FCA promises to go ‘harder and faster’ in reforming financial sector
The Financial Conduct Authority (FCA) has promised to go “harder and faster” in overhauling the financial sector amid government pressure to shake up a variety of regulatory burdens on firms.
The watchdog has pledged to “take another look” at the rules around ongoing advice after wealth managers were forced to set aside hundreds of millions to pay back customers last year.
St James’s Place, the hardest hit firm, was forced to set aside £426m to fund dealing with a deluge of complaints from clients that they had not received the ongoing services they had paid for.
“We acknowledge the rules around ongoing advice were written well over a decade ago,” said Nick Hulme, the FCA’s head of advisers, wealth, and pensions, announcing that “clarity” on the new regime would be announced in the summer.
Speaking at the Morningstar Investment Conference, Hulme faced criticism that the FCA had been acting as a “price regulator” with its consumer duty regime.
The regulation, which forces financial firms to “put their customers’ needs first” and provide ‘fair value’ for their clients, has been controversial, with some accusing it of failing to improve outcomes for investors and pushing firms to charge too little.
In January, business secretary Jonathan Reynolds made it clear that cutting consumer duty was one of the key targets of the government’s deregulation plan.
“I’m not going to rise to [the accusation],” said Hulme in response to the question accusing the FCA of price setting, arguing that the regulator was simply asking for “reasonableness” in how clients were charged.
“Would you be happy if your close family member received a service in your firm?” asked Hulme. “Is that reasonable based on the price, and what is offered?”
Another significant piece of regulation set to be overhauled by the FCA is over the boundary between financial advice and guidance, with the watchdog pledging to allow firms to offer targeted guidance to investors without subscribing to the strict rules surrounding formal financial advice.
“Only around eight per cent of people take financial advice each year, we want to close that gap and find ways into that 92 per cent,” said Hulme.
The review is aimed at creating “stepping stones” to “holistic full fat advice”, so retail investors are “stepping on something rather than nothing,” he added.
The regulator is set to publish a consultation on targeted support in both pensions and retail investments next month, which will also include an update on the advice guidance boundary, said Hulme.
US dollar ‘structural downtrend’ set to benefit pound says UBS
UBS has said investors should expect strengthening of the pound against the US dollar over the next year as fears grow over the American currency’s “fragility.”
The pound has surged almost 10 per cent against the US dollar since its recent low in mid-January, now sitting at $1.33.
However, UBS analysts expect the surge to continue towards $1.39, with a year-end target of $1.40.
Despite positive news emerging about potential trade deals, the US is making to repair the damage done by President Donald Trump’s tariffs, the dollar has failed to bounce back.
“With a traditional rule of markets being that if something can’t rally on good news then it can really fall hard on bad, this price action leads us to stick with our established view that the US dollar is already in a structural downtrend,” added UBS strategist Shahab Jalinoos.
The fact that the euro failed to dip against the dollar after German Chancellor Merz needed an unprecedented second round of voting to receive parliamentary approval provided “more evidence” as to a broader drift away from the currency, UBS analysts added.
But while the dollar has continued to drop against most major currencies, the losses have not been evenly distributed.
“US dollar weakness has been quick and broad based, but not all currencies have appreciated meaningfully versus the dollar since the beginning of April,” noted the UBS analysts.
“Highly pro-growth currencies in the G10, like the Norwegian Krone, the Australian dollar, and the British pound, have been laggards,” they added.
This should also benefit the pound against the euro, as it catches up against the continent’s currency against the dollar.
The Swiss bank has now forecast that the pound will likely surge further against the euro “as the Bank of England is likely to cut rates less (75 basis points this year) than what the market is expecting.”
“The initial underperformance of the pound versus the euro started to reverse with financial markets calming down,” the analysts noted, expecting the value of the euro to fall to 84p from 85p.
UK investors flee bond funds amid US Treasury turmoil
UK investors sold £1.2bn of bond fund holdings throughout April, as US bond markets fell into turmoil over Trump’s tariffs.
As Treasury yields spiked during the month over fears around the fiscal ability of the US, investors fled the asset class in droves, according to data from Calastone.
At one point last month, analysts were warning of a “meltdown” in the US bond market, before Trump eventually moved to suspend his tariffs for 90 days.
Worsening the problem was a sharp dip in the value of the US dollar, which further harmed confidence in US government bonds.
Selling of bond funds reached their second worst level on record last month, beaten only by capital flight in April 2020. Net selling of bond funds reached 46 per cent higher than the third worst month of record.
The selling was concentrated in sovereign bond funds, which saw £621m of outflows, their worst month on record by far.
“Bond markets have whipsawed as investors try to price the impact on the global economy of ever-changing US policy announcements on trade as well as threats, both made and rowed back on, to undermine the independence of the US Federal Reserve,” said Edward Glyn, head of global markets at Calastone.
Instead, investors fled to safe-haven money market funds, depositing £589m in the fifth best month of record and the strongest three-month period in history.
For equity funds, North American funds accounted for the entire £1.5bn of flows into the sector, as UK investors attempted to ‘buy the dip’ in the US market.
In contrast, emerging markets and Asia-Pacific funds suffered significant outflows thanks to their exposure to China, with sentiment souring as tariffs against the country from the US reached 145 per cent.
Meanwhile, investors pulled £521m from UK-focused equity funds, the lowest amount since July 2024 if October and November are ignored, as trading patterns were heavily distorted by changes to capital gains tax.
Charles Hall, head of research at Peel Hunt, noted that UK equity funds have had just one month of inflows in the last 47 months, as investors continue to prefer more growth-focused US assets over investing domestically.
“Anyone who says this isn’t structural needs to think again,” said Hall. “If government wants a thriving equity capital market that supports growth companies then it needs to take urgent action.”
Property funds also continued to sell off, losing £116m in April, 23 per cent more than the month average over the last year. Buy orders for the asset class dropped sharply to £106m, their second lowest on record.
“The US hokey-cokey tariff policy has significantly undermined confidence in the global economy with economists everywhere slashing their forecasts for growth,” added Glyn.
“This is bad news for property funds which rely on a healthy business environment to support tenant demand.”
UK edges closer to US trade deal for cars and steel
The UK is coming close to agreeing a trade deal with the US that would see president Donald Trump’s tariffs on motor and steel exports slashed, according to reports.
The additional 25 per cent tariffs that Trump instituted on steel and car imports earlier this year are expected to be reduced in a deal later this week, the Financial Times reported.
One senior British official told the paper that negotiations were continuing “at speed”, with officials describing the quotas on offer from the US as “generous”.
In return, the UK has offered concessions such as a softening of the digital services tax on big tech firms and cuts to tariffs on US cars and agricultural products.
Sources with knowledge of the negotiations told the paper that the deal had been held up over disagreements around the pharmaceutical sector, while the UK is not expected to agree to demands on US food production, such as accepting chlorine-washed chicken.
The UK was previously allowed to export up to 500,000 tonnes of steel a year to the US without import taxes, but the deal was abandoned under Trump after imposing steep tariffs on the metal.
The news came following a landmark free trade deal was agreed between the UK and India yesterday, which projected to be worth as much as £25.5bn in bilateral trade, adding £4.8bn to the UK economy.
Trump has pledged to make “90 deals in 90 days” after instituting a pause on his sweeping tariffs just days after unveiling them on ‘Liberation Day’.
Treasury Secretary Scott Bessent is set to hold meetings with Chinese representatives in Switzerland this weekend to attempt to reach a conclusion.
However, the administration has since signalled that it is failing to reach a wide number of trade deals, with Trump telling reporters yesterday that “we don’t have to sign deals”.
Bessent suggested last night that the talks with China would focus on de-escalation rather than a significant trade deal, but said “we’ve got to de-escalate before we move forward”.
Trump has also indicated an announcement on a deal with Europe that will be “as big as it gets” between Thursday and Monday, after reports that the EU were planning to hit around €100bn of US goods with tariffs if trade talks failed.
JD Wetherspoon sales jump despite continued pub sell-off
Sales at JD Wetherspoon jumped five per cent over the last quarter as the pub giant continued to sell more locations.
The pub giant has sold off seven of its pubs since the start of the year, despite opening only two new ones, it said in a trading update today.
It said it expected to open four or five more pubs in the rest of this financial year, followed by around ten next year.
In its full-year results in October, Wetherspoons revealed that the number of pubs had fallen from 879 in 2019 to just 800. This number has now dropped to 795.
In addition, the chain now has seven pubs operating under a franchise agreement, four of which opened during the last quarter, all operated by Haven Holiday Parks.
“The company has invested in new staff facilities in 520 pubs (49 in the current year), including staff rooms and changing rooms, with approximately 270 planned for the future,” said JD Wetherspoon chair Tim Martin, adding that each investment per pub comes to around £100,000.
Since the start of 2025, seven freehold reversions, where Wetherspoons was previously the tenant, have been acquired, costing the pub chain £17m.
When accounting for the sold-off pubs during the last three months, like-for-like sales increased by 5.6 per cent over the quarter.
Since the start of 2025, the pub’s total sales have increased 4.2 per cent, while like-for-like sales increased by 5.1 per cent.
JD Wetherspoon has also continued with its share buyback programme, buying back more than £41m of its own shares so far this year.
The firm currently expects its net debt to reach between £720m and £740m by the end of the year, with headroom under existing facilities of around £200m.
“As regards the menu, new initiatives include a gourmet burger offer, which has proved extremely popular in the pubs in which it has been trialled,” added Martin.
“Bearing in mind that recent trading has been helped by favourable weather, the company anticipates a reasonable outcome for the financial year, notwithstanding previously reported wage and tax increases of approximately £1.2m per week.”
Last month, Wetherspoons lost a bid to argue cider does not fall within the meaning of ‘alcoholic beverages’ in a VAT dispute with HMRC, failing to win back £4.9m in taxes.
Billionaire Bill Ackman’s Pershing Square makes moves on Berkshire Hathaway aspirations
FTSE 100 trust Pershing Square has made further steps towards billionaire manager Bill Ackman’s aspiration to emulate Berkshire Hathaway by building a diversified holding company.
Pershing Square Capital Management, which runs the investment trust, has made a further $900m investment into property company Howard Hughes, bringing Ackman’s stake in the firm to 46.9 per cent.
After the company previously rejected an offer for Ackman to raise his stake in the firm to 48 per cent, the FTSE 100 trust has agreed to limit its voting power to 40 per cent and ownership to a 47 per cent stake.
“We believe HHH is a superb platform to build a faster-growing, high-returning holding company that will acquire control of companies that meet Pershing Square’s criteria for business quality and durable growth,” Ackman said.
The move is part of a wider goal for Ackman to transform Pershing Square into a more diversified holding company over just holding large cap equities, similar to Berkshire Hathaway.
Over the weekend, Berkshire Hathaway CEO and president Warren Buffett announced he would be standing down at the end of the year.
The famed American investor is set to leave his post after 60 years, leaving Greg Abel, chair of Berkshire Hathaway Energy, to take over from 2026.
The FTSE 100 trust is down almost nine per cent since the start of the year, thanks to Ackman’s big bets on tariff-exposed stocks like Nike.
Ackman has been a strong opponent of US tariffs despite still backing president Donald Trump, calling yesterday for an 180 day pause to the import taxes.
In contrast, Buffett has traditionally stayed out of politics, though he still spoke out about the negative impact of tariffs at Berkshire’s annual general meeting.
At the start of the year, 9.8 per cent of Pershing Square was made up of Howard Hughes stock.
As part of the purchase, Howard Hughes has agreed to pay Pershing Square a quarterly fee for “investment, advisory, and other ancillary services”, which will reduce the trust’s management fee by a comparable amount.
The trust currently charges 1.5 per cent of the value of its underlying assets to investors annually.
Pershing Square board member Jean-Baptiste Wautier has also been appointed as a non-executive director of Howard Hughes.
Winter fuel payment U-turn not enough to win back support, Labour MPs say
The government is under increasing pressure from its backbenchers to reverse winter fuel cuts amid warnings that even a U-turn would not go far enough to restore trust with voters.
There is talk that senior government officials are reconsidering government’s earlier decision to restrict winter fuel payments to pensioners who qualify for income-related benefits, which would block 9 million from claiming the allowance.
Prime Minister Keir Starmer’s spokesperson denied that there will be “a change to the government’s policy,” despite some of the most vocal opponents to government’s curbs on the winter fuel allowance coming from within the Labour Party.
Health Secretary Wes Streeting said voters “aren’t happy” with the winter fuel allowance cuts, and polling backs this up, even with assurances they would save the Exchequer £1.4 billion.
York Central MP Rachael Maskell told City AM that a “U-turn” on government’s decision on winter fuel payments or adjusting the threshold will not be enough to win back support: “they would have to follow with other decisions like not going ahead with [Personal Independence Payments] and [Universal Credit] cuts to disabled people to show that they have understood the culture change which is needed to start rebuilding trust with the public.”
Barry Gardiner, Labour MP for Brent West, said: “The cuts to the Winter Fuel Allowance were such a political turning point because they damaged those who were most vulnerable, the most. It showed that the leadership of the party had lost their political – and some would say moral – compass.”
Gardiner added that “raising the threshold above £11,500 is not the answer, neither economically or politically. Setting an arbitrary new threshold is no use. The government must create a policy everyone can accept as fair.”
Reform UK leader Nigel Farage has called the winter fuel payment cuts a “terrible mistake,” and the Conservatives have also spotted a political opportunity in Labour MPs breaking from the party line.
Shadow Chancellor Mel Stride said: “After losing a key by-election, Labour is now scrambling to rethink their disastrous mistake.”
Stride added that “Labour’s decision to cut Winter Fuel Payments for millions of pensioners was reckless, cruel and out of touch. The Chancellor left our elderly struggling to heat their homes, at the same time as spending millions on inflation-busting pay rises for the unions and hotels for illegal immigrants.”
Terry Smith: Reeves must drop tax hikes to attract UK investment
Star fund manager Terry Smith has called on Chancellor Rachel Reeves to cancel her tax hikes to make investment in the UK more attractive.
Smith, who runs the £20bn Fundsmith Equity fund, argued that to boost the quality of UK companies the government should “reverse a lot of the policies that are in place with regard to taxation and regulation”.
“[That] would be my starting parameters for [attracting investment], which is almost certainly diametrically the opposite of the current policy,” he told the BBC.
In last year’s October Budget, Reeves raised the tax burden in the UK to its highest level in history, which is predicted to reach 38 per cent of GDP by the end of the decade.
Smith added that capital markets in the UK needed “better companies” for investors to buy, stating: “There are only a handful of companies that I would regard as okay for me to invest in.”
“There are large swathes of the UK market in things like oil and gas and banking and utilities that I just don’t regard as of the quality required.”
UK listed equities have continually struggled from underperformance in comparison to US markets, with international investors showing little interest in British markets.
Smith also emphasised his long-term buy and hold strategy, after his fund has fallen almost 10 per cent in the last three months amid turmoil from US president Donald Trump’s tariff regime.
“We have been running money for 15 years, and over that period we have been successful in so far as we made a big positive return,” said the manager.
“Let’s imagine that we managed to do that for another 15 years, which I sincerely hope that we do, and we look back and say what were the top factors in what we achieved here?”
“Was it selecting good companies, not overpaying for them, being steadfast and not trading too much and incurring costs, or was it predicting what happened with the Trump tariffs? I think it’s unlikely it will be the last factor.”
Fundsmith’s performance
Fundsmith earned its reputation as one of the UK’s top-performing funds thanks to the stock picking skill of Smith, after having grown 555 per cent since he started running it.
But recently the fund has come under fire for registering its fourth consecutive year of relative underperformance, growing 8.9 per cent in 2024 compared to 20.8 per cent for its benchmark.
While Smith does hold some growth-focused companies in his top ten, like Microsoft and Meta, the manager’s decision not to include trailblazers like Nvidia ultimately dented performance.
Smith has also been criticised for the lack of turnover in his portfolio, buying and selling just a handful of stocks over the last few years.
The other issue for Smith is size; as one of the largest investment funds in the UK and holding only between 20 to 30 stocks, Fundsmith is limited in its ability to buy positions in smaller companies without shifting the market.
At the end of last year, Fundsmith was overtaken as the largest investment fund in the UK by St James’s Place for the first time since March 2019.
Ex-JP Morgan and Schroders manager launches boutique advisory
A former fund manager at JP Morgan and Schroders has launched a boutique advisory firm.
William Meadon, who managed the JP Morgan Claverhouse investment trust from 2012 to 2024, has launched a new firm called Steppingstone.
Meadon said that the firm was launching in a bid to challenge the approach of larger firms, targeting clients with a ‘one stop shop’ for UK private companies looking for business services.
“Steppingstone has risen to the challenge of two unmet needs,” said Meadon.
“Firstly, we have responded to the increasing demands of companies to have one port of call for all their professional services. Offering flexible access to a suite of more affordable advisors (e.g. lawyers, accountants, capital raisers, branding experts) goes a long way to meeting that need.
“Secondly, while our professional advisors thoroughly enjoy working in their areas of excellence, they increasingly want to do it away from the often debilitating nine-to-five corporate treadmill.”
The former manager began his career as an auditor at KPMG, before working at Schroders and Newton Investment Management.
At JP Morgan, he headed up the core equity team, managing £7bn of global, European and UK-focused funds.
In his time managing the JP Morgan Claverhouse trust, returns totalled 167 per cent or 8.3 per cent annually, compared to the 128 per cent rise or 6.9% annual return in the FTSE All-Share index.
Other trusts managed by Meadon included JP Morgan Mid Cap, JP Morgan Income and Growth, and JP Morgan Income and Capital.
“SMEs are a critical dynamic for a growing economy, but they can often lack a support network which prevents them from achieving their full potential. Steppingstone’s aim is to provide such a network,” added Andrew Ballheimer, former global managing partner at Allen & Overy.
Magnificent Seven magic is ‘dead’, says top tech investor
For years, investors have relied on the Magnificent Seven to provide massive returns. Now, one of its biggest beneficiaries has said that strategy is “mostly dead”.
The small group of giant tech stocks has seen a tripling of its total weight in the S&P 500 over the last decade, and now makes up around a third of the index. The stocks grew an average of 63 per cent over 2024, and made up more than half of the investment returns for the entire index.
But the dominance of the Magnificent Seven could be waning. Fund manager Stephen Yiu, a well-known standard-bearer for the stocks that have transformed his fund’s returns, has trumpeted the end of their reign.
“That doesn’t mean they will disappear… but for them to outperform the markets like before, like what they did in the last five to 10 years, I think that that era is probably gone,” Yiu told City AM.
Since the start of 2025, the seven tech stocks have struggled to match their previous performance, with the Roundhill Magnificent Seven ETF, which weights all the stocks evenly, down over 14 per cent this year.
Without the Magnificent Seven to supplement stock market growth, Yiu warned that investors should expect investment returns to be “a lot lower” in the coming years.
“Let’s say the market was giving you more than 10 per cent a year, I think going forward, maybe that number would be five per cent. I’m making the numbers up, but it will be lower.”
In addition, the expectations that interest rates will remain higher than before the coronavirus pandemic had been killing off the high growth business model within tech since 2022, he argued.
“Unprofitable growth, which is capturing market share, spending a lot of money, giving freebies or free rides to anyone, I think that is gone forever until interest rates come back down, which, at the moment, doesn’t appear to be imminent,” added Yiu.
“If you’re not profitable as a business, no one is going to give you money to just take market share for nothing. I want to see profits. I want to see that you have a sustainable business model. So then that business formula to grow or to be successful, it’s basically finished.”
Yiu, who manages the £1.1bn Blue Whale Growth fund, had previously held stakes in Microsoft and Meta, but sold out of both of them this year, clinging on solely to Nvidia.
The fund manager first bought into Nvidia in 2021, when the company’s market cap was $500bn – it is now $2.8 trillion.
He has continued to back “the magnificent one” due to the high level of demand for its chips for AI infrastructure development and high spending in research and development.
While the Magnificent Seven stocks had partially been dented by US president Donald Trump’s sweeping tariffs, the companies had been on a decline since the start of the year, when Chinese AI competitor DeepSeek was unveiled.
Despite a wider investor exodus from US stocks, Yiu continues to hold just one UK-listed company in his portfolio (London Stock Exchange Group), compared to around 15 American ones.
He explained that the problem was that with a “high conviction portfolio,” the manager looked to hold one-of-a-kind companies, and there were few substitutes for some of the US giants.
“We have both Visa and Mastercard,” he said as an example, and with only two companies in the world doing what they are doing, “you don’t have a competing alternative outside of America” he could buy.
Visa’s stock price has risen 11.2 per cent since the start of 2025, while Mastercard has jumped 7.7 per cent, compared to a four per cent decline in the S&P 500.
However, the manager was still looking outside of the US for opportunities, such as Italian defence firm Leonardo, which has seen its stock price surge more than 70 per cent since the start of 2025.
“Trump’s policies have created an opportunity for European defence companies to come into play,” he said, but said it was one of the few sectors outside the US he saw as appealing.
The most recent addition to the Blue Whale portfolio has been US private credit giant Apollo, which has entered its top ten holdings for the first time.
As the private credit sector has boomed amid a pullback of banks lending cash to match regulatory-required capital levels, Apollo is sitting on billions in ‘dry powder’ or committed capital, which is ready to be deployed.
As a money manager, Apollo is lending out investor cash rather than its own assets, allowing it to reap investment fees without taking on the level of risk that has plagued some banks from loans, Yiu added.