Wealth Financial Planning

Professional Intermediary Services

Our Intermediary services

At Wealth, we believe that sound financial planning advice starts from a solid base.

Our job is to eliminate as much of that uncertainly as possible and to work with you to identify

the most appropriate way for your client to achieve their financial goals.

The Intermediary Service Proposition is bespoke and will be tailored to meet the requirements

of the organization and/or client structure. This document sets out some of the services we

provide to intermediaries which may be of use to you.

The first step is to discuss your objectives and formulate a specific service level agreement for

your company and/or specific client.

This may be as simple as regularly explaining movements held in an existing investment

mandate to a client, or a full review of a client’s financial needs and existing portfolios, both

from a holistic and performance perspective.

Much of our work with intermediaries is related to investment. However, there may be

requirements for advice and in some cases provision of other services such as

Settlor protection

Trustee financial protection, or

Group arrangements for underlying companies.

We have also been required to advise on other arrangements the clients may hold, for example

international pensions or structures.

We have encountered so many situations where clients’ expectations have not been met that

we feel the following will help any intermediary increase the likelihood of satisfaction and peace

of mind for both client and you as the intermediary fulfilling your fiduciary responsibility.

The Wealth Financial Planning Investment Process is designed with that in mind. It creates a

framework for us to discuss your and the underlying client’s needs and expectations, to assess

and agree a suitable attitude to investment risk and then to build and manage an investment

portfolio to match.

By working through a series of logical steps, you will gain a better understanding of the reason-

ing behind our recommendations and confidence in the resulting choice of investments.

Our process starts with a thorough review of the financial position of all relevant stakeholders.

This is crucial as it allows the all other steps to naturally follow.

Having conducted the financial review, we employ our knowledge and experience in risk/

reward evaluation to establish how well matched current financial arrangements are to the

ambitions of the structure. This includes the review or writing of an investment policy statement

that is married to the stakeholders’ desires and can highlight the need for segregation of

wishes where appropriate.

The review and investment policy statement form the backbone for the structure thus reducing

intermediary risk at the outset. It also increases client comfort whilst providing forward looking

structure in line with the expectations of our regulatory bodies.

The process of reviewing previous performance against static benchmarks or peers

remains useful but can only be regarded as a hindsight exercise. Greater likelihood of

satisfaction will come from a more holistic and forward looking approach to investment

monitoring from a Financial Planning starting point

The Professional Wealth Management Service will give you:

Clear presentation and management structure of entity investments

Investment management tailored to the entities specific needs and risk profile

Access to first-class investment research and expertise

Access to our own administration and consultancy team

On-going, flexible and strategic financial planning advice

Quarterly valuation and reporting and consolidation where required

Annual or half yearly reviews and risk profile updates using third party impartial data

The Process in More Detail:

Fact find and Evaluation of current arrangements - Getting

to know you!

In a world of form filling, we realise that documents such as fact finds can seem onerous and

may even appear to offer little value!

However, we believe this form is one of the most important summary documents. The process

of ‘Know Your Client’ is particularly vital when it comes to providing financial advice as it is all

too easy to overlook the most crucial of factors. For example, failure to take the client's total

investment picture into account when making an investment proposal will almost always result

in a recommended portfolio that is either out of balance or is unsuitable.

Our fact find document has been designed for intermediaries, is easy to complete and will

provide our advisers with the vital information about the structure’s current standing, allowing

the next and equally important stage to take place. The fact find will assess such requirements

as income requirements for Jurisdictional issues such as US clients. Tax considerations, as

well as “Soft Facts” (such as the desires, fears and beliefs of the clients) need to be

considered during both financial planning and portfolio construction.

Understanding investment risk, Your Client’s attitude

to it and preferred investment style

To know your investing personality, you need to understand how much risk is suitable for the

specific entity. Are you comfortable taking on more risk if it means your money might grow

faster? Or are you more comfortable making less and knowing that your money is guaranteed to

be there when you need it?

3 main types of risk

1. Market risk – Investments decline in value because of economic changes or other events that

affect the entire market.

2. Liquidity risk – You can’t easily sell your investment and get your money out when you want

to.

3. Concentration risk – Concentrating your money in 1 investment or type of investment puts

your money at higher risk. When you diversify your investments, you spread the risk over

different types of investments, businesses and industries.

All investments have risk, but some investments are riskier than others – there’s a greater

chance you could lose some or all of your money. In general, higher-risk investments offer higher

potential returns, and lower-risk investments offer lower returns. For example, National Savings

bonds generally have low risk because they guarantee that you will get your money back with a

fixed return. But they also have a lower return than most other investments and may not keep

pace with inflation.

Investments like funds and stocks may have a higher return over the long term, but their prices

can change – sometimes by a lot. You could lose money. Other investments, like high yield

bonds, options or leveraged ETFs, are highly speculative and are meant for investors who can

afford to lose all of their money in the investment.

Diversification is a vital part of modern portfolio theory. This uses expected rates of return and

implied volatility for each asset class. The aim is to optimise the asset allocation so as to achieve

the highest expected level of return for a given level of risk

The most common measure of risk in investments is the standard deviation of investment

returns, i.e. how much returns may move up and down relative to their long-term average rate of

return.

Assets with higher standard deviations may be thought of as more risky because their higher

volatility means that there may be more potential for larger downward movements in price.

Historically, shares (Equities - another name for shares held in a company) have had a higher

standard deviation of returns than Fixed Interest (Referring to income which remains constant

and does not fluctuate, such as income derived from bonds, annuities etc.). Any debt security

which has a fixed flow of income is known as a fixed interest security, and fixed interest in turn

has had higher volatility of returns compared with cash or cash deposits.

The table below illustrates current return and volatility assumptions relating to the different asset

classes:

Returns and volatilities as at 30 November 2012

*Gross of tax and charges

RPI Cash/Money

Markets UK Fixed

Interest International Fixed Inter-

Property UK

Equity International Equity

Returns* 2.67% 1.86% 2.90% 2.58% 6.61% 6.73% 7.71%

Volatility 1.32% 6.94% 8.96% 10.11% 20.70% 20.21%

A fundamental principle of Modern Portfolio Theory is that one should consider the risk

of the portfolio as a whole, and not individual assets in isolation. While individual assets do

have a bearing on the overall level of risk the investor is exposed to, the correlation between the

assets in the portfolio has an even greater bearing. In other words, because the price of one

asset typically does not move up and down in line with the price of another (e.g. fixed interest

and UK and international equity), there are significant diversification benefits to be gained by

including a range of different asset classes in the client’s portfolio. Such diversification reduces

risk, essentially because you don’t have all your eggs in one basket.

Most of the benefits of diversification are at major asset class level, i.e. cash/money

markets, UK fixed interest, international fixed interest, property, UK equity and interna-

tional equity.

There is further diversification benefit within International Equity. The split between North

America, Europe, Japan, Far East, Emerging Markets and Global Specialist and depends

primarily on the size of the respective financial markets and their economies.

This chart shows how increasing volatility means greater price rises and falls

Source: Skandia Proposition Marketing, Towers Watson as at 18 March 2011

Discussing your client’s risk profile and its pertinence

We ask you to complete a risk assessment in order for you to provide a detailed picture of

the entities investment risk profile. This maybe completed with the underlying client and/or

intermediary where appropriate. Often this identifies differences in desired risk levels between

client and intermediary. By discussing these differences and mediating an appropriate solution

there is less opportunity for dissatisfaction during the on-going relationship with your client.

This process allows you to both understand the risk embedded in your prospective portfolio and

establish goals for investing in line with your risk tolerance.

What issues does the Risk Profiler cover?

Client’s financial situation:

1. The term of the investment.

2. Client’s level of cash reserves to meet unexpected expenses.

3. Client’s view on the potential for the entity to grow in future.

4. The size of the client’s investment portfolio.

5. Client’s debt position.

6. Retirement provision (retirement risk profiler only).

Client’s risk tolerance:

1. Client’s overall view on investing.

2. The importance of avoiding short-term losses.

3. The level of loss that would concern the client.

4. Client’s view on whether any losses incurred will be recovered.

5. The importance of protecting the investment from the effects of inflation.

6. The extent to which the client is prepared to assume greater investment risk in order to achieve

higher investment returns.

Clients have the right to expect that the portfolios built for them will meet their investment

needs within a given risk level.

Matching portfolio risk and client risk tolerance

Having established the expected outcomes for all the combinations of assets, a line can be drawn

to join up each of the optimal portfolios at each risk level. In Modern Portfolio Theory, this line is

known as the Efficient Frontier.

‘Optimal’ or ‘Efficient’ portfolios are theoretical concepts and are achieved when a portfolio is

established where a maximum mathematical return for a given level of risk has been established.

In order to determine these Efficient portfolios, it is necessary to analyse every combination of

assets and plot the expected risk-return outcome for each combination. The Optimal or Efficient

portfolios are defined as those that maximise the expected return for the desired level of risk.

The key point is that the portfolio as a whole is matched to a level of risk that is based on the risk

profile that the client obtained in the Risk Profiler.

Risk is defined as portfolio volatility. This risk is

mapped to a corresponding level of portfolio risk

on the Efficient Frontier, as measured by standard

deviation of returns. The Old Mutual Asset Alloca-

tor works out a portfolio with the highest mathe-

matically expected return for that given level of

risk based on the major asset classes.

Creating an ‘asset allocation’ style

in line with your risk profile

Once a risk profile has been established and agreed with the client, a

corresponding portfolio can be detailed for proposal by an approved

Discretionary Fund Manager (DFM), where the proposal’s asset allocation profile

is optimised to provide the maximum expected return for that particular level of

risk.

This is such an important part of the process as it minimises the chances of

disappointment in both the construction and performance of your investments.

Professional Intermediary Solution

The Discretionary Manager with us behind you!

Our Professional Intermediary service offers a panel of top discretionary fund managers who will

build bespoke portfolios, run to your own personal investment policy statements. The service

provides access to a selection of some of the most respected names in the world of discretionary

asset management.

A discretionary service means you give the investment managers authority to use their discretion

and expertise in following your investment mandate. They can move decisively to seize

opportunities to enhance the performance of your investments or protect capital in a market

downturn, without the delay of constantly waiting for your written permission.

The service from Wealth Financial Planning incorporates a holistic financial planning approach,

combined with manager analysis to provide a tailored approach to your specific mandate.

Wealth will, where necessary, utilise third party investment management quantitative research

which, as well as providing access to a selection of top discretionary managers. We will also give

consideration to specialist and alternative classes of investments which, maybe favoured by

some clients, such as particular collective fund, hedge fund or commodities.

Today’s world of investment presents an array of opportunities but identifying the brightest stars

is not easy. This is why specialist expertise is so vital for clients to achieve the best returns

possible. The process that underpins the service draws on the talents of some of the investment

world’s most capable and experienced names.

The discretionary managers we have selected offer first-rate fund management, invaluable

strategic expertise, coupled with economists and analysts constantly monitoring markets around

the world for opportunities to enhance performance.

This expertise means that in assembling a portfolio tailored specifically to the entities needs they

can draw on a more extensive range of asset classes than would normally be available to the

individual investor. This offers the chance to supplement traditional staples such as equities,

bonds and commercial property with alternative investments such as Exchange Traded Funds,

ETF’s, structured products, hedge funds and commodities.

Presentation of suitable investment solution, written report

and

recommendation

Having assessed the requirements of both the intermediary and underlying clients and identified

suitable managers to meet these requirements, we will present these to you in a detailed formal

recommendation report. We will request a meeting, answering any questions you may have and

making sure our assessment and recommendations are aligned with both you and the clients

objectives..

Implementation

To undertake all the application procedures on the client's behalf, liaising with the relevant

product provider, investment managers and tax advisors. Then to collate all required

documentation and AML requirements to implement the solution.

On-going investment policy statement of the Entity

To maintain a clear understanding of the objectives, restrictions and expectations of the entity this

service allows the trustees to work with Wealth in designing a statement to be agreed with the

client and provide a clear investment crib sheet for the selected investment manager and

administrator.

Sophisticated investment reporting

“Wealth” understands that a professional intermediary is required to demonstrate an on-going

monitoring process of its investments and managers. To maintain impartiality, Wealth are happy

to work in collaboration with a monitoring company you may have in place such as ARC, Enhance

or Evolution, to review the on-going effectiveness of its recommendations and relay these findings

to the trustees or managers in plain English, in conjunction with any on-going recommendations

or advice relevant to the entity.

At these reviews it is also important to revisit the entities investment planning requirements and

not just the performance of an investment or fund in relation to its peer group or bench mark. For

example a fund may be top quartile with an excellent manager but this will mean nothing to the

client, if the overall market has fallen and the client is now unable to stomach the new levels of

volatility in a previously low volatility asset class.

Selecting the Services you require

As outlined at the outset, our Professional Intermediary Service is bespoke to the client, therefore

the following table sets out many of the elements which could be incorporated in your service

proposition. We would welcome the opportunity to discuss which of these are relevant to your

organisation and could be discussed further.

You will see the Service flow diagram on the following page

The content of this report is in no way a recommendation to buy or sell investments and is for information only pur-

poses. Investing in key long term themes through well diversified portfolios, which match attitude to risk and time ho-

rizons is paramount to success. Investments of any kind have risks attached. World events can have catastrophic

effects on what can sometimes be viewed as the lowest risk investment products.

• Past performance is not necessarily a guide to future performance.

• The Value of your investments can rise and fall.

• You may not get back the amount you originally invested

• Income received from your Investments may rise and fall and not be guaranteed

• Some funds, such as Emerging Markets, Commodities, Hedge Funds and funds that hold other currencies other

the Sterling can offer even greater risks to your capital. They also may deal infrequently and may delay redemption.

Investment should always be viewed over a minimum 5 year time frame as periods of both positive and negative

growth can occur in any asset class or portfolio.

Financial Planning is a service provided by Wealth Financial Planning Jersey Limited which is authorised and regulat-

ed by the Jersey Financial Services Commission (JFSC) under the Financial Services (Jersey) law 1998. We provide

advice and services on a full range of investments which may include Unit Trust Platform based Investment products,

Life Assurance, Collective Investment schemes, Retirement Annuity Trusts and all Pension products. We are not Dis-

cretionary Investment Managers, but may offer the Services of such Managers, should they suit your needs.

Example Analysis