WEALTHSELECT MANAGED PORTFOLIO SERVICE. For Financial Advisers only

Transcription

1 WEALTHSELECT MANAGED PORTFOLIO SERVICE Due Diligence Responses For Financial Advisers only

2 DUE DILIGENCE MADE EASY We know that choosing an investment service and creating a due diligence report to evidence its suitability can seem like a complex and time-consuming task. To make this as easy as possible for you, we have collated all of the questions we are frequently asked by advisers in their due diligence questionnaires, and listed them with the answers in this document. This document, which should be read in conjunction with our platform due diligence responses document, covers the key areas to focus on in-line with the FCA s high-level guidelines for advisers. WHAT ARE THE FCA S DUE DILIGENCE GUIDELINES? The FCA has published high-level due diligence guidelines for advisers in a thematic review paper. TR16/1: Assessing suitability: Research and due diligence of products and services: We have outlined seven key areas that advisers should take into account when considering the suitability of a third party investment management company. These areas are: ORGANISATION DETAILS INVESTMENT DETAILS INVESTMENT PROCESS FUNCTIONALITY RISK MANAGEMENT AND MONITORING CHARGES ACCESSIBILITY 1. ORGANISATION DETAILS 1.1 Background Description and a brief history of Old Mutual Wealth Old Mutual Wealth is part of Quilter, a leader in wealth management in the UK and selected offshore markets, providing advice-led investment solutions and investment platforms. Quilter plc oversees billion in customer investments (as at 31 December 2017). The Old Mutual Wealth platform launched in its current form in August 2007 and is core to the business in the UK, with more than 425,000 customers, as at 31 December Through the platform we distribute investment and savings products with access to a wide range of over 1,600 OEICs and unit trusts (available in multiple share classes). All products and investments are sold through independent and restricted financial advisers.. All products and investments are sold through financial advisers and are suitable for independent or restricted advisers. Old Mutual Wealth s historical development: 1984 Pioneered multi-manager investing in the UK 1995 Launched the UK s first fund supermarket, Skandia MultiFUNDS Limited (SMFL) 2006 Brought Selestia Investment Solutions into the Skandia proposition 2009 Selestia Investment Solutions changed to Skandia Investment Solutions (SIS) and migration of clients from SMFL completed. SIS was the trading name for the business Skandia MultiFUNDS Ltd (SMFL) and the life company, Skandia MultiFUNDS Assurance Limited (SMAL) Skandia UK rebranded as Old Mutual Wealth 2014 Old Mutual Wealth bought the Intrinsic financial advice network 2015 Old Mutual Wealth bought Quilter Cheviot discretionary asset management Old Mutual plc announced a Managed Separation strategy, which aims to separate its underlying businesses, including the Old Mutual Wealth Group Announcement of Quilter as the new name for the Old Mutual Wealth Group Quilter plc listed independently on the London and Johannesburg stock exchanges. 2

3 Following significant transformation activity over the past three years, Quilter plc s integrated strategy of owning distribution, an investment platform, discretionary fund management and asset management is performing well, contributing to the strength of new flows into the business. Quilter recorded a normalised operating pre-tax profit of 209 million, with Assets under Management (AUM) of billion and a Net Client Cash Flow (NCCF) of 6.3 billion as at 31 December The financial strength of Quilter plc is considerable, ensuring the long term sustainability of the Old Mutual Wealth Platform. All of its underlying businesses are financially strong and regulated, with significant safeguards in place for investors. Independent financial services research firm, AKG, has given the Old Mutual Wealth Platform business and Old Mutual Wealth Life and Pensions Ltd a financial strength rating of B+ ( Very strong ). Fitch Ratings has given Old Mutual Wealth Life Assurance Limited (OMWLA) an insurer financial strength rating of A as at 23 November 2017 and Old Mutual Wealth Management Ltd (now Quilter plc) a Long-Term Issuer Default Rating of A- as at 15 March Quilter s business model is built on providing investors access to a wide range of funds from third party fund managers, as well as Quilter s own multi-asset business. As a result, the business does not expose its capital to the risks associated with annuities and credit spreads, which is a very different model compared to the risks run by more traditional UK insurance companies. The regulated entities within Quilter are well capitalised. The Solvency II ratio for the Quilter companies is over 155% as at 31 December Quilter Investors The management of the WealthSelect Managed Portfolio Service is outsourced to Quilter Investors. The investment team at Quilter Investors has vast experience in managing multi-asset funds, and includes portfolio managers and 28 other investment professionals. Quilter Investors is also the Authorised Corporate Director (ACD) for all of the funds managed by our Global Partners and is obliged to ensure the managers appointed to run the funds are suitable individuals and capable of being able to deliver to the funds objectives. Quilter Investors is responsible for the regulatory oversight of the funds, which involves: Monitoring the sub-advised funds to ensure the manager adheres to the guidelines within the mandate and is aligned to the originally intended design. Ensuring receipt of annual due diligence questionnaires from each sub-adviser group. Measuring fund performance against mandate targets on a quarterly basis 1.2 LEGAL DETAILS Full legal name of the contracting entity For CIA and ISA contracts, the provider is Old Mutual Wealth Limited (OMWL). For CIB and CRA contracts, the provider is Old Mutual Wealth Life & Pensions Limited (OMWLP). They both hold FCA permissions to manage investments and are therefore able to offer the Managed Portfolio Service either as a direct contractual options (CRA/CIB) or as an additional service (CIA/ISA) Parental guarantees and support of operations Old Mutual Wealth UK Holding Company Limited (OMWUKH), OMWL s and OMWLP s parent company provides a letter of support to OMWL and OMWLP which provides that OMWUKH will continue to make available such funds as are needed by the company. 1.3 PERSONNEL AND ROLES Key investment professionals involved in the management of Managed Portfolio Service The management of the Managed Portfolio Service is undertaken by the members of Quilter Investors. They have 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 monitoring Members of the Quilter Investors team will be CF30s (Customer Function enabling them to advise on and arrange investments) to enable them to undertake the management of the portfolios on behalf of these companies. In addition, members of the same team will undertake the ongoing research and monitoring of the funds and decide the appropriate composition and any changes that need to be made. 3

4 Anthony Gillham Anthony is Head of Investments and a portoflio manager at Quilter Investors. 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 Charter holder and has over 14 years of experience. Stuart Clark As Portfolio Manager, Stuart has responsibility for ensuring the quality of the WealthSelect researched fund range and for running the Managed Portfolios, being accountable for all portfolio management decisions. 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 Charter holder. 2. INVESTMENT DETAILS 2.1 WEALTHSELECT MANAGED PORTFOLIO SERVICE 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 all for a very competitive cost. You can select a portfolio based on three factors: Two different investment approaches Active Passive blend Four different product wrapper types Individual Savings Account Collective Investment Account Collective Investment Bond Collective Retirement Account Eight different risk levels Risk Level 3 to GLOBAL PARTNERS Each portfolio invests in a combination of funds from our Global Partners bringing 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. For further information, please see Guide to our Global Partners. 2.3 FUNDS The majority of the funds used within the portfolios are sub-advised mandates. The management of the mandates is outsourced to our Global Partners. The below list shows the current funds available for use within the portfolios: Sub-advised mandates Quilter Investors Asia Pacific (ex Japan) Equity (Aberdeen Standard) Quilter Investors Asia Pacific (ex Japan) Large-Cap Equity (Invesco Perpetual) Quilter Investors Asia Pacific (Old Mutual) Quilter Investors China Equity (Janus Henderson) Quilter Investors Corporate Bond (Old Mutual) Quilter Investors Diversified Bond (Old Mutual) Quilter Investors Emerging Markets Bond (Old Mutual) Quilter Investors Emerging Markets Equity (Old Mutual) Quilter Investors Emerging Markets Equity Growth (JP Morgan) Quilter Investors Emerging Markets Equity Income (Wells Fargo) Quilter Investors Europe (ex UK) Equity (Janus Henderson) Quilter Investors Europe (ex UK) Equity Growth (Columbia Threadneedle) Quilter Investors Europe (ex UK) Equity Income (Schroders) Quilter Investors Europe (ex UK) Small/Mid-Cap Equity (Old Mutual) Quilter Investors Gilt Index (Old Mutual) Quilter Investors Global Equity Absolute Return (Old Mutual) Quilter Investors Global Equity Growth (Fidelity) Quilter Investors Global Equity Index (Old Mutual) Quilter Investors Global Equity Value (Newton) Quilter Investors High Yield Bond (Columbia Threadneedle) Quilter Investors Investment Grade Corporate Bond (Invesco Perpetual) 4

5 Quilter Investors Japanese Equity (Schroders) Quilter Investors Natural Resources Equity (JP Morgan) Quilter Investors North American Equity (Old Mutual) Quilter Investors Precious Metals Equity (BlackRock) Quilter Investors Sterling Corporate Bond (Fidelity) Quilter Investors Sterling Diversified Bond (Fidelity) Quilter Investors UK Equity (Old Mutual) Quilter Investors UK Equity Growth (Newton) Quilter Investors UK Equity Income (Old Mutual) Quilter Investors UK Equity Income II (Woodford) Quilter Investors UK Equity Index (Old Mutual) Quilter Investors UK Equity Large-Cap Income (Artemis) Quilter Investors UK Equity Large-Cap Value (Newton) Quilter Investors UK Equity Opportunities (Artemis) Quilter Investors US Equity Growth (JP Morgan) Quilter Investors US Equity Income (The Boston Company) Quilter Investors US Equity Small/Mid-Cap (Schroders) Direct funds BlackRock Cash Janus Henderson UK Property The investment adviser group is shown in brackets. 3. INVESTMENT PROCESS 3.1. INVESTMENT PHILOSOPHY It is fundamental that the investment solution provided to the client matches their needs. We believe that achieving the optimal investment returns for clients is a function of skill, opportunity set and execution: Skill: our experience and resources internal and external, experience in manager selection Opportunity set: working with a limited range of leading fund groups/managers enables us to drive down costs without compromising on quality. Execution: we use our buying power and ability to package solutions via sub-advised mandates to deliver leading investment solutions to clients at very competitive prices Investment philosophy in WealthSelect The FCA Thematic Review TR 15/12 (Wealth management firms and private banks: Suitability of investment portfolios) confirms that firms providing discretionary and advisory portfolio management services to retail customers must ensure that they can demonstrate that their customer portfolios are suitable. The WealthSelect Managed Portfolio Service is designed with client suitability at its core. This is evidenced through: Clear and unambiguous objectives: we offer risk-targeted solutions that can be closely matched to individuals risk profiles on an ongoing basis. A risk-targeted approach gives investors much greater clarity from the outset about the kind of investment journey they can expect, as compared to a risk-rated approach, which uses past performance to assess fund risk, giving the investor little certainty that this level of risk is going to remain the same in the future. Value for money: we offer a fully outsourced, actively managed solution at a very competitive rate; fund costs are low and there is no added investment management fee. Our size and scale gives us significant buying power in the market and by working with a limited number of leading fund groups, we have been able to drive costs down even further for our clients without compromising quality. Our ability to access managers through sub-advised mandates enables us to deliver high quality solutions that offer outstanding value for money. Tax-optimised portfolio construction: asset allocation is tailored to suit different tax wrappers. Compatibility with advisers risk profiling process: portfolios can be mapped to major risk profiling tools 3.2. PORTFOLIO CONSTRUCTION Fund selection The Managed Portfolios are constructed from funds from our Global Partners. Portfolios are constructed using an appropriate combination of funds to ensure compatibility with the client s attitude to risk. Active management means portfolios are subject to ongoing monitoring and research to ensure they continue to perform as we d expect, within each risk-targeted level. 5

6 3.2.2 Manager selection Our approach focuses on gaining a qualitative understanding of a fund manager s capabilities, supported by quantitative evidence gathering. This framework helps ensure our process is both disciplined and consistent. The process is a continual one in which managers are researched, selected and monitored on an ongoing basis. Key inputs to this process include face-to-face meetings with managers and in-depth portfolio analysis. The weightings allocated to each manager within our portfolios are derived from a combination of qualitative and quantitative inputs, including managers risk profile, investment approach and style, and total portfolio fit. We monitor all positions on a continuous basis, paying close attention to the interaction between managers to ensure the overall portfolio retains the desired characteristics. The weightings allocated to each manager are derived from a combination of qualitative and quantitative inputs, including each manager s risk profile, investment approach and style, and total portfolio fit. We monitor all positions on a continuous basis, paying close attention to the interaction between managers to ensure the overall portfolio retains the desired characteristics Investment research The Quilter Investors Fund Research team identifies strong strategies from each of our Global Partners that may be suitable as sub-advised mandates as part of an overall multi-asset offering. As part of this process, the team will consider a manager s philosophy, process, people, and performance. The team of seven analysts undertake over 16,000 hours of fund research every year using a number of analytical applications and proprietary tools and models when validating and assessing current managers, and screening for new ones. However, nothing can replace the face-to-face contact and the 800+ meeting conducted every year, which remains integral to the process of adding new strategies and monitoring those already covered. Exhaustive research will continue to be undertaken before approving a new strategy for investment just as the Fund Research team will continue to conduct regular meetings with existing managers to ensure the initial rationale for holding the investment is still valid ASSET ALLOCATION Strategic 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. Our portfolio managers combine inputs from Willis Towers Watson (WTW), industry-leading providers of asset allocation research, with our own in-house research to build the optimal portfolios. The process is structured but also allows the portfolio managers discretion to manage the portfolios as they believe is appropriate to achieve the best outcome for the investors, in line with the objectives of the individual portfolios Tactical The long-term, strategic asset allocation is the starting point for portfolio construction. The Multi- Asset team then run a variant of the WTW model in-house that stabilises some of the output by simulating several thousand iterations of the model and finding an average efficient frontier. They use this in conjunction with the fluctuations within the model as a source of information for direction of travel. The team are constantly assessing economic conditions, reading research, and meeting managers. Views are formed from discussions within the team (analysts, other portfolio manager, and economists) and various external resources. The portfolio manager has the final decision on positioning which reflects his interpretation of the current environment. This process is used as an input for deciding on areas where they want to be overweight or underweight to the WTW model at the headline asset class - Cash, UK Fixed Interest, International Fixed Interest, UK Equity, International Equity, and Property. At this point the team reverse the output for each risk level and product to ensure that the portfolio will sit within the ascribed volatility band for that particular risk level. If it does not then they adjust the TAA until it is in the range. The team then use the same sources of information to form a view as to which sub-asset classes they want to be overweight, (e.g. underweight gilt/overweight credit) which is relative to the inputs used in the WTW model, assimilate all these views, which provides the latest TAA. Finally, the team will also further tilt the portfolios through the manager selection and blending process if they have a particular view on market cap size, style, beta, etc. 6

7 3.3.3 Product optimised 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), Individual Savings Account (ISA), or Collective Investment Bond (CIB) to help maximise overall returns. This is because different products enjoy different tax statuses that 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 needs 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 portfolios and so income 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 capital gains allowance. Please note that while we offer optimised asset allocation at a product level, we do not take into account clients individual tax positions when managing the portfolios Tools and capabilities 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 risk-return 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) Willis Towers Watson Willis Towers Watson employs the same process for each of the individual asset classes that they model. They take into account a wide ranging sample of data and forecasts in order to run a series of simulations. The data is gathered from their global research teams and is very much their core competency: They run 10,001 simulations for each asset class (including the sub-asset classes in international equity). The 10,001 simulations are based on a 10 year investment horizon. They then take the mean 10 year return series of each of the asset class models and discount them back to an annual return series. These mean values are used to populate the growth, volatility and correlation fields that are required for a Mean Variance Optimisation calculation. The asset allocation models are constructed using the output from the MVO calculation. The models can be re-optimised by a user who has the ability to set limits and tolerances for each of the asset classes. This allows an asset allocation to be tailored to suit a client s circumstances or short term needs. 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 we may adjust them accordingly. This asset allocation approach is fundamentally the same as the one used in our platform tools for over a decade RISK PROFILING Old Mutual Wealth Risk Profiler Old Mutual Wealth offers a comprehensive risk profiling solution. The pioneering Old Mutual Wealth Risk Profiler, an online tool developed with leading investment consultants Willis Towers Watson, uses a carefully constructed and detailed questionnaire to accurately assess clients investment objectives and attitude to risk. The client is asked a series of questions about their attitude to risk, and a risk score between 1 and 10 is then determined based on the answers to these questions. Within Old Mutual Wealth s risk profiler, risk is defined as the expected degree of portfolio volatility. The tool supports the wider suitability assessment that advisers make and, importantly, provides objectivity by highlighting in monetary terms how much the investor could possibly lose in each risk band. Furthermore, our risk profile and associated asset allocation tools are free from provider bias, respectively using robust scoring systems and independent economic assumptions supplied by Willis Towers Watson. Old Mutual Wealth provides access to a robust and repeatable investment process through the risk profiling and portfolio planning tools. Old Mutual Wealth enables a financial adviser to demonstrate suitability of advice, which can improve the regulatory robustness of a financial adviser s business and help support a compliant sales process. 7

8 The Managed Portfolios are risk-targeted portfolios that are designed to provide a close match for eight of the different risk levels (levels 3-10 of the Old Mutual Wealth Risk Profile). Each portfolio is managed to perform within a specific range of volatility over the long term Client specific portfolios While we provide advisers with the necessary tools to accurately assess clients risk profiles and match them with an appropriate portfolio, it is up to each adviser how often they revisit their clients risk profiles. We do not offer any investment tailoring for individual clients External risk profiling The Old Mutual Wealth Risk Profiler uses a questionnaire to translate an individual s general views on investment risk into a single number a client risk score. This is a measure of the client s willingness and capacity to accept investment risk. Old Mutual Wealth has divided the risk into 10 risk levels, with each level corresponding to a specific level of volatility. The Managed Portfolio Service as part of WealthSelect has a portfolio mapped to each risk level from The portfolios are also mapped to the outputs of external risk profiling tools such as Distribution Technology, evalue, etc PERFORMANCE MEASUREMENT Benchmarks/Indices The Managed Portfolio Service does not have benchmarks. All our portfolios aim to perform with a specific level of risk, measured as volatility, on an ongoing basis. We believe a risk-targeted approach gives clients a much clearer idea of what they can expect from their investments than the risk-rated approach adopted by many of our competitors, which tends to select funds by assessing their risk based on past performance and so gives investors little certainty that this level of risk is going to remain in the future. 4. FUNCTIONALITY 4.1 REBALANCING Frequency All the portfolios are rebalanced quarterly Portfolio Drift Intra-quarter the clients portfolios will be allowed to drift from the model portfolio in line with the performance of the underlying holdings. The drift will be closely monitored by the portfolio management team and if it is prudent to rebalance the portfolios back to target then they will do so if the market conditions are right. In normal market conditions turnover of the portfolio will be low. Following the quarterly asset allocation update all client portfolios will be brought back in line with the updated model portfolio Intra-Quarter Trading It is not envisaged that the portfolios will be repositioned between rebalancing dates, but the portfolio manager has full discretion to rebalance whenever he deems necessary. Exceptional events, such as manager departure, may lead to a repositioning. 4.2 PAYMENT OF FEES The functionality of Old Mutual Wealth means that we do not require a cash account for trading of assets, payment of fees, or our Managed Portfolio Service. Fees and charges are taken via unit deduction proportionately across all funds. 5. RISK MANAGEMENT AND MONITORING 5.1 CORPORATE GOVERNANCE Old Mutual Wealth Limited (Omwl) Board Global Partners and the Managed Portfolio Service are formally overseen by the Old Mutual Wealth Limited (OMWL) Board. The Board of Directors meet six times a year, with a number of ad hoc meetings or calls throughout the year. The Managed Portfolio Service is managed on behalf of Old Mutual Wealth Limited by Quilter Investors, and overseen by the OMWL and OMWLP Investment Committee who is responsible for the oversight of the WealthSelect managed portfolio service. 8

9 Old Mutual Wealth Investment Oversight Council In addition both Global Partners and Managed Portfolio Service are overseen by Old Mutual Wealth s Investment Oversight Council (IOC), which comprises a member of the Old Mutual Wealth Executive Management Team, Old Mutual Wealth s Head of Product, and two independent external advisers. We have established the IOC with a remit to review and offer guidance/challenge on the management of the portfolios and the range itself, and to manage any conflicts of interest. 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. The Investment Committee provides the oversight and governance as sub-committee of the OMWL and OMWLP boards. The below chart shows the different levels of governance: Quilter Investors Global Partners Forum The Global Partners Forum is the delegated body specifically responsible for the oversight and monitoring of our Global Partners and the funds from which the managed portfolios can be constructed. They are tasked with taking appropriate action to deliver good outcomes for your clients. They decide the number and type of mandates to ensure there is appropriate coverage for the construction of multi-asset portfolios. The addition of new sub-advised mandates is based on the identification of a clear investment/customer need. The Global Partners Forum consists of representatives from across Quilter Investors including the portfolio managers of the WealthSelect and Creation portfolios; the Head of Investments, the Head of Product; the Chief Commercial Officer; the Head of Strategic Partners, and the Head of the Fund Research team. The objective of the Global Partners Forum is to provide a governance structure that ensures: The funds consist of high quality fund groups, managers, and strategies. The funds remain appropriate for the portfolio managers so they can build robust investment solutions offering good customer outcomes. The Fund Research team s views are considered and decisions are made promptly regarding the constituent funds and managers. The feedback from portfolio managers regarding their ongoing requirements can be received and direction provided to the Fund Research team and the Head of Strategic Partners on how their needs may be supported. CIA/ISA CIB/CRA Advice Agreement Client Adviser Advice Agreement Client CIA/ISA Terms = Retail Client CIA/ISA Terms = Professional Client Product Terms and MPS: Retail Client Platform OMWL MPS Provider OMWLP Product Provider OMWL CF30s OMWLP CF30s Portfolio Managers (Quilter Investors) OMWL and OMWLP Investment Committee Old Mutual Wealth Investment Oversight Council (including two independent external parties) 9

10 5.2 regulation Regulatory Body Old Mutual Wealth Limited is authorised and regulated by the Financial Conduct Authority and Old Mutual Wealth Life & Pensions Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority Regulatory Review Old Mutual Wealth engages pro-actively with the supervisory teams and the members of our Executive Management team/approved Persons attend meetings with the PRA/FCA periodically throughout the year Regulated jurisdiction The company is regulated in the United Kingdom for investment business. 5.3 CONSUMER PROTECTION Guarantees and Compensation UK resident customers of Old Mutual Wealth companies based in the UK are generally protected by the Financial Services Compensation Scheme (FSCS), against those Old Mutual Wealth companies going into liquidation. For CRA and CIB provided by OMWLP, the amount that can be claimed is 100% of the amount payable under the policies or contracts you have with the relevant firm, with no maximum limit. For ISA and CIA provided by OMWL, the amount that can be claimed is 100% of the first 50,000 of the claim value. This maximum is per client and not per account held with Old Mutual Wealth Limited. The FSCS may not apply to funds domiciled outside of the UK. For more details please see the Protecting Your Money document Financial stability Old Mutual Wealth Limited is authorised and regulated by the Financial Conduct Authority and Old Mutual Wealth Life & Pensions Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority. As such they have to comply with the relevant rules applying to investment and insurance firms, aimed at ensuring clients assets are protected from the failure of the firm providing the products. All regulated financial services firms in the UK are required to hold minimum capital levels on a standalone basis. Quilter plc holds capital well in excess of the required levels Professional indemnities We hold relevant Professional Indemnity insurance (PII) cover as required under the regulatory regime. Our adviser agreements state that you will indemnify us and keep us indemnified against any loss arising from: (a) Introduction of business beyond your authorisation, or when your authorisation has been cancelled or withdrawn (b) Provision of incorrect information by you (c) Infringement of our intellectual property rights (d) Any intellectual property provided by you which infringes the intellectual property rights of a third party (e) Misuse of our online services by any of your users Appropriate insurance cover Our insurance arrangements are assessed on an annual basis and are deemed appropriate and suitable by our regulators F.A.T.C.A. Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions will be deemed to be Participating FFI and as such we will be required to check (where relevant) investors/beneficial owners (as our policy holders) for US connections. 6. CHARGES 6.1 FEES AND OTHER COSTS Managed Portfolio Service charge There is no ongoing charge for MPS, however VAT applies to the service charge for CIA and ISA. These two products fall under different tax rules due to the nature of the products. Our CIB and CRA products are insurance wrappers provided by OMWLP and therefore as the adviser will be acting as an intermediary the fees are exempt from VAT. CIA and ISA are investment products offered by OMWL and VAT should be levied on the fees in respect of the services provided on these products. The same rules apply to OMWL regarding taxation as with any discretionary service. 10

11 Risk Level Product and Style CIA Active Passive Blend CIB Active Passive Blend CRA Active Passive Blend ISA Active Passive Blend COLLECTIVE INVESTMENT ACCOUNT RISK LEVEL 5 ACTIVE PORTFOLIO Investment amount 50,000 75, , , ,000 Service Charge 0.43% 0.40% 0.39% 0.36% 0.34% VAT charge 0.09% 0.08% 0.08% 0.07% 0.07% Weighted Portfolio OCF* 0.64% 0.64% 0.64% 0.64% 0.64% Total Cost of Ownership before annual advice charge 1.16% 1.12% 1.11% 1.07% 1.05% Total Cost of Ownership with 0.75% 1.91% 1.87% 1.86% 1.82% 1.80% Total Cost of Ownership with 0.50% 1.66% 1.62% 1.61% 1.57% 1.55% COLLECTIVE INVESTMENT ACCOUNT RISK LEVEL 5 PASSIVE BLEND PORTFOLIO Investment amount 50,000 75, , , ,000 Service Charge 0.43% 0.40% 0.39% 0.36% 0.34% VAT charge 0.09% 0.08% 0.08% 0.07% 0.07% Weighted Portfolio OCF* 0.55% 0.55% 0.55% 0.55% 0.55% Total Cost of Ownership before annual advice charge 1.07% 1.03% 1.02% 0.98% 0.96% Total Cost of Ownership with 0.75% 1.82% 1.78% 1.77% 1.73% 1.71% Total Cost of Ownership with 0.50% 1.57% 1.53% 1.52% 1.48% 1.46% COLLECTIVE RETIREMENT ACCOUNT RISK LEVEL 5 ACTIVE PORTFOLIO Investment amount 50,000 75, , , ,000 Product Charge 0.43% 0.40% 0.39% 0.36% 0.34% VAT charge 0.00% 0.00% 0.00% 0.00% 0.00% Weighted Portfolio OCF* 0.64% 0.64% 0.64% 0.64% 0.64% Total Cost of Ownership before annual advice charge 1.07% 1.04% 1.03% 1.00% 0.98% Total Cost of Ownership with 0.75% 1.82% 1.79% 1.78% 1.75% 1.73% Total Cost of Ownership with 0.50% 1.57% 1.54% 1.53% 1.50% 1.48% 11

12 COLLECTIVE RETIREMENT ACCOUNT RISK LEVEL 5 PASSIVE BLEND PORTFOLIO Investment amount 50,000 75, , , ,000 Product Charge 0.43% 0.40% 0.39% 0.36% 0.34% VAT charge 0.00% 0.00% 0.00% 0.00% 0.00% Weighted Portfolio OCF* 0.55% 0.55% 0.55% 0.55% 0.55% Total Cost of Ownership before annual advice charge 0.98% 0.95% 0.94% 0.91% 0.89% Total Cost of Ownership with 0.75% 1.73% 1.70% 1.69% 1.66% 1.64% Total Cost of Ownership with 0.50% 1.48% 1.45% 1.44% 1.41% 1.39% Information correct as at 8 June The investment amount is assumed to remain constant throughout the year. * Subject to change due to final portfolio construction. Please note that the weighted portfolio OCF (OCF) can change. The OCF does not include the Property Expense Ratio (PER) or Performance Related Fee (PRF). For transparency Old Mutual Wealth shows the Total Expense Ratio (TER) including an estimate of PER and PRF where relevant on personalised illustrations. These figures are subject to change. The latest figures and further information on the PER and PRF are available in our Fund Information for WealthSelect document: WealthSelect_Charge_Basis_3.pdf please note that the Total Cost of Ownership is an annual indicative total percentage cost that a customer may pay to invest in the WealthSelect Managed Portfolios after all charges are taken into account Transaction fees 7. ACCESSIBILITY There aren t any transaction fees for buying and selling. However, customers 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 customers 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. Purchase trades will be placed once all prices are received for the sell trades when rebalancing or changing funds in the MPS. In almost all cases this will be a one-day difference during which Investors will be out of the market during which prices could rise or fall. 7.1 MINIMUM INVESTMENT AMOUNT There is no minimum investment amount stipulated for MPS, please see the Platform Due Diligence document for the minimum requirements for the platform and for ISA, CIA, CIB and CRA. Please note that WealthSelect is only available on Charge Basis ACCESSING MPS 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. 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, you will need to select the Managed Portfolio Service using the option online. 7.3 CONTRACTUAL ARRANGEMENT 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). 12

13 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. 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). The WealthSelect Managed Portfolio Service is provided by Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited. 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. Quilter Investors is a trading name of Quilter Investors Limited. Authorised and regulated by the Financial Conduct Authority with FCA register number Registered in England & Wales under number Registered office: Millennium Bridge House, 2 Lambeth Hill, London, England, EC4V 4AJ. VAT number for all the above companies is PDF11541/ /June