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80,000
investors and
their families
2,100
financial
adviser firms
£11.5bn
of assets under management
WealthSelect
Source: Quilter as at 30 June 2023.
Unsurprisingly, providing such an explanation requires a great deal of detail on numerous areas. When it came to investments, the firm was asked to confirm whether it had a centralised investment proposition CIP and, if so, to detail:
his was the question recently posed by an FCA supervisor to a financial advice firm.
“Please provide an explanation of how you intend to meet our new Consumer Duty.”
all of the portfolios/funds within the CIP
any portfolios/funds that had been added/removed in the last 12 months (and why)
the governance arrangements in place to provide ongoing oversight of the CIP
the minutes for the last 12 months meetings covering each portfolio/fund.
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the solution is managed to a level of risk that’s appropriate for your client
the solution meets your client’s income or capital growth requirements
the investment style or price point is appropriate for your client
the solution aligns to your client’s views on the environmental or social effects of investing.
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Are costs proportionate to the benefits provided?
Are your client’s performance expectations being met?
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If you run an advice firm with a CIP, this points to only two options. Either you have a highly disciplined, well-resourced, in-house CIP with appropriate fund research capabilities; or you outsource your CIP – typically to a discretionary manager or a multi-asset investment solution.
If it’s the former, it’s past time for you to re-assess your CIP to ensure it meets the new Consumer Duty. If it’s the latter, you need to think about whether the outsourced solution delivers the good outcomes to your clients expected as part of the Consumer Duty.
Here are some areas you may wish to consider:
Clearly, each of your clients have their own unique, financial needs. This means a robust investment solution is one designed to support each client’s individual financial plan. There should be no ‘one-size-fits-all’ CIP. Therefore, you should consider, and have appropriate provision, as to whether:
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1) Your clients’ needs
The FCA states that under the Consumer Duty, ‘low prices do not always mean fair value’. Fair value is an assessment of two things:
2) Finding fair value
It’s very important that your client understands the ‘intentionality’ of their investment; namely what the investment is designed to do from a risk, return, cost, and (if appropriate) responsible investing perspective.
This means it’s important that any investment solution provides the right information to support these conversations with your client.
3) Effective, timely, and properly-informed
Finally, it’s vital that your clients are supported throughout their investment journey. That means ensuring that regular investment updates are sent, and that regular reviews are carried out to ensure any investment solution remains appropriate for each client’s changing needs.
WealthSelect has become a market-leading investment proposition because of the high quality ongoing services it provides. WealthSelect also scores highly in terms of providing good value to its target market through very competitive pricing and meeting investors’ expectations, delivering on its objectives thanks to its consistent long-term track record of relative outperformance.
With a broad spectrum of portfolios available, WealthSelect provides a range of risk and price points, alongside a wealth of responsible investment options. This ensures that investors can always find a solution that, you can demonstrate, is appropriate to their needs.
How you go about carrying out such an assessment isn’t always easy; the good news is that investment providers such as Quilter are already required to report and publish on many of these details. For our WealthSelect Managed Portfolio Service, we provide detailed target market information and we’ve recently updated our assessment of value.
4) Ongoing services
A duty to our customers
If you outsource your centralised investment proposition (CIP) then you need to think about whether it delivers the good outcomes to your clients expected as part of the Consumer Duty, says Andy Miller, Lead Investment Director at Quilter. Each of your clients have their own unique financial needs and that means there should be no ‘one-size-fits-all’ CIP.
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“Each of your clients have their own unique, financial needs. This means a robust investment solution is one designed to support each client’s individual financial plan. There should be no ‘one-size-fits-all’ CIP”
Andy Miller, Lead Investment Director
The starting point for our process is a proprietary, strategic asset allocation model that will meet the objective set out with our clients. We update this on an annual basis to account for changes in assumptions and any additional work that has been undertaken on asset classes or information that we feel can improve the risk-adjusted returns for those clients.
From there we will overlay our tactical views that have a shorter time horizon, where we believe we can further improve outcomes for clients. The final step in this process, although not asset allocation-driven, is to overlay our manager research calls to best implement our views through active, appropriate, passive funds.
While the strategic asset allocation model does not target any style or market cap bias, the decisions made at the tactical asset allocation, and therefore manager implementation stage, explicitly do. We look to avoid unintended or overly-concentrated factor exposure in the portfolio construction phase.
In our Managed Portfolios, we invest predominantly via sub-advised mandates with leading investment managers and this gives us far greater real-time information about the underlying holdings in the portfolios. This also allows us to drill down into key allocations and to monitor our total style and market cap exposures. From there, we use our underlying manager mix to help us adjust these factors, either at our quarterly portfolio rebalances or as part of the ad hoc rebalances we undertake.
Stuart Clark, WealthSelect portfolio manager, on his approach to asset allocation and avoiding style or market cap bias…
Availability: The breadth of platform availability should offer some steer on the current and future utility of the MPS service.
Price: A ‘value for money’ assessment should sit alongside any nominal fee analysis. Does the MPS management fee seem fair? Are the costs of the underlying funds reasonable? Does the performance and service inform good ‘value for money’?
Investment excellence: Experience should form the centrepiece of any analysis with potential MPS partners. Does the offering party showcase sufficient breadth and depth in their investment capability and does this resource support decision making that aligns with the philosophy of the MPS?
Returns: Performance analysis should reflect several metrics, including returns achieved relative to any stated benchmark or peers, but also risk metrics and whether any volatility targets have been met. Time horizons selected to conduct such analysis are also crucial in this exercise and should be reflective of the ambitions of the client.
Service: Support analysis may come later in the due diligence process, given the natural inclination to first look at price and performance. Invesco believe service should carry an equal weight in determining any final decision. Performance and process tells only part of the story – absent a coherent articulation of what is going on in portfolios and why, it is very difficult to gain sufficient understanding of portfolios. Without such insights it would be very difficult to host genuinely engaging meetings with clients.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
This content is for Professional Clients only and is not for consumer use. All information as at 30 June 2023 and sourced by Invesco, unless otherwise stated. Views and opinions are based on current market conditions and are subject to change.
Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.
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Andy Miller, Lead Investment Director
“A good MPS should empower advisers by giving them the range of tools, investment styles, and pricing options to help their clients at every stage of the investment journey”
Andy Miller, Lead Investment Director
“The challenge has always been to make our tools sufficiently intuitive and user-friendly that they become a ‘go to’ service for advisers that empowers them during the advice process”
In this new outcome-based era of advice, there’s no room for one-size-fits-all solutions. In order to offer a solution that’s the best fit for each individual customer and their changing needs over the years, an MPS needs to offer a broad range of easily understood risk levels and the ability to move freely up and down the risk ladder as needs dictate.
From our perspective, the primary characteristic advisers need to look for in a managed portfolio service (MPS), is choice.
It also needs to offer a choice of investment styles, both active and passive, or a blend of the two, and a range of different pricing points to optimise customer choice.
Likewise, a modern MPS needs to offer a range of well-defined responsible investment options.
Alongside all this, an MPS needs to offer user-friendly, intuitive online tools that advisers can easily integrate into their advice process.
The last element is a compelling performance track record; one that advisers can illustrate to their clients as having delivered consistently strong performance in both rising and falling markets.
We think a good MPS should actually empower advisers by giving them the range of tools, investment styles, and pricing options to help their clients at every stage of the investment journey.
Q
What are some of the challenges facing advisers when it comes to selecting a managed portfolio service and how does Quilter’s WealthSelect Managed Portfolio Service address these?
We recognised early on that in order to make our MPS offering a fully integrated investment solution for advisers, we needed to provide a suite of online tools. The challenge has always been to make our tools sufficiently intuitive and user-friendly that they become a ‘go to’ service for advisers that empowers them during the advice process.
The Quilter Client Profiler is designed to help advisers guide their clients to the most suitable outcome for their individual needs and can be tailored to the needs of each individual adviser business. It allows advisers to produce co-branded investor profiles for every client based on four key areas of client research: their appetite for risk; their preferred investment management style; their investment needs; and their views on responsible investment.
Next, the Quilter Solutions Explorer assesses the compatibility of a range of Quilter solutions based on the information contained in each unique investment profile.
The Quilter Solutions Explorer provides an overview of each portfolio’s objective, performance data and charting, asset allocation, and a summary of each portfolio’s responsible investment profile.
By making our tools an integrated extension of of their investment process that advisers use every day, we’ve taken a lot of the time, administration, and regulatory risk out of the equation, and this is reflected in the quality of the outcomes they deliver for their clients.
Q
There are now 56 WealthSelect portfolios spanning a broad range of risk levels and pricing points alongside responsible and sustainable investment solutions. How do you help advisers to match their clients to the right portfolio?
The WealthSelect Responsible Portfolios are designed for investors who are concerned about the environmental and social effects of the activities of the companies in which they invest. Such investors wish this to be considered when investment decisions are being made and they want to see their capital being managed by fund managers who are leaders in the integration of environmental and social factors.
For this reason, the portfolios commit to remaining at least 50% invested in specialist funds that pursue explicit environmental or social targets. A typical concern for many clients is climate change, so the portfolios also aim to have reduced carbon emissions relative to the MSCI ACWI Index. The Responsible Portfolios are available with active, blend, and passive investment approaches.
By contrast, the WealthSelect Sustainable Portfolios are designed for investors who want to see their capital go one stage further by seeking to target positive environmental and social outcomes.
The Sustainable Portfolios are measured against a series of sustainable outcomes, which are mapped against the UN Sustainable Development Goals, and actively exclude, or minimise, unsustainable activities such as tobacco production and fossil fuel generation. At the moment, these positive outcomes are best targeted by active managers – hence our Sustainable Portfolios are only available in an active investment style, diversified across the familiar eight risk bands.
In addition to regular portfolio reporting, all investors in our Responsible and Sustainable Portfolios also receive quarterly responsible investment reports that outline how each portfolio is measuring up to its stated responsible or sustainable investment objective and provide an update on our responsible investment activity.
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What differentiates your sustainable and responsible portfolios from one another and how do advisers decide between them?
Staying relevant
Andy Miller, Lead Investment Director at Quilter, looks at some of the key considerations for advisers when choosing a managed portfolio service for their clients.
Q&A
with...
Andy Miller / Stuart Clark
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