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How £800m IFA Save & Invest runs its clients' money

Jeffrey Deans says, although its unique back-office reporting system is central to the service it provides, Save & Invest is still a face-to-face advice business at its core

How £800m IFA Save & Invest runs its clients' money

Save & Invest’s philosophy leans heavily towards active funds. Managing director Jeffrey Deans (pictured above) believes it will not be sensible to have all clients in passives when quantitative easing is not pushing asset prices up.

But, he says, there is a degree to which passives can be involved, and Save & Invest portfolios are 5% passive.

‘There have been some interesting propositions coming in,’ he says. ‘BMO Global Asset Management has a new range of three funds where the manager of the portfolio investment trust is the key person and then it’s mirroring the assets that are bought by the BMO funds from the service.

‘So it’s passive but active. It’s active because they are taking the information, they are not paying their own internal funds, and it’s a very clever idea.’

Clients of Glasgow-based Save & Invest, which has £800 million of funds under advice, have bespoke advisory portfolios. These are classified in five volatility categories: low; low to moderate; moderate; moderate to high; and high. Each individual investment fund is classified in the same way.

‘The construction of each portfolio takes its direction from the level of cash on deposit (between 5% and 25% of the overall level of liquid assets, depending on overall investable assets) and a client’s strategy to cope with periods of falls in the value of their portfolio,’ the firm’s example portfolio construction document says.

Constantly monitored

The table (above) shows the holdings of an example low-to-moderate volatility portfolio. The firm says many retired clients or those approaching retirement might be in a portfolio like this because it aims for returns that have limited downside volatility.

The firm has picked out Jupiter Merlin Balanced (see graph, below), as a fund it likes for its diversification and consistency. The fund is run by John Chatfeild-Roberts and Citywire + rated David Lewis, Amanda Sillars and Algy Smith-Maxwell.

It is ranked 65/215 over three years and has returned 26.1% compared with the average total return of 22.2%. It holds, at 15.3%, TB Evenlode Income and, at 13%, Fundsmith Equity, run by star fund manager Terry Smith.

Save & Invest’s low-to-moderate portfolio’s factsheet also shows five out of the 13 funds operate on a fund of funds or multi-manager basis where the fund team selects other collective investment schemes it believes will deliver the best performance. Multi-asset funds comprise the core of Save & Invest’s portfolios.

‘All 13 investment funds from 11 fund groups are actively monitored by Save & Invest with each group providing detail of their management. Through [WealthPro] each fund’s performance data, i.e. return, volatility and maximum drawdown are assessed daily with this data accessible online to clients on the Save & Invest website client dashboard. In addition Save & Invest’s investment committee meets monthly to review funds and regularly meets managers to assess their views and decisions,’ the factsheet says.

The monthly investment committee meetings comprise compliance, paraplanners, directors and all advisers, although not all advisers attend every meeting. Everyone has certain funds to research in depth and present at the meeting.

Save & Invest provides examples of how the portfolio performed in different market conditions, using time periods, such as 2013-2017 and two years after the Brexit vote.

This example portfolio falls just shy of the middle of the low-to-moderate band. The asset allocation in the graph (below) reflects the lower end of a low-to-moderate volatility portfolio.

 

Prepared for everything

Instead of risk profiling, Save & Invest prefers to stress test different volatilities and situations with clients. ‘We show clients the reality of what has happened at different points in time,’ Deans says. ‘We show the reality of what’s happened in the past. We will tell them: “here’s a potential volatility, how are you going to cope with it?”’

The firm then has a set of house rules, such as that no more than 20% of a client’s portfolio can be allocated to one asset management group, which are built into its proprietary back-office online valuation and reporting service, WealthPro. Portfolio testing is also built into the system. This means if directors decide to alter or surpass a house rule, for example, or reclassify a fund, this can be done en masse.

The firm does not do many large campaign changes, but may sell out or buy into funds around once a year.

‘A good example is we had house rules that allowed, say, 20% absolute returns,’ says IT director Jack Marsh. ‘The investment committee got a bit nervous about them and thought we should be reducing that. In the funds themselves we wanted to reduce exposure from, say, 10% to 5%.’

Across the board

In November 2016 the firm executed a mass campaign to reduce its clients’ exposure to absolute return funds, including the decision to exit Standard Life Global Absolute Return Strategies (Gars). New Model Adviser® has reported the consistent outflows from Gars and poor performance over the past year.

Although over July the multi-asset strategy turned positive, returning 0.6% (net of fees) to investors, over the long term it still lagged its Libor benchmark as at the summer, returning -2% and -1.1% per year over one and three years respectively, compared with Libor’s 0.6%.  

‘Advisers gave their preferences for other funds to the committee and WealthPro could look across the portfolios, aggregate everything, and find the most appropriate place to take it out, such as in an ISA,’ Marsh says.

This means every client of Save & Invest can receive the same service and everything is consistent. ‘More than 500 individual pieces of advice can be given and advisers can just say: “here’s a wee list of funds”,’ Marsh adds. ‘All the information is generated into one pack, instead of having report writers, although it is still personalised to each client.’

When clients view their funds, which are benchmarked against what Financial Express has selected rather than the fund’s own benchmark, on the WealthPro dashboard, they can see a commentary for each fund written by Save & Invest. ‘There’s no point just showing the client a fund factsheet that’s going to paint a rosy picture,’ says Marsh.

Despite this ability to report and display in bulk, Deans stresses Save & Invest is still a relationship business, with a strong focus on financial planning, and says the relationships with clients are very strong.

‘We use technology to communicate, and the dashboard allows clients to see their portfolios on a daily basis. But we’re still a face-to-face relationship business.’

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