Nehal Desai is an investment director at Rathbones. Nehal manages portfolios for individuals, family groups and their associated trusts, charities and pension funds. She also has a number of international clients.

HeraldScotland:

 

Q. Do you think financial awareness should be taught in schools as part of the national curriculum, and should responsible investing be part of that? What kind of things is Rathbones doing to help young people, and older generations too, lay firm financial foundations?

The younger generations have a steep challenge ahead when it comes to their finances. They face a tricky combination of stagnating pay, ever-increasing housing costs, rising student debts, unfunded government pensions and lower investment returns. This means that they will be very lucky to retire at the same age as their parents; times have certainly changed.

However, those that wish to narrow the age gap can if they start being aware of their finances and managing them carefully from an early age. Schools are perfectly placed to offer this kind of education as if young people are aware of the importance of saving before they’ve even started their first job, they really could make a difference to their long-term financial position. Investment managers talk about compound interest all the time, but that’s because it really does make a huge difference. The earlier you can start to save, the better.

Investing and managing finances in general can sound intimidating to young people until you start explaining the terms in straightforward language - suddenly they get it! And they want to know more. The subject seems to have high barriers to entry, but I think that’s because it’s often talked about using sophisticated language in specialist newspapers. It’s up to us investment managers to knock some of these barriers down.

HeraldScotland:

One of the ways we can do that is by engaging young people on the subject of responsible investing, which I do think should be on the national curriculum. It’s actually a great way to get the younger generations excited about their finances as they tend to be pretty engaged with sustainability in general already. When young people realise the potential power of their investments and how the decisions they make really can drive positive change, they always want to know more.

There are quite tangible ways of engaging young people with responsible investing too - for example, talking about governance issues and stewardship and how engaging with company boards really does drive change. We have plenty of examples of that at Rathbones, like playing a major role in encouraging Royal Dutch Shell to adopt sector-leading carbon reduction targets. We continue to play a leading role on engagement with the utility sector, amongst many other initiatives. Examples of stewardship success inspire young people to learn about the changes they can make.

Q. What are Rathbones doing?

 

At Rathbones, we’re pretty proactive when it comes to talking to young people about finances. We wrote a report about the difficulties ahead for younger generations, which are compounded by the state taking less of a role these days and greater responsibility falling on the individual. We highlighted some uncomfortable truths but we also made sure the report was full of plenty of good advice.

We suggested young people have three options. They either need to save more today by increasing pension fund contributions, work for longer and delay retiring, or spend less in retirement, living a more frugal existence. None may seem that appealing but unfortunately there’s no easy way around these challenges. If you’d like to read more, please refer to our full report, Too poor to retire.

We also hold a lot of educational events around financial awareness, not only for young people but also for divorcees, widows and vulnerable clients. Attendees have the opportunity to draw on the expertise of a team of investment managers who cover a wide range of topics, from an introduction to asset classes, risk and return to outline concepts in responsible investing. Although we tackle some complex subjects, the course is highly interactive, light and enjoyable, and provides an excellent platform to build on financial awareness and capability.

We managed to move all of our events online when COVID-19 hit last year, to make sure that no one missed out. Using an online platform actually means that even more people can attend, so our messages are reaching an even wider audience. These have proven very popular and roughly 100 young people aged 16 – 25 attended one of our financial awareness courses last year. We plan to run even more next year to meet demand with a much wider programme of films and tutorials. In fact, we’re launching a financial awareness miniseries for young people at the end of this year – a course of bite-sized video modules covering a wide range of topics including how to budget and save, the dangers of getting into debt and an introduction to the world of investing.

HeraldScotland:

BESPOKE, TAILORED … AND HUMAN

Q. In your day to day experience helping clients meet their financial goals and ambitions, how much importance do you think they place on having a positive impact on the world through their investments? Do you think they see this as being separate from, or integral to their sense of financial health and security?

We have always looked after clients who have excluded certain investments due to their impact on the world, but in the last year there has been an increasing amount of interest in ensuring investments have a positive impact overall.

Given the recent focus on responsible investments, our clients are thinking more about the social, economic and governance issues within the companies we invest in on their behalf.

There has long been a debate about whether there is a price to pay for responsible investment in the form of returns.  However, the evidence is growing that integrating a consideration of environmental, social and governance factors into investment decision making can help avoid some risks and identify opportunities, further enhancing returns.

 

NOTES TO SELF

Q. If you knew at 25 what you know now with regard to financial planning and investment opportunities, what would you do differently – personally speaking, in terms of a long-term approach to financial security and ethical investment?

I would have made a conscious effort to save a percentage of my income on a monthly basis and would have started investing in ISAs from an earlier age. I would have also made the maximum contribution to my pension to save for my retirement. On ethical and sustainable investment, I would have certainly invested more in technology and renewable energy as well as EV battery technology.

www.rathbones.com/financial-awareness-for-young-people

www.rathbones.com