As everybody is getting into the festive spirit – we thought we’d use the 12 Days of Christmas song as inspiration to look at 12 ways FE has helped Advisers this year. So why not grab a mince pie and scroll through our year in review...
Retirement planning used to be simple, an investor had a long period of accumulation which ended up with the buying of an annuity at retirement which provided a guaranteed income until death. Pension freedoms changed everything as investors are now much likely to enter drawdown in retirement. This has been combined with a period of very poor annuity rates, meaning that these are now seen as very poor value by many entering retirement.
FE’s discretionary model portfolio service was first launched on a single platform just over three years ago to offer Advisers a new breed of model portfolios; created jargon-free with a view to enhancing the Adviser – Investor relationship.
Financial regulators have become slightly obsessed with transparency as a tool for both increasing competition and protecting consumers. Early attempts were pretty clunky, with Simplified Prospectuses that failed to live up to their name, later replaced by Key Investor Information Documents (KIIDs) for UCITS funds, while life and pension funds have had Key Features Documents.
Multi-asset funds offer robust solutions in accumulation, decumulation and income-seeking strategies by providing advisers with a one-stop shop for cost-effective asset allocation, risk management and rebalancing. Based on these merits, they have become popular amongst advisers for use in client portfolios over recent years. Increasingly Advisers are also blending two or more multi-asset funds within one portfolio- a trend that was evident in the results of the FE Adviser Survey 2018.
The recent FE Invest Breakfast Briefing series explored the topic of cognitive & behavioural biases and their effect on investing. The speakers discussed the pitfalls faced by investors, advisers and fund managers alike and made it clear that none of us are immune from our own assumptions.
‘Outsourcing’ has been a big buzzword over the last few years. From support desks to software development - outsourcing for operational and business efficiencies has become popular, even in financial services. In the Financial Advice industry, there has been a more recent trend towards outsourcing investment solutions to DFMS - giving third-party discretionary fund managers, the permission to invest and rebalance client portfolios. However, given the onus on Advisers to ensure they remain accountable for the investment selection for an individual client, does the term ‘outsourcing’ truly reflect the reality?
Performance, risk level and costs are key elements in establishing investment suitability. Whilst undertaking replacement business, regulation requires Advisers to conduct comprehensive cost comparisons, by factoring in all costs (not just a ‘headline’ annual management charge) associated with the existing solution against the recommendation. Finalised guidance from the regulator in this regard (FG12/16), offered a number of suggestions for good practice including identifying and justifying any additional costs involved in investing that could impact the client’s objectives. Ideally, this would include initial costs, exit charges, adviser fees, platform charges and so on.
The FE Crown Fund Ratings are rebalanced twice a year. The first rebalance of 2018 has given 324 funds the highly-prized five FE Crowns Rating, of which 15 are newcomers and 54 have jumped two or more FE Crowns to achieve the top accolade. The funds are spread across sectors with all the IA sectors seeing some churn in the ratings of their funds - 45% of funds within the universe (a total of 1345) have gained or lost FE Crowns at this rebalance.