WHY CHOOSE A DISCRETIONARY INVESTMENT MANAGER? WHAT IS DISCRETIONARY INVESTMENT MANAGEMENT? This is a service offered by professional investment managers for those with funds available for investment who are looking for a tailored investment solution. An investment manager takes time to understand your personal requirements, including attitude to investment risk, and constructs a suitable portfolio in line with your needs. You will have a direct relationship with this investment manager and their team throughout the lifetime of your investment. Your investment manager is accountable for the performance and on-going suitability of your portfolio, taking responsibility for all decisions on the portfolio. WHY WOULD I WANT A DISCRETIONARY SERVICE? People choose discretionary investment management for a number of reasons. For example: Failing to achieve desired outcomes from existing arrangements, No suitable ready-made solutions available, Not having enough time to manage investments yourself, or, Simply not knowing where to start to look for the right investment. Clients often have capital that has accumulated in a SIPP, from an inheritance or the sale of a property or business and want to ensure that this money is carefully invested to secure a long term future goal. Whatever the reason, a discretionary investment manager can carefully assess your financial situation and tailor a portfolio to match your goals, whether it s to plan for the future, provide a regular income from your portfolio or simply target the highest capital appreciation. WHY WOULD I CHOOSE A DISCRETIONARY MANAGER RATHER THAN MANAGING MY OWN PORTFOLIO? Some private investors successfully run their own portfolios, and enjoy doing so, but in practise it can be very time consuming to continually monitor and confidently react to market events. Discretionary investment managers are experts in this field, having years of practical experience and access to primary and secondary research across all asset classes so they can to select and manage the best investment opportunities. Discretionary investment managers build a diversified portfolio to suit each client s unique personal circumstances and risk preferences. It is not just about 01
selecting the right investments to achieve the best returns but rather making sure they are the most suitable investments for each client. Implications of tax status or a requirement to use the portfolio to generate a regular income over time have a significant impact on which investment options are appropriate. Unlike the majority of private investors, discretionary investment managers can meet face to face with listed companies or investment funds to gain a deep understanding of the investment opportunities they offer and the risks attached to them, only selecting those who are best suited to meet their clients needs. They also have access to leading industry and in-house research that is not publically available, helping them make the right investment decisions. HOW WILL I BE INVOLVED IN THE MANAGEMENT OF MY OWN PORTFOLIO? You can be as involved as you like when you choose to invest with a discretionary manager. Some clients choose to be consulted on all investment decisions whereas others choose to let the manager make all the decisions and want very little contact with their manager. The service we offer is client led, and we are flexible in meeting a variety of different service requirements. Clients can choose to have a face-to-face meeting with their investment manager on a regular basis, or some are simply happy to have the occasional telephone conversation to keep them up to date. Just like building the investment portfolio, the way that the discretionary service is delivered can be tailored to suit you. WHAT INVESTMENTS WILL A DISCRETIONARY MANAGER CHOOSE FOR MY PORTFOLIO? A discretionary investment manager will invest across a range of asset classes to create the most suitable diversified portfolio to manage risk and optimise growth opportunities. This typically includes: Equities Fixed interest (government and corporate bonds) Property Alternative investments Collective investment funds Cash/cash equivalents (such as fixed-term deposits) A good discretionary investment manager will invest predominantly in direct equities, bonds and a mix of collective investment funds from several leading fund management houses for those markets where it is harder to gain direct equity exposure. This could include some element of their own in-house collective funds and it is worth checking that you are happy with the level of these selected, the manner in which you are charged for accessing these funds (i.e. are you paying for the discretionary service as well as access to the in-house fund which equates to double charging?) and the performance track record. Alternative investments can mean anything from renewable energy projects to fine wine and art investments. In most discretionary managers cases this will mean commodities (such as gold and silver), structured products or hedge funds. Such investments can offer significant diversification to a wider portfolio but are often hard for private clients to access. A discretionary manager has resources to research and source the best opportunities, often using their buying power to secure these investments on the most attractive terms. WOULD INVESTING DIRECTLY IN A COLLECTIVE FUND ACHIEVE THE SAME OUTCOME? No. The key differences are as follows: Collective funds are generally designed for retail investors with a minimum of 1,000 to invest. These follow a set objective and are no way tailored to your individual needs, both initially and as your circumstances change over time. They do not take into account your own individual circumstances, such as other investments outside this portfolio or your tax status. They may not provide the same level of diversification that is possible in your own discretionary portfolio. You will not get regular performance reports, valuations or tax packs. You will not benefit from a direct relationship with the investment manager responsible for your portfolio. COULD I NOT JUST USE A FINANCIAL ADVISER INSTEAD OF A DISCRETIONARY MANAGER? Investors are always encouraged to see a financial adviser before making any investment decisions. Financial advisers are experts in recommending the most suitable financial products, such as investment funds, life assurance and pensions, but are not experts in carefully managing an investment portfolio this is where a discretionary investment manager s knowledge, investment process and experience is essential. It is also the reason why discretionary investment managers have such a close relationship with financial advisers. DO ALL DISCRETIONARY INVESTMENT MANAGERS FOLLOW AN ACTIVE INVESTMENT PROCESS? The basis for discretionary investment management is that the discretionary investment manager should be continuously reviewing your bespoke portfolio, actively making changes as market conditions or your financial circumstances dictate. However, some may choose to only be active in switching between markets and asset class exposure as economic conditions require, or primarily use index tracker or 02
passive funds as the underlying investments. A manager following a fully active investment approach would react to market conditions using direct investments such as equities or actively managed collective fund options. Other investment managers may simply be active in selecting the right stocks or funds within a geographic region or market segment but are not active in looking at the overall economic picture. It is all well and good to have the best performing stock or fund in a market but it has to be at the right time. You should question whether your discretionary investment manager follows a fully active investment process and if it combines both active asset allocation and active stock selection. WHAT ABOUT THE ETHICAL IMPLICATIONS OF MY INVESTMENTS? A discretionary investment portfolio is bespoke so you can enforce any investment restrictions you like. An increasing number of private clients wish to reflect their environmentally friendly lifestyle in their portfolios and have an element of their funds invested in green companies with positive attitudes towards climate change; others simply want to be as ethical by means of avoiding companies in sectors such as alcohol, tobacco, gambling etc. WHAT IS THEMATIC INVESTING AND WILL THIS IMPACT MY PORTFOLIO? Thematic investing is about investing on the back of global economic trends. These trends can be driven by politics, culture, demographics or a combination of all three. One of the most common thematic trends is investing in companies that are aiming to reduce global warming. Other popular themes include investing in agriculture, energy scarcity and water companies. A discretionary investment manager may invest in a thematic collective fund as part of a private client s portfolio or buy shares directly in companies that operate in these sectors of the market. It will be up to each discretionary investment manager to gauge whether thematic investing is right for their client. SHOULD I BE CONCERNED WITH THE RISKS OF INVESTING IN EMERGING MARKETS? All investments carry a level of risk but in emerging markets this is more prominent. As the name suggests, these are economies that are in their infancy and need investment to grow. They are more likely to face significant economic or political uncertainty than established economies. The growth potential from emerging markets can be significant. It is up to each discretionary investment manager to assess each of their client s attitudes to risk and determine if exposure to such markets is suitable for them. Emerging markets will not be suitable for all investors, but for some can offer portfolio diversification and greater growth potential. HOW OFTEN WILL I GET AN UPDATE ON MY PORTFOLIO? Most discretionary investment managers offer an online service that allows you to view your portfolio at any time. You will receive a copy of your initial portfolio then after that you can agree how often you would like regular updates. You could elect to receive these valuation reports every quarter or six monthly. Your portfolio valuation reports should contain a breakdown of the portfolio constituents, details of all transactions executed and an update on performance. This performance information should show how your portfolio has performed versus a benchmark that you will agree with your discretionary manager at the outset. There should also be some accompanying commentary to explain this in more detail. Nothing in your regular valuation reports should come as a surprise as you should be in regular contact with your discretionary investment manager. HOW DOES THIS SERVICE IMPACT MY ANNUAL TAX RETURN? Your discretionary investment manager will provide everything you need to complete your annual tax return. This will include a detailed list of all portfolio transactions, statement of portfolio income and the overall portfolio s profit or loss for the financial year. Where necessary they can work with you to manage capital gains tax allowances. WHAT ARE THE FEES INVOLVED? By law, all discretionary investment managers must be clear about the fees they charge so if they are in away unclear then you must question this. Broadly speaking, the fees you will be charged fall into two categories the annual management fee and dealing charges arising each time an investment is bought or sold for your portfolio. In some cases a discretionary investment manager may simply charge a higher annual management fee alone with no dealing costs incurred on your portfolio. The annual charge is usually a percentage of the funds you hold and will most likely be tiered with a lower percentage fee for larger portfolios. There may be other smaller charges also involved and you should make sure you know what they are in advance of selecting a discretionary investment manager. WHAT INFORMATION SHOULD I REGULARLY RECEIVE? Other than the regular portfolio valuation reports covered above, it is up to you what you would like to regularly receive from your investment manager. Some investors prefer to be sent regular notification on trades, ahead of their quarterly report, whereas others are happy not to have this level of involvement and are satisfied with just an occasional phone call from their manager. 03
Discretionary investment management firms will usually produce regular market commentaries, newsletters and research reports that are available to all clients. You can elect to be added to the mailing list for these publications. HOW DO I SELECT THE RIGHT DISCRETIONARY INVESTMENT MANAGER FOR ME? Having a good relationship with your discretionary investment manager is very important as you should feel at ease when you discuss your investment portfolio and goals. You also need to be confident that they have the right experience and qualifications to manage your investments. Investment managers are used to explaining what they do and how they do it so ask as many questions as you like to feel confident in your discretionary investment manager selection. The most common questions may include: Discretionary investment manager s experience and track record Investment process Firm s funds under management, history and annual report Office locations Use of in-house and external collective funds Research resources and asset classes monitored Any past regulatory issues or fines Investment manager s understanding of your investment goals HOW PERSONAL IS THE SERVICE? This is a relationship that can last a lifetime so you need to be comfortable with the level of service you would like from your investment manager. Each discretionary investment management firm offers different levels of service and you should be clear from the outset what you expect and state your terms. You should confirm that your discretionary investment manager and their team will remain your main point of contact and that this is not likely to change in the future. You should also check who will be your contact when your discretionary investment manager is unavailable and check their credentials. WHAT IS THE PROCESS FOR SIGNING UP TO A DISCRETIONARY INVESTMENT SERVICE? When signing up to a discretionary investment service, you must first agree with your discretionary investment manager your investment goals and where your assets are currently invested, whether sitting in cash or tied up in another investment product. You will complete and sign an initial application form and discretionary investment management agreement with your discretionary investment manager. You will be asked to provide the usual proof of identification such as passport and utility bills. Your investment manager will generally hold your investments in a nominee account under their firm s name rather than yours. This is perfectly normal and is necessary to allow the manager to execute and administer the portfolio on your behalf. Cover when manager is unavailable Main firm contacts Firm and discretionary investment manager s regulator and confirmation of registration The list of questions is endless but the most important thing to remember is that you can ask for a different investment manager if you do not feel the manager you first meet with is the right fit for you. Do not be afraid to ask for evidence of your discretionary investment manager s track record. A good discretionary investment manager or investment firm should be happy to share their past performance history, although this alone should not be used as a decision for selecting a discretionary investment manager. 04
WHY CHOOSE QUILTER CHEVIOT AS YOUR DISCRETIONARY INVESTMENT MANAGER? Quilter Cheviot is one of the UK s largest independently owned discretionary investment firms, which can trace its heritage to 1771. The firm is based in thirteen locations across the UK, Jersey and Ireland and has total funds under management of 15.4bn (as at 31 March 2014). Quilter Cheviot focuses primarily on structuring and managing bespoke discretionary portfolios for private clients, charities, trusts, pension funds and intermediaries. Using our active investment management process, we take advantage of the best investment opportunities from across the globe and act in our clients best interests. Following their stated objectives and restrictions and reviewing and reporting back regularly. We offer: A truly bespoke approach based on each individual client s requirements A direct relationship between clients and their investment manager Why are we so different? We re in touch with our clients providing ongoing dialogue with investment managers. We are accountable ensuring the decisions made on each client s portfolio are in line with their requirements. We take an unbiased approach unconstrained by corporate ownership, to select the most suitable investments. We expertly manage client portfolios accessing industry leading market research to reflect their investment objectives. We aim for problem-free portfolio management doing the hard work, so our clients don t have to. For more information or to talk to one of our discretionary investment managers, call us now on 020 7150 4005 or visit www.quiltercheviot.com. Regular reporting online and in print CGT monitoring helping clients manage their capital gains tax liabilities The ability to accommodate cherished holdings as well as off piste investments CONTACT US: Quilter Cheviot One Kingsway London WC2B 6AN t: +44 (0)20 7150 4005 w: quiltercheviot.com Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. This document is not intended to constitute financial advice; investments referred to may not be suitable for all recipients. Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London WC2B 6AN. Quilter Cheviot Limited has established a branch in Dublin, Ireland with number 904906, is a member of the London Stock Exchange, is authorised and regulated by the UK Financial Conduct Authority, is regulated by the Central Bank of Ireland for conduct of business rules, under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom. 05