When a new client invests their money at Applewood Independent Ltd, three main questions arise:
- How will we invest their money?
- How will they know their money is safe?
- How can they be sure we won’t lose all their money?
We routinely manage more than a quarter of a billion pounds of clients’ funds through investments, pensions, trusts and so on; we choose to invest the money with UK-based fund managers who we know will spread the money into fixed interest investments like corporate bonds, gilts, high-yield environments, commercial property funds, and into UK and overseas equities.
For the last 25 years, we’ve chosen to invest the funds on what’s called a platform: the products are all at the same charging structures but with different tax wrappers.
Produce a yield
In the UK, an equity fund manager will pick a section of the market to concentrate on. If they’re an income fund manager, they’ll seek out the best dividend producers in the UK to invest in that will produce a yield to pass on to the investors as a dividend.
Most of the shares producing the higher dividends would be in the larger companies (mainly in the FTSE 100 and the FTSE 250). The fund manager will pick anything from 50 to 150 different stocks and shares in which to invest.
No client has ever lost all their money
Unless every single one of those shares goes bust, there is no way that that fund manager will ever lose all the money. No client has ever lost all the money in any of the investments we’ve done, and no client investing with us has ever lost money over the medium to longer term. However, we don’t put all the client’s money into equities unless they want to take 100%, ten-out-of-ten risk (ten being the highest risk and one being the lowest).
We invest into other asset classes such as fixed interest funds and property funds, etc. If the stock market in the UK goes down, then some of the clients’ monies will be invested in different asset classes that don’t go down, and some will be invested in overseas funds, which may move in a different direction; asset allocation is about the spread of risk and the reduction of volatility. Clients have virtually no risk of losing all of the money (and as we mentioned before, they have never lost money over the medium to longer term).
Applewood Independent Ltd regularly speaks to each of the fund managers remotely and face to face. I meet almost all of our fund managers so that I can ask them how they are investing our clients’ money, to assess how well it’s performing and what their view is on the economy, inflation and how these will impact on the investments they are choosing for our clients.
We also meet with the property fund managers to see what they’re investing in and to gauge the rent they were able to collect during Covid-19.
I met with a property fund manager a few weeks ago who managed to collect 93% of their rent from commercial buildings, which is really good when you consider how much empty retail property there is at the moment. These fund managers know the trends that are coming up, and place the investments in the right areas to be ahead of the trend.
Fixed interest funds
We also look at products like fixed interest funds, for example corporate bonds, gilt funds and high-yielding bonds. These are much lower in volatility. They’re not stocks and shares; they move usually in a different direction to equities, and they’re in a position whereby they give some diversification, reduction of risk, and are also a good yield for clients who want current income.
Overseas funds are invested in by UK fund managers, but usually through agents in the foreign countries where they’re investing. Some funds are country specific such as North America, China and India, for example. A lot of the funds that we look after are global funds that exclude the UK for equities; the fund managers will go to the right businesses, the right companies, the right shares in whatever country they’re invested into and pick out what they think are going to be the winners over the next six, 12 or 18 months or longer.
Best returning funds
The overseas equities have been the best returning funds over the last 18 months. The American stock market went through the roof with technology and shares doing extremely well.
Shares for Facebook, Apple, Amazon, Netflix, Google and Tesla have increased massively because people have been using them and buying them more than ever before (because of the pandemic). Initially they were expensive, but now we have made considerable profits for our clients in the overseas funds.
The fund managers also seek out the best opportunities in Europe, the Far East, India, Hong Kong and South Korea.
Most of the global funds are for growth, but there are some equity income funds that look at higher-yielding shares around the world; this gives our clients a decent income if that’s their priority.
Review asset allocation
We use an 18-point questionnaire to review a client’s asset allocation based on their attitude to risk. This is reviewed every two years. We then pick the funds to match that asset allocation and use the very best fund managers on the market. This is one of the true benefits of being an independent financial adviser (seen as the gold standard for advice in this country).
Applewood Independent Ltd chooses the best funds with the best fund managers on the very best platforms to invest and manage our clients’ money.
There’s no point picking funds if they remain the same for five years; every single client has an annual, half yearly or quarterly reviews. All of our funds are reviewed to make sure they’re performing well within their peer group, within that asset class (and within their risk profile) on a quarterly basis.
What if they aren’t performing well?
If the funds are not performing well, we will discuss it with the fund manager; a good fund manager doesn’t go bad on one quarter’s under performance.
If we feel confident in their answers, we’ll wait for the recovery to happen; but eventually if the recovery doesn’t happen, then we will recommend to our clients that we switch out of that fund, and we’ll select what we think will be better for them going forward. This service is included in our annual servicing charge for all of our clients. There are no extra charges.
I hope that offers financial peace of mind; we do all we can to protect and grow your funds. To find out more, feel free to get in touch by emailing firstname.lastname@example.org.
The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.
The value of your investment can go down as well as up, and you may not get back the full amount invested.
Past performance is not a guide to future performance.