Concerns that Brexit will affect financial services still worry the industry a month after ‘project Fear’ ended in failure.
However, as a raft of results have shown no one is quite yet ready to admit that their business will take a hit in the post-Brexit world.
So when support services provider and national advice business True Potential said Brexit had prompted it to open up its model portfolios to non-members New Model Adviser® wanted to put the claims to the test.
The 10 portfolios invest in funds from True Potential’s Wealth Strategy range, which is essentially a version of St James’s Place model or the Old Mutual Wealth selection of funds. It includes managers such as Goldman Sachs, 7IM and Close Brothers.
True Potential claimed that in the period between 1 October 2015 and 15 July 2016 the range of portfolios delivered returns of up to 15%, making them attractive to advisers.
When New Model Adviser® compared the performance figures for the funds with mixed asset sectors they generally fared well.
The best performing portfolio was the Aggressive portfolio, which delivered the 15% returns touted by True Potential. This put it into the top 10% of the Mixed Assets – Aggressive GBP sector, where it placed 16th out of 153 funds.
Other portfolios were similarly well placed, if slightly less impressive. Even the worse performing Defensive portfolio, which delivered returns of 7% in the period, was (just) in the top half of the Mixed Assets – Conservative GBP sector as it finished 45th out of 92 finds.
So what about those post-Brexit returns?
This was more of a mixed bag. There were still some strong performers, again topped by the Aggressive portfolio which slipped ever so slightly into 19th place between 23 June and 15 July in the same Mixed Assets – Aggressive GBP sector, meaning it was in the top 12%.
Perhaps unsurprisingly the Defensive portfolio was also consistent in its placing, finishing in 47th place out of 94 funds.
The portfolios that took a hit after Brexit were the Income portfolios.
True Potential’s Cautious Income portfolio was in the top 23% in the Mixed Assets – Conservative GBP sector between 1 October 2015 and 15 July this year. When this was reduced to the period after 23 June though, it slipped out of the top half and ended in the top 56%.
The Balanced Income Portfolio also suffered as it moved from the top quarter of the Mixed Assets – Balanced GBP sector all the way to only the top 68% after the referendum.
The launch of the portfolios pose some questions for IFAs. On one hand the portfolios performed well and following Brexit advisers will be keen to find alternatives such as these.
The OCF for the portfolios range between 0.78% and 0.92%, making them relatively cheap as a discretionary managed proposition.
However, some IFAs will undoubtedly feel uncomfortable about handing over to a proposition that is restricted in the funds it can choose. If SJP opened up its portfolios I doubt many would flock to use them...
So I think True Potential will face a difficult challenge to convince IFAs to use its proposition. That said, decent performance figures and competitive costs mean it is not a lost cause.