A whole of market due diligence approach to selecting

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A whole of market due diligence approach to selecting
A whole of market due diligence approach
to selecting a discretionary manager
Contents
Introduction1
Foreword by Fraser Donaldson
2
Suggested 7 Step process to creating a panel of DMs 3
Identifying the ‘long list’ - PAM Guide 2011 Managers Index
5
Contributors to Defaqto – ‘Database of DMs as at 1st March 2012’
8
Contributors to PCI
9
Asset managers with £2bn and over FUM
11
Panel analysis
12
Amalgamated Panel Analysis 17
Sample DM questionnaire
24
Appendix
Adviser Fee Justification
A Example of initial research undertaken by an adviser in order
to recommend a discretionary manager
B Summary of work undertaken by an adviser on an annual basis CSample client review letter
27
28
29
30
A Research Guide to Creating a Panel of Discretionary Managers
Introduction
Over the course of our work with advisers we are
often asked how to demonstrate or justify the use of
one DM against another. In this new distribution era,
as driven by the Retail Distribution Review (RDR) the
responsibility for selection and due diligence will be of
key importance to ensure appropriate partner selection
for adviser firms and of course their clients.
This year, Defaqto have taken on the role of selecting the SIPP
In contrast to unit trusts, the task of comparing DMs is less
on, once a shortlist is established. We have provided a sample
straight forward, indeed experience tells us that it necessitates a
questionnaire that could assist in establishing the credentials of
significant amount of initial work in order to establish a workable
each DM. It should not be forgotten that comparisons based
and meaningful shortlist.
on wordy descriptive answers can be extremely difficult to
This guide aims to provide the quantitative and suggested
interpret and compare. The questions that require significant
and offshore bond panels under review based on their star rating
and Engage Adviser Research systems. As a result of this the
2012 products are, in the main, different to the 2011 products,
therefore we have added another table providing a combined
score over the two years that this document has been published.
As in the first edition, suggestions have been made with regard
to areas an adviser might want to undertake further due diligence
dialogue are designed to assist in a better appreciation of the
qualitative research data that an adviser might use to create
in-depth workings of each DM. Equally, the questions that
a shortlist of DMs from a whole of market perspective. It also
require a numerical response (e.g. less than 60% of our business
provides a framework for subsequent analysis in order to
is introduced by professional advisers) are well served to allow
demonstrate a thorough due diligence process.
further filtration of the shortlist with the ultimate aim to identify
This second edition of the guide has been produced with the
one or perhaps two preferred DM partners.
assistance of Defaqto who have reviewed and updated the
After having explained the 7 steps to creating a panel of DMs
data, as well as providing some formal commentary about the
we have included, from page 27, some example documents that
suggested process. We have taken this route to provide an
an adviser might wish use to explain exactly what services they
independent assessment as a result of feedback from last year’s
provide in relation to the research and monitoring of a DM and
edition. This should remove any conflicts of interest that may
arise in the ongoing upgrade of this suggested research process,
how they might appropriately charge a client for this.
ensuring the future validity of this document.
We hope that you find this suggested approach and research
We have attempted to distil the long list of over 200 DMs to a
document useful. Defaqto’s involvement is designed to remove
any perceived bias, and ensure that all of the data employed,
more manageable short-list by applying some fairly traditional
and the rationale behind the selection of panels, is accurate and
and fundamental filters such as size (FUM), willingness to be
evaluated on both performance and service (contributors to PCI
methodologically sound.
and Defaqto), and the ability to be used via both offshore bond
Andrew Denham-Davis
and SIPP providers.
Director, Intermediary Sales
As before, we recognise that many offshore bond and SIPP
providers have undertaken significant due diligence during
the process of establishing a panel of DMs available via
their products. We have harnessed this valuable research by
establishing which DMs consistently feature on the major
providers’ panels.
1
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
FOREWORD BY FRASER DONALDSON –
DEFAQTO INSIGHT ANALYST FOR FUNDS
Brooks Macdonald have requested an independent
audit of the data and methodologies used within
this research document.
Defaqto Research Services. Other contributors are also clearly
Defaqto have been researching, and providing consultancy
It should be noted that Defaqto has not been party to the
referenced, and Defaqto has verified that the data has been
reproduced accurately. Defaqto has not audited third party
data in terms of the information itself.
on the selection and comparison of discretionary managers
construction of the suggested questionnaires, fee charging
(DMs) for the past three years and feel well placed to
schedules, or other sample communiqués highlighted by
comment on the processes suggested within this document.
Brooks Macdonald within this report. This content has been
It should be made clear that Defaqto has been employed
reviewed in terms of the overall process, but not in terms of
to audit a process that has been created and developed by
the actual content and layout of the documentation.
Brooks Macdonald Asset Management (Brooks Macdonald).
The value to advisers in following a process such as this stems
All copyright, statements and methodological assumptions
from two aspects inherent in this document. Firstly, the use
are the intellectual property of Brooks Macdonald. The
of the Private Asset Managers (PAM) directory, to set out a
Defaqto comments will be clearly marked with our logo to
good proxy for a whole of market approach to DM selection.
further highlight the additional content that Defaqto have
Secondly, the suggested process and scoring can be modified
produced as part of the audit. An entire summary of the
to suit adviser firm preferences, either in terms of the
review is also at the end of this document.
importance attached to each filter, or by creating a bespoke
Defaqto has either verified or supplied the data for this whole
filtering system using the data made available by the research
of market due diligence approach to selecting a discretionary
document. This benefit can be enhanced by the existence
manager document. Data supplied by Defaqto is clearly
of last year’s edition of the same process using different data
sourced and is supplied to Brooks Macdonald as a licensee of
sets and criteria.
2
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
7 Steps to Creating a Panel of Discretionary Fund Managers
1. Identify list of all DMs in the market
2. Apply filters to reduce to a manageable size
3. Send a focused questionnaire to those on the reduced list
4. Evaluate returned questionnaires and create a shortlist
5. Meet with each DM on shortlist and
select those to include on panel
6. Maintain and monitor your panel of DMs
7. Keep records of research undertaken for future reference
3
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
EXECUTIVE SUMMARY BY DEFAQTO
ON BROOKS MACDONALD’S DUE
DILIGENCE PROCESS
Brooks Macdonald’s approach to selecting a DM is a sensible
In auditing any due diligence process, however, Defaqto
and comprehensive one. It is of course not the only approach
would make the following provisions:
and some bespoke work, by each adviser may be required on
• It is for the individual adviser to weight the importance
the process to emphasise what is important to that adviser
and relevance of individual filters. Some filters, or the
and his clients.
details of specific filters can of course be modified to
Having said that, Defaqto has noted that the sheer range of
suit. The scores can easily be recalculated, and the core
DMs covered by this process permits an adviser to realistically
process retained.
claim that they have selected a shortlist from the market, and
• The adviser can modify the filters or indeed add different
it is difficult to suggest other filters where similar data from
ones to suit. With DM services increasingly made
such a wide range of firms would be readily available.
available to the intermediated market relevant due
diligence information is becoming easier to obtain.
Defaqto would not want to comment on the relevance of
retaining a whole of market and independent starting point
for each adviser, but should that be important then these
stages are a viable way of achieving the goal.
4
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Step 1
Identifying a list of DMs in the market
The two most comprehensive lists we have worked from are 1; the Private Asset Managers (PAM) 2011 index and 2; contributors to the
Defaqto database of discretionary managers. The names used in this guide are in the form used in the PAM guide.
DEFAQTO’S VIEW ON USING THE PAM
DIRECTORY AS A FILTER - STEP 1.1
Brooks Macdonald has developed their universe of DMs
Client Investment Managers) have a full members list which
with reference to the Private Asset Managers directory. This
may also add some additional firms, but as a starting point
directory covers the majority of DMs geared up to cater for
the PAM directory entries are a good proxy of DMs servicing
the intermediated market. APCIMs (Association of Private
the UK market.
List 1. PAM Directory 2011 Managers Index
1
Absolute Fund Management
28 Brewin Dolphin Ltd
2
ACPI Investment Managers
29 Broadstone (Was BDO Investments)
3
Adam & Company Investment Managers Limited
30 Brompton Asset Management
4
AFH Group
31 Brooks Macdonald
5
AllianceBernstein
32 Brown Shipley
6
Arbuthnot Latham & Co Ltd
33 Butterfield Private Bank (incorporating Bentley Capital)
7
Arjent
34 C Hoare & Co
8
Ashburton (Jersey) Limited
35 Cardale
9
Ashcourt Rowan
36 Cave & Sons
10 Atkinson Bolton
37 Cavendish Asset Management
11 AXA Framlington
38 Cazenove Capital Management Limited
12 Bank Leumi
39 Charles Stanley & Co Limited
13 Barclays Wealth
40 Charteris Treasury Portfolio Managers Limited
14 Baring Asset Management
41 Cheviot Asset Management Ltd
15 BARMAC
42 Church House Investment Management
16 Barratt & Cooke
43 Citadel International Wealthcare Ltd
17 Bedlam Asset Management
44 Citi Private Bank
18 Bedrock
45 City Asset Management PLC
19 Belgrave Asset Management
46 Clariden Leu Asset Management (UK) Limited
20 Berenburg UK
47 Close Asset Management Limited
21 Berry Asset Management
48 Collins Stewart Wealth Management
22 Bestinvest
49 Cornelian Asset Managers Limited
23 Blankstone Sington
50 Courtiers Investment Services
24 Blue Ray Asset Management
51 Coutts & Co
25 BNP Paribas
52 CPN Investment Management
26 Boston
53 Credit Suisse
27 Bramdean Asset Management
54 Credo Group
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Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
List 1. PAM Directory 2011 Managers Index continued
55 Crossbridge Capital LLP
95 HSBC Private Bank
56 Dalton Strategic Partnership
96 Iain Nicholson Investment Management
57 Dart
97 Ingenious Asset Management
58 Davy
98 International Asset Management Ltd
59 Delmore Asset Management
99 Investec Wealth & Investments
60 Deutsche Bank Private Wealth Management
100 Investment Quorum
61 Duet Asset Management
101 IPS Capital
62 Duncan Lawrie Asset Management Ltd
102 Iveagh Ltd
63 Eden Financial
103 J M Finn & Co
64 EFG Private Bank
104 J O Hambro Investment Management
65 Equilibrium
105 James Brearley & Sons
66 Ermitage Global Wealth Management Jersey
106 JLT iimia Wealth Management
67 Evercore Pan-Asset
107 JPMorgan Private Bank
68 Fairbairn Private Bank
108 Julius Baer
69 FI Asset Management
109 Jupiter Asset Management
70 Fidelity International
110 Kauders Portfolio Management
71 Fiduciary Trust International
111 Key Asset Management (UK) Ltd
72 Fiscal Engineers
112 Killik Asset Management
73 Fiske Plc
113 Kleinwort Benson
74 Fleming Family & Partners
114 Lazard Asset Management Limited
75 Fulcrum Asset Management
115 Lloyds TSB Private Banking
76 FXCM
116 Lombard Odier
77 Fyshe Horton Finney
117 London & Capital Asset Management Limited
78 GAM
118 London Management Group
79 GHC Capital Markets Limited
119 Lord North Street
80 Glendevon King Asset Management
120 Maseco Private Wealth
81 GLG Partners
121 MaxCap Partners
82 Goldman Sachs International
122 McInroy & Wood Personal Investment Managers
83 Gore Browne Investment Management LLP
123 Merchant Securities
84 Greyfriars Asset Management
124 Merrill Lynch
85 Greystone Wealth Management
125 Midas Investment Management
86 Hargreave Hale
126 Mirabaud Investment Management Ltd
87 Hargreaves Lansdown Asset Management
127 Morgan Stanley Private Wealth Management
88 Hassium
128 Morgans Wealth Management
89 Heartwood Wealth Management Ltd
129 MPL Wealth Management
90 Hedley & Company
130 Murray Asset Management
91 Helvetia Wealth
131 N W Brown Investment Management
92 Holland Hahn & Wills
132 Nemesis Asset Management
93 Horizon Group
133 Newton Investment Limited
94 HSBC Global Asset Management
134 Northern Bank Limited
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Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
List 1. PAM Directory 2011 Managers Index continued
135 Oakley Capital
175 SCM Private
136 Odey Wealth
176 Seven Investment Management (7IM)
137 ODL Securities Limited
177 Shore Capital Group
138 Odley Wealth Management
178 Signature
139 Oldfield Partners LLP
179 Signia
140 Olim Investment Management
180 Smith & Pinching Portfolio Management Ltd
141 Parmenion Capital Partners LLP
181 Smith & Williamson
142 Partners Capital LLP
182 SGPB Hambros
143 PFP Group
183 Spearpoint
144 Philip J Milton & Co Plc
184 Speirs & Jeffrey
145 Pictet Investment Management Limited
185 St. James’s Place Wealth Management
146 Pilling & Co
186 Standard Bank
147 Premier Fund Managers Limited
187 Standard Chartered Private Bank
148 Principal Investment Management Limited
188 Standard Life Wealth
149 Pritchards Stockbrokers
189 Stanhope Capital
150 Prospect Wealth Management
190 Stenham Advisers
151 PSigma Investment Management
191 Stonehage Investment Partners
152 Quartet Capital Partners
192 Talisman
153 Quilter
193 Taylor Young Investment Management
154 R C Brown Investment Management PLC
194 Team Asset Management
155 Ramsey Crookall & Co
195 Thesis Asset Management Plc
156 Rathbones
196 Thomas Miller Wealth
157 Raymond James Investment Services
197 Thurleigh Investment Managers
158 RBC Wealth Management
198 Towry
159 Redmayne Bentley
199 Turcan Connell
160 Reeves Investment Management
200 UBS Wealth Management
161 RMG Wealth
201 UK Portfolio Management
162 Rossie House Investment Management
202 Union Bancaire Privee
163 Rothschild
203 Vartan & Son
164 Rowan Dartington & Co Limited
204 Veritas Asset Management (UK) Ltd
165 Ruffer LLP
205 Vestra Wealth Management
166 Saltus Fund Management
206 VWM Consulting
167 SandAire
207 W H Ireland Limited
168 Santander Private Banking
208 Weatherby Private Banking
169 Sarasin & Partners
209 Wells Capital
170 Saunderson House
210 Westbury
171 Saxo Bank
211 Williams de Broë
172 SC Davies
212 YP & P Wealth Management Partners
173 Schroders Private Banking
213 Zan Partners
174 Sciens
Source: PAM Directory 2011
7
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
List 2. Defaqto’s Database of Discretionary Managers
CONTRIBUTORS TO THE
DEFAQTO DM DATABASE - STEP 1.2
Defaqto now collects detailed information on discretionary
as other details on their service, process, and company, for
management firms that have specific solutions for the
UK financial advisers. Appearance on any Defaqto product/
intermediary market. The comparison and due diligence of
service research table is free. This additional filter will
DMs is now part of Defaqto’s core research tools. Defaqto
highlight those firms that consider their services to be highly
collects data on firms that have predefined service terms
geared to the UK intermediary market.
for UK advisers, and are happy to reproduce these, as well
1
Albert E Sharp
27
JM Finn
2
Anello Asset Management
28
Jupiter
3
Arbuthnot Latham & Co Ltd
29
London and Capital
4
Apollo Multi-Asset
30
Mercater Capital Management
5
Argyll Investment Services Ltd
31
Octopus Investments
6
BestInvest
32
Parmenion Capital Partners LLP
7
BNP Paribas
33
Pilling & Co Stockbrokers
8
Brewin Dolphin
34
Premier Asset Management
9
Brooks Macdonald
35
Principal Investment Management Ltd
10
Brown Shipley
36
Psigma
11
Cazenove Capital Management
37
Quilter
12
Charles stanley
38
Rathbones
13
Cheviot Asset Management
39
Redmayne-Bentley
14
City Asset Management
40
Richmond House Investment Services Ltd
15
Close Asset Management Ltd
41
Smith & Williamson
16
Collins Stewart Wealth Management
42
Saltus Fund Management
17
Cornelian Asset Managers
43
Seven Investment Management
18
Deutsche Bank PWM
44
Standard Life Wealth
19
EVERCORE - Pan-Asset
45
TAM Asset Management
20
Fairbairn Private Bank
46
Thesis Asset Management
21
Fieldings
47
Thurleigh Investment Management
22
GHC Capital Markets
48
Vestra Wealth Management
23
Hawksmoor
49
Wells Capital
24
Investec Wealth & Investment
50
Whitechurch Securities Ltd
25
J O Hambro Inv Mgmt Ltd
51
Williams de Broe
26
James Brearley & Sons
Data contributors to Defaqto’s DM Database 1st March 2012
8
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Step 2
Apply filters to reduce to a shortlist
We believe the following filters are appropriate ones to consider so as to reduce the lists in step one to a manageable shortlist:
1. Is the DM a contributor to Asset Risk Consultants’ (ARC) Private Client Indices (PCI)?
2. What is the minimum level of funds under management required?
3. Which offshore bond panels are the DMs on?
4. Which SIPP panels are the DMs on?
Filter 1. Contributors to Asset Risk Consultants’ (ARC) Private Client Indices (PCI)
DEFAQTO’S VIEW ON USING CONTRIBUTORS
TO THE Asset Risk Consultants’ Private
Client Indices – AS A FILTER - STEP 2.1
Asset Risk Consultants are well known researchers of DM
against wider peer groups. The fact that contributing DMs
performance. They produce a highly credible measure of
are happy to submit this data makes it a good additional
risk vs returns over time. The number of contributors to their
filter. It must also be stated that contributors pay an annual
private client indices demonstrates that DMs are happy for
subscription to ARC which prevents some DMs participating,
their performance to be independently audited and compared
and is not necessarily a comment on their performance.
Founder Contributors
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Brooks Macdonald Global Asset Management
Jupiter Asset Management London and Capital Matrix Investment Management Newton Investment Management Rothschild Private Banking Sarasin & Partners Schroder & Co Limited Stenham Advisors Taylor Young Investment Management Thurleigh Investment Managers Ashburton (Jersey) Limited Collins Stewart Wealth Management Ermitage Group Global Asset Management MeesPierson Asset Management Rathbone Investment Management Int Merrill Lynch Jurisdiction
Subsequent Contributors
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Guernsey
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Jurisdiction
Barclays Wealth Limited
UK
Baring Asset Management (London) UK
Cazenove Capital Management Limited UK
Cheviot Asset Management UK
Coutts & Co UK
Heartwood Wealth Management
UK
Ingenious Asset Management Limited UK
J O Hambro Investment Management UK
JP Morgan Private Bank UK
Morgan Stanley Private Wealth Management UK
PSigma Investment Management Limited UK
Rensburg Sheppards Investment Management UK
Royal Bank of Canada (UK) Limited UK
SG Hambros Bank UK
Smith & Williamson UK
Kleinwort Benson
UK
Lloyds TSB Private Banking
UK
Seven Investment Management
UK
Standard Life Wealth
UK
Veritas Asset Management (UK) Limited UK
Vestra Wealth UK
Credit Suisse AG Zurich Switzerland
Investec Bank (Switzerland) AG Switzerland
Mirabaud & Cie Switzerland
Deutsche Bank International Limited Jersey
Standard Bank Jersey Limited Jersey
UBS AG Jersey
ABN Amro
Guernsey
Credit Suisse Guernsey
Source: ARC PCI Q4 2011 Report
9
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Filter 2. Funds under management 2012
The list below looks at discretionary managers from the perspective of private client assets under discretionary management as
recorded for the PAM directory 2011. This is likely to mean a figure recorded as at the 31st December 2010, but it does mean that
there is a consistent process in place to compare DMs on the basis of funds under management. It also allows the analyst to track the
growth of FUM from the 2011 edition of this research document with a consistent measurement in place.
DEFAQTO’S VIEW ON USING ASSETS
UNDER MANAGEMENT OF £2BN AND
ABOVE AS A FILTER - STEP 2.2
Brooks Macdonald has applied a filter at £2bn for assets
may look at smaller firms which they believe are typically
under management (AUM), not an unreasonable cut-off in
more agile in their decision making. Indeed size may not be
our opinion. The actual level selected by an adviser may vary
important at all and looking for a local DM may be a priority.
from this amount and is dependent on individual preference.
The growth rate of AUM can also be a useful indicator of
Some advisers may have the ‘safety in size, big is beautiful’
firms on the up, or those that are having a high degree of
belief, where the cut-off could be much higher. Another
success in winning new business.
Company 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
FUM (£bn)
Company Citi Private Bank
£248.9
Julius Baer
£115.4
Lombard Odier
£113.0
Lazard Asset Management Limited
£99.4
Pictet Investment Management Limited
£68.8
Clariden Leu Asset Management (UK) Ltd
£66.0
Santander Private Banking
£62.5
Barclays Wealth
£51.4
AllianceBernstein£49.8
Coutts & Co
£48.4
Standard Chartered Private Bank
£46.5
Union Bancaire Privee
£34.0
UBS Wealth Management
£34.0
Goldman Sachs International
£28.8
St. James’s Place Wealth Management
£27.0
Brewin Dolphin Ltd
£25.0
HSBC Private Bank
£23.4
Hargreaves Lansdown Asset Management
£22.3
Schroders Private Banking
£16.2
Rathbones£14.6
GLG Partners
£14.4
Morgan Stanley Private Wealth Management
£13.5
Merrill Lynch
£12.8
Investec Wealth & Investments
£12.8
Smith & Williamson
£10.1
Lloyds TSB Private Banking
£10.0
SGPB Hambros
£9.5
HSBC Global Asset Management
£9.3
Bank Leumi
£8.9
Credit Suisse
£8.8
JPMorgan Private Bank
£8.7
Collins Stewart Wealth Management
£7.9
Cazenove Capital Management Limited
£7.9
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
FUM (£bn)
Fiduciary Trust International
£7.5
Deutsche Bank Private Wealth Management
£7.3
Charles Stanley & Co Limited
£7.2
Blue Ray Asset Management
£6.8
J M Finn & Co
£6.3
EFG Private Bank
£6.3
BNP Paribas
£6.1
Williams de Broë
£5.8
Quilter£5.1
GAM£4.9
Kleinwort Benson
£4.8
Close Asset Management Limited
£4.7
Stanhope Capital
£4.6
Ruffer LLP
£4.6
Partners Capital LLP
£4.5
Newton Investment Limited
£4.4
Towry£4.2
Rothschild£3.8
Saxo Bank
£3.7
Fleming Family & Partners
£3.5
Cheviot Asset Management Ltd
£3.5
Thesis Asset Management Plc
£3.1
J O Hambro Investment Management
£3.0
Broadstone (Was BDO)
£2.9
Seven Investment Management (7IM)
£2.8
Brooks Macdonald
£2.7
Raymond James Investment Services
£2.6
Killik Asset Management
£2.5
Brown Shipley
£2.4
Sarasin & Partners
£2.1
Vestra Wealth Management
£2.0
Saunderson House
£2.0
Adam & Company Investment Managers Ltd
£2.0
Source: PAM Directory 2011
[AUM are officially reported to PAM for 2011 edition of PAM Directory. Firms that failed to report have assumed AUM under £2bn]
10
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Filter 3. Offshore bond panel analysis
Following advice from Defaqto we have evaluated the availability of DMs via life assurance company offshore bond product panels.
We restricted our research to the top offshore bond products as rated by Defaqto in the official 2012 Defaqto Star Ratings. The
products listed have all achieved the highest 2 ratings (5 Star & 4 Star) in terms of product features and service. The products covered
are listed below in no particular order:
1. Aegon Scottish Equitable International (NB DFM Panel remains unpublished)
2.Standard Life International
3. Prudential International
4. Friends Provident International
5.Sanlam
6. Axa IOM
7. Axa Life Europe
The individual scores are sorted overleaf, first by the total number of panels they appear in, and alphabetically should scores be even.
DEFAQTO’S VIEW ON USING
OFFSHORE BOND & SIPP PROVIDER
PANELS AS FILTERS - STEP 2.3 & 2.4
Brooks Macdonald has sought Defaqto’s advice in selecting
wrappers coming through to recommendation tend to have
the offshore bond and SIPP products featured in this 2012
the best features and associated services.
edition of their DM due diligence document. We have
In terms of the process itself, we would agree that should
selected offshore bond products that have achieved the
DM firms sit on a wide number of SIPP and bond panels, it
highest Defaqto star ratings, which are based on the product
is inevitable that a certain amount of due diligence will have
and service features offered. Last year Brooks Macdonald
been executed by the SIPP or bond provider. We would note
opted for pure adviser popularity. Using Defaqto’s star ratings
that this can vary considerably and highlight the fact that
has added in some tax wrapper quality measures to the
different providers use different methodologies in screening
process, and has widened the total number of offshore bond
the DMs that sit on their panels.
panels covered if advisers chose to factor in last year’s results
Furthermore, these steps in the process gain credibility over
as well. Furthermore, product providers that are developing
time, as the sum of SIPP and bond products being examined
products with high levels of features and service are likely to
increases. It allows advisers to combine scores over the two
be more diligent in their research of DMs for their panels.
editions of this research. A total of 10 SIPP products and 9
Similarly, for SIPP products we have gone with the products
offshore bond products have been analysed.*
most frequently recommended via Defaqto’s adviser research
[* It should be noted that Defaqto have not screened the accuracy of data
tool, Engage. The filtering process that Defaqto’s Engage
in the previous edition referred to here.]
system makes available to advisers is such that those tax
11
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Offshore bond product panels
Standard Prudential
Friends
Life Intl
Intl
Provident Intl Sanlam
AXA
IOM
AXA Life
Europe
TOTAL /6
DM
1
Brooks Macdonald •
•
•
•
•
•
6
2
Brewin Dolphin Ltd
•
•
•
•
•
5
3
Deutsche Bank Private Wealth Management
•
•
•
•
•
5
4
Williams de Broë
•
•
•
•
•
5
5
Investec Wealth & Investments
•
•
•
•
4
6
Quilter
•
•
•
•
4
7
Seven Investment Management (7IM)
•
•
•
•
4
8
Barclays Wealth
•
•
•
3
9
Cazenove Capital Management Limited
•
•
•
3
10
Cornelian Asset Managers Limited
•
•
•
3
11
Coutts & Co
•
•
•
3
12
Credit Suisse
•
•
•
3
13
Newton Investment Limited
•
•
•
3
14
Principal Investment Management Limited
15
Rathbones
16
17
•
•
•
3
•
•
•
3
Raymond James Investment Services
•
•
•
3
Schroders Private Banking
•
•
•
3
18
Societe Generale Private Banking Hambros
•
•
•
3
19
Standard Life Wealth
•
•
•
3
20
UBS Wealth Management
•
•
•
3
21
Vestra Wealth Management
•
•
•
3
22
W H Ireland Limited
•
•
•
3
23
Arbuthnot Latham & Co Ltd
•
•
2
24
AXA Framlington
•
•
2
25
Baring Asset Management
•
•
2
26
Berry Asset Management
•
•
2
27
Bestinvest
•
•
2
28
BNP Paribas
•
•
2
29
Brown Shipley
•
•
2
30
C Hoare & Co
•
•
2
31
Charles Stanley & Co Limited
•
•
2
32
Cheviot Asset Management Ltd
•
•
2
33
Close Asset Management Limited
•
•
2
34
Collins Stewart Wealth Management
•
•
2
35
Duncan Lawrie Asset Management Ltd
•
•
2
36
EFG Private Bank
•
•
2
37
Fairbairn Private Bank
•
•
2
38
GAM
•
•
2
39
GHC Capital Markets Limited
•
•
2
40
Goldman Sachs International
•
•
2
12
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Offshore bond product panels
Standard Prudential
Friends
Life Intl
Intl
Provident Intl Sanlam
AXA
IOM
AXA Life
Europe
TOTAL /6
41
Hargreaves Lansdown Asset Management
•
•
2
42
HSBC Private Bank
•
•
2
43
J M Finn & Co
•
•
2
44
JPMorgan Private Bank
•
•
2
45
Jupiter Asset Management
•
•
2
46
Killik Asset Management
•
•
2
47
Kleinwort Benson
•
•
2
48
Lloyds TSB Private Banking
•
•
2
49
Lombard Odier
•
•
2
50
Merrill Lynch
•
•
2
51
Mirabaud Investment Management Ltd
•
•
2
52
Parmenion Capital Partners LLP
•
•
2
53
PSigma Investment Management
•
•
2
54
RBC Wealth Management
•
•
2
55
Rothschild
•
•
2
56
Rowan Dartington & Co Limited
•
•
2
57
Ruffer LLP
•
•
2
58
Sarasin & Partners
•
•
2
59
Towry
•
•
2
60
Adam & Company Investment Managers Limited •
1
61
AFH Group
•
1
62
Ashburton (Jersey) Limited
•
1
63
Ashcourt Rowan
•
1
64
Broadstone (Was BDO)
•
1
65
Butterfield Private Bank (incorporating Bentley Capital)
•
1
66
Cardale
•
1
67
Cavendish Asset Management
•
1
68
Charteris Treasury Portfolio Managers Limited
•
1
69
Church House Investment Management
•
1
70
City Asset Management PLC
•
1
71
Courtiers Investment Services
•
1
72
Credo Group
•
1
73
Eden Financial
•
1
74
Gore Browne Investment Management LLP
•
1
75
Hargreave Hale
•
1
76
Heartwood Wealth Management Ltd
•
1
77
Ingenious Asset Management
•
1
78
J O Hambro Investment Management
•
1
79
James Brearley & Sons
•
1
80
JLT iimia Wealth Management
•
1
13
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Offshore bond product panels
Standard Prudential
Friends
Life Intl
Intl
Provident Intl Sanlam
AXA
IOM
AXA Life
Europe
TOTAL /6
81
Julius Baer
•
1
82
London & Capital Asset Management Limited
•
1
83
PFP Group
•
1
84
Pilling & Co
•
1
85
Premier Fund Managers Limited
•
1
86
Pritchards Stockbrokers
•
1
87
Prospect Wealth Management
•
1
88
Ramsey Crookall & Co
•
1
89
Redmayne Bentley
•
1
90
Saltus Fund Management
•
1
91
SC Davies
•
1
92
Smith & Pinching Portfolio Management Ltd
•
1
93
Smith & Williamson
•
1
94
Spearpoint
•
1
95
Speirs & Jeffrey
•
1
96
Thesis Asset Management Plc
•
1
97
Thomas Miller Wealth
•
1
98
Thurleigh Investment Managers
•
1
99
Turcan Connell
•
1
•
1
15
6
59
8
94
12
194
100 Wells Capital
Totals
Source: Defaqto offshore bond data 2012
14
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Filter 4. SIPP panel analysis
For our SIPP analysis, we restricted this year’s research to the
As Hornbuckle Mitchell do not have a formal DM panel we have
five most frequently recommended pure SIPP products from the
replaced it with FundsNetwork as it is a SIPP wrapper widely used
Defaqto Engage Adviser Research System. The system permits
by UK advisers and was not part of the 2011 edition.
whole of market research and due diligence reporting by advisers,
As a result the final SIPP panels investigated in this year’s report
consultants and para-planners. Recommendations are logged when
are as follows:
the research process is completed and the user downloads a formal
1.Scottish Widows Retirement Account
summary report for audit trail, CRM and client records. At this point
2.Rowanmoor SIPP
the product of choice is logged as recommended. On this basis the
3.SIPPCentre
following SIPP products were most frequently recommended in the
4.Standard Life Active Money SIPP
last twelve months and are listed in no particular order:
•
Scottish Widows Retirement Account
•
Standard Life Active Money SIPP
•
Rowanmoor SIPP
•
SIPPCentre SIPP
•
Hornbuckle Mitchell SIPP
SIPP product panels
5.FundsNetwork
The individual scores are sorted below, first by the total number of
panels they appear in, then alphabetically should scores be even.
ScottishStandard
Widows Rowanmoor SIPPCentre
Life
FundsNetwork
TOTAL /5
DM
1
Brooks Macdonald •
•
•
•
•
5
2
Brewin Dolphin Ltd
•
•
•
•
4
3
Cazenove Capital Management Limited
•
•
•
•
4
4
Deutsche Bank Private Wealth Management
•
•
•
•
4
5
Quilter
•
•
•
•
4
6
Rathbones
•
•
•
•
4
7
Barclays Wealth
•
•
•
3
8
Investec Wealth & Investments
•
•
•
3
9
Charles Stanley & Co Limited
•
•
2
10 J M Finn & Co
•
•
2
11 Newton Investment Limited
•
•
2
12 Seven Investment Management (7IM)
•
•
2
13 Standard Life Wealth
•
•
2
14 UBS Wealth Management
•
•
2
15 Williams de Broë
•
•
2
16 Ashcourt Rowan
•
1
17 Baring Asset Management
•
1
18 Close Asset Management Limited
•
1
19 Collins Stewart Wealth Management
•
1
20 James Brearley & Sons
•
1
21 JLT iimia Wealth Management
•
1
22 Kleinwort Benson
•
1
23 Parmenion Capital Partners LLP
•
1
24 Pilling & Co
•
1
25 PSigma Investment Management
•
1
26 Redmayne Bentley
•
1
27 Smith & Williamson
•
1
28 Speirs & Jeffrey
•
1
29 Vestra Wealth Management
•
1
Totals
8
2
18
21
10
59
Source: Defaqto SIPP data 2012
15
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
DEFAQTO’S VIEW ON USING
TAX WRAPPER PROVIDERS
VIA BROOKS MACDONALD
The range of tax wrappers available through a discretionary
Employing an off-panel DM may involve more due diligence
service could be quite important additional information. It
work and administration but some tax wrapper providers do
demonstrates that DMs do not necessarily have to be on formal
offer this option.
SIPP & bond panels to be employed by the adviser/client.
The table opposite summarises, evaluates and consolidates the individual pieces of research undertaken up to this point.
As will hopefully be appreciated, we have tried to be objective in our research in order that it is as helpful as possible.
For the sake of clarity and reference, we have included below a list of all product providers’ with whom Brooks Macdonald are able to
be used.
SIPPS
Aegon Scottish Equitable
AJ Bell
Alliance Trust
AXA Family Suntrust SIPP
Barnett Waddingham
Cabot Trustees Limited
Capita
City Trustees
Curtis Banks
D A Phillips & Co
Denton Wilde Sapte
EBS Trustees
Hansard Europe Ltd
IPM Trustees Ltd
James Hay
L & G Sipp
LV=
Mattioli Woods Pension Consultants
MC Trustees Ltd
Merchant Investors
MJ Field Trustees
NM Trustees
Pilgrim SIPP
Pointon York
Premier Pension Services
Prudential
Royal Bank of Canada Trustees
SIPP Centre
SIPP Deal Trustees Ltd
Standard Life SIPP
Suffolk Life
Talbot & Muir
The IPS Partnership
Westerby
Winterthur Life
Zurich SIPP
SSAS
Newcourt SSAS
Rowanmoor
Standard Life
Zurich International Portfolio Bond
Generali
Onshore Bonds
Merchant Investors
QROPS
Bourse
Concept Trustees
Equity Trust Limited
Annuity
London & Colonial
Offshore Bonds
Allied Dunbar
AXA
Canada Life
Clerical Medical
Friends Provident International
Hansard Europe Ltd
Legal & General
Merchant Investors
Norwich Union
Prudential
Royal Bank of Canada Trustees
Royal Skandia
Scottish Equitable
Scottish Mutual International
16
AIM
Octopus Asset Management
FURBS
OFA Trustee Services
Private OEIC
R+H Fund Services (Jersey) Limited
EBTs
Dominion
EFRBS
Dominion
Copyright ©2012 Brooks Macdonald Asset Management Limited
Amalgamated Panel Analysis
The table below summarises the scores of each filter
and gives an overall score for each DM. This provides
a basis for deciding which companies to investigate
further. For example a decision could be made to
investigate those DMs who score 9 and above.
Defaqto’s view on
creating this Shortlist
In Defaqto’s opinion, applying these filters, or variations of, is
of additional filters in the current market would be platform
a good place to start in creating the initial shortlist for further
availability or customer relationship management (CRM) data
investigation from the wider market. An adviser can also add
feeds. Again, such filters can be designed to suit the needs of
in any other must have criteria at this stage. This will ensure
the researcher, and assist them with their design of the shortlist.
that the shortlist meets their basic criteria. Common examples
Discretionary Managers
Company
Creating an Initial Shortlist
FUM
(£bn)
2.7
FUM >
£2bn
•
Defaqto
1.
Brooks Macdonald
•
Contributor
to PCI
•
2.
Deutsche Bank Private Wealth Management
7.3
•
•
•
3.
Brewin Dolphin Ltd
25
•
•
4.
Cazenove Capital Management Limited
7.9
•
•
5.
Quilter
5.1
•
•
6.
Rathbones
14.6
•
•
7.
Investec Wealth & Investments
12.8
•
•
8.
Seven Investment Management (7IM)
2.8
•
•
9.
Williams de Broë
•
10. Barclays Wealth
11. Newton Investment Limited
12. Standard Life Wealth
5.8
•
51.4
•
4.4
•
<£2bn
•
•
Offshore Bond Panels
Sub
Total
3
Standard Prudential
Life
•
•
3
•
2
•
3
•
2
•
3
•
2
•
3
2
•
•
2
•
SIPP Panels
Friends
Prov
•
Sanlam
•
Axa
IOM
•
•
•
•
•
•
•
•
•
3
•
•
•
•
4
10
•
•
•
4
•
•
•
•
4
10
•
•
•
4
10
•
•
•
•
•
•
•
•
•
•
•
Axa
Life
•
•
•
•
Sub
Total
6
Scottish
Widows
•
R’moor
5
•
•
•
•
4
12
5
•
•
•
•
4
11
•
SIPP
Centre
•
Standard
Funds
Life
Network
•
•
3
•
•
•
4
•
•
•
4
•
•
•
5
•
•
•
3
•
•
•
Sub
Total
5
Total
14
3
9
2
9
2
9
3
8
•
•
3
•
•
•
3
•
•
2
8
•
•
2
•
•
•
3
•
•
2
7
•
2
•
•
•
3
•
•
2
7
•
3
•
•
•
3
•
1
7
•
13. UBS Wealth Management
34
•
14. Vestra Wealth Management
2
•
•
15. Charles Stanley & Co Limited
7.2
•
•
2
•
•
2
2
6
16. Close Asset Management Limited
4.7
•
•
•
3
•
•
2
•
1
6
17. Collins Stewart Wealth Management
7.9
•
•
•
3
•
•
2
•
1
6
18. J M Finn & Co
6.3
•
•
2
•
•
2
•
2
6
19. Societe Generale Private Banking Hambros
9.5
•
•
•
3
•
•
3
0
6
20. Cheviot Asset Management Ltd
3.5
•
•
•
3
•
•
2
0
5
21. Coutts & Co
48.4
•
•
2
•
•
•
3
0
5
•
22. Credit Suisse
8.8
•
•
2
•
•
23. Kleinwort Benson
4.8
•
•
2
•
•
•
2
24. PSigma Investment Management
<£2bn
•
25. Raymond James Investment Services
2.6
•
26. Schroders Private Banking
16.2
•
10.1
•
27. Smith & Williamson
28. Baring Asset Management
<£2bn
29. Bestinvest
<£2bn
•
•
•
•
•
2
•
•
•
•
•
•
0
5
2
3
•
1
5
2
•
1
5
3
0
5
3
0
5
•
3
•
1
•
1
5
•
1
•
•
2
•
1
4
•
2
•
•
2
0
4
30. BNP Paribas
6.1
•
•
2
•
•
2
0
4
31. Brown Shipley
2.4
•
•
2
•
•
2
0
4
•
1
•
•
3
0
4
32. Cornelian Asset Managers Limited
<£2bn
•
•
2
•
•
•
17
Discretionary Managers
Company
Creating an Initial Shortlist
FUM >
£2bn
•
Defaqto
33. GAM
FUM
(£bn)
4.9
34. Hargreaves Lansdown Asset Management
22.3
•
•
3
•
•
8.7
•
35. J O Hambro Investment Management
36. JPMorgan Private Bank
37. Jupiter Asset Management
<£2bn
38. Lloyds TSB Private Banking
10
•
12.8
•
39. Merrill Lynch
•
Contributor
to PCI
•
Offshore Bond Panels
Sub
Total
2
Standard Prudential
Life
Friends
Prov
•
Axa
Life
Sub
Total
2
2
•
•
•
3
•
2
•
0
4
•
2
0
4
0
4
0
4
•
2
•
0
4
1
4
•
•
2
2.1
•
•
2
6.3
1
2
•
47. EFG Private Bank
4
•
4
2
3.8
•
0
•
•
•
2
•
1
<£2bn
Total
•
•
<£2bn
Sub
Total
0
•
<£2bn
46. City Asset Management PLC
Standard
Funds
Life
Network
2
41. Principal Investment Management Limited
45. Arbuthnot Latham
SIPP
Centre
2
1
<£2bn
R’moor
•
•
43. Sarasin & Partners
Scottish
Widows
•
<£2bn
44. W H Ireland Limited
SIPP Panels
Axa
IOM
•
40. Parmenion Capital Partners LLP
42. Rothschild
Sanlam
1
•
•
•
•
2
•
•
2
•
•
3
0
4
•
2
0
4
•
•
•
2
0
4
•
•
3
0
4
1
•
2
0
3
2
•
•
1
0
3
1
•
•
2
0
3
•
•
2
0
3
•
2
0
3
48. Fairbairn Private Bank
<£2bn
•
1
49. GHC Capital Markets Limited
<£2bn
•
1
50. Goldman Sachs International
28.8
•
1
•
•
2
0
3
51. HSBC Private Bank
23.4
•
1
•
•
2
0
3
•
1
1
3
•
2
0
3
2
0
3
•
1
0
3
•
•
2
0
3
•
1
•
•
2
•
1
•
2
2
•
2
52. James Brearley & Sons
<£2bn
•
•
1
53. Killik Asset Management
2.5
•
1
•
54. Lombard Odier
113
•
1
•
55. London & Capital Asset Management Limited
<£2bn
56. Mirabaud Investment Management Ltd
<£2bn
57. Pilling & Co
<£2bn
58. RBC Wealth Management
<£2bn
59. Redmayne Bentley
<£2bn
•
•
61. Thesis Asset Management Plc
3.1
•
64. Adam & Company Investment Managers
Limited
•
1
•
1
1
•
4.6
63. Towry
2
•
60. Ruffer LLP
62. Thurleigh Investment Managers
•
<£2bn
1
1
•
•
•
4.2
•
1
2
•
1
65. Ashburton (Jersey) Limited
<£2bn
66. Ashcourt Rowan
<£2bn
0
67. AXA Framlington
<£2bn
0
68. Berry Asset Management
<£2bn
0
69. Broadstone (Was BDO)
2.9
•
•
•
•
1
•
•
1
3
0
3
1
3
0
3
1
0
3
•
1
0
3
•
2
0
3
•
1
0
2
0
2
1
2
•
•
•
1
•
1
•
•
2
0
2
•
•
2
0
2
•
1
0
2
•
2
0
2
2
0
2
0
2
0
2
1
2
1
70. C Hoare & Co
<£2bn
0
71. Duncan Lawrie Asset Management
<£2bn
0
•
72. Heartwood Wealth Management Ltd
<£2bn
•
1
•
1
•
1
•
1
0
•
1
1
•
1
0
2
0
0
2
73. Ingenious Asset Management
<£2bn
74. JLT iimia Wealth Management
<£2bn
75. Julius Baer
115.4
•
76. Morgan Stanley Private Wealth Management
13.5
•
•
•
•
2
18
•
•
Discretionary Managers
Company
Creating an Initial Shortlist
77. Premier Fund Managers Limited
FUM
(£bn)
<£2bn
78. Rowan Dartington & Co Limited
<£2bn
79. Saltus Fund Management
<£2bn
80. Speirs & Jeffrey
<£2bn
81. St. James’s Place Wealth Management
27
82. Wells Capital
<£2bn
83. AFH Group
<£2bn
FUM >
£2bn
Defaqto
Contributor
to PCI
•
Offshore Bond Panels
Sub
Total
1
Standard Prudential
Life
0
•
•
Friends
Prov
SIPP Panels
Axa
IOM
•
Axa
Life
Sub
Total
1
Scottish
Widows
R’moor
SIPP
Centre
Standard
Funds
Life
Network
Sub
Total
0
Total
2
•
2
0
2
1
•
1
0
2
0
•
1
1
2
0
0
2
1
0
2
1
0
1
•
2
•
1
•
Sanlam
•
0
•
•
84. AllianceBernstein
49.8
•
1
0
0
1
85. Bank Leumi
8.9
•
1
0
0
1
86. Blue Ray Asset Management
6.8
•
1
0
0
1
1
0
1
1
87. Butterfield Private Bank (incorporating
Bentley Capital)
<£2bn
0
88. Cardale
<£2bn
0
•
1
0
89. Cavendish Asset Management
<£2bn
0
•
1
0
1
90. Charteris Treasury Portfolio Managers Limited
<£2bn
0
•
1
0
1
91. Church House Investment Management
<£2bn
0
•
1
0
1
92. Citi Private Bank
248.9
•
1
0
0
1
66
•
1
0
0
1
93. Clariden Leu Asset Management (UK) Limited
•
94. Courtiers Investment Services
<£2bn
0
•
1
0
1
95. Credo Group
<£2bn
0
•
1
0
1
96. Eden Financial
<£2bn
0
1
0
1
97. Ermitage Global Wealth Management Jersey
<£2bn
1
0
0
1
98. Evercore Pan-Asset
<£2bn
•
•
•
1
0
0
1
99. Fiduciary Trust International
7.5
•
1
0
0
1
100. Fleming Family & Partners
3.5
•
1
0
0
1
101. GLG Partners
14.4
•
1
0
0
1
102. Gore Browne Investment Management LLP
<£2bn
0
•
1
0
1
103. Hargreave Hale
<£2bn
0
•
1
0
1
104. Helvetia Wealth
<£2bn
1
0
0
1
•
105. HSBC Global Asset Management
9.3
•
1
0
0
1
106. Lazard Asset Management Limited
99.4
•
1
0
0
1
107. Partners Capital LLP
4.5
•
1
0
0
1
1
0
1
0
0
1
108. PFP Group
109. Pictet Investment Management Limited
<£2bn
68.8
0
•
•
1
110. Pritchards Stockbrokers
<£2bn
0
•
1
0
1
111. Prospect Wealth Management
<£2bn
0
•
1
0
1
112. Ramsey Crookall & Co
<£2bn
0
1
0
1
113. Santander Private Banking
•
62.5
•
1
0
0
1
2
•
1
0
0
1
115. Saxo Bank
3.7
•
1
0
0
1
116. SC Davies
<£2bn
0
1
0
1
117. Smith & Pinching Portfolio Management Ltd
<£2bn
0
•
1
0
1
118. Spearpoint
<£2bn
0
•
1
0
1
119. Standard Bank
<£2bn
1
0
0
1
1
0
0
1
114. Saunderson House
120. Standard Chartered Private Bank
46.5
•
•
•
19
Discretionary Managers
Company
Creating an Initial Shortlist
FUM >
£2bn
•
Defaqto
Offshore Bond Panels
121. Stanhope Capital
FUM
(£bn)
4.6
Contributor
to PCI
Sub
Total
1
122. Stenham Advisers
<£2bn
•
1
•
1
Standard Prudential
Life
Friends
Prov
Sanlam
SIPP Panels
Axa
IOM
Axa
Life
Sub
Total
0
Scottish
Widows
R’moor
SIPP
Centre
Standard
Funds
Life
Network
Sub
Total
0
Total
0
0
1
1
123. Taylor Young Investment Management
<£2bn
0
0
1
124. Thomas Miller Wealth
<£2bn
0
•
1
0
1
125. Turcan Connell
<£2bn
0
•
1
0
1
1
0
0
1
1
0
0
1
126. Union Bancaire Privee
34
•
127. Veritas Asset Management (UK) Ltd
<£2bn
•
128. Absolute Fund Management
<£2bn
0
0
0
0
129. ACPI Investment Managers
<£2bn
0
0
0
0
130. Arjent
<£2bn
0
0
0
0
131. Atkinson Bolton
<£2bn
0
0
0
0
132. BARMAC
<£2bn
0
0
0
0
133. Barratt & Cooke
<£2bn
0
0
0
0
134. Bedlam Asset Management
<£2bn
0
0
0
0
135. Bedrock
<£2bn
0
0
0
0
136. Belgrave Asset Management
<£2bn
0
0
0
0
137. Blankstone Sington
<£2bn
0
0
0
0
138. Boston
<£2bn
0
0
0
0
139. Bramdean Asset Management
<£2bn
0
0
0
0
140. Brompton Asset Management
<£2bn
0
0
0
0
141. Cave & Sons
<£2bn
0
0
0
0
142. Citadel International Wealthcare Ltd
<£2bn
0
0
0
0
143. CPN Investment Management
<£2bn
0
0
0
0
144. Crossbridge Capital LLP
<£2bn
0
0
0
0
145. Dalton Strategic Partnership
<£2bn
0
0
0
0
146. Dart
<£2bn
0
0
0
0
147. Davy
<£2bn
0
0
0
0
148. Delmore Asset Management
<£2bn
0
0
0
0
149. Duet Asset Management
<£2bn
0
0
0
0
150. Equilibrium
<£2bn
0
0
0
0
151. FI Asset Management
<£2bn
0
0
0
0
152. Fidelity International
<£2bn
0
0
0
0
153. Fiscal Engineers
<£2bn
0
0
0
0
154. Fiske Plc
<£2bn
0
0
0
0
155. Fulcrum Asset Management
<£2bn
0
0
0
0
156. FXCM
<£2bn
0
0
0
0
157. Fyshe Horton Finney
<£2bn
0
0
0
0
158. Glendevon King Asset Management
<£2bn
0
0
0
0
159. Greyfriars Asset Management
<£2bn
0
0
0
0
160. Greystone Wealth Management
<£2bn
0
0
0
0
161. Hassium
<£2bn
0
0
0
0
162. Hedley & Company
<£2bn
0
0
0
0
163. Holland Hahn & Wills
<£2bn
0
0
0
0
164. Horizon Group
<£2bn
0
0
0
0
165. Iain Nicholson Investment Management
<£2bn
0
0
0
0
166. International Asset Management Ltd
<£2bn
0
0
0
0
20
Discretionary Managers
Company
Creating an Initial Shortlist
FUM >
£2bn
Defaqto
Contributor
to PCI
Offshore Bond Panels
Sub
Total
0
Standard Prudential
Life
Friends
Prov
Sanlam
Axa
IOM
SIPP Panels
167. Investment Quorum
FUM
(£bn)
<£2bn
Axa
Life
Sub
Total
0
Scottish
Widows
R’moor
SIPP
Centre
Standard
Funds
Life
Network
Sub
Total
0
Total
168. IPS Capital
<£2bn
0
0
0
0
169. Iveagh Ltd
<£2bn
0
0
0
0
170. Kauders Portfolio Management
<£2bn
0
0
0
0
171. Key Asset Management (UK) Ltd
<£2bn
0
0
0
0
172. London Management Group
<£2bn
0
0
0
0
173. Lord North Street
<£2bn
0
0
0
0
174. Maseco Private Wealth
<£2bn
0
0
0
0
175. MaxCap Partners
<£2bn
0
0
0
0
176. McInroy & Wood Personal Investment Managers
<£2bn
0
0
0
0
177. Merchant Securities
<£2bn
0
0
0
0
178. Midas Investment Management
<£2bn
0
0
0
0
179. Morgans Wealth Management
<£2bn
0
0
0
0
180. MPL Wealth Management
<£2bn
0
0
0
0
181. Murray Asset Management
<£2bn
0
0
0
0
182. N W Brown Investment Management
<£2bn
0
0
0
0
183. Nemesis Asset Management
<£2bn
0
0
0
0
184. Northern Bank Limited
<£2bn
0
0
0
0
185. Oakley Capital
<£2bn
0
0
0
0
186. Odey Wealth
<£2bn
0
0
0
0
187. ODL Securities Limited
<£2bn
0
0
0
0
188. Odley Wealth Management
<£2bn
0
0
0
0
189. Oldfield Partners LLP
<£2bn
0
0
0
0
190. Olim Investment Management
<£2bn
0
0
0
0
191. Philip J Milton & Co Plc
<£2bn
0
0
0
0
192. Quartet Capital Partners
<£2bn
0
0
0
0
193. R C Brown Investment Management PLC
<£2bn
0
0
0
0
194. Reeves Investment Management
<£2bn
0
0
0
0
195. RMG Wealth
<£2bn
0
0
0
0
196. Rossie House Investment Management
<£2bn
0
0
0
0
197. SandAire
<£2bn
0
0
0
0
198. Sciens
<£2bn
0
0
0
0
199. SCM Private
<£2bn
0
0
0
0
200. Shore Capital Group
<£2bn
0
0
0
0
201. Signature
<£2bn
0
0
0
0
202. Signia
<£2bn
0
0
0
0
203. Stonehage Investment Partners
<£2bn
0
0
0
0
204. Talisman
<£2bn
0
0
0
0
0
205. Team Asset Management
<£2bn
0
0
0
0
206. UK Portfolio Management
<£2bn
0
0
0
0
207. Vartan & Son
<£2bn
0
0
0
0
208. VWM Consulting
<£2bn
0
0
0
0
209. Weatherby Private Banking
<£2bn
0
0
0
0
210. Westbury
<£2bn
0
0
0
0
211. YP & P Wealth Management Partners
<£2bn
0
0
0
0
212. Zan Partners
<£2bn
0
0
0
0
21
Combined scores for 2011 & 2012
Given that this is the second edition of this research process
it was deemed sensible to provide a combined score as some
interesting features can be derived from it.
The totals for both the 2011 and 2012 processes have been
added together and the DMs with a total score of two or
more have been included on the summary table on the right.
COMBINED 2011 & 2012 SCORES
• Defaqto agrees that the combining of the two
research documents may be something that an
adviser may choose to do. The benefits of doing this
might include:
–The research process can be applied to a much
wider base of SIPP & bond panels (although we
would note that we have not changed last year’s
panel results so some firms may have been added
to certain product panels since publication. As
such we would not recommend going beyond
combining two successive years without checking
that all the data is still accurate).
–The combined score can highlight those DMs
that are growing in terms of AUM and presence,
particularly in the intermediated marketplace.
–A consistency value for those DMs that do well in
both reports can be ascertained.
–Anomalies can be identified and evaluated.
Rank
Discretionary Manager
2011
2012
Total
Rank
Discretionary Manager
2011
2012
Score
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
Brooks Macdonald
Brewin Dolphin Ltd
Cazenove Capital Management Limited
Deutsche Bank PWM
Quilter
Rathbones
Seven Investment Management (7IM)
Williams de Broë
Investec Wealth & Investments
Barclays Wealth
UBS Wealth Management
Vestra Wealth Management
Close Asset Management Limited
Collins Stewart Wealth Management
Newton Investment Limited
Charles Stanley & Co Limited
J M Finn & Co
Smith & Williamson
Standard Life Wealth
Cheviot Asset management Ltd
PSigma Investment Management
Brown Shipley
Jupiter Asset Management
Parmenion Capital Partners LLP
Principal Investment Ltd
W H Ireland Limited
Baring Asset Management
BestInvest
Coutts & Co
Credit Suisse
James Brearley & Sons
JO Hambro Investment Management
Kleinwort Benson
Lloyds TSB Private Banking
Merrill Lynch
Raymond James Investment Services
Schroders Private Banking
Berry Asset Management
Hargreaves Lansdown Asset Management
Heartwood Wealth Management Ltd
JP Morgan Private Bank
London & Capital Asset Management Limited
Rothschild
Societe Generale Private Banking Hambros
Thesis Asset Management Plc
City Asset Management
Cornelian Asset Managers Limited
EFG Private Bank
Goldman Sachs International
HSBC Private Bank
Killik Asset Management
Ruffer LLP
Sarasin & Partners
Ashcourt Rowan
22
16
15
14
12
14
13
11
11
10
10
9
8
8
8
6
7
7
8
6
6
6
6
6
6
6
6
5
5
4
4
6
5
4
5
5
4
4
6
4
6
4
5
4
2
5
4
3
4
4
4
4
4
3
4
14
11
10
12
10
10
9
9
9
8
7
7
6
6
8
6
6
5
7
5
5
4
4
4
4
4
4
4
5
5
3
4
5
4
4
5
5
2
4
2
4
3
4
6
3
3
4
3
3
3
3
3
4
2
30
26
24
24
24
23
20
20
19
18
16
15
14
14
14
13
13
13
13
11
11
10
10
10
10
10
9
9
9
9
9
9
9
9
9
9
9
8
8
8
8
8
8
8
8
7
7
7
7
7
7
7
7
6
Total
Score
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
BNP Paribas
Broadstone (was BDO)
C Hoare & Co
Credo Group
GAM
Morgan Stanley Private Wealth Management
Premier Fund Managers Limited
Thurleigh Investment Management
Towry
Adam & Company Investment Managers Ltd
Arbuthnot Latham & Co Ltd
Ashburton (Jersey) Limted
Fairburn Private Bank
GHC Capital Markets Limited
Ingenious Asset Management
JLT iimia Wealth Management
Julius Baer
Lombard Odier
Mirabaud Investment Management Ltd
Turcan Connell
Duncan Lawrie Asset Management Limited
RBC Wealth Management
Rowan Dartington & Co Limited
Standard Bank
Charteris Treasury Portfolio Managers Limited
Church House Investment Management
Clariden Leu Asset Management (UK) Ltd
Eden Financial
Pictet Investment Management Limited
Pilling & Co
Redmayne Bentley
Smith & Pinching Portfolio Management Ltd
St James Place Wealth Management
Taylor Young Investment Management
Veritas Asset Management (UK) Ltd
AllianceBernstein
AXA Framlington
Bank Leumi
Cavendish Asset Management
Citi Private Bank
Ermitage Global Wealth Management Jersey
Fleming Family & Partners
GLG Partners
Gore Browne Investment Management LLP
HSBC Global Asset Management
Partners Capital LLP
Saltus Fund Management
Shore Capital Group
Spearpoint
Speirs & Jeffrey
Standard Chartered Private Bank
Union Bancaire Privee
Wells Capital (was Fund Intelligence)
2
4
4
5
2
4
4
3
3
3
2
3
2
2
3
3
3
2
2
4
2
1
2
3
2
2
2
2
2
0
0
2
1
2
2
1
0
1
1
1
1
1
1
1
1
1
0
2
1
0
1
1
0
Source: Brooks Macdonald due diligence process 2011 & 2012
4
2
2
1
4
2
2
3
3
2
3
2
3
3
2
2
2
3
3
1
2
3
2
1
1
1
1
1
1
3
3
1
2
1
1
1
2
1
1
1
1
1
1
1
1
1
2
0
1
2
1
1
2
6
6
6
6
6
6
6
6
6
5
5
5
5
5
5
5
5
5
5
5
4
4
4
4
3
3
3
3
3
3
3
3
3
3
3
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
A Research Guide to Creating a Panel of Discretionary Managers
Step 3
Send a questionnaire to those you want to know more about
Having created a workable shortlist it may be necessary and indeed prudent to undertake further, more specific
due diligence to ensure appropriate understanding of the relevant merits of each shortlisted firm. We have
provided overleaf a sample questionnaire that will hopefully assist in establishing greater knowledge of each DM.
Ensure you include a deadline for a response, as this will give you an initial indication of their service standards.
Unfortunately, comparisons based on wordy descriptive answers can be extremely difficult, nigh impossible, to evaluate. The questions
that require significant dialogue are included more to assist in a better appreciation of the workings of each house. Equally, we have
included questions that require a numerical response (e.g. percentage of business introduced by professional advisers) which can be
helpful in fine tuning the filter process previously undertaken and assist in narrowing the shortlist to a workable list of one or perhaps
two preferred DM partners.
DEFAQTO’S VIEW ON SENDING A
QUESTIONNAIRE AND EVALUATING
THE RETURNS - STEP 3 & 4
These should be designed to find out more about each of the
In terms of the questions suggested by Brooks Macdonald,
firms on a shortlist. Defaqto would agree that this is an essential
although they are fairly comprehensive and will elicit enough
process to embark upon.
information to reduce the shortlist further, the list is not
exhaustive and additional questions can be added.
Advisers may not only be dealing with their selected DM on
a daily basis, but may have questions that need answering
Brooks Macdonald suggests reducing the shortlist to around 4
in the future. This process will not only help to whittle down
or 5 firms. Defaqto would go along with this as a manageable
the shortlist further, based on the responses but, equally as
number but stresses that there is no rule of thumb on how long
important, those responses (or lack of them) and the way in
or short such a list should be.
which a DM answers the questions will give the adviser a good
A note on fees & charges
indication of their willingness to service the adviser market and
These are important, but the priority is selecting the right
what their service standards may be like in the future.
discretionary solutions for the client. Costs can be considered
At this stage, it would be sensible to ask for all marketing
more closely once the shortlist has been reached. Brooks
materials on the services offered, together with their terms and
Macdonald have summarised the potential charging costs well.
conditions as it is not always possible to download these from
Defaqto would also agree that cheapest is not necessarily best,
websites. At this stage you may not want to request a call from
look for value for money. Terrific service, support and quality
an account manager which can sometimes be the only option
reporting systems may well justify an extra few basis points in
offered on DM websites.
the minds of both adviser and the client.
23
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Sample Questionnaire
1.Background
3.Personnel
1.1 Basic details
3.1Please list key executives and client management team
Company name:
Telephone number:
Facsimile number:
E-mail:
Website:
members as well as their overall investment experience and
Head office Address:
their length of tenure with your firm. Please also detail who
would be responsible for day-to-day client contact and the
expertise/qualifications of the people in these roles. Please
Principal contact:Secondary contact:
Bank:
Custodian:
CEO: CIO:
Head of Private Clients:
Company Secretary:
Addresses of all regional offices:
explain the role of relationship managers where applicable.
3.2For how many mandates/amount of assets is each
relationship and/or portfolio manager responsible?
3.3How do you ensure the quality of staff and the culture of the
organisation are maintained?
2. Asset Management Experience
3.4Please advise how many investment managers have left the
2.1Please describe your organisation, including a brief history
company in the last 5 years.
and a description of the ownership structure.
3.5What is the ratio between the number of clients and
2.2.Please highlight major partnerships and relationships that
investment managers?
you currently rely upon.
4. Portfolio Construction
2.3Please provide information on your total assets under
management and 5 year historical numbers.
4.1Please outline your underlying investment philosophy and
manager research process behind your investment approach
2.4What percentage of assets under management has been
for multi asset class mandates.
introduced by IFAs?
4.2Please describe your investment approach.
2.5In addition to core asset management what are the range of
services that you are providing to similar clients?
4.3Why do you think your research resources can identify the
best investment managers and can do so more consistently
2.6How would you describe your relative levels of expertise
than your competitors?
across the different asset classes?
4.4Do you have the capacity to tailor your solution according
2.7How many years have you been involved in receiving client
to various risk profiled asset allocations?
introductions from IFAs?
4.5Please describe the capabilities and tools that are available
for you to identify the optimal strategic asset class mixes
and what these decisions are based upon.
4.6To what extent are in-house collectives used?
24
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
5.Risk Management and Monitoring
8. Fees and Other Costs
5.1What level of discretion does the investment manager
8.1 Please outline your fee structure, including the following:
have to deviate from portfolio constraints and how is it
monitored?
5.2Describe the usual level of interaction that your investment
professionals have with the third party fund managers.
5.3What benchmarks would you propose for client portfolios?
5.4Would you be able to provide a benchmark based on peer
group performance?
5.5To what extent would you be able to adapt the selection
of investments for different portfolios within a specific asset
class, e.g. a different selection of hedge funds depending on
the risk profile?
5.6Would you advocate the use of retail or institutional funds?
6.Communications
6.1How often would investment managers (or other
a) Initial charge
b) Annual management charge
c) Dealing commission or transaction charge
d) Level of interest paid on cash
e) Underlying fund charges (AMC and / or Initial)
f) Ancillary costs including:
i)Overseas investment additional charges
ii)Transfers out
iii)Telegraphic transfer
iv)Missing certificate indemnities
v)Tax adviser queries
vi)Probate, IHT or CGT valuations
8.2 Do you offer a flat/all inclusive fee structure?
professionals) typically meet with clients/advisers to keep
them abreast of the characteristics and developments of
8.3 What frequency are fees paid/charged?
your products on an ongoing basis?
8.4 Can you provide TERs?
6.2Do you have an online service, with access to valuations?
6.3How often are portfolio valuations sent to clients?
7.Compliance
Step 4
7.1What policies/procedures are in place to ensure sufficient
Evaluate returned
questionnaires and create a
manager shortlist of ideally less
than four/five firms
compliance, monitoring and control with regulatory issues?
7.2Is there a separate dedicated compliance team?
7.3What do you consider to be the key compliance issues
facing discretionary investment managers?
Additionally, consider the availability of a DM via life companies,
7.4Have there been any compliance issues anywhere within
willingness of a DM to partake in performance measurement by
your organisation in the last three years?
its desire to be a contributor to ARC’s PCI. It may also be relevant
7.5To what extent is there an independent check (i.e. outside
to revisit the points listed in section two, perhaps ranking the
the nominated investment manager(s) and client contact) in
relevance of each point to your specific business requirements.
relation to client and in-house guidelines?
7.6Who is responsible for monitoring and controlling
compliance of the funds in which the investment manager
invests?
25
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
Step 5
Step 6
Meet with each DM
Maintain and monitor your
panel of DMs
You should establish whether you feel they are a firm that you
can work with. It is important to meet with the actual investment
Re-send the questionnaire to be updated on a 12 – 18 month basis.
managers as these are (hopefully!) the people that will meet your
clients and manage their assets on an ongoing basis. Additionally,
you may want to position different houses/investment managers
with different clients, acknowledging that personalities are a
factor and can be the difference between winning and losing an
investment mandate.
DEFAQTO’S VIEW ON MAINTAINING,
MONITORING & RECORDING THE
PROCESS AND RESULTS - STEP 6 & 7
It is essential that the progress of the DM is monitored,
DEFAQTO’S VIEW ON MEETING
WITH EACH DM ON THE
SHORTLIST - STEP 5
preferably on a formal basis at least twice a year. We
would agree with Brooks Macdonald that things such
as administration, approach to regulatory changes and
support to the adviser are a must. In terms of performance,
Brooks Macdonald suggests monthly monitoring, which we
Defaqto agrees that this is essential. Advisers may be
would agree with.
entrusting considerable amounts of their clients’ assets to
It is also essential that the whole selection process is
the selected firms, so it is essential that they feel comfortable
repeated on a regular basis and we would agree that every
with the people managing their clients’ money. Personalities
12 months or so is sensible.
can come in to the equation as the adviser will potentially
be working with the DMs on a daily basis. If it is not the
Of course keeping records of the selection process is a
decision maker (at the adviser firm) who will be dealing
must, both from a compliance basis and to see if anything
directly with the prospective DM, it may be advisable to
has changed from when the original selection was made.
involve the person who will be at this stage.
• Approach the meetings as if assessing a business partner.
• Get it right first time to increase the odds of an extended
Step 7
partnership.
Keep records of research
undertaken for future reference
• Use the meeting as a good opportunity to test the validity
of the responses to the questionnaire.
26
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
ADVISER fee justification
In order to help advisers demonstrate to clients the value of the research and monitoring of DMs, or a DM panel, we have outlined
below the time an IFA might spend on the tasks relating to monitoring discretionary managers and client portfolios.
Task
Frequency
Hours p.a.
On-going suitability meetings with DMSix-monthly
Regular review of the client’s requirements and circumstances
6
Quarterly
10
Weekly
10
Ongoing review and analysis of portfolio performance
Monthly
6
Comparative analysis of clients’ portfolios. Ongoing evaluation of continued suitability of existing DM
Monthly
6
Updating spreadsheets to track managed and non-managed assets
Regular discussions with DM about the client and the client’s portfolio
Fortnightly
6
Face-to-face meeting with DM about client’s portfolio and requirements
Quarterly
8
Regular auditing of DM service and reports
Quarterly
4
Total Time:
56
Total time spent: 56 hours per annum (which on a charge of 0.5% per annum equates to £90 per hour for a £1 million portfolio).
This excludes all tax planning and any additional work undertaken.
On the following pages we have provided three example documents that an adviser could use to explain the initial research and ongoing
monitoring processes to a client.
I. Example of initial and ongoing research undertaken by an adviser as demonstrated to a client
II. Ideas of work undertaken by the adviser on an annual basis to justify the adviser’s ongoing fee
III. Sample client review letter
DEFAQTO’S VIEW ON THE ADVISER
FEE JUSTIFICATION
Brooks Macdonald lists a whole series of adviser responsibilities
does the ongoing review and monitoring processes. Defaqto
and actions that they feel will justify the adviser’s fee. We
has not reviewed the examples or charging structures and
would agree with their appraisal in that selecting the right
rates, and highlights the fact that each adviser will develop
investment managers for the client has significant value, as
their own processes and fee schedules.
27
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
A. EXAMPLE OF INITIAL RESEARCH UNDERTAKEN BY AN ADVISER IN ORDER TO
RECOMMEND A DISCREATIONARY MANAGER
Review of investment approach (DM perspective)
Following the decision for ABC Financial Services to concentrate
on the delivery of generic financial advice, extensive research was
carried out in order to select a panel of third party discretionary
• Breadth of asset allocation
managers to work with, to take over the responsibility for
• Choice and use of different investment vehicles / media
the day-to-day investment responsibility of their client’s
investment portfolios.
Review of investment services provided by DM
Listed below are some of the research functions and due diligence
• Rates on cash
that was carried out prior to the selection and construction of the
• Availability of new products
panel of chosen third party managers.
• Ability to critique an existing portfolio
Research of the general investment marketplace
• Additional services
• Overview and research into the investment management
FSA and regulatory concerns
market-place considering the benefits of each of the different
• Review of DM compliance
approaches
• Evaluation of geo-politics and global economics
• Review of DM’s standards on TCF
• Overview of financial services
• Review of DM’s position following RDR
•
Platforms
Performance
•
Products
•
Rule / Law changes
• Analysis of DM’s performance against recognised benchmarks
• Analysis of DM’s performance against peers
Evaluation of Discretionary Managers (DMs)
• Analysis of DM’s performance relative to the wider market
• Initial analysis of the role and positioning of discretionary
Administration
managers in the marketplace
• Quality and standard of administration
• Analysis of discretionary managers’ strategy in different
• Quality of and access to reports
market conditions
• Consideration of the investment universe
• Functionality of online reporting systems
• Adaptability of discretionary managers to new products etc
• Availability of investment managers
• Custody of cash and assets
• Flow of generic market information to the client
• Ownership and corporate governance structures
28
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
B. SUMMARY OF WORK UNDERTAKEN BY AN ADVISER ON AN ANNUAL BASIS
Financial Press
This section suggests a form of words that an adviser might use
to demonstrate the continuous monitoring of the discretionary
• The financial press is continuously monitored for articles
managers employed that they undertake on behalf of clients.
regarding each of the DMs and these are reported to
Fund of Fund Performance – monthly reviews
ABC Financial Services board on a monthly basis, when
appropriate. In addition, if there should be any negative
• The performance of each model is monitored and reported
press, this would be picked-up immediately with the relevant
to ABC Financial Services Board on a monthly basis. This
DM and if applicable, explanations sought.
includes a comparison of the performance against each
Financial Strength
model’s respective benchmark.
• Attribution analysis is also undertaken on a monthly basis in
Each DM’s annual report & accounts is reviewed along with any
order to highlight which asset classes/funds added value and
other financial reporting and updates.
which detracted from performance.
LSE listing
• Any periods of prolonged underperformance compared to
their benchmark would result in further close investigation,
It is also worth noting that where the DM is a listed company,
including if necessary a meeting with the managers.
they will also have to abide by the London Stock Exchange
requirements as well as those of Companies House. ABC Financial
• Any monitoring of transaction analysis, e.g. portfolio turnover
Services will monitor the activities of any parent company where
Regular meeting with the chosen DMs on
the panel
applicable, in addition to the review of the annual report &
accounts and other financial reporting and updates.
• Over the last twelve months, ABC Financial Services
Ongoing review of portfolios
management meet each DM at least quarterly and these
In addition to the regular reviews of product providers and
meetings will continue in the future.
specific investment managers we work with, we undertake
• Additionally, an annual review is undertaken which considers
regular evaluation of each client’s portfolio specifically and will
other important aspects in addition to performance
report back on an annual basis with confirmation of where we are
measurement such as systems, administration support,
in relation to their financial plan.
new products and services, local support of regional teams,
• Regular reviews of product providers and specific investment
investment approach (checking cash rates paid and other
managers.
small, but important points), together with in depth analysis
of their systems. Finally, each DM completed a questionnaire
• Regular evaluations of model and bespoke portfolios.
providing analysis of performance of segregated portfolios
• For bespoke portfolios, annual reporting including
against recognised benchmarks.
confirmation of where they are in relation to the client’s
Administration monitoring
financial plan. The reporting will include the following areas:
• Quality and standard of administration generally.
• Confirmation of agreed benchmark
• Quality of, and access to, reports.
• Timeframe being considered
• Functionality of online reporting systems.
• Confirmation of objective and risk profile
• Availability of investment managers.
• Benchmark performance
• Flow of generic market information to the client.
• Portfolio performance
• Investment manager approach
29
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
C. Sample client review letter and portfolio review summary
Below is a suggested client review letter and an outline portfolio review document that an adviser may wish to
send to a client on regular basis that provides reassurance and demonstrates the ongoing work undertaken by the
adviser on behalf of a client.
IFA Client
Client Address #1
Client Address #2
Client Address #3
Postcode
PL
Dear Sir
E
[Date]
M
It is with pleasure that I write following my 6 monthly investment review meeting with ________________ of Brooks
Macdonald Asset Management on _________.
SA
I have attached a summary of their performance over the past 6 months, together with confirmation of the
benchmark they are using which clearly demonstrates their relative performance. The review includes a comment
from _______________, the investment manager, which concurs with our stance and conforms to your objectives
that we agreed at our last meeting.
PL
E
In summary, I am pleased to report that the portfolio has performed well against our own agreed benchmark and
the industry accepted benchmark of APCIMS. The portfolio is performing in line with expectations and meeting
your current objectives and I am pleased with the way ________ is running the investment management mandate
we have given him.
Yours sincerely
SA
With kind regards
M
As you know, we receive regular updates from Brooks Macdonald Asset Management that allow us to monitor the
performance of your portfolio on an on-going basis. This 6 monthly review is designed to formally confirm our
ongoing evaluation of the performance of your investment managers and to ensure that your objectives are being
met and performance achieved. As always, if you have any queries whatsoever please call me.
A B Consultant
An IFA Co Ltd
30
Copyright ©2012 Brooks Macdonald Asset Management Limited
A Research Guide to Creating a Panel of Discretionary Managers
BMAM Portfolio Review Summary
1. Date of review:
2. Agreed Benchmark:
3. Timeframe:
M
PL
E
4. Performance of the agreed benchmark:
SA
5. Performance of the portfolio:
6. Investment Managers comments:
SA
M
PL
E
7. Performance of BMAM model portfolio vs APCIMS __________ benchmark:
31
Copyright ©2012 Brooks Macdonald Asset Management Limited
FULL DEFAQTO TRANSCRIPT OF COMMENTS
FOREWORD BY FRASER DONALDSON – DEFAQTO
INSIGHT ANALYST FOR FUNDS
EXECUTIVE SUMMARY BY DEFAQTO ON BROOKS
MACDONALD’S DUE DILIGENCE PROCESS
Brooks Macdonald have requested an independent audit of the
Brooks Macdonald’s approach to selecting a DM is a sensible and
data and methodologies within this research document.
comprehensive one. It is of course not the only approach and some
bespoke work, by each adviser may be required on the process to
Defaqto have been researching, and providing consultancy on
emphasise what is important to that adviser and his clients.
the selection and comparison of discretionary managers (DMs)
for the past three years and feel well placed to comment on the
Having said that, Defaqto has noted that the sheer range of
processes suggested within this document.
DMs covered by this process permits an adviser to realistically
claim that they have selected a shortlist from the market, and it
It should be made clear that Defaqto has been employed to
is difficult to suggest other filters where similar data from such a
audit a process that has been created and developed by Brooks
wide range of firms would be readily available.
Macdonald. All copyright, statements and methodological
assumptions are the intellectual property of Brooks Macdonald.
Defaqto would not want to comment on the relevance of
The Defaqto comments will be clearly marked with our logo
retaining a whole of market and independent starting point for
to further highlight the additional content that Defaqto have
each adviser, but should that be important then these stages are
produced as part of the audit. An entire summary of the review is
a viable way of achieving the goal.
also available within this document.
In auditing any due diligence process, however, Defaqto would
Defaqto has either verified or supplied the data for this whole
make the following provisions:
of market due diligence approach to selecting a discretionary
• It is for the individual adviser to weight the importance and
manager document. Data supplied by Defaqto is clearly sourced
relevance of individual filters. Some filters, or the details of
and is supplied to Brooks Macdonald as a licensee of Defaqto
specific filters can of course be modified to suit. The scores
Research Services. Other contributors are also clearly referenced,
can easily be recalculated, and the core process retained.
and Defaqto has verified that the data has been reproduced
• The adviser can modify the filters or indeed add different ones
accurately. Defaqto has not audited third party data in terms of
to suit. With DM services increasingly made available to the
the information itself.
intermediated market relevant due diligence information is
It is should be noted that Defaqto has not been party to the
becoming easier to obtain.
construction of the suggested questionnaires, fee charging
STEP 1.1 DEFAQTO’S VIEW ON USING THE PAM
DIRECTORY AS A FILTER
schedules, or other sample communiqués highlighted by Brooks
Macdonald within this report. This content has been reviewed
in terms of the overall process, but not in terms of the actual
Brooks Macdonald has developed their universe of DMs with
content and layout of the documentation.
reference to the PAM Directory. This directory covers the majority
The value to advisers in following a process such as this stems
of DMs geared up to cater for the intermediated market. APCIMs
from two aspects inherent in this document. Firstly, the use of the
(Association of Private Client Investment Managers) have a full
Private Asset Managers (PAM) directory, to set out a good proxy
members list which may also add some additional firms, but as a
for a whole of market approach to DM selection. Secondly, the
starting point the PAM directory entries are a good proxy of DMs
suggested process and scoring can be modified to suit adviser
servicing the UK market.
firm preferences, either in terms of the importance attached to
STEP 1.2 CONTRIBUTORS TO THE DEFAQTO DM
DATABASE
each filter, or by creating a bespoke filtering system using the
data made available by the research document. This benefit can
be enhanced by the existence of last year’s edition of the same
Defaqto now collects detailed information on discretionary
process using different data sets and criteria.
management firms that have specific solutions for the
©Defaqto Ltd 32
www.defaqto.com/adviser
intermediary market. The comparison and due diligence of DMs
offshore bond panels covered if advisers chose to factor in last
is now part of Defaqto’s core research tools. Defaqto collects
year’s results as well. Furthermore, product providers that are
data on firms that have predefined service terms for UK advisers,
developing products with high levels of features and service are
and are happy to reproduce these, as well as other details on
likely to be more diligent in their research of DMs for their panels.
their service, process, and company, for UK financial advisers.
Alternatively, for SIPP products we have gone with the products
Appearance on any Defaqto product/service research table is free.
most frequently recommended via Defaqto’s adviser research
This additional filter will highlight those firms that consider their
tool, Engage. The filtering process that Defaqto’s Engage system
services to be highly geared to the UK intermediary market.
makes available to advisers is such that those tax wrappers
coming through to recommendation tend to have the best
STEP 2.1 DEFAQTO’S VIEW ON USING
CONTRIBUTORS TO THE ARC PCI – Q4 2011
– AS A FILTER
features and associated services.
In terms of the process itself, we would agree that should
DM firms sit on a wide number of SIPP and bond panels, it is
Asset Risk Consultants are well known researchers of DM
inevitable that a certain amount of due diligence will have been
performance. They produce a highly credible measure of risk
executed by the SIPP or bond provider. We would note that
vs returns over time. The number of contributors to their
this can vary considerably and highlight the fact that different
private client indices demonstrates that DMs are happy for their
providers use different methodologies in screening the DMs that
performance to be independently audited and compared against
sit on their panels.
wider peer groups. The fact that contributing DMs are happy
Furthermore, these steps in the process gain credibility over time,
to submit this data makes it a good additional filter. It must also
as the sum of SIPP and bond products being examined increases.
be stated that contributors pay an annual subscription to ARC
It allows advisers to combine scores over the two editions of
which prevents some DMs participating, and is not necessarily a
this research. A total of 10 SIPP products and 9 offshore bond
comment on their performance.
products have been analysed.*
STEP 2.2 DEFAQTO’S VIEW ON USING ASSETS
UNDER MANAGEMENT (AUM) OF £2BN AND
ABOVE AS A FILTER
[* It should be noted that Defaqto have not screened the accuracy of data in
the previous edition referred to here.]
STEP 2.4 DEFAQTO’S VIEW ON USING TAX
WRAPPER PROVIDERS VIA BROOKS MACDONALD
Brooks Macdonald has applied a filter at £2bn for assets under
management, not an unreasonable cut-off in our opinion. The
The range of tax wrappers available through a discretionary
actual level selected by an adviser may vary from this amount and
service could be quite important additional information. It
is dependent on individual preference.
demonstrates that DMs do not necessarily have to be on formal
Some advisers may have the ‘safety in size, big is beautiful’ belief,
SIPP & bond panels to be employed by the adviser/client.
where the cut-off could be much higher. Another may look at
Employing an off-panel DM may involve more due diligence
smaller firms which they believe are typically more agile in their
work and administration but some tax wrapper providers do offer
decision making. Indeed size may not be important at all and
this option.
looking for a local DM may be a priority.
DEFAQTO’S VIEW ON CREATING THIS SHORTLIST
The growth rate of AUM can also be a useful indicator of firms
on the up, or those that are having a high degree of success in
In Defaqto’s opinion, applying these filters, or variations of, is
winning new business.
a good place to start in creating the initial shortlist for further
STEP 2.3 DEFAQTO’S VIEW ON USING OFFSHORE
BOND & SIPP PROVIDER PANELS AS FILTERS
investigation from the wider market. An adviser can also add
in any other must have criteria at this stage. This will ensure
that the shortlist meets their basic criteria. Common examples
Brooks Macdonald has sought Defaqto’s advice in selecting the
of additional filters in the current market would be platform
offshore bond and SIPP products featured in this 2012 edition
availability or customer relationship management (CRM) data
of their DM due diligence document. We have selected offshore
feeds. Again, such filters can be designed to suit the needs of the
bond products that have achieved the highest Defaqto star ratings,
researcher, and assist them with their design of the shortlist.
which are based on the product and service features offered. Last
COMBINED 2011 & 2012 SCORES
year Brooks Macdonald opted for pure adviser popularity. Using
Defaqto’s star ratings has added in some tax wrapper quality
Defaqto agrees that the combining of the two research
measures to the process, and has widened the total number of
documents may be something that an adviser may choose to do.
©Defaqto Ltd 33
www.defaqto.com/adviser
Defaqto would also agree that cheapest is not necessarily best,
The benefits of doing this might include:
look for value for money. Terrific service, support and quality
• The research process can be applied to a much wider base of
reporting systems may well justify an extra few basis points in the
SIPP & bond panels (although we would note that we have
minds of both adviser and the client.
not changed last year’s panel results so some firms may have
been added to certain product panels since publication. As
STEP 5 DEFAQTO’S VIEW ON MEETING WITH
EACH DM ON THE SHORTLIST
such we would not recommend going beyond combining
two successive years without checking that all the data is
Defaqto agrees that this is essential. Advisers may be entrusting
still accurate).
considerable amounts of their clients’ assets to the selected
• The combined score can highlight those DMs that are
firms, so it is essential that they feel comfortable with the people
growing in terms of AUM and presence, particularly in the
managing their clients’ money. Personalities can come in to the
intermediated marketplace.
equation as the adviser will potentially be working with the DMs
• A consistency value for those DMs that do well in both reports
on a daily basis. If it is not the decision maker (at the adviser firm)
can be ascertained.
who will be dealing direct with the prospective DM, it may be
• Anomalies can be identified and evaluated.
advisable to involve the person who will be at this stage.
STEP 3 & 4 DEFAQTO’S VIEW ON SENDING A
QUESTIONNAIRE AND EVALUATING THE RETURNS
• Approach the meetings as if assessing a business partner.
• Get it right first time to increase the odds of an extended
partnership.
These should be designed to find out more about each of the
• Use the meeting as a good opportunity to test the validity of
firms on a shortlist. Defaqto would agree that this is an essential
the responses to the questionnaire.
process to embark upon.
STEP 6 & 7 DEFAQTO’S VIEW ON MAINTAINING,
MONITORING & RECORDING THE PROCESS
AND RESULTS
Advisers may not only be dealing with their selected DM on
a daily basis, but may have questions that need answering in
the future. This process will not only help to whittle down the
shortlist further based on the responses but, equally as important,
It is essential that the progress of the DM is monitored, preferably
those responses (or lack of them) and the way in which a DM
on a formal basis at least twice a year. We would agree with
answers the questions will give the adviser a good indication of
Brooks Macdonald that things such as administration, approach
their willingness to service the adviser market and what their
to regulation changes and support to the adviser are a must.
service standards may be like in the future.
In terms of performance, Brooks Macdonald suggests monthly
At this stage, it would be sensible to ask for all marketing
monitoring, which we would agree with.
materials on the services offered, together with their terms and
It is also essential that the whole selection process is repeated on
conditions as it is not always possible to download these from
a regular basis and we would agree that every 12 months or so
websites. At this stage you may not want to request a call from
is sensible.
an account manager which can sometimes be the only option
Of course keeping records of the selection process is a must, both
offered on DM websites.
from a compliance basis and to see if anything has changed from
In terms of the questions suggested by Brooks Macdonald,
when the original selection was made.
although they are fairly comprehensive and will elicit enough
information to reduce the shortlist further, the list is not
DEFAQTO’S VIEW ON THE ADVISER FEE
JUSTIFICATION
exhaustive and additional questions can be added.
Brooks Macdonald suggests reducing the shortlist to around 4
Brooks Macdonald lists a whole series of adviser responsibilities and
or 5 firms. Defaqto would go along with this as a manageable
actions that they feel will justify the adviser’s fee. We would agree
number but stresses that there is no rule of thumb on how long
with their appraisal in that selecting the right investment managers
or short such a list should be.
for the client has significant value, as do the ongoing review and
A note on fees & charges
monitoring processes. Defaqto has not reviewed the examples or
These are important, but the priority is selecting the right
charging structures and rates, and highlights the fact that each
adviser will develop their own processes and fee schedules.
discretionary solutions for the client. Costs can be considered
more closely once the shortlist has been reached. Brooks
Macdonald have summarised the potential charging costs well.
©Defaqto Ltd 34
www.defaqto.com/adviser
A Research Guide to Creating a Panel of Discretionary Managers
New Business Development Team
T: 020 7408 5560 E: [email protected] http://www.brooksmacdonald.com/am
Richard Allison
Scotland and N. Ireland
T: 0131 240 3923
M: 07825 735 746
E: [email protected]
Ian Wolfenden
North East
T: 0161 861 4110
M: 07879 811 675
E: [email protected]
Richard Harley
Midlands
M: 07557 746 897
E: [email protected]
Justin Woolf
Northern Home Counties
& North London
Julian Holden
North West
T: 020 7659 3480
M: 07785 617 214
E: [email protected]
T: 0161 861 4113
M: 07979 159 579
E: [email protected]
Carol Evins
East Anglia
Alan Falkingham
South West
T: 01892 554 923
M: 07786 628 566
E: [email protected]
T: 020 7408 5579
M: 07557 113 103
E: [email protected]
Andrew Denham-Davis
London & Head of UK Sales
T: 020 7408 5590
M: 07720 399 307
E: [email protected]
Grainger Thomas
South Central
T: 01329 552 111
M: 07557 110 795
E: [email protected]
Kevin Cull
South Central
David Hyner
London & SE – Sussex & Surrey
Mark Eyres
SE – Kent & East Sussex
T: 01329 226 821
M: 07826 958 791
E: [email protected]
T: 020 7659 3420
M: 07500 601 716
E: [email protected]
T: 01892 554 922
M: 07979 159 272
E: [email protected]
Brooks Macdonald offices
35
Copyright ©2012 Brooks Macdonald Asset Management Limited
This publication has been prepared for professional advisors only for general guidance on matters of interest, and does not constitute
professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.
No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this
publication, and, to the extent permitted by law, Brooks Macdonald Group plc (including its subsidiaries), its members, employees and
agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining
to act, in reliance on the information contained in this publication or for any decision based on it.
790-1 (5.12)

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