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Nomadic adviser turns to tech to boost portfolio performance

For the director of Money Honey Financial Planning, digital technology is the way forward when building portfolios

Nomadic adviser turns to tech to boost portfolio performance

Jane Hodges, director at remote advice provider Money Honey Financial Planning, believes computers and artificial intelligence will gradually take over investment management. Since launching the firm last year, she has investigated robotic investment options, particularly the 8AM Clever Managed Portfolio Service. This automated service assesses fund performance through algorithms and empirical analysis.

The 8AM service analyses information from more than 4,000 UK registered funds. It replaces underperforming ones, thus removing human biases and errors, said Hodges. The service has used its current methodology in portfolios since November 2017 and is based on the Clever Adviser systems.

These have consistently beaten their MSCI benchmarks and many other managed solutions on a risk-adjusted basis, said Hodges. They also outperform on a back-tested basis, she added.

Money Honey’s investment proposition is 90% outsourced. ‘With highly skilled external professionals available, for most clients it is not appropriate to build portfolios in-house,’ said Hodges.

As she builds her investment proposition, she anticipates outsourced investments will be split roughly between Parmenion (50%), 8AM portfolios (30%), AJ Bell (10%), Morningstar (9%), and Brooks Macdonald (1%).

For insourced funds, Hodges chooses from an array of offerings including multi-asset ranges such as Vanguard LifeStrategy (see chart, below) and Royal London Governed Portfolios. ‘But many of my clients work in financial services, and some of them use Hargreaves Lansdown to self-invest,’ she added.

Hodges is a self-professed digital nomad who works in a variety of locations, from Kentish caravans to Cambodian cafés. She has several expat clients and favours AJ Bell for Sipps.

She also likes Parmenion for its range of active and passive portfolios. ‘It will hybrid them. You can choose how much is in passive and active, and adjust as you go,’ said Hodges.

Parmenion can also incorporate its ethical, social and environmental values. Its four ethical profiles aim to offer a cross-section of the entire regulated socially responsible investment market.

‘Morningstar has a good range of performing portfolios at an attractive price,’ added Hodges. ‘And I use Brooks Macdonald for bespoke investments.’

Platform technology

Hodges charges a retainer for financial planning and an investment oversight fee of 0.25% where there are also discretionary fund manager (DFM) fees. ‘This oversight fee is lower than the 0.5% to 1% that many advisers charge,’ she said. ‘It ensures the client is not disadvantaged by using DFMs and does not pay more in total.’

She believes the industry is still hooked on the funds under management charging model, but she thinks this will change as robots take over investment management.

Money Honey mainly uses four platforms: Parmenion, James Hay, Embark and AJ Bell. Hodges said state-of-the-art technology is a crucial factor in platform selection.

‘As a paperless advice practice, non-paperless processes are a deal breaker,’ she said. ‘We look at platforms that provide access to daily valuations either via their own portal or [our back office and portal provider] Intelligent Office. We look at how innovative and technology-enabled they are, for example, in setting up, accessing funds, drawdown and switching.’

To choose DFMs, Money Honey researches industry reviews, comparison services, performance and charging differentials across fund volumes and risk levels. ‘When advising clients, we don’t want to put all our eggs in one basket,’ said Hodges.

‘So we provide a mix of solutions, such as active, passive, and ethical choices; and a mix of human management, such as Parmenion, and innovative software, such as 8AM.’

Hodges uses lower-priced options ‘to limit any drag on performance for smaller fund sizes’. She assesses the rest of the client’s portfolio to see if it needs balancing, for example if it has a high property allocation or self-invested funds. ‘And I look at options that vary risk and style,’ she added.

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