Mazars Financial Planning received discretionary permissions two years ago. This is transforming the company by helping it scale from £5.5 million turnover in 2015 towards its target of £20 million by 2021, says director Andy Springford (pictured, left).
The firm runs a range of in-house model portfolios, comprising five growth portfolios and one income portfolio, as well as ethical versions of each of these. It can also tailor portfolios if necessary. Mazars also uses external discretionary fund managers (DFMs) in cases where a model portfolio may not be suitable: for instance, if the client wants direct stocks or other specialist investments.
London-based Springford says running the in-house proposition on an advisory basis had become unmanageable. It was also an obstacle to its growth ambitions.
‘We hardly had enough time to do anything else, let alone take on new clients,’ he says. ‘There was short-term pain in switching to the new discretionary service. But after two years, we are seeing substantial benefits in terms of efficiency, client satisfaction, and fewer errors.’
Mazars Financial Planning’s investment committee comprises its six in-house investment team members, plus partners from other parts of Mazars Group and external asset allocation specialists. ‘Because we work with lots of trustees and charities, it’s important we don’t rely only on our in-house view,’ says Springford.
The investment committee meets quarterly and portfolios are rebalanced annually. Mazars uses Dynamic Planner to set the risk profile of portfolios, which helps guide asset allocations. To select funds, the committee uses criteria such as performance, charges, manager tenure, and strength of the management team.
Mazars Balanced portfolio outperformed the Investment Association Mixed Investment 40%-85% Shares sector in the past three calendar years, with lower volatility. In the five years to September 2017, it has had a moderate overweight to equities and been underweight fixed income.
Mazars says that, of the 5.5% outperformance during those five years, only a small fraction (0.77%) was attributable to asset allocation. The rest was due to fund selection. The firm therefore maintains its strong preference for active funds, which occupy 88% of portfolios. The rest is split between exchange-traded funds and passives. Funds that contributed to that outperformance include the Somerset Emerging Market Dividend Growth fund and the Marlborough Special Situations fund.
This quarter, the firm has reduced gilts exposure in portfolios to guard against potential interest rate rises, and redeployed assets in Japanese equities. It prefers Japan and emerging markets to domestically-focused UK shares. After all, valuations in Japanese equities remain attractive, and there are signs of a momentum switch to this market.
In the third quarter, Mazars replaced long-short equity fund Kames UK Equity Absolute Return with a specialist infrastructure fund, First State Global Listed Infrastructure, managed by Citywire AAA-rated Andrew Greenup.
Going the extra mile
Mazars has a panel of external DFMs, providing model portfolio and fully bespoke services that it reviews every two years. Springford explains this helps avoid potential conflicts of interest in using the firm’s internal proposition. ‘Many clients like having their investment manager and financial planner in the same place and often together in the meeting.’
Natalie Wright (pictured, right), Leeds-based chartered financial planner and senior manager at Mazars, says she generally uses Brewin Dolphin and UBS the most. ‘Because Brewin has a great presence in Leeds, I can meet regularly with the investment director and they can attend client meetings,’ she says. ‘It provides genuine bespoke portfolios. There are many alternatives that suit some of our more sophisticated investors, for example structured notes, zeros, specific investment trusts and currency notes.
‘UBS is an international organisation. This aligns it well with Mazars and some of our clients who reside in various countries. As a private bank, it offers services that suit ultra-high-net-worth individuals, such as multi-currency banking and loans against investments.’