What we do
What we do in detail
1. Investment Advice
Consulting an Independent Financial Adviser (IFA) will be an obvious first step for many, particularly those who are looking at the various types of collective investment vehicles available rather than planning to invest directly in shares.
As well as savings vehicles designed for specific purposes - such as school fees provision - there is also a whole range of opportunities open to the investor wishing to generate extra income or build up a capital sum for the future. Additionally, the investor can address the need to provide for dependants in the event of an unexpected loss of earnings.
However, before choosing suitable investment vehicles from the many available, Exclusive have developed a tried and trusted 5 steps to success toolbox that we use to implement a bespoke investment strategy for each client.
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2. Understanding your goals
What do you expect from your investments?
We find that clients seek our advice for a whole variety of reasons. These may include the desire for capital growth, the need for income, or a combination of the two.
When you first meet your Adviser he or she will:
- Build an understanding of your personal goals
- Discuss possible solutions
- Explain the Exclusive process
At the beginning of the investment process we discuss any specific constraints or restrictions that you may want to impose on your investments. Perhaps you have strong views about a particular asset class or fund manager, or you may have socially responsible investment requirements. We establish all your specific requirements during our initial consultation and build these into our advice.
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3. Finding investments that suit you
Once we have discussed your investment objectives we now investigate your attitude to risk. The level of risk you wish to take with your money will fundamentally shape the types of investment we recommend. We look at your attitude to risk, the reward you would like to see and the volatility you are prepared to accept.
All three are closely connected to each other. If you want a higher reward from your investment you would have to be prepared to take a greater risk. If you want a low volatility range, (the up and down movement in capital value), you need to take less risk and also expect a lower reward. Finding the correct balance between the elements of risk, reward and volatility is an integral part of finding investments that suit you.
We do not expect all of our clients to fully understand their investment risk profiles. However, we do find that many of our clients already have a preconceived idea of their attitude to risk, but we believe discussing, and if necessary, challenging these preconceptions enables us to better establish an accurate basis for our investment advice.
We have a risk profiling questionnaire that we use with our clients. We analyse your responses to these questions using specialized software applications. Without directly asking you what risk profile you feel you have, this can provide a starting point for debate and discussion.
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4. Asset Allocation - Building your Portfolio
The single best way to diversify your investments is to spread the risk across several different asset types. At Exclusive Asset Management we strongly recommend strategic asset allocation. The asset allocation programme involves a model showing the optimum level of investment in each of the major asset classes - cash, fixed interest, equities and property. This becomes the 'foundation' of our discussions with our client.
The aim is to select asset classes that behave in different ways; the principle being that when one class is underperforming, one or more of the other asset classes are outperforming. For example, some assets, such as bonds and property are particularly useful in creating a portfolio of investments; they behave very differently to equities, often offering lower but more consistent returns. This provides a 'safety net' if there were to be a fall in the stock market. By spreading investment between different asset types, such as bonds and equities, the investor diversifies away many risks associated with the reliance upon one particular asset - this is our key to the concept of diversification within an individuals asset allocation.
Building this mix of investments, often called a Balanced Portfolio, will involve choosing from each of the major asset classes:
Global Equities
An equity investment fund is one which comprises of shares in public limited companies. Returns can be provided by dividend yield (income) and/or growth in the value of the shares.
Historically, equity investment has provided long-term rising income and capital values. In most five to seven year periods, returns have comfortably beaten inflation. However, it should be remembered that past performance is no guarantee of future performance and that investment values can go down as well as up.
Equities offer potentially higher rewards than the other asset classes i.e. cash, fixed interest and property but at greater risk. However, this risk can be reduced by using a collective investment vehicle, such as a unit trust or investment bond, whereby investor's cash can be pooled into a large portfolio of shares and professional fund managers make the underlying investment decisions.
Property
Property funds enjoy relatively low volatility and provide good, reasonably stable returns over the medium to long term. These funds have performed well over recent years and they carry the benefit of constantly receiving rental income. The funds do not contain general shares but may contain some property company shares.
Commercial Property has been the top performing asset class over 1, 3, 5 and 10 years (compared with shares, gilts and cash).
(Source: Lipper December 2005)
Fixed Interest & Security
The Fixed Interest asset class includes both gilts and Corporate Bonds. Gilts are issued by the British Government and are considered one of the safest forms of investment. Gilts provide a good diversification from equities, but returns are generally more modest. Corporate Bonds are issued by companies. They are considered riskier than gilts but can pay a correspondingly higher interest rate to investors. Bonds are oppositely correlated with equities and so provide a good opportunity for diversification.
Cash
Cash and cash equivalent investments, such as money market funds, certificates of deposit and Treasury Bills, are low-risk investments that pay interest. Their short terms and stable values mean they generally provide smaller returns than other major asset classes. But they have one big advantage - they're highly liquid, which means you can turn them into cash at any time without a significant loss in value.
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5. Choosing your funds
Although we focus on asset allocation, we never underestimate the difference that good fund selection makes to the overall performance of an investment portfolio. Our fund selection process aims to select funds to meet each asset class required. We have access to over four thousand funds from every asset class.
Our fund selection criteria will differ depending on each individual's objectives, but we typically seek fundamental indicators such as, consistency in relative performance, competitive charges, low volatility and strong fund ratings from independent sources such as City Wire.
We use investment funds rather than individual stocks and shares, because each fund will have a larger number of holdings in it, thus spreading the risk yet further.
When selecting a fund it is important to consider not only quantitative research (track record, risk analysis, charges, etc.) but also qualitative information, such as the fund manager's beliefs, including the investment process and risk controls which dictate the likely outcome of his / her decisions. In addition we consider if the fund manager were to leave, would his / her team be able to continue to run the fund as before? Would a new fund manager run the fund in a different way? Does the fund 'do what it says on the tin?'
Having access to relevant, up-to-date background information and research is vital to ensure that the funds we select most effectively fit your individual portfolio requirements. We also continuously survey the whole range of investment funds on a 90 day cycle using our expertise and research resources, to maximize your portfolio's ability to deliver expected returns, without unexpected surprises.
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6. Quarterly reviews and recommendations - Rebalancing your Portfolio
Over time, the asset allocations that were identified when the original portfolio was built will shift depending on the performance of the different investments that make up your portfolio. Regular quarterly reviews based on our 90 day research cycle can restore, or rebalance, your portfolio to the asset allocation required at a time determined by you when initially making your investment.
Keeping track of your investment
We will send you an investment statement four times a year to keep you informed of the progress of your investment. We have made it possible for your Adviser to access your investment portfolio information on our secure website. This information is updated on a daily basis, which means that your Adviser can determine your investment's progress at any stage, 24 hours a day, 365 days a year!
Keeping things simple, and listening
No matter how many funds and fund managers you invest in, you will receive a statement each quarter for each individual investment product that shows your position in each of the funds within your investment portfolio.
We encourage you to speak to your Adviser about these statements and in addition, with each statement you will receive a 'feedback' form to return to us so that we can listen to your views. We cultivate the culture that clients are part of our company, and that each one is important to us. We respond positively to constructive criticism, because we know that an open, active dialogue with our clients only helps us get even better.
Keeping up with Life
When significant changes happen in your life - such as marriage, birth of a child or grandchild, starting a new business venture or selling your existing business - your investment needs and objectives may also change, and so might your attitude to risk.
You may then wish to change the mix of assets in your portfolio to become more cautious, or perhaps accept a higher level of investment risk. Changing the structure of your investment portfolio is easy. This can be done simply by switching from your existing funds to other funds that may be more suited to your new circumstances. There is no limit on the number of switches you are able to make, although charges may apply.
Your Adviser will be central to guiding you through this essential review process.
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7. Fund selection - The reality
It is an accepted truth in investment that past performance is no guarantee of future performance. It is therefore surprising that many people, and some advisers, rely heavily on performance when recommending investment funds.
This perception can often lead investors to choose funds that are 'best performers' at the time when an investment is to be made. Attractive though this may seem at the time, you need to remember that most investments are made for typically at least five or more years, so what are the chances that today's top performing funds will also be tomorrow's top performing funds?
In reality, the answer is 'pretty slim'. For example, of the top performing 50 funds of 5 years ago where are they now?
- In the top 50 - None!
- In the top 100 - None!
- In the top 250 - 2!
- In the top 500 - 5!
The lesson to be drawn is that fund selection by itself is a highly risky way to decide where to invest your money. This is why at Exclusive Asset Management we have developed a tried and trusted 5 steps to success toolbox that we use to implement a bespoke investment strategy for each client. To discuss our truly exclusive brand of investment advice simple contact us now to arrange a free initial consultation.
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