Whether you are investing with specific goals in mind, or want to grow an existing investment portfolio, we can offer expert professional help with an investment adviser. We recommend from the whole of the market. There is an extensive range of products available in the UK as well as offshore (where appropriate), including:
When it comes to advising on investments, our clients needs and objectives can vary quite widely. However, our investment advisor has a framework for advice and will always follow these steps to ensure that our recommendations are appropriate to the client’s needs and the client receives best advice:
Step 1: Fact Finding:
As with any project, the key to a successful outcome is careful preparation and planning. Detailed discussion with our clients is essential to bring out their current financial situation, their expectations for the future, and their investment and savings objectives. It will include careful assessment of their tax situation and the potential tax on existing and proposed investments, the intended investment time horizon, family commitments, the need for income and so on. Integral to all of this will be the client’s appetite for investment risk, usually described as “attitude to risk”.
Step 2: Attitude to Risk:
A good investment adviser will initially form a fairly accurate picture of the client’s attitude to risk from their fact-finding discussions. This will be further refined by the use of a specific attitude to risk questionnaire, which documents more closely the clients preferences for risk, (and which may vary between say, pension related investments, and other non-pension investments, or between husband and wife). This is an important area and the agreed upon level(s) of risk to which the client is happy to be exposed should be carefully recorded.
Step 3: Asset Allocation:
Having established your attitude to risk, your investment IFA will then consider the best mix of asset classes appropriate for that level of risk as the framework for our recommendations to you. Asset classes are categories of assets. The main asset classes are:
- Fixed Interest
These may be further broken down into sub categories by geographical location or sub-asset types, for example guaranteed funds, gilts and other sovereign debt, corporate bonds, UK directly held property, international property, international bonds, UK equities, US equities, emerging markets and so on.
It is widely accepted, backed up by significant evidence, that asset allocation – the mix of the different asset classes in your portfolio – is the main factor in determining your likely future investment returns. Each asset class has historically displayed over long periods a certain level of average return with a measurable degree of volatility or risk.
Economic theory shows that for a given level of attitude to risk, it is possible to establish an efficient mixture of assets that gives an effective balance between future risk and returns.
We have partnered with Ibbotson Associates, an organisation that are global leaders in understanding and modelling financial market risk and asset allocation. The calculations they carry out are complex, but basically use assumptions on:
- the likely level of return, and of volatility of each asset class, and
- assumptions about the extent to which the different assets classes behave differently over particular periods over an investment period of at least 5 years.
The output of their models is the mix of the assets that based on these assumptions, gives the maximum target level of return for your chosen level of risk. Your investment advisor will be guided by this in designing your portfolio.
Step 4: Choice of Funds / Products:
The construction of the portfolio of investments is a skilled area where the investment IFA will blend asset classes, and different types of investment vehicle, into a portfolio which in his opinion offers optimal returns within all criteria specified by the client and arising from the fact finding, having regard to the specific tax position of the client(s) (often optimising the tax between husband and wife), the investment time horizon, cash flow and needs for income. A typical portfolio may include some or all of the following:
- Cash on deposit
- National savings products, e.g. Certificates and Premium Bonds
- Sovereign Debt e.g. Gilts
- Structured products, such as fixed term bonds with guarantees
- Stocks and Shares ISA funds
- Directly held funds in unit trusts, OEICs and investment trusts
- Onshore or offshore Investment bonds, possibly within a trust
Your investment adviser has significant resources available to him to assist in choice of recommended products. In the case of unitised funds, which will be the usual medium for pensions, stocks and shares ISAs, investment bonds and directly held funds, we are guided by an independent research company, Morningstar.
Morningstar is an international investment consultancy that specialises in fund research and providing forward looking investment research to financial intermediaries, life offices and investment houses. Their research is available in a variety of ways and is used by their clients to help deliver good advice to investors and provide an audit trail on advice given, best advice panelling services, bespoke consultancy and fund rating services. They act in partnership with Ibbotson (see above). DFM & True Potential have partnered with Morningstar for this service, producing bespoke panels of recommended funds covering all of the IMA Fund Sectors for our investment advisers’ use.
Step 5: Suitability Report:
Whether your recommended investments comprise a small stocks and shares ISA, a personal pension or a complex portfolio of many asset classes and products, you will receive our suitability report setting out in writing our assessment of your needs and objectives, the research tools we have utilised, the types of investments we chose not to use and the reasons why, and detailed reasoning behind our recommended solution.
Step 6: Implementation:
After obtaining your approval to the recommended solution(s), your investment adviser will arrange for the necessary paperwork to be completed and forwarded to the investment provider(s).
Step 7: Ongoing Review and Advice:
We recommend that your relationship with your investment IFA is long term. In order to get the best from your investment portfolio, it is necessary for it to be reviewed regularly, and adjustments made where deemed appropriate. Economies and markets can change, as can a client’s situation, objectives or attitude to risk. In order to get the best from your portfolio of investments or pension, we recommend you seek advice from your investment adviser on a regular basis. Our investment advisors offer an ongoing service for an agreed level of remuneration.
For more information please call us on 0345 013 6525.