Smarter investing made easier

Transcription

1 Managed Portfolio Service - Adviser guide Smarter investing made easier For professional intermediaries only. Not for distribution to retail clients.

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3 Smarter investing the Managed Portfolio Service The Managed Portfolio Service (MPS) offers a range of risk-targeted model portfolios for use with your clients. Exclusively available on the AJ Bell Investcentre platform, the service combines a low-cost managed investment solution with all the marketleading tools and functionality you would expect from one of the UK s leading investment platforms. Designed with a focus on risk, the portfolios use passively managed instruments to deliver a cost-effective solution with the right balance between volatility and returns, mapped to your client s attitude to risk. Thanks to our inhouse investment expertise, we are able to select a range of funds and ETFs that provide diversified exposure to a wide variety of markets. Time efficiencies Cost efficiencies A smarter way to invest Reducing your regulatory burden, taking the hassle out of portfolio management Low-cost, risk-targeted managed portfolios The MPS is designed to help you select the most appropriate portfolio for each client s needs, in the most efficient way possible. We do this by mapping each of those portfolios to market-leading risk profiling tools including Distribution Technology s Dynamic Planner and Finametrica. The value of your clients investments can go down as well as up and they may not get back what they put in. Portfolios for growth Mapped to market-leading risk profiling tools Portfolios mapped to client needs Great service Investment expertise Expert investment management backed by great service 2

4 The next stage in our evolution A strong, forward-thinking business AJ Bell Investcentre is part of AJ Bell one of the largest providers of online investment platforms and stockbroker services in the UK. Currently looking after more than 39.8 billion of platform and pension assets on behalf of 164,500 customers, the company is profitable, debt-free and financially secure. A respected platform The AJ Bell Investcentre platform is designed specifically for financial advisers. By providing outstanding service, together with a comprehensive investment range and smart tools at a fair price, we can help you look after your clients in the most time- and cost-efficient way possible. A new service Our new Managed Portfolio Service (MPS) is a logical extension of the platform services that we already provide. Offering you a complete investment management solution, it is based on a range of risk-targeted model portfolios that are constructed and managed by AJ Bell Investments. Employing the MPS frees you up to spend more time building strong relationships and advising your clients. So, while we take on the burden of investment selection, asset allocation and portfolio rebalancing, the client remains resolutely yours. We will provide you with all the data you need regarding their investments, but the process of providing initial and ongoing financial advice to the client stays solely in your hands. Proven expertise The MPS is powered by AJ Bell Investments; part of the AJ Bell Group responsible for providing a range of investment and fund management services. The team behind AJ Bell Investments has more than 50 years experience of managing funds for retail and institutional investors, and of building Centralised Investment Propositions and other investment management solutions. 39.8bn of assets for 164,500 customers Profitable and financially strong Market-leading platform technology Great service and technical support SIPPs, ISAs, GIAs and offshore bonds Funds & Shares Service Managed Portfolio Service 3

5 Take the jeopardy out of risk profiling All our portfolios are constructed using rigorous asset allocation and asset selection processes, supported by more than 50 years of fund and investment management experience. By using market-leading risk profiling tools we can ensure that each of the portfolios on offer via the MPS reflects a defined level of risk. This makes it as easy as possible for you to select the right portfolio for any particular client s attitude to risk. Our risk-targeted model portfolios are managed on a forward-looking, tactical basis - unlike risk-rated portfolios, which are assessed at one particular point in time, and don t necessarily reflect either the level of risk in the past, or that which is likely to occur in the future. The Dynamic Planner risk score mappings are shown in the graphic below. Mappings to Finametrica risk tolerance scores are available from MPS Risk profiling 5 7 4

6 Who is the MPS for? When you sign up for the MPS, the full range of portfolios will be available for you to use with any of your clients in the Funds & Shares Service, across SIPP accounts, ISAs and GIAs. There is no minimum investment amount, and the portfolios are designed to suit a wide range of client scenarios. The make-up of the portfolios means that, for some smaller accounts, it may not always be possible to invest into or rebalance to the portfolio allocation. Typically, we may not be able to generate the required deals for accounts with a value of less than 10,000. There are always costs associated with managing portfolios, and while we do not enforce any minimum account values for using the MPS, you may wish to consider the impact that the cost of the service and other product charges may have on expected returns for smaller portfolios. Our factsheets clearly disclose a total cost for the service and underlying investments. We suggest you use these factsheets in conjunction with our comprehensive suite of illustration tools to help clients gain a better understanding of how the charges associated with the service might impact on their returns. How does the MPS benefit clients? Expertise without the charges With the MPS your client receives a portfolio of investments that has been constructed to match their attitude to risk, while offering all the potential for investment and growth that an experienced discretionary investment manager can bring only at a fraction of the normal cost. Other platform, product and dealing charges will apply in addition to the charge for the MPS please refer to our charges and rates document on for more details. Peace of mind With ongoing management and rebalancing of the portfolios, you and your client have the peace of mind that comes from knowing the portfolio will continue to target the appropriate level of risk, while remaining invested to provide the potential for capital growth and income generation. The portfolios are rebalanced quarterly often enough to keep to the risk target, but not so often that unnecessary deals - and the associated costs - impact on your clients accounts. website at any time to access read-only valuations and portfolio breakdowns. Quarterly factsheets are available online, so you can easily download co-branded PDF investment updates to share with your clients. You can also use the full suite of investment reporting tools in conjunction with the MPS, giving you detailed, customised client reporting at the touch of a button. Client Discretionary investment management at a fraction of the normal cost Targeted to meet investment goals and attitude to risk Regular reviews mitigate portfolio drift Easy-to-understand reporting and support material Transparency Our platform already provides you with the tools to give every client clear and comprehensive information about their portfolio, both at the point of sale and on an ongoing basis. This enables them to easily understand how their money is invested, and how the portfolio is performing over time. Clients can log into the AJ Bell Investcentre 5

7 How does the MPS benefit advisers? More time for clients The service gives you easy access to a diversified and risk-targeted model portfolio, without any of the hassle that comes with researching, building and maintaining a portfolio by yourself. By leveraging the discretionary permissions of AJ Bell Investments, there s no need to obtain individual client authorities for portfolio amendments or rebalancing - we can manage all this on your and your client s behalf. That leaves you free to focus on adding value through the financial planning process. Reduced regulatory burden The FCA expects advisers to make sure that any riskrated Centralised Investment Proposition meets the individual needs of the end customer. We make sure you have all the information, tools and documentation you need to fulfil your responsibilities to your clients. Competitive, transparent charges Trading in the portfolios is subject to the same competitive, transparent charges as all other trades placed via AJ Bell Investcentre s Bulk Dealing and Model Portfolio service. For full details of the charges associated with the service, please refer to the portfolio factsheets and the charges and rates document on You re still in control We help to reduce the regulatory and administrative burden of managing investments, but you retain overall control of your client s accounts. The responsibility for managing cash in the accounts and for investing or realising cash from the portfolio remains with you. Initial investments are instructed online via our Bulk Dealing and Model Portfolio service. To invest additional money into the portfolio, you simply need to rebalance it. We will do this on a quarterly basis anyway, so if you make sure cash is in the account we will invest it as part of the next scheduled rebalance. Alternatively, you can instruct an ad hoc rebalance online yourself. To realise cash, you can simply input manual orders online to sell funds as you normally would, or you can automate the process by using the cash management tools to instruct regular disinvestments. It is important to note that trading on individual holdings may mean a client s portfolio is out of line with the model until the next scheduled rebalance. The cash management tools include a proportionate regular disinvestment option, which you can use in conjunction with the MPS. Adviser Access diversified and risk-targeted model portfolios at the click of a button Competitive and transparent charges and trading costs Reduced regulatory burden Allows you to focus on continuing to add value through the financial planning proccess Further details are available in the Managed Portfolio Service user guide, which you can access on the AJ Bell Investcentre website: 6

8 Our investment philosophy Our goal is to deliver the specific, meaningful outcomes that matter most to our customers. We do this by adhering to seven key beliefs. We are driven by our customers needs By listening to our customers aspirations and understanding their challenges, we aim to invest in funds that can deliver the specific outcomes they need - be that growing capital, or protecting against inflation. We collaborate to innovate Our investment team and our chosen partners act as one. While we bring our knowledge, skill and creativity to the mix, the leading investment management providers we work with contribute in-depth capabilities across major asset classes, disciplines and regions. The result is a highly robust framework from which to work. We believe in informed risk, effectively managed We manage risk with discipline and rigour. By combining our extensive experience and unique insights, we reach an informed view on every decision throughout our whole investment process. That process is rooted in vigorous due diligence, strict compliance and the application of efficient, creative, customised solutions. We strive to minimise cost wherever possible We want to build long-lasting partnerships with our customers, and we understand the adverse impact costs can have on performance. We therefore aim to reduce costs where it is practical to do so, and to deliver value for money by ensuring that the management charges of underlying assets are justified by performance. We demand a culture of transparency We employ a framework of strong corporate governance and an unwavering commitment to financial and operational transparency and best practices. Our charges are clearly disclosed in simple terms and are readily available to clients and advisers at all times. We maintain a robust investment framework To make sure our investment framework stays robust, we monitor targeted volatility, ensure a minimum of five diversified asset classes within strategic asset allocations and minimise targeted derivative exposure for efficient portfolio management. Targeted volatility, diversified asset classes and strategic asset allocations Targeting specific outcomes driven by the needs of our customers Value-for-money management charges justified by performance Collaborating to innovate: carefully selected partners with the right capabilities Strong governance and an unwavering commitment to transparency Effective and informed risk management throughout our investment process 7

9 Portfolio construction and management Building a portfolio is like building a house; you have to start with strong foundations. These come in the form of our asset allocation models. Our approach targets specific risk factors and gives investors a clear picture of their expected investment journey. These models are not meant to be exciting; they are designed to provide a more stable journey towards the achievement of your clients investment objectives. Once you have solid and dependable foundations in place, it s time to move to the next stage; construction. With a house you can choose from bricks and mortar, timber frame, glass and steel, right the way up to modern techniques using advanced materials. Similarly, portfolios have multiple options, including tactical overlays, factor tilts, funds, ETFs, shares, bonds, passive, active and the more recent development of smart beta. We keep things simple by focussing on passive, fund-based and low-cost portfolios. We take each asset class and look for the lowest-cost fund with the lowest tracking error, as well as looking at the fund manager s strategy when reproducing the index return. We believe that specialist jobs need to be outsourced to experts in the field in order to achieve the right results. Just as house builders subcontract to reliable and experienced tradesmen, we have selected some of the leading lights in the fund management world to populate the MPS. We have also looked to smaller, more specialised managers to provide the finishing touches that really set our portfolios apart. When the construction phase is over it is time to plumb in the services and finish the interiors of the house. Here we have an advantage as we can use our award-winning platform to ensure your clients have up-to-date, accurate portfolio information at the touch of a button. Combine this with access to our investment team, supporting documentation and reporting functionality, and you have the makings of an extremely des res for your clients investments. Finally, we need a system of maintenance and monitoring to ensure the house can remain comfortable whatever the weather outside. With the portfolios we use proprietary analytics to check all our investment choices right back to the initial assumptions in our asset allocation model. This reflective loop is crucial to ensuring your clients don t get any surprises and the portfolios don t get too hot or too cold when the risk thermostat is set on just right! 8

10 Governance and risk management Governance Appropriate governance and oversight is a key driver in ensuring that investment solutions meet customers expectations and their stated investment objectives. Designed in conjunction with Moody s Analytics, the governance framework for the MPS combines quantitative analysis and independently validated risk metrics. However, all of this information can only provide a robust governance framework if it is coupled with adequate oversight. The AJ Bell Investcentre MPS is overseen by our investment committee, which is made up of senior AJ Bell staff and experienced, well-respected figures from the investment management world. As such it strikes the right balance between independent expertise and an indepth knowledge of our customers and their needs. To ensure that the MPS continues to meet the defined risk targets, our governance framework requires quarterly updates of economic assumptions and portfolio calibrations, which are exhaustively stress tested against independently defined scenarios. All of this combines to deliver peace of mind that the portfolios will continue to meet the defined risk targets and objectives and, more importantly, meet the customer s expectations. Risk management We believe that sensible, strategic asset allocation is the key determinant of long-term performance. As such, we allocate assets using a risk-targeted approach, rather than the traditional point in time risk-rated methodology. The difference is subtle, yet significant. Risk-targeted model portfolios are managed on a forward-looking tactical basis to ensure that the actual level of risk remains compatible with the customer s risk appetite. We analyse the level of risk at every stage in the process of portfolio construction, including the volatility or risk of the underlying funds in which we invest, as well as the risk inherent in asset allocation. We utilise specialist software to help us quantify and manage risk but we never surrender our common sense. Our dynamic approach ensures that we understand the true level of risk in our portfolios at each point in the investment cycle. Each fund portfolio is dynamic, and changes will occur when required to maintain the specific risk profile. Our investment committee meets quarterly on a formal basis to review the performance and investment risk management of our strategies. Portfolio testing Our disciplined approach to risk management forces us to continually check and test both our modelling and our investment decisions. We begin with back testing the portfolios, ensuring they are correlated to the underlying asset allocation. It sounds simple but requires statistical tools and reliable data to achieve. This assessment of the past volatility and performance of the portfolios builds our understanding of how the portfolios may perform in the future. The graph below shows the simulated performance of the portfolios over five years /07/ /10/ /01/ /04/ /07/ /10/ /01/ /04/ /07/ /10/ /01/ /04/ /07/ /10/ /01/ /04/ /07/ /10/ /01/ /04/2016 MPS 1 MPS 2 MPS 3 MPS 4 MPS 5 Next it is crash testing, which involves putting the portfolios through a series of shocks, some classics from history and some CGI simulated ones. This gives us a better understanding of how our portfolios might behave in a host of scenarios. Finally, we put them through some long-term testing. This involves generating hundreds of thousands of simulated journeys (known as Monte Carlo testing). This forms the basis of the expected outcomes for each portfolio over time. Underpinning a lot of this testing is an assumed series of relationships between the different funds, markets, economies, asset classes and currencies. These relationships are monitored and tested as well. This helps us understand when our portfolios might be stressed and perhaps more likely to behave unexpectedly. This informs subsequent investment decisions and gives a robust and rigorous framework for risk management. Past performance is not a guide to future performance and some investments may need to be held for the long term. 9

11 The right support for you As well as having direct access to the expertise of our in-house investment team, you will also receive support from our experienced s and Adviser Relationship Managers, who can assist you with every aspect of using AJ Bell Investcentre and the Managed Portfolio Service. Colin Cunningham Covering areas: Scotland and Northern Ireland Direct: Mobile: colin.cunningham@ajbell.co.uk Andy Witter Covering areas: North West Tel: Mobile: andy.witter@ajbell.co.uk Matthew Jonas Covering areas: North East Direct: Mobile: matthew.jonas@ajbell.co.uk Mike Parker Covering areas: Midlands Direct: Mobile: mike.parker@ajbell.co.uk Alison Mollard Covering areas: South East (North of the River Thames) Direct: Mobile: alison.mollard@ajbell.co.uk Mike Sharp Covering areas: South East (South of the River Thames) Tel: Mobile: mike.sharp@ajbell.co.uk Damian Bryant Covering areas: South West Tel: Mobile: damian.bryant@ajbell.co.uk 10

12 This brochure provides general information about the Managed Portfolio Service. It should not be read or construed as investment advice. It is your responsibility to assess your client s circumstances and make a personal recommendation that is suitable for their needs. AJ Bell Management Limited (company number ), AJ Bell Securities Limited (company number ) and AJ Bell Asset Management Limited (company number ) are authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales at 4 Exchange Quay, Salford Quays, Manchester M5 3EE. See website for full details. AJBIC/MPS/ADB/