Investec Wealth & Investment Due Diligence Q&A Contact Name
Job Title
Investec Wealth & Investment
Address
Tel
Mobile
Email Contents 1 Company Background 3 Client Administration 1.1 Company Information 4 3.1 Custody 22
1.2 Company Structure 4 3.2 Fees & Charges 24
1.3 Corporate Governance 5 3.3 Client Reporting 24
1.4 Regulation & Insurance 5 3.4 Tax Considerations 25
1.5 Resourcing 6 3.5 Client Take-On & Departure Process 25 1.6 Compensation of Personnel 8 4 Compliance 2 Investment Services & Process 4.1 Compliance 27 2.1 Investment Activities 9 4.2 FCA Handbook 28 2.2 Discretionary Client Relationships 9 4.3 Bribery Act 2010 28
2.3 Investment Philosophy 10 4.4 Treating Customers Fairly 29
2.4 Investment Proposition 11 4.5 Pre-Employment Screening 29
2.5 Investment Performance 12 5 Systems & Service Providers 5.1 Systems 30 2.6 Investment Process 16 5.2 Service Providers 30 2.7 Investment Tailoring 17 Appendices 30 2.8 Investment Risk Management 19
2.9 Fund Investment 20
3 Due Diligence Q&A 1 COMPANY BACKGROUND 1.1 COMPANY INFORMATION 1.1.1 Name Investec Wealth & Investment Limited. 1.1.2 Address 30 Gresham Street, London, EC2V 7QN. 1.1.3 Website www.investecwin.co.uk 1.1.4 Contact(s) Name & Position John Cowmeadow, Head of Intermediary Services. Tel: 020 7597 1704 1.1.5 Telephone/Email/Fax Email: [email protected] Fax: 020 7597 1000 1.1.6 Registered No. 2122340. 1.1.7 Legal Entity Identifier (LEI) 213800RJBFS4M7AV8W97. Credit rating and rating body (if N/A. 1.1.8 applicable). 1.1.9 MiFID II Status IFPRU (limited access) 1.2 COMPANY STRUCTURE How would you characterise Investment Manager. your company (e.g. Private 1.2.1 Bank, Investment Manager, Investment Bank)? Investec Wealth & Investment (IW&I) has a foundation that goes back to 1827 and our history is closely linked to the development of the financial sector in the UK. The bringing together of illustrious names including Rensburg Sheppards and Williams de Broë, combined with the strength of the Investec group, has allowed IW&I to consolidate its wide-ranging Please provide a brief history of expertise and leading position. The depth and breadth of Investec enables 1.2.2 the company, and if applicable, us to offer a broad service to our clients and access to an extensive pool the group. of investment opportunities around the world. Meanwhile our commitment to providing out of the ordinary levels of personal service for our clients and their advisers remains paramount. Investec plc is an international specialist bank and asset manager that provides a diverse range of financial products and services to a select client base, principally in the United Kingdom, Guernsey (CI), South Africa and Australia. What is the legal structure of The Investec Group is a FTSE 250 company and is listed on both the your company? Please provide London and Johannesburg stock exchanges. IW&I is a wholly-owned details of the company’s current subsidiary of Investec and forms a key part of the Wealth & Investment 1.2.3 ownership structure, and any business unit. We remain an autonomous unit within the organisation. details of recent or planned changes. Include a structure chart if applicable. Please indicate the percentage 100% of company revenue is derived from investment management and of company and group revenue related business, circa 10% of the Group’s operating profit. 1.2.4 derived from investment management. Please give details of any changes There are no material changes to the IW&I business. On 13 March 2020, to the firm or its group during the the Investec group successfully completed the demerger of its asset past 12 months (i.e. mergers/ management business (Investec Asset Management), which became 1.2.5 acquisitions, disposals and separately listed as Ninety One on 16 March 2020. However, there will be alliances) including changes in no change to the ownership, organisation and structure of IW&I in the UK progress or due in the next 12 as a result and most importantly, there will be no change to the services months. we provide all our clients.
4 Due Diligence Q&A 1.3 CORPORATE GOVERNANCE Steve Elliott – Chairman Ciaran Whelan – Chief Executive Iain Hooley – Finance Director Jane Warren – Executive Director Judy Price – Executive Director Tomas Street – Executive Director Who are the Directors? Please Mike Rigby – Executive Director 1.3.1 provide details of their effective Louise Hall – Executive Director roles. Murray Mackay – Executive Director Andrew Rydon – Executive Director Robert Lister – Non-Executive Director (Independent) Dr Tim May – Non-Executive Director (Independent) Cath Thorpe – Non-Executive Director (Independent) Elizabeth Catchpole – Non-Executive Director (Independent) How often does the Board of The Executive Directors hold an executive management meeting monthly, 1.3.2 Directors meet? whilst the entire Board meet quarterly. Are there any Independent As set out above under Non-Executive Directors. 1.3.3 Directors? 1.3.4 Company Secretary Steven Kilday 1.4 REGULATION & INSURANCE Indicate the jurisdictions in which United Kingdom / Guernsey / Switzerland / South Africa. We can passport 1.4.1 the company is regulated for our activities into various EEA states. investment business. Please provide dates and nature IW&I’s relationship is managed by the FCA and as such we are in 1.4.2 of the last FCA visit. continuous contact with our FCA relationship manager. Please confirm that you continue Yes, FCA number 124537. to have the required FCA 1.4.3 permitted activities to enable you to act in the capacity of Investment Manager. Please give details of any None. disciplinary action pending or instigated during the past 12 months (including fines) taken by the FCA (or its predecessors) or any other regulatory body (please include any areas of the risk mitigation programme 1.4.4 relevant to the activities carried out as a discretionary fund manager in respect of: a) The Firm b) The Firm’s directors, partners or senior managers c) Employees or agents of the Firm. Provide details of the number of Our Complaints Policy and Procedures comply with FCA regulations. There client complaints received in the are no issues, of which we believe, you should be made aware of. 1.4.5 last three years, and the number that remain outstanding after 12 months.
5 Due Diligence Q&A The actual level of compensation you receive will depend on the basis of your claim. For example, the FSCS only pays compensation for financial loss. Compensation limits are per person per firm, and per claim category (listed below). The maximum levels of compensation are: Would an investor be covered Deposits (Client Money): £85,000 per person per authorised bank or by any guarantee and/or building society for claims against firms declared in default on or after 30th 1.4.6 compensation scheme with January 2017. £170,000 for joint accounts. Any cash balances held within regards to investments held? To an IW&I portfolio at an authorised bank will count towards your overall what maximum amount? FSCS limit. Investments (Client Assets): £85,000 per person per firm for claims against firms declared in default from 1st April 2019. Further information can be found at the FSCS website at https://www.fscs.org.uk What Professional Indemnity Insurance is maintained against Investec’s possible negligence of up to 1.4.7 insurance is held? £200m in any one claim and in all. Have you assured yourselves Yes. and your regulatory body(s) 1.4.8 that your insurance cover is appropriate & suitable? FATCA – will you be a Foreign We are a UK Financial Institution. Our Operations department checks. Financial Institution (FFI) or a 1.4.9 Participating FFI? Who checks investors/beneficial owners for US connection? Following the implementation of Restricted. the Retail Distribution Review 1.4.10 (RDR) in the UK, will you be classified as independent or restricted? 1.5 RESOURCING 1.5.1 Number of permanent staff. IW&I employs approximately 1,400 permanent staff. Approximately 470 investment professionals, all of whom are directly involved in private client investment management. Our Research Number of investment Team includes research specialists under the stewardship of our Chief 1.5.2 professionals. Investment Officer. We are supported by management, marketing and control functions, a full in-house settlements department and a significant IT division that allows us to continually enhance our systems. Number of investment In addition to the above, many of the individuals within the investment professionals directly involved teams are fully qualified. 1.5.3 in discretionary investment management. Although no firm can guarantee continuity, we believe it is good business practice to attract and retain high calibre, quality staff. We often attract Please provide staff turnover new clients from competitor firms who have suffered from frequent metrics for the discretionary changes in their Investment Manager. Stability of the team allows us to 1.5.4 investment team for each of the understand our clients fully and to develop a proper relationship with them. last three years, and explain any We have an average tenure of 13 years and whilst we do not have specific significant employee turnover. details for the turnover rate for Investment Managers, for the firm as a whole the rate is low by industry standards (<5%).
6 Due Diligence Q&A Central to our philosophy is our belief in the continuity of personnel which we have achieved by generating and maintaining an atmosphere of trust and respect. Our collegiate style allows all staff to be empowered with Explain any succession planning 1.5.5 a sense of common purpose. We operate in a team-based approach or other Key Man risk defence. and should we lose a ‘Key Man’, we have a sufficient number of capable people available to ensure that the level of service to our clients and their advisers would be maintained and our business unaffected. As a result of the number of investment professionals (1.5.2.) within IW&I it is not possible to detail the level of experience for each individual. However, the average is in excess of ten years. An example of the experience held is within the Research Team, there are 12 CFA holders and, separately, two Associates of the Society of Investment Professionals.
Investment Name Role Experience (Years) Abhay Gohel Senior Structured Products Analyst 13 Adrian Todd Fund Selection Specialist 13 Andrew Shard Senior Equity Analyst 31 Andrew Summers Head of Collectives 23 Chris Hills Chief Investment Officer 45 Darren Ruane Head of Fixed Interest 23 Dominic Barnes Portfolio Manager 33 Please give details of key Eddy Hargreaves Senior Equity Analyst 25 discretionary investment Esther Gilbert Fixed Income Analyst 13 1.5.6 personnel, including years of Guy Ellison Head of UK Equities 19 investment experience. Jimmy Muchechetere Equity Analyst 9 John Haynes Head of Research 33 John Wyn-Evans Head of Investment Strategy 35 Lottie Mitchell Research Assistant 3 Marcus Blyth Fund Selection Specialist 12 Nicola Mills Research Assistant 1 Peter Tasou Head of Structured Products 16 Saul Larthe Research Assistant 4 Shilen Shah Bond Strategist 16 Simon Lapthorne Senior Equity Analyst 34 Stacey Parrinder- Fund Selection Specialist 14 Johnson Tom Mann Head of International Equities 22 Zane Bezuidenhout Equity Analyst 14
7 Due Diligence Q&A Chief Executive Of cer Ciaran Whelan
Managing Director Tom Street
Regional Regional Regional Regional Intermediary Head of Director Director Director Private Of ce Director Services International Dealing Southern Region Scotland & Midlands and Michael Winson London John Catherine Crispin Goody Alex Northern Ireland the North Louise Hall Cowmeadow Kirchmann Charalambous Murray Mackay Carl Cross
Of ce Heads Of ce Heads Bournemouth, Of ce Heads Birmingham Bristol, Of ce Heads Of ce Heads Belfast, Leeds, Cheltenham, Channel London Edinburgh, Liverpool, Exeter Islands Glasgow Manchester, Guilford Shef eld Reigate Please include an 1.5.7 organisational chart.
Business Managing Director Chief Executive Of cer Transformation Tom Street Ciaran Whelan Jane Warren
Compliance Financial Human Information Operations & Risk Control Resources Technology Judy Price Mike Rigby Iain Hooley Simon McBride Andrew Rydon
Research & CIO Investment Risk Marketing John Haynes Mark Bulsing Iain Clark Chris Hills
1.6 COMPENSATION OF PERSONNEL Please explain your employee Salaries with bonuses linked to performance criteria. All bonuses are paid 1.6.1 compensation/bonus scheme. on a discretionary basis. We align our Investment Managers remuneration and the activities of the firm to the successful management of each client portfolio. The How are the objectives of majority of our revenue is derived from ‘ad valorem’ fees. Pre the RDR key discretionary investment we sought Institutional rather than Retail share classes where collectives 1.6.2 personnel aligned with those of were held and we have ensured full transparency throughout. The more the investor? consistent the performance achieved for our clients the greater our reward; conversely it is in our interests as well as the clients to mitigate risk and protection of capital.
8 Due Diligence Q&A 2 INVESTMENT SERVICES & PROCESS 2.1 INVESTMENT ACTIVITIES Total Assets Under Management We have circa £32.8 billion AUM, as at end March 2020. 2.1.1 (AUM). We have a mature business, established over many decades, which typically grows at 3-5% per annum on an organic basis. In the short-term, our AUM is influenced by market movements. Date AUM Percentage growth of AUM over 2.1.2 31/03/2020 £33bn each of the last 5 years. 31/03/2019 £36bn 31/03/2018 £34bn 31/03/2017 £33bn 31/03/2016 £28bn
Private Client 66% Split of assets by investor group Pensions 9% 2.1.3 (private, charity, institutional, Intermediary 16% fund). Charities 9% Split of private client assets by In terms of asset split by revenue we make the distinction between revenue stream (discretionary non-managed and managed accounts, split 16% and 84%. 2.1.4 investment management, advisory, execution only). US Dollars 1.17% Split of private client Euro 0.19% 2.1.5 discretionary assets by currency Sterling 98.49% (GBP, USD, EUR, CHF, Other). Other 0.15% 2.2 DISCRETIONARY CLIENT RELATIONSHIPS Who is the clients’ primary Each client is appointed a dedicated Investment Manager and his/her team point of contact; the Investment as and when appropriate. We typically operate within teams of Investment 2.2.1 Manager, a dedicated Managers, with a lead manager and experienced back-up for each client relationship manager or another and adviser relationship. contact? Which jurisdictions do your We have Investment Managers in all 15 office locations: Belfast, Investment Managers operate Birmingham, Bournemouth, Bristol, Cheltenham, Edinburgh, Exeter, 2.2.2 from? Do you have relationship Glasgow, Guildford, Leeds, Liverpool, London, Manchester, Reigate and managers in additional Sheffield. locations? We do not impose set maximums on the number of client relationships that Typically how many discretionary each Investment Manager can have responsibility for, as the breadth of the private client relationships will 2.2.3 client and/or family relationship, complexity and size of our internal team all each Investment Manager/point influence capacity. Each Investment Manager works within a team ensuring of contact be responsible for? that there is sufficient resource to meet each client’s specific needs. How many discretionary private 37,500 Discretionary Clients (based on main accounts/ISAs joined together 2.2.4 client relationships does the and counted as one). company manage in total? What is the average discretionary The average is £522,093 funds under management based on linked 2.2.5 client size? accounts (as per the above re Main/ISAs, joined together).
9 Due Diligence Q&A What is the smallest Our minimum value for segregated bespoke portfolios is £150,000 and 2.2.6 discretionary client size there is a minimum fee of £1,200 plus VAT. considered? There is no minimum to access our MPS on Platforms service. What percentage of AUM is As a well-established business with a broad range of clients our five largest accounted for by the five largest clients account only for 2% of our overall AUM. 2.2.7 clients? Please indicate the client types (private, charity, institutional, fund). 2.3 INVESTMENT PHILOSOPHY We believe a structured and disciplined investment process is central to delivering consistent risk-adjusted returns to our clients. Our independent researchers and experienced investment managers are organised into specialist teams to focus on three core areas: asset allocation, stock and sector allocation and collective funds. Our committees meet regularly to review markets and ensure they remain relevant. Additionally, IW&I have a Global Investment Strategy Committee, which is comprised of global members of Investec’s Wealth and Investment division. The committee co-ordinates our risk tolerance, discusses how we should spend our risk budget, identifies and validates investment themes, highlights threats and Describe your investment discusses new developments with potential impact upon asset market 2.3.1 philosophy. returns. Our guiding principle is that markets are far from perfect and that a research based approach will reveal the imperfections and provide the best overall results in the long term. Indeed increasing levels of volatility suggest that markets are becoming less efficient in the short and medium term. This approach allows us to exploit such opportunities for our clients’ advantage through a policy of active rather than passive management, albeit we are investors not traders. Our investment philosophy is not slavish to any single ‘style’ such as growth, value or momentum. Different styles will be used at different points of the economic cycle. Over many years we have found that a disciplined approach to investment incorporating all of these (sometimes conflicting) factors, coupled with a flexibility to embrace change, has given us a performance track record of which we are extremely proud. How has this philosophy evolved 2.3.2 Because of the diversity and complexity of markets, no individual manager over the last three years? can hope to keep abreast of the wealth of information available. This is why we adopt a collegiate approach which enables our clients to benefit from our combined experience and contributes significantly to our exceptionally low level of staff turnover. Genuinely bespoke portfolios rather than imposed models with direct In what ways do you believe your access to a dedicated Investment Manager who works closely with the 2.3.3 characteristics differentiate you client/s and their trusted adviser all supported by a robust investment from peers? process and pre-eminent Research capability.
10 Due Diligence Q&A 2.4 INVESTMENT PROPOSITION
Steady Equity Cautious Balanced Cash + Growth Risk GBP ↔ ↔ ↔ ↔ USD ✰ ✰ ✰ ✰ In the table opposite, please EUR ✰ ✰ ✰ ✰ indicate which of the mandates CHF ✰ ✰ ✰ ✰ you feel you can deliver against (by 2.4.1 Other way of a ✰), and also which areas you believe to be your particular We operate within a risk adjusted framework and when initially constructing strength (by way of a ↔). bespoke portfolios there are five levels of portfolio risk and three investment options creating a matrix of 15 templates from which a client may initially choose. These are then tailored to each client’s unique circumstances and needs. In addition we can offer fully defined mandates. Further detail is contained in our Managing Your Investments document (IWI476). Please indicate where you offer We do not offer pooled investment via in-house funds. a pooled vehicle by giving the 2.4.2 name of the vehicle and the minimum investment required. Can clients access your We’ve developed a range of investment strategies designed to match your discretionary solution via a clients’ investment objectives and attitudes to risk. The strategies are now Wrap Platform? If so, please list available on more third party Platforms than ever before (Embark, Hubwise, 2.4.3 the platforms used (e.g. Novia Nucleus, Standard Life and Transact) and are actively managed by our Financial, AXA Elevate, Fidelity dedicated investment team. FundsNetwork, etc.). Our segregated DFM services are only available via our platform. Detail any tax/insurance Clients can hold portfolios within most pension wrappers and bond 2.4.4 wrappers that can invest in your products (onshore and offshore). discretionary solution(s).
11 Due Diligence Q&A 2.5 INVESTMENT PERFORMANCE Steady Growth Discrete Annual Total Return Performance
IW&I Steady Growth PCI ARC Steady Growth PCI Average 20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0% 2015 2016 2017 2018 2019 2020 to date
IW&I Steady Growth ARC Steady Growth Index (%) PCI (%) 2015 1.9 2.3 Please provide performance 2016 12.3 11.6 figures for your key discretionary 2017 9.9 9.4 offerings (indicated with a ↔ 2018 -5.5 -5.6 in the table above) or pooled 2019 15.5 15.0 2.5.1 investment vehicles, including 2020 to date -15.5 -14.5 comparisons with the relevant benchmarks for each of the last Drawdowns and Recovery Periods on a Rolling 5-Year Basis 3 years. IW&I Steady Growth PCI ARC Steady Growth PCI Average
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-12.0%
-14.0%
-16.0% Mar 2015 Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020
Annualised Volatilities 3 years (%) 5 years (%) IW&I Steady Growth PCI 9.4 8.5 ARC Steady Growth PCI Average 8.9 8.1 Volatility Compared To PCI 0.5 0.4 ARC PCI Median Volatility 9.0 8.2 Figures as at 31.03.2020
Past performance should not be taken as an indication or guarantee of future performance.
12 Due Diligence Q&A Balanced Discrete Annual Total Return Performance
IW&I Balanced PCI ARC Balanced PCI Average 15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0% 2015 2016 2017 2018 2019 2020 to date
IW&I Balanced Index (%) ARC Balanced PCI (%) 2015 1.5 1.9 Please provide performance 2016 9.8 8.6 figures for your key discretionary 2017 7.5 6.7 ↔ offerings (indicated with a 2018 -4.4 -5.1 in the table above) or pooled 2.5.1 2019 12.7 11.7 investment vehicles, including 2020 to date -12.0 -11.0 comparisons with the relevant benchmarks for each of the last Drawdowns and Recovery Periods on a Rolling 5-Year Basis 3 years. IW&I Balanced PCI ARC Balanced PCI Average 0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-12.0%
-14.0% Mar 2015 Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020
Annualised Volatilities 3 years (%) 5 years (%) IW&I Balanced PCI 7.3 6.6 ARC Balanced PCI Average 6.7 6.2 Volatility Compared To PCI 0.6 0.4 ARC PCI Median Volatility 7.1 6.6 Figures as at 31.03.2020
Past performance should not be taken as an indication or guarantee of future performance.
13 Due Diligence Q&A Cautious Discrete Annual Total Return Performance IW&I Cautious PCI ARC Cautious PCI Average 10.0%
5.0%
0.0%
-5.0%
-10.0% 2015 2016 2017 2018 2019 2020 to date
IW&I Cautious Index (%) ARC Cautious PCI (%) 2015 1.0 1.3 Please provide performance 2016 7.2 5.5 figures for your key discretionary 2017 5.0 4.5 offerings (indicated with a ↔ 2018 -2.8 -3.6 in the table above) or pooled 2.5.1 2019 9.1 8.1 investment vehicles, including 2020 to date -6.7 -6.5 comparisons with the relevant benchmarks for each of the last Drawdowns and Recovery Periods on a Rolling 5-Year Basis 3 years. IW&I Cautious PCI ARC Cautious PCI Average 0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
-6.0%
-7.0% Mar 2015 Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020
Annualised Volatilities 3 years (%) 5 years (%) IW&I Cautious PCI 4.4 4.0 ARC Cautious PCI Average 4.2 3.8 Volatility Compared To PCI 0.2 0.2 ARC PCI Median Volatility 4.5 4.2 Figures as at 31.03.2020
Past performance should not be taken as an indication or guarantee of future performance.
14 Due Diligence Q&A Equity Risk Discrete Annual Total Return Performance IW&I Equity Risk PCI ARC Equity Risk PCI Average 20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0% 2015 2016 2017 2018 2019 2020 to date
IW&I Equity Risk Index (%) ARC Equity Risk PCI (%) 2015 2.3 2.1 Please provide performance 2016 13.9 13.7 figures for your key discretionary 2017 11.5 11.4 offerings (indicated with a ↔ 2018 -5.8 -6.5 in the table above) or pooled 2.5.1 investment vehicles, including 2019 17.7 18.0 comparisons with the relevant 2020 to date -18.2 -17.3 benchmarks for each of the last 3 years. Drawdowns and Recovery Periods on a Rolling 5-Year Basis IW&I Equity Risk PCI ARC Equity Risk PCI Average 0.0%
-5.0%
-10.0%
-15.0%
-20.0% Mar 2015 Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020
Annualised Volatilities 3 years (%) 5 years (%) IW&I Equity Risk PCI 10.9 9.9 ARC Equity Risk PCI Average 10.8 9.8 Volatility Compared To PCI 0.1 0.1 ARC PCI Median Volatility 10.9 10.0 Figures as at 31.03.2020 We currently submit performance in excess of 22,400 portfolios (at Family Level) and are one of the largest contributors of data to the indices. There are currently around 80 contributing investment management firms. The data used to calculate the performance figures consists of all of our discretionary managed clients with a portfolio value greater than £200,000 and where all stocks are managed within the portfolio by IW&I. Both the ARC PCI and the IW&I PCI are calculated on a simple average basis. Classification of portfolios is carried out by ARC using historic risk relative to the risk of global equities. ARC’s risk categories may not match the risk and return objectives of all underlying portfolios. All data is net of fees. Average performance data will not necessarily reflect the returns achieved by individual portfolios. Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.
15 Due Diligence Q&A Please compile a list of any • Winner of Defaqto Gold Discretionary Fund Manager Service award major industry awards your firm (2017-2020) has received in connection to • Winner of Defaqto 5-Star awards for DFM Bespoke (2013-2020), 2.5.2 any services of relevance to this DFM MPS Direct (2017-2020) and DFM MPS on Platform (2020) assessment questionnaire, in the • Winner of City Of London Wealth Manager Award – for Wealth Manager past three years. of the Year 2015 2.6 INVESTMENT PROCESS In order to ensure that Investment Managers have a consistent amount of common information flow, we have a company-wide investment process, which addresses the following tasks: 1. Asset Allocation 2. Sector and stock weights in equity portfolios 3. Preferred investment selection for other asset classes or types: Fixed Interest Collectives Commercial Property Alternatives Describe your investment Cash 2.6.1 process. 4. Tactical flexibility 5. Communication The investment process needs to harness the best ideas of the firm’s resources, in pursuit of the objective of delivering consistently good risk- adjusted returns for our clients. We adopt a collegiate approach taking the best ideas from our Research Team and Investment Managers. This includes specialists in collective funds, bonds, macro-strategists and former institutional fund managers. We have access to wide networks of personal contacts in the City, as well as access to a full range of sell-side written research and a broking service from selected brokers. Please also refer to our Managing Your Investments document (IWI476). Are there any asset classes/ We avoid opaque structures, illiquid investments and highly leveraged strategies that you would situations. Whilst we would consider almost all investable asset classes, 2.6.2 not consider investing in, or this does not mean that we would recommend investing in a particular particularly favour? asset class for our clients. We firmly believe in offering a bespoke, tailored portfolio for each client rather than imposing “model” portfolios. We strongly believe that each client should be looked after by their dedicated Investment Manager, not a relationship or marketing person. Our investment managers develop close working relationships with advisers and their clients to ensure that we fully understand the requirements of each and establish long term relationships. Please provide a model asset Whilst we adopt a flexible, bespoke approach, our tactical asset allocation for allocation for your ‘Balanced’ a medium risk balanced portfolio would be: 2.6.3 offering (i.e. risk approx. 50% of Asset Class Benchmark volatility of world equities). Fixed Interest 20.0% Equities 61.0% Commercial Property 4.5% Alternative Investments 10.0% Cash 4.5% 100.0%
16 Due Diligence Q&A Our Strategic Asset Allocation is formerly reviewed annually but material changes are rare, driven only by changes in the long-term outlook for the component asset classes. It will be unaffected by normal short-term market fluctuations. Our Asset Allocation Committee meets every month and on an ad-hoc basis as is appropriate. They analyse the performance of the five asset classes, how we might expect them to perform in the future in “normal” economic conditions together with their potential volatility. As we rarely experience what could be described as “normal” economic conditions, a key part of our process is to establish our preferred asset allocation to best reflect, at any one On what basis and when might moment in time, the prevailing and anticipated economic, interest rate and 2.6.4 your model strategic asset currency forecasts and the outlook for fixed income and equity markets. allocation change? This we refer to as Tactical Asset Allocation which is established, reviewed and revised by our Asset Allocation Committee. The committee is comprised of representatives from both our Investment Manager practitioners and our in- house Research Team. This tactical position can be set either side of the strategic position, but within additional boundaries which we have defined, to give us the flexibility to manage investments to reflect all likely market conditions. This creates an asset allocation range for each asset class with a minimum and a maximum exposure. Please again refer to our Managing Your Investments document (IWI476). The buy and sell discipline revolves around our ongoing security selection criteria and meetings with company and fund managers. At a macro level, our asset allocation views may dictate whether we wish to be in a How does an investment particular asset class or country. Each situation is reviewed on its own become a ‘buy’, and then how 2.6.5 merits with an overlay of common sense and we do not rely on machines does an investment become a to tell us when a stock should be bought, held or sold. In addition, due ‘sell’? to the bespoke nature of our service, trading within a client portfolio is dependent on the particular circumstances of the client, taking into consideration things like attitude to risk and timeframe for investment. 2.7 INVESTMENT TAILORING For clients that come to us directly we use the FinaMetrica questionnaire based profiling system to establish the clients risk appetite. This is then combined with capacity for loss measures to select the most appropriate risk profile. We do not map directly from FinaMetrica to portfolio structure. Such a process may well provide the client with an inappropriate result, and of course will fail if a client refuses to complete the questionnaire. Do you provide client risk Further, we are all too aware that their client questionnaire is out of date profiling, and if so by what 2.7.1 and can lead to incomplete and therefore ‘inaccurate’ survey results. method? How often is this risk We have evaluated other risk profiling tools and retain an open mind on profile revisited? whether they may replace FinaMetrica. This is only a “snapshot” in time and the clients risk profile needs to be revisited by the client’s Adviser at regular intervals and on an ad-hoc basis as determined by any events which may occur in the client’s lives resulting in a need to re-evaluate their objectives. An open dialogue with the Adviser and/or their client is maintained at all times.
17 Due Diligence Q&A Portfolio construction is a key part of our investment practice and follows our top down approach. Asset allocation is fundamental to ensuring an appropriate structure to the client’s portfolio and we will consider all asset classes: Fixed Interest Equities Commercial Property Alternative Investments Cash Describe how portfolio The client’s dedicated Investment Manager will ensure that the tactical construction works for a specific asset allocation adopted on a day-to-day basis reflects the agreed 2.7.2 client. Can the investor be strategic asset allocation and prevailing market conditions. involved in this process? We are very aware that most clients are more sensitive to losses on initial capital than reductions in capital gains built up over the years, as a result we would normally adopt a conservative stance with new client portfolios. This is particularly relevant with cash investments where the timing of a new client’s investment will have to reflect their wishes and investment opportunities. Our clients are encouraged to be involved in the investment process and we understand that we may be managing only a part of an investor’s overall wealth. We can accommodate specific preferences and we are used to tailoring portfolios to adjust, include greater weightings or exclude asset classes where appropriate. In accordance with our investment process the Investment Manager has a degree of tolerance within which they can operate. Each month our Asset Allocation Committee reviews and sets the tactical asset allocation for different scenarios and the Investment Manager then has the flexibility within a pre-determined range of +/-10% to apply a more personalised approach (please refer to the Managing Your Investments document). Whilst we do not wish to become dependent on quantitative tools such as “black boxes” for measuring portfolio risk, we have a number of internal checks including a centrally run monitoring committee and an automated alerts process. The monitoring committee reviews all portfolios on a rolling basis to check that they are being invested in accordance How much discretion does an with the underlying client’s mandate and also that the composition of the individual Investment Manager investments reflects our house view. In addition, it considers areas such 2.7.3 have over the construction and as overall asset allocation, portfolio concentration and performance in the operation of a client’s portfolio context of each client’s risk parameters and ranges. vis-à-vis in-house models etc.? The alerts function is an automated process that reviews all portfolios on an ongoing basis and then raises alerts with the Investment Manager. This highlights any move away from the agreed mandate and will address any subtle drift over a period of time. Alerts cover: Asset Allocation against the agreed mandate Quality of the stocks selected Diversification of assets held Concentration of investment The Investment Manager then has to either action each alert or they can defer a decision for a short period of time.
18 Due Diligence Q&A 2.8 INVESTMENT RISK MANAGEMENT Please give details of your Please see 2.7.1. 2.8.1 investment risk management policy. How do you incorporate All investment restrictions are recorded on our portfolio management investment restrictions (ethical system and are clearly visible to Investment Managers when implementing constraints, credit risk limits, investment decisions. 2.8.2 min/max. exposures etc) into your day-to-day management of portfolios? In terms of market counterparty exposure for dealing, a counterparty panel exists within IW&I to approve any new market counterparties and to monitor the current list used by the company in the execution of client orders. The Panel includes the Head of Dealing, the Chief Investment Officer, representatives from Senior Investment Managers and a Describe how you monitor and 2.8.3 representative of the Cash & Credit Management Committee. control counterparty risk. When reviewing both potential and existing investments our Research Team bears in mind exposure to a particular counterparty across the firm, whether that be equity, debt or guarantor. For structured products the Research process starts with counterparty risk and only product from risk approved providers is allowed to get onto the recommended lists. Patisserie Valerie (Patisserie Holdings) was part of our AIM portfolios. Has any product/fund/holding No researched asset has been written down to zero for our mainstream in your discretionary client accounts over the last three years. Clients are allowed to hold non- 2.8.4 portfolios been written down to discretionary assets in their discretionary portfolios. These are embargoed zero in the last three years? If so, and in effect are execution only holdings within the discretionary account. please give details. Some of these may have lost 100% of their value. Our “default” strategy is to hedge Overseas Fixed Interest back into Sterling. This is universally achieved via holding a Sterling hedged asset class (fund or ETF). We have no ability to hedge directly using futures or options. Occasionally a hedged /unhedged view is taken of Yen assets. Please explain your currency Our general philosophy is that we have no proven ability to forecast FX. 2.8.5 hedging policy. Does this apply We therefore prefer to run portfolios with low currency risks, but we accept equally to all asset classes? that currency hedging direct equity holdings is a complex proposition that is unlikely to be successful. Therefore currency risk emanating from equity exposure is best considered to be part of the overall risk of holding the asset. Our risk model allows us to estimate the fraction of portfolio risk due to FX, and to stress test portfolios against currency moves. Discretionary portfolios are managed without the use of direct derivatives Do you ever use derivatives for either for hedging or speculative purposes. However, we may invest in 2.8.6 non-hedging purposes? structured products or alternative investments where the investment return is based on an underlying derivative strategy.
19 Due Diligence Q&A 2.9 FUND INVESTMENT We passionately believe in the benefits of active management for most asset classes. Successful active management provides an opportunity to improve risk-adjusted returns through: (a) outperformance of a benchmark, (b) diversification benefits from combining different investment approaches and idiosyncratic stock selection risk and (c) exposure to asset classes and strategies that are simply not available or suitable in a passive form. We believe that successful active management, as defined by better net risk-adjusted returns, is driven by persistent manager skill. Do you use internal/external However, we also recognise that identifying in advance persistent manager 2.9.1 funds in your discretionary skill sufficient to generate better net risk-adjusted returns requires time, investment portfolios? resources and experience. Such skill is not normally easily identifiable, and certainly not by past performance, which is not a guide to the future. It requires a deep understanding of the relative strengths and weaknesses of an investment proposition to determine. We believe that our six strong fund research team plus the combined experience of our investment managers gives us the scale of resources and depth of experience necessary to undertake the level of both initial and on-going due diligence that is required for successful active fund manager selection.
20 Due Diligence Q&A We have developed a proprietary APPROVED fund assessment framework to guide our fund selection and on-going monitoring process. This framework is based upon academic and empirical evidence as well as logic and our experience. In each instance we believe these pillars determine a fund’s ability and likelihood of delivering its investment objective. Our approach is qualitative in focus as the evidence warns us against picking funds based on quantitative measures that are rarely predictive of future performance. We are fortunate to have a competitive advantage in terms of resources, time and access to managers to truly understand their investment offering, with the principal mechanism being frequent face-to-face meetings with fund managers. Our APPROVE framework is designed to exploit that competitive advantage for the benefit of our clients. Assets Scale of assets managed Inappropriate scale of manageable must be compatible with assets is a key driver of investment objective underperformance Philosophy Intuitively appealing and Investment team must resonantes able to deliver our required articulate and demonstrate investment outcome efficacy of philosophy Please describe the company’s Process Philosophy rigorously Disciplined application of due diligence process when disciplined implemented with a process to minimise risk of 2.9.2 considering investment in a consistent approach style drift particular fund solution. Risk managed Investment process Risk taken must be embeds appropriate risk consistently commensurate management. with the returns delivered Organisationally All relevant aspects of Investment excellence is sound the organisation and best sustained by round infrastructure must be sound organisational excellence Value for money All costs are reasonable A large portion of given value of investment active managers lose objective outperformance due to excessive costs ESG approach A robust, dispassionate Appropriate ESG approach and suitable integrated will maximise risk-adjusted ESG approach in evidence returns Demonstrable Investment team should This is the first pre-requisite talent demonstrate peer-leading of achieving an investment investment skill objective Fund additions and removals are subject to the scrutiny of the Collectives Research team with input from the CIO and Head of Research as well as investment managers. What liquidity profiles do you We invest only in listed investment companies or daily traded UCITS vehicles. require; are “gates”, lock-ups, 2.9.3 exit restrictions tolerated? Please give details. We have as much transparency as we require for our assessment but the usefulness thereof will vary by fund or strategy. We regularly seek substantial, What level of transparency do 2.9.4 detailed information well beyond that available to investors who do not you require from such funds? specifically ask for it. Where necessary, we will sign Non Disclosure Agreements to access information necessary to inform our analysis and on-going monitoring. We maintain coverage of c300 collective investment vehicles. Our first choice in Is there an approved list of each sub sector is blue flagged; our second choices in a sub sector are green funds? If so, how many funds flagged as are funds that may be more niche. Together these constitute c180 are on it and do discretionary flagged names which form the basis of our recommendations for portfolios 2.9.5 managers have the ability to and where we undertake the vast majority of our on-going due diligence and invest in other, non-approved monitoring. However, we also maintain lighter coverage on a further c120 funds funds? that we deem appropriate to own in specific circumstances and where owning blue or green flagged names are not appropriate or possible.
21 Due Diligence Q&A 3 CLIENT ADMINISTRATION 3.1 CUSTODY Rensburg Client Nominees Limited, incorporated in England under number 02020824; Ferlim Nominees Limited, incorporated in England under number 01022478; Spring Nominees Limited, incorporated in England Please confirm the full legal title under number 01747036; Hero Nominees Limited, under number 34543 & address of your nominated or such other nominee company as we may lawfully establish from time custodian bank, & where 3.1.1 to time. For overseas securities, these will be lodged with an authorised appropriate, the ultimate depository in the name of ‘our nominee company’, or the company if parent holding company of the required. Our nominee companies are wholly-owned subsidiaries for whom custodian. we accept responsibility for safe custody obligations. Holdings may be in certificated or other physical form or held in a dematerialised form within the CREST settlement system on a pooled basis. Where it is not possible to use our own nominee company and safe custody services (for example with non-UK securities), our client’s investments may be registered, recorded or held in a trust account on their behalf in the name of Can the nominated custodian one or more eligible custodians or their nominees. However, such investments provide custody for all will not be held with any third party in another country which does not regulate 3.1.2 instruments and investment the safekeeping of financial instruments unless the nature of the financial types? instrument requires it or where a professional client requests us to do so in writing. Such investments will be held on a pooled basis, but may be held on a designated basis if dictated by overseas jurisdictions. Please refer to our Terms and Conditions (IWI040). Can the client nominate a We can accommodate alternative custodians where necessary. 3.1.3 specific custodian? As an FCA regulated firm, we follow the rules prescribed by the FCA What is your approach to in choosing where stock or cash will be deposited for safe keeping or 3.1.4 protecting clients’ money and custody. In relation to cash balances, the FCA Client Money rules require assets? us to deposit Client Money in a client account with a bank or other credit institution of a type permitted under the rules. IW&I wholly owns four Nominee Companies, Ferlim Nominees Limited, Rensburg Client Nominees Limited, Spring Nominees Limited and Hero Nominees Limited, all of which are used to hold Client Assets in accordance with the Client Assets rules of the FCA. A Nominee Company holds assets as the legal owner, but on behalf of clients as beneficial owners of the associated Client Assets. IW&I does not hold any of its own assets in our Nominee Companies, they exist purely to hold Client Assets. Assets of clients held in our Nominee Company are recorded in such a manner to clearly indicate that they do not belong to IW&I. Therefore, in the unlikely event of the insolvency of IW&I, a liquidator would be legally How are individual client assets prevented from using clients’ assets to settle the firm’s liabilities. 3.1.5 held? Our Nominee Companies operate as pooled nominees, meaning all of our clients who hold their assets in our Nominee Companies have a claim against the relevant pooled nominee holdings in the event of any insolvency event. Pooling your investments with those of other investors means that your individual entitlement may not be identifiable by separate certificates, physical documents or entries on the register. In the event of insolvency or other such default event, as your holding is pooled with other clients, this means that you will have a general claim on the assets alongside other clients, which in the event of any shortfall, may result in a proportionate distribution of such assets to you that are less than your recorded holding.
22 Due Diligence Q&A Client Money is held with a bank or approved credit institution as permitted by the FCA Rules, in an account which is designated as Client Money and covered by an FCA Acknowledgement Letter. The letter sets out the legal terms that apply to the protection and segregation of those funds and clearly differentiates it from our own firm’s money. In the unlikely event of an IW&I insolvency, this means the money in these accounts would be held separate to our own firm’s money and be available to the insolvency practitioner to distribute to the respective clients with a valid claim on the balance. If you have elected for an offshore portfolio, your Client Money is held in a bank account in an offshore location, but forms part of our overall general pool of Client Money. For any type of portfolio, because we operate a general Client Money pool, it means that any claim by you is against the Client Money pool in general, which means that the balance on all of our Client Money Bank Accounts How is individual Client Money 3.1.6 will be divided proportionately to all clients who have a valid claim against held? the sum held in the general pool and this may or may not be equal to the individual sum you hold in your client portfolio. We place Client Money with a number of banks and this helps us to optimise the service and also diversify to reduce the exposure of holding Client Money with a single bank. We manage our deposits with strict banking limits in place, to cover any single bank or group of banks operating with a single banking licence. We would normally have a minimum of 8-10 banks with whom we are placing money, of which we have exposure limits. In the main individual banks have a limit of 25%, with groups a maximum limit of 35%, however, we do not normally reach these limits. This may not entirely eliminate any risk of loss to you in the event of a default situation, but we feel it is a beneficial control to assist in mitigation of the risk. Do you maintain separate We review all stock movements on a daily basis and immediately records to the custodian & how investigate and resolve any anomalies. In addition we undertake a 3.1.7 often are custodian statements complete reconciliation monthly. reconciled to client statements? How are exceptions from See above. the reconciliation process investigated and cleared? 3.1.8 Typically, what is the current length of time an item will be remain unreconciled for? Please describe the procedures We have rigorous monitoring and controls to prevent such events. & controls in place to prevent 3.1.9 the nominated custodian from engaging in unauthorised lending of client stock. What processes are in place We have sufficient controls and monitoring to minimise the counterparty 3.1.10 to monitor and minimise risk. counterparty risk? Client Money is held in trust within a bank or approved credit institution as Which legal entity will physically 3.1.11 permitted by the FCA Rules in an account which is designated as Client hold client cash? Money and covered by an FCA Acknowledgment Letter. Do you have the capability No. 3.1.12 of offering “gross nominee” arrangements?
23 Due Diligence Q&A 3.2 FEES & CHARGES We apply a ‘Fee Only’ charge. Transparency is paramount and we ensure that the client knows exactly the cost of all elements of our service and any remuneration we facilitate to their adviser on their behalf. Please provide your discretionary • On the first £1,000,000 1.00% plus VAT 3.2.1 investment management fee • On next £1,500,000 0.75% plus VAT scale. • Thereafter 0.60% plus VAT • Bargain Administration Charge is £25 • Minimum Charge Discretionary is £1,200 plus VAT Any adviser agreed remuneration is in addition to IW&I charges. Please provide details of other Please refer to our Rate Card (IWI029) for details of any incidental costs. 3.2.2 fees/charges not included in the figures above. Cash is an integral part of our active asset allocation process and is How are cash balances and included for fee calculation. The cash held is pending investment within the 3.2.3 in-house funds treated when portfolio and therefore clients should maintain their cash reserves, “rainy calculating fees? day” funds elsewhere. Do you receive retrocessions Prior to the RDR our policy was to invest in institutional unit/share classes from third party managers, and that do not pay trail commissions rather than institutional share classes. 3.2.4 if so how do you account to the Post the RDR we seek to invest in “clean” share classes. client for this revenue? Can you provide an estimated As we do not impose model portfolios we do not have typical portfolios 3.2.5 illustration of costs for your or clients. We will provide all potential clients with full details of indicative typical ‘Balanced’ client? costs prior to appointing IW&I as their discretionary manager. Please give details of your fee Our charges are calculated on the value of the portfolio on a pro-rata calculation process (valuation basis quarterly in arrears on the last day of February, May, August and 3.2.6 basis, calculation frequency, November. vehicles with lagged pricing, etc.). How are fees / charges claimed Most charges are debited directly from the client’s account/s but we can (and reimbursed)? Are fees accommodate invoicing when required. 3.2.7 charged to client accounts, or invoiced then settled? Do/can you levy performance No. 3.2.8 fees? Please give details. Do you offer a facility to use a No. client portfolio as collateral in 3.2.9 a lending arrangement? Give details of fees/charges. 3.3 CLIENT REPORTING How often are portfolio Quarterly. 3.3.1 valuations typically sent out to the client? Can historic valuations be All client valuations from 28th June 2018 are stored within Investec Online 3.3.2 generated for any given date? but ad-hoc valuations can be requested and specific timeframes chosen. Yes our Investec Online Service is available 24/7 for both clients and their advisers. Advisers can use a secure login to view all of their client portfolios and their agency statements. Holdings are priced on real time Do you provide clients with 3.3.3 (with a short delay of 15-20 minutes). Clients can access their Capital online valuation facilities? Account statements and can self select their valuation and statement time periods. Additionally there is the ability to drill down into each holding to see all transactions and associated costs.
24 Due Diligence Q&A Are you GIPS (Global Investment The methodology used for the calculation of individual client portfolios Performance Standards) is consistent with GIPS. However, due to the wide variety of client compliant (or similar)? Are requirements, we have decided that the sheer number of different ‘GIPS 3.3.4 your discretionary portfolio buckets’ required would make GIPS compliance across all portfolios a performance statistics externally meaningless exercise. reviewed? On what basis are securities Mid-Price. 3.3.5 valued? Securities will be valued at the close of business on the valuation date. If the valuation date falls on a non-Business Day, prices quoted will be those Please give details of your as at the close of business on the last Business Day before the valuation security pricing policies & date. UK quoted securities are valued at the mid-market price quoted sources (including direct on the London Stock Exchange. Overseas securities are valued at the 3.3.6 securities, open & closed ended midmarket price or last traded price available to us on the relevant Stock collectives, foreign exchange Exchange. Unit Trusts are valued at the middle of the prices prevailing on rates, etc.). the valuation date. We use the Interactive Data Corp every night for prices from all exchanges and fund managers. Detail the process for accounting Where illiquid stocks are held our Dealers establish an indicative market 3.3.7 for self-certified and stale prices. price daily. 3.4 TAX CONSIDERATIONS Not as part of our Discretionary Management services but we do have an in-house Financial Planning capability where a client does not already have a trusted adviser. Our Financial Planning team are focused on direct private clients only and all clients of Advisers are ring-fenced and Do you provide clients with tax 3.4.1 protected. advice and / or tax solutions? We do not provide tax advice although many of our Investment Managers have a working knowledge of tax issues as far as they effect the investment management of client portfolios. We are always happy to work with the investor’s tax advisers to create the most appropriate solution. We provide a full UK annual report containing all the information that a UK taxpayer will require to complete their tax return in respect of their Do you provide UK tax 3.4.2 investments under our management. Although this pack is designed from reporting? a UK tax perspective it can be produced at any month end and for many non UK residents. Do you provide US / other tax No. 3.4.3 reporting? Do you offer a Tax Reclamation No. 3.4.4 service? 3.5 CLIENT TAKE-ON & DEPARTURE PROCESS Each client will be allocated a dedicated Investment Manager who will meet with them (and their adviser) to ensure that we understand their requirements and to then explain our service, features, functions, benefits and costs. If the client decided that they would like to proceed we ensure Describe the client take-on 3.5.1 that they have all of the necessary information on which they can base process. their decision. We provide each client with a Portfolio Suitability Report which sets out our understanding of their situation and confirms how their portfolio is to be managed to the client’s specific requirements and all costs. Yes, we will obtain the necessary authority/ies to transfer from an existing Can a new client transfer their 3.5.2 Investment Manager or own name and process the transfer into the clients existing portfolio in specie? portfolio.
25 Due Diligence Q&A We broadly obtain new clients from two sources, direct or through an intermediary. In the first instance the Investment Manager will meet with the client to establish their circumstances and complete all the necessary regulatory aspects (KYC, Suitability etc.). Where an introduction is received Detail the new client due 3.5.3 from a professional financial adviser (FCA regulated) we will expect them to diligence process. accept responsibility for “suitability”. We will typically meet with the client and their adviser to ensure that we understand our obligations to construct a portfolio that is appropriate to their agreed mandate. Please refer to our Managing Your Investments document (IWI476). In the event that a client decides to exit the service we will facilitate the Describe client/portfolio exit sale and/or transfer into their own name or to an alternative Investment 3.5.4 procedures. Manager. Charges will be calculated up to the date of closure and reporting provided to that date (CGT, Tax etc.).
26 Due Diligence Q&A 4 COMPLIANCE 4.1 COMPLIANCE The Compliance and Risk department comprises of four separate teams: IM Compliance (UK) Please describe your IM Compliance (International) 4.1.1 Compliance Procedures and Operational Risk Resources. Financial Crime Routine monitoring and themed reviews are undertaken within the four teams and procedures are documented. What policies/procedures are in place to ensure sufficient We have appropriate policies and procedures in place in order to ensure 4.1.2 compliance, monitoring and compliance with our regulatory obligations. control with regulatory issues? Is there a separate dedicated Yes, our Risk and Compliance Department is responsible for reviewing 4.1.3 compliance team? policy, providing advice and monitoring the business. What do you consider to be the key compliance issues 4.1.4 The pace of regulatory change. facing discretionary Investment Managers? Have there been any compliance 4.1.5 issues anywhere within your No. organisation in the last 3 years? To what extent is there an We have a proprietary “alert” system which identify various aspects of independent check client portfolios, these outliers are followed up by our IW&I ‘Suitability (i.e. outside the nominated 4.1.6 Team’. In addition the Compliance Department undertakes various portfolio manager(s) and client routine monitoring checks and themed reviews to ensure compliance with contact) in relation to client and regulations and in-house guidelines. in-house guidelines? Who is responsible for Investment Managers are responsible, in the first instance, for ensuring the monitoring and controlling 4.1.7 suitability of investments for clients. Our internal monitoring routines ensure compliance of the funds in which this is complied with. the Investment Manager invests? These aspects are addressed by our: How do you protect your data or Data and Record Retention Policy 4.1.8 client data from risk of theft or Information Security Policy destruction? Clear Desk Policy
Do you have a Business 4.1.9 Continuity & Disaster Recovery Yes. Programme? What process do you use to copy/back up your information? 4.1.10 Back up’s are undertaken every evening. How frequently are backup’s taken?
27 Due Diligence Q&A 4.2 FCA HANDBOOK Please confirm that you have implemented appropriate processes and procedures in 4.2.1 Yes. order to comply with COBS and specifically COBS 9 (Suitability) and 11 (Dealing and Managing). Please confirm that all appropriate information / 4.2.2 Yes. notifications required by COBS is provided to clients. Please confirm in whose name 4.2.3 Rensburg Nominees (Please refer to section 3). assets have been registered. Please confirm that your Client Money Account(s) have trust 4.2.4 Yes. status as required in the CASS rules. Have you had any material CASS 4.2.5 breaches in the past 12 months? No. If so, please provide details? Have you had to notify the FCA of any CASS breaches in the 4.2.6 No. past 12 months? If so, please provide details. How do you disclose your Conflicts of Interest Policy is contained within our Terms and Conditions 4.2.7 conflicts of interest? (IWI040) and a Conflicts Log is maintained within the Firm. What is your policy on soft commission arrangements? Do 4.2.8 Soft Commission arrangements are not permissable. you have any soft commission arrangements? 4.3 BRIBERY ACT 2010 What systems and controls do We have policies in relation to: you have in place to ensure Avoidance of Bribery and Corruption 4.3.1 compliance with the Bribery Act Whistle Blowing 2010? Please provide a copy of Gifts and Hospitality your Anti-Corruption Policy. Can you provide copies of these We cannot provide a copy of our Internal Policies as it is proprietary 4.3.2 policies? material, but the Policies are available to view at any of our offices. What training relating to anti- bribery or corruption do you Computer Based Training (for new employees and every two years for all 4.3.3 have in place for your staff, employees) and face to face training every two years (for all employees). including management? How do you ensure that your agents, business partners and We do not have agents, business partners or other third parties with whom 4.3.4 other third parties with whom we contract. you contract comply with anti- corruption legislation? Who is your contact for Bribery 4.3.5 Richard Traub (MLRO). Act compliance?
28 Due Diligence Q&A Have you, or any of your directors, officers or employees had any previous convictions, fines or 4.3.6 other sanctions imposed by a Not to our knowledge. court, regulator or authority for corruption (including fraud, money laundering and/or bribery)? 4.4 TREATING CUSTOMERS FAIRLY What systems and controls do you have in place to ensure the These are incorporated within our Conduct Risk Framework, Conduct Risk 4.4.1 requirement to treat customers Policy and Conduct Risk Committee. fairly is embedded in your culture? How will you satisfy yourselves that the appropriate behaviours Through regular monitoring of Investment Managers activities and 4.4.2 and actions are happening in Management Information from the business. practice? 4.5 PRE-EMPLOYMENT SCREENING Please confirm you undertake appropriate employee screening • DBS checks are undertaken on all new employees. so as to confirm and verify the • An external reference firm is used to validate qualifications 4.5.1 identify of employees including and employment history their address and employment • AML identification is required for all new employees. history.
29 Due Diligence Q&A 5 SYSTEMS & SERVICE PROVIDERS 5.1 SYSTEMS Our main portfolio management system is Pulse which has been part developed internally. Pulse is a browser based portfolio management What investment management system that takes holding data from our client settlement and custody systems do you use? When were 5.1.1 system (FISCAL) and provides Investment Managers with portfolio they installed? Are there any modeling and analytics as well as links to our research intranet and order recent or planned upgrades? management systems. Pulse was installed in 2000 and functionality is constantly being added. All trades are handled by our order management system (OMS) which Once a decision to buy or sell is 5.1.2 routes orders to our trading desks where they are either executed manually made, how are trades executed? or electronically. Yes, all orders are handled by our dealing desk. As members of the Is there an internal dealing 5.1.3 London Stock Exchange we deal direct in UK equities, Gilts and Corporate function? Bonds and pass orders to third party brokers on other exchanges globally. If in-house or affiliated brokers are used, what percentage of We act as agent in respect of client transactions and do not take principal 5.1.4 transactions are placed through positions. them? 5.2 SERVICE PROVIDERS Please provide a list of Squire Patton Boggs • Legal Advisers KPMG 5.2.1 • Auditors HSBC • Bankers/Custodians In-house • Administrators (if applicable) Please provide details of any As you would anticipate we manage numerous portfolios within wrappers 5.2.2 other key outsourced service (SIPPs, Bonds etc) and we can provide full details if required. providers. APPENDICES • Managing Your Investments for Clients of Financial Advisers (IWI476) • Rate Card (IWI029) • Financial Adviser Client Set-Up Procedures (IWI351) • Brochure/s o Financial Advisers (IWI020) o Clients of Financial Advisers (IWI236)
IW&I has maintained a Defaqto 5 star rating for our DFM Bespoke service since 2013 and for our DFM MPS Direct service since 2017. IW&I has also maintained a Gold rating for it’s DFM Service for the third year running.
30 Due Diligence Q&A All data correct as of March 2020 unless otherwise stated
Belfast 02890 321002 Edinburgh 0131 226 5000 Liverpool 0151 227 2030 Birmingham 0121 232 0700 Exeter 01392 204404 London 020 7597 1234 Bournemouth 01202 208100 Glasgow 0141 333 9323 Manchester 0161 832 6868 Bristol 01225 444860 Guildford 01483 304707 Reigate 01737 224223 Cheltenham 01242 514756 Leeds 0113 245 4488 Sheffield 0114 275 5100
Member firm of the London Stock Exchange. Authorised and regulated by the Financial Conduct Authority. Investec Wealth & Investment Limited is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street, London, EC2V 7QN.
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