Aim: Growth by investing in UK bonds, UK equities and property
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 85% UK bonds, 10% UK equities, 5% property
Isa link: Yes
Pep transfers: Yes
Charges: A shares – initial 5%, annual 1%, N shares annual 0.5%
Commission: A shares – initial up to 5%, renewal 0.5%, N shares – none
Tel: 0800 995511
Fidelity FundsNetwork has prepared for the implementation of the proposals in the Retail Distribution Review by introducing a fund of funds range with different share classes for fee-based and commission-based advice.
Arch Financial Planning managing director Arthur Childs says: “FIL FundsNetwork PortfolioManager: defensive is one of five new Fidelity multi manager portfolios that have just been added to the FundsNetwork platform. These portfolios are part of something called FundsNetwork Investment Solutions which appears to be a genuine attempt to make life easier for advisers.”
Childs believes that as the funds can accommodate a range of commission and fee options, advisers can arrange investments with confidence, without trying to second-guess the outcome of the RDR. “A range of clearly defined risk rated portfolios is bound to make the adviser’s job easier. Many IFAs consider themselves investment managers, but there are a number who would prefer to concentrate on the big picture of their clients’ needs and leave investment management to those with skills and professional qualifications in that area. As many IFAs are changing to a model of mainly ongoing fund based or fee remuneration, it is difficult to justify time and resources spent on individual fund research,” he says.
Childs points out that the fund will have two distinct share classes. “Class N is commission-free for fee-based advisers and Class A offers flexible commission options, including support for customer agreed remuneration. Advisers who work with a segmented client bank and offer differing remuneration models will have that flexibility within this one fund,” he says.
In Childs’ view, the fund should be seen as a part of an overall service that Fidelity intends to be a ‘one stop shop’ for advisers. “The portfolio service includes attitude to risk, asset allocation and ongoing management and reporting tools. Clients will have access to their account information 24 hours a day and Fidelity will report to investors quarterly. These formal reports will include current asset allocation, fund performance and a market outlook,” says Childs.
Childs regards the literature as attractively produced, with generous use of drawings, charts and tables rather than too much text. “The portfolios are colour-coded for ease of reference so that matching a client’s risk profile to the right fund is straightforward. As expected of Fidelity, the charges are on the low side for multi-manager funds and can be made even more competitive depending on the adviser’s choice of remuneration,” he says.
Turning to the potential drawbacks of the fund Childs says: “For a fund which states a level of income as part of its aim, it is strange that only accumulation units are available. Any income will have to be obtained by using the Fidelity regular withdrawal facility. This is likely to be more tax efficient for the majority of investors, especially with the single rate of CGT from April, but for a defensive fund such withdrawals can unnecessarily damage capital in a falling market.”
Childs’ main concern is the asset allocation. “I am not sure that a fund which invests 85 per cent in one asset class, unless that is cash, should be called defensive. “Through our relationship with threesixty services we have access to some asset allocation models designed by AKG Actuaries and Consultants. For defensive investors their models include 15 per cent cash and 25 per cent in big company stocks rather than quite so much in bonds.”
Childs thinks competition will come from CF Miton arcturus and Cazenove multi-manager diversity. “Looking at the PortfolioManager as a service I think that it will certainly offer strong competition to its main rivals Cofunds and Skandia. Many advisers, and that includes me, will find the portfolios just too restrictive and will prefer to work with wrap platforms such as Nucleus to set up their own standard risk rated portfolios.
“For those advisers who do not have the experience, resources or desire to manage investments, I expect that this will quickly become part of their investment service to clients.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good