The application of technology in wealth management

Published by Daniel Robertson on 4 June 2021

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The evolution of financial technology, more commonly known as ‘fintech’ designed to improve the delivery of financial services, helping investors navigate an increasingly complex financial landscape has come a long way in recent years.

Whether you are considering investing for the first time, or have an established portfolio, we understand that the various terms can be confusing, so have put together a short guide to explain some of these along with connected terminology, how they assist in the financial planning process and what they can mean for you.

Platforms

Platforms are a way in which clients can access investment products, underlying investments and associated services. Standard Life, Transact, AJ Bell, Aegon and others all have their own platforms by which they can offer a range of products offered by multiple providers and held within various tax wrappers. All platform services and processes are underpinned by technology, and UK investment platforms are web-based services accessed via secure portals.

Wrappers

A wrapper is simply the vehicle through which an investment is held with the main difference between them being the tax treatment. The most commonly used wrappers are:

ISAs

An ISA is a tax-advantaged and flexible wrapper. Although no tax is payable on gains made, contributions are limited £20,000 per year (2021/2022 tax year). ISAs held on platforms tend to be Stocks & Shares ISAs.

Self-Invested Personal Pensions (SIPP)

A wrapper specifically designed to tax-efficiently save for retirement which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs.

Other wrappers include Offshore and Onshore Bonds, Trustee Investment plans and Small Self- Administered Schemes (SSASs).

In addition, all platforms offer ‘unwrapped’ general investment accounts (GIAs or Personal portfolios). These do not have any tax advantages, but come without restrictions, such as annual or lifetime allowances. Any income drawn from these accounts may however be liable for Capital Gains, Income or Dividend Tax.

Comprehensive financial planning may use a combination of wrappers and unwrapped investments in order to produce the best outcome.

Each wrapper or product can invest in collective investments, or in some cases directly into shares or bonds.

Collective investments pool the resources of many investors to buy into a wide range of shares, bonds and other types of assets and may otherwise be known as a Unit Trust or Open-Ended Investment Company (OEIC), or more generically a Fund. By pooling investors’ money the fund benefits from economies of scale, sometimes allowing access to investments which may not otherwise be available to a typical investor. Although management charges apply, this arrangement can work out more cost-effective than running a portfolio personally. It may also be considered lower risk than purchasing individual shares.

Bonds are a loan to a company or government. In exchange for capital investment, investors receive regular interest payments and a return of capital at a set future date. Similarly, to shares, bond values fluctuate too, but typically to a lesser extent.

Model investment portfolios

A model portfolio is a diversified group of blended assets designed by a financial advisory, wealth management or investment firm to achieve an expected return within corresponding risk parameters constructed through a collaborative process of factors such as a client’s objectives, attitude to risk and capacity for loss. We currently provide 4 advisory managed model portfolios and 9 managed on a discretionary basis, catering for a wide variety of differing attitudes towards risk, capacity for loss, objectives, timescales and personal preferences all managed by our Investment Committee.

Advisory managed portfolios

Once a portfolio is constructed, should any changes be appropriate, such as a switch from an underperforming investment, or a change in asset allocation, the express permission of the client is sought before the changes can be made. This can be of benefit to those clients who particularly wish for a high level of involvement in their portfolio, but understand delays as a result can impact performance.

Discretionary managed portfolios

The execution of an agreed overall agreed investment strategy is delegated to a qualified investment portfolio manager, allowing clients to benefit from their investment skills, experience – along with the support from a full team of research analysists all also highly attuned to the market able to make real-time strategic decisions using a systematic approach.

Portals

A portal provides clients with immediate and deeper access to their investment portfolios with potentially more methods of corresponding with their Financial Adviser. We operate a variety of different portals for different purposes:

My Personal Finance Portal (PFP)

This is our easy to use and secure client portal through which investment portfolios and standalone investments can be viewed with clients also benefiting from real-time valuations, transactions and secure document storage. Client engagement with our portal has been incredibly successful with many utilising facilities, such as being able to view our expert monthly market commentaries, update their own details, completing their own Attitude To Risk and Capacity for Loss questionnaires in advance of meetings and being able to communicate securely with both their adviser and our back-office support team.

Learn more here.

Provider portals

These are similar to our own portal but for particular product providers, such as Standard Life or Transact for example and often provide valuations and document storage. For providers we use that offer this facility and for clients invested in discretionary model portfolios, this is where they can benefit from receiving their quarterly discretionary investment management statements.

The use of portals has also assisted us as a firm in working towards becoming paperless.

Virtual meetings

Although offered before various government ‘lockdowns’, the importance of continuing to continuing to provide an ongoing service to our clients accelerated the adoption of virtual meetings over the last year.

Whilst we do not consider this to necessarily be a replacement for face-to-face meetings post pandemic, it can certainly serve to compliment our service for ad-hoc meetings, or perhaps where clients have particularly busy schedules.

Practice management system

Allows Financial Advisory firms to view and manage client’s investments in one place with additional benefits such as workflow management and a centralised client database which provides comprehensive client reporting. Our platform has the additional feature of being linked to My Personal Finance Portal, making communication more secure and efficient.

The future

Investors are increasingly expecting a level of service that feels both personalised and modern from their Financial Planners which can only be achieved by firms integrating online collaboration and digital tools into their offering.

It is likely the next generation of software will provide a fully interconnected system for both financial advisers and their clients.

At Kreston Reeves Financial Planning, we have been early adopters of available technology to enhance the wealth management experience, ensuring it remains client centric, transparent yet cost effective for clients.

To learn further about how Kreston Reeves Financial Planning use technology to assist you in achieving your financial goals please contact us on +44 (0)1227 768231 or provide your details on our online enquiry form.

The content of this article is for information only and does not constitute formal financial advice. 

This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

Kreston Reeves Financial Planning Limited, Independent Financial Advisers. Authorised and regulated by the Financial Conduct Authority.

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