This is the week of predictions, whether it’s the year of the Tiger or the year of Tax the first week of January is awash with crystal balls and hopes of joy and worries of doom.

1. Ten for 2010
The 1st week of January a week of predictions

2. Top ten predictions for 2010
The year ahead
1. Yes, we’ll clamber out of recession, but growth
of only 1.2% expected next year.
2. Insurance sector set to continue U-shaped
recovery.
3. Continued resistance to LT saving.
4. Property set to re-emerge as fund managers
wade back in cautiously (& China / Emerging)
5. Big year of change in banking with several new
entrants expected.
6. Despite optimism mortgage market unlikely to
really pick up until 2011.
7. Lending still depressed into 2010.
8. Further consolidation expected in adviser
market (with business quality key).
9. DC set to dominate pensions landscape.
10. Higher tax environment will test British
temperament.
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3. The economy
Long hard slog to recovery
The CBI predictions are markedly lower than those made by Alistair Darling, three
weeks ago.
Next year, CBI is forecasting growth of 1.2%
Thereafter, the CBI is forecasting growth of 2.5 per cent in 2011, which would be
insufficient to return Britain to its pre-recession growth rate by the end of the year.
The CBI's forecasts reflect its view that the outlook for consumer spending is
worrying, with tax rises and unemployment continuing to dog confidence.
The economy
will be on a BRITAIN’S economy will finally make it
fragile path of out of recession in the last quarter of
very slow growth 2009, but will perform much less
as we continue strongly in each of the next three years
to feel the lasting than the Government is currently
effects of the forecasting, the CBI will say today
financial crisis
John Crdland, CBI
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4. FS company impact
U-shaped recovery
Swiss Re says the insurance and reinsurance sectors will continue their “U-
shaped” recoveries in 2010, alongside the major global economies.
However, it also raises concerns about the looming threat of regulation
from European and national authorities, in a bid to crackdown on loose
financial practices, which could risk the delicate improvement.
Foster Denovo envisages the market will continue to experience similar
challenges in the first half of 2010, and FS companies are going to be
continually working to keep costs down.
The consensus is there will be a level of growth towards the end of 2010.
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5. Long term savings
Shying away from commitment
Statistics indicate a disparity between consumer action and inaction,
with fewer consumers initiating positive change with regards to their
financial plans:
A survey by Deloitte has
found that although more The survey found
than two-thirds of that just 38% are
consumers saying they
saving more for a
are more aware of
personal finance issues, rainy day, while only
a number of respondents 49% are trying to pay
are wary of making off more debt than
long-term financial before the recession.
plans
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6. Investment
The return of property
Next year will continue to be tough for investors despite various signs of economic
improvement.
A degree of diversification into real estate markets seems therefore to be an attractive
proposition, especially in the UK.
Equities have reclaimed their position as the most popular asset class from corporate
bonds in recent months, thanks to the rally in markets. However, we are also starting to
see property also start to pick up interest again, as fund managers start to wade more
cautiously into the sector.
For multi-asset portfolios, equity asset allocation continues to favour Asian and emerging
market companies, given these regions’ strong foundations.
In fixed income markets, commentators still see potential in credit and emerging market
debt, where current prices remain attractive.
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7. Investment horizon
Adviser intentions
Q: Which of the following regions or sectors are you
most likely to increase your exposure to in 2010?
IFA Online, Jan 4st 2010
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8. Banking
New entrants?
While conditions at UK banks have improved significantly since the
summer, with a sharp rise in their key capital ratios, there could be
more aftershocks to come. But as the landscape shifts…several
banks are eyeing a move into Britain
Sunday Times reported that Brazil’s biggest bank, Itau
Unibanco, is considering buying a stake in one of Britain’s
nationalised banks.
‘Bank of Britain’ (aimed at affluent individuals)– is one of
three tipped to receive banking licenses over the coming
weeks.
Vernon Hill is expected to win approval for his plans to
launch Metro bank in the UK, opening 12 branches in
London over the next two years.
Virgin Money is also hoping to win approval for a banking
license
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9. Mortgages
It can only get better…can’t it?
The real barrier to increased mortgage lending Good news
over the last couple of years has been on the
supply side, as lenders have been reluctant to
On the road to Mortgage
open their purse strings for fear of increasing recovery after lending
their book of bad debt. This meant that the four months of increased by
sustained £1.5bn in
market was dominated by rather tepid products November 2009
growth.
with low LTVs.
Growth in the number of 85% LTV products is
therefore encouraging And when
But there are
Also the % of landlords obtaining BTL mortgages compared to
still less
January, the
for portfolio expansion purposes has hit its mortgages
number of
available than at
highest level since 200, leading commentators the start of the
mortgages is
down 27%.
believe that BTL could be hot to trot in 2010, or at year.
least lukewarm.
Bad news
“ Anyone saying we're out of the woods needs a reality check - 2010
“
will not be a bed of roses but at least the outlook for 2011 should be
better IFA Online, Dec 1 200Alan Cleary Exact Mortgages
st
08/01/2010 9

10. Lending
Still depressed
Lending activity is likely to remain
relatively depressed in 2010 until funding
and supply conditions improve,
according to the BSA
Funding conditions for all lenders are
improving slowly, but these are still
acting as a brake on lending
Although credit card lending rose slightly
in November, the lack of popularity of
other loans and overdrafts meant that
people paid back £376m more than they
borrowed during the month.
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11. RDR effect
Adviser fall-out
The nascent global economic recovery has offered some reassurance that the UK's fortunes
are poised to improve, but, with business costs growing and margins under mounting
pressure, it is unrealistic to expect the sector to emerge from 2010 unscathed
Scale is, and will remain, crucial, but it is no substitute for capital and profitability.
Business quality is the all-important factor, which in practice means high quality advisers
writing high quality business. Under the Retail Distribution Review, the size-at-all-costs
business model could be rapidly exposed.
Any company lacking The advice sector is likely to
sufficient capitalisation could be defined by consolidation
be in for a torrid 12 months in the next 12 months, with
and that applies to the bigger
players almost as much as the most likely to struggle at
their smaller counterparts first set to be the subscale,
Martin Davies, Openwork capital-poor networks.
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12. Pensions landscape evolution
DC set to dominate
The UK pensions landscape is undergoing huge change, with the numbers
drawing benefits from defined contribution pensions savings in 2010 set to
exceed 500,000.
Defined contribution schemes are to continue
as the "natural successor" to defined benefit
schemes in 2010 as long as advice can be
guaranteed!
In particular I would expect to
RDR is a concern, as with commissions see a greater use of online tools
potentially being removed from 2012 the to communicate the offering and
issue of employers and/or employees being benefits of defined contribution
willing or able to pay for advice will come to schemes”
the fore.
2010 should bring with it innovation in the Sally Webber, Creative
defined contribution arena as product Benefit Solutions
providers and the IFA market need to alter
their propositions so that they differentiate
themselves from their competition.
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13. Taxing times
And a risk to LT saving
An environment of higher taxes – likely imposed soon after the general
election if Labour is ousted – and public spending cuts will emerge. Instead
of 'doing more with less', the result in public provision could feel like 'getting
less for more money', which will test the temperament of the British people.
The third most used word in Darling's
PBR speech was ‘tax' and this is exactly
what the increase in NI contributions will
be; a stealth tax on Middle England as
those on £20,000 a year or less have
been specifically excluded.
Further Government restrictions on
higher-rate tax relief seriously risks
damaging long-term savings.
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