Wealth management: a combination of financial planning and investment management

A holistic wealth management service will incorporate both advice and investment functions, which require a significant degree of technical understanding, considerable time and a great deal of effort.

"The seven step process looks spot on!"

Rory Percival, former technical specialist at the Financial Conduct Authority

Professional advisers' intricate knowledge of their clients' circumstances makes them best placed to provide expert financial advice. However, undertaking both generic financial advice and investment management services simultaneously can be challenging, particularly as investing is a specialist skill which often benefits from the allocation of significant resources.

Servicing the adviser community: DFM due diligence in seven steps

We understand the issues facing professional advisers and offer them support by providing services that allow them to transfer their investment functions to a third party. While our business model is specifically designed to help advisers that might benefit from insourcing their investment functions, we appreciate that we are not the only Discretionary Fund Manager (DFM) operating within the UK wealth management industry. We recognise the importance of advisers being able to choose the best partner to work with and have therefore consulted with industry professionals to establish a comprehensive DFM due diligence process which they may wish to adopt. This involves evaluations across four key areas:

  1. Range of services
  2. Performance transparency
  3. Back office systems and controls
  4. Financial strength

To assist, independent third parties have undertaken analyses of each of these four core themes and advisers can use these to gain confidence in a DFM partner. Furthermore, we have been able to use the results to steadily improve the services we provide.

The Synaptic Risk-rated Brooks Macdonald Managed Portfolio Service (MPS)

Our Managed Portfolio Service allows clients to access our considerable investment expertise and institutional buying power. It provides a way to access a wide range of asset classes, some of which might not otherwise be available to retail investors. It also employs qualitative and quantitative risk controls that endeavour to limit the potential for losses.

The Service is only available through professional advisers authorised to give financial advice, either directly or via a range of platforms. It provides a means for investors to access the proven Brooks Macdonald investment process through a segregated portfolio running one of a selection of ten Synaptic Risk-rated investment strategies. These strategies invest across a wide range of asset classes and can be run within various investment vehicles and tax wrappers. While discretionary management services are usually only available to investors with relatively large investment minimums, the minimum Managed Portfolio Service investment threshold is just £20,000.

The Brooks Macdonald investment process

While the level of service provided by a DFM is important, the investment returns they achieve are critical. Our MPS employs a proven investment process which we are proud to show has helped it outperform its peer group, as represented by the relevant Investment Associated indices (Figure 1).

Calendar year performance: Brooks Macdonald Managed Portfolio Service

Figure 1: Brooks Macdonald Managed Portfolio Service performance

  2010 2011 2012 2013 2014 2015 2016 2017
MPS Low Risk (Defensive Income) 9.9 2.7 10.8 9.0 5.5 2.9 5.9 6.2
IA Mixed Investment 0-35% Shares TR in GB 7.8 1.4 6.2 4.2 4.8 0.4 8.5 4.8
MPS Low Medium Risk (Income)           2.9 10.7 6.9
MPS Low Medium Risk 11.5 0.8 10.8 12.7 7.1 5.1 11.1 7.8
IA Mixed Investment 20-60% Shares TR in GB 8.6 -1.9 8.4 8.9 4.9 1.2 10.3 7.2
MPS Medium Risk (Active) 16.1 -3.0 11.2 16.0 5.0 5.0 8.6 13.1
MPS Medium Risk (Income)           3.2 11.1 9.1
MPS Medium Risk (Passive)     10.4 13.7 8.7 1.0 15.7 10.0
IA Mixed Investment 40-85% Shares TR in GB 12.3 -5.5 10.0 14.5 4.9 2.7 12.9 10.0
MPS Medium High Risk 20.0 -9.5 11.9 20.1 5.1 7.6 9.8 17.0
MPS Medium High Risk (Passive)           2.2 19.0 11.6
IA Flexible Investment TR in GB 14.6 -8.7 10.1 14.5 4.9 2.0 13.8 11.2
MPS High Risk (Growth)       20.7 5.3 7.6 12.0 18.3
MPS High Risk (Income)       20.8 6.7 4.6 12.6 13.0
IA Flexible Investment TR in GB       14.5 4.9 2.0 13.8 11.2

Source: Brooks Macdonald/FE as at 31.12.17. Gross of fees, but net of underlying fund charges. Deduction of fees will impact performance shown. Past performance is not a reliable indicator of future results.

For further information on our “Seven Steps” DFM due diligence process, Managed Portfolio Service, or investment insights, please visit brooksmacdonald.com

Important information

The value of investments and the income from them may go down as well as up and neither is guaranteed. Investors may not get back the capital they invested. Past performance is not a reliable indicator of future results. Changes in exchange rates may have an adverse effect on the value of an investment. Changes in interest rates may also impact the value of fixed income investments. The value of your investment may be impacted if the issuers of underlying fixed income holdings default, or market perceptions of their credit risk change. There are additional risks associated with investments in emerging or developing markets. The information in this article does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it.

Brooks Macdonald is a trading name of Brooks Macdonald Group plc used by various companies in the Brooks Macdonald group of companies. Brooks Macdonald Group plc is registered in England No 4402058. Registered office: 72 Welbeck Street, London, W1G 0AY.

Brooks Macdonald Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Registered in England No 3417519. Registered office: 72 Welbeck Street, London, W1G 0AY.