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Choppy markets and geopolitical uncertainty have changed the way advisers feel about running – or rather not running – their own portfolios. And just as the demand for dedicated investment providers is growing, the number of outsourced solutions has also mushroomed. But with choice comes confusion, and plenty of it. We find out what advisers need to be mindful of when picking outsourcing partners, which offerings are particularly appealing at the moment and why outsourcing has never been more relevant than today.
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CHAPTER ONE
Interview
INVESTMENT PERFORMANCE AWARDS
CHAPTER TWO
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Fierce macroeconomic headwinds and geopolitical uncertainty have rattled investors, sending financial markets spiralling downwards – and advisers’ appetite for outsourcing soaring upwards. In May, 31% of advisers were outsourcing portfolio management for more than half of the assets they advise on – a jump of 10 percentage points from six months earlier, according to Schroders’ 2022 UK Financial Adviser Pulse survey. A further 17% of the 225 advisers surveyed have increased their use of outsourced investment solutions over the past year. It comes as little surprise amid a turbulent and uncertain environment. The survey points to a sharp rise in bearish sentiment among advisers’ clients – from just 12% of those surveyed in November 2021 to 57% in May 2022. ‘There’s no doubt about it, this year has given investment managers plenty to think about,’ says Tony Lawrence, senior investment manager at 7IM. ‘Years of easy monetary policy coming to an end, Russia’s expulsion from any form of global trade or market, inflation hitting levels not seen since the ’80s – it’s a lot to digest. Navigating a regime shift like this takes expertise. It takes a sophisticated approach.’ Another phenomenon stoking demand for outsourcing is the volume of merger and acquisition activity among adviser businesses. ‘There’s a lot of consolidation out there and typically that means changing to the central investment process of the acquirer – essentially, that’s outsourcing too,’ says Greg Mullins, head of sales at Rathbones. Below, we look at the chief reasons for – and benefits of – outsourcing in 2022 and beyond.
Access to investment expertise Access to investment expertise and resources is the biggest catalyst for outsourcing portfolio management, deemed to be important or very important by 71% of advisers surveyed by Schroders. ‘Personally, I think very few advisers are qualified to efficiently manage client portfolios,’ says Tom Munro, financial planner at McHardy Private Wealth in Falkirk and a long-time proponent of outsourcing. ‘Utilising both strategic and tactical asset allocation to construct a well-diversified global portfolio remains the province of experienced teams of analysts and fund managers, especially against the current backdrop of volatility in both equities and bonds.’ Dedicated investment providers benefit from scale and experience. They boast deeper research resources and can glean insights unavailable to the average adviser through having access to company management teams – not just UK companies but big global brands, says Mullins. ‘That access is crucial as often by the time you read about something significant, it’s already in the price.’ Providers of outsourced solutions also equip advisers to communicate more effectively with clients, reassuring them that their investments are in good hands. ‘The challenging market conditions of the past few years have made the prospect of working with an investment partner who can not only deliver a high-quality investment proposition but also provide support and commentary on markets and investments an increasingly compelling proposition for many advisers,’ says Gillian Hepburn, head of intermediary solutions at Schroders. ‘Many advisers were spooked when markets plummeted during the pandemic. Client conversations remained challenging despite the market recovery, and in the wake of the Russia-Ukraine war and the associated surge in inflation and renewed downturn in markets, it’s not surprising that the number of advisers choosing to outsource is continuing to rise.’ Effective volatility management Given the turbulence experienced by investors in recent years, keeping up with market movements has become increasingly time-consuming. And with shares and bonds plummeting in unison this year, portfolio construction has become more complex. In reaching a decision to outsource portfolio management, 64% of advisers cite effective volatility management as being important or very important. ‘Many advisers’ in-house portfolios are not as diversified as they could be – no fault of their own as this often comes down to availability of assets widely available across platforms,’ says Matthew Lamb, chief executive of Pacific Asset Management. Having exposure to a broader range of investment vehicles and strategies – from ETFs and investment trusts to macro strategies and alternative risk premia – can bring genuine diversification but can also demand a specialist skillset to pick and monitor, he adds. For 7IM’s Lawrence, portfolios built for the last decade will not be appropriate for the next one. Portfolio construction must now include alternatives – and researching these is labour- and resource-intensive.
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chapter one
Yay or nay?
Outsourcing 2022
In the wake of the Russia-Ukraine war and the associated surge in inflation and renewed downturn in markets, it’s not surprising that the number of advisers choosing to outsource is continuing to rise.
‘Portfolio construction needs to change. The types of funds being held need to change. To chart a smoother ride through rocky markets, advisers are seeking portfolios built for now with the ability to adapt to rapidly changing conditions,’ he says. Improved operational effectiveness Running portfolios on an advisory basis is operationally intensive. Rebalancing portfolios can be a clunky process, with trading often occurring across multiple platforms with different idiosyncrasies. With permission being required for every portfolio change, delays in obtaining approval often create inconsistent client outcomes. ‘Delays to portfolio changes are inevitable and the drift between client portfolios – and therefore outcomes – is very real,’ says Lawrence. Outsourcing to discretionary fund managers (DFMs) with the autonomy to manage client portfolios as they deem appropriate, within the parameters of the agreed investment objectives and risk categorisation, of course, can significantly increase operational effectiveness – a key consideration for 62% of advisers in the Schroders survey. ‘Increasing operational efficiency helps advisers to reduce their costs and the risk within their businesses,’ says Schroders’ Hepburn. Reduced risk is a deciding factor for 58% of advisers, the survey shows. More time to spend with clients Outsourcing gives advisers more time to focus on what they do best – financial planning. Having more time to spend with clients is a priority for 61% of advisers surveyed. ‘Outsourcing to a properly resourced bespoke discretionary service for circa 80 basis points offers excellent value as it fashions considerable time for face-to-face discussions on the more pressing issues such as tax and succession planning,’ says McHardy’s Munro. ‘This is where real value is added and clients genuinely appreciate the work done on their behalf rather than me sitting behind a desk fretting over rising bond yields, falls in oil prices and the Bank of England’s next move – a total waste of my time.’ Increased regulatory burden At the same time, the growing regulatory burden is eating into advisers’ ability to service clients to the same level. The FCA’s new consumer duty, which comes into force on 31 July 2023, is just the latest obligation being put on advisers. ‘With the implementation date fast approaching, this is leading many businesses to focus on their target market ensuring that client outcomes are at the forefront of their minds, whilst also bearing in mind that these services need to represent value for money,’ says Antony Champion, head of intermediaries at RBC Brewin Dolphin. A good working relationship between the advisory firm and the outsourced investment partner can help advisers to meet their regulatory compliance obligations. The onus will fall on the provider as well as the adviser and providers are intent on ensuring they have clear and sufficient information for advisers to confirm the product is suitable for the client. Half of the advisers Schroders surveyed see the increased regulatory burden as important or very important in the decision to outsource. And as advisers start to implement the consumer duty, and the debate on value intensifies, we can expect to see the use of outsourcing grow further.
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chapter two
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Recent developments from the war in Ukraine to spiking inflation have made outsourcing much more appealing
Three advisers who have recently started outsourcing and one who is doing so more tell us about the reasons behind the moves. MATTHEW DOUGLAS Matthew Douglas in Suffolk is adopting a DFM solution for the first time and plans to appoint a provider by the end of the year. ‘The issue of using an outsourced DFM has been discussed among our senior management team intermittently over the past decade,’ says chief executive Matthew Pescott Frost. ‘We’ve considered all options, including increasing our own FCA permissions to run our own DFM solution to the extent that both myself and a colleague passed the relevant exams through the CII. ‘In the end, we decided that if we could partner with the right company at the right price it would be a cost-effective solution that improves our ability to operate at scale and significantly increases our competitiveness, which can only benefit all stakeholders – clients, team members and the business owners.’ The firm is taking a steady-as-she-goes approach. It will outsource the lower 50% of its clients by assets under advice, which constitutes just 13% of the total. The portfolios of the other half of its clients will continue to be managed in-house. ‘We’ll have a period of reflection on the new arrangement with a view to extending it in future,’ adds Pescott Frost. RESPONSIBLE WEALTH Simon Bray owns Responsible Wealth in West Oxfordshire, which started trading last November. Having begun his advice career with Lloyds Bank in 2007 before becoming an appointed representation of St James’s Place in 2012, he relishes having full control. His key motivations are managing risk in client portfolios, managing outcomes and performance expectations, keeping investment costs low and seeking a solution whereby all funds meet basic ESG principles. ‘Our proposition is quite different to previously – independent, fixed fees for advice, quality platform administration and a focus on investing responsibly,’ he says. ‘I really enjoy spending time with clients and want to be able to add as much value as possible. I made the decision early on that we would outsource compliance to a third-party specialist [SimplyBiz], which included creating a centralised investment proposition. ‘I didn’t think it was of value to clients for me to individually create portfolios due to capacity and effectiveness, so it was an easy decision to outsource to DFMs, primarily EBI Portfolios, aligned to our centralised investment proposition. ‘I’m always open to exploring new ways of creating efficiencies for clients and us as a business. Outsourcing to trusted partners is a critical part of what we do.’ PROSPERITY IFA Prosperity IFA in East Sussex had been running advisory portfolios since 2012. In July last year, it moved the models to a DFM under a white-labelled solution. ‘As the regulatory environment in the UK has continued to change, overseeing the day-to-day management and administration of investment portfolios had become a significant resource issue for us,’ says Prosperity founder Simon Munday. Having consulted several providers, it chose Casterbridge due to its flexible and approachable nature. ‘The team came to us with a blank sheet of paper and began by listening to our needs, rather than telling us how they would run our portfolios,’ says Munday. The adviser and provider worked together to develop a suite of seven adviser-branded discretionary multi-asset portfolios called the ESG Integrated Prosperity Wealth Portfolios. Prosperity’s investment committee is involved in idea generation and oversight, but Casterbridge is responsible for conducting regular and ad hoc tactical changes, as well as ongoing maintenance and administration on Prosperity’s chosen platform. ‘Since we started outsourcing, we’ve been able to focus much more on the needs of our clients,’ adds Munday. ‘We’ve significantly reduced the time it takes to manage portfolio decisions for clients – particularly important during periods of market volatility.’ STRATEGIC SOLUTIONS Over recent years, Strategic Solutions Financial Services, headquartered in Bournemouth, has moved away from advisory portfolios due to the growing administrative burden of running in-house advisory portfolios. It has also been affected by property fund suspensions. Recently, it has made a big shift towards outsourcing with new investment business and reviews of existing client portfolios going down this route. ‘I believe that it’s important in any role to acknowledge one’s strengths and weaknesses and remain focused on the best outcome for clients,’ says chartered financial planner Natasha O’Neill. ‘Outsourcing investment decisions shouldn’t be seen as a sign of weakness but an opportunity to enhance our service. DFMs have more experience, time and knowledge than I can offer. ‘I prefer my clients being in portfolios that are actively managed and can react quickly to threats and opportunities in the markets.’ The firm’s investment committee has approved a mix of multi-asset risk-targeted models, DFM models and bespoke solutions. Some of the DFMs currently on its panel are Casterbridge, Investec and LGT. ‘In an ever-changing world, it is imperative now, more than ever, to be open-minded and avoid being stagnant in how we work and think,’ adds O’Neill.
Why I’m now outsourcing
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OUTSOURCING 2022
INVESTMENT performance awards
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Advisers want more from their outsourcing partners. While investment performance remains important, there is a growing emphasis on customisation and collaborative working to design and deliver a solution that fits seamlessly with the adviser’s business model and better meets the needs of clients. ‘Financial advisers became tired of being sold products manufactured by and for the benefit of asset management groups,’ says James Sullivan, head of partnerships at Tyndall Investment Management. ‘They began looking for solutions and services that fitted nicely with their own blueprint, creating efficiencies and helping to create long-term value. Advisers are right to demand more from their investment partners.’ But with choice comes confusion and some of the finer details may be baffling to advisers – something that Keith Boyes discovered when he founded Edinburgh-based Spentwell in August 2019. ‘It’s a busy and noisy place with everyone jumping up and down to get your attention,’ he says. ‘It can be incredibly overwhelming and certainly tricky to navigate such waters when you aren’t quite sure in which direction to head.’ Collaborative solutions While selecting an off-the-shelf multi-asset fund or managed portfolio service (MPS) was once the norm, advisers now increasingly want solutions that they have helped to develop. ‘The best relationships between adviser and outsourced provider are collaborative ones where there is joint ownership of the investment solution,’ says Bevan Blair, CIO of One Four Nine Portfolio Management. ‘The outsourced solution can then be designed to meet the adviser’s target market assessment and Prod needs.’
It is an avenue down which both the earliest and most recent entrants to the outsourcing scene are going. Francis Klonowski, the sole practitioner of Leeds-based Klonowski & Co, was an early adopter of outsourcing, having used fund-of-funds since the mid-90s. Today, the firm is an appointed representative of another small firm and the pair have worked with a consultant to design portfolios. The advisers decided on the asset allocation and suggested implementation across open-ended, closed-ended and passive funds. Since the end of 2021, the portfolios have been populated and managed by a discretionary fund manager (DFM). ‘Now we have the best of both worlds: a range of portfolios to suit different risk profiles with the underlying funds selected, monitored and reported by specialists,’ says Klonowski. Matthew Douglas in Suffolk is taking its first steps on its outsourcing journey and is seeking a bespoke solution, which will be dual branded. Director Tony West says: ‘The number of times I’ve been told recently that our preferred equity content is only 1% different to the DFM’s off-the-shelf model and so we should accommodate them is surprising. Why are we the ones that are 1% out? ‘We want to have something that we have real input on how it is built – things like believing in a conviction approach to investment. We don’t want a portfolio of 30 funds. We’d rather have 15 we really believe in and know work well to diversify each other.’ Custom-built propositions More innovative, custom-built products are also starting to emerge. Casterbridge Wealth is considering creating an open-ended investment company (Oeic) for larger firms, typically those with assets under advice of more than £100m. The adviser would own it and appoint Casterbridge as the regulated investment manager. As well as having a high degree of governance and oversight, the adviser could then choose to take a co-manufacturer/sponsor fee, typically around 10 basis points. ‘The commercials are exciting for advisory firms heading down this route,’ says Matt Cheek, managing director and head of distribution at Casterbridge. Other benefits include potentially cheaper pricing. Because an Oeic can hold direct equities and bonds – unlike an MPS – it effectively unitises a version of the DFM’s bespoke portfolios, which have around 60% in direct equities and 40% in collectives. Centurion Chartered Financial Planners in Bristol is collaborating with its investment partner, Brooks Macdonald, to examine the feasibility of creating a hybrid solution that helps clients to manage their tax liability. ‘The only downside of MPS is the potential loss of control over tax – particularly capital gains tax – which is an issue for high-value general investment accounts,’ says Centurion director Dave Robinson. ‘We’d like to see the development of a hybrid MPS, so that rather than investment switches being made automatically, the tax implications can be reported in advance and discussed with the client to decide whether they should accept the switch and tax liability or opt out.’
chapter TWO
The best relationships between adviser and outsourced provider are collaborative ones where there is joint ownership of the investment solution.
Flexible friends In such a fast-paced environment, advisers are demanding solutions that can react quickly to market events and changes in sentiment to produce competitive risk-adjusted returns. Friar Gate Independent Financial Services in Derby has outsourced for more than 13 years and has developed a system of using data from FE Analytics and overlaying this with its in-house calculations to establish the performance of each provider per unit of risk taken. Its current providers are Fidelity, Liontrust, Quilter, Royal London, 7IM and Vanguard. OCM Wealth Management in Northampton runs its own models, which it markets to the IFA market, and reports an uptick in demand for its risk-managed, active approach to managing assets. ‘IFAs are increasingly looking for options for proactive management of client portfolios, rather than the more static approach which has long dominated the market,’ says deputy CIO Georgina Stone. ‘We’re somewhat unique in the way we manage assets with the flexibility to remove risk asset exposure entirely depending on market conditions.’ OCM reduced risk exposure in February on the back of geopolitical tensions and inflationary concerns, then began to reallocate at more attractive entry points later in the year. Cash levels are now at around 15% across the portfolio range, ready for opportunities as they arise. It also has exposure to long income property, infrastructure, commodities and low-volatility strategies to add diversification and manage risk. David Rouse, the principal financial planner at Friar Gate, points to the potential for greater use of alternatives going forwards. ‘For example, Web 3.0 may create opportunities in digital asset markets,’ he says. Enhanced service As outsourcing moves from arms-length arrangements to much closer business relationships, there is greater potential to add real value beyond performance alone. ‘The industry needs to shift its mindset from outsourcing to insourcing,’ says Greg Mullins, head of sales at Rathbones. ‘If you’re bringing something in, it needs to enhance your business proposition and your client experience. ‘It’s not solely about outright performance but how the provider engages with your business and the reporting available, as well as access to good, timely information. Spentwell uses Finalytiq on an advisory basis. The investment proposition is white-labelled and comes with a host of benefits. ‘We wanted a provider that goes above and beyond to enhance our service,’ says Boyes. ‘Ours does platform due diligence, provides multi-asset reports and runs insightful webinar sessions throughout the year. It also has analysis tools that make our job easier and make us look great in front of clients. ‘What we’ve seen so far gives us the confidence that it will continue to think beyond the norms and push boundaries, embracing great technology to give us even better solutions year-on-year.’ Across the industry, providers are not standing still. Market participants expect to see further developments in personalisation, broader use of private assets and greater choice in outsourced income solutions – all driven by client demand and supported by advances in technology.
chapter three
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As the breadth and depth of the outsourced investment solutions market balloons, advisers are becoming ever more discerning about whom they partner with
From multi-asset funds, model portfolios and bespoke DFM solutions, there is more choice than ever. We spoke to two advisers who favour quite different approaches to hear what matters most to them when selecting solutions. Dave Robinson Director, Centurion Chartered Financial Planners ‘We are generally sceptical of a stock-picking approach and relatively expensive fully bespoke investment management. Our research indicates that model portfolios tend to achieve a better net result after costs. We generally only engage with fully bespoke where necessary; for example, if clients come to us with stock portfolios or where there is a need to aim for a particularly high income or balance competing interests – say, with life interest trusts. ‘The first thing we look for in a partner is an MPS that covers the full range of risk profiles and has a successful record of optimising returns across all those profiles. We also want to access the various strategies as either unwrapped model portfolios or as wrapped funds to improve our ability to manage tax. And finally, we want to have an option to invest in strategies that comprise only low-cost, passive instruments. ‘The most helpful developments in recent years are the increased range of models and the amount of information and analysis tools available, which make it relatively easy to screen potential outsourcing partners and keep the selected ones under review against both expectations and their peers.’ Hannah Edwards Managing director, Eva Capital Management ‘We outsource to a blend of discretionary MPS and multi-asset funds with an element of global trackers in most client portfolios. Typically, our clients have three to six strategies in their overall portfolio to improve the style mix and ensure that not all our clients’ investment eggs are in one basket. ‘Including a global tracker lowers charges and helps to improve value. Our current global tracker choice still makes active asset allocation calls within broad parameters between equities, fixed income and alternatives. ‘We also like to blend the size of funds. More boutique funds sometimes invest in smaller-capitalised businesses that offer greater growth potential, while the multibillion-pound multi-asset ranges have huge investment depth and expertise, so should be long-term holds. ‘When working with our partners, we look for access to the main decision-makers, good quality periodic reporting, availability on all our preferred platforms, some flexibility when we discuss fees and good quality structured CPD that our team can tap into. Our role as planners is to be able to talk in detail about how one strategy differs from the other and therefore information is key.’
Selecting a solution
What aspects should advisers consider when picking an outsourcing partner? Our five-point checklist is here to help. 1. Business model fit Does the provider’s business model fit yours? How would it support you to ensure it is delivering precisely what you require? ‘This is easy to say but difficult to do, so ask for examples,’ says Kevin Silvester, head of strategic adviser partnerships at RBC Brewin Dolphin. The business development manager should be able to walk you through the terms of business, what they mean and how they might fit with your business model. 2. Potential for partnership With many advice firms seeking collaborative solutions, how willing is the provider to work in partnership with you? Working together to develop a solution means you have all the benefits of outsourcing – harnessing expertise and generating time savings – but keep the client bought into your corporate ecosystem. ‘Firms that run their own advisory portfolios have a really good handle on how much their clients value the IFA input into the portfolios,’ says Matt Cheek, managing director and head of distribution at Casterbridge. ‘These advisers don’t just want to sail their clients down the river with another outsourcing solution.’ 3. Risk management How does the provider manage risk? Is it consistent and easy for you to map to your client agreements? ‘The focus should be on risk management capabilities and how returns have been achieved, rather than the returns themselves,’ says Bevan Blair, CIO of One Four Nine Portfolio Management. ‘No manager can control markets, but managers can control their investment process and the level and types of risk they take to generate returns.’ 4. Relationship in practice How would the investment manager work with you and your clients? ‘Whilst that might sound obvious, this is an area that’s often forgotten in the technical and tactical analysis, but do look at what they’ve done previously, their experience in the adviser market and how they interact with you and your clients,’ says Silvester. ‘They should be able to give you lots of examples of this.’ 5. Added value Does their proposition add value to your business and your clients? Cost is important but it is only part of the equation. ‘It’s not all about costs and it’s not all about performance,’ adds Silvester. ‘We all learnt at school that value is the sum of quality and service divided by cost, so make sure you weigh up all of those elements.’ Customised materials, bespoke client investment proposals, cash flow planning tools, performance pack exports and live performance tracking are areas of added value that Pacific Asset Management highlights.
Picking a partner
Citywire’s annual Investment Performance Awards celebrates the best performing risk-adjusted portfolios from discretionary fund managers in the UK. Usually, we award the winners at our much beloved Wealth Manager Retreat. However, this year, in an unfortunate twist of fate, the UK lost its head of state on the same day we were due to announce them. So instead, we went on the road to personally hand-deliver each award to the DFMs who deserved them. You can see the winners video here. There were seven categories up for grabs – four judged on the following risk spectrum: Cautious, Balanced, Growth and Aggressive. The other three honoured the best small, medium and large firms. While this year’s winners stand out for a variety of reasons, there’s one thing they all have in common: over a three-year period, their portfolios performed the best.
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We are delighted to accept these independently verified performance awards. To win in categories at each end of the risk spectrum is a fantastic endorsement of our global, active and direct investment process, the innovative portfolio construction of our MPS and the talent of our dedicated investment team. I hope these awards will provide advisers and their clients with reassurance that they are in good hand John Bellamy, head of adviser solutions at Waverton Investment Management
Cautious WINNER: Waverton Investment Management
Methodology The aim of the Citywire Wealth Manager Annual Investment Performance Awards is to recognise the firms delivering excellent risk-adjusted performance for their clients. The seven awards held in association with ARC Research Limited (ARC) cover four risk categories of portfolios and recognition of the best firms by size: CATEGORIES • Investment Performance – Cautious Portfolio • Investment Performance – Balanced Asset Portfolio • Investment Performance – Steady Growth Portfolio • Investment Performance – Aggressive Portfolio • Best Small Firm • Best Medium Firm • Best Large Firm THE ENTRY PROCESS Data is collated by ARC either via the Suggestus Research Platform or in spreadsheet format. Firms that are contributors to the ARC Private Client Indices that wish to use their PCI composites as their award entry need not provide the performance data as this is already held by ARC. Firms must enter performance data that is representative of client experience in the chosen risk categories. Data provided must be verifiable, either by provision of real data (e.g. funds or composites of portfolios) or a model that can be verified against actual client performance data. The awards are not intended to encompass single-strategy pooled vehicles but rather the performance that a typical private client might expect to receive as a discretionary client of each entrant. Award Categories and Entry Requirements Data must be entered into the Suggestus Research Platform or in the spreadsheet format provided by ARC. Required data includes: • Monthly discrete returns net of fees for the three years to end June 2021 • Latest asset allocation • Number of clients invested in the entered strategy • Total value of assets in the strategy Some basic rules: • Entries should be UK Sterling products only • Entries should have at least three years’ performance data • Entries should have monthly performance data net of fees • The same product may not be entered into multiple categories • Only one product may be entered into each category Cautious The definition of a Cautious portfolio is one where the historical variability of returns has been less than 40% of that recorded by world equities. The dominant asset classes tend to be cash, bonds and hedge funds. Comparable ARC PCI = PCI Cautious GBP. Should have relative volatility to world equities of less than 40%. Balanced Asset Balanced Asset portfolios are those where the historical variability of returns has been around 50% of that recorded by world equities. Balanced asset portfolios tend to encompass the widest range of asset classes. Managers often refer to multi-asset class strategies in this risk category as being absolute return oriented. Comparable ARC PCI = PCI Balanced Asset GBP. Should have relative volatility to world equities of between 40% to 60%. Steady Growth Portfolios falling into the Steady Growth risk category have a risk profile of between 60% to 80% of world equity markets. They usually have a significant allocation to equities but also have exposure to a range of other asset classes. Traditionally, such portfolios would have been tagged as ‘Balanced’. Comparable ARC PCI = PCI Steady Growth GBP. Should have relative volatility to world equities of between 60% to 80%. Aggressive The Aggressive category encompasses all portfolios with a risk profile similar to that of the equity markets. Traditionally, such portfolios would have been tagged as ‘Growth’. Equities tend to be the dominant asset class, but the portfolio may well hold other asset classes in line with the risk profile. Comparable ARC PCI = PCI Equity Risk GBP. Should have relative volatility to world equities of between 80% to 120%. Data Verification Where an entrant has no current relationship with ARC, they may be asked to provide evidence that the performance series supplied is representative of actual client outcomes. Typically this will involve providing monthly returns for a sample of actual clients that are following the model that has been entered. Entrants may also be asked to provide more detailed information on asset allocation, holdings and overall assets invested in the entered model. If suitable verification cannot be undertaken then the entry will be disqualified. THE JUDGING PROCESS All entries delivered by the deadline are verified by ARC to ensure compliance with the category rules. All eligible entries and then passed through a quantitative analysis process to establish a ranked list of managers in each category. The ranking is based on a series of statistics: 3 Year Growth; Discrete calendar year performance; and 3 year annualized Sharpe Ratio. A ranking for each manager is calculated for each statistic and a combined overall ranking calculated to produce the shortlist of managers. A final sanity check is then run over the shortlist before the results are finalized. The best small/medium/large firm awards are then considered in the context of overall positioning within the various performance awards. ARC and Citywire reserve the right to refuse or remove an entry if the firm or portfolio fails to fulfil any of the criteria laid out in this methodology document. Citywire and AKG reserve the right to review entrants and their entries to ensure that shortlisted and/or winning firms are of good reputation and standing and are robust according to regulatory and governance criteria. Citywire and AKG reserve the right to exclude an entry from consideration for these awards if any of these factors are not satis
We are so delighted to have won the Investment Performance Award for our Balanced Model Portfolio. It is a testament to the hard work of the whole team here at Sarasin & Partners, as well as our thematic investment process that aims to provide clients with sustainable returns over the long term. Ben Gilbert, senior associate partner at Sarasin & Partners
balanced WINNER: Sarasin & Partners
We are delighted to accept these independently verified performance awards. To win in categories at each end of the risk spectrum is a fantastic endorsement of our global, active and direct investment process, the innovative portfolio construction of our MPS and the talent of our dedicated investment team. I hope these awards will provide advisers and their clients with reassurance that they are in good hands. John Bellamy, head of adviser solutions at Waverton Investment Management
growth WINNER: Waverton Investment Management
We are delighted that our team has been recognised by Citywire Wealth Manager with two awards this year. Our team believes in delivering long-term returns ahead of inflation for our clients. Providing a sense of security through common sense investing, we look for opportunity and optimism in a changing world. We're grateful to our clients for their continued partnership. Caroline Stokell, chief executive officer at Veritas Investment Partners
aggressive WINNER: Waverton Investment Management
It is wonderful to collect this award again this year. We have strived to provide high performance through all our portfolio offerings at a competitive cost level and look forward to further success in the future. Tom Sparke, investment manager and director at GDIM
small firm: GDIM
We're delighted to win the 2022 Citywire Investment Performance Award for best medium firm as we continue to strive to offer clients suitable simple, transparent and low cost investment solutions that offer consistency and value over time Alena Kosava, head of investment research at AJ Bell
overall medium firm: AJ Bell
overall best firm: Veritas Investment Partners
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What does the re-brand of Tilney Smith & Williamson to Evelyn Partners bring to the table for advisers? Craig Wright, Head of UK IFA Services at Evelyn Partners, explains. The recent re-brand of Tilney Smith & Williamson to Evelyn Partners creates a new entity with around £53bn of client assets under management. What advantages does Evelyn Partners offer to advisers? Our size and scale bring a number of advantages to our adviser clients. We have redefined our product range to offer a bespoke service, an AIM service and a range of three model portfolio services (MPSs) across 13 different platforms. Our costs are lower across our product range since the merger. We’ve always been very focused on the UK IFA market, but the depth of experience and expertise in the team now means that we can also work with the international IFA market as well as IFAs that are part of networks and nationals. With our larger research team, we can also produce more content for advisers, and in a timely fashion.
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Evelyn Partners: The power of good investment advice
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We appreciate that advisers have a preference for housing assets on platforms and that we needed to provide a larger range of options and choices for them on this medium.
What differentiates the sustainable range from others in the market? Our Sustainable MPS has an eleven-year track record, which we feel sets us apart from other products in the market that have often been going for much shorter time periods. It’s run by a team of people who feel very strongly that the theme of sustainability is becoming a part of everyday conversation. People want to know what their carbon footprint is, or what their plastic wastage is. This product clearly sets out what we’re trying to avoid – areas such as tobacco, gambling and pornography – but also focuses on areas that can make a difference to the future – things like sustainable transport, infrastructure and housing. Experience is very important in this area because sustainability is not black and white. Even among the United Nations 17 Sustainable Development Goals, by working towards one you can be detrimental to another, so an experienced team is vital because it’s important to understand the balance. You have to think about every piece of the puzzle. Your brand statement is ‘the power of good investment advice’. What does that look like today? I believe that good investment advice comes from us collaborating with advisers, pooling together collectively our knowledge, experience and expertise to create the best outcomes for our clients.
Craig Wright Managing Partner Head of UK IFA Services
lower across our product range since the merger. We’ve always been very focused on the UK IFA market, but the depth of experience and expertise in the team now means that we can also work with the international IFA market as well as IFAs that are part of networks and nationals. With our larger research team, we can also produce more content for advisers, and in a timely fashion.
LOGO
The Discretionary Portfolio Service, our bespoke service, differs from the MPS in that it invests in direct equities and bonds alongside opened funds, investment trusts and passives. If a client has a specific income requirement, capital gains tax constraint or preference for a particular ESG theme our investment managers can accommodate it. We can also work with US connected clients. The AIM service has been available since 2006 and has a focus on business relief and a bias to quality companies.
What benefits can your redefined product range give to advisers in the current environment? We appreciate that advisers have a preference for using platforms and that we needed to provide a larger range of options and choices for them on this medium. The three MPSs we have built on platform – Core, Active and Sustainable – consist of growth models and income models. The Core range is a blend of active and passive investments across five growth models and two income models. This MPS has a real focus on the models being suitable to price sensitive clients, with OCFs typically coming in under 0.40%pa. The usual client type are those who want access to a service with a track record of protecting against market downside. Our Active range, which consists of six models, has just celebrated its 10-year anniversary and the team managing the MPS is same since the start. The range blends open-ended funds, passives and investment companies. We feel strongly that in areas such as property, our experience in using closed-ended vehicles offers a distinct advantage. We do not have a preference for investment companies over open-ended funds or passives, we just want to use the best tool for the job. The Sustainable MPS consists of six models all of which have a clear mandate for what the managers will invest in and what they are looking to avoid. The service has an 11-year track record.
Evelyn Partners: Everything you need and more
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Lucy Mitchell is all about commitment, and the Evelyn Partners’ business development director explains how it translates to the firm’s adviser offering
In November 2004 PruFund Growth entered the market with the aim of delivering smooth, competitive returns for a wide variety of clients and scenarios over the medium to long-term. Eighteen years on, there are many different versions of PruFund across our major product lines such as Onshore and Offshore Bonds, ISAs and Pensions. And some are now available on the M&G Wealth Platform. Over this time PruFund Growth has navigated a number of highly volatile market events from the global financial crisis, Brexit, the Covid-19 pandemic and, most recently, the UK’s mini-budget announcement. With the significant challenges our economy faces, from the extremely tense geopolitical landscape to the strain of the cost of living crisis, we are seeing significant interest again from advisers in our PruFund range.
Because of the very diverse nature of the PruFund range, sometimes advisers will invest solely in PruFund for a particular client or, in other cases, it can form the core part of a core and satellite investment portfolio approach. For example, if an adviser’s client has exposure to tactical investments in a particular area, they may want to do that and hold PruFund as a core part of it. The nature of PruFund funds means that they attract a wide spectrum of clients – some of who are looking to increase risk, some who are looking to decrease it. Like many of the best ideas, PruFund was developed out of challenge. With-Profits, an industry stalwart for decades, was often regarded as complex and difficult to understand – despite producing competitive long term returns for customers. PruFund set out to take the ‘best bits’ of With-Profits, the well-managed underlying fund, and combine this with a simple, transparent and formulaic smoothing process. Eighteen years later and PruFund has proved itself time and time again, in some very challenging investment conditions. It has remained a favoured alternative for advisers seeking an investment solution that can help meet their clients’ objectives, giving them the opportunity to achieve the long-term returns they seek but without the full impact of short-term market volatility. We believe PruFund, in all its forms, to be a powerful vehicle in navigating all sorts of market conditions, whether that be in 2004, today or 18 years from now. Find out more on PruFund from our 18-year anniversary webpage.
Disclaimer: We can’t predict the future. Past performance isn’t a guide to future performance. The value of your clients investment can go down as well as up so your client might not get back the amount they put in. Please visit: https://www.mandg.com/pru/adviser/en-gb/funds/prufund-range
This white-labelled service allows Financial Advisers to spend more time directly advising their clients, retaining the closeness of those relationships and the strength of their brands.
words by Paul Fidell, Senior Investment Business Development Manager, Pru
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PruFund Growth standing the test of time for 18 years
James Andrews Partner & Director of Investment Management
James S Andrews Director, Head of Investment Services
Quilter’s investment director Andy Miller on how to strike a delicate balance in intergenerational wealth planning
Paul Fidell, Senior Investment Business Development Manager, Pru
So what’s behind the funds’ success? A combination of global diversification, an established smoothing process and a forward-looking and long-term approach to investing. PruFund employs its established ‘smoothing’ process designed to smooth short-term stock market volatility by setting Expected Growth Rates (EGRs). EGRs reflect our view on how we think the funds will perform over the long term and give advisers a guideline they can use for planning and cashflow modelling. The EGRs help smooth investment returns, with Unit Price Adjustments (UPAs) employed to amend returns in the event of actual performance diverging significantly from EGRs (up or down). Robust, realistic and regularly reviewed by a combination of thorough economic and actuarial analysis, PruFund is invested in our Pru With-Profits fund – one of the largest and financially strongest With-Profits funds in the UK with £143bn invested as at 31 December 2021. This size and scale of the fund alongside expert strategic asset allocation management from the M&G Treasury and Investment Office (T&IO) offers global diversification in 34 different asset classes across numerous locations, providing significant exposure to real assets such as direct property and infrastructure. This brings with it a major point of differentiation over many typical multi-asset funds.
Size of the PruFund range of funds
The number of customers invested in the fund
The 18-year annualised return to end October 2022
Asset types that make up the fund
Different funds available across a range of risk attitudes
£58bn*
450,000*
6.67%
34
12
This is just for UK advisers – it’s not for use with clients
* As at October 2022 Website link
‘Prudential’ is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at 5 Central Way, Kildean Business Park, Stirling FK8 1FT. Registered number SC212640. Authorised and Regulated by the Financial Conduct Authority.
PruFund Growth: 18 years of skilful navigation
Parit Jakhria explains how the PruFund Growth Fund navigated the ups and downs of markets in its near-two-decade existence
You can’t please everyone all the time. And yet that’s exactly what Andy Miller is trying to do. As we sat down with Quilter’s lead investment director, he explained how his firm goes about providing tailored advice to the entire family, from grandparents to teenagers. How do you anticipate the investment needs of different family members? When providing advice, it’s important to understand what everyone’s expectations are – which becomes a lot more complex when you’re working with a family unit. Different generations won’t just have different investment needs and objectives, but they’ll also have different terms to invest. What does that look like in reality? Say you’re dealing with grandparents. They might be in the decumulation phase, taking a retirement income or thinking about inheritance tax planning and associated investment strategies for that. Parents, on the other hand, could well be in the accumulation phase and taking income won’t be relevant for them any time soon. Whereas grandchildren may still be financially dependent, so you’re not providing advice to them but for them. Don’t all those differing needs make it quite challenging to advise different family members? They do indeed, especially when you take some of the new regulations into account that are coming into force. One of those regulations focuses on consumer duty and how products and services should meet the needs and requirements of target markets. As mentioned, analysing what those needs and requirements are and aligning them to appropriate investments at the other end is anything but easy. There’s also the fact that you’re going to be investing different amounts. As you go down generations from grandparents to grandchildren, the size of investments typically decreases. The challenge is to provide a high level of service to all family members because if one of them is unhappy, the relationship with the whole family unit is at risk. Personalised advice is key as it creates a better experience and, ultimately, a better outcome for each member of the family.
It’s a family affair
The challenge is to provide a high level of service to all family members because if one of them is unhappy, the relationship with the whole family unit is at risk.
What exactly is Quilter doing to help with this? We’ve invested a lot of time, effort and money in some new investment advice tools. Among them is our client profiler tool, which aims to help advisers assess clients through four question sets. The first question set is attitude to risk, so you can either use our attitude to risk profile or you can slot your own risk profile into that tool. In the second question set, we focus on clients’ specific investment needs. Are they looking for income, growth or a combination of the two? Next, we assess their investment style preference for active, passive or blended solutions, which could be driven by attitude to cost. The last question set, which is key for many advisers, focuses on clients’ stance on responsible investing. We want to get away from the concept that responsible investing is just binary – so, either the client wants it or not. Instead, we’re trying to assess where they are on a range. Our tool gives advisers the ability to easily and succinctly analyse their clients’ views on that topic. And to be clear, the tool is just there to support your advice – there’s no product bias whatsoever. Apart from our client profiler tool, we’ve also significantly enhanced our core investment offering in the form of the WealthSelect Managed Portfolio Service. What’s the background behind WealthSelect? It’s a Defaqto five-diamond rated, actively managed, discretionary investment solution. We launched WealthSelect in February 2014 to help advisers outsource day-to-day portfolio management duties like asset allocation and fund selection, so they can focus on what they do best – giving financial advice to their clients. How has it performed over the past eight years? Very well, particularly when you compare it to the flexible global and mixed IA sectors. In fact, the majority of our portfolios have outperformed significantly and one of the reasons for that is our approach towards risk management and risk control. Our goal is to create well-diversified, balanced portfolios that we then adjust through regular rebalances, depending on the current market environment. It’s the consistency of our approach that makes it so successful. What enhancements did Quilter make to WealthSelect this year specifically? In March, we significantly increased the number of portfolios WealthSelect offers – from 16 to 56. That enables us to cater to a wider range of clients and allow advisers to deliver more personalised investment service. We began with a range of managed active and blended portfolios and have now added some passive options for clients who have a higher sensitivity to costs. We also came up with a range of responsible and sustainable investing portfolios. It’s a slightly corny metaphor that we use, but we see our core range as a tried and tested recipe that’s now available in 56 different flavours.
Quilter’s Andy Miller explains how to get the right intergenerational wealth strategy in place
Quilter: Generation monetization
The market opportunity With 20% of the UK population forecast to be over the age of 65 by 2030 , the number of people seeking retirement advice is growing exponentially. As a result, decumulation will be a significant opportunity for advice firms to re-engage their existing clients and to win new ones. But it also means adviser firms will need to be prepared for this growth and in their ability to help clients navigate the ever-changing retirement landscape. The challenging world we’ve been experiencing will continue to have a direct impact on future retirement drawdown methodology and client incomes. These challenges around retirement also extend to advice firms.
Sources: 1- ONS. (2017b). National population projections: 2016 - based - Office for National Statistics. Retrieved January 31, 2019, from: https://www.ons.gov.uk/releases/nationalpopulationprojections2016basedstatisticalbulletin 2- Financial Conduct Authority. Retirement income market data 2021/22 3- AKG Research Briefing 2022 - Coming back to the table on CRPs
words by Tony Allan, Partner and Head of Business Development
Investec: Decumulation means opportunity
Sequencing risk: Exposure to market losses in the early years of retirement can impact how long a pension may last. Withdrawal rate risk: Consumers may exhaust their assets too quickly. Advisers need to ensure clients maintain a realistic spending pattern through market cycles Market risk: Markets are inherently volatile and can expose investors to the possibility of loss in the short term Inflation risk: The investment strategy needs to hedge the fall in the purchasing power as the price of goods and services rise over time Behavioural risk: Some investors have a habit of undertaking the wrong action at the wrong time. Advisers need to maintain their clients’ long-term asset allocation through market cycles Longevity risk: An investment term of 20 years or more needs to be planned for as more and more retirees live longer
Key themes to explore with clients Future clients in retirement will face increasingly complex decisions. Exploring key retirement themes with clients will be important in ensuring firms offer suitable options to match their clients’ objectives, including:
Market volatility and its impact on retirement income Ways to avoid inflation eroding a client’s pension pot Managing a sustainable withdrawal rate Reviewing a client’s plan for later-life care The importance of planning in helping minimise tax in retirement
Managing the risks: The benefits of bucketing Managing the risks of volatile returns is key when planning retirement income. There are various strategies to achieve this, and research conducted by AKG suggests the three most popular adopted by advisers are as follows:
The ‘bucketing approach’, whereby income is drawn from specific buckets within the portfolio The ‘natural income approach’ whereby this involves taking the cash distributions an investment provides and leaving the capital untouched The ‘total return approach’, whereby units are encashed across the portfolio to generate the required income
40% of withdrawals are at an unsustainable rate of more than 8%
Of these options, the bucketing or three-pot strategy is the one that is growing in popularity. It’s an approach that we believe helps to mitigate against clients’ emotional responses to the investment risks we’ve highlighted earlier. The ‘buckets’ or ‘three pots’ would typically be comprised as follows:
Cash for a client’s immediate income needs A short-term portfolio of low-risk investments A diversified portfolio of higher risk investments that can be left to grow on a long-term basis
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Investec’s Centralised Retirement Proposition (CRP) With pension freedoms providing customers with far greater choice and flexibility, a CRP framework can ensure a clear, consistent and repeatable advice process that deals with more complex decisions, and risks, as clients move from accumulating wealth to decumulation and generating a sustainable retirement income. Investec offer both a Discretionary Fund Management Service built around the client’s individual retirement goals and a Managed Portfolio Service (MPS) on Platforms that features a range of eight investment strategies to suit clients varying in needs and attitudes to risk.
Achieve more with Investec Investec.com/CRP
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Today, you need to take even greater responsibility for the client income solutions you recommend, especially in the context of ensuring they offer sustainable withdrawal strategies. This in turn can lead to increased admin overhead to address the need for additional compliance record keeping and ongoing reviews. The main risks during decumulation There are far more risks associated with a client’s transition to retirement and during drawdown than there are in the accumulation phase.
Simon Taylor Head of Strategic Partnerships & Platforms
Through the thoughtful design and implementation of an investment strategy that can cater for client income needs and risk profiles, both our Discretionary Fund Management and MPS on Platforms services help advice firms achieve their client goals through a CRP. Ultimately, putting in place a CRP can help your clients plan for the life they wish to have in retirement.
How do you manage your intermediary relationships? Our local Business Development Directors are the main point of contact for financial advisers. They will assist with identifying the most appropriate services for your business and ultimately, your clients. Your dedicated Business Development Director acts as a conduit between the two businesses and will support access to our Intermediary Investment Services team, as well as bespoke portfolio managers as you choose. How do you monitor your portfolios? The central Investment Committee is responsible for asset allocation views, providing macro and market overview, and reviewing market and liquidity risk. Fund analysts undertake constant due diligence on those held in the Model Portfolios to ensure they remain suitable, are following their investment process and performing as we expect them to. Fund performance and analysis is run through Morningstar Direct, along with regular performance reports versus peers, ARC and other benchmarks.
All aboard for a true partnership
How do you interact with your intermediary partners? We understand the importance of keeping you fully informed. We provide videos containing our market views and written market snapshots on a weekly basis, alongside monthly portfolio reviews which discuss and explain investment performance and changes to the portfolios. Every change within each portfolio is communicated to you, along with the rationale. We undertake to provide you with timely material in various forms for your client conversations. Ensuring good client outcomes is our priority.
Unique Selling Point
Tony Allan Partner and Head of Business Development
Why should financial planners consider using you as a discretionary fund manager?
Investment services to suit a range of clients – model portfolios, unitised solutions, sustainable investing and bespoke portfolio management for UK, international and US-connected clients. Wholly owned by the Princely Family of Liechtenstein, ensuring private ownership and financial strength and stability. Long-term approach to business decisions, affording us to make investments in our business that we believe will enhance the experience of advisers and clients.
Portfolio Construction
How are portfolios constructed? The composition of the LGT WM Model Portfolios is agreed by the Intermediary Investment Services Committee, which meets at least once a month to select funds that reflect the house view and define the asset allocation for each portfolio. Any investment decisions are based on the output from the central Investment Committee, which comprises of our most experienced portfolio managers and asset class specialists. The role of these individuals is to set the overall investment strategy for the firm across all the principal asset classes. Decisions made by the Investment Committee encompass information provided by sub-committees of specialists who are dedicated to researching specific asset classes. What is the performance record? The Model Portfolio Service has a strong track record since inception in 2009. The Sustainable Model Portfolio Service was launched in 2018 and when comparing the cumulative returns since inception, both have outperformed the ARC PCI. How extensively do you use collectives? The LGT WM Model Portfolios are constructed using a range of funds. We select each of the funds from a universe of many thousands and in each case, the fund selected is in our minds the best in class. Each individual fund is used to access a specific geography, asset class, sector or investment theme. Investing in funds ensures that the portfolios are diversified, meaning clients are not exposed to any individual market risks. We invest using a conviction-led approach, so the portfolios are typically made up of 20 to 25 funds. We take meaningful positions that ensure portfolios would not suffer from being overly diversified. The objective when selecting funds from our investable universe is to identify managers with an edge who can deliver repeatable performance in line with our performance expectations. We focus on fewer managers and get to know them well so that we understand their individual style and process and build long-term relationships.
Since 2008, we have had a successful history of partnering with intermediaries to provide the highest level of service for advisers and the clients they represent. Our aim has been to provide a high quality, risk-rated investment proposition with a focus on the needs of financial advisers. We are committed to continue developing our proposition for advisers and to delivering a leading service in the industry.
Message to potential adviser clients
Relationship management
Established in 1875, Redmayne Bentley is one of the largest independent private client investment management and stockbroking firms in the UK, with about £2.4bn* of assets under management and £6.8bn* of assets under control across more than 90 investment managers and over 25 offices throughout the UK. Today – over 145 years later – as an independently-owned partnership, we aren’t beholden to short-term shareholder demands. Instead, we are aligned with our clients and focused on the long term, which sets us apart from many of our competitors. As might be expected from a firm with such heritage, we are proud that we continue to enjoy both low staff turnover and high levels of client loyalty – something that speaks volumes about our approach to business.
Bespoke portfolio management Where individual clients pose unique needs, we can offer our Bespoke Discretionary Management solution, tailoring each portfolio specifically for each client. Whatever the needs of you and your clients are, our personal and tailored approach has the flexibility and solutions required. • Supporting clients with CGT issues • Fully diversified portfolio • ESG consideration • Ethical portfolio construction • Fully risk rated • Daily monitoring and trading When we say fully bespoke, we mean fully bespoke. We build each portfolio to client requirements by listening to what you and your client(s) say. Our aim at Redmayne Bentley is to always deliver on our founding values to ensure we always provide a great client experience. At Redmayne Bentley we are able to deliver one of the most personalised services in the market by not having discretionary desks where your clients’ money is run in line with thousands of other portfolios. Your local investment manager and their team will be on hand to discuss any investment rationale you or your client might have. For more information on this or our other services, please get in touch. Please contact our Business Development support team: 0344 259 0001 or dfm@redmayne.co.uk. (*as of October 2022)
Redmayne Bentley: Independent and bespoke
Your Portfolio Service Our new service is designed to complement Financial Advisers’ existing business practices by providing a centralised investment proposition that will support the conversations they have with their clients and help reduce the ongoing administration and resources associated with fund and investment selection. Redmayne Bentley works closely with Financial Advisers to create a range of portfolios in line with their risk-profiling methodology; these portfolios are then white-labelled and hosted on their preferred platform(s) of choice. We offer a broad range of portfolios with the primary aim of income, growth or ESG.
Whether clients are accumulating wealth for later life, looking to drawdown on their investments during retirement or have a passion for environmental, social and governance investing, we strive to provide solutions that cater for all requirements. The overarching aim is to help advisers mitigate the regulatory risk and operational burden within their business through a high-quality proposition, which enables them to spend more time advising their clients.
James S Andrews Director of Investment Management
At Vanguard, we see our role as helping to make sure financial advisers have the choice of solutions and services they need to best serve their clients. In fact, our story in the UK began through our partnership with financial advisers – a strategy to which we remain wholly committed. Nowadays, advice is no longer just about making good use of surplus financial assets. The reality is that clients are living longer and yields are expected to remain low by historical standards, making investing for retirement and inter-generational planning even more challenging. With that in mind, we believe the need for good quality financial advice is only going to grow. Our research suggests clients greatly value the uniquely human skills advisers offer in providing the peace of mind that their investments are being managed well. They also value the emotional support and guidance that advisers can give through sometimes difficult economic conditions and financial decisions. At the same time, advised clients tend to favour automation for portfolio-related tasks, such as asset allocation and rebalancing*. Delivering value with LifeStrategy Vanguard’s LifeStrategy offering is designed to give advisers more time back to focus on strengthening client relationships. Because Vanguard handles asset allocation, portfolio construction and regular rebalancing, advisers using LifeStrategy can spend more time building client relationships and other more complex, higher value-added tasks, such as estate planning, tax services and spending strategies, for example. LifeStrategy is our flagship multi-asset offering and is one of the UK’s most popular investments, with more than £35 billion** invested across the mutual fund range since it was launched in the UK in 2011. The range has delivered value to more than 4,000 adviser firms, freeing them up to focus on their client relationships. The funds are intended to serve as all-in-one investment solutions, or as the core of a broadly diversified portfolio, with five equity-to-bond ratios available to meet the needs of most investors. As part of our ongoing partnership with advisers in the UK, we’re always looking for ways to help them deliver more value to their investors. We recognise that for some clients, advisers can prefer to use model portfolio solutions (MPS), so we’re delighted to announce that LifeStrategy is now available to advisers in both fund and model portfolio format. The LifeStrategy MPS range includes two versions: Vanguard LifeStrategy MPS Classic and Vanguard LifeStrategy MPS Global. More choice, more value The Vanguard LifeStrategy MPS Classic range includes five model portfolios that mirror the asset allocation of the Vanguard LifeStrategy mutual funds, providing broadly diversified, high-quality exposure to global equity and fixed income markets via a portfolio of underling index funds. The success of the Vanguard LifeStrategy mutual fund range suggests many UK investors continue to hold a preference for their home market. As such, the Vanguard LifeStrategy MPS Classic range follows the same design; the portfolios have a tilt towards the UK with a 25% weighting to UK equities and a 35% weighting to UK bonds. At the same time, we recognise that some investors might not want a tilt to UK investments. To meet this need, Vanguard is pleased to be launching the Vanguard LifeStrategy MPS Global range, which includes the same five equity-to-bond ratios without the strategic tilt to the UK, providing a purely global market capitalisation-weighted approach. The LifeStrategy MPS ranges will be rebalanced on a quarterly basis, as opposed to the mutual fund portfolios, which are rebalanced daily, based on cashflows as well as certain thresholds. We’re excited to be able to provide advisers with a preference for model portfolios access to Vanguard’s market-leading LifeStrategy offering. It’s all part of our mission to deliver value to investors and our appreciation for the role of advice in achieving that mission. For further information about the LifeStrategy MPS range, please get in touch with your local business development manager or send your enquiry to us directly.
* Source: Vanguard. See P. Costa and J. E. Henshaw, 2021: ‘Quantifying the investor’s view on the value of human and robo advice’. ** Source: Vanguard, as at 31 March 2022. Investment risk information The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. Past performance is not a reliable indicator of future results. Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall. Investments in smaller companies may be more volatile than investments in well-established blue chip companies. The Vanguard LifeStrategy® Funds may invest in Exchange Traded Fund (ETF) shares. ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing. Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds. The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index. For further information on risks please see the “Risk Factors” section of the prospectus on our website at https://global.vanguard.com. Important information This document is directed at professional investors and should not be distributed to, or relied upon by retail investors. For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website https://global.vanguard.com/ This document is designed for use by, and is directed only at persons resident in the UK. The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment. The information contained in this document is for educational purposes only and is not a recommendation or solicitation to buy or sell investments. The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC. For investors in UK domiciled funds, a summary of investor rights can be obtained via https://www.vanguard.co.uk/content/dam/intl/europe/documents/en/Vanguard-InvestorsRightsSummaryUKFUNDSJan22.pdf and is available in English. Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. © 2022 Vanguard Asset Management Limited. All rights reserved.
words by Neil Cowell, Head of UK Intermediary Distribution, Vanguard UK
Why LifeStrategy model portfolios mean more value to advisers
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