Often in the financial services world we speak in terms that aren’t used in everyday language. It’s always our goal to communicate effectively, but it’s not always possible to stay away from the industry language. So we’ve chosen to add a glossary of the common terms within this post.
Within the financial advice community there’s been a debate ongoing since January 2012 and the implementation of the Retail Distribution Review (RDR). The debate continues regarding the use of independent(1) or restricted financial advisors(2).
More recently this debate has extended to the outsourcing of the investment proposition against creating your own in-house investment solution for clients and ultimately discretionary investment powers(3).
At AGL Wealth Management we have been consistent in our approach since the business was established early 2009. We provide independent financial advice and we are directly regulated by the Financial Conduct Authority (FCA).
We believe our strength in the business is the provision of quality financial planning, incorporating client goal setting and regular financial reviews to make sure our clients remain “on track”. We do this within the most tax efficient wrappers to maximise returns. Our aim is always to enhance the experience and ultimately returns for our clients over a long term relationship. Our clients appreciate this and we’re proud not to have lost a client to a competitor since we established the business. Long may this continue!
We have an Investment Oversight Committee (IOC) at AGL which sits on a quarterly basis; where our investment strategy is reviewed and appropriate changes made. As our strengths are with financial planning our preference is to outsource the day to day professional management of investments and pension funds. Our proposition incorporates the use of leading platform technology, passive(4) and active(5) investment strategies and advisory(6) and discretionary investment solutions(7).
At an individual fund level, we can where appropriate, use the expertise of independent research company Rayner Spencer Mills (RSM) to filter the large number of funds in the market place. The Rated Fund Service allows us to select only funds which have reached the required standard to attain the RSM rating. Whereas this facility allows us to build a portfolio of individual funds and review and assess legacy investments, our preference for our clients is to outsource the day to day investments to a professional third party. This can be done in the following two methods.
- Through our due diligence process and quarterly IOC meetings, we use a number of pre-selected model portfolios, multi-asset and multi-manager investment solutions which can be accessed using market-leading platform technology. These will be selected taking into account the client’s risk profile, capacity for loss and preference for passive or active investments. This investment solution tends to favour clients who wish a cost effective entry to diversified investment solutions, whilst having access via their phones/tablets/PCs. Typically this will assist with sub £250,000 investments where access to the individual investment manager is not deemed necessary.
- For larger sums, we also provide a bespoke discretionary investment portfolio solution following an extensive review of the Discretionary Fund Management (DFM) market place. This funnelling process means that we have a panel of four individual DFMs at our disposal where we can place client funds. This service is valued by clients who wish a more “hands-on” approach to managing their investments and enjoy meeting those managers face to face. Our responsibility at AGL is to review the service provided by the DFM as well as investment volatility, performance and fees. We regular meet the DFM as part of our due diligence process. We attend all review meetings and challenge the DFMs where appropriate on behalf of our clients.
Hopefully you better understand the importance of consideration and strategy to your individual investments and circumstances. We remain passionate at AGL about face to face financial advice and the benefits of long term relationships with our clients as trusted advisors. If you’d like to know more, do get in touch. You’ll find our contact details here.
Steven Sweeney, Senior Wealth Manager
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(1) In simple terms independent means the advisor will consider and recommend all types of retail investment products from all firms across the market and they have to give unbiased and unrestricted advice.
(2) A restricted advisor can only recommend certain products, product providers, or both. The advisor therefore requires to clearly explain the nature of their restriction(s).
(3) Discretionary investment powers are where the advisor firm gains additional permissions from the regulator to run and manage their own investment portfolios on behalf of clients.
(4) Passive investing involves investing in each asset class to match as closely as possible the movements of a particular index e.g.) the FTSE All-Share index. Investors will participate in gains and losses in the underlying index.
(5) Active investing is an approach that embraces non-specific risk and managers aim to identify a basket of securities that, in aggregate, will behave differently from the whole market – looking to perform better over the longer term.
(6) The construction of an advisory portfolio by the advisor will select a number of investments or funds which are commensurate to a client’s attitude to risk and investment objectives. The responsibility lies with the advisor to review and make changes to the asset allocation and underlying investments.
(7) The discretionary mandate, in effect, hands full management responsibility to the external fund manager / investment manager who can manage the funds day to day without reference to the client. The advisor continues to oversee this process.