We are completely independent & whole of market & if cost is the main driver – there are other solutions that will cost less but we would need to look toward a single provider & model portfolio’s rather than a platform & active management.
Process
Depending upon the product mix and the amounts involved we will select a suitable platform to hold your pension & investments on. The advantage of using a platform, rather than a specific provider is that we have access to a wide range of providers and their funds, which gives us complete open architecture when building someone’s portfolio – we are not tied to any one provider & a typical portfolio will have about 35 different funds & their providers.
Think of the platform as a ‘shopping precinct’ for investment & pension funds. Although we will initially set these up according to your attitude to risk, you are not in any way tied to this, and you can change your asset allocation to a different risk portfolio at any time and even have different portfolios for different products (e.g., ISA & pension).
There is even a 100% cash/ money market portfolio if you wanted to pull out of the market completely for a period of time.
The portfolio is then discretionary managed from this point on. We outsource this discretionary management (although the product is white labelled as Deep Blue), and we have used the same provider since 2008 with great success. We have in excess of £250 million under discretionary management, who are effectively acting as your ‘personal shopper’ in our shopping precinct analogy.
Of course, they will look at past fund performance, but they will also look at many other factors and are constantly talking to all the individual fund managers. They will also look at things such as over or under exposure to certain geographic or investment types (e.g., technology, emerging markets, power), they look at fund manager tenure in terms of a particular managers track record what they have done managing their previous funds, etc) & it’s a core led investment strategy placing no more than 4% with any one fund manager (with the exception of the cash & money market funds & some corporate bonds in cautious portfolios).
They are able to react quickly to market events (e.g. Brexit, Covid & Ukraine) & having this ability to be actively managed results in the funds consistently outperforming their benchmark. None of these products have any exit penalties and are readily available in terms of being able to deliver your ad hoc spending requirements in addition to your core income & spending as and when they are needed – usually with a 10 working days’ notice period.
Costings
With this type of solution there are different types of charges that will apply. Firstly, whichever platform we choose will have a charge for us doing so. This is called a platform charge and it depends entirely on who we use, what products we select & how much money is invested. Discounts exist for larger funds, and we are able to link clients to get this number up with certain platforms – the charge can vary between 0.13% & 0.38%. It is not something we can have an impact on at all, other than making the right selection at outset.
Next, we have the individual fund managers charge which is known as the OCR (overall charge rate) or sometimes referred to as the AMC (annual management charge) & their transaction charge. Again, this isn’t something we can influence – but generally, the more cautious the portfolio, the lower the charge will be – as there is less for the fund manager to do. Basically, if you want to use their fund – that’s what their charge is. Having said that, using a big platform will bring about some economies of scale in terms of group discounts that are all passed on to the client (FCA rules). You also have a discretionary fund manager (DFM) charge for selecting & making these investment calls.
*None of the above charges can be directly affected or influenced by us & do not benefit Deep Blue.
We (Deep Blue) have just two charges; an initial charge to set everything up (including any transfers) & an ongoing annual adviser charge to run it all & advise you through the years. The initial charge does depend upon how much you invest/funds under management. This covers all the research, comparisons, & actions to actually set up the new arrangement. This takes many hours & also larger funds carry more risk premium for us, which also has to be factored in.
The reason our proposition always has an initial fee – is that we have to effectively receive payment for all this work undertaken, up until that point – as if not, we are at risk of loss if the relationship is terminated once it’s all set up by either the client’s choice or an untimely death.
Our second fee is the ongoing annual adviser fee which is payable monthly from inception. This covers all your advice requirements, on an ‘all you can eat’ basis – including, but not limited to conducting annual reviews, additional ‘event based’ reviews as & when they occur, annual access & taxation advice (including Inheritance tax), all applicable legislative changes, risk strategy reviews, beneficiary & death benefit advice & actions.
