Wealth advisers adapt in the face of challenge

Beverly Chandler

Speaking at the 13 May Wealth Adviser Awards lunch, held at The Reform Club in Pall Mall, Gemma Woodward, director of Socially Responsible Investment (SRI) at Quilter Cheviot, commented that on her appointment, most people asked: "Were we investing irresponsibly before?"

The rising importance of SRI and Environmental Social Governance (ESG ) approaches to investing has led to what Woodward called, "a bit of an alphabet soup".

"Our definition is that we are integrating ESG concerns into the investment process," she said, "not wearing hair shirts but improving our investment approach as a whole. More than ESG and SRI, we look at all the factors that impact investor concerns."

In her speech, Woodward mentioned Volkswagen, a stock that scored well on all the metrics but has been embroiled in a lengthy emissions scandal. 

"We do risk mitigation," she said. "We ask `where are the risks?' and look at anything a company is facing as an issue. So with a tobacco company, we ask how much water does tobacco use in the light of water scarcity and we look at the decrease in demand for smoking products. We allow clients to do what they want and to do it properly."

Wealth advisers and independent financial advisors face increasing challenges at the moment, from the markets to the very structure of their businesses.

 The latest Fidelity Advisor Investment Pulse study found that in the first quarter of this year, financial advisers are most concerned about market volatility, with nearly 30 per cent of advisors citing it as an area of focus, a significant rise from less than 20 per cent in the previous quarter. 

The second biggest concern was in portfolio management with Fidelity commenting that it is important for advisors to focus on what they can control. "This starts by helping clients look at longer-term horizons, and by having a plan to invest through market fluctuations," the firm said.

Portfolio fears among advisers are understandable given the issues that face the sector. And the situation is not eased by the fact that many individual investors are no clearer on their aims and hopes. 

Recent research from SyndicateRoom, the equity crowdfunding investor platform, finds that equity investment needs to be simplified to attract individuals. The survey found that Britain is a nation of savers and investors, with over half of respondents saying that if they were given GBP10,000, they would either save it or invest it. 

Some 22 per cent of respondents said they would spend the money and 17 per cent said they would use the money to pay off debt. While the average UK adult now has around GBP173,000 in personal assets, the majority of those who could be motivated to invest in equities have been put off because they cannot find a simple and easy way to do so.

The survey found that everyday investors are attracted to public markets, but awareness is low. More than half (53 per cent) believe their net worth would increase if they invested in equities. Furthermore, 40 per cent said that they would have invested in some IPOs had they known about them. In addition, SyndicateRoom has identified that 15 per cent of the UK population has never invested in an IPO but have the ability and desire to do so. 

With three-quarters of individuals surveyed believing that they are better off looking after their own personal finances, rather than using a financial advisor or wealth manager, the public equity markets are missing out on a vital source of retail investment demand, the company says, also highlighting a big issue for our wealth adviser and IFA audience.

Among the winners in the Wealth Adviser awards are firms that have taken on these concerns directly and who are offering a different approach to the industry. A new winner for us is Octopus Investments, with its Ronseal promise approach to investment products. 

Founder and CEO Simon Rogerson says: "Our clients buy a product with the implicit promise that it will do what it says it's going to do and we try to align our fees with that promise." The key investment platforms the company has built are renewable energy, property finance, healthcare infrastructure, multi manager and smaller company investment.

Another new firm is Tatton Investment Management, which was founded just three years ago and has raised assets under management to GBP2.75 million in that time.

Funded by the Paradigm Group, a distribution and independent financial adviser (IFA) support company, but an independent standalone firm, Tatton offers investment management services to the IFA community, offering a range of model portfolios benchmarked against the Morningstar range of model portfolios.

CEO and CIO Lothar Mentel says that there is a recognition that model portfolios on platforms are better for IFAs, taking the operational overheads away, and saving the IFA time and risk exposure.

A regular winner in our awards is St James's Place, which has a network of wealth adviser partners around the country. The firm has won best private client investment manager in this year's awards, and its partner numbers have increased to over 3,000 over 2015. The firm has developed a range of new products which allow St. James's Place clients to borrow against their portfolios, and the firm is also developing some inter-generational mortgage products.

In an interview for our Wealth Adviser Special Report, Iain Rayner, the firm's Joint Chief Operating Officer, comments that inter-generational products and investing have become a big theme in the firm's business.

Financial planning priorities are changing, Rayner says: "Traditionally we have found that our clients are very concerned about inheritance tax planning and those trends are changing quite quickly. We have a baby boomer generation which is more affluent, with people who have done well in terms of pension provision and property value growth and so on, but then there are some interesting trends of people living longer and increasingly thinking about nursing home fees for themselves but also looking to pay for their grandchildren's education and helping them get on the property ladder."

Whatever stage in life the investor is at, it is clear from Wealth Adviser's 2016 awards that they need and can get access to sound financial advice.

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Beverly Chandler
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Managing Editor