Outsourcing relationships can too often fail on the lack of defined objectives. For Martin Hill, managing director of TWP Wealth, this was not a problem. He was very clear on his investment beliefs and what he required from his investment partners, he just couldn’t find the right provider to do it.
He says: “We had some strong views on what we wanted. We don’t believe in traditional asset allocation – we believe it is backward-looking and fraught with danger, we believe in a multi-asset approach, and in using derivatives to reduce risk. We believe there is a role for passive and active and any group needed to have a capital preservation mindset.”
Finding a provider to fit those criteria proved difficult. “We spent eighteen months looking for an appropriate investment partner and we interviewed a range of discretionary fund managers.” Hill interviewed a number of managers congratulating themselves on beating their benchmarks by a few percent, despite the investments having fallen 20-30 per cent.
He knew that this approach – focused on APCIMs benchmarks – was not right for him. Hill admits that he was, and remains, extremely bearish, believing markets are likely to take another lurch down before the legacy of the credit crisis is resolved. He needed a group that could accommodate this bearishness and manage with an absolute rather than relative return mindset.
Ultimately, he decided on London & Capital. He says: “It ticked all my boxes. They had a good track record, incorporated alternative asset classes. They had strong people and, perhaps most importantly, they listened to me and were even willing to take our recommendations in some areas. For example, we were keen to have a cautious income fund and they launched that for us.” He also liked their pricing, which was just 0.25 per cent plus VAT, giving an overall TER of around 0.6 per cent to 1 per cent on their managed portfolios.
He now uses this for the lion’s share of his client base – all those clients with between £100,000 and £500,000 in investable assets. Also, the group recently bought another advisory business and, having looked at the investment provision for many of those clients, moved them across to London & Capital as well. For those below £100,000, he uses the Standard Life wrap Myfolio options and for those with over £500,000 he would select from a number of discretionary managers. He also has a number of ‘off-wrap’ solutions, and will mix in some enterprise investment schemes or venture capital trusts where it is appropriate for specific clients.
Clients have generally been happy with this approach, but Hill has shared his research and decision-making process with clients where they have requested it. London & Capital has no direct contact with the group’s clients, but supports the process. Hill has monthly conversations to receive updates on portfolios and also has quarterly investment meetings.
Hill’s original decision to outsource was taken because the process of being advisory had simply become too onerous: “We were using model portfolios on Transact, but we found the process of being advisory very cumbersome. Making fund switches was difficult without discretionary permissions, so we needed to find a managed portfolio provider.”
Although Hill’s decision to outsource the investment part of his business was perhaps the most important, it is not the only area where he has looking to outside help. He uses Jon Pittham at ClientsFirst to run the group’s marketing side. This includes website design and newsletters, plus helping with social media. Pittham helped the group create its ‘thinking differently’ branding, which includes the ‘don’t forget the fish’ monthly eNews letter and with ad hoc updates known as ‘tiddlers’. Hill has been very pleased with the relationship, which has worked well over a long period of time.
The other major area of outsourcing for the group is its compliance. It uses threesixty and again, Hill has been pleased with how the relationship has worked. He believes that it has functioned as a strong business consultancy relationship as well as simply a compliance relationship. Threesixty has been instrumental in helping him reshape his business to ensure RDR readiness.
The compliance function became particularly important in 2011 when the group became directly authorised. Hill says: “It’s a bit of a cliche to say it, but we outgrew the network. We felt that it was managing to the lowest common denominator of the highest potential risk. We felt we were well ahead of that. We had always worked in quite a different way, even when we were part of the network, so it wasn’t a significant shift for the business.”
The team formed in 2006, led by Hill himself and his business partner David Otway. TWP Financial Planning was formed in 2008 to create a ‘new model’ type advisory practice. Hill says: “We had been developing it from the time we got together. We laid out the process through which we would evolve, right down to becoming directly authorised in November last year.” The group has five RIs who are fully qualified ahead of the RDR deadline in January. Hill says that the group has been broadly RDR-ready for some time.
The group’s client base tends to have between £100,000 and £500,000 in investable assets: a handful have less and a handful have considerably more. The client base is widely-drawn from the wealthy Cheshire enclave from which the group operates.
Ultimately, Hill believes that he has found a solution that fits with his investment beliefs, is on sound regulatory footing and works well across his client base.
Underpinning the advice:
Number of advisers: 5
Number of staff: 12
Platforms used: Transact
Investment strategy: Outsource to London & Capital plus Standard Life Myfolio for lower value clients. Range of DFMs for higher value clients.
Marketing strategy: Clientsfirst
Estimated assets under advice: £62m