Service Update

A Platforms role

A platform is our outsourced administrative arm. It allows us to;

• Send you income and withdrawals.
• Allow you to invest into a tax wrapper (product) such as a pension or an ISA .
• Allows you to get a valuation 24/7 and to monitor all transactions that take place.
• Hold all your cash and other assets such as shares securely.
• Make and settle any trades which we decide to make on your behalf.
• Report to financial regulators and HMRC as necessary.

This is not an exhaustive list, but I’m sure you get the picture. Admin, admin and more admin. It leaves us free to do what we do best; offer regulated financial planning and advice and manage your life savings through both the good times and the bad.

Additional Platform Added

Since we commenced using platforms in 2003 we have used just 3.

• SIPPcentre which became Investcentre.
• Selestia which became Skandia which became Old Mutual.
• Nucleus which in around 12 months time will probably become James Hay.

This week we added a fourth. Welcome to Transact. Here follows the blog I never thought I would write.

If it ain’t broke, don’t try to fix it.

Platforms are comfortable partners. A large proportion of clients, me included pick up our mobile devices and login every day to get the comfort of knowing all is well in our world. So the idea of change doesn’t come easily.

At almost 60 years of age I have no wish to re-invent the wheel again as Lesley puts it, but I want more from a platform. More for me as a client and more for you as our clients. Many of you will know of my current platform frustrations. Change has been in the air for over a year, progress was stifled due to the pandemic, but there have been a couple of additional push factors recently, which help us to swallow the bitter pill of all of the unpaid additional work that will become necessary for us.

Changes

Two pieces of news broke in December.

• Investcentre announced an increase in charges which made holding smaller pensions on their platform uneconomic.
• Sanlam, the majority shareholder of Nucleus, effectively put the business up for sale. This week it was announced that Nucleus will be bought by James Hay, another UK platform, subject to regulatory approval.

When we enter into a relationship with a new business partner we always hope it will last forever. However experience tells us very little stands the test of time. We accept that there is no perfect business partner, tailored entirely to meet our demanding business proposition. So we accept maybe a poorer level of service (Selestia, Skandia, Old Mutual, SIPPcentre and Investcentre) or perhaps a non-evolving investment proposition (Nucleus), but we continue to plan for a better future. We always need a Plan B. The regulator insists on it.

Slowly we compromise and accept until the final straw breaks the camels back. A period of evolution usually is punctuated by revolution. Sometimes all it takes is a couple of announcements.

Guinea Pigs

Early next week Lesley and I commence transferring our savings from Nucleus and Investcentre to Transact. We will be literally putting our money where our mouth is. We are hoping for a swift transfer from platform to platform, but if things go astray, we will only have ourselves to blame. We will not incur the wrath of any disgruntled clients where their life savings have disappeared in the ether for a short period of time. Once we have learned from the experience we will begin offering the new platform to those clients it will benefit most. We will not be moving every client from Nucleus and Investcentre, for many, many clients there is no need to make the change. Obviously we will not be charging any clients where a transfer is recommended.

What’s prompted the change?

In 2014 we began investing directly in shares for our AIM portfolio. After a few years once we could see the results of cutting out the middlemen we gradually changed our managed portfolios to virtually entirely direct shareholdings. We now manage over £90 million in direct equities. Encouraged by the results, we wanted to add some global shares into the portfolios. Primarily US, but some Canadian and European names too. We wanted to further expand our investment proposition. We asked Nucleus if that was possible on their platform and negotiations commenced. Unfortunately there was no demand from other adviser firms. This is what I said in my last blog.

Although we may only hold shares traded on the London Stock Exchange, let’s not forget these companies are global in their reach. Indeed, over 70% of the income generated by the FTSE 100 companies comes from outside the UK.

Whist we did far better than the UK stock markets suggest, other global stock markets did somewhat better. The US in particular powered ahead. This was due to 25% of the S&P index being formed of shares that contain world beating companies that develop, manufacture and distribute computer technology and software. These companies have been the lockdown winners so far. In the UK there is less than 2% of the FTSE All Share index that could be called a tech share. We already own most of them.

In many ways we are fighting with one arm tied behind our back. It’s an ongoing issue as I continue to lobby Nucleus to allow directly held overseas, predominantly US shares, on the platform. My efforts last year were thwarted due to Covid – 19 and the lack of appetite from other advisory firms who solely track indices. Hopefully Nucleus is now closer to committing resources to the platform changes needed and fellow advisers can now see the issues involved with index tracking. If not, I have to weigh up the convenience of the Nucleus award winning software, with an alternative platform with a wider investment choice, but perhaps poorer customer usability.

Of course I could just buy a US fund, but as in the UK, I have no wish to hold a bunch of losers along with a handful of winners.

January 2021 Investment Review

Extended Fishing Rights

With the recent twist to the plot it has become clear that offering direct investment into the likes of Amazon, Paypal, Microsoft, Google etc through the Nucleus platform is at least 3 years away and perhaps may never materialise. As good as the global mix of companies listed on the UK stock market is, domestically we have very few technology giants. Exposure to renewable energy resources in lithium, cobalt and rare earth metals is impossible. Investment into global leaders in wind farm technology, solar panels and battery production is unavailable.

To enhance our managed portfolios, I need to fish in International waters not just domestic ones.

Results

I will blog further with regular updates of this exciting new chapter. Hopefully the transition will be smooth and many clients can benefit from our experience in the not too distant future. 12 years ago I could have chosen Transact instead of Nucleus. Do I have any regrets? Not at all. 12 years ago we didn’t know what we know now. Transact levied an entrance fee and their charges were higher. Today with over £40 billion on the platform they can afford to be one of the keenest priced platforms there is. I’m also no oracle, would I have bought Apple or Microsoft or Amazon along the way? I probably wouldn’t have liked the risk. Let’s remember we now see only the survivors and have conveniently forgotten all of those businesses that have failed along the way.