Woolworths, Our Price, Zavvi HMV and now Blockbuster. Or, as Queen might say, “Another one bites the dust”.
Of course, the recession hasn’t helped and HMV was crippled by a debt mountain of around £220m plus a multi-million pound rent bill (Are landlords too greedy? That’s a debate for another day.) but it can’t be denied that many of these retailers have also been badly hit by the effect of internet shopping. Let’s face it, Christmas Day was apparently a record for online sales with estimates of around £200m being spent; Boxing Day even bigger at £475m give or take. The stats also show that huge numbers of Christmas presents were purchased online (again) and, let’s face it, it’s hard to argue with some of the internet prices that are available because those e-tailers don’t have shop overheads.
So are we all now so sucked in to the internet that we’ve forgotten the simple pleasures of shopping?
Yes, I am a bloke – and no, I don’t mean traipsing round hundreds of clothes shops with my wife only to return to the first one (sorry, dear). I mean the simple pleasure of whiling away an hour or so in a record shop, preferably filled with vinyl although CDs will do. I have a collection of vinyl LPs and CDs going back to the ‘60s and there’s quite a bit I wouldn’t have bought if I hadn’t been in the store, going through the records.
It’s not just records clearly. Blockbuster shows that the DVD market is also struggling and, in fairness, I haven’t rented a DVD for a long time. If you can buy a DVD for under £5 in Sainsbury’s, why would you pay £3.50 to rent it?
Yet I read that 75% of music is purchased in hard form on CD, i.e. it is not downloaded. I also read that the film and music industry recognise the importance of high street outlets to promote new products and to benefit from impulse buys yet this seems contradictory to reality.
Independent camera retailers are another group that seem few and far between and I’ve struggled to find independent hi-fi retailers unless you want to spend thousands at the high end of the market (although I have finally ventured into a Richer Sounds store and been impressed by their customer service).
So who will succumb next to the power of the internet? No-one is safe. Solicitors have already experienced the power of the internet and the power of big corporations (to the extent that they now generically refer to ‘Tesco Law’) as a result of de-regulation and if you think face-to-face advice in financial services is sacrosanct, take a look at www.nutmeg.com
The end is not nigh but firms providing face to face advice to clients had better wake up and smell the coffee. Technology is changing our world as much as any other – and not necessarily for the better. Adapt, survive and grow or potentially face difficulties as the power of the internet replaces traditional ways of doing business. No, online business won’t be right for every client, but in the more competitive post-RDR environment with too many people chasing too few HNW clients, the market amongst the ‘disenfranchised’ (estimated at 5m by Deloitte in their survey last year) may well drift towards the ‘net – and once they’re there, they may be hard to claw back.
So, the Mayans were wrong and – unless I’m very much mistaken – the world did not come to an apocalyptic end on December 21st, 2012. I appear to be still here and, if you are reading this, then you are too. The probability that the Mayans were wrong didn’t stop a frenzy of preparation though. People bought and built shelters (why would you bother?), stocked up on canned food (again, why bother? The world was ending…) and TV crews were dispatched to watch a mountain take off into outer space – yes, really. Amazing. Unbelievable.
Others merely carried on as normal, probably disbelieving but none the less accepting that if the world did come to an end, there wasn’t much they could do about it.
The real apocalypse arrived though, not with a bang but with a whimper. As promised, it happened on December 31st, 2012 when it came and went without fuss, fanfare or explosion – except from some rather good firework displays….
People partied, drank too much and sang ‘Auld Lang Syne’ at midnight – and then it was January 1st, 2013. Sssh! Whisper it quietly – RDR-day was a non-event.
January 2nd, 2013 was no different than any previous day for those who had prepared, kept clients informed and generally readied themselves for the day of change. Yes, some have had waivers granted by the FSA but in many cases this is because of illness, bereavement or some other catastrophe. These people who have genuine reasons for a waiver deserve sympathy and it is right that the otherwise stern and apparently inflexible regulator should make appropriate exceptions.
To the others who have now found themselves without authorisation – I’m sorry, but you only have yuorselves to blame. RDR was not foisted on us at short notice, there were years to prepare – granted, not as many years notice as the Mayans gave us – and, for those whose eyes and ears were open and looking for early warning signs of change, it was an inevitability. Indeed, some of us wonder why it took so long, yet it seems many advisers adopted the ostrich strategy by ignoring it all and hoping it would go away. Oh dear. Still, this did prove at least one important thing; some (many?) of those who blathered “I’ve been doing this for over 20 years without ever having a complaint, why do I need to take exams?” did so because they couldn’t pass the exams, even with study and revision.
To those who adopted the ostrich strategy and buried their heads in the sand and to anyone who is considering adopting this tactic from the animal world, it has once again been proven that there is one major flaw in the ostrich’s tactics.
If you bury your head in the sand, it leaves your backside exposed.
Yes, it’s old news now. UBS, that giant Swiss Bank is cutting 10,000 jobs and reverting to being a discreet private bank. Like many banks, UBS had its troubles and needed some help to get through tough times – but sympathy is not where we’re coming from. Instead, it’s a bit of detail that’s interesting here.
UBS says that it is going to focus more on wealth management and is targeting a return on equity of at least 15%. Now you can say what you like but UBS’s management is not completely daft. UBS has been around a long time and they don’t make decisions like this lightly. So we assume they must believe…
We think the ‘focussing on wealth management’ bit is significant. Clearly UBS see that there is money to be made from wealth management and they also believe that they can offer a package that will be attractive to wealthy folk. Yes, we know that the über wealthy and the seriously wealthy are not always the traditional clients of advisers but there are some – and there’s even more who are just plain old boringly wealthy, as well as those who are just ordinary….
The point is that there is money in wealth management and many IFA firms are so close to being wealth management firms that the lines are already blurred. One area where many IFA firms struggle to compete is in investment management – and it’s nothing to do with competence. It’s about being advisory and the consequent need to rely on outsourcing as a solution for investment management – and with delicious irony, organisations like UBS are adding to their AUM by taking in IFA-introduced clients just for investment management.
Now we’re not suggesting the average IFA firm should be trying to compete with UBS – although there’s nothing to stop you. No, what we’re saying is that in an environment where there are not enough HNW clients to go round it will be vital to hang on to existing clients and attract new ones. Being a nice guy (or gal) won’t be enough. An “If I build it, they’ll come” attitude won’t cut it. Being cheapest won’t do it – at least, not in the long term.
Giving your clients everything they need to achieve their financial planning goals under one roof at a reasonable cost will attract and retain them.
To do that you may need to merge, acquire and/or form strategic partnerships but whatever you do you will need to be in control, in the driving seat, in charge and fully focussed on achieving your client’s financial goals. How? Integrate, in-source, innovate and get that message in front of your client.
Having a robust investment policy of your own is part of that. Executing your investment policy can be tricky though without discretionary permissions – or investment management permissions to be correct. Here’s a fact though – discretionary is merely an efficient way of executing a policy, not a solution in itself, what matters is the investment policy and how that relates to the client’s targetted goals, their ATR and their ability to withstand losses. What’s the position on tax? How can you effectively tax plan if someone else is running their investment policy – not your policy – and doing so for their own ends?
Post RDR the challenge will be to turn “U’ve Been Sacked” into “U’re Bloomin’ Superb” from your clients so here’s a ‘starter for 10’. How can you provide truly client goal focussed, integrated professional investment management that you are in charge of without the expense and hassles of obtaining and maintaining investment management permissions?
A short while ago I was fortunate enough to be able to catch up with someone whose opinions and values I respect. He’s aware of what we do at Novatis so imagine how disappointed I was when he said “Yes, but how are you different?”
Shock horror! How could he ask that? Isn’t it obvious? Worse still, if he doesn’t understand how we’re different, then you probably don’t either…..but it’s simple, right?
There’s the misconception. Of course, it’s simple to me and my colleagues at Novatis and so it should be – we came up with the concept after all. But that isn’t enough and my pal has it bang on the nail – how are we different?
Let’s start with a few basics:
1. Do you agree that ‘Discretionary’ is not a solution in itself, but is merely an efficient means of executing a strategy?
2. When you choose a DFM do they fit their strategy to your client or do you fit your client to their strategy?
3. So whose strategy is being executed?
and then saying:
i. ‘Discretionary’ is not a solution in itself, it is merely an efficient way of executing a strategy. Period. It’s not rocket science.
ii. The best strategy to use has to be the one that you have designed to suit your clients and your practice. Correct?
iii. If you could simply hire a DFM in-house to execute your strategy whether it be actively managed or low-cost tracker based, without having to worry about permissions or capital adequacy or any of the other things associated with ‘DFM-ing’, why wouldn’t you?
It really is that simple.
We’re trying to make what we do clearer and easier to understand. In that way advisers should be able to see the benefits and how it can relate to their practice. It’s a competitive world out there and we’re all fishing in the same waters.
Advisers are too. We all know that there are not enough wealthy clients to meet the likely demand for wealthy clients so there will be some advisers who lose out, by definition. That means it will not only be essential for advisers to have a competitive edge, but also to have a clear proposition that can easily be marketed to both existing and potential clients. Oh yes, and shouldn’t that be a proposition that keeps the client in-house rather than one that passes them on to someone else?
So there you have it, a ‘top tip’ from the guys who offer the simplest possible solution to your professional discretionary investment management needs: design your integrated financial planning and investment management process, then keep it in –house, in your control and in front of your clients and potential clients.
As that great marketeer (or should that be ‘meerkateer’?) Aleksandr Orlov would say, “Simples!”
So, the word on the street is WATCH OUT! Hundreds of ordinary people are, overnight, going to become expert DIY investors. No-one will buy through advisers and we’re all doomed. Of course, there’s always doom-mongers just as there are eternal optimists, but how about a dose of reality?
Yes, those advisers who have remained committed to squeezing every last drop of commission out of their clients until the last possible moment – the word on the street is WATCH OUT! You’ve got a nasty surprise coming.
Those advisers who have embraced change however, and have – in whole or in part – moved to a CAR or full fee model, BRAVO! Your clients are already buying from you as they did before and so long as you continue to add value, there’s no reason why they should suddenly decide overnight that they can do a better job.
Post RDR clients, investors – call them what you will – will be seeking value for money. That doesn’t mean ‘cheap’, by the way, but it does mean that you’ll need to justify your 1% p.a. or whatever fee you charge. How will you do that once you’ve set up a financial plan and then handed the investment management over to a third party? Clients don’t need a full financial plan every year – they may not need one for ten years after they first consult you, so how will you justify your fees each year? The investment manager’s doing all the work, all the reporting so remind me, what I am I paying you for? I already know IFAs who have had this conversation with clients. Make no mistake, it will be much more frequent post RDR when clients will be looking much more closely at the charges they are bearing.
The market will be confusing of course with Tom, Dick & Harry coming up with a variety of different charging structures for essentially the same service and in that environment, no one will then blame clients who opt for the cheapest – at least initially.
The only way to be a clear winner and the first choice for your existing clients as well as new ones, is to be DIFFERENT. Of course you’ll have an unrivalled commitment to customer service, that goes without saying, but you’ll also offer more – like a fully integrated planning and investment service in-house. No more will your clients find that just as they are getting to like you and trust you, their portfolio is passed to some outsider or other to manage. No longer will you have to try to make XYZ’s strategy ‘fit’ with the client’s requirements. No more explaining why the portfolio looks so heavily weighted to emerging markets because they’re XYZ’s flavour of the month. No more worries about who’s saying what to your client – and believe me, the threat of ‘losing’ clients to wealth manager type DMs is VERY real.
These new, different firms will have their own investment philosophy, their own investment committee, model portfolios, buy list, strategic asset allocation(s) and so on all created for and aimed at their clients – and, crucially, the offering will be available to ALL clients. In my opinion this is an enormous differentiator since we already know that there are not enough HNW clients to go round. That means that advisers will need to attract/retain those in the next group – the one I call not-quite-rich-enough-to-be-HNW and the one below that, the not-exactly-rich-but-comfortable-and-have-got-a-few-bob brigade.
With a defined process that is fully integrated, you can make a case for adding value to smaller portfolios, albeit that you may use models rather than a fully bespoke offering. By carefully constructing a portfolio of equities, gilts, low-cost trackers and so on, you can add value by giving a better investment experience to those who, at present, are being screwed on charges.
Gilts and equities! That’s a whole new differentiator right there. I’d be willing to bet that there’s quite a few clients out there in so-called ‘passive’ funds or multi-manager funds who’d like the excitement of holding a few equities. So let them. You can deliver active portfolios that are 100% equity based; you can deliver bespoke portfolios to clients; you can build portfolios with exposure to commodities; you can build portfolios that are exclusively in trackers and other low-cost funds; you can mix and match; the world, as they say, is your lobster!
Are advisers going to all seek discretionary permissions then? No. Some will inevitably choose this route, but for many the additional exam requirements, costs, reporting regime and other hurdles to gaining investment management permissions will make it an impractical exercise. So why bother?
For them – indeed, for any firm that wants to climb onto the fully integrated model bandwagon – there’s us. This is what we created Novatis for – to enable ‘ordinary’ adviser firms to compete with the big boys, put their clients first and thus retain them, increase their profitability and, above all, SURVIVE and PROSPER in the new post-RDR world.
Our service is not for everyone, of course and some will never see the advantages they can gain over their peers and/or competitors but others of you will pause, think and then say ‘Hey, that’s a great idea, these guys really seem to have something to offer. Let’s call them & look into it.”
To me it’s a no-brainer – but I’m biased. Check out the brochure at www.novatis-am.com and if you want to offer your clients the benefits of a fully integrated service that will help you justify your fees, call us for an informal chat. Go on – you know you want to!
There is a famous legal case (‘Inland Revenue Commissioners v the Duke of Westminster’) of 1936 during which Lord Tomlin stated that “Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be”.
This was a reiteration of the ruling in ‘Ayrshire Pullman Motor Services & Ritchie v the Commissioners of Inland Revenue’ in 1929 when Lord Clyde ruled that “No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Revenue”.
So it would seem that the precedents are set and insofar as those precedents stand, it should matter not one jot how ‘astute’ the avoidance is, so long as it is within the bounds of the law. This much is clear: tax evasion remains a criminal offence as it rightly should but tax avoidance – within the bounds of the various Acts – is a right and morality does not come into it.
Recent tax law has changed the focus however, to put the onus on taxpayers to declare their tax avoidance schemes (and the legislation they are relying on to make such schemes viable)to HMRC, yet in doing so, they automatically give HMRC an opportunity to challenge them. The Government and the Inland Revenue Commissioners have – and always have had – recourse to the Courts to challenge arrangements that they believe to be artificial, close to illegal, aggressive, or whatever term you care to put on it as well as the ultimate sanction of new laws being enacted by Parliament. These powers have been used with increasing frequency so that a number of loopholes that previously existed have been firmly closed.
Forcing the disclosure of who is using a particular scheme or schemes is the latest ‘weapon’ being brandished by the UK authorities but the users of tax avoidance schemes are surely entitled to their privacy and as entitled as I am to avail themselves of the judgements of Lord Tomlin and/or Lord Clyde. Why should they pay tax if they can legally avoid it? Morality is not the issue, as Lord Clyde so eloquently said in 1929 – interestingly enough, a time when morals and a sense of fair play probably counted for more than they do now.
Most of the bad press arises out of jealousy (although Jimmy Carr may have made an error of judgment as the pot calling the kettle black). I can assure you that I would dearly love to have the wherewithal to pay some bright accountants and lawyers to come up with a scheme that legally avoided me paying tax, but don’t challenge me on moral grounds. I have no duty to pay any more tax than I need to and my right to take that stance is not only enshrined in British case law, it is a cornerstone of tax law in so many other jurisdictions as to be an international principle.
Challenge the arrangement if you wish but remember, neither the Government nor HMRC are above the law and if existing legislation is inadequate, has (loop)holes and is clearly ineffective such that it ‘allows’ the creation of these schemes, then new legislation will need to be enacted. There will always be those who can circumvent legislation with clever schemes but HMRC already has the power to look at ‘associated operations’ (once used extensively with IHT cases) and, where there is a series of steps taken for the sole purpose of avoiding tax that would otherwise be due, HMRC can look at the position at the start and the position at the end, ignore any steps in between and levy tax accordingly.
We should not use ‘morality’ as an excuse to create a witch hunt for those who are legitimately exercising their right to pay the least amount of tax possible. The law has already ruled that morals don’t come into it so let’s not usurp the law. That’s the thin end of the wedge and a judgment too far.
Note: This represents the writer’s personal view and not the opinion of Novatis Asset Management
Banking failures, manipulated LIBOR, inappropriate takeover bids, bribery scandals – how do these things arise? Well, there are many reasons as you might expect, but a contributory factor surely has to be failings in ‘corporate governance’. This is, as you would expect, a huge topic and one that cannot be covered in detail here but nonetheless, it should not be ignored, especially in the current climate of distrust.
Logic and experience tell us that there are few senior executive directors who do not know what is happening in their businesses. Indeed, if a senior executive director is in the dark, he or she is clearly not doing their job properly – and if they do know that something unethical (or just plain wrong) is happening but choose to ignore it, the sin of ‘turning a blind eye’ makes them wholly culpable.
So what are the checks and balances in the corporate world?
The first line is the non-executive directors. In law, there is no distinction between an executive and a non-executive director but it is general practice that non-executive directors give objective criticism and advice from an independent standpoint: as the Cadbury Report (1992) said, “they should bring an independent judgment to bear on issues of strategy, performance and resources including key appointments and standards of conduct”.
Non-executive directors (perhaps Independent Directors would be a better term?) should also have a breadth of experience and specialist knowledge that enables them to see the ‘big picture’ and give useful advice and guidance to their executive colleagues, thereby bringing valuable objectivity to the Board’s deliberations and subsequent decisions. This also means that they should be sufficient in number to carry significant weight in that process and not be simply a ‘lone voice’.
Non-executive directors should bring specialist knowledge to a business and may well be useful on various sub-committees such as the remuneration committee. Of course, it is essential to ensure that the packages offered are good enough to attract the right calibre of executive, but where have the non-executive directors and remuneration committees been when huge severance packages have been agreed or when remuneration linked to share price performance and not overall profitability have been agreed? If an executive’s contract is terminated ahead of time, it may be a legal requirement that they are compensated – indeed, under some circumstances it may simply be a matter of being ‘fair’ to compensate them – but whose clever idea was it to arrange a package that pays massive severance even if the executive has ‘failed’ or if they resign? This is not how the ordinary world works: if you resign from your job you’ll get paid what you are owed to the date of resignation and no more. Are such deals reasonable then or do they represent the seedier side of the ‘old boy network’…. or is it just that the remuneration committees are too stupid to know any better?
The non-executive directors are supposed to monitor the Board’s performance towards achieving the Company’s targets and they should always be asking questions, particularly if they have concerns or doubts about actions that are being taken. If necessary, they should seek independent legal advice about issues where they have concerns. This continual probing is an important function that should keep executive management ‘on the straight and narrow’ but recent events have shown that these functions are not being fulfilled – or perhaps the non-executive directors are having the wool pulled over their eyes with their executive colleagues proving economical with the truth?
To be effective, non-executive directors must be fully briefed by their executive colleagues and must be given access to information and/or documents that they ask for. If the executive delays things or withholds information so that non-executive directors only get partially briefed or briefed at the last minute, their role is nullified and non-executive directors need to speak out. It may cause conflict, but that’s part of business and certainly, that kind of conflict is important to ensure the continuing honest and ethical running of the business.
It seems that there are non-executive directors who are not necessarily appointed on merit – they are competent, no doubt, but are they specialists? Do they have the depth of experience of the business to which they are appointed? Is there a potential conflict because they represent the interests of a major shareholder? (Note: The Companies Act 2006 technically makes this more difficult. In such circumstances, the non-executive director should consider his/her position as there is a clear conflict of interest.) Whatever the position, this is not a foolproof system of checks and balances.
The second line of checks and balances is the major shareholders. In this modern era, many of us participate in the profits of these corporations indirectly, through holdings in unit trusts or life company funds, or perhaps a company pension scheme, so these major shareholders have a duty to ensure that a company in which they participate is being run honestly and truthfully.
We all know that the big investment houses often undertake company visits. On these they are greeted by senior management, taken on a tour, probably fed a pleasant lunch in comfortable surroundings, the fat is chewed… and yes, questions will be asked, but no Chief Executive or senior director worth their salt is going to say “don’t buy our shares because frankly we’re dead in the water” nor will they say “our profits will increase fivefold this year because we’re now buying cheap rubbish but we’re passing it off as good quality and flogging it on to our unsuspecting buyers at high margins”. To an extent, unless the visiting analyst or fund manager knows the business well and knows what to ask, they are going to be spun a positive picture every time.
Yet, with the voting power that these investors have, they also have a moral responsibility to protect the interests of smaller shareholders, many of whom may also be their stakeholders so, as with non-executive directors, they should be looking at the big picture and not focussing on short term gains. It may be a hard task for them to do so when we, as their stakeholders, demand high returns and, in particular, short term gains but while it is human nature to want quick returns, the constant striving to achieve such results merely leads to volatility in markets. Perhaps that pressure is also a driver for companies who want to encourage investment in their businesses and support their share price, to take a flexible approach to ethics, morals and regulations. Under such pressures, executives may well have been tempted to move rashly but, as we are seeing, this can have serious consequences. Chickens have a habit of coming home to roost; you reap what you sow; what goes round, comes round….
For those who hold shares directly, the increasing use of electronic trading platforms in financial services means that these shares are often held in the name of a nominee company and this is often the case with stockbrokers as well. Of course, the use of a nominee company has many benefits and for proper use of a trading platform (or wrap as some are known) it is essential. The investor also benefits from far less paperwork than is involved in holding shares directly, as well as consolidated reporting, but often this is at the cost of being remote from information that would otherwise be passed on directly.
Those whose holdings are in nominee company names often miss out on such things as the annual report and accounts, shareholder ‘perks’, invitations to the AGM and so on, merely because they are not alerted to these things by the nominee company that is being used and are not aware that they can ask for them. They forget – or do not realise – that they are the shareholder; the nominee holding is merely a convenience.
The Chairman or Chairwoman, Chief Executive and the Board of Directors are employed by the company but they are appointed by the shareholders and by definition therefore, they are accountable to the shareholders. Yes, their job is to run the company but the key is that it is on behalf of the shareholders so shareholders of all sizes need to make their voices heard. Anyone who directly owns shares in a publicly quoted company is entitled to attend shareholder meetings, to vote (either directly or through a proxy) on resolutions and to participate in the profits of the company, if there are any. They can have a say in the appointment of directors and auditors and if they are sufficient in number, they can force an extraordinary general meeting to be called. This is not about subversion or undermining the Board, nor is it about following a political agenda, but it is about reminding executives that shareholders care about the companies in which they invest and in how they are run, not just in the share price.
Corporate governance is a serious issue. Companies must not be allowed to ride roughshod over their investors, the regulators (or anyone else for that matter) nor should they be allowed to manipulate for their own ends. In short, share ownership carries responsibility and it matters not whether one is an individual, an investment club or a major institution, silence is not an option. Shareholders must take an interest in what is happening in their company and, if unsure or dissatisfied, must speak out, otherwise they must share at least moral responsibility for the actions of the Board they appointed.
CIPS – Centralised Investment Propositions – have been in the news lately. So how does a forward thinking adviser provide the kind of service his or her demanding clients want without being tripped up by the regulator?
The FSA wants everyone to have an individual outcome and suggests that a range of model portfolios is not necessarily the right solution. On the other side of the coin, they have previously suggested that if Mr A and Mr B are identical, they should receive identical outcomes. Now on the face of it, that seems like a contradiction – but it is not.
The key lies with the investment process. At the head of that process will be an investment philosophy – a statement of what you the adviser (or your firm) believes. From that philosophy you will develop an investment policy that will include a list of investments that you feel meet the criteria and this could be a broad list or a specific detailed list. Thereafter, your process will outline how you select investments for a client, how you monitor performance, how often you rebalance, switch and so on.
In enlightened firms – and especially those who will survive and prosper post 1/1/13 – this process is integrated with the financial planning process so the client is taken seamlessly from the ‘what, when, why, where?’ elements to the ‘how?’.
Now the question is ‘what is the most effective way to execute the agreed strategy?’
For some, that will be on an advisory basis and there is nothing wrong with that in principle however, in practice it is cumbersome, may involve the client in making decisions they are not equipped to make and, worst of all, may not want to make.
Discretionary investment management looks like a good solution because the client’s money can be easily managed through periods of change and rebalancing without any need to seek permission each time. That means a better investment experience for the client but it’s not easy or inexpensive to obtain investment management permissions, especially for small firms.
So, many advisers are choosing to outsource, but when outsourcing in this way, it is pretty certain that the DFM will be applying their own investment policy and process after capturing the client assets onto their own platform. How does that integrate with your financial planning? How do you demonstrate that the DFM and their associated investment policy you’ve chosen is the right one for your client? What assurances do you have/can you give your client that they will manage his or her money to achieve the client’s objectives, rather than focussing on their own internal targets? In short, how much control do you have?
If there was a way to provide discretionary investment management for your clients using your investment policy, your ideas, focussed on achieving their goals while leaving you in control of the client relationship and the investment policy, surely that’s something you’d want to know more about, isn’t it?
www.novatis-am.com has all the details and a downloadable copy of our brochure, but in summary, we can give you not only the help you need to formulate and articulate your own robust investment policy, we can help you maintain it, thus helping you to ensure that you remain compliant. We will then manage your client’s funds following your investment policy and focussing on achieving your client’s goals.
We firmly believe that to survive and prosper in the post-RDR world, advisers will need to offer this kind of integrated investment service to their clients – in fact, we believe that many clients will demand it. They realise that the day of the ‘jack of all trades’ has passed but they will expect a firm to be able to provide an integrated service. Those that do will find client loyalty improves along with referrals – and that should lead to higher revenues and increased profitability. That’s the bottom line – in more ways than one.
Talking costs nothing so why wait? Get in touch for an informal chat – our contact details are on the website. Let’s talk soon.
Virgil wrote these words in the Aenid and literally translated it means “I fear the Danaens even if they bring presents”. Our more modern expression is “Beware of Greeks bearing gifts”.
The phrase relates to the story of the siege of Troy and the wooden horse prepared by the Danaens. For those who don’t know, the horse was left and the army ‘departed’. The Trojans, believing this to be a peace offering by the Danaens and that they had withdrawn, brought it inside the gates of Troy and stood it in their town square. Later than night, the horse opened and Danaen soldiers emerged, launched an attack and captured the City.
History lesson over – let’s move on to what is happening now and why I’ve chosen to start this blog with that particular phrase.
Like most people, I’ve sat and watched the events in Greece unfold with a mix of alarm and incredulity: the former because clearly there are serious implications for the Euro and the latter because it seems hard to believe that having worked with Merkel et alii to find a solution, Papandreou would then say “Oh, by the way, I need to hold a referendum. Did I not mention that?”
The problem has always been that allowing Greece to default undermines the Eurozone and perhaps the EC itself. Allowing Greece to exit the Eurozone was also perceived as tantamount to admitting that the single currency model doesn’t work (in fact, I don’t believe it can work in the long term without full fiscal union, but that was another blog).
So back and forth, round the houses, up and down, from side to side between Greece, Germany, France and the rest of the Eurozone with other member states (such as the UK) offering their advice, the plot has more twists and turns than a Greek tragedy. Ironic since the unfolding events are clearly tragic.
But where are we now?
Is it possible that with performances worthy of Oscars – nay, induction into the Hall of Fame and stars outside the Chinese Theatre in Los Angeles – Papandreou, Sarkozy and Merkel have fooled us all?
The events of this week so brilliantly summed up by the cartoonist Adams in the Telegraph on Tuesday 2nd and Wednesday 3rd November (see them by finding the dates at http://www.telegraph.co.uk/comment/cartoon/ and enjoy a good laugh) have us all stunned at the apparent stupidity of the Greek government. First Papandreou agrees, then he must refer. There must be a referendum, now apparently no referendum is needed. Hasn’t the Greek government proved itself to be completely inept….
Hang on, inept? Is that rather clever? Wouldn’t the presence of an inept Government undermine the strength of the Euro? Would it not be prudent, in order to maintain the status quo, to ‘sack’ such a government from membership of the Eurozone? Would that not be the sensible thing to do in order to demonstrate that the Euro is a strong currency?
Watch this space but when the Oscar nominations are announced I would not be surprised to see Merkel up for “Best Actress”, Papandreou as “Best Actor” and Sarkozy completing a clean sweep as “Best Actor in a Supporting Role”.
Whatever happens, beware of Greeks…
(This blog is a personal view by the way and not an official statement from Novatis Asset Management, nor is it an economic forecast. It is even less the result of astrological star gazing, crystal ball scrying, or dancing naked with a coven of witches at midnight in an attempt to foretell the future. Just so you know, OK?)
“There is a Chinese curse which says ‘May he live in interesting times.’ Like it or not we live in interesting times. They are times of danger and uncertainty; but they are also more open to the creative energy of men than any other time in history.”
How prescient for us in financial services that Robert Kennedy should say those words in Cape Town during a speech he gave in 1966.
Whether you consider some or all of current events to be curses or blessings is irrelevant for this blog. Instead I want to focus on the second part of Kennedy’s words: “They are times of danger and uncertainty; but they are also more open to the creative energy of men than any other time in history.”
Ever since the original Financial Services Act of 1986 and the “A-day” that followed, advisers have lived and work in a fluid environment – times that have often seemed surrounded by constant change. Now we face some of the biggest changes and challenges so far.
Yes, these are ‘interesting times’ but this is when with a stiff upper lip and a backs-to-the-wall do-or-die attitude, winners emerge and drive forwards into the future blazing a trail for others to follow. (Ah, such prose!) Yet it is true. Adversity and challenge is often a spur to great things and sometimes, greatness itself.
The fuss will die down, of course. On 1st January 2013 the sun will rise as it always does and the world will carry on turning – even if the Greeks do say ‘non’ (or “όχι” to be correct) to the rescue plan – but for IFAs, it will be different. For the leaders and forward thinkers, new methods and working practices will have been established and adopted. The leading financial advisory practices will be offering a full life/financial planning service and an integrated investment management operation that is focussed on the achievement of client goals. Clients will clearly see the value they get from ongoing advice and constant monitoring of where they are with regular ‘fine tuning’ adjustments to keep them on track. They will value the bespoke portfolios created to match their needs, aspirations and appetite for risk and they will appreciate being advised by a firm that uses qualified professionals to deliver its results.
For others, the same challenges will remain as exist now. How to carry on in the new world, how to keep clients in the face of competition from practices that took the initiative early on, how to maintain client relationships when so much has to be outsourced to people who have their own [hidden] agenda….
‘Interesting times’ these may be, but if you rise to the challenge, now is a great opportunity to build for and secure your future. You don’t need to be big to compete in the new world – in fact, being small and personal is probably going to be a distinct advantage – but you do need to be ready and on the ball.
It may look tough – “a big ask” as is said so often nowadays – but in reality it is easier than you think to create and deliver integrated financial planning and investment management. IFAs have great people skills and extensive knowledge of life, pensions and financial planning matters: post RDR they are so much better equipped to compete in the Wealth Manager space than many so-called Wealth Managers. There’s a market ripe for the picking.
But to compete in the WM space, you need to have the full integrated package in place and that is the where many IFAs come up short. Strategy is not the issue. Skill is not the issue. It is simply the ability to articulate the policy and execute the strategy efficiently for the benefit of the client: in other words, deliver a better financial planning and investment experience.
Some people think Novatis Asset Management is just another DFM with an ivory tower and an agenda. Nothing could be further from the truth. We exist solely to help you bring that same ‘big firm’ integrated service to your clients at reasonable cost. We don’t want to capture your clients’ assets; we don’t want to undermine your client relationships; we don’t want to impose our policy on you; we have no agenda – hidden or otherwise.
If you want to compete post RDR by offering a fully integrated advisory and investment management service, you should talk to us – but be prepared for a shock when you find out that we’re firmly on your side.