarket.Afterall,rising
energypricespushupproductioncosts,which
squeezesproducers’marginsandreducesliving
standards.Itmightalsosignalrisinginflation,thus
increasingtheoddsoffutureincreasesininterest
rates,whichtendtocrimpgrowthandprofits.On
theotherhand,risingenergypricescouldbeseen
asasignofastrongeconomy(andfallingpricesa
signaloftheopposite).Thesituationisalsomade
morecomplicatedbythefactthat,asofAugust
2021 ,energyshares(whichshouldbenefitfromoil
rising)accountforaround 8 %oftheFTSE 10 0.
Moststudiessuggestthattherelationship
betweenoilpricesandstockreturnsisindeed
negative.A 2007 paperbyGerbenDriesprongof
ErasmusUniversityRotterdam,BenJacobsenof
TilburgUniversityandBenjaminMaatofAPG
AssetManagementfoundthatbetween 1973 and
2003 ,a 10 %riseinoilpricesloweredglobal
stockmarketpricesbyanaverageof1%overthe
nextmonth.Butsomestudiessuggestthe
relationshipisetherweakornon-existent.For
example,astudybyAndreaPescatoriandBeth
MowryoftheFederalReserveBankofCleveland,
covering 1998 to 2008 ,foundnocorrelation
betweenthechangeinoilpricesandtheS&P 500.Matthew Partridge
Senior writer32 Trading