We provide fully managed pensions (with SIPP property functionality) and ISAs. Our portfolios are made up of low cost index trackers (passive investments) to replicate the global market exposure and weightings required (or not) to fit within your attitude to risk/reward.
This is best described as an Active:Passive approach which we consider offers the very best of both worlds by providing all the benefits of active management – at the all important asset allocation level – with all the benefits of low cost passive (index tracking) underlying investments.
We have 5 different levels of risk/reward or, alternatively, 2 different target date portfolios that will blend through appropriate levels of risk/reward over the years based upon your end requirement (drawing down income at your target date, or withdrawing a lump sum at your target date).
The total annual cost is an all inclusive 0.87% a year with a one-off 1.5% transaction charge.
Below we compare this approach with the two main alternatives to running your investments (DIY Platforms and Financial Advice) together with a comparison of our Active:Passive investment style to fully Active or fully Passive investing.
DIY platforms are very popular with individuals who do not want to pay for financial advice. Essentially you pay the platform provider a fee to access its platform and select your own investments from a list of thousands.
The consequence of this, however, is that you are responsible for selecting an asset allocation model and the underlying investments that map to this, then running the ongoing monitoring and rebalancing of this.
In reality however, most people just select popular funds based upon past performance and do not assess the asset allocation and underlying investments their fund options create, which can lead to poor investment outcomes and taking the wrong level of risk/reward.
The typical costs with the UK’s largest DIY platform provider is 0.45% a year plus fund costs. The fund costs can be as little as 0.2% for purely passive investments (see below) or as much as 1.6% for fully managed funds (again, see below) giving a total cost of between 0.65% at base level up to 2% a year.
We don’t offer DIY Platforms. Our Private Client service gives you fully managed portfolios for a 1.5% initial transaction fee and then an all inclusive 0.87% annual fee, so we can do everything for you at a significantly lower cost that if you were doing everything yourself.
Taking financial advice means it is the responsibility of your adviser to assess your financial needs and provide you with a suitable investment portfolio, together with tax efficient planning and insurance considerations (something they remain liable for).
This obviously does add a much larger layer of costs onto those quoted above for DIY platform investing, bringing the total combined costs (platform, investment management and advice) up to as much as 5% upfront and 3% every year.
We don’t offer (or charge for) financial advice. Our Private Client service has an initial transaction charge of 1.5% and then an all inclusive annual charge of just 0.87% with no advice fees yet with full support, information and guidance when required to help you make the right decisions yourself.
This option involves your asset allocation and your underlying investments being completely computer managed.
Your exposure to different markets and assets is completely dictated by their global rank/weighting.
It is certainly the lowest cost option, but means that risk/reward is only crudely addressed by an increase or decrease of equity/bond exposure (which you have to constantly reset yourself).
There is no human team allocating assets based upon your requirements and no ability to do anything other than blindly track markets regardless of any other factors.
Importantly, our Private Client service does not have this crucial undermining limitation, as all weightings across each individual global asset classes and market sector are fully managed and we are also able to divert to other asset classes (such as property and gold) as and when this is desirable.
This option involves you choosing particular funds, usually based upon their current popularity and/or past performance, to meet your future needs.
The fund manager has displayed a good performance record in selecting stocks. You (or your adviser) believe this will continue. It may. But statistically it is unlikely.
This approach also does not really consider asset allocation (which, statistically, is the proven driver of investment returns).
So if you do identify a particular fund manager who is about to excel in a particular sector you could achieve high returns from such an investment, regardless of the higher costs.
However, most people only target such fund managers after they have achieved such returns. If the future performance becomes average then the effect of these higher charges can result in under performance.
Our Private Client service works differently, targeting asset classes, not individual stocks.