Our Investment Proposition

Transcription

1 Suite A, Lancaster House Imperial Financial Planning Grange Business Park Our Investment Proposition This document explains the defined investment strategy that we use with our clients. Our investment proposition involves assessing your tolerance to investment risk, agreeing with you an asset allocation and fund selection that reflects this, and regularly monitoring this asset allocation/fund selection so that it is regularly re-balanced back to it's original composition. The process is designed to ensure that your portfolio continues to be managed in line with your agreed objectives and tolerance to risk. The Risk Analysis Tool/Questionnaire We use risk analysis tool/s to analyse your responses to the questions on the risk questionnaire. This provides an indication of your potential tolerance to investment risk using a scale of 1 to 10, where 1 represents a low tolerance to risk and 10 represents a high tolerance to risk. You will be provided with a description of the risk category which has been determined after completing the questionnaire. We will discuss with you the risk category which has been calculated by the tool and what this may mean for your investment portfolio. We will assess your knowledge and experience of investments and discuss with you potential alternative risk categories and risk descriptions in coming to a conclusion as to the most appropriate level of risk tolerance for you. We will also assess your capacity to take risk with your investment portfolio in terms of your overall capital and income and take into account the time-scale you require for the investment. We will then use the selected risk category to choose an appropriate portfolio designed to keep within your agreed tolerance for investment risk. If your attitude to risk is category 1 or 2 or your capacity for financial loss is very low we may recommend, after thorough discussion with you, cash deposits only. The descriptions of 10 risk categories used to assess your tolerance for risk are shown within the appendix to this document. Our Portfolio Offerings Using Outsourced Fund Selection We have broadly identified four main outsourced portfolio offerings, each offering its own approach to dealing with the considerations surrounding asset allocation, fund selection and client reviews. As each client has different needs, we recognise that you may need to use more than one approach. Our recommended solution will be chosen to fit your overall investment circumstances and objectives. In the event that none of our portfolio offerings fit with your overall investment circumstances and objectives then we can discuss your individual

2 Suite A, Lancaster House Imperial Financial Planning Grange Business Park requirements with you and we may recommend an alternative solution. We will also use all the information you have given us and focus on your investment needs to determine a solution. The key areas will be:- amount of investment your previous investment experience attitude to investment risk investment time-scale investment objectives ie growth, income or both Risk-Rated Integrated OEIC Fund Range This solution will use risk-rated OEIC investments incorporating the principles of fund of funds and manager of manager. The fund manager will select underlying funds and blend them to a pre-determined asset allocation, constructing a portfolio designed to remain within a pre-defined risk-rating. Depending on the proposition there may be some tactical asset allocation overlay with clearly defined risk tolerances. Our research has identified a number of specialist fund managers offering these funds which can be used individually or to construct a portfolio combining a number of these funds together. These are likely to include: Capita Fund Managers, F&C MM Lifestyle, IFSL Sinfonia, Old Mutual Spectrum and Prudential Portfolios. We would normally construct a portfolio incorporating some or all of these funds to give diversification through the different fund manager styles and investment strategies. These funds would typically suit clients who have limited investment experience and varying levels of capital to invest. Another example of using these funds would be the Prime Investment Portfolios. Prime brings together the talents of three specialist fund of fund managers to provide you with access to fully diversified investment portfolios which are specifically designed to reflect your attitude to investment risk. With Prime your investment is split evenly across the risk-rated portfolios provided by IFSL Sinfonia, 7IM and F&C Lifestyle. This means that you benefit from diversification across asset classes, different fund management techniques and investment strategies which aim to reduce volatility and improve the potential for consistent investment performance. The managers of the three risk-rated funds will regularly rebalance their underlying portfolios to ensure that your investment continues to keep in line with your agreed tolerance to investment risk. The following Prime portfolios are available: Prime Cautious Prime Moderately Cautious Prime Cautious Balanced Prime Balanced Growth Prime Moderate Growth

3 Imperial Financial Planning These portfolios are aligned to risk categories 3 to 7. Suite A, Lancaster House Grange Business Park You will be offered an annual review meeting to examine your overall investment objectives and any potential changes to your tolerance for investment risk. As part of the annual review we will rebalance the Prime Portfolio to ensure that the even split between the three fund propositions is maintained. Typically, this solution may be suitable for a relatively inexperienced investor with between 25,000 and 50,000 to invest. Passive Index Portfolios Vanguard s Lifestrategy funds, Blackrock Consensus funds and HSBC World Portfolios apply a number of investment best practices including top-down asset allocation, broad diversification and a balance between risk, return and cost. The funds offer a straightforward design, low investment costs and broad exposure to equity and fixed income allocations, all of which help to maximise the usefulness of these funds for investors. Vanguard and Blackrock offer 5 portfolios aligned to risk categories 3 to 7. They are the fourth largest and largest fund group respectively in the world by assests managed. HSBC have three portfolios available for the Cautious/Balanced/Adventurous investor. These institutions manage their funds using what is known as Passive Management. Their funds are automatically rebalanced in line with the original asset allocation chosen by the client. When constructing these funds, Vanguard/Blackrock/HSBC strongly believes that any risks investors bear should be expected to produce a compensating return over time. Modern financial theory and years of investment practice lead these providers to conclude that diversified, broad-based index exposures represent precisely this kind of compensated risk. While some active managers can add value at least some of the time out-performance cannot be guaranteed. Your portfolio will be reviewed at least annually, with interim reviews depending on your requirements. Typically, this solution would suit most levels of investment and investors who have a preference for passively managed funds as opposed to actively managed funds on a core / satellite investment model. These funds could also be used for an existing investment portfolio to provide a balance between passive and active investment. Tenet Model Portfolios These are portfolios of suggested funds selected by Morningstar Old Broad Street Research (OBSR), a leading fund research company. All of the suggested funds within your portfolio will have been selected to fit within a strategic asset allocation (a mix of different investment types and assets) which is consistent with your attitude to investment risk. The strategic asset allocation is supplied by Barrie & Hibbert and is designed to be aligned to your chosen risk category which has been determined through the risk analysis process.

4 Suite A, Lancaster House Imperial Financial Planning Grange Business Park Your portfolio will be regularly reviewed and rebalanced each quarter. Following the review we may recommend changes to your fund selection to ensure that your portfolio always has the best perceived blend of funds to meet its stated investment objective. We will notify you of any recommended fund changes, in writing, and you will be given the opportunity to discuss any investment changes with us. Each quarter the portfolios are rebalanced in line with OBSR guidance to ensure that they continue to keep in line with their agreed tolerance to investment risk. We will assess your individual portfolio and rebalance accordingly at your scheduled review. We offer from a choice of eight growth portfolios which are aligned to risk categories 2 to 9. These include options for the more aggressive investor. We also offer five portfolios which are suitable for investors requiring income. The income portfolios are aligned to risk categories 3 to 7. We will recommend Tenet Model Portfolios for investments of 100,000 and above. We use these portfolios for clients who prefer to have the more regular quarterly review with the option to discuss their fund selections with us. Typically, this solution may be suitable for investors with some investment experience who require a more bespoke portfolio of investment funds. You will be offered an annual review meeting to examine your overall investment objectives and any potential changes to your tolerance for investment risk. Discretionary Fund Management This solution would typically suit clients looking for a complete bespoke managed investment solution where the client has input into the make-up of their investment portfolio. These clients are likely to be experienced investors with an existing portfolio or investment capital in excess of 250,000. We maintain relationships with a number of specialist discretionary portfolio management companies. Our research has identified a number of suitable companies who include: Cazenove, Investec and Smith & Williamson. If this route is selected we will discuss your requirements and facilitate an introduction to a private investment manager who will be appointed to manage a bespoke portfolio in accordance with your needs. Your appointed portfolio manager will discuss your investment objectives with you. Administration of your Investment Solution All of these investment solutions are administered using a Wrap/Platform Account. A wrap is an online platform utility which assists advisers with arranging and reporting on fund and portfolio investments across a range of investment types and tax wrappers.

5 Suite A, Lancaster House Imperial Financial Planning Grange Business Park Our generic research has identified two suitable Wrap/Platform Accounts who are Integrated Financial Arrangements (Transact) and Aviva. Our research is undertaken using Defaqto as an online research tool. We will identify which Wrap/Platform provider meets your individual investment needs by refining the research process accordingly. We will provide you with full details of your Wrap/Platform account as part of our recommendation. Investment Wrappers Available Our Investment Proposition can be used with the following range of investment wrappers: OEIC / Unit Trust Portfolios Individual Savings Accounts (ISA) Personal Pensions / Self-Invested Personal Pensions (SIPP) Onshore Investment Bonds (including a range of trust investments). Offshore Investment Bonds We will also consider other investment options available depending upon your investment experience, level of investment and attitude to risk. These options may include: Investment Trusts Exchange Traded Funds Structured Products Enterprise Investment Scheme Venture Capital Trust Offshore OEIC / Unit Trust Unregulated Collective Investment Scheme Taxation Portfolios held within ISA and SIPP are considered tax efficient and, subject to keeping within the investment limits and rules for these wrappers, there will not usually be any tax liability arising on investment gains on the portfolio. Any dividend distributions on the underlying investment will, however, be paid net of a 10% income tax credit which cannot be reclaimed.

6 Suite A, Lancaster House Imperial Financial Planning Grange Business Park Investment gains made on the OEIC/Unit Trust Portfolios could be subject to Capital Gains Tax (CGT) which can be offset against the annual CGT allowance. Many people do not make regular use of their annual tax-free CGT allowance meaning that a tax saving opportunity is then wasted. One advantage of holding the Tenet Model Portfolio as an OEIC/Unit Trust Account on a Wrap is that any investment gains can be realised and offset against the annual CGT allowance during the process of making suggested fund changes or regular rebalancing. We will explain to you the taxation position of your portfolio as part of our recommendation. Please inform us of any change to your financial circumstances as this may impact on the future taxation position of your portfolio. Costs Our advice costs are detailed within our Initial Disclosure Document / Fee Agreement and ongoing Client Service document and comprise of an initial advice fee and an ongoing annual administration fee. You will have the option of paying the fees yourself or having the fees deducted from your portfolio Wrap/Platform account. In additional to our advice costs there will be annual charges on the underlying funds within your portfolio and there may also be charges imposed by the selected Wrap/Platform. Typically the actively managed underlying funds within your portfolio will have an annual management charge in the region of 1% to1.5 %. Typically the passively managed funds will have an annual management fee of 0.5%. You will be provided with a personalised illustration which will detail all of the applicable charges including our advice charge, the fund charges and any applicable Wrap charges. Contact To discuss any aspect of our investment proposition and whether it is suitable to meet your investment requirements please contact your Financial Adviser. Version 4 March 2014

7 Imperial Financial Planning Suite A, Lancaster House Grange Business Park Appendix Risk Category Descriptions Category 1 Conservative In general, Conservative investors prefer knowing that their capital is safe rather than seeking high returns. They are not comfortable with the thought of investing in the stockmarket and would rather keep their money in the bank. Conservative investors usually avoid anything that looks like a gamble. They can take a relatively long time to make up their mind on financial matters and will usually suffer from severe regret when their decisions turn out badly. Conservative investors typically are unlikely to have much experience of investment beyond bank and building society accounts. Category 2 Moderately Conservative In general, Moderately Conservative investors prefer knowing that their capital is safe rather than seeking higher returns. They are not comfortable with the thought of investing in the stockmarket and would rather keep their money in the bank, but would be willing to invest in other types of investments if they were likely to be better for the longer term. Moderately Conservative investors usually avoid anything that looks like a gamble. They can take a long time to make up their mind on financial matters and will likely suffer from regret when their decisions turn out badly. Moderately Conservative Investors are unlikely to have much investment experience beyond bank and building society accounts. Category 3 Cautious In general, Cautious investors would prefer not to take any risk with their investments, but they can be persuaded to do so to a limited extent. They would prefer to keep their money in the bank, but may realise that other types of investments are likely to be better for the longer term. Cautious investors typically prefer certain outcomes to gambles. They can take a relatively long time to make up their mind on financial matters and can often suffer from regret when decisions turn out badly. Cautious investors may have some limited experience of investment products, but will be more familiar with bank and building society accounts than other types of investments.

8 Category 4 Moderately Cautious Imperial Financial Planning Suite A, Lancaster House Grange Business Park In general, Moderately Cautious investors are uncomfortable taking risk with their investments, but would be willing to do so to a limited extent. They realise that risky investments are likely to be better for longer-term returns. Moderately Cautious investors typically prefer certain outcomes to gambles. They can take a relatively long time to make up their mind on financial matters and may suffer from regret when decisions turn out badly. Moderately Cautious investors may have some experience of investment products, but will be more familiar with bank and building society accounts than other types of investments. Category 5 Cautious Balanced In general, Cautious Balanced investors understand that they have to take some investment risk in order to be able to meet their long-term goals. But are likely to only take risks with a small part of their available assets. Cautious Balanced investors will usually be prepared to give up a certain outcome for a gamble provided that the potential rewards from the gamble are high enough. They will usually be able to make up their minds on financial matters relatively quickly, but do still suffer from feelings of regret when their decisions turn out badly. Cautious Balanced investors may have some experience of investment, including investing in products containing risky assets such as equities and bonds. Category 6 Balanced Growth In general, Balanced Growth investors understand that they have to take investment risk in order to be able to meet their long-term goals. They are likely to be willing to take risk with a small to medium part of their available assets. Balanced Growth investors will usually be prepared to give up a certain outcome for a gamble provided that the potential rewards from the gamble are high enough. They will usually be able to make up their minds on financial matters relatively quickly, but do still suffer from some feelings of regret when their decisions turn out badly. Balanced Growth will usually have experience of investment, including investing in products containing risky assets such as equities and bonds.

9 Category 7 Moderate Growth Imperial Financial Planning Suite A, Lancaster House Grange Business Park In general, Moderate Growth investors are willing to take on investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risk with a large proportion of their available assets. Moderate Growth investors will occasionally take gambles where they see the potential rewards as being attractive. They will usually be able to make up their minds on financial matters quite quickly. While they can suffer from regret when their decisions turn out badly, they are usually able to accept that occasional poor outcomes are a necessary part of long-term investment. Moderate Growth investors typically will usually be fairly experienced investors, who have used a range of investment products in the past. Category 8 Growth In general, Growth investors are happy to take on investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risks with most of their available assets. Growth investors will readily take gambles where they see the potential rewards as being attractive. They will usually be able to make up their minds on financial matters quite quickly. While they can suffer from regret when their decisions turn out badly, they are usually able to accept that occasional poor outcomes are a necessary part of long-term investment. Growth investors will usually be experienced investors, who have used a range of investment products in the past. Category 9 Moderately Aggressive In general, Moderately Aggressive investors are happy to take on investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risk with most of their available assets. Moderately Aggressive investors will readily take gambles where they see the potential rewards as being attractive. They will usually be able to make up their minds on financial matters quickly. While they can suffer from regret when their decisions turn out badly, they are able to accept that occasional poor outcomes are a necessary part of long-term investment. Moderately Aggressive investors will usually be experienced investors, who have used a range on investment products in the past, and who may take an active approach to managing their investments.

10 Category 10 Aggressive Imperial Financial Planning Suite A, Lancaster House Grange Business Park In general, Aggressive investors are looking for the highest possible return on their capital and are willing to take considerable amounts of risk to achieve this. They are usually willing to take risk with all of their available assets. Aggressive investors can easily be persuaded to take a gamble rather than a certain outcome and enjoy gambling as an activity. They have firm views on investment and will make up their minds on financial matters quickly. They do not suffer from regret to any great extent and can accept poor outcomes without much difficulty. Aggressive investors typically have substantial amounts of investment experience and will typically have been active in managing their investment arrangements.