Our Brecon challenge complete

So, the seven intrepid explorers left Bristol on Friday 21st October for the Brecon Beacons.

Surprisingly the forecast was for a dry weekend, so spirits were high and everyone had enough kit to last a whole week on the mountains. Our Kit master Andy had prepared us for the worse, so no excuses of being cold, hungry, injured or dehydrated.

Saturday arrived at 5.30 for Dave and Andy who were head chefs for the morning and tasked with providing a hearty breakfast for all. Surprisingly, it was poetry in motion in the kitchen. A ‘full English’ proved to be the perfect start to a day of climbing in the Brecon’s. Unfortunately, the welsh weather provided a cloudy misty day and thus after a long climb to the summit of Pen y Fan, the euphoria of reaching the top was tempered by the disappointment of not being able to take in the glorious view.

Cribyn and Fan Y Big passed without incident. Andy’s meticulous planning, map and compass reading provided the confidence to trek on without fear of getting lost. Still no view… and where did that wind come from! All layers were now on, so at least the backpacks were now lighter.

top-of-pen-y-fan

Clockwise from top left: Tim Blowers, Dan Hiles, Andrew Weston, David Buchan, Kate Harris, Lucie Ellrich and Sara Mather

2.00 – at last the mist clears and we all took the opportunity to take in the views. Simply stunning! After a scheduled route across a challenging bog and heathland, we soon realised we were only half way. Still at least we could go no higher; so down we went, past Talybont reservoir and after 16 miles of hard walking we arrived back to the pub for some welcome refreshment and a hearty dinner.

Sunday arrived with a briefing on how to canoe the 7 miles of the canal to Brecon in a straight line. The boys seem to grasp this would be the best and quickest option. The girls had different ideas. Lots of giggling, shouting and crashing into the canal banks followed. Dan and Tim came to the rescue and tethered their canoe to the girl’s canoe to add some welcome direction and power. Dave and Andy were in search of a welcome coffee stop but alas came up short. So, after a scheduled stop and half an hour wait, the team became one again. Dave and Andy took the abuse on the chin for going ahead!

rowing

With arms and shoulders aching, the arrival into Brecon was a welcome sight. Lunch at one of Brecon’s finest restaurants (actually it was the first we came across) followed. A quick photo to finish and off back home to no sympathy for our aching limbs. What next for the intrepid explorers?

Thank you for everyone who donated to our chosen charity – Alzheimer’s Society. You will be pleased to know we exceeded our target and with a few extra donations at the end, we broke through our £1,000 target.

David Buchan, Director, Brunel Capital Partners

The role of the Paraplanner

By Sara Mather, Paraplanner, Brunel Capital Partners

“What do you do?”

When people ask me what I do, I assume they’re not asking about what I do in my own time, what I do with my kids or what I think my role in life is. They are asking what I do as a job. “I’m a Paraplanner” I tell them. “Oh right” is the standard response. Cue the blank face, followed by a second question “and what does that mean then?”.

To anyone outside the financial profession it’s not a term people are generally familiar with, unlike Financial Adviser or Financial Planner which are roles people tend to recognise.

The role of the Paraplanner is a relatively new one, and even within the industry it is not always clearly defined.

In some Financial Planning practices, a Paraplanner has limited input into the advice process and is simply tasked with the role of gathering information and formalising the Financial Planner’s recommendations into a report, essentially, providing a report writing service.

In other practices, the Paraplanner has a much more active role in the advice process.

This is the case at Brunel Capital Partners. The Paraplanner here works as part of a team alongside the Financial Planner to provide clients with a professional and ongoing Financial Planning experience. We play an active role in the advice process.

The Financial Planner gathers the initial client information, gets to know the client and gains a real understanding of their objectives and what they are trying to achieve. The Paraplanner then collates the client’s personal details, gathers policy information and builds up a picture of the client’s current financial position. We then use this as the starting point for identifying any shortfall between the client’s current position and where they want to be, in line with their personal objectives.

We analyse every detail of the client’s personal situation; their age, their health, their objectives, their existing plans, their attitude to risk, their existing plan charges, the underlying investments; essentially the overall suitability of these plans and how likely it is that the current provisions are going to meet their future needs.

Then we build on the initial picture with the Financial Planner. Together we analyse whether the client’s existing plans and provisions are appropriate and sufficient on all fronts. We look at what would need to be done to address any shortfall and whether the objectives set are achievable. This is a collaborative process between Financial Planner and Paraplanner.

We draw on the intricate knowledge and understanding that the Financial Planner has of the client, their needs and their objectives and apply this to the analysis the Paraplanner has done, to determine the best course of action for the client going forward.

A Paraplanner is often qualified to give investment advice in their own right, and typically has a wealth of financial exams to prove it. Honestly we are a little (ahem) geeky, we like numbers, we like technical detail and we make sure we keep abreast of changes in the market, changes in legislation and compliance requirements. This gives the Financial Planner and Paraplanner combination a dynamic edge, two sets of knowledge, two sets of eyes, and two sets of ideas.

This gives the client the best possible solution, advice and hopefully outcome.

Once recommendations have been made and put in place we work with the Financial Planner to review this advice regularly, ensuring it remains appropriate, and that it’s on target to achieve the client’s goals.

So, when people ask me “what do you do?”, I must admit I do sigh a little inside. Not because I don’t love what I do (which I do), but because there isn’t a quick answer. Explaining the role takes a while, and I fear that Mr Well-Meaning Polite Person isn’t actually looking for chapter and verse on the ins and outs of my role.

Apparently pension legislation, Inheritance Tax and cash flow forecasting aren’t everyone’s cup of tea. Luckily, it’s ours, and that’s what we’re here for.

Sara Mather
Paraplanner, Brunel Capital Partners

Colin McInnes: Brunel Chief Investment Officer

Active vs Passive investment

Colin McInnes is Chief Investment Officer, Brunel Wealth Management and Managing Partner, Quartet Capital Partners LLP

Quartet Capital Partners Ltd

Whilst Brunel Wealth Management manages its own portfolios, Quartet provides the research and fund selection resource to Brunel. Colin sits on the  Brunel Wealth Management Investment Committee that oversees all investment decisions made as we construct our and our clients’ investment portfolios. Other members of the Brunel Wealth Management Investment Committee include Steve Brady, Brunel Director; Dan Hiles, Brunel Chartered Financial Planner; and Andrew Weston, Brunel Compliance & Technical Manager.

Here Colin talks about the Brunel Investment Strategy. Described as ‘systematic, globally diversified & low cost’, it is also an investment style that can be described as ‘passive’ rather than ‘active’. But passive doesn’t mean in-active.

Active Management is what most investors expect

It’s an investment strategy that:

  • Aims to outperform the market by selecting some investments (bonds or equities) in preference to others
  • Believes research will uncover hidden value or cheap assets and avoid expensive ones
  • Carries higher costs as managers charge fees and incur transaction costs
Passive Management is far more measured

A passive investment strategy:

  • Tracks a specific index (e.g. FTSE 100) and reflects the market as a whole. It’s important to note that indices are active… bad performers get cut and more successful ones are switched in
  • Carries lower costs as transactions are limited and there is a lower management fee
  • Aims to gather whole market value, not to outperform the index/market.

Brunel takes the approach that the starting position in its core satellite portfolios is a passive position and that only if there is a compelling argument for an active fund over a passive one will it be included.

Over a recent 10-year period, active mutual fund managers’ returns trailed passive funds consistently

This is according to Kent Smetters, a Professor of Business Economics at Wharton Business School, Pennsylvania. Managers of stock funds for large- and mid-sized companies produced lower returns than their index competitors 97% of the time, while managers of small-cap stocks trailed 77% of the time.

Smetters says:

Those very few investment managers that outperformed the passive index were still likely to underperform in the future. In fact, outperformers had only a 20% chance of repeating the following year, and … just a 10% chance of outperforming three years in a row.

It’s just too hard for an asset manager to pick a portfolio that outperforms the market by enough to make up for the 1, 2 or 3% fee that must be charged to support the stock and bond picking operation.

Many index-style mutual funds and exchange-traded funds charge less than 0.2%, some less than 0.1%, giving them a huge cost advantage.

The importance of staying invested

Most investors are not good at predicting short-term swings in the market. More often than not, investors find themselves buying high and selling low.

When the market starts selling off sharply, investors will panic, sell their own shares, and sit on the sidelines.

Unfortunately, some of the biggest one-day upswings in the market occur during these volatile periods. For instance, if an investor stayed fully invested in the S&P 500 from 1993 to 2013, they would’ve had a 9.2% annualised return.

However, if trading resulted in them missing just the ten best days during that same period, then those annualized returns would collapse to 5.4%!

Portfolio diversification

Portfolio diversification plays a key role in passive investing and is a widely embraced investment strategy that helps mitigate the unpredictability of markets for investors. It has the key benefits of reducing portfolio loss and volatility and is especially important during times of increased uncertainty.

Modern Portfolio Theory, provides the academic bedrock for diversifying portfolios. Simply stated, by combining assets that are not perfectly correlated, that is, do not move in perfect lock-step together, the risks embedded in a portfolio are lowered and higher risk-adjusted returns can be achieved. The lower the correlation between assets, the greater the reduction in risk that can be derived.

Colin McInnes
Chief Investment Officer, Brunel Wealth Management and Managing Partner, Quartet

Colin has over 18 years’ investment management experience and founded Quartet in 2009. Before this Colin was a board director at the UK arm of a Swiss Private Bank where he oversaw the portfolio management function. He holds the Investment Management Certificate and the Chartered Institute of Securities and Investment Diploma. Colin is a Chartered Wealth Manager and a Chartered Fellow of the Institute of Securities and Investment. Quartet is a discretionary investment management firm managing bespoke portfolios for individuals and providing research and fund selection resources to firms who manage their own portfolios such as Brunel Wealth Management.

Investment: how our philosophy works

We let portfolios breathe allowing the underlying holdings to do their job

Below are performance charts for a selection of Brunel Wealth Management portfolios: Cautious, Balanced and Adventurous which are compared against the FTSE All Share.

The FTSE All Share is not a true benchmark because it is made up of 100% equities. Our clients’ portfolios only contain a percentage of equities. We use the FTSE All Share to give general market context and because it is the one most often reported in UK market news bulletins.

The 6 months show the impact on markets of Brexit

bwm-portfolios-6-months-vs-ftse-all-share

12 months include Brexit and the fallout from the markets going wobbly over China last year

bwm-portfolios-12-months-vs-ftse-all-share

Since the inception of our clients’ portfolios on 1st January 2012, the markets and our clients’ portfolios have experienced significant market meltdowns such as the Euro Crisis, Greece (twice), the fall out in the China market and most recently Brexit.

Brunel Wealth Management portfolios from 1st January 2012

bwm-portfolios-since-inception-vs-ftse-allshare

The past performance is evidence that our philosophy is working.

Our approach is to hold a low cost, diversified portfolio. Our underlying philosophy is not to second guess the markets but to take advantage of what the whole market has to offer. It means not trying to control the markets using complex products such as hedge funds and structured products and sticking to a rebalancing programme when our portfolios become too weighted towards certain asset classes. We let portfolios breathe allowing the underlying holdings to do their job.

This four year scatter graph shows that our clients’ portfolios display lower levels of volatility but delivered higher returns than the FTSE All Share

bwm-scatter-chart-4-year-comparison

Steve Brady, Director
Brunel Capital Partners & Brunel Wealth Management
Brunel Capital Partners is a sister company of Pilgrim Financial Planning