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Technical Stuff


Whilst our aim is always to make everything as simple to understand as possible and to communicate in ‘layman’s terms’, there is an enormous amount of technical stuff going on in the background.


The underlying investments in your portfolio for instance – The starting point to everything we do is to assess each client’s personal Attitude to Investment Risk, so imagine the amount of risk you are comfortable taking with your money were to sit somewhere on a scale of One to Ten with One being ‘no risk’ and Ten being ‘Highly Adventurous’. By assessing your personal comfort zone on this scale, we can then start to build a portfolio of funds to match this level of risk, which means your investments will grow in relation to the amount of risk you are willing to take and the amount of protection for your capital you need to be comfortable.


From here of we need to ensure that as well as the level of risk matching your personal feelings, we take as much volatility out of the portfolio as possible.


As most investors know, stock markets tend to go through short term swings in value – they go up and they go down. The level of volatility is the sharpness of these rises and falls, or how fast they go up and go down. Over the longer term, the longer you remain invested, the more chance your investment has to recover, in the event of a stock market fall so by reducing the level of volatility, your investment shouldn’t fall too much in the first place.


The way we do this is by spreading your invested funds over a number of different areas:

• Sectors – the different types of industry (such as mining, financial or consumables for example)

• Geographies – We have a global economy so we spread your investment over different areas of the globe (such as The UK, America, Europe, Emerging Markets, Japan etc.); and

• Currencies – After Brexit, the value of the Pound dropped against the US Dollar and the Euro; by having investments spread across various currency denominations, the rise in the Dollar counteracted the fall in the Pound for example


Rebalancing

Once a portfolio has been designed for a client, due to the fact that it contains a number of different funds to meet all the criteria we have above, each fund will perform differently, some better than others and some worse. What this can (and does) do over time is change the risk rating of the portfolio.

Imagine you have a portfolio that is initially invested with 40% of the value of the fund in UK equities and 20% in US Equities (as part of the portfolio) – if the UK economy outperforms the US over a period of time and the Sterling value of the UK Equities grows more than the equivalent growth of the US Equities, this will skew the ratio of these sectors in the portfolio.


In other words, instead of having 40% of your money in UK equities and 20% in US equities, you may end up with 48% in UK and 16% in US equities. This will change the risk level of the overall portfolio and may, for example change the risk making it a higher risk portfolio.


If we do not ‘Rebalance’ the portfolio – in other words, reduce the amount invested in UK and increase the amount invested in US, this can materially affect the way your portfolio performs and may not remain a suitable risk portfolio for you. We see many instances of a client who has invested in, for example, a cautious portfolio ten years ago whom has not had the portfolio rebalanced and is now in a high risk portfolio. This is just the nature of the markets but can have a serious affect on the value of your funds as you reach the point you would like to access them.


Fund Research

There are close to 2,500 different investment funds available in the UK today and each of them have their different sectors, geographies and currencies along with their fund manager’s particular aim and focus. They also have completely different charges and fees and they may be actively or passively managed.

Our continuous research allows us to choose funds for our portfolios that match our risk requirements, growth and performance requirements as well as allow us to spread the investment over our identified sectors, geographies and currencies.


As these funds can change on a daily basis, you can understand the level of research and management that goes into this process. Some of the work is contracted out and some done in-house, but it is a constant process to maintain our standards.


Provider Research

As mentioned elsewhere, we are totally independent and ‘Directly Authorised’ which means we are not linked or influenced by any one provider. As such we are constantly reviewing the each provider’s offering and cost structure and we advise and recommend the most suitable provider to each client’s specific circumstance.


Once again, there are a large number of providers in the UK and this requires ongoing research to ensure we provide the most relevant recommendations.


Tax

The most involved part of any financial planning process is the understanding of the current tax regime in the UK and how it affects the various types of investments. Governments are continually changing tax laws and introducing new ways to tax us. To this end we are constantly updating and researching the tax laws and changes that may affect or be beneficial to our clients.


In short, there is a large amount of ‘technical stuff’ going on in the background that you are essentially relying on us to do in order to make your life easier and your investments perform as well as they should. The ‘Layman’s Terms’ we use in our reports and communication with our clients doesn’t often reflect this but it certainly keeps the office busy!

The cost of our services 

Our initial appointment with you is free of charge.

Thereafter we have standard client charges to cover the work that we have to do in looking after client portfolios.These charges are to cover all the usual administration, such as sending statements, re-balancing portfolios, liaising with insurance companies and platforms, monitoring of the portfolio, individual funds and their managers, sending out attitude to risk questionnaires, etc.

On top of this is the regular analysis we carry out for our clients to review the performance of their portfolio and consider any recommendations for change.