Investment Insider: As confidence rises, financial service shares are worth a look

David Kuo

Who would have guessed that the UK finance industry would ever recover from the severe beating it has taken over the past few years? But it has.

According to the latest survey from the CBI and accountant PWC, confidence in the sector has dramatically recovered in the last quarter. So, how can we, as investors, capitalise on this?

By and large, stockbrokers are said to be geared plays on the stock market, meaning that if the market does well then stockbrokers' shares should do even better. Shares in Brewin Dolphin Holdings, which manages clients' portfolios and offers internet trading, have returned more than 100 per cent since the FTSE 100 index hit a low of 3,512 points on 3 March 2009. By comparison the index has returned 83 per cent.

Brewin Dolphin is not alone. Close Brothers Group, which provides banking, securities and asset management services, has returned 94 per cent. And, Charles Stanley, which offers stockbroking and management services, has returned 100 per cent.

The rise in stockbrokers' shares is not entirely unexpected. Consider Brewin Dolphin, which saw a 40 per cent cut in profits from £42m to £26m between 2007 and 2009. Profits have gradually recovered and the dividend yield of 4.2 per cent looks quite decent too, as indeed do the yields for other brokers.

Money managers are also likely to benefit as investors regain their risk appetite. And so these are also seen as geared plays on a stock market recovery.

Aberdeen Asset Management has delivered a return of 133 per cent since March 2009. Other fund managers have equally impressive, if not better, returns. Ashmore, an emerging market specialist, has returned 273 per cent or 54 per cent a year, while Henderson Group and Investec have returned 131 per cent and 151 per cent respectively.

Geared plays can be a great way to outperform the wider market. But they are a double-edged sword. Just as profits can rise quickly when market confidence is high, they can evaporate even faster should shares fall.

David Kuo is director of the financial advice website www.fool.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Tax Manager / Accountant

    £35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

    Ashdown Group: Contracts Executive - City of London

    £35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

    Recruitment Genius: Call Centre Debt Collector - Multiple Roles

    £21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Day In a Page

    Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

    Uganda's giants are flourishing once again

    After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
    10 best sun creams for kids

    10 best sun creams for kids

    Protect delicate and sensitive skin with products specially formulated for little ones
    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
    The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

    The haunting of Shirley Jackson

    Was the gothic author's life really as bleak as her fiction?
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

    Tourists are limp, leaderless and distinctly UnAustralian

    A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives