Our objective is always to construct a financial plan that meets your needs, including an appropriate timescale and accessibility, where you understand and agree the risk level, with an appropriate risk and return profile. All portfolios are built on an individual basis to suit your circumstances with no two portfolios being the same.
It is important to be tax effective but this is the last item we address - for those who want maximum tax efficiency we can simply lose all of your money, leading to tax reclaims; however we find most clients do not seek this particular level of tax efficiency.
Whether you are new to investment or whether you have existing investments and your financial adviser has retired or moved on, talk to us - we can help.
We will provide a simple report to you that outlines what we can do to help and what we will charge for doing it if you agree. We will not charge to review your current investments but will quote you a fee if you wish for us to take them over.
We are happy to see prospective clients at their home.
The Investment Process
We have specific stages to the investment process some of which are discussed below:
A ‘Fact-Find’ is the term given by the Financial Services industry to the process of ascertaining relevant information from clients. The information gathered is broken down into ‘Hard Facts’ and ‘Soft Facts’.
‘Hard Facts’; these are factual facts, for example your name, date of birth, income, expenditure, assets, liabilities etc. etc.
‘Soft Facts’ are more concerned with your aims & intentions, aspirations and feelings. Examples would include attitude to risk, ethical considerations, family issues etc.
Any plan or strategy should take into account both ‘Hard’ and ‘Soft’ facts with the aim of identifying your financial and other needs.
Here we provide a broad overview of your situation and our proposals. At this stage we will also tell you what we propose to charge if you decide to proceed. More information about this can be found in our Costs section.
If you agree with the proposals and costs detailed in the Strategy report we proceed to draw up a specific investment plan. Our objective is always to achieve the maximum return for the appropriate level of risk - hence the name of this Website. The starting point for this is Asset Allocation.
It is important to regularly review portfolios to ensure that they continue to perform and to meet requirements - we will agree a review schedule with you at the outset.
Leave the money in the bank or invest?
The starting point is the comparison between asset backed investments and deposits. Asset-backed investments are those which are backed by a company's underlying assets. Examples of funds using asset backed securities are Equity (share based) funds, Property funds and Fixed interest funds. Please also refer to our commentary on asset classes.
Why asset backed investments (over time) often better deposit returns...
Banks and commercial lenders need to make a profit on their lending – they must lend out money at a greater cost than the interest that they pay to depositors.
Businesses almost always have ‘gearing’ – they borrow money to trade. Businesses over time must earn a greater rate of return than that they pay on the money that they borrow, otherwise they will fail. Thus over most five year periods during the last 80 or so years the returns from asset backed investments have outperformed cash (deposit based) returns.
On balance a portfolio of asset backed investments offers the best chance of out performing deposit based holdings and, importantly, out performing inflation - provided that it is held for a reasonable period of time.
It is of course always necessary to leave some funds on deposit (cash based) for emergencies and planned expenditure.
We describe the categories of investment as “Asset Classes”. The foundation of investment planning is the asset allocation decision - what percentage of funds are to be placed under which heading. The main asset classes are:
Cash / Deposits – characterised by security of nominal capital values but returns are limited, particularly in real terms, that is to say compared to inflation.
Fixed Interest – generally provide security of income, particularly in nominal terms with exposure to capital gains or losses.
Equities (Shares) – characterised by insecurity of both income and capital values over the shorter term, but offering a much higher probability of producing real growth (over inflation) over time in both income and capital.
Property – both residential and commercial property have proved to be a reasonable long term hedge against inflation and provide diversification from the other asset classes. The problem with specific property purchase is high cost and limited diversity.
Derivatives – generally characterised by highly leveraged gains or losses but can offer risk management (example hedging) at a cost.
We manage risk by using combinations of the above asset classes. It is vital to select the correct vehicle for managing and reviewing any non-deposit investments selected because it is necessary to be able to carry out fast and detailed reviews of investments.
Risk & Return
Risk has been described as the “uncertainty of loss or profit”. Risk is a huge subject in its own right and one that needs extensive discussion.
The objective of portfolio building is to construct a portfolio that maximises the return for an appropriate level of risk – hence the name of our website.
Some of the things that determine risk include:
Timescale: if you need the money in six or twelve months, then you should not be investing. Clients who are at or approaching retirement will generally tend to have a far lower overall risk profile than those who are younger.
Tolerance for risk: this is subjective; for example if you have never invested before you should typically approach with caution.
Capacity for loss: If for example you have very little income (employment, pensions etc) and what you are proposing to invest is needed to support your lifestyle this would suggest a lower risk approach.
Amount available: If you have a modest amount only then you may not have sufficient over and above necessary emergency funds to invest. As a guide we start providing bespoke advice at £100,000 plus.
This is a complex subject and we will talk through the appropriate profile to target with clients. There are many ways of achieving the correct overall risk profile. If for example a client instructs us to place funds at a medium risk level then we could just follow this instruction. Alternatively the investment could be split with half below medium risk and the other half above – resulting in an overall (averaged) correct risk profile and there are good reasons for taking this latter approach.
As a starting point we use an illustrative ‘Staircase of Risk’ to explain risk to our clients. The Staircase is an imaginary one that has ten steps – from 1 to 10 – the top floor. Think of this as the higher you are on the staircase the more it hurts if you fall off!
We prefer to be paid for our work.
The costs that we charge generally fall into two categories:
1. Cost of the initial consultations and construction of a suitable portfolio of holdings.
2. The cost of ongoing management and review of holdings.
We will quote you a fee based on the amount of time that we need to spend. The proposed level of our fees will be indicated in all cases once the work to be done is quantified.
In addition investment houses will make charges for running their funds.
It is important that the level of fees should allow for the real prospect of obtaining returns that better deposit based alternative investments – taking into account risk tolerance and required return. If we do not feel that we can benefit you we will tell you and decline to act.
Please note that the first meeting is free and that we will not carry out any chargeable work without having first discussed and agreed the amounts with you.