Adviser profile: Jeffrey Deans of Save & Invest

Save & Invest has become an unlikely pioneer having developed technology its directors say makes platforms redundant.

Any client of Save & Invest Financial Planning would rightly expect the firm to know a thing or two about managing their money. After all, the clue is in the name.

Despite some voices urging financial planners to leave investments ‘the hell alone’, the Glasgow-based firm has made it one of its core strengths.

Save & Invest creates bespoke portfolios, is a strong believer in active management, does not perform risk profiling and shuns outsourcing to discretionary fund managers (DFMs). This will seem a bold approach to some advisers. But backing it up is an impressive piece of proprietary technology that has been 30 years in the development.

Managing director Jeffrey Deans and operations director Mary Marsh are firm believers in their approach. They have answers to all our questions.

Why not use cheaper passives? Because quantitative easing will no longer be pushing prices up. What is wrong with DFMs? They are not sufficiently diversified. What do you do instead of risk profiling? The firm runs scenarios to test people’s approaches to volatility.

The firm also applies other house rules, such as no more than 20% of a client’s portfolio can go to any one asset management group. Portfolios typically contain from 10 to 20 funds apiece.

‘We focus on investment because people are paying an annual fee and we’ve got to work for that,’ says Marsh. To work for it, Save & Invest staff research funds, using technology from Financial Express, and analyse client portfolios on a daily basis.

They are able to do this because of the unique piece of technology they have been building since the firm began: WealthPro.

Any client of Save & Invest Financial Planning would rightly expect the firm to know a thing or two about managing their money. After all, the clue is in the name.

Despite some voices urging financial planners to leave investments ‘the hell alone’, the Glasgow-based firm has made it one of its core strengths.

Save & Invest creates bespoke portfolios, is a strong believer in active management, does not perform risk profiling and shuns outsourcing to discretionary fund managers (DFMs). This will seem a bold approach to some advisers. But backing it up is an impressive piece of proprietary technology that has been 30 years in the development.

Managing director Jeffrey Deans and operations director Mary Marsh are firm believers in their approach. They have answers to all our questions.

Why not use cheaper passives? Because quantitative easing will no longer be pushing prices up. What is wrong with DFMs? They are not sufficiently diversified. What do you do instead of risk profiling? The firm runs scenarios to test people’s approaches to volatility.

The firm also applies other house rules, such as no more than 20% of a client’s portfolio can go to any one asset management group. Portfolios typically contain from 10 to 20 funds apiece.

‘We focus on investment because people are paying an annual fee and we’ve got to work for that,’ says Marsh. To work for it, Save & Invest staff research funds, using technology from Financial Express, and analyse client portfolios on a daily basis.

They are able to do this because of the unique piece of technology they have been building since the firm began: WealthPro.

Key collaboration

WealthPro is an online valuation and reporting service. It is a back-office system built in-house, which organises workflow, allows advisers to see whose reviews are coming up, generates personalised reports and allows clients to log in and view their investments. It has taken years to build, a process of constant, incremental addition.

Data can be shown to clients in a number of ways, such as by overall exposure to certain funds, or breaking down where particular funds are held, such as in an ISA or pension.

WealthPro also has a compliance function, which prevents advisers from breaking the firm’s house investment rules. The house rule can only be changed if decided on by the directors. For example, if a client’s exposure to one manager exceeds 20%, WealthPro will alert the fact or prevent it.

But over the past few years, WealthPro has also served another function. In 2010 Save & Invest met with a range of custodians, including AJ Bell Securities, previously called Lawshare. ‘It did all its asset dealing in custody for discretionary management firms,’ says Deans. ‘We said: “we want a service, we will pay for it and just back our systems into your systems”.’

In other words, WealthPro does almost everything a platform does apart from custody and dealing (and therefore does not need the Financial Conduct Authority permissions a platform would do). AJ Bell Securities was the most willing to implement a bespoke interface between its internal custody platform (Figaro) and WealthPro. Save & Invest pays AJ Bell Securities for a custody, trading and administration service, which is invoiced to and paid directly by Save & Invest. AJ Bell never charge a fee directly to Save & Invest’s clients.

‘AJ Bell Securities is a London Stock Exchange member so we have total flexibility. Every fund is available, every listed stock market is available and we’re free to use any Sipp,’ Deans says.

‘Mark Polson [principal of consultancy The Lang Cat] came to us and said: “you’ve got what people should need: a back-office system that actually runs a business, communications with clients, helps advisers and links directly into an asset custody service. What are you going to do with it?”’

Polson says: ‘While others debate the practicality of advisers becoming platform operators in their own right, Save & Invest has just got on and done it. The result is it now has a proposition that exactly matches its own processes, rather than trying to make something that is built to accommodate many different models fit.

‘This reduces rework, improves controls and should allow Save & Invest advisers to spend more time on the stuff that really matters.’

WealthPro has allowed Save & Invest to create a progressive fee structure (see box on page 28), but also communicate clearly with clients. ‘We’re a technology and communications company,’ says Deans. ‘The educational aspect of this job is very important to us. We help people make decisions.

‘I worry that those people who are just life planners, who outsource and put everything in trackers to keep costs down, will eventually lose control of their client relationship. And because of Mifid II, their fees will be scrutinised like never before.’

Ticking the boxes

Save & Invest has not shied away from defined benefit (DB) pension transfer advice. It believes its robust technology is an asset in this area.

‘Many people are now saying they won’t give advice on [transfers], but clients need advice,’ Deans says. ‘You’re a professional advice firm. You cannot walk away from giving people advice if they come to you.’

The firm charges a minimum non-contingent fee of £2,500 for DB transfer advice where there is only one scheme to be assessed, although this can vary if the situation is more complex. Around 85% of DB clients have been advised not to transfer, Deans says.

There are four sets of people who must look at each transfer request: the original adviser; the pensions transfer specialist; the compliance department; and the directors. The advice process is done in four stages. Advice not to transfer is generally given by the second stage.

Marsh recounts one case, a couple of years ago, of an insistent client. The firm, which had recommended them not to transfer, was worried the client would ‘go and do something extremely dangerous,’ anyway, ‘which would have come back to us but was going to come back to him even more so,’ says Marsh.

‘So we wrote to the scheme to say our advice was strongly not to transfer. You have to tick a box to say advice has been given, but there wasn’t anywhere to say what the advice was.’

The directors say since providing this information, pension schemes have been asking for more detail.

Options for expansion

Deans says the business’s next challenge is to hit two ambitious growth targets: first £2 billion and then £5 billion assets under advice. Acquisition will be the quickest route, but Deans believes WealthPro will help the firm overcome the typical trips and traps that come with trying to integrate someone else’s business into your own.

With WealthPro able to do research, reporting and administration en masse, Deans says, ‘we could probably buy five retiring advisers’ client banks tomorrow and cope, enter a joint-venture or integrate an accountancy firm’s IFA business if we got the people as well. So there are options and we can be flexible.’

Since its formation in 1985, Save & Invest has bought businesses with advisers (its London office), bought client banks and, most recently, bought the IFA arm of law firm Shepherd & Wedderburn. This latest acquisition is in the migration phase. Many of the law firm’s clients were on DFMs.

The team built a tool for WealthPro to enable it to map a DFM’s asset allocation and volatility onto its own system and build an equivalent portfolio, if that was the most appropriate solution for a client.

‘For Shepherd & Wedderburn clients with DFMs, we are providing, in addition to the benchmark set by the DFM, two alternative benchmarks,’ says Deans.

‘One is a benchmark using market indices and sectors that matches the asset allocation of the DFM portfolio. The other is a Save & Invest sample portfolio we create. These are used to help new clients select a volatility profile for their portfolio, which would “match” the volatility profile of the DFM.’

Save & Invest is also building up a younger management team to help shape its longer-term plans. It has an in-house graduate training programme, and currently has two undergraduates working at the firm while studying, who may wish to come onto the training scheme afterwards.

It only has two people processing business, but six in IT. The directors are happy to invest in their own technology, and profits are either reinvested in the business, in staff, professional salaries or the next acquisition. ‘We are careful with what we spend money on, but we do spend money,’ Deans says.

The fee bit...

Save & Invest has a combined fixed fee for initial advice and implementation, which has a minimum charge of £800. Ongoing clients will then pay up to 0.95% for the full service.

There are no extra platform or provider fees (as the business uses WealthPro and pays for AJ Bell Securities itself), but fund changes may still incur charges.

Someone with £100,000 to invest and fairly simple requirements would be entitled to a free initial meeting, and could then be charged £1,500 for the creation of the investment portfolio, the advice and the implementation. ‘At the first meeting, we would give them a sample portfolio pack that shows different volatility profiles,’ Deans says.

The new client process is quite detailed, Deans adds. ‘We’ve got to feel comfortable they know what they’re doing. We don’t want investors we feel are not going to understand what they’re doing and why. So education is a part of it, showing them how things might happen, making sure they understand some investments will be higher volatility than others.’

The £100,000 client might then expect to pay 0.95% for the full ongoing service. But if their needs are simple and they don’t need an annual review every year, for example, they might pay 0.7% and use the WealthPro dashboard for more frequent updates. This client could pay £2,200 in their first year.

The investment bit...

Automatic reclassification allows Save & Invest to offer a bespoke advisory service.

Save & Invest clients have bespoke advisory portfolios, which are classified in five volatility categories: low, low to moderate, moderate, moderate to high, and high.

‘We classify funds in the same profile based on our view of the fund, its historic returns and then we create a portfolio,’ says Deans.

‘The house rules are made at the top level and then built into the machine. So when people are building the portfolio they know if they’re going to break the rules and this won’t get through construction,’ Marsh adds. ‘Then we’ll benchmark against our portfolios in a particular sector to back test if they’re actually giving us results.’

The investment committee meets every month and is made up of compliance, paraplanners, directors and all advisers, although not all attend every meeting. ‘Everybody has work to do for the committee,’ Marsh says. ‘Everybody has certain funds to get to know in depth and all this has to be shared. All of us will have responsibility for funds; it’s too big a job for just half a dozen people.’

If a fund is not behaving as the firm anticipated, it can be reclassified. WealthPro will automatically work out which clients this will not affect (because they will remain within their volatility band) or will affect (because they will not). This means many clients can be dealt with at the same time, although all still receive a personal letter if a fund is switched out, for example.

‘A lot of clients are shoehorned into what suits a business,’ says Deans. ‘But our approach is clients will come first. A lot of people can say that but the client still has to fit into it. If that means things have to be sold, that’s what will happen.

‘So much of the sector is model portfolios, it is outsourcing discretionary or it is chucking stuff into something and forgetting about it and moving onto the next sale.’

 The CVs:

Jeffrey's CV:

1985–present: Save & Invest, founder and managing director

Mary's CV:

1985–prese: Save & Invest, founder, operations and compliance director

Jack's CV:

2010 - present: Save & Invest Group, IT Director,

1999 - 2010: Marsh Data Engineering, director,

1988 - 1999: Workload Financial Business Consultants, IT director

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