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Intelligent approach

Scottish Mutual&#39s multi-manager portfolio service, Investment Intelligence, provides access to three pre-packaged funds from its sister company Inscape. Or investors can choose from a range of six multi-manager funds from institutional fund management group Attica.

Assessing how II fits into the market, Gilbey says: “It is a sophisticated, flexible and structured multi-manager investment option within the Scottish Mutual flexible investment bond and complete retirement package products. It combines much of the simplicity offered by the fund-of-funds product with much of the participation and flexibility of discretionary fund management.”

Greening says: “At a time when markets are volatile and are likely to remain so, the idea of a multi-manager approach to investments appeals to IFAs.”

Dilke-Wing says: “The product reflects a growing realisation among providers that their internal fund ranges do not generally stack up and that a range of external fund links is not the be all and end all. ”

Highlighting the type of client the product could suit, Dilke-Wing says: “The investor demanding something more than internally managed funds but who does not want to go through the bother of self-selection and monitoring.”

Greening thinks it could be used by IFAs to add value to their clients by focusing more on the performance of funds.

Gilbey says: “It is most suitable for clients who are looking to diversify and maintain a portfolio with a minimum of effort. This type of client tends to be under 50, an affluent and more sophisticated investor within the pensions and life assurance bond markets. Outside the pension and life assurance bond sectors, the development of fund supermarkets and wrap accounts would confine this product to either the lazy client or those with insufficient funds to afford a personal portfolio management service.”

Identifying the marketing opportunities that the product could provide, Greening says: “I do not see a major marketing initiative but a gradual process of educating clients. Regular reviewing of clients&#39 portfolios with poor performance of managed funds will produce opportunities to switch funds into this type of environment.” Dilke-Wing says: “It is difficult to see any great marketing opportunities.”

Pointing out the main useful features and strong points, Greening says: “The investment environment needs extra assistance at client adviser level. Using Inscape and Attica&#39s investment expertise, IFAs should be better positioned to advise clients regarding their investments generally.”

Dilke-Wing says: “The main useful features are that it provides an alternative to Frank Russell and it is always useful to have a degree of competition. Unfortunately, it is impossible to gauge how useful this is because only superficial detail is given on the process and nothing on performance.”

Turning to the product&#39s disadvantages, Gilbey says: “The main one is the opaque nature of costs associated with multi-manager products. There are layers of transaction and management costs that are constantly changing.”

Dilke-Wing says: “The main disadvantages are that the strategies are not particularly well defined and it is hard to know what Inscape is doing. Why Inscape and Attica? We end up with a hotchpotch and there is no sense of conviction. It looks like a &#39mud at the wall&#39 investment philosophy.”

Greening says: “Inscape and Attica are generally not well known in the IFA market, although they are major players in the private client and institutional fields. Scottish Mutual will have to get the message across to IFAs that in the future it will not be good enough to put everyone into managed funds.”

Looking at the flexibility offered, Greening points out that investors can switch between Inscape and Attica funds. Gilbey says: “The investment options are very flexible. There is the choice of three base portfolios for those who wish to keep things simple. Those who want to be a little more discerning can mix together two of the base portfolios and for the sophisticated investor there is a matrix portfolio to provide a more tailor-made solution.”

Dilke-Wing says: “If anything, there is too much flexibility. There is the potential to create multiple portfolios with Attica but it is also possible to devise a complex strategy. I am sure this would bemuse all but the most sophisticated investor. I am not sure that this does not defeat the object of the multi-manager approach.”

Assessing the company&#39s reputation, Gilbey says: “Scottish Mutual is a long established firm that has for some time now been backed by Abbey National. It is well known in the IFA market and has a good reputation for product design and service. The addition of Scot Prov to the Abbey National stable caused some confusion but this now seems to be resolving itself.”

Dilke-Wing says: “Scottish Mutual has a confused reputation at present that is entirely of its own making. The takeover by Abbey Nat and the bundling with Pegasus and Scot Prov has left a company with no obvious sense of purpose or direction.”

Evaluating the company&#39s past performance, Greening thinks it has been reasonable. Gilbey says Scottish Mutual has often achieved good past performance in its unit-linked funds. Dilke-Wing says: “I haven&#39t the faintest idea who Inscape and Attica are.” He regards Scottish Mutual&#39s past performance as not relevant to this product.

Discussing the charges, Gilbey says: “The charges appear to be fair and reasonable. The true costs, as opposed to charges, of multi-manager funds and fund-of-funds are difficult to pin down but are certain to be higher than mainstream single manager funds.”

Dilke-Wing could not find any reference to the charges in the literature and says this can be the problem with this type of product. He thinks that when all the layering is taken into account it can be difficult to discern who is being paid what.

The panel think the commission is reasonable.

Turning to the product&#39s competitors, Greening mentions Scottish Life and Escher. Gilbey says: “The main competitors are likely to be the new batch of multi-manager products now beginning to appear, as well as the more established fund of funds. The Gerrard hallmark funds from Old Mutual were past favourites of mine.”

Dilke-Wing says: “The main competition will be provided by the major insurance companies already offering similar propositions such as Scottish Widows and Axa.”

Looking at the product literature, Greening says: “It is clear but more visual performance figures should be added, including how well Inscape and Attica have performed against their peer groups.”

Gilbey says: “It is easy to read and relatively attractive but suffers from too many loose inserts. A workbook approach or detachable pages would improve matters.”

Dilke-Wing says: “It manages to marry the worst of both worlds. To a non-professional, the process appears to be highly complex. Yet there is very little indication of what is actually going on.”

Martin Dilke-Wing, director, Morgans Independent

Advisers,

Barry Greening, proprietor, Greenridge Life Pensions and Mortgage Consultants,

Mike Gilbey, managing director, Atlantean Financial

Management

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