Looking for Advice: Change in Investment Management After Firm Buyout

Jimbouk

My long-standing financial advisor recently retired. Despite the ups and downs of the markets over the years, they consistently helped me stay on track and achieve both my retirement and investment goals.

Since their retirement, I’ve been working with a new advisor within the same firm, and overall I've been happy with the advice and performance so far.

However, the firm has recently been acquired by Perspective Financial Group, and my advisor is now recommending a change in how my investments are managed. They’re proposing that my funds be moved under the management of Cambridge Investments Ltd, the group’s in-house discretionary portfolio manager. The suggested approach would involve either a fully managed fund or a passive tracker fund with active asset allocation.

I’ve been told I can stay with my current setup if I wish, but the advisor feels he its unlikely he would be able to match the performance or efficiency of Cambridge Investments going forward. It’s worth noting that all assets would remain on the existing Aviva platform.

However, the firm has recently been acquired by Perspective Financial Group, and my advisor is now recommending a shift in how my investments are managed. Specifically, they’re suggesting my funds be moved under the management of Cambridge Investments Ltd, the group’s in-house discretionary portfolio manager. The proposed setup would involve either a managed fund or a passive tracker fund with active asset allocation. I do have the option to remain as I am but the advisor feels he would not be able to match the performance or efficiency of Cambridge investments ltd .All assets would remain on the current Aviva platform.

My advisor is currently preparing a detailed report following our latest review, which will include a cost comparison and projections of future performance under the new model versus my current arrangement.

That said, I’m feeling a bit uneasy about the change and want to take this opportunity to reassess everything before moving forward.

My main concerns:

·        I know very little about Cambridge Investments Ltd and haven’t been able to find much independent information or performance history.

·        This could introduce an extra layer of cost.

·        If the advisor is no longer directly managing the investments, is their 0.69% fee still justified?

For context:

I’m currently in drawdown from my pension and also hold Stocks & Shares ISAs with the firm. My current charges are:

·        Advisor fee: 0.69%

·        Fund fees: 0.62%

·        Transaction fees: 0.11%

·        Platform fee (Aviva): 0.16%
Total annual cost: approx. 1.58%

I’d really appreciate any insights from others who have experienced a similar transition, or who have any thoughts on discretionary fund management, Cambridge Investments Ltd, or how best to evaluate this kind of change.

Thanks in advance!

dunstonh

However, the firm has recently been acquired by Perspective Financial Group, and my advisor is now recommending a change in how my investments are managed. They’re proposing that my funds be moved under the management of Cambridge Investments Ltd, the group’s in-house discretionary portfolio manager. The suggested approach would involve either a fully managed fund or a passive tracker fund with active asset allocation.

A portfolio of index trackers with an active asset allocation (i.e. choosing how much goes to UK, US, Euorope etc) is increasingly the norm nowadays.   Some firms do it on an advised and/or discretionary basis.   Sometimes there is an OEIC version as well.    Certain tax wrappers can favour one method of another.

I’ve been told I can stay with my current setup if I wish, but the advisor feels he its unlikely he would be able to match the performance or efficiency of Cambridge Investments going forward. It’s worth noting that all assets would remain on the existing Aviva platform.

Aviva is a whole-of-market platform.  So, whole of market options would be expected to be on there.

  

        I know very little about Cambridge Investments Ltd and haven’t been able to find much independent information or performance history.
·        This could introduce an extra layer of cost.
·        If the advisor is no longer directly managing the investments, is their 0.69% fee still justified?

Cambridge don't report their portfolios to third party sources (I just checked a couple and it didn't appear there).  However, the adviser will be required to show performance comparisons in their recommendation.

The extra cost layer for a DFM is not necessarily an issue but it can be.

I sometimes use a DFM MPS but when I do, the platform charge is reduced and the DFM MPS uses institutional share classes which are cheaper.    That mostly or completely covers the cost of the DFM that I use.  Although in your case, that is unlikely to happen as Aviva is not a platform that is known to offer special terms for DFMs.

The adviser is still responsible for the portfolio, even if it is moved from advisory to discretionary.  It just takes some of the work away, but not much.   IFAs are not investment managers.   They are financial planners.   Yes, investment selection is part of it, but it's better to have an IFA with a structured and process-driven approach than one that operates on the fly.

I’m currently in drawdown from my pension and also hold Stocks & Shares ISAs with the firm. My current charges are:
·        Advisor fee: 0.69%
·        Fund fees: 0.62%
·        Transaction fees: 0.11%
·        Platform fee (Aviva): 0.16%
Total annual cost: approx. 1.58%

If they are moving you to the passive portfolio then your fund charges are likely to go down to around circa 0.08-0.10%.  DFM charges on the alternative are unknown, but two of the DFMs I use for an underlying passive portfolio either charge a flat £240 a year or 0.09%.   If theirs is in that range, then you have nothing to fear there.

Transaction charges can be ignored as that is a synthetic charge and no investor takes any notice of those.  They need to be disclosed, but it's an EU directive figure that has flaws.  The FCA is currently consulting on making changes on that figure to remove the flaws now that the UK is not required to follow the MiFID II directive.

Platform charge is reasonable, although I am no fan of the Aviva platform (it's a bit basic and has limited functionality compared to others, but it does the job if you have simple needs).

Adviser costs largely depend on the size of the funds.   0.69% could be cheap for some but more expensive for others.   Broadly speaking, the typical range is 0.50% to 1.00%, with smaller values at the 1.00% ballpark and larger values at the 0.50% ballpark.

I’d really appreciate any insights from others who have experienced a similar transition, or who have any thoughts on discretionary fund management, Cambridge Investments Ltd, or how best to evaluate this kind of change.

I use both discretionary and advisory.   Both the advisory and the discretionary approaches are almost identical, but they achieve their goals in different ways.       

The larger the firm, the more likely they are to want their advisers to use the same outcomes.   It's a systems and controls thing.   However, the employer will also be looking at trying to get some more income in-house.   For example, using their own DFM and charging a DFM charge means the company earns more than using a third party DFM.     Its a route to becoming a tied agent rather than an IFA.  The next step will be in-house platforms where the whole process  of platform, adviser and portfolio is under the same group.   However, for as long as they say you have the choice to stay whole of market, they can continue to refer to themselves as IFAs.

Spike718

I am in a very similar situation with the same organisation. I started with a personal friend who was an IFA over 20 years ago. He evolved, eventually sold out and now Perspective has taken over the business, along with (from what I can discover via Companies House) 58 other smaller IFAs. I’m nervous that the advisor is also the DFM. I have not yet committed to the change.

dunstonh

Spike718 said:

I am in a very similar situation with the same organisation. I started with a personal friend who was an IFA over 20 years ago. He evolved, eventually sold out and now Perspective has taken over the business, along with (from what I can discover via Companies House) 58 other smaller IFAs. I’m nervous that the advisor is also the DFM. I have not yet committed to the change.

Perspective is a consolidator firm.  

I’m nervous that the advisor is also the DFM. I have not yet committed to the change.

Remember that you are free to move to another firm at no cost.   Plus, to be an IFA, you have to offer products and investments from the whole of market.  IFAs also have to take instructions from you on your investment preferences (passive, ESG, Responsible, Ethical, etc).   So, you can make sure they invest within your objectives.

Don't be overly concerned about the adviser firm being a DFM too.  Most advisers are not DFMs but many employ the use of DFM services (to varying degrees).  Sometimes it is to use a DFM's portfolio. Sometimes the arrangement is to run the firm's own portfolios in a discretionary method (i.e. white labelling).     The largest firms are starting to build their own platform and their own DFM services to try and keep all bits in-house.   You could argue that when an IFA firm does that, they cease to be an IFA unless they can clearly show they have compared it to the whole of market and its better.