In our latest article, Ed Margot FEI’s Investment Strategist, contemplates the power struggle that raging between the world’s two largest superpowers: China and the USA. All, it appears, is not as it seems on the surface…
Whether you build portfolios or use third party models, the Dynamic Portfolio Tool (DPT) on FE Analytics can evaluate and display the historic performance of a portfolio and mark key switch points.
Since FE Invest launched its Managed Portfolio Service in 2015, it has gained over 2 billion in assets under management. This has resulted in FE Invest being named the fastest growing Discretionary Fund Manager (DFM) on platform according to research from Platforum*.
Financial experts have long debated whether investors should go down the active or the passive route when it comes to selecting their investments. The benefit of passive funds can largely be put down to the lower fees they charge over their active counterparts. On the contrary, the benefit of an active fund is that, while more expensive, it offers the possibility of outperforming the benchmark and returning greater profits to the investor.
It goes without saying that investments should only be recommended to, or included in discretionary portfolios of, clients whose needs, characteristics and objectives they meet. MiFID II has formalised this obligation by requiring advisers, platforms and DFMs (collectively referred to as distributors) to consider matching any funds or products with target markets based on given criteria.
A recent study by Ben Carlson showed “the only one of the [US-based] three major asset classes that’s up this year is actually cash”. Carlson has found out that “it’s only happened 10 times in 92 years”. I decided to apply the same analysis to UK-based investors, who have not benefited from several interest rates hikes in 2018.
Following the EU referendum in 2016, investors expected property markets to fall sharply, resulting in a rush of withdrawals from property funds. Several funds had to suspend withdrawals or apply value adjustments to stave off the tide while they raised money through the sale of assets. Despite the initial panic most of the affected funds have now re-opened and the sector overall has performed relatively well since 2017. We give our view on what's next for the sector.
Following the launch of MiFID II, the FCA recently carried out a review of MiFID authorised firms* to gage how firms are complying with the new rules and what challenges they have faced.
At FE Invest, our investment philosophy is built around managing and adjusting risk to deliver optimal returns for clients. Below we look at 5 key investment successes our robust methodology has offered in 2018.
As everybody is getting into the festive spirit – we thought we’d use the 12 Days of Christmas song as inspiration to look at 12 ways FE has helped Advisers this year. So why not grab a mince pie and scroll through our year in review...
Retirement planning used to be simple, an investor had a long period of accumulation which ended up with the buying of an annuity at retirement which provided a guaranteed income until death. Pension freedoms changed everything as investors are now much likely to enter drawdown in retirement. This has been combined with a period of very poor annuity rates, meaning that these are now seen as very poor value by many entering retirement.
FE’s discretionary model portfolio service was first launched on a single platform just over three years ago to offer Advisers a new breed of model portfolios; created jargon-free with a view to enhancing the Adviser – Investor relationship.
Financial regulators have become slightly obsessed with transparency as a tool for both increasing competition and protecting consumers. Early attempts were pretty clunky, with Simplified Prospectuses that failed to live up to their name, later replaced by Key Investor Information Documents (KIIDs) for UCITS funds, while life and pension funds have had Key Features Documents.
Multi-asset funds offer robust solutions in accumulation, decumulation and income-seeking strategies by providing advisers with a one-stop shop for cost-effective asset allocation, risk management and rebalancing. Based on these merits, they have become popular amongst advisers for use in client portfolios over recent years. Increasingly Advisers are also blending two or more multi-asset funds within one portfolio- a trend that was evident in the results of the FE Adviser Survey 2018.
The recent FE Invest Breakfast Briefing series explored the topic of cognitive & behavioural biases and their effect on investing. The speakers discussed the pitfalls faced by investors, advisers and fund managers alike and made it clear that none of us are immune from our own assumptions.
‘Outsourcing’ has been a big buzzword over the last few years. From support desks to software development - outsourcing for operational and business efficiencies has become popular, even in financial services. In the Financial Advice industry, there has been a more recent trend towards outsourcing investment solutions to DFMS - giving third-party discretionary fund managers, the permission to invest and rebalance client portfolios. However, given the onus on Advisers to ensure they remain accountable for the investment selection for an individual client, does the term ‘outsourcing’ truly reflect the reality?
Performance, risk level and costs are key elements in establishing investment suitability. Whilst undertaking replacement business, regulation requires Advisers to conduct comprehensive cost comparisons, by factoring in all costs (not just a ‘headline’ annual management charge) associated with the existing solution against the recommendation. Finalised guidance from the regulator in this regard (FG12/16), offered a number of suggestions for good practice including identifying and justifying any additional costs involved in investing that could impact the client’s objectives. Ideally, this would include initial costs, exit charges, adviser fees, platform charges and so on.
The FE Crown Fund Ratings are rebalanced twice a year. The first rebalance of 2018 has given 324 funds the highly-prized five FE Crowns Rating, of which 15 are newcomers and 54 have jumped two or more FE Crowns to achieve the top accolade. The funds are spread across sectors with all the IA sectors seeing some churn in the ratings of their funds - 45% of funds within the universe (a total of 1345) have gained or lost FE Crowns at this rebalance.
As everybody is getting into the festive spirit – we thought we’d use the 12 Days of Christmas song as inspiration to look at 12 ways FE has helped Advisers this year. It's been a busy year of new launches and additions to FE Analytics. So why not grab a mince pie and scroll through our year in review...
The interest in responsible investing has recently increased manifold.
We are pleased to announce that 21 Multi-Asset funds have today been added to the FE Approved list.
The latest addition will help Financial Advisers in selecting the best of breed Multi-Asset funds for their clients' needs.
You may have seen in the press recently, the team here at FE have launched a new product in response to client feedback. FE Analytics+ Investment Planner is the latest addition to FE’s award-winning Adviser proposition. The Investment Planner brings together FE’s data capabilities, the FE Risk Scores and dynamic reporting solutions to offer Advisers a complete end-to-end investment process from profiling a client's risk appetite and capacity for loss through to selecting and reporting the most appropriate investment options for an individual client's needs.
Written by Mikkel Bates, Regulatory Consultant at FE. First published at professionalparaplanner.co.uk.
Inflation in the UK hit a record high of 2.9% in May 2017 and is set to soar to 4% in the second half of the year as per forecasts from the National Institute of Economic and Social Research. Data from FE Analytics shows the upward trend in the UK Consumer Price Index and UK Retail Price Index over the last five years to 3.09% and 6.01% respectively (as at 10th July 2017).
Last month, the FCA published the much-awaited results of its suitability study.
The review, having assessed 1,142 individual pieces of advice given by 656 firms against the suitability and disclosure rules in the Conduct of Business Sourcebook (COBS), found that in 93.1% of the cases the sector was providing suitable advice to investors. The regulator has called the results both positive and encouraging.
With the increase in number of Discretionary fund managers and Model Portfolio providers in the market, Advisers face a proliferation of options to consider. When using discretionary models as a part of a Centralised Investment Proposition it is critical to undertake extensive due diligence on the providers as you will be embarking on a close working relationship based on trust to achieve the best outcomes for your clients.
The FCA uses the expression research and due diligence to refer to the process carried out by the firm to assess (a) the nature of the investment (b) its risks and benefits and (c) the provider. The firm needs to understand these factors in order to judge whether the solution is suitable for their particular client base. With this in mind, we look at 7 key areas to consider before partnering with a discretionary service provider.
In the previous blog post Measuring and managing investment risk: Part 1, we looked at the popularity of volatility as a measure of risk and how FE Analytics can help in effectively monitoring it. Although volatility is a common measure of risk, it comes with certain inherent limitations when forecasting future performance or planning for worst case scenarios; hence Advisers ought to be mindful of an overreliance on volatility as the primary source of risk evaluation and management.
Assessing the level of risk in a particular instrument and understanding its role within a client’s portfolio is key to ensuring the suitability of your investment advice. This relationship between investment risk and suitability is currently under increased focus from the FCA, as it analyses reports from over 700 firms ahead of its suitability review that is due to be published this year. In keeping with the theme, FE conducted a survey over the Christmas period to assess Advisers’ attitude to risk with a view to better understanding how our clients identify, measure and manage investment risk.
2016 has proven to be a turbulent year with the UK choosing to leave the European Union, the rise of anti-establishment politics and unprecedented levels of geo-political turmoil. These macro factors have had a significant impact on market volatility and investment valuations, emphasising the need for careful risk management of client portfolios.
Our focus at FE is to support Advisers, planners and wealth managers in selecting the best and most suitable investment options for their clients. In addition to award-winning research tools on FE Analytics, we offer a set of simple, reliable and accurate ratings which can uniquely work together, whatever your investment style.
It’s Christmas and whilst everybody is feeling festive – we thought we’d use the 12 Days of Christmas as inspiration and look at 12 ways FE has helped Advisers this year!
Assessing suitability involves a great deal of judgement by Advisers on the appropriateness of an investment option for the client in front of them. In order to make the right decisions and get favourable client outcomes Advisers need to be competent in the nature of investments and have a deep understanding of the individual product or service they are recommending. To do this, they need to conduct objective research and due diligence of the options in consideration. In its recent thematic review on the matter, the FCA said that, reviewed firms which demonstrated good practice in assessing suitability had research and due diligence as a central function of their advice process, demonstrating that they had the client’s best interests at heart.
Have you thought about your brand?
What do Uber, AirBnb and Netflix have in common? Valued at $66 billion and $30 billion respectively, Uber and AirBnb are the world’s largest taxi and accommodation service albeit not owning a single vehicle or property. Similarly, valued at $42 billion, the content distribution service Netflix only recently started producing content yet is worth nearly as much as big production houses such as Time Warner and Century Fox. These brand valuations are thanks to the rise of the sharing economy within the service industries - causing significant change in consumer expectations, attitudes and behaviour. There is immense dependence on the ‘brand’ to stand for something and provide the promise of a level of service. Unlike product brands that can provide something tangible; what most professional services organisations sell, including financial advisers, is often intangible before point of sale and the benefits cannot be fully “experienced” until after purchase.
FE Analytics has won the award for the ‘Leading Independent Planning Tool Provider’ at the Schroders’ UK Platform Awards – marking this the sixth time the planning tool has won the award since 2010.
Liontrust, Brooks Macdonald and Standard Life Wealth join the Model Portfolio Transparency Revolution
By Corporate
Liontrust, Brooks Macdonald and Standard Life Wealth are now live on FE Analytic’s Model Portfolio Comparison Service – FE Transmission, the service that allows advisers to compare performance data on leading model portfolios.
North American growth funds have been added for the first time to the FE Invest Approved list, as funds in the region are viewed more favourably for UK investors in light of concerns over UK equities as an asset class - following the Brexit vote.
Earlier this summer, a statement from the newly appointed Director of Supervision - Wholesale, Investment and Specialists at the FCA – Megan Butler proved that suitability is right back on top of the regulator’s agenda as they believe ‘firms still need to up their game’ whilst demonstrating suitability within their portfolio recommendations. The statement warned that the regulator would continue its scrutiny of wealth management firms until they gain satisfactory evidence that firms are stepping up and looking at suitability ‘as the day job’ rather than a regulatory checkbox.
The topic of charges and fees is usually on the regulator’s radar. The RDR published in 2012 aimed to rectify ‘opaque charging structures’ within the advice market and since then the regulator has kept a close eye on the matter. Recently the FCA conducted a deep dive review of Adviser charging structures in its newly published Adviser survey report which found that 89% of the respondent advisers charged clients percentage fee, 44% had fixed fees and 27% reported hourly charges (titled ‘FCA survey of firms providing financial advice’, published on the 1st of July 2016 –click here to read in full). On the provider side too, across Europe there have been calls for improvement in the communication of fees and charging structures to the end investor (via KIIDS, PRIPS) in a bid to help investors navigate through the variety of charges that can erode/affect their portfolio. However, most investors remain unaware of hidden costs that are unaccounted for in glossy literature from product providers.
FE would like to congratulate all the winners of the Fund Manager of the Year Awards 2016. FE's Gary Wheeler and Mika-John Southworth presented the Global Group and UK Income awards to Fidelity International and Evenlode Income on the night (pictured below).
Fund Managers - the mythical sirens of the asset management industry lure in vast amounts of money and admiration with their perceived intellect and skills. As of April 2016, records show that managers in the UK are responsible for an impressive £928 billion held in investment products (stats from the Investment Association’s website). With some star managers managing over £800million in a single fund, it is safe to say that a handful of individuals hold the prosperity of many of the UK’s investors in their hands and often their judgments decide if money invested doubles in value or vanishes overnight.
First they said it couldn’t possibly happen, then that it probably wouldn’t happen, then that it might happen and until finally today it did happen. Yesterday Britain voted to leave the European Union and although the vote is not binding it seems inconceivable that it won’t be followed through.
Let’s for a moment rewind to the summer of 2012 – the personal finance section of the
Daily Telegraph published a research study that found that the television character most closely associated with the term ‘’financial adviser’’ was the market trader Del Boy, from the popular sitcom Only Fools and Horses.
Mounting demand paves way for model portfolio service FE Invest to be added to three new platforms
By Corporate
FE is pleased to announce that the FE Invest Model Portfolios are now available via three more of the UK’s leading platforms following increasing demand from the financial adviser community.
Love it or hate it you cannot ignore the latest American import – robo advice. What many of us initially thought was a passing fad is now officially here to stay, as the FCA has advocated the adoption of ‘automated advice models’ as a means of delivering regulated advice ‘’more cheaply, efficiently and effectively’’.
FE Transmission celebrates 1st birthday but more still needs to be done to bring transparency to the DFM industry
By Corporate
Results from a recent survey of FE adviser clients found that more than half of advisers (52 per cent) only use a single model portfolio service provider – despite the boom in model portfolios and providers since the implementation of the Retail Distribution Review, with advisers turning to DFMs (discretionary fund managers) to assist with managing clients' assets.
First published in Professional Paraplanner Magazine, April 2016.
Advisers are not always expert stock pickers and shouldn’t have to be. Post RDR and in preparation for the looming sunset clause, more advisers are starting to recognise the benefit of allowing specialists to deal with their fund picking as a key strategy for spending more time with clients, reducing risk levels and operating costs. Results from the FE Adviser Survey 2016 were testament to this.
On April 6th, new UK taxation will be applied to dividends https://www.gov.uk/government/publications/income-tax-changes-to-dividend-taxation/income-tax-changes-to-dividend-taxation.
A short 4 years since the Retail Distribution Review, the UK advice market prepares itself for another big piece of regulation that is likely to alter the who, what, where and when of Financial Advice.
In response to increased demand for professional adviser accreditation, ratings and research firm FE is launching the FE Analytics Certification. The accreditation provides advisory firms with an independent benchmark when looking to hire top talent, while also providing advisers and paraplanners with a way to enhance their personal development as well as demonstrate their capabilities.
Volatility is here to stay as FE repositions its successful model portfolio service, FE Invest – after a turbulent six months. The head of FE Research, Rob Gleeson underlines the rapid deterioration in market conditions as the catalyst for taking some risk off the table and allocating to broader market strategies, rather than highly focused funds in the current volatile market conditions.
Invesco Perpetual Income and Monthly Income Plus, Jupiter Merlin Income Portfolio and Jupiter Merlin Income Portfolio were some of the largest funds falling out of favour with FE’s in-house analysts in the latest review of the FE Invest Approved fund list and the FE Invest MPS (model portfolio service).
Advisers can now assess the risk levels of any given portfolio, be it an adviser-constructed portfolio or a model portfolio, using FE Portfolio Risk Scores available through FE Analytics.
FE Analytics+ addresses industry need for one answer to researching, investing and due diligence
By Corporate
FE’s Analytics+ addresses the advisory industry’s growing need for a streamlined solution to researching, comparing, selecting and investing clients’ funds that not only eases the pressures of an evolving regulatory landscape – but also highlights the true value of advice.
It’s 2016 and the digital information age is truly upon us – from buying pet insurance to ethical funds, investors don’t have to stretch beyond their mobile phones to buy financial products or dabble in investment markets.
It’s Christmas and whilst everybody is feeling festive – we thought we’d use the 12 Days of Christmas as inspiration and look at 12 ways FE has helped its ‘true loves’ i.e. Advisers this year!
1. Unique Model Portfolio Research
The FE DFM Survey found that whilst nearly 70% of our Adviser clients had invested client money in a Discretionary or Model Portfolio Service, more than 40% of them admitted to finding it ‘Extremely difficult’ or ‘Very difficult’ to access quality research and analysis on the value of options available to them. We soon found that the results of the survey echoed an industry wide concern about the lack of transparency around performance, charging and risk mandates for model portfolios. This lack of research available to Advisers also meant that they were unable to conduct objective analysis on the suitability of the solutions they were choosing, particularly on an ongoing basis.
Recent research from Standard Life shows that the UK retirement market will see nearly £700 billion come through the system in the next ten years. In April and May alone of this year nearly 250,000 payments were made to customers from their pension pots, worth some £1.8 billion. The new pension freedoms are acting as a catalyst for adventurous investors to turn their backs on standard annuities in search of alpha from higher risk investments; the most popular of these being income drawdown solutions with £1.3bn invested in over the same period.
Although the term centralised investment proposition (CIP) is now common parlance in this industry, the ever growing range of investment approaches still leave adviser firms unsure on how to proceed.
Franklin Mid Cap, Marlborough UK Multi-Cap Growth and AXA Framlington UK Select Opportunities top the list of funds consistently rewarding long term investors, according to recent research from FE Trustnet.
As the latest update from the Office for National Statistics highlights the growing confidence among UK investors – especially in the Alternative Investment Market (AIM), FE Trustnet takes a look at the top performing smaller companies.
Old Mutual’s WealthSelect MPS range is now live on FE Transmission, the service that allows financial advisers access to performance data on leading model portfolio providers through FE Analytics.
FE’s new service addresses the on-going need for clean data in the asset management industry to bring forth greater transparency to ultimately support the end-investor.
Time and again, advisers seem to find themselves in hot water with the FCA Financial Conduct Authority over not demonstrating the suitability of their investment advice adequately.
Just thirteen ethical funds from the ethical and socially responsible investment universe made the cut in the inaugural recommended ethical funds list from ratings, research and investment data specialists FE Trustnet. Henderson Global Investors bags three spots for its sustainable range.
Today’s financial landscape boasts a wide variety of methods to invest client assets. Irrespective of portfolio size or life stage of the investor; there is a solution that can match their risk level and specific objectives. Whilst this comes as great news for advisers and investors – it often leaves paraplanners with a whole lot more to think about when conducting due diligence.
Time and again, advisers seem to find themselves in hot water with the FCA Financial Conduct Authority over not demonstrating the suitability of their investment advice adequately.
Not all technology is equal...
Investment research today involves more than looking at Money Marketing with an old ruler and a dry highlighter. The financial advice industry is now supported by a wide variety of cutting-edge research technology that is designed to help advisers with the knowledge and analysis they need to give sound investment advice to their clients.