2023 Round Up

A lot happens in a twelve-month period. We live in a world full of subjective opinion, and often sensationalism, resulting in a greater risk of thinking short term and reacting in the moment. We’ve all heard the saying ‘patience is a virtue’ and it’s been absolutely required this year with significant economic uncertainty and geopolitics continuing to be a concern. Don’t worry though, its not all bad news!

This time last year annual inflation was sitting at 10.5% year on year. We didn’t know it then, but inflation had peaked last December. Nonetheless, the UK endured a further 6 interest rate rises in 2023, as rates increased from 3.5% from January to 5.25% in August. Inflation, although it reduced over the year, remained stubborn, and was still sat at 6.7% annualised to September, way above the government target of 2%.

Overall, it has been a year of many challenges. Maintaining course in choppy waters is much easier to say than do, and I am proud that we have managed to remain convicted to our beliefs. Professionally at least, it has been one of the toughest years on record, and one where patience has proved (as so often is the case) to be a real virtue.

In the last 10 weeks or so, inflation has fallen markedly, sitting at 3.9% today. We expect this to continue into next year (January might be a seasonal exception) and could well start with a ‘2’ by May. As we move towards 2024 therefore, we have a notable positive change in direction for inflation and interest rates, and markets have reacted positively as was our expectation.

So, yes, at last our investment outlook has started to play out. As a result, 2023 will close with all our portfolio’s providing strong positive returns well above their respective benchmarks. Although we have seen rapid improvements in capital values in recent months, mostly this has just offset the losses across the rest of the year. The constant has been the income, which has continued to tick in and make up the majority of returns. Happily, our income yield moving into 2024 is largely unchanged, sitting at between 4% and 6% depending on the risk profile.  Therefore, with a falling inflation and interest rate environment (the opposite of what we faced last year), we are able to look forward to 2024 with more of a spring in our step. We can all raise a glass to that, I’m sure!

In other news, we have been delighted to acquire two new businesses in 2023, boosting staff numbers (from 37 to 52), and the number of clients we have the privilege to work for. Our total assets under management are now around £850 million and with two more purchases already in progress for completion next year, we expect to travel through the £1 billion asset barrier at some point in early 2025.

As we have tried to deliver consistently across recent years, as our scale increases we continue to focus on pushing costs down. Client costs have fallen by around 20% over the last two years making us one of the lowest cost financial advisory and discretionary fund management business in the UK. We are exceptionally proud of the work that goes into delivering our longer-term plans, which remains a balance between reinvesting in our team to provide quality outcomes for clients, whilst keeping costs keenly competitive.

I would like to thank the fantastic team at DB Wood. They are genuinely committed to the principles of hard work and delivering quality outcomes. That said, we are mindful that without our incredibly loyal clients, who we know have shown patience in our story, we wouldn’t be able to have a great business. Client persistency has maintained above 99% this year and we would like to thank you very much for your faith and support.

May I take this opportunity on behalf of the entire team at DBW, to wish you all a very happy Christmas. Please accept our very best wishes, and good luck for 2024.