Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Secular themes continue to surge despite growth selloff
Thematic investment was among the most popular reasons for getting into the share market in recent years. Whether it was renewable energy, carbon or cryptocurrency, investors of all types are naturally optimistic, often seeking to allocate capital to the sectors and businesses that are building towards the future.
The bond-yield-triggered selloff thus far in 2022 has been unique in that every growth-focused business has been sold off significantly, regardless of its quality. Multiples for technology, health and industrial businesses have nearly halved, trading below pre-pandemic valuations despite having significantly higher revenue and cash flow.
Beyond the headlines of volatility, little has actually changed in the powerful growth occurring across key thematics, those being the megatrends that are set to change the way we live, work and communicate in the future. In fact, the events of the last six months have likely acted to accelerate them even further.
This is the contention of a recent update from Mayuranki De, a research analyst at Global X ETFs, which recently acquired ETF Securities in Australia. The “Next Big Theme” monthly update offered real-world insights into what is occurring across crypto and fintech markets and the metaverse.
Highlighting the growth in electric vehicle (EV) demand and sales, De flags that the “the US Department of Energy (DOE) released notices of intent to provide $2.91 billion to help ramp-up production of advanced batteries.” Further, “the DOE views batteries for EVs and clean energy storage as critical to establish clean energy industries in the near future.” This was highlighted by the recent decision of carmaker Stellantis to buy 25,000 tonnes of lithium for the next decade from Controlled Thermal Resources in California.
Switching to cybersecurity, the events in Ukraine and Russia have seen cybersecurity mergers and acquisitions hit an all-time high as “companies seek to integrate technologies in new security verticals and move away from being niche solution providers.” One such example was IBM’s acquisition of Randori, an offensive-security startup that seeks to combat attacks before they occur.
The energy crisis has also likely contributed to a surge in demand for EVs with De pointing out that EV producers continue to exceed expectations on car sales. “Ford’s EV sales were up 222% from the same time last year” with most success tied to the Mustang Mach E. “In the UK, Fiat announced their lineup would consist of only EVs and hybrids starting July 2022” she explains.
Finally, Australian investors would be well aware of the challenge facing buy-now-pay-later (BNPL) players including Zip and Afterpay, but Apple launched its own approach in the last few weeks. Interestingly, it may not all be bad news, with De suggesting that “though initially posing as a threat to traditional BNPL companies such as Affirm, the exposure from Apple can help drive mass consumer adoption of BNPL without detracting from merchant-led business practices of companies like Affirm.”
