42October 5, 2014

IFA of the Year 2015

Steven joined AGL Wealth Manage-ment in April 2011. He is a Chartered Financial Planner and Fellow of The Personal Finance Society (PFS). He also holds the Invest-ment Management Certificate (IMC). With 21 years in the industry, Ste-ven has worked in the private client/high-net-worth and corpo-rate marketplace since 2000.

The portfolio has been constructed to address the couple’s different over-all objectives and attitudes to investment risk and marginal tax positions.

£40,000 is held in each name, with £20,000 retained in cash to provide liquidity due to David’s potential capital plans.

David is a higher rate taxpayer and prefers income-producing investment for a total return. David’s investments reflect the asset allocation for a more cautious, defensive investor, with higher yielding investments held in the ISA for tax effi-ciency.

As Fiona is a basic-rate tax payer, regular monthly savings are placed in her sole name, to reduce likelihood of higher-rate tax being paid on dividends/po-tential gains. I have used investment trusts as per the family preference.

Fiona’s investments favour the more growth-oriented adventurous investor, looking for long-term growth.

I will use ISA/CGT allowances going forward, and have used both investment trusts and collectives – mainly active management, limited trackers.”

Catriona works for Chase de Vere providing independent financial advice on investments, inheritance tax, retirement planning and long term care.

She has attained the prestigious Later Life Adviser Accredita-tion from the Society of Later L i fe Adv isers (SOLLA), being one of only eight independent SOLLA advisers in Scotland.

Cat r i o n a i s a l s o treasurer of the Scottish Association of Young Farm-ers’ Clubs, a registered charity.

I have constructed two very different portfolios to meet the contrasting ob-jectives for the investments and the risk profiles of David and Fiona.

For the £100,000 gift from Fiona’s father I’ve adopted a balanced approach. I’ve invested 50% in shares, which will provide good growth potential, and 50% in other assets, including fixed interest and property, to provide some protection

Most of the share investments are in equity income funds to meet David’s preference for benefiting from reinvesting

For the £500 each month from David’s father I’ve adopted a more aggressive approach. They can afford to take more risk to try and achieve better returns here, because if the invest-ments fall in value, they will then benefit from buying them at a lower cost the following month.

This portfolio is solely in investment trusts, as preferred by David’s father, investing in an equal split of UK, US, European,

Emerging Markets and Japanese shares.”

STE VE N SWE E N E Y AGL W EALTH MAN AGEMEN T P O R TFO L IO V AL UE £ 100,000 CATR ION A SMITH CH ASE DE V ER E P O R TFO L IO V AL UE £ 100,000

T he S c en ario

DAVID and Fiona Mackay start with some advantages. They have a small flat in central Edinburgh and a £100,000 gift from Fiona’s father. But they have different financial objectives and different approaches to investment.

David, 28, is a cost accountant with an Edinburgh-based contract solution provider. He prefers a defensive, income-orientated approach, reflecting his concern for capital protection from inflation, and he believes total returns are the product of steady re-investment of equity dividends over time. Fiona, 27, is a flamboyant, entrepreneurially-minded Edinburgh socialite. David’s father, who prefers investment trusts, will put around £500 a month into a savings scheme for the couple. David has a salary of £55,000, while Fiona, who started and built her executive secretarial and corporate networking service, contributes some £20,000 a year to household spending from freelance work.

Neither is in a pension scheme and neither has an ISA. The main outgoings are interest payments on a £130,000 mortgage on a flat in the Old Town, just off the Royal Mile. David would like to refurbish the flat, convert the attic into a third bedroom and install sound-proofing. Fiona’s long-term aim is to accumulate a large sum to purchase a Highland rural estate for horse riding.

She has attained the prestigious Later Life Adviser Accredita-tion from the Society of Later L i fe Adv isers (SOLLA), being one of only eight independent SOLLA

Cat r i o n a i s a l s o treasurer of the Scottish Association of Young Farm-ers’ Clubs, a registered

in other assets, including fixed interest and property, to provide some protection if stock markets fall.

Most of the share investments are in equity income funds to meet David’s preference for benefiting from reinvesting

dividends.For the £500 each month from David’s father I’ve adopted a

more aggressive approach. They can afford to take more risk to try and achieve better returns here, because if the invest-ments fall in value, they will then benefit from buying them at a lower cost the following month.

This portfolio is solely in investment trusts, as preferred by David’s father, investing in an equal split of UK, US, European,

£ 4,800

£ 2,800

£ 5,700

£ 2,400

£ 5,500

£ 5,100

£ 5,700

£ 2,400

£ 5,700

£ 3,500

£ 6,300

£ 4,700

£ 5,700

£ 5,400

£ 4,800

£ 5,500

£ 24,000

4.8%

2.8%

5.7%

2.4%

5.5%

5.1%

5.7%

2.4%

5.7%

3.5%

6.3%

4.7%

5.7%

5.4%

4.8%

5.5%

24.0%

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Artemis Fd Mngrs Global Inc Units Instl Inc ( P KGL O B )

B aillie Gifford Japanese B N av Acc (B GJB A)

Capita Financial Mgrs Miton Uk Smaller Cos B Instl (CGSML A)

First St ate Inv Global R esources B Acc N av (CFR ESB )

Impax Enviro Mkts O rd Gbp0.10 (IEM)

Invesco Inc Gth O rd Gbp0.25 (IV I)

Invesco Mgrs Monthly Income P lus Inc ( B R Y GH L )

Jpmorgan Asset Management Uk L td Us Equity Income (C5EIJ)

Jupiter Unit Trust Managers Strategic B ond I Inc ( R W AAB D)

P acific Assets Tst O rd Gbp0.125 (P AC)

P rimary H lth P rop O rd Gbp0.50 (P H P )

Standard L ife Investments Eurp Eqty Income P latfor (STUTFL )

Standard L ife Investments Global Absolute R eturn S (STGL O B )

Templtn Emg Mkt In O rd Gbp0.25 (TEM)

V anguard Investments Uk L td Us Equity Index A Inc ( V V USEQ )

Cornelian Svs Cornelian P rogressive D Inc (CGCFSV )

Cash Available For Investment

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£ 5,000

£ 10,100

£ 5,000

£ 10,100

£ 10,000

£ 10,000

£ 9,900

£ 10,000

£ 4,900

£ 5,000

£ 10,000

£ 5,000

£ 5,000

5.0%

10.1%

5.0%

10.1%

10.0%

10.0%

9.9%

10.0%

4.9%

5.0%

10.0%

5.0%

5.0%

1

2

3

4

5

6

7

8

9

10

11

12

13

Aberdeen Ut Mgrs Japan Equity I Acc N av (MJGAS)

Artemis Fd Mngrs Global Inc Units Instl Inc ( P KGL O B )

Artemis Fd Mngrs Uk Special Situations I Acc (P KSSIA)

B ny Mellon Fund Managers L imited N ewton Global H ig ( R SIN TZ )

B ny Mellon Fund Managers L imited N ewton R eal R tn W ( R SETR S)

Fil Inv Svcs Uk Strategic B d N et Y Inc (FIFSTG)

H enderson Investme Strategic B ond I Inc ( H EEH Y I)

H enderson Investme Uk P roperty O eic I N et Inc ( 9 H H EN A)

Investec Fund Mgrs Uk Special Situations I N et Inc ( Y FSITU)

Jpmorgan Asset Management Uk L td Emerging Markets (C5JEB A)

Kames Capital Strategic B ond B Instl Inc (SEGIC)

R athbone Ut Mgt Income Instl Inc ( L EN CME)

Threadneedle Inv Uk Equity Income N et Z Inc (ADSAAG)

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43October 5, 2014

IFA of the Year 2015

FOR a young couple starting out on investment with a clean slate, financial planning would seem simple enough. The couple is well off by con-

ventional standards – both are em-ployed, they share a £200,000 property, they have income to spare after mortgage and living costs and they have substantial financial support from parents. Setting up an invest-ment plan is simple. And our model couple, Fiona and David Mackay, have no existing Individual Savings Ac-counts (ISAs) or pension plans.

But appearances will often deceive – and no more so than in financial planning. The couple may feel that their financial objec-tives are simple and straightforward. But in defining these objec-tives, and the means to attain them, many is-sues arise.

Questions rain down from financial advisers, obliged by Know Your Client rules, to establish many aspects of the cou-ple’s financial state and their investment objectives – all with as much precision as possible – and critically, the couple’s attitude to risk. In such an interrogation, clients may soon feel exhausted, wrestling with

enabling her to buy a house in the country and pursue her hobby of horse riding. Her father has given the couple a gift of £100,000 to invest.

The primary aim of the competition was to enable our IFA contestants to display their portfolio building skills across both the cautious managed and higher risk sectors. Getting the bal-ance appropriate to the couple’s situa-tion – and sufficiently broad to meet their differing approaches – is a challenge indeed.

The sums involved for this couple may seem comfortable enough. A com-fortable pension in retirement should not be difficult. But building a capital sum after allowing for the depreda-tions of tax and inflation is a demand-ing task. No less stretching for

searching questions that had simply not occurred to them.

How much risk precisely are they prepared to tolerate? Do they wish their financial affairs to be separate as far as possible or to hold investments in joint names? How secure are their incomes? What are their outgoings and their insurance arrangements?

While David and Fiona have a grasp of their long term objectives, these are markedly different – and they have

distinctly different ideas of how to attain them!

David, with a £55,000-a-year salary, wants to invest for the long term and prefers a notably defensive approach. He would also like to refurbish and up-grade their Edinburgh flat. His father has pledged £500 a month to help the couple build up a long term savings nest egg.

Fiona, with a £20,000-a-year income from freelance work, has quite different ideas. She is more of a risk taker, and would prefer to take a more adventurous approach to investment. She would like to build a capital sum

contestants is the issue of risk when equity markets have enjoyed a near-unbroken run for five years. Many commentators are warning that share prices are “toppy”, and with interest rates poised to rise soon, this would not augur well for conventional gilt-edged stock and fixed interest holdings.

So our game IFAs have opted for a wide spread of unit and investment trust investments, with a core portfo-lio of cautious holdings to satisfy David’s defensive preference and a range of small company, overseas and emerging market trusts for Fiona.

This year, for the first time, our IFAs will be able to choose investment trusts among their selections. But with many trusts standing at a premium to net assets rather than a discount as is more common, should our IFAs rec-ommend trusts whose shares are standing above the underlying value of the portfolios?

The need for expert advice and guidance is as strong as ever. We can all benefit from the knowledge, experi-ence and professional skills of an independent financial adviser.

This is what makes the Scotland on Sunday IFA of the Year competition compelling reading for experienced and starter investors alike. Watch out for monthly updates during the course of the competition.

After graduating in Economics from Glasgow University in 2003, Nicola Ellis gained experience with a number of investment man-agement companies. Nicola joined Sinclair Wood Asset Manage-ment in 2004, and af-ter obtaining her level four qualification she has been working as an IFA providing investment, pre- and post-retirement, and tax planning advice to private clients.

“My investment strategy is based on a ‘core and satellite’ approach, with 47 per cent (the core) being held in a combination of UK and US tracker

funds and absolute return funds in the UK, Europe and global sector. I have uti-lised the absolute return funds for downside protection. I have also included

fixed interest exposure through the Baillie Gifford Investment Grade Long and the Artemis Strategic Bond.

The remaining 53 per cent is split across a range of satellite funds and investment trusts including UK & global equities, plus a small exposure to property. My recommendation for the regular contribution of £500 per month is to invest equally into the five investment trusts included in the portfolio each month.

I have tried to blend different types of investments to suit both David and Fiona’s different attitudes to investment risk. Going forward, I feel my portfolio is well positioned for growth, and the ‘steady eddy’

absolute return funds help to provide stability alongside the more adventurous satellite funds, namely the five investment trusts.”

David is a chartered and certified fi-nancial planner at Acumen’s Edin-burgh office. He sets goals with his clients, gathers and analyses informa-tion, constructs and implements finan-cial plans which he monitors annually, while offering tax mitigation and intelli-gent investment strate-gies. He uses the same strategies for his own family as he seeks to build a secure financial future.

Our approach for David and Fiona as with any of our client’s monies is to design a portfolio with the highest probability of success.

The nature of this competition means we are speculating on returns over an extremely short period of time whereas the reality is that investing is for the long

Fiona’s main objective of a Highland retreat has been defined as a long-term aim and so the £100,000 investment could be earmarked for this whilst the renovations of their existing property could be funded by excess income.

Taking into account conflicting risk profiles and long-term market return data, volatility and capacity for loss we have designed a portfolio of ap-proximately 25 per cent covering cash, corporate bonds and property funds, 65 per cent in equities and 10 per cent in a special class of funds known

as zero dividends.The zero dividends produce no income but capital growth until maturity. We will also be looking at tilting the equity por-

tion to smaller companies.”

clients, gathers and analyses informa-tion, constructs and implements finan-cial plans which he monitors annually, while offering tax mitigation and intelli-gent investment strate-gies. He uses the same strategies for his own family as he seeks to build a secure financial future.

extremely short period of time whereas the reality is that investing is for the long term.

Fiona’s main objective of a Highland retreat has been defined as a long-term aim and so the £100,000 investment could be earmarked for this whilst the renovations of their existing property could be funded by excess income.

Taking into account conflicting risk profiles and long-term market return data, volatility and capacity for loss we have designed a portfolio of ap-proximately 25 per cent covering cash, corporate bonds and property funds, 65 per cent in equities and 10 per cent in a special class of funds known

as zero dividends.The zero dividends produce no income but capital growth until maturity. We will also be looking at tilting the equity por-

tion to smaller companies.”

Bill

Jamieson

A year of living dangerously-ishOur new IFA of the Year competition requires four advisers to apply their real-world skills to the fictional financial scenario of one imaginary young couple

‘Fiona and David have very different

objectives and attitudes to risk’

NIC O L A EL L IS SIN C LAIR WOOD ASSET MAN AGEMEN T POR TFOLIO V ALUE £ 100,000 DAV ID GO W AC UMEN POR TFOLIO V ALUE £ 100,000

IFAOF THE YEAR

2015

£ 3,800

£ 4,700

£ 3,800

£ 3,800

£ 14,100

£ 2,800

£ 7,500

£ 2,900

£ 4,700

£ 4,700

£ 4,800

£ 4,700

£ 3,800

£ 34,000

3.8%

4.7%

3.8%

3.8%

14.1%

2.8%

7.5%

2.9%

4.7%

4.7%

4.8%

4.7%

3.8%

34.0%

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14

Artemis Fd Mngrs Strategic Bond M Instl Inc (PKSBMI)

First State Inv Asia Pacific Leaders B Inc (C FASPL)

Henderson Investme European Abst R tn I Acc (GEAR IA)

Henderson Investme Uk Absolute R eturn I Acc (N WGUAR )

Legal & General Ut Uk Index Trust I Dis (LGBTII)

Legal & General Ut Uk Property I Inc (LGAAHW)

Legal & General Ut Us Index Trust I Dis (LGUTII)

M&G Securities Ltd Property Ptf Stl I Inc (MGPTTM)

Marlborough Fd Mgr Multi C ap Income P Inc (FMAPUT)

Marlborough Fd Mgr Special Situations P Acc (FMC IAL)

N eptune Inv Mgmt European Income C Inc (N EETAA)

R athbone Ut Mgt Gbl Opportunities Instl Acc (LEGLOP)

Standard Life Investments Global Absolute R eturn S (STGLOB)

C ash Available For Investment

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£ 4,100

£ 2,500

£ 12,300

£ 21,400

£ 7,100

£ 1,700

£ 9,400

£ 3,700

£ 23,600

£ 6,000

£ 8,200

4.1%

2.5%

12.3%

21.4%

7.1%

1.7%

9.4%

3.7%

23.6%

6.0%

8.2%

1

2

3

4

5

6

7

8

9

10

11

Aberforth Geared Inc Z ero Div Prf Shs Gbp0.01 (AGIZ )

Blackrock Am Uk C orporate Bd Tracker D Dis (MY KAAN )

Blackrock Am Uk Emg Mkts Equity Tkr D Acc (MY KAAR )

Blackrock Am Uk Uk Equity Tracker D Acc (MY KAAY )

F&C Private Equity Z ero Div Prf Shs Gbp (FPEZ )

Henderson Diversif Ord N pv (HDIV )

Tr Property Inv Tr Ord Gbp0.25 (TR Y )

Utilico Fin.Ltd R ed Z ero Div Prf 31/ 10/ 2018 (UTLD)

V anguard Investments Uk Ltd Ftse Developed World E (V V DWEU)

V anguard Glbl Sm C ap Idx Inc (V IGSC I)

C ash Available For Investment

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