Portfolio Management Strategy
When it comes to investing money, whether through Pensions, ISAs, Property or the Stockmarket. It is vital you seek independent advice, not just on the Funds themselves but also on the most tax efficient way of investing.
Here we set out the methods we use to advise clients on all matters to do with investments.
Our starting point is assessing a client’s attitude to risk, this is the most important issue, we either ask you to complete a questionnaire or ask a series of questions to determine acceptable levels of return. All clients have differing requirements, be it long term capital growth, short term income requirements or a combination of both.
Having agreed a client’s attitude to risk, we then recommend an appropriate asset allocation, ie a split of investments across UK Equities, International Equities, Property, Fixed Interest, Cash etc as appropriate.
This asset allocation is then used to help us to determine which Investment Funds best fit the investment portfolio. Depending on the funds available for investment, we usually recommend a ‘multi–manager’ Fund approach. This gives us maximum flexibility to choose the very best Funds from an extremely wide range of Funds on the Market. We prefer this approach rather than having to select a rather more limited range of Funds from one or two Insurance Companies. This method has proved to be much more effective, allowing us to obtain the very best performing investments for our clients.
We aim to diversify our client’s funds across separate areas to give a balanced approach, so that for example if Equities under perform, the fund is counterbalanced by other assets in the portfolio. We look for non–correlating Funds, without spreading the risk too far and wide, and look for consistently outperforming Funds.
We have four main risk categories for our clients:–
- Cautious
- Realistic
- Adventurous
- Speculative
Our Investment Committee, which consists of our Board of Directors, is responsible for reviewing the past performance of Funds and sectors and sets specific guidance to all staff on how to design and manage clients’ portfolios.
In selecting the best Funds, we take into account the historic performance of the Fund, the sectors in which it operates and also the quality of the Fund Manager itself. We use external research to arrive at our conclusions from, amongst others, Fund Managers, rating agencies, leading economists and the Bank of England.
A SIPP is in effect a Personal Pension with much wider investment choices. A SIPP could be suitable for any investor, although we would usually not recommend a SIPP if the starting fund value was below £30,000. Regular premiums and or lump sums can be accommodated within a SIPP.
Below are some of the more popular wider investment options:
- Investment Funds – Pretty much any investment fund can be accommodated within a SIPP, certainly the full range of Unit Trusts and any Insurance company fund can be included, this immediately gives access to thousands of investment funds. You are able to select (with our help) the very best from the whole market.
- Quoted Shares – In addition, shares can also be held within a SIPP, you can either appoint a Discretionary Stockbroker to act for you, or if you wish to trade the occasional share, then this can simply be done via your bank, or online, for example Selftrade (www.selftrade.co.uk). Your share purchase will effectively receive tax relief at up to 40%, if bought via the SIPP. Ie say you wish to buy £10,000 worth of shares, you deposit this sum into your SIPP, if you are a Higher Rate tax payer, you receive 40% tax relief. The SIPP then buys the shares for £10,000. As the shares are held within the pension fund, there will be no Capital Gains Tax (CGT) when the share are sold.
- Unquoted Shares – A SIPP can also hold shares in unquoted companies, subject to certain restrictions
- Property – Commercial Property can also be bought via a SIPP, and the SIPP may borrow to assist with the property purchase, loans of up to 50% of the SIPP fund value are permitted.
Income Drawdown (also called alternatively Secured Income), is an alternative to buying an annuity at retirement. Annuities are very inflexible, they usually provide a fixed level of income and have no or very limited death benefits.
Income Drawdown allows you to draw income from an actively invested fund, allowing you to benefit from future fund growth. A Drawdown arrangement also has the following benefits:
- Flexibility to be able to take maximum Tax Free Cash and an income ranging from zero to a pre agreed maximum. Your pension fund remains fully invested, allowing you to benefit from future growth (if markets underperform you could see a fall in the value of the fund too)
- Maximum income is approximately 20% higher than an Annuity
- Income may be varied between zero, and the maximum at any time
- Death benefits are available via Drawdown
- 100% spouse provision is also built in
- Maximum income can be reassessed each year, and with increasing age this usually means a gradually rising income, in effect inflation proofing your income.
As Annuities remain a very inflexible way of drawing an income in retirement, Income Drawdown provides a very real alternative for most clients.
A SSAS is available to Directors of Limited companies, and allows company directors to maintain control over their pension arrangements in a flexible and tax efficient environment. The investment powers and flexibility of a SSAS is similar to a SIPP, with the added benefit that a SSAS can lend money back to the employer company.
Loans are available of up to 50% of the SSAS value, and must be on a commercial basis, secured on a suitable company asset.
