Not everyone has the time, patience or understanding of the markets to fully take charge of investing for their future.
This is especially true with the current market turbulence testing the nerves of even the most hardened investors.
Unsurprisingly, an entire sector has evolved to look after the wealth of individuals, organisations and trusts, with assets under management by UK firms, running into the trillions.
A large part of this is through the financial advice profession, which tailors investment strategies for clients who find themselves with enough capital, and/or income to make financial planning worthwhile.
One such firm is Tunbridge Wells-based AV Trinity. Situated in the same building as fund managers Wellian Investment Solutions, featured in an earlier edition of Market Watch, AV Trinity is the client interface of wealth management.
Headed by Karen Vidler, who bought into the firm in 1996, AV Trinity advises clients on how best to invest, and protect their families financially.
“We are all about advice, we don’t do anything other than advise,” she said, adding the reason why the company parted from Wellian was to ensure both firms were given full independence to operate.
“I spun it off into a separate company because if you have an asset manager which is owned by a financial advisors, independence could be challenged, but more importantly I wanted Wellian to be more widely accessed. It is a great service, and they continue to manage investments on behalf of me, and my family.
“But there was never any three line whip to channel business into Wellian because fundamentally we look for what is right for the client.
“You don’t try and make something that is square fit into something that’s round.”
Miss Vidler said an example of what not to do would be appointing a discretionary fund manager, who will act on their own initiative, for a client who wants to be involved in the decision making process.
“That is a recipe for disaster, as they will not be consulted whatsoever by that sort of firm.”
She added: “Equally, if you have someone that wants something so low risk, and it actually fits their circumstance, that they do not need active management they should go for something simple and low cost.
“Essentially we have to listen to people and what they want before putting in place a financial route map.
“We make a plan you can tweak as you go along, so everybody knows where they are starting and where they are going.”
However, Miss Vidler revealed the clients most reliant on advice to manage their financial affairs are not the sort of people one would typically expect.
“It’s company executives, lawyers and accountants. They frankly don’t have the time, the aptitude or the appetite to do it themselves.
“An increasing number of our clients are coming from the City, investment bankers and the like, who you think would know their way around financial matters.”
Miss Vidler recalls a meeting with a hugely successful businesswoman who simply admitted to ‘not having a clue’ about how to properly manage her money.
The business model of a firm such as AV Trinity is fee based, which Miss Vidler admits means that to realistically add value through the use of a financial advisor, there is a minimum amount worth investing.
“It is a difficult one. To add meaningful value a client will come to us with a minimum of between £100,000 and £200,000, or a realistic prospect they will be close to that in the future.”
However, the firm does display a philanthropic side by doing pro-bono work for good causes within the community.
For those who do not utilise financial advice, there is often a perception that its main purpose is to help people minimise their tax bill.
Miss Vidler said this is not the case, as tax is just one of many considerations which have to be taken into account when drawing up a good investment plan.
“I have some clients who feel they have been very fortunate in life and so want to give something back by ensuring they are not that sheltered from tax.
“But then I have other clients, who want to save as much as possible. The one thing we will not do is touch any of the schemes which could be construed as being evasive or contrived.
“The tax planning needs to fit in with the overall plan, you should never have a strategy which is only conceived to save tax as that makes it contrived.
“If it generates some income and happens to save on a bit of tax, that’s the way to do it.”
Although AV Trinity is taking on the ‘brave’ decision to continue expanding, having recently opened a new office in London and procured more junior advisors, there are industry-wide challenges ahead.
Explaining one of the long-term issues facing the industry, and the country as a whole, Miss Vidler who describes herself as a ‘bit of a lefty’, much to the chagrin of some clients and colleagues said: “The problem we have at the moment is there is a big difference between the haves, who have choices, and the have-nots.
“I would love to give advice to people on low salaries, but I have to pay salaries myself.
“There needs to be a much better financial education for children because some people are entering their twenties and living far beyond their means but they do not know how.
“Even hugely well educated people, like some barristers I have met, have consulted me for advice and said, ‘I didn’t know that, how does that work then?’
“Imagine the struggle then, if you have come through a failing school. There I do feel passionately, we need to do more to improve the education of financial management.”
Surprisingly, regulation no longer appears to be an issue, claims Miss Vidler.
“Regulation has got better. I never thought I would say that. I think the regulator is listening better to the financial advice community whereas previously they would come up with a new idea every month.
“There was a year when we had to reprint our letter head four times because of regulatory statement changes.
“I had a lot of paper to start my fires with.” She is far less sympathetic with the deregulation of the pensions industry, touted by the government as ‘pensions freedom’.
Miss Vidler describes the move to allow pensioners to cash in their savings early without any income, as a ‘nightmare’.
“It sends a really strange message: it is saying to people ‘you are living longer, you have long term care issues,’ and in the same breath telling them, ‘but you can cash in your pensions.’
“Where is the synergy in that?”
She said a shrinking taxpayer base, brought about by an aging workforce, means allowing the pension freedom is ultimately unsustainable as there will be fewer people of working age to pick up the bill if it all goes wrong.
Although she has some left-of-centre leanings, Miss Vidler was in no doubt that a ‘hypothetical’ Corbyn victory in a general election would leave the markets ‘terrified.’
“So much of what is financially driven in the markets depends on confidence. Markets thrive on it, but Corbyn doesn’t even have the backing of his own party.”
Much of the current turbulence can be put down to a regular loss of confidence which Miss Vidler believes often occurs when there is a Presidential election in the USA.
“It happens every four years, I could set my clock by it. But it is especially bad as there is a President who can’t be re-elected and markets hate that uncertainty.
“And then you have China messing about with its currency and nobody likes a country which does that.”
However, Miss Vidler is confident AV Trinity’s clients will be well positioned to ride out the storm.
“Fundamentally, we are relatively cautious in the approach that we take and have clients who are cautious, so we look for all-weather portfolios.
“We know that in any one climate some things will perform and other things will not. What you need is enough things that will perform to balance out those which do not.
“What we have to ensure is that if the unexpected happens there is a part of the portfolio which will come good.
“If you deal on the known and save on the known then it makes life much easier if the unknown plays against you.”
And Miss Vidler believes the current market turbulence is an overreaction which does not reflect economic reality, describing it as a ‘squirrel Nutkin market.’
“It is a phrase I borrowed off my late father,” she explained, “meaning it is a market that is actually fine, but people keep looking up waiting for the sky to fall on their heads.
“The oil price should provide an economic boost, but the US should never have put up interest rates when they did and they are going to have to reverse that.
“There are a few issues going round but it is not as bad as people think.
“The fundamentals are good and I can categorically forecast the FTSE 100 will be at 6,500 sometime this year, just don’t ask me name to a day.”
One of the main sources of uncertainty cited by economists has been the looming prospect of a British withdrawal from the European Union, with a recent YouGov poll putting the ‘out’ campaign nine points ahead.
However, Miss Vidler is resolute such a prospect will not come to pass.
“It isn’t going to happen because we derive too much trade from our association with the EU.
“We will catch a major cold if we are locked out of Europe. Don’t get me wrong it needs big reform, but to leave would be a calamity.”
