How advisers invest: Kingswood Group’s MD on creating bespoke model portfolios

Kingswood Group managing director of wealth planning David Healy discusses using in-house expertise to create bespoke model portfolios

Is your approach to investment management in-house, outsourced or a mixture of both?
As a fully integrated wealth management business, we use our in-house expertise to leverage our well-established and highly experienced investment team at Kingswood. Clients benefit from a close and combined approach from both the wealth planning and investment management sides.
What investment options do your clients have?
Depending upon whether the client wants to be involved in decisions or allow us to make them on their behalf based on their objectives and risk parameters, we principally have four investment options – two advisory and two discretionary.
The first is a panel of multi-asset funds that are inexpensive, offer a diverse range of investment exposures and are principally used for clients who are more cost sensitive, want a lighter-touch approach and perhaps are in the capital accumulation – as opposed to accumulated – phase of their lives.
The second is a range of advisory model portfolios. There are five core models representing different risk profiles, which harness our best ideas but are suited to clients who would prefer some involvement and agreement to their investment decisions on an ongoing basis. These portfolios are rebalanced either quarterly or annually depending upon the client’s service proposition.
Of our discretionary options the first is our model portfolio service that has recently been upgraded. We offer a range of portfolios to suit client needs, including active management, passive, income and ethical. The portfolios can be accessed directly through Kingswood but also through the major platforms we work with, including Novia and Standard Life Wrap.
The final option is the personal portfolio service, our bespoke discretionary offering to clients who are seeking the optimisation of a discretionary investment proposition but with a set of underlying investments tailored to them. Clients typically work both with a planner, who  determines the strategy and financial plan, and with an investment manager, who determines the best asset mix to fulfil the plan based on the risk profile the client is prepared to adopt.
How do you select the DFMs and platforms you work with?
For discretionary fund management, we work exclusively with our in-house sister company, Kingswood Investment Management. Clients can benefit from a ‘closeness’ in terms of both proximity and approach between their planner and investment manager.
Clients often come to us with an existing platform that we avoid changing unless there is a material reason to do so. The platforms we work most closely with and have chosen to put on our panel of preferred partners are Novia, Nucleus and Standard Life Wrap. We select our platform partners based on a rigorous annual due diligence process that compares cost, fund availability, functionality and error rate, and examines any change in service level. Many of the charging structures we employ through the platforms are bespoke to us.
We have a core panel of platforms that we feel suit different client circumstances and needs but, since Kingswood is in growth phase and we have been acquiring businesses, it has become necessary to consider the needs of these businesses and their clients during the integration. This has led us to utilise the Old Mutual Wealth wrap, for example.
How do you build model and bespoke portfolios?
Our portfolio construction process has one over-arching aim: to deliver consistent outcomes to clients in line with their goals and objectives. Portfolios are based on clients’ time horizon and risk tolerance. We offer investment strategies for five client profiles, which form the starting point for all our portfolios.
Each investment strategy has a strategic asset allocation or benchmark that represents the most likely asset allocation over the long term to achieve the client’s goals within an acceptable level of risk. Against this we implement our tactical asset allocation views that tilt the portfolio towards asset classes expected to outperform on a risk-adjusted basis over the medium term.
Our investment committee is responsible for asset allocation and meets on a quarterly basis. We also have a collectives committee that is responsible for fund selection and meets on an ad hoc basis.
Fund research or due diligence is all done in-house and we leverage from third parties such as Morningstar. We have various lists: a buy list of funds used in the models; an approved list of funds-of-funds available for investment managers to use in addition for bespoke portfolios; and a watchlist/shortlist of funds we’re reviewing and/or monitoring.
Funds can be replaced for many reasons but typically one of the following: the original strategy is not doing what we’d expect; style drift; change of manager; and the fund is hard-closed. Portfolios are monitored daily while fund performance is checked weekly.
How does your investment management approach  benefit clients and the business?
To the benefit of our clients, we focus on searching for superior longer-term investment opportunities while monitoring and limiting potential losses. This approach should also benefit the firm by leading to long-term client satisfaction.
Company factfile

Date established: 2010

Assets under management: £2bn

No. of clients: 7,000 active clients

Platforms used: Fidelity Funds Network, Novia, Nucleus, Old Mutual Wealth, Standard Life Wrap

DFMs used: Kingswood Investment Management

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