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A whole of market due diligence approach to selecting a discretionary manager

Contents

Introduction 1Foreword by Fraser Donaldson 2suggested 7 step process to creating a panel of DMs 3Identifying the ‘long list’ - PAM Guide 2011 Managers Index 5Contributors to Defaqto – ‘Database of DMs as at 1st March 2012’ 8Contributors to PCI 9Asset managers with £2bn and over FUM 11Panel analysis 12Amalgamated Panel Analysis 17sample DM questionnaire 24

AppendixAdviser Fee Justification 27A example of initial research undertaken by an adviser in order

to recommend a discretionary manager 28B summary of work undertaken by an adviser on an annual basis 29C sample client review letter 30

A Research Guide to Creating a Panel of Discretionary Managers

1 Copyright ©2012 Brooks Macdonald Asset Management Limited

IntroDUCtIon

over the course of our work with advisers we are often asked how to demonstrate or justify the use of one DM against another. In this new distribution era, as driven by the retail Distribution review (rDr) the responsibility for selection and due diligence will be of key importance to ensure appropriate partner selection for adviser firms and of course their clients.

In contrast to unit trusts, the task of comparing DMs is less

straight forward, indeed experience tells us that it necessitates a

significant amount of initial work in order to establish a workable

and meaningful shortlist.

this guide aims to provide the quantitative and suggested

qualitative research data that an adviser might use to create

a shortlist of DMs from a whole of market perspective. It also

provides a framework for subsequent analysis in order to

demonstrate a thorough due diligence process.

this second edition of the guide has been produced with the

assistance of Defaqto who have reviewed and updated the

data, as well as providing some formal commentary about the

suggested process. We have taken this route to provide an

independent assessment as a result of feedback from last year’s

edition. this should remove any conflicts of interest that may

arise in the ongoing upgrade of this suggested research process,

ensuring the future validity of this document.

We have attempted to distil the long list of over 200 DMs to a

more manageable short-list by applying some fairly traditional

and fundamental filters such as size (FUM), willingness to be

evaluated on both performance and service (contributors to PCI

and Defaqto), and the ability to be used via both offshore bond

and sIPP providers.

As before, we recognise that many offshore bond and sIPP

providers have undertaken significant due diligence during

the process of establishing a panel of DMs available via

their products. We have harnessed this valuable research by

establishing which DMs consistently feature on the major

providers’ panels.

this year, Defaqto have taken on the role of selecting the sIPP

and offshore bond panels under review based on their star rating

and engage Adviser research systems. As a result of this the

2012 products are, in the main, different to the 2011 products,

therefore we have added another table providing a combined

score over the two years that this document has been published.

As in the first edition, suggestions have been made with regard

to areas an adviser might want to undertake further due diligence

on, once a shortlist is established. We have provided a sample

questionnaire that could assist in establishing the credentials of

each DM. It should not be forgotten that comparisons based

on wordy descriptive answers can be extremely difficult to

interpret and compare. the questions that require significant

dialogue are designed to assist in a better appreciation of the

in-depth workings of each DM. equally, the questions that

require a numerical response (e.g. less than 60% of our business

is introduced by professional advisers) are well served to allow

further filtration of the shortlist with the ultimate aim to identify

one or perhaps two preferred DM partners.

After having explained the 7 steps to creating a panel of DMs

we have included, from page 27, some example documents that

an adviser might wish use to explain exactly what services they

provide in relation to the research and monitoring of a DM and

how they might appropriately charge a client for this.

We hope that you find this suggested approach and research

document useful. Defaqto’s involvement is designed to remove

any perceived bias, and ensure that all of the data employed,

and the rationale behind the selection of panels, is accurate and

methodologically sound.

Andrew Denham-Davis

Director, Intermediary sales



Brooks Macdonald have requested an independent audit of the data and methodologies used within this research document.

Defaqto have been researching, and providing consultancy

on the selection and comparison of discretionary managers

(DMs) for the past three years and feel well placed to

comment on the processes suggested within this document.

It should be made clear that Defaqto has been employed

to audit a process that has been created and developed by

Brooks Macdonald Asset Management (Brooks Macdonald).

All copyright, statements and methodological assumptions

are the intellectual property of Brooks Macdonald. the

Defaqto comments will be clearly marked with our logo to

further highlight the additional content that Defaqto have

produced as part of the audit. An entire summary of the

review is also at the end of this document.

Defaqto has either verified or supplied the data for this whole

of market due diligence approach to selecting a discretionary

manager document. Data supplied by Defaqto is clearly

sourced and is supplied to Brooks Macdonald as a licensee of

Defaqto research services. other contributors are also clearly

referenced, and Defaqto has verified that the data has been

reproduced accurately. Defaqto has not audited third party

data in terms of the information itself.

It should be noted that Defaqto has not been party to the

construction of the suggested questionnaires, fee charging

schedules, or other sample communiqués highlighted by

Brooks Macdonald within this report. this content has been

reviewed in terms of the overall process, but not in terms of

the actual content and layout of the documentation.

the value to advisers in following a process such as this stems

from two aspects inherent in this document. Firstly, the use

of the Private Asset Managers (PAM) directory, to set out a

good proxy for a whole of market approach to DM selection.

secondly, the suggested process and scoring can be modified

to suit adviser firm preferences, either in terms of the

importance attached to each filter, or by creating a bespoke

filtering system using the data made available by the research

document. this benefit can be enhanced by the existence

of last year’s edition of the same process using different data

sets and criteria.

ForeWorD BY FrAser DonALDson – DeFAQto InsIGHt AnALYst For FUnDs



7. Keep records of research undertaken for future reference

7 stePs to CreAtInG A PAneL oF DIsCretIonArY FUnD MAnAGers

4. Evaluate returned questionnaires and create a shortlist

5. Meet with each DM on shortlist and select those to include on panel

6. Maintain and monitor your panel of DMs

2. Apply filters to reduce to a manageable size

3. Send a focused questionnaire to those on the reduced list

1. Identify list of all DMs in the market



Brooks Macdonald’s approach to selecting a DM is a sensible

and comprehensive one. It is of course not the only approach

and some bespoke work, by each adviser may be required on

the process to emphasise what is important to that adviser

and his clients.

Having said that, Defaqto has noted that the sheer range of

DMs covered by this process permits an adviser to realistically

claim that they have selected a shortlist from the market, and

it is difficult to suggest other filters where similar data from

such a wide range of firms would be readily available.

Defaqto would not want to comment on the relevance of

retaining a whole of market and independent starting point

for each adviser, but should that be important then these

stages are a viable way of achieving the goal.

In auditing any due diligence process, however, Defaqto

would make the following provisions:

• Itisfortheindividualadvisertoweighttheimportance

and relevance of individual filters. some filters, or the

details of specific filters can of course be modified to

suit. the scores can easily be recalculated, and the core

process retained.

• Theadvisercanmodifythefiltersorindeedadddifferent

ones to suit. With DM services increasingly made

available to the intermediated market relevant due

diligence information is becoming easier to obtain.

eXeCUtIVe sUMMArY BY DeFAQto on BrooKs MACDonALD’s DUe DILIGenCe ProCess



steP 1IDentIFYInG A LIst oF DMs In tHe MArKet

List 1. PAM Directory 2011 Managers Index

1 Absolute Fund Management

2 ACPI Investment Managers

3 Adam & Company Investment Managers Limited

4 AFH Group

5 AllianceBernstein

6 Arbuthnot Latham & Co Ltd

7 Arjent

8 Ashburton (Jersey) Limited

9 Ashcourt rowan

10 Atkinson Bolton

11 AXA Framlington

12 Bank Leumi

13 Barclays Wealth

14 Baring Asset Management

15 BArMAC

16 Barratt & Cooke

17 Bedlam Asset Management

18 Bedrock

19 Belgrave Asset Management

20 Berenburg UK

21 Berry Asset Management

22 Bestinvest

23 Blankstone sington

24 Blue ray Asset Management

25 BnP Paribas

26 Boston

27 Bramdean Asset Management

28 Brewin Dolphin Ltd

29 Broadstone (Was BDo Investments)

30 Brompton Asset Management

31 Brooks Macdonald

32 Brown shipley

33 Butterfield Private Bank (incorporating Bentley Capital)

34 C Hoare & Co

35 Cardale

36 Cave & sons

37 Cavendish Asset Management

38 Cazenove Capital Management Limited

39 Charles stanley & Co Limited

40 Charteris treasury Portfolio Managers Limited

41 Cheviot Asset Management Ltd

42 Church House Investment Management

43 Citadel International Wealthcare Ltd

44 Citi Private Bank

45 City Asset Management PLC

46 Clariden Leu Asset Management (UK) Limited

47 Close Asset Management Limited

48 Collins stewart Wealth Management

49 Cornelian Asset Managers Limited

50 Courtiers Investment services

51 Coutts & Co

52 CPn Investment Management

53 Credit suisse

54 Credo Group

Brooks Macdonald has developed their universe of DMs

with reference to the Private Asset Managers directory. this

directory covers the majority of DMs geared up to cater for

the intermediated market. APCIMs (Association of Private

Client Investment Managers) have a full members list which

may also add some additional firms, but as a starting point

the PAM directory entries are a good proxy of DMs servicing

the UK market.

DeFAQto’s VIeW on UsInG tHe PAM DIreCtorY As A FILter - steP 1.1

the two most comprehensive lists we have worked from are 1; the Private Asset Managers (PAM) 2011 index and 2; contributors to the

Defaqto database of discretionary managers. the names used in this guide are in the form used in the PAM guide.



55 Crossbridge Capital LLP

56 Dalton strategic Partnership

57 Dart

58 Davy

59 Delmore Asset Management

60 Deutsche Bank Private Wealth Management

61 Duet Asset Management

62 Duncan Lawrie Asset Management Ltd

63 eden Financial

64 eFG Private Bank

65 equilibrium

66 ermitage Global Wealth Management Jersey

67 evercore Pan-Asset

68 Fairbairn Private Bank

69 FI Asset Management

70 Fidelity International

71 Fiduciary trust International

72 Fiscal engineers

73 Fiske Plc

74 Fleming Family & Partners

75 Fulcrum Asset Management

76 FXCM

77 Fyshe Horton Finney

78 GAM

79 GHC Capital Markets Limited

80 Glendevon King Asset Management

81 GLG Partners

82 Goldman sachs International

83 Gore Browne Investment Management LLP

84 Greyfriars Asset Management

85 Greystone Wealth Management

86 Hargreave Hale

87 Hargreaves Lansdown Asset Management

88 Hassium

89 Heartwood Wealth Management Ltd

90 Hedley & Company

91 Helvetia Wealth

92 Holland Hahn & Wills

93 Horizon Group

94 HsBC Global Asset Management

95 HsBC Private Bank

96 Iain nicholson Investment Management

97 Ingenious Asset Management

98 International Asset Management Ltd

99 Investec Wealth & Investments

100 Investment Quorum

101 IPs Capital

102 Iveagh Ltd

103 J M Finn & Co

104 J o Hambro Investment Management

105 James Brearley & sons

106 JLt iimia Wealth Management

107 JPMorgan Private Bank

108 Julius Baer

109 Jupiter Asset Management

110 Kauders Portfolio Management

111 Key Asset Management (UK) Ltd

112 Killik Asset Management

113 Kleinwort Benson

114 Lazard Asset Management Limited

115 Lloyds tsB Private Banking

116 Lombard odier

117 London & Capital Asset Management Limited

118 London Management Group

119 Lord north street

120 Maseco Private Wealth

121 MaxCap Partners

122 McInroy & Wood Personal Investment Managers

123 Merchant securities

124 Merrill Lynch

125 Midas Investment Management

126 Mirabaud Investment Management Ltd

127 Morgan stanley Private Wealth Management

128 Morgans Wealth Management

129 MPL Wealth Management

130 Murray Asset Management

131 n W Brown Investment Management

132 nemesis Asset Management

133 newton Investment Limited

134 northern Bank Limited

List 1. PAM Directory 2011 Managers Index continued



135 oakley Capital

136 odey Wealth

137 oDL securities Limited

138 odley Wealth Management

139 oldfield Partners LLP

140 olim Investment Management

141 Parmenion Capital Partners LLP

142 Partners Capital LLP

143 PFP Group

144 Philip J Milton & Co Plc

145 Pictet Investment Management Limited

146 Pilling & Co

147 Premier Fund Managers Limited

148 Principal Investment Management Limited

149 Pritchards stockbrokers

150 Prospect Wealth Management

151 Psigma Investment Management

152 Quartet Capital Partners

153 Quilter

154 r C Brown Investment Management PLC

155 ramsey Crookall & Co

156 rathbones

157 raymond James Investment services

158 rBC Wealth Management

159 redmayne Bentley

160 reeves Investment Management

161 rMG Wealth

162 rossie House Investment Management

163 rothschild

164 rowan Dartington & Co Limited

165 ruffer LLP

166 saltus Fund Management

167 sandAire

168 santander Private Banking

169 sarasin & Partners

170 saunderson House

171 saxo Bank

172 sC Davies

173 schroders Private Banking

174 sciens

175 sCM Private

176 seven Investment Management (7IM)

177 shore Capital Group

178 signature

179 signia

180 smith & Pinching Portfolio Management Ltd

181 smith & Williamson

182 sGPB Hambros

183 spearpoint

184 speirs & Jeffrey

185 st. James’s Place Wealth Management

186 standard Bank

187 standard Chartered Private Bank

188 standard Life Wealth

189 stanhope Capital

190 stenham Advisers

191 stonehage Investment Partners

192 talisman

193 taylor Young Investment Management

194 team Asset Management

195 thesis Asset Management Plc

196 thomas Miller Wealth

197 thurleigh Investment Managers

198 towry

199 turcan Connell

200 UBs Wealth Management

201 UK Portfolio Management

202 Union Bancaire Privee

203 Vartan & son

204 Veritas Asset Management (UK) Ltd

205 Vestra Wealth Management

206 VWM Consulting

207 W H Ireland Limited

208 Weatherby Private Banking

209 Wells Capital

210 Westbury

211 Williams de Broë

212 YP & P Wealth Management Partners

213 Zan Partners

source: PAM Directory 2011

List 1. PAM Directory 2011 Managers Index continued



List 2. Defaqto’s Database of Discretionary Managers

1 Albert e sharp

2 Anello Asset Management

3 Arbuthnot Latham & Co Ltd

4 Apollo Multi-Asset

5 Argyll Investment services Ltd

6 BestInvest

7 BnP Paribas

8 Brewin Dolphin

9 Brooks Macdonald

10 Brown shipley

11 Cazenove Capital Management

12 Charles stanley

13 Cheviot Asset Management

14 City Asset Management

15 Close Asset Management Ltd

16 Collins stewart Wealth Management

17 Cornelian Asset Managers

18 Deutsche Bank PWM

19 eVerCore - Pan-Asset

20 Fairbairn Private Bank

21 Fieldings

22 GHC Capital Markets

23 Hawksmoor

24 Investec Wealth & Investment

25 J o Hambro Inv Mgmt Ltd

26 James Brearley & sons

27 JM Finn

28 Jupiter

29 London and Capital

30 Mercater Capital Management

31 octopus Investments

32 Parmenion Capital Partners LLP

33 Pilling & Co stockbrokers

34 Premier Asset Management

35 Principal Investment Management Ltd

36 Psigma

37 Quilter

38 rathbones

39 redmayne-Bentley

40 richmond House Investment services Ltd

41 smith & Williamson

42 saltus Fund Management

43 seven Investment Management

44 standard Life Wealth

45 tAM Asset Management

46 thesis Asset Management

47 thurleigh Investment Management

48 Vestra Wealth Management

49 Wells Capital

50 Whitechurch securities Ltd

51 Williams de Broe

Data contributors to Defaqto’s DM Database 1st March 2012

Defaqto now collects detailed information on discretionary

management firms that have specific solutions for the

intermediary market. the comparison and due diligence of

DMs is now part of Defaqto’s core research tools. Defaqto

collects data on firms that have predefined service terms

for UK advisers, and are happy to reproduce these, as well

as other details on their service, process, and company, for

UK financial advisers. Appearance on any Defaqto product/

service research table is free. this additional filter will

highlight those firms that consider their services to be highly

geared to the UK intermediary market.

ContrIBUtors to tHe DeFAQto DM DAtABAse - steP 1.2



Asset risk Consultants are well known researchers of DM

performance. they produce a highly credible measure of

risk vs returns over time. the number of contributors to their

private client indices demonstrates that DMs are happy for

their performance to be independently audited and compared

against wider peer groups. the fact that contributing DMs

are happy to submit this data makes it a good additional

filter. It must also be stated that contributors pay an annual

subscription to ArC which prevents some DMs participating,

and is not necessarily a comment on their performance.

DeFAQto’s VIeW on UsInG ContrIBUtors to tHe Asset rIsK ConsULtAnts’ PrIVAte CLIent InDICes – As A FILter - steP 2.1

steP 2APPLY FILters to reDUCe to A sHortLIstWe believe the following filters are appropriate ones to consider so as to reduce the lists in step one to a manageable shortlist:

1. Is the DM a contributor to Asset risk Consultants’ (ArC) Private Client Indices (PCI)?

2. What is the minimum level of funds under management required?

3. Which offshore bond panels are the DMs on?

4. Which sIPP panels are the DMs on?

Filter 1. Contributors to Asset risk Consultants’ (ArC) Private Client Indices (PCI)

Founder Contributors Jurisdiction

1 Brooks Macdonald UK2 Global Asset Management UK3 Jupiter Asset Management UK4 London and Capital UK5 Matrix Investment Management UK6 newton Investment Management UK7 rothschild Private Banking UK8 sarasin & Partners UK9 schroder & Co Limited UK10 stenham Advisors UK11 taylor Young Investment Management UK12 thurleigh Investment Managers UK13 Ashburton (Jersey) Limited Jersey14 Collins stewart Wealth Management Jersey15 ermitage Group Global Asset Management Jersey16 MeesPierson Asset Management Jersey17 rathbone Investment Management Int Jersey18 Merrill Lynch Guernsey

1 Barclays Wealth Limited UK2 Baring Asset Management (London) UK3 Cazenove Capital Management Limited UK4 Cheviot Asset Management UK5 Coutts & Co UK6 Heartwood Wealth Management UK7 Ingenious Asset Management Limited UK8 J o Hambro Investment Management UK9 JP Morgan Private Bank UK10 Morgan stanley Private Wealth Management UK11 Psigma Investment Management Limited UK12 rensburg sheppards Investment Management UK13 royal Bank of Canada (UK) Limited UK14 sG Hambros Bank UK15 smith & Williamson UK16 Kleinwort Benson UK17 Lloyds tsB Private Banking UK18 seven Investment Management UK19 standard Life Wealth UK20 Veritas Asset Management (UK) Limited UK21 Vestra Wealth UK22 Credit suisse AG Zurich switzerland23 Investec Bank (switzerland) AG switzerland24 Mirabaud & Cie switzerland25 Deutsche Bank International Limited Jersey26 standard Bank Jersey Limited Jersey27 UBs AG Jersey28 ABn Amro Guernsey29 Credit suisse Guernsey

source: ArC PCI Q4 2011 report

subsequent Contributors Jurisdiction



Filter 2. Funds under management 2012

the list below looks at discretionary managers from the perspective of private client assets under discretionary management as

recorded for the PAM directory 2011. this is likely to mean a figure recorded as at the 31st December 2010, but it does mean that

there is a consistent process in place to compare DMs on the basis of funds under management. It also allows the analyst to track the

growth of FUM from the 2011 edition of this research document with a consistent measurement in place.

Brooks Macdonald has applied a filter at £2bn for assets

under management (AUM), not an unreasonable cut-off in

our opinion. the actual level selected by an adviser may vary

from this amount and is dependent on individual preference.

some advisers may have the ‘safety in size, big is beautiful’

belief, where the cut-off could be much higher. Another

may look at smaller firms which they believe are typically

more agile in their decision making. Indeed size may not be

important at all and looking for a local DM may be a priority.

the growth rate of AUM can also be a useful indicator of

firms on the up, or those that are having a high degree of

success in winning new business.

DeFAQto’s VIeW on UsInG Assets UnDer MAnAGeMent oF £2Bn AnD ABoVe As A FILter - steP 2.2

1 Citi Private Bank £248.92 Julius Baer £115.43 Lombard odier £113.04 Lazard Asset Management Limited £99.45 Pictet Investment Management Limited £68.86 Clariden Leu Asset Management (UK) Ltd £66.07 santander Private Banking £62.58 Barclays Wealth £51.49 AllianceBernstein £49.810 Coutts & Co £48.411 standard Chartered Private Bank £46.512 Union Bancaire Privee £34.013 UBs Wealth Management £34.014 Goldman sachs International £28.815 st. James’s Place Wealth Management £27.016 Brewin Dolphin Ltd £25.017 HsBC Private Bank £23.418 Hargreaves Lansdown Asset Management £22.319 schroders Private Banking £16.220 rathbones £14.621 GLG Partners £14.422 Morgan stanley Private Wealth Management £13.523 Merrill Lynch £12.824 Investec Wealth & Investments £12.825 smith & Williamson £10.126 Lloyds tsB Private Banking £10.027 sGPB Hambros £9.528 HsBC Global Asset Management £9.329 Bank Leumi £8.930 Credit suisse £8.831 JPMorgan Private Bank £8.732 Collins stewart Wealth Management £7.933 Cazenove Capital Management Limited £7.9

34 Fiduciary trust International £7.535 Deutsche Bank Private Wealth Management £7.336 Charles stanley & Co Limited £7.237 Blue ray Asset Management £6.838 J M Finn & Co £6.339 eFG Private Bank £6.340 BnP Paribas £6.141 Williams de Broë £5.842 Quilter £5.143 GAM £4.944 Kleinwort Benson £4.845 Close Asset Management Limited £4.746 stanhope Capital £4.647 ruffer LLP £4.648 Partners Capital LLP £4.549 newton Investment Limited £4.450 towry £4.251 rothschild £3.852 saxo Bank £3.753 Fleming Family & Partners £3.554 Cheviot Asset Management Ltd £3.555 thesis Asset Management Plc £3.156 J o Hambro Investment Management £3.057 Broadstone (Was BDo) £2.958 seven Investment Management (7IM) £2.859 Brooks Macdonald £2.760 raymond James Investment services £2.661 Killik Asset Management £2.562 Brown shipley £2.463 sarasin & Partners £2.164 Vestra Wealth Management £2.065 saunderson House £2.066 Adam & Company Investment Managers Ltd £2.0

Company FUM (£bn) Company FUM (£bn)

source: PAM Directory 2011

[AUM are officially reported to PAM for 2011 edition of PAM Directory. Firms that failed to report have assumed AUM under £2bn]



DeFAQto’s VIeW on UsInG oFFsHore BonD & sIPP ProVIDer PAneLs As FILters - steP 2.3 & 2.4

Brooks Macdonald has sought Defaqto’s advice in selecting

the offshore bond and sIPP products featured in this 2012

edition of their DM due diligence document. We have

selected offshore bond products that have achieved the

highest Defaqto star ratings, which are based on the product

and service features offered. Last year Brooks Macdonald

opted for pure adviser popularity. Using Defaqto’s star ratings

has added in some tax wrapper quality measures to the

process, and has widened the total number of offshore bond

panels covered if advisers chose to factor in last year’s results

as well. Furthermore, product providers that are developing

products with high levels of features and service are likely to

be more diligent in their research of DMs for their panels.

similarly, for sIPP products we have gone with the products

most frequently recommended via Defaqto’s adviser research

tool, engage. the filtering process that Defaqto’s engage

system makes available to advisers is such that those tax

wrappers coming through to recommendation tend to have

the best features and associated services.

In terms of the process itself, we would agree that should

DM firms sit on a wide number of sIPP and bond panels, it

is inevitable that a certain amount of due diligence will have

been executed by the sIPP or bond provider. We would note

that this can vary considerably and highlight the fact that

different providers use different methodologies in screening

the DMs that sit on their panels.

Furthermore, these steps in the process gain credibility over

time, as the sum of sIPP and bond products being examined

increases. It allows advisers to combine scores over the two

editions of this research. A total of 10 sIPP products and 9

offshore bond products have been analysed.*

[* It should be noted that Defaqto have not screened the accuracy of data

in the previous edition referred to here.]

Filter 3. offshore bond panel analysis

Following advice from Defaqto we have evaluated the availability of DMs via life assurance company offshore bond product panels.

We restricted our research to the top offshore bond products as rated by Defaqto in the official 2012 Defaqto star ratings. the

products listed have all achieved the highest 2 ratings (5 star & 4 star) in terms of product features and service. the products covered

are listed below in no particular order:

1. Aegon scottish equitable International (nB DFM Panel remains unpublished)

2. standard Life International

3. Prudential International

4. Friends Provident International

5. sanlam

6. Axa IoM

7. Axa Life europe

the individual scores are sorted overleaf, first by the total number of panels they appear in, and alphabetically should scores be even.



Standard Prudential Friends AXA AXA Life Offshore bond product panels Life Intl Intl Provident Intl Sanlam IOM Europe TOTAL /6

DM

1 BrooksMacdonald • • • • • • 6

2 BrewinDolphinLtd • • • • • 5

3 DeutscheBankPrivateWealthManagement • • • • • 5

4 WilliamsdeBroë • • • • • 5

5 InvestecWealth&Investments • • • • 4

6 Quilter • • • • 4

7 SevenInvestmentManagement(7IM) • • • • 4

8 BarclaysWealth • • • 3

9 CazenoveCapitalManagementLimited • • • 3

10 CornelianAssetManagersLimited • • • 3

11 Coutts&Co • • • 3

12 CreditSuisse • • • 3

13 NewtonInvestmentLimited • • • 3

14 PrincipalInvestmentManagementLimited • • • 3

15 Rathbones • • • 3

16 RaymondJamesInvestmentServices • • • 3

17 SchrodersPrivateBanking • • • 3

18 SocieteGeneralePrivateBankingHambros • • • 3

19 StandardLifeWealth • • • 3

20 UBSWealthManagement • • • 3

21 VestraWealthManagement • • • 3

22 WHIrelandLimited • • • 3

23 ArbuthnotLatham&CoLtd • • 2

24 AXAFramlington • • 2

25 BaringAssetManagement • • 2

26 BerryAssetManagement • • 2

27 Bestinvest • • 2

28 BNPParibas • • 2

29 BrownShipley • • 2

30 CHoare&Co • • 2

31 CharlesStanley&CoLimited • • 2

32 CheviotAssetManagementLtd • • 2

33 CloseAssetManagementLimited • • 2

34 CollinsStewartWealthManagement • • 2

35 DuncanLawrieAssetManagementLtd • • 2

36 EFGPrivateBank • • 2

37 FairbairnPrivateBank • • 2

38 GAM • • 2

39 GHCCapitalMarketsLimited • • 2

40 GoldmanSachsInternational • • 2



41 HargreavesLansdownAssetManagement • • 2

42 HSBCPrivateBank • • 2

43 JMFinn&Co • • 2

44 JPMorganPrivateBank • • 2

45 JupiterAssetManagement • • 2

46 KillikAssetManagement • • 2

47 KleinwortBenson • • 2

48 LloydsTSBPrivateBanking • • 2

49 LombardOdier • • 2

50 MerrillLynch • • 2

51 MirabaudInvestmentManagementLtd • • 2

52 ParmenionCapitalPartnersLLP • • 2

53 PSigmaInvestmentManagement • • 2

54 RBCWealthManagement • • 2

55 Rothschild • • 2

56 RowanDartington&CoLimited • • 2

57 RufferLLP • • 2

58 Sarasin&Partners • • 2

59 Towry • • 2

60 Adam&CompanyInvestmentManagersLimited • 1

61 AFHGroup • 1

62 Ashburton(Jersey)Limited • 1

63 AshcourtRowan • 1

64 Broadstone(WasBDO) • 1

65 ButterfieldPrivateBank(incorporatingBentleyCapital) • 1

66 Cardale • 1

67 CavendishAssetManagement • 1

68 CharterisTreasuryPortfolioManagersLimited • 1

69 ChurchHouseInvestmentManagement • 1

70 CityAssetManagementPLC • 1

71 CourtiersInvestmentServices • 1

72 CredoGroup • 1

73 EdenFinancial • 1

74 GoreBrowneInvestmentManagementLLP • 1

75 HargreaveHale • 1

76 HeartwoodWealthManagementLtd • 1

77 IngeniousAssetManagement • 1

78 JOHambroInvestmentManagement • 1

79 JamesBrearley&Sons • 1

80 JLTiimiaWealthManagement • 1




81 JuliusBaer • 1

82 London&CapitalAssetManagementLimited • 1

83 PFPGroup • 1

84 Pilling&Co • 1

85 PremierFundManagersLimited • 1

86 PritchardsStockbrokers • 1

87 ProspectWealthManagement • 1

88 RamseyCrookall&Co • 1

89 RedmayneBentley • 1

90 SaltusFundManagement • 1

91 SCDavies • 1

92 Smith&PinchingPortfolioManagementLtd • 1

93 Smith&Williamson • 1

94 Spearpoint • 1

95 Speirs&Jeffrey • 1

96 ThesisAssetManagementPlc • 1

97 ThomasMillerWealth • 1

98 ThurleighInvestmentManagers • 1

99 TurcanConnell • 1

100 WellsCapital • 1

Totals 15 6 59 8 94 12 194

source: Defaqto offshore bond data 2012




For our sIPP analysis, we restricted this year’s research to the

five most frequently recommended pure sIPP products from the

Defaqto engage Adviser research system. the system permits

whole of market research and due diligence reporting by advisers,

consultants and para-planners. recommendations are logged when

the research process is completed and the user downloads a formal

summary report for audit trail, CrM and client records. At this point

the product of choice is logged as recommended. on this basis the

following sIPP products were most frequently recommended in the

last twelve months and are listed in no particular order:

• scottish Widows retirement Account

• standard Life Active Money sIPP

• rowanmoor sIPP

• sIPPCentre sIPP

• Hornbuckle Mitchell sIPP

As Hornbuckle Mitchell do not have a formal DM panel we have

replaced it with Fundsnetwork as it is a sIPP wrapper widely used

by UK advisers and was not part of the 2011 edition.

As a result the final sIPP panels investigated in this year’s report

are as follows:

1. scottish Widows retirement Account

2. rowanmoor sIPP

3. sIPPCentre

4. standard Life Active Money sIPP

5. Fundsnetwork

the individual scores are sorted below, first by the total number of

panels they appear in, then alphabetically should scores be even.

Filter 4. sIPP panel analysis

Scottish Standard SIPP product panels Widows Rowanmoor SIPPCentre Life FundsNetwork TOTAL /5

DM 1 BrooksMacdonald • • • • • 52 BrewinDolphinLtd • • • • 43 CazenoveCapitalManagementLimited • • • • 44 DeutscheBankPrivateWealthManagement • • • • 45 Quilter • • • • 46 Rathbones • • • • 47 BarclaysWealth • • • 38 InvestecWealth&Investments • • • 39 CharlesStanley&CoLimited • • 210 JMFinn&Co • • 211 NewtonInvestmentLimited • • 212 SevenInvestmentManagement(7IM) • • 213 StandardLifeWealth • • 214 UBSWealthManagement • • 215 WilliamsdeBroë • • 216 AshcourtRowan • 117 BaringAssetManagement • 118 CloseAssetManagementLimited • 119 CollinsStewartWealthManagement • 120 JamesBrearley&Sons • 121 JLTiimiaWealthManagement • 122 KleinwortBenson • 123 ParmenionCapitalPartnersLLP • 124 Pilling&Co • 125 PSigmaInvestmentManagement • 126 RedmayneBentley • 127 Smith&Williamson • 128 Speirs&Jeffrey • 129 VestraWealthManagement • 1

Totals 8 2 18 21 10 59

source: Defaqto sIPP data 2012



the range of tax wrappers available through a discretionary

service could be quite important additional information. It

demonstrates that DMs do not necessarily have to be on formal

sIPP & bond panels to be employed by the adviser/client.

employing an off-panel DM may involve more due diligence

work and administration but some tax wrapper providers do

offer this option.

DeFAQto’s VIeW on UsInG tAX WrAPPer ProVIDers VIA BrooKs MACDonALD

the table opposite summarises, evaluates and consolidates the individual pieces of research undertaken up to this point.

As will hopefully be appreciated, we have tried to be objective in our research in order that it is as helpful as possible.

For the sake of clarity and reference, we have included below a list of all product providers’ with whom Brooks Macdonald are able to

be used.

sIPPsAegon scottish equitableAJ BellAlliance trustAXA Family suntrust sIPPBarnett WaddinghamCabot trustees LimitedCapitaCity trusteesCurtis BanksD A Phillips & CoDenton Wilde sapteeBs trusteesHansard europe LtdIPM trustees LtdJames HayL & G sippLV=Mattioli Woods Pension ConsultantsMC trustees LtdMerchant InvestorsMJ Field trusteesnM trusteesPilgrim sIPPPointon YorkPremier Pension servicesPrudentialroyal Bank of Canada trustees

sIPP CentresIPP Deal trustees Ltdstandard Life sIPPsuffolk Lifetalbot & Muirthe IPs PartnershipWesterbyWinterthur LifeZurich sIPP

ssAsnewcourt ssAsrowanmoor

offshore BondsAllied DunbarAXACanada LifeClerical MedicalFriends Provident InternationalHansard europe LtdLegal & GeneralMerchant Investorsnorwich UnionPrudentialroyal Bank of Canada trusteesroyal skandiascottish equitablescottish Mutual International

standard LifeZurich International Portfolio BondGenerali

onshore BondsMerchant Investors

QroPs Bourse Concept trustees equity trust Limited

Annuity London & Colonial

AIM octopus Asset Management

FUrBsoFA trustee services

Private oeICr+H Fund services (Jersey) Limited

eBtsDominion

eFrBsDominion

17

In Defaqto’s opinion, applying these filters, or variations of, is

a good place to start in creating the initial shortlist for further

investigation from the wider market. An adviser can also add

in any other must have criteria at this stage. this will ensure

that the shortlist meets their basic criteria. Common examples

of additional filters in the current market would be platform

availability or customer relationship management (CrM) data

feeds. Again, such filters can be designed to suit the needs of

the researcher, and assist them with their design of the shortlist.

DeFAQto’s VIeW on CreAtInG tHIs sHortLIst

Amalgamated Panel Analysis

the table below summarises the scores of each filter and gives an overall score for each DM. this provides a basis for deciding which companies to investigate further. For example a decision could be made to investigate those DMs who score 9 and above.

Discretionary Managers Creating an Initial shortlist offshore Bond Panels sIPP Panels

Company FUM (£bn)

FUM > £2bn

Defaqto Contributor to PCI

sub total

standard Life

Prudential Friends Prov

sanlam Axa IoM

Axa Life

sub total

scottish Widows

r’moor sIPP Centre

standard Life

Funds network

sub total

total

1. Brooks Macdonald 2.7 • • • 3 • • • • • • 6 • • • • • 5 14

2. Deutsche Bank Private Wealth Management 7.3 • • • 3 • • • • • 5 • • • • 4 12

3. Brewin Dolphin Ltd 25 • • 2 • • • • • 5 • • • • 4 11

4. Cazenove Capital Management Limited 7.9 • • • 3 • • • 3 • • • • 4 10

5. Quilter 5.1 • • 2 • • • • 4 • • • • 4 10

6. rathbones 14.6 • • • 3 • • • 3 • • • • 4 10

7. Investec Wealth & Investments 12.8 • • 2 • • • • 4 • • • 3 9

8. seven Investment Management (7IM) 2.8 • • • 3 • • • • 4 • • 2 9

9. Williams de Broë 5.8 • • 2 • • • • • 5 • • 2 9

10. Barclays Wealth 51.4 • • 2 • • • 3 • • • 3 8

11. newton Investment Limited 4.4 • • • 3 • • • 3 • • 2 8

12. standard Life Wealth <£2bn • • 2 • • • 3 • • 2 7

13. UBs Wealth Management 34 • • 2 • • • 3 • • 2 7

14. Vestra Wealth Management 2 • • • 3 • • • 3 • 1 7

15. Charles stanley & Co Limited 7.2 • • 2 • • 2 • • 2 6

16. Close Asset Management Limited 4.7 • • • 3 • • 2 • 1 6

17. Collins stewart Wealth Management 7.9 • • • 3 • • 2 • 1 6

18. J M Finn & Co 6.3 • • 2 • • 2 • • 2 6

19. societe Generale Private Banking Hambros 9.5 • • • 3 • • • 3 0 6

20. Cheviot Asset Management Ltd 3.5 • • • 3 • • 2 0 5

21. Coutts & Co 48.4 • • 2 • • • 3 0 5

22. Credit suisse 8.8 • • 2 • • • 3 0 5

23. Kleinwort Benson 4.8 • • 2 • • 2 • 1 5

24. Psigma Investment Management <£2bn • • 2 • • 2 • 1 5

25. raymond James Investment services 2.6 • • 2 • • • 3 0 5

26. schroders Private Banking 16.2 • • 2 • • • 3 0 5

27. smith & Williamson 10.1 • • • 3 • 1 • 1 5

28. Baring Asset Management <£2bn • 1 • • 2 • 1 4

29. Bestinvest <£2bn • • 2 • • 2 0 4

30. BnP Paribas 6.1 • • 2 • • 2 0 4

31. Brown shipley 2.4 • • 2 • • 2 0 4

32. Cornelian Asset Managers Limited <£2bn • 1 • • • 3 0 4

18


Company FUM (£bn)

FUM > £2bn


sub total

standard Life


sanlam Axa IoM

Axa Life

sub total

scottish Widows


standard Life

Funds network

sub total

total

33. GAM 4.9 • • 2 • • 2 0 4

34. Hargreaves Lansdown Asset Management 22.3 • • 2 • • 2 0 4

35. J o Hambro Investment Management 3 • • • 3 • 1 0 4

36. JPMorgan Private Bank 8.7 • • 2 • • 2 0 4

37. Jupiter Asset Management <£2bn • • 2 • • 2 0 4

38. Lloyds tsB Private Banking 10 • • 2 • • 2 0 4

39. Merrill Lynch 12.8 • • 2 • • 2 0 4

40. Parmenion Capital Partners LLP <£2bn • 1 • • 2 • 1 4

41. Principal Investment Management Limited <£2bn • 1 • • • 3 0 4

42. rothschild 3.8 • • 2 • • 2 0 4

43. sarasin & Partners 2.1 • • 2 • • 2 0 4

44. W H Ireland Limited <£2bn 1 • • • 3 0 4

45. Arbuthnot Latham <£2bn • 1 • • 2 0 3

46. City Asset Management PLC <£2bn • • 2 • 1 0 3

47. eFG Private Bank 6.3 • 1 • • 2 0 3

48. Fairbairn Private Bank <£2bn • 1 • • 2 0 3

49. GHC Capital Markets Limited <£2bn • 1 • • 2 0 3

50. Goldman sachs International 28.8 • 1 • • 2 0 3

51. HsBC Private Bank 23.4 • 1 • • 2 0 3

52. James Brearley & sons <£2bn • 1 • 1 • 1 3

53. Killik Asset Management 2.5 • 1 • • 2 0 3

54. Lombard odier 113 • 1 • • 2 0 3

55. London & Capital Asset Management Limited <£2bn • • 2 • 1 0 3

56. Mirabaud Investment Management Ltd <£2bn • 1 • • 2 0 3

57. Pilling & Co <£2bn • 1 • 1 • 1 3

58. rBC Wealth Management <£2bn • 1 • • 2 0 3

59. redmayne Bentley <£2bn • 1 • 1 • 1 3

60. ruffer LLP 4.6 • 1 • • 2 0 3

61. thesis Asset Management Plc 3.1 • • 2 • 1 0 3

62. thurleigh Investment Managers <£2bn • • 2 • 1 0 3

63. towry 4.2 • 1 • • 2 0 3

64. Adam & Company Investment Managers Limited

2 • 1 • 1 0 2

65. Ashburton (Jersey) Limited <£2bn • 1 • 1 0 2

66. Ashcourt rowan <£2bn 0 • 1 • 1 2

67. AXA Framlington <£2bn 0 • • 2 0 2

68. Berry Asset Management <£2bn 0 • • 2 0 2

69. Broadstone (Was BDo) 2.9 • 1 • 1 0 2

70. C Hoare & Co <£2bn 0 • • 2 0 2

71. Duncan Lawrie Asset Management <£2bn 0 • • 2 0 2

72. Heartwood Wealth Management Ltd <£2bn • 1 • 1 0 2

73. Ingenious Asset Management <£2bn • 1 • 1 0 2

74. JLt iimia Wealth Management <£2bn 0 • 1 • 1 2

75. Julius Baer 115.4 • 1 • 1 0 2

76. Morgan stanley Private Wealth Management 13.5 • • 2 0 0 2

19


Company FUM (£bn)

FUM > £2bn


sub total

standard Life


sanlam Axa IoM

Axa Life

sub total

scottish Widows


standard Life

Funds network

sub total

total

77. Premier Fund Managers Limited <£2bn • 1 • 1 0 2

78. rowan Dartington & Co Limited <£2bn 0 • • 2 0 2

79. saltus Fund Management <£2bn • 1 • 1 0 2

80. speirs & Jeffrey <£2bn 0 • 1 • 1 2

81. st. James’s Place Wealth Management 27 • • 2 0 0 2

82. Wells Capital <£2bn • 1 • 1 0 2

83. AFH Group <£2bn 0 • 1 0 1

84. AllianceBernstein 49.8 • 1 0 0 1

85. Bank Leumi 8.9 • 1 0 0 1

86. Blue ray Asset Management 6.8 • 1 0 0 1

87. Butterfield Private Bank (incorporating Bentley Capital)

<£2bn 0 • 1 0 1

88. Cardale <£2bn 0 • 1 0 1

89. Cavendish Asset Management <£2bn 0 • 1 0 1

90. Charteris treasury Portfolio Managers Limited <£2bn 0 • 1 0 1

91. Church House Investment Management <£2bn 0 • 1 0 1

92. Citi Private Bank 248.9 • 1 0 0 1

93. Clariden Leu Asset Management (UK) Limited 66 • 1 0 0 1

94. Courtiers Investment services <£2bn 0 • 1 0 1

95. Credo Group <£2bn 0 • 1 0 1

96. eden Financial <£2bn 0 • 1 0 1

97. ermitage Global Wealth Management Jersey <£2bn • 1 0 0 1

98. evercore Pan-Asset <£2bn • 1 0 0 1

99. Fiduciary trust International 7.5 • 1 0 0 1

100. Fleming Family & Partners 3.5 • 1 0 0 1

101. GLG Partners 14.4 • 1 0 0 1

102. Gore Browne Investment Management LLP <£2bn 0 • 1 0 1

103. Hargreave Hale <£2bn 0 • 1 0 1

104. Helvetia Wealth <£2bn • 1 0 0 1

105. HsBC Global Asset Management 9.3 • 1 0 0 1

106. Lazard Asset Management Limited 99.4 • 1 0 0 1

107. Partners Capital LLP 4.5 • 1 0 0 1

108. PFP Group <£2bn 0 • 1 0 1

109. Pictet Investment Management Limited 68.8 • 1 0 0 1

110. Pritchards stockbrokers <£2bn 0 • 1 0 1

111. Prospect Wealth Management <£2bn 0 • 1 0 1

112. ramsey Crookall & Co <£2bn 0 • 1 0 1

113. santander Private Banking 62.5 • 1 0 0 1

114. saunderson House 2 • 1 0 0 1

115. saxo Bank 3.7 • 1 0 0 1

116. sC Davies <£2bn 0 • 1 0 1

117. smith & Pinching Portfolio Management Ltd <£2bn 0 • 1 0 1

118. spearpoint <£2bn 0 • 1 0 1

119. standard Bank <£2bn • 1 0 0 1

120. standard Chartered Private Bank 46.5 • 1 0 0 1

20


Company FUM (£bn)

FUM > £2bn


sub total

standard Life


sanlam Axa IoM

Axa Life

sub total

scottish Widows


standard Life

Funds network

sub total

total

121. stanhope Capital 4.6 • 1 0 0 1

122. stenham Advisers <£2bn • 1 0 0 1

123. taylor Young Investment Management <£2bn • 1 0 0 1

124. thomas Miller Wealth <£2bn 0 • 1 0 1

125. turcan Connell <£2bn 0 • 1 0 1

126. Union Bancaire Privee 34 • 1 0 0 1

127. Veritas Asset Management (UK) Ltd <£2bn • 1 0 0 1

128. Absolute Fund Management <£2bn 0 0 0 0

129. ACPI Investment Managers <£2bn 0 0 0 0

130. Arjent <£2bn 0 0 0 0

131. Atkinson Bolton <£2bn 0 0 0 0

132. BArMAC <£2bn 0 0 0 0

133. Barratt & Cooke <£2bn 0 0 0 0

134. Bedlam Asset Management <£2bn 0 0 0 0

135. Bedrock <£2bn 0 0 0 0

136. Belgrave Asset Management <£2bn 0 0 0 0

137. Blankstone sington <£2bn 0 0 0 0

138. Boston <£2bn 0 0 0 0

139. Bramdean Asset Management <£2bn 0 0 0 0

140. Brompton Asset Management <£2bn 0 0 0 0

141. Cave & sons <£2bn 0 0 0 0

142. Citadel International Wealthcare Ltd <£2bn 0 0 0 0

143. CPn Investment Management <£2bn 0 0 0 0

144. Crossbridge Capital LLP <£2bn 0 0 0 0

145. Dalton strategic Partnership <£2bn 0 0 0 0

146. Dart <£2bn 0 0 0 0

147. Davy <£2bn 0 0 0 0

148. Delmore Asset Management <£2bn 0 0 0 0

149. Duet Asset Management <£2bn 0 0 0 0

150. equilibrium <£2bn 0 0 0 0

151. FI Asset Management <£2bn 0 0 0 0

152. Fidelity International <£2bn 0 0 0 0

153. Fiscal engineers <£2bn 0 0 0 0

154. Fiske Plc <£2bn 0 0 0 0

155. Fulcrum Asset Management <£2bn 0 0 0 0

156. FXCM <£2bn 0 0 0 0

157. Fyshe Horton Finney <£2bn 0 0 0 0

158. Glendevon King Asset Management <£2bn 0 0 0 0

159. Greyfriars Asset Management <£2bn 0 0 0 0

160. Greystone Wealth Management <£2bn 0 0 0 0

161. Hassium <£2bn 0 0 0 0

162. Hedley & Company <£2bn 0 0 0 0

163. Holland Hahn & Wills <£2bn 0 0 0 0

164. Horizon Group <£2bn 0 0 0 0

165. Iain nicholson Investment Management <£2bn 0 0 0 0

166. International Asset Management Ltd <£2bn 0 0 0 0

21


Company FUM (£bn)

FUM > £2bn


sub total

standard Life


sanlam Axa IoM

Axa Life

sub total

scottish Widows


standard Life

Funds network

sub total

total

167. Investment Quorum <£2bn 0 0 0 0

168. IPs Capital <£2bn 0 0 0 0

169. Iveagh Ltd <£2bn 0 0 0 0

170. Kauders Portfolio Management <£2bn 0 0 0 0

171. Key Asset Management (UK) Ltd <£2bn 0 0 0 0

172. London Management Group <£2bn 0 0 0 0

173. Lord north street <£2bn 0 0 0 0

174. Maseco Private Wealth <£2bn 0 0 0 0

175. MaxCap Partners <£2bn 0 0 0 0

176. McInroy & Wood Personal Investment Managers <£2bn 0 0 0 0

177. Merchant securities <£2bn 0 0 0 0

178. Midas Investment Management <£2bn 0 0 0 0

179. Morgans Wealth Management <£2bn 0 0 0 0

180. MPL Wealth Management <£2bn 0 0 0 0

181. Murray Asset Management <£2bn 0 0 0 0

182. n W Brown Investment Management <£2bn 0 0 0 0

183. nemesis Asset Management <£2bn 0 0 0 0

184. northern Bank Limited <£2bn 0 0 0 0

185. oakley Capital <£2bn 0 0 0 0

186. odey Wealth <£2bn 0 0 0 0

187. oDL securities Limited <£2bn 0 0 0 0

188. odley Wealth Management <£2bn 0 0 0 0

189. oldfield Partners LLP <£2bn 0 0 0 0

190. olim Investment Management <£2bn 0 0 0 0

191. Philip J Milton & Co Plc <£2bn 0 0 0 0

192. Quartet Capital Partners <£2bn 0 0 0 0

193. r C Brown Investment Management PLC <£2bn 0 0 0 0

194. reeves Investment Management <£2bn 0 0 0 0

195. rMG Wealth <£2bn 0 0 0 0

196. rossie House Investment Management <£2bn 0 0 0 0

197. sandAire <£2bn 0 0 0 0

198. sciens <£2bn 0 0 0 0

199. sCM Private <£2bn 0 0 0 0

200. shore Capital Group <£2bn 0 0 0 0

201. signature <£2bn 0 0 0 0

202. signia <£2bn 0 0 0 0

203. stonehage Investment Partners <£2bn 0 0 0 0

204. talisman <£2bn 0 0 0 0

205. team Asset Management <£2bn 0 0 0 0

206. UK Portfolio Management <£2bn 0 0 0 0

207. Vartan & son <£2bn 0 0 0 0

208. VWM Consulting <£2bn 0 0 0 0

209. Weatherby Private Banking <£2bn 0 0 0 0

210. Westbury <£2bn 0 0 0 0

211. YP & P Wealth Management Partners <£2bn 0 0 0 0

212. Zan Partners <£2bn 0 0 0 0

Combined scores for 2011 & 2012

Given that this is the second edition of this research process

it was deemed sensible to provide a combined score as some

interesting features can be derived from it.

the totals for both the 2011 and 2012 processes have been

added together and the DMs with a total score of two or

more have been included on the summary table on the right.

22

rank Discretionary Manager 2011 2012 total

score

1 Brooks Macdonald 16 14 302 Brewin Dolphin Ltd 15 11 263 Cazenove Capital Management Limited 14 10 244 Deutsche Bank PWM 12 12 245 Quilter 14 10 246 rathbones 13 10 237 seven Investment Management (7IM) 11 9 208 Williams de Broë 11 9 209 Investec Wealth & Investments 10 9 1910 Barclays Wealth 10 8 1811 UBs Wealth Management 9 7 1612 Vestra Wealth Management 8 7 1513 Close Asset Management Limited 8 6 1414 Collins stewart Wealth Management 8 6 1415 newton Investment Limited 6 8 1416 Charles stanley & Co Limited 7 6 1317 J M Finn & Co 7 6 1318 smith & Williamson 8 5 1319 standard Life Wealth 6 7 1320 Cheviot Asset management Ltd 6 5 1121 Psigma Investment Management 6 5 1122 Brown shipley 6 4 1023 Jupiter Asset Management 6 4 1024 Parmenion Capital Partners LLP 6 4 1025 Principal Investment Ltd 6 4 1026 W H Ireland Limited 6 4 1027 Baring Asset Management 5 4 928 BestInvest 5 4 929 Coutts & Co 4 5 930 Credit suisse 4 5 931 James Brearley & sons 6 3 932 Jo Hambro Investment Management 5 4 933 Kleinwort Benson 4 5 934 Lloyds tsB Private Banking 5 4 935 Merrill Lynch 5 4 936 raymond James Investment services 4 5 937 schroders Private Banking 4 5 938 Berry Asset Management 6 2 839 Hargreaves Lansdown Asset Management 4 4 840 Heartwood Wealth Management Ltd 6 2 841 JP Morgan Private Bank 4 4 842 London & Capital Asset Management Limited 5 3 843 rothschild 4 4 844 societe Generale Private Banking Hambros 2 6 845 thesis Asset Management Plc 5 3 846 City Asset Management 4 3 747 Cornelian Asset Managers Limited 3 4 748 eFG Private Bank 4 3 749 Goldman sachs International 4 3 750 HsBC Private Bank 4 3 751 Killik Asset Management 4 3 752 ruffer LLP 4 3 753 sarasin & Partners 3 4 754 Ashcourt rowan 4 2 6

rank Discretionary Manager 2011 2012 total

score

55 BnP Paribas 2 4 656 Broadstone (was BDo) 4 2 657 C Hoare & Co 4 2 658 Credo Group 5 1 659 GAM 2 4 660 Morgan stanley Private Wealth Management 4 2 661 Premier Fund Managers Limited 4 2 662 thurleigh Investment Management 3 3 663 towry 3 3 664 Adam & Company Investment Managers Ltd 3 2 565 Arbuthnot Latham & Co Ltd 2 3 566 Ashburton (Jersey) Limted 3 2 567 Fairburn Private Bank 2 3 568 GHC Capital Markets Limited 2 3 569 Ingenious Asset Management 3 2 570 JLt iimia Wealth Management 3 2 571 Julius Baer 3 2 572 Lombard odier 2 3 573 Mirabaud Investment Management Ltd 2 3 574 turcan Connell 4 1 575 Duncan Lawrie Asset Management Limited 2 2 476 rBC Wealth Management 1 3 477 rowan Dartington & Co Limited 2 2 478 standard Bank 3 1 479 Charteris treasury Portfolio Managers Limited 2 1 380 Church House Investment Management 2 1 381 Clariden Leu Asset Management (UK) Ltd 2 1 382 eden Financial 2 1 383 Pictet Investment Management Limited 2 1 384 Pilling & Co 0 3 385 redmayne Bentley 0 3 386 smith & Pinching Portfolio Management Ltd 2 1 387 st James Place Wealth Management 1 2 388 taylor Young Investment Management 2 1 389 Veritas Asset Management (UK) Ltd 2 1 390 AllianceBernstein 1 1 291 AXA Framlington 0 2 292 Bank Leumi 1 1 293 Cavendish Asset Management 1 1 294 Citi Private Bank 1 1 295 ermitage Global Wealth Management Jersey 1 1 296 Fleming Family & Partners 1 1 297 GLG Partners 1 1 298 Gore Browne Investment Management LLP 1 1 299 HsBC Global Asset Management 1 1 2100 Partners Capital LLP 1 1 2101 saltus Fund Management 0 2 2102 shore Capital Group 2 0 2103 spearpoint 1 1 2104 speirs & Jeffrey 0 2 2105 standard Chartered Private Bank 1 1 2106 Union Bancaire Privee 1 1 2107 Wells Capital (was Fund Intelligence) 0 2 2

CoMBIneD 2011 & 2012 sCores

• Defaqto agrees that the combining of the two

research documents may be something that an

adviser may choose to do. the benefits of doing this

might include:

– the research process can be applied to a much

wider base of sIPP & bond panels (although we

would note that we have not changed last year’s

panel results so some firms may have been added

to certain product panels since publication. As

such we would not recommend going beyond

combining two successive years without checking

that all the data is still accurate).

– the combined score can highlight those DMs

that are growing in terms of AUM and presence,

particularly in the intermediated marketplace.

– A consistency value for those DMs that do well in

both reports can be ascertained.

– Anomalies can be identified and evaluated.

source: Brooks Macdonald due diligence process 2011 & 2012



steP 3senD A QUestIonnAIre to tHose YoU WAnt to KnoW More ABoUtHaving created a workable shortlist it may be necessary and indeed prudent to undertake further, more specific due diligence to ensure appropriate understanding of the relevant merits of each shortlisted firm. We have provided overleaf a sample questionnaire that will hopefully assist in establishing greater knowledge of each DM. ensure you include a deadline for a response, as this will give you an initial indication of their service standards.

Unfortunately, comparisons based on wordy descriptive answers can be extremely difficult, nigh impossible, to evaluate. the questions

that require significant dialogue are included more to assist in a better appreciation of the workings of each house. equally, we have

included questions that require a numerical response (e.g. percentage of business introduced by professional advisers) which can be

helpful in fine tuning the filter process previously undertaken and assist in narrowing the shortlist to a workable list of one or perhaps

two preferred DM partners.

these should be designed to find out more about each of the

firms on a shortlist. Defaqto would agree that this is an essential

process to embark upon.

Advisers may not only be dealing with their selected DM on

a daily basis, but may have questions that need answering

in the future. this process will not only help to whittle down

the shortlist further, based on the responses but, equally as

important, those responses (or lack of them) and the way in

which a DM answers the questions will give the adviser a good

indication of their willingness to service the adviser market and

what their service standards may be like in the future.

At this stage, it would be sensible to ask for all marketing

materials on the services offered, together with their terms and

conditions as it is not always possible to download these from

websites. At this stage you may not want to request a call from

an account manager which can sometimes be the only option

offered on DM websites.

In terms of the questions suggested by Brooks Macdonald,

although they are fairly comprehensive and will elicit enough

information to reduce the shortlist further, the list is not

exhaustive and additional questions can be added.

Brooks Macdonald suggests reducing the shortlist to around 4

or 5 firms. Defaqto would go along with this as a manageable

number but stresses that there is no rule of thumb on how long

or short such a list should be.

A note on fees & charges

these are important, but the priority is selecting the right

discretionary solutions for the client. Costs can be considered

more closely once the shortlist has been reached. Brooks

Macdonald have summarised the potential charging costs well.

Defaqto would also agree that cheapest is not necessarily best,

look for value for money. terrific service, support and quality

reporting systems may well justify an extra few basis points in

the minds of both adviser and the client.

DeFAQto’s VIeW on senDInG A QUestIonnAIre AnD eVALUAtInG tHe retUrns - steP 3 & 4



1. Background

1.1 Basic details

Company name: Head office Address:

telephone number: Facsimile number:

e-mail: Website:

Principal contact: secondary contact:

Bank: Custodian:

Ceo: CIo:

Head of Private Clients: Company secretary:

Addresses of all regional offices:

2. Asset Management experience

2.1 Please describe your organisation, including a brief history

and a description of the ownership structure.

2.2. Please highlight major partnerships and relationships that

you currently rely upon.

2.3 Please provide information on your total assets under

management and 5 year historical numbers.

2.4 What percentage of assets under management has been

introduced by IFAs?

2.5 In addition to core asset management what are the range of

services that you are providing to similar clients?

2.6 How would you describe your relative levels of expertise

across the different asset classes?

2.7 How many years have you been involved in receiving client

introductions from IFAs?

3. Personnel

3.1 Please list key executives and client management team

members as well as their overall investment experience and

their length of tenure with your firm. Please also detail who

would be responsible for day-to-day client contact and the

expertise/qualifications of the people in these roles. Please

explain the role of relationship managers where applicable.

3.2 For how many mandates/amount of assets is each

relationship and/or portfolio manager responsible?

3.3 How do you ensure the quality of staff and the culture of the

organisation are maintained?

3.4 Please advise how many investment managers have left the

company in the last 5 years.

3.5 What is the ratio between the number of clients and

investment managers?

4. Portfolio Construction

4.1 Please outline your underlying investment philosophy and

manager research process behind your investment approach

for multi asset class mandates.

4.2 Please describe your investment approach.

4.3 Why do you think your research resources can identify the

best investment managers and can do so more consistently

than your competitors?

4.4 Do you have the capacity to tailor your solution according

to various risk profiled asset allocations?

4.5 Please describe the capabilities and tools that are available

for you to identify the optimal strategic asset class mixes

and what these decisions are based upon.

4.6 to what extent are in-house collectives used?

sAMPLe QUestIonnAIre



5. risk Management and Monitoring

5.1 What level of discretion does the investment manager

have to deviate from portfolio constraints and how is it

monitored?

5.2 Describe the usual level of interaction that your investment

professionals have with the third party fund managers.

5.3 What benchmarks would you propose for client portfolios?

5.4 Would you be able to provide a benchmark based on peer

group performance?

5.5 to what extent would you be able to adapt the selection

of investments for different portfolios within a specific asset

class, e.g. a different selection of hedge funds depending on

the risk profile?

5.6 Would you advocate the use of retail or institutional funds?

6. Communications

6.1 How often would investment managers (or other

professionals) typically meet with clients/advisers to keep

them abreast of the characteristics and developments of

your products on an ongoing basis?

6.2 Do you have an online service, with access to valuations?

6.3 How often are portfolio valuations sent to clients?

7. Compliance

7.1 What policies/procedures are in place to ensure sufficient

compliance, monitoring and control with regulatory issues?

7.2 Is there a separate dedicated compliance team?

7.3 What do you consider to be the key compliance issues

facing discretionary investment managers?

7.4 Have there been any compliance issues anywhere within

your organisation in the last three years?

7.5 to what extent is there an independent check (i.e. outside

the nominated investment manager(s) and client contact) in

relation to client and in-house guidelines?

7.6 Who is responsible for monitoring and controlling

compliance of the funds in which the investment manager

invests?

8. Fees and other Costs

8.1 Please outline your fee structure, including the following:

a) Initial charge

b) Annual management charge

c) Dealing commission or transaction charge

d) Level of interest paid on cash

e) Underlying fund charges (AMC and / or Initial)

f) Ancillary costs including:

i) overseas investment additional charges

ii) transfers out

iii) telegraphic transfer

iv) Missing certificate indemnities

v) tax adviser queries

vi) Probate, IHt or CGt valuations

8.2 Do you offer a flat/all inclusive fee structure?

8.3 What frequency are fees paid/charged?

8.4 Can you provide ters?

steP 4eVALUAte retUrneD QUestIonnAIres AnD CreAte A MAnAGer sHortLIst oF IDeALLY Less tHAn FoUr/FIVe FIrMs

Additionally, consider the availability of a DM via life companies,

willingness of a DM to partake in performance measurement by

its desire to be a contributor to ArC’s PCI. It may also be relevant

to revisit the points listed in section two, perhaps ranking the

relevance of each point to your specific business requirements.



steP 5Meet WItH eACH DM

You should establish whether you feel they are a firm that you

can work with. It is important to meet with the actual investment

managers as these are (hopefully!) the people that will meet your

clients and manage their assets on an ongoing basis. Additionally,

you may want to position different houses/investment managers

with different clients, acknowledging that personalities are a

factor and can be the difference between winning and losing an

investment mandate.

steP 6 MAIntAIn AnD MonItor YoUr PAneL oF DMs

re-send the questionnaire to be updated on a 12 – 18 month basis.

DeFAQto’s VIeW on MeetInG WItH eACH DM on tHe sHortLIst - steP 5

Defaqto agrees that this is essential. Advisers may be

entrusting considerable amounts of their clients’ assets to

the selected firms, so it is essential that they feel comfortable

with the people managing their clients’ money. Personalities

can come in to the equation as the adviser will potentially

be working with the DMs on a daily basis. If it is not the

decision maker (at the adviser firm) who will be dealing

directly with the prospective DM, it may be advisable to

involve the person who will be at this stage.

• Approachthemeetingsasifassessingabusinesspartner.

• Getitrightfirsttimetoincreasetheoddsofanextended

partnership.

• Usethemeetingasagoodopportunitytotestthevalidity

of the responses to the questionnaire.

DeFAQto’s VIeW on MAIntAInInG, MonItorInG & reCorDInG tHe ProCess AnD resULts - steP 6 & 7

It is essential that the progress of the DM is monitored,

preferably on a formal basis at least twice a year. We

would agree with Brooks Macdonald that things such

as administration, approach to regulatory changes and

support to the adviser are a must. In terms of performance,

Brooks Macdonald suggests monthly monitoring, which we

would agree with.

It is also essential that the whole selection process is

repeated on a regular basis and we would agree that every

12 months or so is sensible.

of course keeping records of the selection process is a

must, both from a compliance basis and to see if anything

has changed from when the original selection was made.

steP 7KeeP reCorDs oF reseArCH UnDertAKen For FUtUre reFerenCe



ADVIser Fee JUstIFICAtIon

on the following pages we have provided three example documents that an adviser could use to explain the initial research and ongoing

monitoring processes to a client.

I. example of initial and ongoing research undertaken by an adviser as demonstrated to a client

II. Ideas of work undertaken by the adviser on an annual basis to justify the adviser’s ongoing fee

III. sample client review letter

Brooks Macdonald lists a whole series of adviser responsibilities

and actions that they feel will justify the adviser’s fee. We

would agree with their appraisal in that selecting the right

investment managers for the client has significant value, as

does the ongoing review and monitoring processes. Defaqto

has not reviewed the examples or charging structures and

rates, and highlights the fact that each adviser will develop

their own processes and fee schedules.

DeFAQto’s VIeW on tHe ADVIser Fee JUstIFICAtIon

In order to help advisers demonstrate to clients the value of the research and monitoring of DMs, or a DM panel, we have outlined

below the time an IFA might spend on the tasks relating to monitoring discretionary managers and client portfolios.

Task Frequency Hours p.a.

on-going suitability meetings with DM six-monthly 6

regular review of the client’s requirements and circumstances Quarterly 10

Updating spreadsheets to track managed and non-managed assets Weekly 10

ongoing review and analysis of portfolio performance Monthly 6

Comparative analysis of clients’ portfolios. ongoing evaluation of continued suitability of existing DM Monthly 6

regular discussions with DM about the client and the client’s portfolio Fortnightly 6

Face-to-face meeting with DM about client’s portfolio and requirements Quarterly 8

regular auditing of DM service and reports Quarterly 4

Total Time: 56

total time spent: 56 hours per annum (which on a charge of 0.5% per annum equates to £90 per hour for a £1 million portfolio).

this excludes all tax planning and any additional work undertaken.



Following the decision for ABC Financial services to concentrate

on the delivery of generic financial advice, extensive research was

carried out in order to select a panel of third party discretionary

managers to work with, to take over the responsibility for

the day-to-day investment responsibility of their client’s

investment portfolios.

Listed below are some of the research functions and due diligence

that was carried out prior to the selection and construction of the

panel of chosen third party managers.

research of the general investment marketplace

• Overviewandresearchintotheinvestmentmanagement

market-place considering the benefits of each of the different

approaches

• Evaluationofgeo-politicsandglobaleconomics

• Overviewoffinancialservices

• Platforms

• Products

• Rule/Lawchanges

evaluation of Discretionary Managers (DMs)

• Initialanalysisoftheroleandpositioningofdiscretionary

managers in the marketplace

• Analysisofdiscretionarymanagers’strategyindifferent

market conditions

• Considerationoftheinvestmentuniverse

• Adaptabilityofdiscretionarymanagerstonewproductsetc

• Custodyofcashandassets

• Ownershipandcorporategovernancestructures

review of investment approach (DM perspective)

• Breadthofassetallocation

• Choiceanduseofdifferentinvestmentvehicles/media

review of investment services provided by DM

• Ratesoncash

• Availabilityofnewproducts

• Abilitytocritiqueanexistingportfolio

• Additionalservices

FsA and regulatory concerns

• ReviewofDMcompliance

• ReviewofDM’sstandardsonTCF

• ReviewofDM’spositionfollowingRDR

Performance

• AnalysisofDM’sperformanceagainstrecognisedbenchmarks

• AnalysisofDM’sperformanceagainstpeers

• AnalysisofDM’sperformancerelativetothewidermarket

Administration

• Qualityandstandardofadministration

• Qualityofandaccesstoreports

• Functionalityofonlinereportingsystems

• Availabilityofinvestmentmanagers

• Flowofgenericmarketinformationtotheclient

A. eXAMPLe oF InItIAL reseArCH UnDertAKen BY An ADVIser In orDer to reCoMMenD A DIsCreAtIonArY MAnAGer



this section suggests a form of words that an adviser might use

to demonstrate the continuous monitoring of the discretionary

managers employed that they undertake on behalf of clients.

Fund of Fund Performance – monthly reviews

• Theperformanceofeachmodelismonitoredandreported

to ABC Financial services Board on a monthly basis. this

includes a comparison of the performance against each

model’s respective benchmark.

• Attributionanalysisisalsoundertakenonamonthlybasisin

order to highlight which asset classes/funds added value and

which detracted from performance.

• Anyperiodsofprolongedunderperformancecomparedto

their benchmark would result in further close investigation,

including if necessary a meeting with the managers.

• Anymonitoringoftransactionanalysis,e.g.portfolioturnover

regular meeting with the chosen DMs on the panel

• Overthelasttwelvemonths,ABCFinancialServices

management meet each DM at least quarterly and these

meetings will continue in the future.

• Additionally,anannualreviewisundertakenwhichconsiders

other important aspects in addition to performance

measurement such as systems, administration support,

new products and services, local support of regional teams,

investment approach (checking cash rates paid and other

small, but important points), together with in depth analysis

of their systems. Finally, each DM completed a questionnaire

providing analysis of performance of segregated portfolios

against recognised benchmarks.

Administration monitoring

• Qualityandstandardofadministrationgenerally.

• Qualityof,andaccessto,reports.

• Functionalityofonlinereportingsystems.

• Availabilityofinvestmentmanagers.

• Flowofgenericmarketinformationtotheclient.

Financial Press

• Thefinancialpressiscontinuouslymonitoredforarticles

regarding each of the DMs and these are reported to

ABC Financial services board on a monthly basis, when

appropriate. In addition, if there should be any negative

press, this would be picked-up immediately with the relevant

DM and if applicable, explanations sought.

Financial strength

each DM’s annual report & accounts is reviewed along with any

other financial reporting and updates.

Lse listing

It is also worth noting that where the DM is a listed company,

they will also have to abide by the London stock exchange

requirements as well as those of Companies House. ABC Financial

services will monitor the activities of any parent company where

applicable, in addition to the review of the annual report &

accounts and other financial reporting and updates.

ongoing review of portfolios

In addition to the regular reviews of product providers and

specific investment managers we work with, we undertake

regular evaluation of each client’s portfolio specifically and will

report back on an annual basis with confirmation of where we are

in relation to their financial plan.

• Regularreviewsofproductprovidersandspecificinvestment

managers.

• Regularevaluationsofmodelandbespokeportfolios.

• Forbespokeportfolios,annualreportingincluding

confirmation of where they are in relation to the client’s

financial plan. the reporting will include the following areas:

• Confirmationofagreedbenchmark

• Timeframebeingconsidered

• Confirmationofobjectiveandriskprofile

• Benchmarkperformance

• Portfolioperformance

• Investmentmanagerapproach

B. sUMMArY oF WorK UnDertAKen BY An ADVIser on An AnnUAL BAsIs



sAM

PLe

sAM

PLe

IFA Client

Client Address #1

Client Address #2

Client Address #3

Postcode

[Date]

Dear sir

It is with pleasure that I write following my 6 monthly investment review meeting with ________________ of Brooks

Macdonald Asset Management on _________.

I have attached a summary of their performance over the past 6 months, together with confirmation of the

benchmark they are using which clearly demonstrates their relative performance. the review includes a comment

from _______________, the investment manager, which concurs with our stance and conforms to your objectives

that we agreed at our last meeting.

In summary, I am pleased to report that the portfolio has performed well against our own agreed benchmark and

the industry accepted benchmark of APCIMs. the portfolio is performing in line with expectations and meeting

your current objectives and I am pleased with the way ________ is running the investment management mandate

we have given him.

As you know, we receive regular updates from Brooks Macdonald Asset Management that allow us to monitor the

performance of your portfolio on an on-going basis. this 6 monthly review is designed to formally confirm our

ongoing evaluation of the performance of your investment managers and to ensure that your objectives are being

met and performance achieved. As always, if you have any queries whatsoever please call me.

With kind regards

Yours sincerely

A B Consultant

An IFA Co Ltd

Below is a suggested client review letter and an outline portfolio review document that an adviser may wish to send to a client on regular basis that provides reassurance and demonstrates the ongoing work undertaken by the adviser on behalf of a client.

C. sAMPLe CLIent reVIeW Letter AnD PortFoLIo reVIeW sUMMArY



BMAM PortFoLIo reVIeW sUMMArY

1. Date of review:

2. Agreed Benchmark:

3. timeframe:

4. Performance of the agreed benchmark:

5. Performance of the portfolio:

6. Investment Managers comments:

7. Performance of BMAM model portfolio vs APCIMs __________ benchmark:

sAM

PLe

sAM

PLe

32

©Defaqto Ltd www.defaqto.com/adviser

FULL DeFAQto trAnsCrIPt oF CoMMents

ForeWorD BY FrAser DonALDson – DeFAQto InsIGHt AnALYst For FUnDs

Brooks Macdonald have requested an independent audit of the

data and methodologies within this research document.

Defaqto have been researching, and providing consultancy on

the selection and comparison of discretionary managers (DMs)

for the past three years and feel well placed to comment on the

processes suggested within this document.

It should be made clear that Defaqto has been employed to

audit a process that has been created and developed by Brooks

Macdonald. All copyright, statements and methodological

assumptions are the intellectual property of Brooks Macdonald.

the Defaqto comments will be clearly marked with our logo

to further highlight the additional content that Defaqto have

produced as part of the audit. An entire summary of the review is

also available within this document.

Defaqto has either verified or supplied the data for this whole

of market due diligence approach to selecting a discretionary

manager document. Data supplied by Defaqto is clearly sourced

and is supplied to Brooks Macdonald as a licensee of Defaqto

research services. other contributors are also clearly referenced,

and Defaqto has verified that the data has been reproduced

accurately. Defaqto has not audited third party data in terms of

the information itself.

It is should be noted that Defaqto has not been party to the

construction of the suggested questionnaires, fee charging

schedules, or other sample communiqués highlighted by Brooks

Macdonald within this report. this content has been reviewed

in terms of the overall process, but not in terms of the actual

content and layout of the documentation.

the value to advisers in following a process such as this stems

from two aspects inherent in this document. Firstly, the use of the

Private Asset Managers (PAM) directory, to set out a good proxy

for a whole of market approach to DM selection. secondly, the

suggested process and scoring can be modified to suit adviser

firm preferences, either in terms of the importance attached to

each filter, or by creating a bespoke filtering system using the

data made available by the research document. this benefit can

be enhanced by the existence of last year’s edition of the same

process using different data sets and criteria.

eXeCUtIVe sUMMArY BY DeFAQto on BrooKs MACDonALD’s DUe DILIGenCe ProCess

Brooks Macdonald’s approach to selecting a DM is a sensible and

comprehensive one. It is of course not the only approach and some

bespoke work, by each adviser may be required on the process to

emphasise what is important to that adviser and his clients.

Having said that, Defaqto has noted that the sheer range of

DMs covered by this process permits an adviser to realistically

claim that they have selected a shortlist from the market, and it

is difficult to suggest other filters where similar data from such a

wide range of firms would be readily available.

Defaqto would not want to comment on the relevance of

retaining a whole of market and independent starting point for

each adviser, but should that be important then these stages are

a viable way of achieving the goal.

In auditing any due diligence process, however, Defaqto would

make the following provisions:

• Itisfortheindividualadvisertoweighttheimportanceand

relevance of individual filters. some filters, or the details of

specific filters can of course be modified to suit. the scores

can easily be recalculated, and the core process retained.

• Theadvisercanmodifythefiltersorindeedadddifferentones

to suit. With DM services increasingly made available to the

intermediated market relevant due diligence information is

becoming easier to obtain.

steP 1.1 DeFAQto’s VIeW on UsInG tHe PAM DIreCtorY As A FILter

Brooks Macdonald has developed their universe of DMs with

reference to the PAM Directory. this directory covers the majority

of DMs geared up to cater for the intermediated market. APCIMs

(Association of Private Client Investment Managers) have a full

members list which may also add some additional firms, but as a

starting point the PAM directory entries are a good proxy of DMs

servicing the UK market.

steP 1.2 ContrIBUtors to tHe DeFAQto DM DAtABAse

Defaqto now collects detailed information on discretionary

management firms that have specific solutions for the

33


intermediary market. the comparison and due diligence of DMs

is now part of Defaqto’s core research tools. Defaqto collects

data on firms that have predefined service terms for UK advisers,

and are happy to reproduce these, as well as other details on

their service, process, and company, for UK financial advisers.

Appearance on any Defaqto product/service research table is free.

this additional filter will highlight those firms that consider their

services to be highly geared to the UK intermediary market.

steP 2.1 DeFAQto’s VIeW on UsInG ContrIBUtors to tHe ArC PCI – Q4 2011 – As A FILter

Asset risk Consultants are well known researchers of DM

performance. they produce a highly credible measure of risk

vs returns over time. the number of contributors to their

private client indices demonstrates that DMs are happy for their

performance to be independently audited and compared against

wider peer groups. the fact that contributing DMs are happy

to submit this data makes it a good additional filter. It must also

be stated that contributors pay an annual subscription to ArC

which prevents some DMs participating, and is not necessarily a

comment on their performance.

steP 2.2 DeFAQto’s VIeW on UsInG Assets UnDer MAnAGeMent (AUM) oF £2Bn AnD ABoVe As A FILter

Brooks Macdonald has applied a filter at £2bn for assets under

management, not an unreasonable cut-off in our opinion. the

actual level selected by an adviser may vary from this amount and

is dependent on individual preference.

some advisers may have the ‘safety in size, big is beautiful’ belief,

where the cut-off could be much higher. Another may look at

smaller firms which they believe are typically more agile in their

decision making. Indeed size may not be important at all and

looking for a local DM may be a priority.

the growth rate of AUM can also be a useful indicator of firms

on the up, or those that are having a high degree of success in

winning new business.

steP 2.3 DeFAQto’s VIeW on UsInG oFFsHore BonD & sIPP ProVIDer PAneLs As FILters

Brooks Macdonald has sought Defaqto’s advice in selecting the

offshore bond and sIPP products featured in this 2012 edition

of their DM due diligence document. We have selected offshore

bond products that have achieved the highest Defaqto star ratings,

which are based on the product and service features offered. Last

year Brooks Macdonald opted for pure adviser popularity. Using

Defaqto’s star ratings has added in some tax wrapper quality

measures to the process, and has widened the total number of

offshore bond panels covered if advisers chose to factor in last

year’s results as well. Furthermore, product providers that are

developing products with high levels of features and service are

likely to be more diligent in their research of DMs for their panels.

Alternatively, for sIPP products we have gone with the products

most frequently recommended via Defaqto’s adviser research

tool, engage. the filtering process that Defaqto’s engage system

makes available to advisers is such that those tax wrappers

coming through to recommendation tend to have the best

features and associated services.

In terms of the process itself, we would agree that should

DM firms sit on a wide number of sIPP and bond panels, it is

inevitable that a certain amount of due diligence will have been

executed by the sIPP or bond provider. We would note that

this can vary considerably and highlight the fact that different

providers use different methodologies in screening the DMs that

sit on their panels.

Furthermore, these steps in the process gain credibility over time,

as the sum of sIPP and bond products being examined increases.

It allows advisers to combine scores over the two editions of

this research. A total of 10 sIPP products and 9 offshore bond

products have been analysed.*

[* It should be noted that Defaqto have not screened the accuracy of data in the previous edition referred to here.]

steP 2.4 DeFAQto’s VIeW on UsInG tAX WrAPPer ProVIDers VIA BrooKs MACDonALD

the range of tax wrappers available through a discretionary

service could be quite important additional information. It

demonstrates that DMs do not necessarily have to be on formal

sIPP & bond panels to be employed by the adviser/client.

employing an off-panel DM may involve more due diligence

work and administration but some tax wrapper providers do offer

this option.

DeFAQto’s VIeW on CreAtInG tHIs sHortLIst

In Defaqto’s opinion, applying these filters, or variations of, is

a good place to start in creating the initial shortlist for further

investigation from the wider market. An adviser can also add

in any other must have criteria at this stage. this will ensure

that the shortlist meets their basic criteria. Common examples

of additional filters in the current market would be platform

availability or customer relationship management (CrM) data

feeds. Again, such filters can be designed to suit the needs of the

researcher, and assist them with their design of the shortlist.

CoMBIneD 2011 & 2012 sCores

Defaqto agrees that the combining of the two research

documents may be something that an adviser may choose to do.

34


the benefits of doing this might include:

• Theresearchprocesscanbeappliedtoamuchwiderbaseof

sIPP & bond panels (although we would note that we have

not changed last year’s panel results so some firms may have

been added to certain product panels since publication. As

such we would not recommend going beyond combining

two successive years without checking that all the data is

still accurate).

• ThecombinedscorecanhighlightthoseDMsthatare

growing in terms of AUM and presence, particularly in the

intermediated marketplace.

• AconsistencyvalueforthoseDMsthatdowellinbothreports

can be ascertained.

• Anomaliescanbeidentifiedandevaluated.

steP 3 & 4 DeFAQto’s VIeW on senDInG A QUestIonnAIre AnD eVALUAtInG tHe retUrns

these should be designed to find out more about each of the

firms on a shortlist. Defaqto would agree that this is an essential

process to embark upon.

Advisers may not only be dealing with their selected DM on

a daily basis, but may have questions that need answering in

the future. this process will not only help to whittle down the

shortlist further based on the responses but, equally as important,

those responses (or lack of them) and the way in which a DM

answers the questions will give the adviser a good indication of

their willingness to service the adviser market and what their

service standards may be like in the future.

At this stage, it would be sensible to ask for all marketing

materials on the services offered, together with their terms and

conditions as it is not always possible to download these from

websites. At this stage you may not want to request a call from

an account manager which can sometimes be the only option

offered on DM websites.

In terms of the questions suggested by Brooks Macdonald,

although they are fairly comprehensive and will elicit enough

information to reduce the shortlist further, the list is not

exhaustive and additional questions can be added.

Brooks Macdonald suggests reducing the shortlist to around 4

or 5 firms. Defaqto would go along with this as a manageable

number but stresses that there is no rule of thumb on how long

or short such a list should be.

A note on fees & charges

these are important, but the priority is selecting the right

discretionary solutions for the client. Costs can be considered

more closely once the shortlist has been reached. Brooks

Macdonald have summarised the potential charging costs well.

Defaqto would also agree that cheapest is not necessarily best,

look for value for money. terrific service, support and quality

reporting systems may well justify an extra few basis points in the

minds of both adviser and the client.

steP 5 DeFAQto’s VIeW on MeetInG WItH eACH DM on tHe sHortLIst

Defaqto agrees that this is essential. Advisers may be entrusting

considerable amounts of their clients’ assets to the selected

firms, so it is essential that they feel comfortable with the people

managing their clients’ money. Personalities can come in to the

equation as the adviser will potentially be working with the DMs

on a daily basis. If it is not the decision maker (at the adviser firm)

who will be dealing direct with the prospective DM, it may be

advisable to involve the person who will be at this stage.

• Approachthemeetingsasifassessingabusinesspartner.

• Getitrightfirsttimetoincreasetheoddsofanextended

partnership.

• Usethemeetingasagoodopportunitytotestthevalidityof

the responses to the questionnaire.

steP 6 & 7 DeFAQto’s VIeW on MAIntAInInG, MonItorInG & reCorDInG tHe ProCess AnD resULts

It is essential that the progress of the DM is monitored, preferably

on a formal basis at least twice a year. We would agree with

Brooks Macdonald that things such as administration, approach

to regulation changes and support to the adviser are a must.

In terms of performance, Brooks Macdonald suggests monthly

monitoring, which we would agree with.

It is also essential that the whole selection process is repeated on

a regular basis and we would agree that every 12 months or so

is sensible.

of course keeping records of the selection process is a must, both

from a compliance basis and to see if anything has changed from

when the original selection was made.

DeFAQto’s VIeW on tHe ADVIser Fee JUstIFICAtIon

Brooks Macdonald lists a whole series of adviser responsibilities and

actions that they feel will justify the adviser’s fee. We would agree

with their appraisal in that selecting the right investment managers

for the client has significant value, as do the ongoing review and

monitoring processes. Defaqto has not reviewed the examples or

charging structures and rates, and highlights the fact that each

adviser will develop their own processes and fee schedules.



neW BUsIness DeVeLoPMent teAM

T: 020 7408 5560 E: [email protected] http://www.brooksmacdonald.com/am

Brooks Macdonald offices

Alan Falkingham South West

t: 020 7408 5579M: 07557 113 103e: [email protected]

Julian Holden North West


Grainger Thomas South Central


Richard Allison Scotland and N. Ireland


David Hyner London & SE – Sussex & Surrey


Kevin Cull South Central

t: 01329 226 821M: 07826 958 791

e: [email protected]

Mark Eyres SE – Kent & East Sussex


Richard Harley Midlands

M: 07557 746 897e: [email protected]

Ian Wolfenden North East

t: 0161 861 4110 M: 07879 811 675e: [email protected]

Carol Evins East Anglia


Andrew Denham-Davis London & Head of UK Sales


Justin Woolf Northern Home Counties & North London


790-1 (5.12)

this publication has been prepared for professional advisors only for general guidance on matters of interest, and does not constitute

professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.

no representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this

publication, and, to the extent permitted by law, Brooks Macdonald Group plc (including its subsidiaries), its members, employees and

agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining

to act, in reliance on the information contained in this publication or for any decision based on it.

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