Wealthselect. Managed portfolio service. We ll help you get there. For financial advisers only

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1 Wealthselect Managed portfolio service For financial advisers only pensions investment PROTECTION We ll help you get there

2 A high quality solution to meet your clients investment goals Contents A high quality solution to meet your clients investment goals 2 WealthSelect Managed Portfolio Service - at a glance 3 Our approach leading funds combined to match client risk profiles 4 Maximising returns through portfolio construction 5 Who is involved in the managed portfolio service? 8 Key Investment Professionals 9 Setting up and using the WealthSelect Managed Portfolio Service 10 Managing your clients investments effectively can be an onerous task. Making informed investment decisions, both at the initial recommendation stage and on an ongoing basis, is not only time-consuming but also carries a significant burden of responsibility, especially given the increased regulatory focus on suitability and due diligence. Our Managed Portfolio Service provides a convenient and complete investment solution that enables you to outsource the asset allocation, manager selection and day-to-day running of your clients portfolios. And all for a very competitive cost. Meaning you can spend more time on your clients financial planning requirements, safe in the knowledge their investments are being actively managed by our team of experts. 2

3 WealthSelect Managed Portfolio Service - at a glance fully outsourced, discretionary, actively managed investment solution, incorporating asset allocation, manager selection, rebalancing and ongoing monitoring. A choice of investment styles: Active portfolios consisting predominantly of actively managed funds. Passive Blend - portfolios with a mix of active and passive funds in different weightings to control the overall cost of the portfolio. Well diversified, risk-targeted portfolios designed to maximise potential returns for eight different risk profiles. Product-optimised asset allocation for clients investing through a Collective Retirement Account, Individual Savings Account (ISA), Collective Investment Account or Collective Investment Bond. Access to high quality managers from some of the industry s leading fund groups. supported by a proven risk profiling and asset allocation model developed by leading investment consultancy Towers Watson. Managed Portfolios available You can select a portfolio based on these three factors: 2 different investment approaches Active Passive blend 4 different product wrapper types Individual Savings Account Collective Investment Account Collective Investment Bond Collective Retirement Account 8 different risk levels From Risk Level 3 through to 10 For example: A Collective Investment Account; risk level 5; Active quarterly asset allocation reviews and rebalancing ensure all portfolios remain current and appropriate for each risk level. comprehensive, client-friendly quarterly reporting with opportunity for co-branding and client personalisation. convenient online reporting tool for portfolio valuations, ongoing monitoring and review. Backed by a wealth of in-house and third-party investment expertise in asset allocation, manager research and portfolio management. no additional charge for the service. Note that where the Managed Portfolio Service is used with an ISA or Collective Investment Account, VAT will be applied on the Old Mutual Wealth Service Charge. 3

4 Our approach leading funds combined to match client risk profiles Each portfolio invests in a combination of funds from Global Partners. Global Partners brings together the industry s leading fund managers and best known asset management brands across all the major asset classes at a very competitive cost. The fund managers in the range have been selected from 17 market-leading fund groups and are regularly monitored to ensure they perform as expected and continue to meet our high standards. To enable you to meet a wide range of client needs, our Managed Portfolios are available in two investment styles Active and Passive blend across eight different risk levels. Available on the platform across ISA, Collective Retirement Account, Collective Investment Account or Collective Investment Bond our Managed Portfolios have asset allocations tailored for each product wrapper to maximise any tax efficiencies. Key benefits Investments that meet clients needs with 16 different portfolios available for each product wrapper, the Managed Portfolio Service can meet a broad range of client needs, with the flexibility for you to switch between portfolios should you find that their requirements change over time*. Investors benefit from having a portfolio that is constantly matched to their risk profile. More time for your clients we take the headache out of fund research and monitoring, asset allocation and rebalancing. This gives you more time to focus on your clients financial planning needs and on building long-term relationships with them. Peace of mind outsourcing some or all of the investment process to expert teams can reduce the reputational and regulatory risk of making the wrong investment decisions. Our in-depth and continuing research on every manager selected provides additional validation of your investment recommendations. Recommend trusted brand names our Managed Portfolios feature leading fund managers with a proven ability to deliver strong investment performance, backed by some of the best-known fund management brands in the industry. Our risk-targeted approach helps ensure that every client s portfolio is managed with a level of risk that is appropriate to their individual requirements, in turn helping you to meet their investment goals more efficiently. The portfolios are designed to provide a close match for risk levels 3-10 of the Old Mutual Wealth Risk Profiler, and can also be mapped to other leading risk profiling models. This helps you to complete your initial and on-going suitability assessments for your clients. Clients investing with our Managed Portfolio Service benefit from a wealth of in-house investment expertise in manager research and portfolio construction, together with the extensive resources of leading research providers including Towers Watson. Old Mutual Wealth Investment Division which comprises Old Mutual Global Investors (OMGI) and Quilter Cheviot also has a proven track record of successfully managing risk-targeted investments exemplified by our Creation fund range. Tax-considered solutions we offer product-optimised asset allocation for clients investing through a Collective Retirement Account, ISA or Collective Investment Bond, enabling you to recommend solutions that could meet their needs with greater precision. Comprehensive, professional reporting your clients will be impressed with the comprehensive, co-branded reporting. This can help reduce your compliance and dramatically simplify your audit trail. Easy opt-out clients who invest in the Managed Portfolio Service and later wish to opt out can do so easily, without charge and without having to sell any of the underlying holdings. This enables you to take back control of client portfolios if you need to and manage the timing of any further changes you wish to make. Access to established expertise Old Mutual Wealth has a long history of researching investments and building portfolios for clients, having pioneered the multi-manager approach in the late 1980s. Old Mutual Wealth also has a proven track record in managing risktargeted investments, having been one of the first to market in 2008 with a range of risk-targeted funds. Value for money the Managed Portfolio Service gives your clients access to a high quality, actively managed investment solution at very competitive rates. Reduced costs could potentially lead to better investment outcomes. * Investors can only hold one Managed Portfolio for any one product wrapper. They cannot combine a Managed Portfolio with any other funds within the same product wrapper. However, they may invest in another Managed Portfolio or other funds through different product wrappers on the platform. 4

5 Maximising returns through portfolio construction This section includes the following: 1. Risk-targeting with precision 2. Asset allocation 3. Researched fund selection 4. Active management We aim to deliver the best possible returns for each risk level, creating well-diversified portfolios through superior asset allocation that is tax-optimised where possible, and by selecting high quality managers from some of the world s leading investment providers. 1. risk-targeting with precision All our Managed Portfolios are risk-targeted, designed to perform within a specific range of volatility over the long term. A risk-targeted approach helps ensure that clients investments are always managed with a level of risk that is acceptable to them and gives greater clarity from the outset about the kind of investment journey they can expect. This contrasts with a risk-rated approach, which assesses risk based on past performance only. This offers investors little certainty about how their investments might behave in the future. Old Mutual Wealth has a proven track record in managing risk-targeted investments, having been one of the first to market in Our portfolios are available in eight different risk levels, designed to match to risk levels 3-10 on the Old Mutual Wealth Risk Profiler. The pioneering Risk Profiler tool, developed with leading investment consultancy Willis Towers Watson, uses a carefully constructed and detailed questionnaire to allow you to accurately assess clients investment objectives and attitude to risk. It then quantifies their requirements by means of a risk score between 1 and 10, with 1 being the most risk-averse, and maps them to a Managed Portfolio with appropriate risk and return characteristics. Portfolios can also be mapped to risk profiling models from providers such as Distribution Technology and Barrie & Hibbert. For further details, see our Risk Profile Matrix document. This helps you to carry out the initial and on-going suitability assessments for your clients that you are required to complete by the FCA. 2. asset allocation Strategic asset allocation Our Managed Portfolios use a disciplined, long-term, strategic asset allocation approach designed to maximise the potential return for an expected level of risk. They provide access to a broad range of assets, including not only equities, bonds and cash, but also commercial property and other specialist investment opportunities. They are designed to offer diversification at multiple levels, investing across global markets, both developed and emerging, and via managers with different styles and approaches. The strategic asset allocations for our portfolios are based on output from an asset allocation model developed with leading investment consultancy Willis Towers Watson, which uses a process known as Mean Variance Optimisation. This process is based on the theory that the correlation between assets within a portfolio has a much greater bearing on overall risk than any individual asset in isolation, and that by analysing the riskreturn outcomes for different combinations of assets, it is possible to create an optimal portfolio for every level of risk. There are a number of factors which go into building optimal asset allocations, including assumptions about expected returns for each asset class, their expected volatility, and the correlation between these assets over the long term (10 years). Along with Willis Towers Watson, we review these assumptions on a quarterly basis to ensure they remain appropriate given the ever-changing market environment and may adjust them accordingly. This asset allocation approach is fundamentally the same as the one used in our platform tools for over a decade. 5

6 Maximising returns through portfolio construction (contiuned) Product-optimised asset allocation Our portfolios asset allocations are also designed to be as tax-efficient as possible, enabling you to recommend solutions that could meet your clients needs with greater precision. The asset allocation targets are tailored depending on whether clients invest through a Collective Retirement Account (CRA), ISA or Collective Investment Bond (CIB), to help maximise overall returns. Because different product wrappers enjoy different tax status s this can affect the attractiveness of different asset classes to our portfolio optimiser. For example, there is no tax on interest within an ISA or Pension (our Collective Retirement Account), which makes fixed interest more attractive than cash at lower risk levels. Therefore, this means more fixed interest funds need to be held at lower risk levels to compensate for cash s ability to lower volatility and to benefit as much as possible from the tax relief available. There are no tax considerations built into the asset allocation of our Collective Investment Account (CIA) portfolios and so income tax and capital gains tax will be chargeable, where applicable. However, for some clients, investing in this way can be an efficient means of utilising their annual exempt amount for capital gains. Sample asset allocations Collective Retirement Account risk level 3 CRA 3 Cash/money markets 27.25% Property 32.50% UK fixed interest 31.47% UK Equity 6.28% International Equity 2.50% Collective Retirement Account risk level 5 CRA 5 Cash/money markets 18.00% Property 21.76% UK fixed interest 45.01% UK Equity 12.73% International Equity 2.50% Please note that while we offer optimised asset allocation at a product wrapper level, we do not take into account clients individual tax positions when managing the portfolios. Collective Retirement Account risk level 7 CRA 7 Cash/money markets 11.75% Property 11.00% UK fixed interest 57.40% UK Equity 17.35% International Equity 2.50% 6

7 3. Researched fund selection With more than 2,500 funds in the UK retail sector alone, selecting, monitoring and reviewing funds for your clients portfolios is a time-consuming, research-intensive process that presents a number of challenges: Access to fund managers and their teams is not always easy. You need up-to-date, relevant information. Past performance is no guide to the future fund manager skill needs to be assessed in other ways. Fund managers may move on. you have a regulatory requirement to demonstrate due diligence in your fund selection. your clients have high expectations of your investment choices. Our Managed Portfolio Service offers a convenient solution, incorporating all fund research, selection and monitoring on your behalf. Using a rigorous research process, we have distilled the thousands of available funds into one focused range of high quality managers that we believe can deliver superior investment performance for investors. This is known as Global Partners. Global Partners brings together the industry s leading fund managers and best known asset management brands across all the major asset classes. We then refine this selection further when constructing the Managed Portfolios, carefully combining managers to achieve the optimal overall blend. The range also features a number of passive funds, giving us additional flexibility to keep investment costs to a minimum. 4. Active management Ongoing manager monitoring We constantly monitor the performance and behaviour of all managers held in Managed Portfolios to ensure they continue to deliver to our expectations. With extensive and long-established industry contacts and relationships, we are able to secure regular, direct access to the key people we invest with, to fully understand what they are doing. In addition, as the majority of funds are run as segregated mandates, we have full access to portfolio information, allowing us to undertake very precise, in-depth portfolio analysis and ensure that managers stick to the agreed objectives and parameters. We select managers for Global Partners and Managed Portfolios for the medium to long term and do not anticipate changing them frequently. However, we will replace them if we believe this would be in the best interests of investors. Review, reporting and rebalancing Regular review and, where necessary, rebalancing are essential to maintain the level of risk of a portfolio. The Managed Portfolio Service can support you in your client servicing and due diligence process in the following ways: Constant monitoring of all managers held within our portfolios. All portfolios rebalanced at a minimum on a quarterly basis to their most recent asset allocation targets to ensure they maintain their risk-return characteristics within a changing economic and market environment. Access to online management tools, such as the market-leading U-Scan, to allow you to review and report easily on your clients investments. A full breakdown of portfolio holdings helps give your clients clarity over exactly how their wealth is invested. comprehensive client reporting tool, to help reduce your compliance burden and simplify your audit trail. Opportunity for co-branded reporting and communications. You can find details of each portfolio s performance to date, current asset allocation and top ten holdings in our latest WealthSelect Managed Portfolio factsheets. For a full list of the funds in the Global Partners, see wealthselect.oldmutualwealth. co.uk 7

8 WHO IS INVOLVED IN THE MANAGED PORTFOLIO SERVICE? The Investment Division within Old Mutual Wealth is ultimately responsible for the governance and oversight of how the Managed Portfolio Service is run and managed but there are a number of parties involved in providing the Managed Portfolio Service: Who Old Mutual Wealth UK business The Old Mutual Wealth Investment Division which comprises Old Mutual Global Investors (OMGI) and Quilter Cheviot External fund managers Responsible for: Providing the Managed Portfolio Service. for ISA and CIA the legal entity that provides the service is Old Mutual Wealth Limited. for CIB and CRA the legal entity that provides the service is Old Mutual Wealth Life & Pensions Limited. governing and overseeing the running and management of the Managed Portfolio Service see below. developing the WealthSelect offering over time to ensure it continues to meet any changing customer needs. Providing most of the Old Mutual fund vehicles offered within the WealthSelect range. Managing and running some of the WealthSelect funds. Where a fund is sub-advised, ensuring the relevant third party manager adheres to the terms of their investment mandates. In addition to this, members of the OMGI Multi- Asset team, do the following on behalf of Old Mutual Wealth Limited (for ISA/CIA) or Old Mutual Wealth Life & Pensions Limited (for CRA/CIB): i) Manage, monitor and administer the range of Managed Portfolios, including fund manager selection and implementing any changes to the strategic asset allocation provided quarterly by Towers Watson. ii) Undertake the research and ongoing monitoring of the managers within the WealthSelect range. External fund managers are responsible for: Managing and running sub-advised funds within the WealthSelect range (i.e. funds that aren t run and managed directly by Old Mutual Global Investors). some non-old Mutual vehicles may feature in the range. Our people In 2008, Old Mutual Wealth was one of the first in the UK market to launch funds specifically targeting risk. Our Managed Portfolio Service builds on this experience, using the knowledge that we gained in successfully managing risk-targeted investments through one of the most volatile periods in stockmarket history, to inform our investment thinking and help build investment solutions that meet the needs of our clients today. The Multi-Asset team within the Old Mutual Wealth Investment Division is responsible for running the Managed Portfolio Service and it has extensive experience of researching investment managers as well as managing investment portfolios both via investment funds and directly for private clients. The team s key responsibilities include: Qualitative fund manager research. Quantitative fund manager analysis. Portfolio management, including manager selection, asset allocation, rebalancing and monitoring. The team places great emphasis on the resource they have available which enables them to dedicate the time needed to undertake comprehensive research and also allows them to build relationships with the managers and the fund groups. The team comprises a variety of backgrounds which brings different aspects to the process. The team structure is relatively flat which they feel encourages teamwork and a full exchange of ideas and information. 8

9 Key investment Professionals Dean Bowden Multi-Asset Commercial Director, Old Mutual Wealth Investment Division Dean is responsible for the oversight and integrity of the investment propositions offered across Old Mutual Wealth, including WealthSelect. Dean is also in charge of the firm s commercial relationships with all of its investment management partners. Prior to this role, Dean was the Chief Investment Officer for International, where he had prudential oversight of the proprietary investment proposition across multiple international jurisdictions. Dean joined Old Mutual Wealth in January 2007, after almost 10 years with Thesis Asset Management, where he was Head of the Fund of Funds Managed Service and fund selection team. Dean is a Fellow of the Securities Institute. Anthony Gillham and Ben Mountain Co-LEADs, Multi-Asset Team, Old Mutual Wealth Investment Division Anthony Gillham Anthony joined Old Mutual in 2000 and is a portfolio manager within our multi-asset team. In 2007, Anthony became a global bond portfolio manager having been a fixed income research analyst since Prior to focusing on fixed income, Anthony s areas of coverage included multi-asset, Nordic equities and quantitative US equity and fixed income research. Anthony is a CFA Charterholder and has over 14 years of experience. Ben Mountain Ben graduated with a BSc (Hons) degree in information technology for business from Aston University. He joined Quilter Cheviot (then Quilter) in 1999 and has been joint head of the Managed Portfolio Service, which offers clients a range of actively managed, risk controlled portfolios, since He is also head of the investment fund research team, which has responsibility for analysing all third-party managed investments. He is a member of the company s asset allocation committee. Ben is a Chartered Financial Analyst (CFA) Charterholder and a member of the Chartered Institute for Securities & Investment. Robust governance We recognise that the safety and security of your clients money is of paramount importance when it comes to selecting your investment partners. That is why we ensure we have robust governance in place. In addition to formal oversight by the Old Mutual Wealth Limited (OWML) Board, Global Partners and the Managed Portfolio Service are overseen by the Old Mutual Wealth Investment Oversight Council (OMWIOC), which comprises a member of the Old Mutual Wealth Executive Management Team, Old Mutual Wealth s Head of Product, and two independent external advisers. They advise and make recommendations to the Investment Committee in respect of the following: the investment solutions are performing as intended the investment decision-making processes are robust appropriate risk management is in place any conflicts of interest are managed. In addition to this formal oversight, our portfolio managers also monitor all of our investments and portfolios on a daily basis to ensure that they remain appropriate. This includes monitoring the underlying holdings to ensure the external fund managers stay within their stated controls as well as monitoring the overall portfolios. Through the Managed Portfolio Service, portfolio managers have discretion to make immediate alterations to the portfolios, ensuring that they reflect our very latest thinking and are positioned to capitalise on investment opportunities across the market. Stuart Clark Portfolio manger, Multi-Asset Team, Old Mutual Wealth Investment Division As Portfolio Manager Stuart has responsibility for leading the fund research and portfolio management for the WealthSelect fund range and Managed Portfolio Service. Prior to joining Old Mutual Stuart was an Executive Director at Julius Baer responsible for mutual fund due diligence and has held similar roles at Merrill Lynch Wealth Management, UBS and BDO Investment Management. Stuart is a CFA Charterholder. 9

10 Setting up and using the WealthSelect Managed Portfolio Service 1. What is the contractual arrangement between a financial adviser and their client in relation to the operation of the Managed Portfolio Service? In line with FCA regulations on investment permissions, the contractual agreement for the Managed Portfolio Service is between you and your client in the case of the ISA and Collective Investment Account (CIA) and between Old Mutual Wealth and your client in the case of Collective Retirement Account (CRA) and Collective Retirement Bond (CIB). ISA and CIA agent as client When you provide the Managed Portfolio Service for clients with ISA and CIA investments, we will treat you as our client, with you acting as the agent of your client. This enables you to offer the MPS to your client without needing to hold discretionary permission in line with FCA requirements. All we require from you is a declaration, as part of the application process, that your client understands the roles and responsibilities of each party to the service and has given their authority to invest using the Managed Portfolio Service. We will provide you with quarterly reports that enable you to keep your clients updated about the performance of their investments in line with FCA rules. Your clients benefit from full regulatory protection in relation to the service and to their underlying fund holdings on the platform. The only difference for ISA and CIA investors is that you are responsible for dealing in the first instance with any complaints they may have about the Managed Portfolio Service. CIB and CRA Client contract The Managed Portfolio Service is provided as an option within the client s Terms and Conditions. This is their contract with us. One of the conditions of choosing this option is the client must have an adviser appointed while the service is in use. This is because you must complete the suitability assessment and select the appropriate managed portfolio on behalf of your client online. All we require from you is a declaration, as part of the application process, that your client understands the roles and responsibilities of each party to the service and has given their authority for you to invest using the Managed Portfolio Service on their behalf. We will provide you and your client with quarterly reports that enable you to keep your clients updated about the performance of their investments in line with FCA rules. Your clients benefit from full regulatory protection in relation to the service and to their underlying fund holdings on the platform. 2. how can my clients access the WealthSelect Managed Portfolio Service? Setting up a client with a Managed Portfolio is simple. You can do this online through the platform as you would otherwise select a list of funds or personalised portfolio. The Managed Portfolio Service is only available to clients on Charge Basis 3 who are invested in the WealthSelect investment range. For clients with a Collective Retirement Account, you will need to convert them to Charge Basis 3 first if appropriate. You cannot convert a Collective Investment Bond to Charge Basis 3. For clients already on Charge Basis 3 and invested in the SelfSelect investment range, you will need to swap the investment range and select the Managed Portfolio Service using the option online. If you have a client currently invested in the WealthSelect investment range who would like to move into the service, you can simply switch their fund choice into a Managed Portfolio. 3. can clients combine the Managed Portfolio Service with other investments? Investors may only hold one Managed Portfolio in any one product wrapper. They cannot combine this with any other fund holdings within the same product wrapper. However, they may choose to hold another WealthSelect Managed Portfolio, or other investment portfolios, through separate platform product wrappers. 4. are there any tax implications when using the WealthSelect Managed Portfolio Service? Clients who invest in the WealthSelect Managed Portfolio Service via a Collective Investment Account will be liable for Capital Gains Tax (CGT), where applicable, when we make changes to the underlying funds. This does not apply to clients investing via a Collective Retirement Account, ISA or Collective Investment Bond. You should ensure clients are aware of any potential CGT liability that may occur when they initially transfer their assets into the WealthSelect Managed Portfolio Service and on future changes to the funds. 10

11 5. is there a minimum investment amount for the WealthSelect Managed Portfolio Service? No. The only minimum amounts that apply are the usual product wrapper minimums. 6. is there a charge for the WealthSelect Managed Portfolio Service? We do not charge an additional fee for the Managed Portfolio Service. However, in the case of the ISA and Collective Investment Account only, VAT is chargeable on the client s Old Mutual Wealth Service Charge. Illustrations for investments using the Managed Portfolio Service take this into account. Transaction costs Out of market risks Any dealing within the WealthSelect Managed Portfolios will be settled on the next working day after the trade is placed. During the period between placing and settling the trade, investors will be out of the market and therefore will not benefit from any gains. 7. can clients change their mind once they have invested in the WealthSelect Managed Portfolio Service? Clients who invest in the Managed Portfolio Service and later wish to opt out can do so easily, without charge, without having to sell any of the underlying holdings. This enables you to take back control of client portfolios if you need to and manage the timing of any further changes you wish to make. Clients may incur transaction costs when we buy or sell funds within the Managed Portfolios. The exact costs will vary by fund. single-priced funds: The vast majority of WealthSelect funds in which the Managed Portfolios invest have a single price with a swinging price policy i.e. a fund s price will be swung up if it is experiencing net inflows or down if it has net outflows on any particular day, and all clients buying and selling on that day will pay the same price. A swinging price policy ensures that investors buying or selling shares in the fund pay no more than their own transaction costs and may even benefit if the price is swung in their favour while non-trading shareholders are unaffected. dual-priced funds: A few WealthSelect funds are dual-priced i.e. they have a higher buying (offer) price and a lower selling (bid) price. The spread between the two reflects the costs of buying and selling the underlying assets within the fund. Investors buying or selling shares in dual-priced funds will therefore always pay their dealing costs while non-trading shareholders are unaffected. 11

12 Your client s investment may fall or rise in value and they may not get back what they put in. Please be aware that calls and electronic communications may be recorded for monitoring, regulatory and training purposes and records are available for at least five years. Old Mutual Wealth is the trading name of Old Mutual Wealth Limited which provides an Individual Savings Account (ISA) and Collective Investment Account (CIA) and Old Mutual Wealth Life & Pensions Limited which provides a Collective Retirement Account (CRA) and Collective Investment Bond (CIB). Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited are registered in England and Wales under numbers and respectively. Registered Office at Old Mutual House, Portland Terrace, Southampton SO14 7EJ, United Kingdom. Old Mutual Wealth Limited is authorised and regulated by the Financial Conduct Authority. Old Mutual Wealth Life & Pensions Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Their Financial Services register numbers are and respectively. VAT number SK9261/ /March 2018