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Our Investment Process

Our range of investment options span from the relatively simple 'off-the-shelf' choice of portfolios to a fully customised solution.

We've introduced a simple yet comprehensive four stage process that is based on your own process of risk assessment, asset allocation, fund choice, and the reviewing and monitoring of clients' portfolios.

Risk Profile

Review and Governance
investmentwheel
Asset Allocation

Fund Selection

Risk profile

Attitude to risk is a very personal affair; which is why your risk assessment is so critical to choosing the correct investment strategy.

If your clients are investing in one of our specially developed risk-graded portfolios or lifestyle strategies from our Governed range, use our risk attitude profiler to measure your client's risk attitude and make it easier to see which investment options are more suitable for them.

It involves answering questions about their current feelings and attitude to risk. As a result, they will be placed in one of the seven following categories.

Click on a category heading to expand the description:

Very Cautious

Very Cautious investors typically have very low levels of knowledge of investment matters and very limited interest in keeping up to date with investment issues. They are unlikely to have experience of investment having only saved into bank accounts.

In general, Very Cautious investors prefer knowing that their capital is safe rather than seeking high returns. They are not comfortable with the thought of investing in the stockmarket and would rather keep their money in the bank.

Very Cautious investors can take a long time to make up their mind on investment matters and will usually suffer from severe regret when their investment decisions turn out badly.

Cautious Investors

Cautious investors typically have low levels of knowledge about investment matters and limited interest in keeping up to date with investment issues. They may have some limited experience of investment products, but will be more familiar with bank accounts than riskier investments.

In general, cautious investors do not like to take risk with their investments. They would prefer to keep their money in the bank, but may be willing to invest in other types of investments if they are likely to be better for the longer term.

Cautious investors can take a relatively long time to make up their mind on investment matters and can often suffer from regret when investment decisions turn out badly.

Moderately Cautious

Moderately Cautious investors typically have low to moderate levels of knowledge about investment matters and quite limited interest in keeping up to date with investment issues. They may have some experience of investment products, but will be more familiar with bank accounts than riskier investments.

In general, moderately cautious investors are uncomfortable taking risk with their investments, but can be willing to do so to a limited extent. They realise that risky investments are likely to be better for longer-term returns.

Moderately Cautious investors can take a relatively long time to make up their mind on investment matters and may suffer from regret when investment decisions turn out badly.

Balanced Investors

Balanced investors typically have moderate levels of knowledge about investment matters and will pay some attention to keeping up to date with investment matters. They may have some experience of investment, including investing in products containing riskier assets such as equities and bonds.

In general, balanced investors understand that they have to take investment risk in order to be able to meet their long-term goals. They are likely to be willing to take risk with part of their available assets.

Balanced investors will usually be able to make up their minds on investment matters relatively quickly, but do still suffer from some feelings of regret when their investment decisions turn out badly.

Moderately Adventurous

Moderately Adventurous investors typically have moderate to high levels of investment knowledge and will usually keep up to date on investment issues. They will usually be fairly experienced investors, who have used a range on investment products in the past.

In general, Moderately Adventurous investors are willing to take investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risk with a substantial proportion of their available assets.

Moderately Adventurous investors will usually be able to make up their minds on investment matters quite quickly. While they can suffer from regret when their investment decisions turn out badly,they are usually able to accept that occasional poor outcomes are a necessary part of long-term investment.

Adventurous

Adventurous investors typically have high levels of investment knowledge and keep up to date on investment issues. They will usually be experienced investors, who have used a range on investment products in the past, and who may take an active approach to managing their investments.

In general, Adventurous investors are happy to take investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risk with most of their available assets.

Adventurous investors will usually be able to make up their minds on investment matters quickly. While they can suffer from regret when their investment decisions turn out badly, they are able to accept that occasional poor outcomes are a necessary part of long-term investment.

Very Adventurous

Very Adventurous investors typically have very high levels of investment knowledge and a keen interest in investment matters. They have substantial amounts of investment experience and will typically have been active in managing their investment arrangements.

In general, Very Adventurous investors are looking for the highest possible return on their capital and are willing to take considerable amounts of risk to achieve this. They are usually willing to take risk with all of their available assets.

Very Adventurous investors often have firm views on investment and will make up their minds on investment matters quickly. They do not suffer from regret to any great extent and can accept occasional poor investment outcomes without much difficulty.

 

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Asset allocation

Once you know your client's attitude to risk, you can start to decide a suitable asset allocation.

Deciding an asset allocation for your clients is one of the most important decisions you will make for them. Get it right and you could keep risk to a minimum and maximise potential returns.

Indeed, studies1 have shown that it can influence up to 90% of returns. But getting it right and maintaining it takes a lot of your time and resource. It's a complex area to work out what the best blend of assets should be for each client. The reality is that no single asset class or geographical area is consistently the best, year in, year out.

How we can help

Our Governed Range of portfolios and lifestyle strategies are designed to have a formal review process to ensure they continue to provide an asset allocation depending on your client's attitude to risk and time to retirement.

And our governance promise means that all of our investment options have a formal review process to ensure they continue to remain true to their time and risk profiles.

This can help you fulfil your TCF responsibilities to provide suitable advice that takes account of client circumstances.

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Fund selection

This part of the process involves selecting the appropriate funds to meet the client's objectives.

We offer a comprehensive fund range that covers a wide span of asset classes, geographical sectors and management styles.

Our investment options range from the relatively simple 'off-the-shelf' choice of portfolios to a fully customised solution.

Your clients can invest in one of our specially developed risk-graded portfolios or lifestyle strategies from our Governed range, or you can create and manage their investment strategy by selecting from our Fund range. This includes a range of risk graded multi asset funds run by leading discretionary fund managers, 7IM, Brooks Macdonald, Schroders and Rathbones.

If a Governed Portfolio is chosen the funds within it default to funds managed by Royal London Asset Management (RLAM). But, depending on individual preferences, the default equity fund can be changed to any from our range.

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Governance

A standard feature for our Governed Range and Matrix Funds, governance comes totally free of charge.

If governance sounds rather important, that's because it is. At its simplest, it is the framework established to ensure decisions are taken in the best interests of our investors.

Naturally, we place a great deal of emphasis on this. As a robust process that covers all of our investment options, it is an integral part of our proposition, and comes as a standard feature at no extra cost.

Our Investment Advisory Committee

The cornerstone of our governance framework is our independent Investment Advisory Committee (IAC), which meets quarterly to review asset allocations. As markets move up and down, risk and return statistics can change so it's important to review asset allocation to ensure that each Governed Portfolio holds the most efficient blend of assets for its risk profile. Any changes made as a result of these reviews are communicated on this website.

Furthermore, the IAC not only reviews our own asset allocations, but also keeps an eye on the external managers within our Matrix Funds. These are a set of external funds with a strict governance process wrapped around them.

1. Does asset allocation policy explain 40, 90 or 100 percent of performance?, Roger G Ibbotson and Paul D Kaplan, 2000.

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Latest update September 2014
5W1178/2


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