Aim: Income and growth by investing in Inscape cautious, steady and higher growth funds and six Attica multi-manager funds.
Minimum investment: Lump sum £5,000
Investment split: Choice of cautious, steady and higher growth funds
Income facility: Monthly, quarterly, four monthly, half yearly, annually
Charges: Annual depends on fund
Commission: Initial 6.25%
Tel: 0845 7660221
The panel: Martin Dilke-Wing, Director, Morgans Independent Advisers,
Barry Greening, Proprietor, Greenridge Life, Pensions and Mortgage Consultants,
Mike Gilbey, Managing director, Atlantean Financial Management.
Suitability to market 7.4
Company's reputation 5.8
Past performance 4.5
Product literature 5.8
Scottish Mutual's multi-manager portfolio service, investment intelligence, provides investors with access to three pre-packaged funds from Scottish Mutual's sister company, Inscape. Alternatively, investors can choose from a range of six multi-manager funds from institutional fund management group Attica.
Assessing how investment intelligence fits into the market Gilbey says: “It is not yet available as a stand-alone product. It is, however, 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 volatile, the idea of a multi-manager approach to investments is appealing for IFAs.” Dilke-Wing says: “The product reflects a growing realisation among product providers that their internal fund ranges do not generally stack up and that offering a range of external fund links is not the be all and end all. Scottish Mutual has spotted this and jumped on the bandwagon.”
Highlighting the type of client the product could suit Dilke-Wing says: “This product is suitable for the investor who demands something more than internally managed funds, but 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: “Investment intelligence 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 who have 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. Having said that, regular reviewing of clients 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 the product providing any great marketing opportunities.”
Pointing out the main useful features and strong points of the product Greening says: “The investment environment needs additional assistance at client adviser level. Using Attica and Inscape's investment expertise, IFAs should be better positioned to advise clients regarding their investments generally.” Dilke-Wing says: “The main useful features are that the product 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 really is because only superficial detail is given on the process and absolutely nothing on performance.”
Turning to the product's disadvantages Gilbey says: “The main disadvantage is the opaqueness of costs associated with multi-manager products. There are layers of transaction and management costs that are constantly changing and difficult to disclose.”Dilke-Wing says: “The main disadvantages of the product are that the strategies are not particularly well-defined and it is hard to know exactly what Inscape is doing. Why Inscape and Attica? We end up with a hotchpotch that is being proposed and there is no sense of conviction. it looks like a mud at the wall investment philosophy.”
Greening says: “Inscape and Attica are generally not well known in the IFA market, although they are major players n the private clients 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 the 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 matters simple. Those who wish 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, providing access to six basic portfolios. But it is also possible to devise a complex strategy this, that I am sure would bemuse all but the most sophisticated investors. I am not sure that this does not defeat the object of the multi-manager approach.”
Assessing the company's 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 Scottish Provident to the Abbey National stable appears to have 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 national and the bundling together with Pegasus and Scottish Provident has left a company with no obvious sense of purpose or direction.”
Evaluating the company's 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 hasn't the faintest idea who Inscape and Attica are and regards Scottish Mutual's 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 notoriously 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's 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 have been past favourites of mine.”
Dilke-Wing says: “The main competition will be provided by the major insurance companies that already offer similar propositions such as Scottish Widows with Frank Russell, Axa and Escher.”
Looking at the product literature Greening says: “It is clear, but more visual performance figures should be added which would include how well Inscape and Attica have performed against their peer groups.”
Gilbey says: “The literature is easy to read and relatively attractive. It suffers, however, because of too many inserts and loose leaves. A workbook approach or detachable pages would improve matters.”
Dilke-Wing concludes: “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.”