Wealth Management

Wealth Management

When managing your wealth it is important to carefully assess both risk and potential returns. If the potential returns do not justify the risk, avoid the investment!

When making investments for our clients, we consider:

  • The client’s specific risk profile and capacity for loss.
  • Is it appropriate to diversify risk by investing across a range of different assets?
  • Which asset classes are likely to produce the best “risk adjusted” returns given the current economic cycle and expected future economic direction?
  • Is it suitable to reassess the risk and performance at regular intervals, such as quarterly, half yearly or annually?
  • If a client does not review their investments regularly they may end up with an unsuitable investment strategy, given that economies and markets are constantly changing.
  • What was a suitable risk profile for a client one day, may no longer be appropriate in future.
  • Even if a client is investing for the long term, perhaps 10-25 years away, it is important to review investments on a regular basis, to check risk, suitability and ongoing performance relative to alternatives.
  • If a fund underperforms compared to its peers, serious questions need to be asked why and whether a different fund should replace it. This should always be done in the context of the set risk tolerances and any specific financial objectives.

Past performance is no guarantee of future returns, but it can be used to help assess risks and expectations about potential returns.

Questions also to consider in addition to risk and performance:

  • Investment Charges: What are the charges involved and how are they worth paying?
    1. If a fund has high charges yet the asset class is yielding low returns then the charges will be disproportionately high and unlikely to be suitable.
    2. Is the fund a low cost index tracker, a reasonable cost actively managed fund or an expensive active?
  • Tax: What are the tax consequences, for income and growth?
    1. Can the investments be structured differently to optimise the net of tax return?
  • Access and Liquidity: Is access to the fund important, or can the investment be locked away for a long time?
    1. Does the investment fund/provider have the facility to block encashment for a period of time, such as some property funds or fixed rate bonds?
    2. Are there any penalties or charges for cashing in early?
  • Protection & Guarantees: Are there any guarantees, or levels of protection (perhaps through structured products, with profits or hedging), which give some peace of mind or a greater degree of certainty?
  • Investment type: What is the best type of fund to hold (ETF, index tracker, Unit Trust, OEIC, Structured Product etc).
  • Product type: What is the most appropriate product (also referred to as a “wrapper”) to hold the investment (such as an ISA, Onshore Investment Bond, Offshore Investment Bond, General Investment Account (on or off a “platform”)?
  • Regulatory protection: Is the product or investment held onshore or offshore? Does it come with FSCS protection?
  • Due Diligence: How reputable and financially strong is the investment provider or investment manager?
    1. Is there a counter party involved? What is their financial strength?
    2. Is the investment leveraged (perhaps using debt or high risk derivatives)?
    3. What are the underlying investments (is a “deposit” fund invested in cash or more risky money market instruments)?
    4. Even bank accounts can lose money if you are with a bank that fails where the regulatory protection is not 100%.

Our Wealth Management Service

We can provide clients with advice on investments portfolios and help match them to wider financial goals.

As part of our ongoing investment reviews, we carry out significant research covering all of the above factors.

Researching investments

Risk profile

We start by assessing a client’s risk profile and tolerances. This is what primarily drives the type of investment we would recommend.

We also consider economic conditions and perceived risks and opportunities. This helps us allocate more to assets that we believe have a good risk/reward balance whilst reducing allocation to perceived lower value investments.

Asset allocation

If any significant changes have taken place since the last review, or if a fund has started to lag its peers for no obvious acceptable reason, then the % allocations for each asset class or fund is adjusted.

We undertake fund research to show up to date figures for risk, performance (since last review and cumulative for 1,3 and 5 years) and initial/ongoing charges (OCF).

For unitised collective investments, we typically recommend “super clean” units where possible. We will also advise on whether your investment portfolio should hold “income units” or “accumulation units”.

Investment selection

We check many regulated funds for each asset class. We assess all the main factors and identify what we consider to be the “best of breed” and those we feel are most relevant to our clients.

Our aim is to use as the best quality funds for clients taking into account the risk, reward, restrictions, features and costs involved.

Regular reviews

Funds that performed well over recent years often perform poorly in future years, so it is vital to review and potentially switch investments. We assess ongoing management performance, changes in charges, alterations to underlying investments and changing economic circumstances which are the typical drivers of returns.

We also check asset allocations quarterly, but we would only review your portfolio at an interval agreed with a client at the outset, since more frequent reviews cost more. There would be no point reviewing a small or low risk portfolio on a quarterly basis, whereas a large portfolio or a high risk approach might require a more frequent review.

Also, if a client is nearing an objective, such as retirement, or a child’s 18th birthday (for university funding strategies) then they may want more frequent reviews.

Product type

Not only do we assess the right investments but we also help client’s choose the best way to hold them, which may require the use of a specific financial product. This may be as simple as investing via an ISA (Individual Savings Account), or a range of products held on a low cost investment platform.

Monitoring risk

In addition to reviewing investments held, we also identify the need for rebalancing of risk for each individual client, because often there is “risk drift” which occurs when some asset types do well over a period of time while others underperform, which skews the overall asset allocation away from the initial desirable level.

This ensures that we bring the client’s holdings back in line with the asset allocations for their set risk profile, which we also confirm on a regular basis.

If you would like a professional financial adviser to assess your existing investments, whether it is a single product or a whole investment portfolio, please let us know, since we can perform an initial audit free of charge to give you an idea of whether we can help.

Further in depth analysis and specific financial advice will involve fees, but we will discuss this with you at the outset.

Bespoke Portfolio building or Model portfolios

An example of a recent risk profile model portfolio asset allocation (whereby 1 is no risk and 10 is speculative) is as follows:

Strategic Asset Allocations IRP Folio 3 IRP Folio 4 IRP Folio 5 IRP Folio 6 IRP Folio 7 IRP Folio 8 IRP Folio 9 IRP Folio 10
Asia Pacific (Ex Japan) Equity 0.7% 1.5% 2.1% 2.7% 3.2% 3.8% 4.8% 2.8%
Emerging Markets Equity 1.6% 3.5% 5.0% 6.4% 7.6% 9.0% 11.4% 45.9%
Euro Equity 1.8% 3.9% 5.6% 7.2% 8.5% 10.0% 12.8% 7.8%
GBP Cash 25.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Global Fixed Income 10.7% 11.6% 8.3% 5.3% 2.8% 0.0% 0.0% 0.0%
Japan Equity 1.1% 2.4% 3.4% 4.4% 5.2% 6.1% 7.8% 4.9%
UK Corporate Bonds 10.9% 12.4% 9.7% 7.2% 5.1% 2.7% 0.0% 0.0%
UK Equity 5.5% 11.7% 16.8% 21.6% 25.5% 30.0% 38.1% 23.5%
UK Govt Bonds 31.2% 35.3% 27.7% 20.4% 14.5% 7.6% 0.0% 0.0%
UK Property 7.4% 10.2% 10.6% 10.9% 11.2% 11.5% 0.6% 0.0%
US Equity 3.5% 7.5% 10.8% 13.9% 16.4% 19.3% 24.5% 15.1%

Risks and returns

The model portfolios help clients structure risks with a view to an expected potential return. We will select the most suitable investment strategy appropriate to the clients attitude to risk.

We typically select a wide range of investments funds with differing risk traits and profiles but ensuring that the overall portfolio is balanced to keep it in line with the client’s specific risk requirements.

We can compare our model portfolios to suitable benchmarks so that clients can readily compare performance and risk to check our own performance and value.