Model Portfolio Service

Transcription

1 WAVERTON INVESTMENT MANAGEMENT October/November 2016 Model Portfolio Service FOR PROFESSIONAL ADVISERS ONLY NOT TO BE DISTRIBUTED TO OR RELIED UPON BY RETAIL CLIENTS

2 WAVERTON INVESTMENT MANAGEMENT Founded in 1986 as J O Hambro Investment Management Current AUM: 5.0 billion* Model portfolios: Exclusive to clients of Financial Advisers Available on 12 Platforms and growing 5 Year track record on platform *As at 30 September

3 AGENDA DFM OUTSOURCING: Drivers in Demand Need for Due Diligence MODEL PORTFOLIOS ON PLATFORM Due Diligence Considerations 3

4 DFM OUTSOURCING

5 bn DRIVERS IN DEMAND WELL DOCUMENTED 45% of advisers expect to outsource by 2017* Of these: 66% use DFM services** RDR: catalyst to focus on core competencies Outsourced Investment Proposition*** 140bn Pensions freedoms accelerated the trend Advisers seeking to: adapt their business model and deliver great client outcomes bn Sources: *Cerulii Associates 2016,** Defaqto April 2015 and ***OMW

6 NEED FOR DUE DILIGENCE INCREASED CHOICE & COMPLEXITY Huge choice of DFMs: ARC Survey: over 60 managers PAM Report: over 200 managers Broad range of offerings: Large variety of services to meet adviser demand DFM can be opaque and difficult to research: But getting much better 6

7 NEED FOR DUE DILIGENCE FCA THEMATIC REVIEW Due Diligence a central function of the advice process Applies to platforms and DFMs School report could do better : Depth of process Create audit trails to back decision making Brief but to the point, FCA will keep looking 7

8 DUE DILIGENCE PROCESS: HIGH LEVEL FOUR KEY COMPONENTS PROPOSITION Type of solutions, features, cost/value analysis INVESTMENT PERFORMANCE Consistent comparison, against customer parameters OPERATIONAL CAPABILITY & SERVICE DELIVERY Infrastructure in place to support the service PROVIDER ASSESSMENT Business structure, financial strength, operations risk 8

9 MODEL PORTFOLIOS ON PLATFORM

10 MODEL PORTFOLIOS: BENEFITS CUSTOMER Portfolio: broad flexible investment portfolio Appropriate: against client parameters Cost: lower DFM charges ADVISER Efficiency: in-house investment difficult alongside other services Universal: meet the needs of different client segments Cost: in-house investment expertise can be expensive Risk: de-risk the business through outsourcing MODEL ASSESSMENT Combination: of client & adviser benefits but client outcome is key 10

11 MODEL PORTFOLIOS ON PLATFORM DUE DILIGENCE CONSIDERATIONS 1. Accessibility 2. Consistency 3. Whole of market 4. Charges 5. Performance 6. Reporting & Communication 7. Flexibility 8. DFM Commitment 9. Client Outcome 11

12 1. ACCESSIBILITY AVAILABILITY ACROSS DIFFERENT PLATFORMS Portfolios must be accessible on multiple platforms 25+ adviser Platforms Most advisers use more than one Plus legacy clients on non-core platforms Equally important: consistency across platforms 12

13 2. CONSISTENCY CONSISTENCY ACROSS PLATFORMS FCA: Clear repeatable process Consistent Client Outcomes Need to avoid portfolio drift Fund costs across platforms can vary Not all funds or products available Guinness Global Equity Income Fund March 2012 to September 2016 *Source: Waverton and Morningstar. Performance is shown NET of fees. Past performance is no guarantee of future results and the value of such investments and their strategies may fall as well as rise. You may not get back your initial investment. Capital security is not guaranteed Guinness (Z Class) IA Global Eq Inc 13

14 3. WHOLE OF MARKET PLATFORM CONSTRAINTS How far are portfolios constrained by the investment options available on platform? Use of alternative assets Funds not available Structured products Soft closed funds Doric Nimrod Air Two Total Return Since Inception 90 29/07/ /07/ /07/ /07/ /07/ /07/20 *Source: Waverton and Morningstar. Performance is shown NET of fees. Past performance is no guarantee of future results and the value of such investments and their strategies may fall as well as rise. You may not get back your initial investment. Capital security is not guaranteed. 14

15 4. PORTFOLIO CHARGES ARE THE PORTFOLIOS GOOD VALUE? HOW ACCURATE IS THE TER? MULTIPLE LAYERS OF COSTS 1 Platform Charge 2 DFM Charge 3 Cost of underlying holdings - Accuracy eg; Absolute Return Funds - Founder share classes - Rebates 4 Platform Trading Costs 15

16 5. PERFORMANCE ACCURACY & TRANSPARENCY Actual: Is the performance real client experience or simulated? Accuracy: net of fees & underlying manger costs Length: of track record: MPS solutions reaching 2-3 plus years of age so easier to compare Variety: measure against a variety of matrix: inflation, peer group, index benchmarks 16

17 6.REPORTING & COMMUNICATION QUALITY OF REPORTING IS VITAL Specific to each model portfolio Core elements: Portfolio factsheets Detailed quarterly investment report Ongoing investment bulletins Reporting tailored to your requirements: Adviser branded material Factsheets and reporting Regular review with the portfolio manager 17

18 7. FLEXIBILITY MEET YOUR REQUIREMENTS A driver of demand for DFMs: Support the adviser business model Often used as part of a Centralised Investment Process But there is a broad church of CIPs: From use of the standard models to Bespoke adviser portfolios eg; defined strategic asset allocation Fit with or within the adviser s own offering 18

19 8. DFM COMMITMENT A PRIORITY TO THE DFM? Model portfolios on multiple platforms can be: Complex Low margin But an important part of your proposition Are the models a DFM Trojan Horse? How much resource has the DFM provided Quality of reporting and accessibility PM available for reviews, client meetings and presentations Are the models a profitable part of the DFM s business? 19

20 9. CLIENT OUTCOME THE PRIMARY CONSIDERATION Is the model as good as or better than a bespoke portfolio?: Investment outcome Costs including platform charge Alignment with the client need: Not just aligned to markets but real returns Aligned to your planning process A COMBINATION OF ALL THE FACTORS Cost Consistent Accessibility Whole of market Performance Client Outcome Reporting/Communication Flexibility DFM Commitment 20

21 PLATFORM BASED PORTFOLIOS SUMMARY 1. Accessibility: availability across different platforms? 2. Consistency: are the underlying holdings consistent across different platforms platforms? 3. Whole of market: how far are portfolios constrained by the investment options available? 4. Charges: a. Are the portfolios still good value once the platform fee is added? b. How transparent are the portfolio costs? 5. Performance: how transparent and accurate is the portfolios performance? 6. Reporting & Communication: quality of reporting is vital 7. Flexibility: can the models flex to your requirements? 8. DFM Commitment: is the model portfolio a priority to the DFM? 9. Client Outcomes: the primary consideration 21

22 WHERE TO GO FOR HELP Direct: to DFM with RFI: Personalise your questions to fit customer type and your business requirements Be selfish! There is lots of competition for your business Independent: research from third parties To support DFM assertions Trade: range of trade bodies Meet: potential business partners in person Still no substitute for personal engagement! 22

23 RISK WARNINGS Past performance is no guarantee of future results and the value of such investments and their strategies may fall as well as rise. Your client may not get back your initial investment. Capital security is not guaranteed. The opinions expressed are based on current market conditions and are subject to change. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. The portfolio may invest in assets which are not readily realisable or where there is counterparty risk. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. Risk Associated with underlying investments within this model There is no guarantee of a return on Absolute Return Funds held.the returns for structured products may fluctuate according to different market conditions; your client may get back less than they originally invested. The Model Portfolio Service may invest in derivative products such as futures, options, and contracts for differences. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products may be unsuitable for investors. Different instruments involve different levels of exposure to risk. Therefore financial advisers should ensure they understand the nature of such holdings and the extent of exposure to risk when considering whether the investment is suitable for their clients. 23