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How to build a centralised investment proposition

This week, Money Marketing speaks to three financial advisers about how they built their centralised investment propositions, how they approach outsourcing and how they charge for their services

How have you built your CIP? 

Cube Financial Planning director Mike Godfrey: We use Finametrica for asset allocation but prefer to build bespoke portfolios based on the individual portfolios available through James Hay, with additional fund selection done through Square Mile. But we do not subscribe to picking a process-driven, off-the-shelf solution. We look for experienced analysts with pedigree, a strong track record, and relationships with the fund groups. We carry out a due diligence process that will be reviewed every couple of years.

Nexus IFA managing director Kerry Nelson: We have built ours slightly differently to a typical outsourced arrangement. We have drawn up a comprehensive document that details fully the processes, procedures and our methodology.

We review our portfolios on a monthly basis to assess ongoing appropriateness and measure performance, not just on our own portfolios but on all funds, and then run these against a proprietary screening system.

These findings are then documented on a monthly basis, giving details of relevant stats and the outcome of our investment committee meeting, headed by Clive Hale, who is Albemarle Street Partners’ managing director and a non-executive director at Nexus.

Higgins Fairbairn chartered financial planner Gianpaolo Mantini: We start with a list of all the discretionary fund management providers and apply two initial filters – those that subscribe to Asset Risk Consultants and those with Defaqto ratings – looking for a combination of service, ability of the fund manager and the quality of their valuations.

It comes down to cost, performance and risk-adjusted returns and then it is a case of finding the most appropriate investment manager for the client’s requirements like their risk attitude, whether they have international affairs, or whether they interested in a charitable portfolio. We mostly use Brooks Macdonald, Rathbones and Tilney but also have clients with the likes of Quilter Cheviot, Ruffer, 7IM and UBS.

Are there ever concerns over the client relationship or clash of skills? 

Godfrey: We recognise our limitations and buy in external experience to build a stronger proposition. Also, from a regulatory point of view it sends a big message to the FCA that we are willing to spend a significant amount of capital to buy in the tools to do the job properly.

There is no point in us pretending we have the skills in-house – it is not what we do. We also find it is a stronger story for clients. They seem to like the fact we are upfront about it – these are our preferred specialists; they do this 24/7 and it leaves us to focus on what we do best.

Nelson: It is an in-house CIP, therefore we do not have concerns over the client relationship or responsibilities. We have set up the model this way – keeping it in-house – for those very reasons.

Mantini: Maybe because I’m younger or maybe because of the type of people I look after (I’m 41 and look after £70m of DFM funds), but they know I prefer to put business with them so it would be very short-sighted of them to try and take clients away from me.

I know Tilney, Rathbones and Brooks Macdonald all have their own in-house advice arms but they have all been quick to assure me no cross- information is being shared. That is actually in our contract.

How are your charges structured or split? 

Godfrey: We have got a standard fee agreement in place. So for most of our clients it is 0.75 per cent a year on a retainer basis. The cost of us delivering our service, whether it is using third-party model portfolios or operating our back-office systems, is all just absorbed as a cost to the business and comes out of our profits.

Nelson: We have seven predeter-mined portfolio outcomes that are driven by the use of Finametrica’s attitude to risk, which forms part of our CIP and on which we build our own proprietary models. The charges are all transparent and made up of three elements – the wrap fee, fund manager charges and our service charter fee. None of our models exceed 2 per cent a year. There are no additional charges; it is all part of our service offering.

Mantini: We prefer a flat fee with no dealing charges and are pleased to see the steady downward pressure continue over the past few years. Our fees are all laid out and disclosed separately in our literature but it might be facilitated through a Sipp provider, or through the investment manager. That is the client’s individual preference.



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. For those using a third party DFM would be interesting to see what the all-in costs (advice, platform, funds and DFM) are.

  2. Fine, but no mention of starting the design process with a consideration of the firm’s client bank/segments

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