Tees Valley Asset Management Limited provides a comprehensive financial planning service to a relatively small number of client families. We regard our role as helping you to deal with all aspects of personal finance and to achieve your personal goals, which may be financial or non-financial. The advice given to you is geared towards helping you achieve these goals. The service we offer is much more than just recommending where you can place any excess capital you may have available.
At its core, the financial planning service we provide aims to help you develop a comprehensive investment strategy, which will assist you to maximise the benefits from your portfolio of assets. To do this we help you to be financially well organised, to invest in funds that provide the right balance between the investment risk you are willing to take, and the return that you require, whilst ensuring that you minimise any tax liabilities that may arise from your portfolio.
Once the plan is implemented, we believe it is vital that as your circumstances change, we review the plan and update it to take account of your changed circumstances. For this reason, we include as part of our financial planning service; regular review meetings. The number and regularity can be agreed with you when the plan is first implemented.
- Advice Process
- Our Service
- Investment Risk
- Types of Risk
- Managing Risk
- Investment Process
- Model Portfolios
- The Model Portfolios
Step 1: Initial Meeting
At our first meeting, we carry out a thorough assessment of your current financial position, your goals and aspirations, and we will determine how we can add value to help you achieve your goals. We will discuss your attitude to investment risk and assess your capacity for loss aided by completion of a questionnaire. The initial discovery meeting is free of charge, and we will agree with you our payment for service options at this meeting.
Step 2: Recommendation Meeting
Following our initial discovery meeting, we will analyse the information we have gathered regarding your present financial situation and where you want to be moving forward. We will prepare a plan to discuss with you at the recommendation meeting, based on the information you have provided and in particular your attitude to investment risk.
Step 3: Implementation and Review Meetings
If you are happy with the plan, we will arrange to implement it or agree any amendments. We will complete the application process and we will put the plan into action. The level of service and the number of review meetings you require will be agreed. Regularly reviewing your arrangements, as well as revisiting your needs and objectives, mean planning adjustments can be made to suit your changing personal and financial circumstances, whilst maintaining focus on your long term financial goals and aspirations.
Introduction to our Service
When constructing an investment portfolio, you need to consider the risks as well as the rewards. Many people think of saving, investing and speculating as being the same thing; they are in fact quite different.
- Saving is putting money into a lower risk financial vehicle, where it can grow slowly and safely over time.
- Investing is putting money into financial vehicles with some degree of risk in the hope of seeing the money grow more significantly over time.
- Speculating is putting money into investments with a high degree of risk in the hope of enjoying rapid growth.
It is only by having a detailed understanding of your current financial position and future financial objectives that we can ensure any recommendations made are suitable, with consideration given to your capacity for capital loss. We believe combining financial planning with investment advice is far superior to a purely investment driven approach. Without establishing goals and objectives before providing investment advice, it is simply not possible to ensure that investment advice is suitable.
As part of our process, we will help you establish your attitude to investment risk. This is especially important if you are not confident or experienced at investing. You may have a different attitude for different types of investments. For example you might be happy to take some investment risk with money you won’t need access to for many years; but if you are also saving up for something over just a few years, you may need to be much more cautious. You can’t plan financially without understanding investment risk. Many people, when they hear about ‘risk’, automatically worry about the chance of not getting all their money back. This ‘capital’ risk is important, but it isn’t the only type.
Other types of risk involve uncertainty and unpredictability. When you make an investment, it can be difficult to say with any certainty what you’ll get back when you finally cash it in. Share prices fluctuate, interest rates vary, and inflation is a risk too. Just concentrating on capital risk and ignoring these other risks could mean you take too cautious an approach.
Understanding risk means identifying your own attitude to investment risk and identifying the different types of risk.
- The greater return you want, the more risk you’ll usually have to accept.
- The higher return you want from your investments, the greater the chance of losing some or all of your initial investment (your capital).
- The longer you can wait before you need to cash in your investments, the more risk you can afford to take.
- What you are investing for and when you’ll need access to your money will have a big impact on what types of investments are right for you.
- Over the longer term, investing in share-based assets is a good way of providing growth that can potentially outstrip inflation. On the downside, significant falls can also be experienced. This is why investment advice and assessing your exposure to investment risk are essential.
Types Of Investment Risk
In simple terms the main risks all savers and investors face are:
The risk that the value of the money you have invested will fall, instead of rise.
The risk that your investment won’t perform well enough to meet a particular target (e.g. to pay for school feels or repay a mortgage).
Interest rate risk:
The risk that you commit to a product paying a fixed return over a fixed period, and interest rates move against you during that period.
The risk that the growth you achieve on the money you invest will be outweighed by inflation, so its purchasing power will diminish over time.
The risk that your investment won’t perform well enough to generate the income you need (or that the amount of income you take exceeds the growth generated by the money you invested – so your capital shrinks over time).
Share-based risks are a bit more complex:
This is the risk that the company (shares) you’ve invested in, performs badly or goes out of business.
This is the risk of a fall in a particular country’s stock-market where your money is invested
If your money is invested in stock markets outside the UK, then you will face currency risk. Wherever your money is invested, it will have to be converted into sterling when you want it back. As a result, movements in the exchange rate will affect the value of your investment.
This is the risk of picking an investment manager which has performed poorly compared to the market, the sector or in the delivery of their funds objectives.
Managing Investment Risk
To help manage the risk your investments are exposed to, a number of risk management strategies are used. Two of the most prominent include diversifying across asset classes, known as Asset Allocation, and adjusting portfolios, known as Rebalancing.
Asset allocation is the process of dividing your investments among the various types of asset classes. The primary asset classes are equities, bonds, property and cash. There are also a range of other asset classes that may be suitable such as commodities.
There is a whole host of academic research suggesting that the correct asset allocation strategy is the key to successful long-term investment performance. Research by Brinson, Singer and Beebower (see note 1), using data covering the 10-year period from 1977 onwards, showed that 91.5% of the investment portfolio’s performance over time was attributable to asset allocation. Selecting the Right Asset Classes; the appropriate proportion, or weighting, invested in the different asset classes depends on a number of factors. These include your investment objectives, time frame and attitude towards risk. Understanding your position with regard to these factors is of the utmost importance and will form the cornerstone of your investment portfolio.
Rebalancing is the periodic adjustment of your portfolio to restore the original asset allocation mix. Market fluctuations can affect your mix of assets and change the risk/return profile of your portfolio. Sometimes referred to as ‘rebalancing’, adjusting your portfolio back in line with your investment objective helps to ensure that your portfolio does not become overly invested in a particular type of investment and thus change its risk profile so that it’s out of line with yours.
Rebalancing is one of the key factors in successful long-term investment performance, possibly almost as important as asset allocation itself. Your asset allocation which is set at the outset to reflect your attitude to risk and your desired outcomes will almost certainly become distorted and you could find yourself taking either too much or too little risk, without rebalancing.
Note 1- Brinson, GP, Singer, BD, & Beebower, GL, ‘Determinants of Portfolio Performance, An Update’, Financial Analysts Journal, May-June 1991
Our investment process is a sophisticated extension of the old adage ‘don’t put all your eggs in one basket’, which inevitably prompts the question; ‘which baskets should I put them in, and how many in each?’
Before we decide this; it is vital that we determine with you how much investment risk you are prepared to accept since this will provide an indication of the potential investment growth you may achieve from your investments. We can then compare this against the rate of return required to meet your objective, consider whether additional funding may be required and re-assess your financial goals. What you need, expect and are comfortable with are not always the same. We therefore aim to help you to analyse and solve these differentials.
In order to provide robust independent investment research, we use the services of independent research and investment management professionals, Morningstar.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. They provide an extensive line of products and services for financial advisers and asset managers.
They provide data on approximately 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 17 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and treasury markets.
To determine how much investment risk you are prepared to accept we offer a highly sophisticated method of risk profiling, using a world renowned system offered by Morningstar. Morningstar use the results of the questionnaire to suggest an initial asset allocation, which we then consider when recommending investments tailored for your personal circumstances, needs and objectives. Ibbotson Associates, who became a Morningstar company in 2006, are the leading independent asset allocation provider. Formed in the early 1970s, Roger G. Ibbotson, Ph.D., along with Rex Sinquefield researched and assembled the annual returns for several asset classes dating back to 1926. This seminal research allowed for the analysis of risk and return characteristics of different asset classes and served as a foundation for modern asset allocation.
Tatton Investment Management
Tatton Investment Management (‘Tatton’), is a boutique discretionary fund management house (DFM), which works exclusively with financial advisers and their clients. Tatton was founded in 2012 and are the largest on-platform-only discretionary investment manager in the UK with over £4 billion under management. Tatton works alongside us to ensure that our clients with platform or ‘wrap’ based investment portfolios can utilise the more effective and timely management of a discretionary overlay, to overcome the shortcomings of a basic advisory model portfolio service. Tatton Investment Management steps in where existing model portfolio based investment services experience limitations. This is particularly in the areas of timely portfolio rebalancing and the short term management of long term strategic asset allocation weightings.
To achieve this, Tatton apply an active overlay around your model portfolio by managing the strategic asset allocations on a day to day basis, to help protect your money by avoiding temporarily overvalued or overbought investments. The Tatton discretionary overlay allows the team to react faster to the appearance of new threats and new opportunities when compared to an advisory service model. However, the core of your investment portfolio will be anchored around your chosen asset allocation as determined by Morningstar.
Tatton can be more nimble and agile when making necessary portfolio changes, whilst ensuring that your investments always remain suitable for the level of risk that you are comfortable with. They also recognise that their service has to provide good value for money, which is why they are amongst the most competitive in the marketplace by working alongside financial advisers who remain the primary client contact. Tatton’s investment philosophy is that of portfolio guardians, with its investment managers focusing on protecting value through the avoidance of overvalued asset classes rather than return maximisation as practised by traditional asset managers. They are not trying to second guess the market by identifying the next big thing, they simply act in a sensible and responsible way with the aim of keeping your portfolio on target towards your chosen risk-return objective. You will also receive regular and clear reporting on your portfolio and Tatton’s views on the World’s economies and investment opportunities.
Rather than selecting several individual companies to invest with, we use a Wrap, from which it is possible to build a portfolio of funds with many specialist investment companies.
Put simply, a wrap account is a relatively new concept in portfolio administration designed to assist you with arranging transactions, reporting and administering an investment portfolio.
There are many advantages for you as an investor when using wrap accounts such as:
Ease of transactions:
One point of entry to access your portfolio and arrange transactions.
Consolidated income and capital gains tax statements from one source simplifies tax year end reporting for tax return purposes.
As your adviser we will be able to report, arrange transactions and monitor your portfolio from one centralised online location.
Provided the required investment (or security) is tradable, it can be accessed through the Wrap provider, giving you access to a much wider range of funds than if you were to invest directly.
You will be able to access your portfolio via our website, or by telephone to get up to date valuations. Transactions such as withdrawing income from your various investments and tax wrappers can be carried out in an efficient and simple way.
Cost & Economies of scale:
The avoidance of marketing and sales costs for the fund management groups and the purchasing power of the wrap provider equates to discounts on initial and annual management charges of individual funds.
We have combined the strengths of Morningstar and Tatton Investment Management Limited through a range of model portfolios, these portfolios are designed to suit differing risk appetites, they are known as:
Tatton Managed Defensive Portfolio
Tatton Managed Cautious Portfolio
Tatton Managed Balanced Portfolio
Tatton Managed Active Portfolio
Tatton Managed Aggressive Portfolio
The asset allocation for these model portfolios is sourced from Morningstar. Tatton Investment Management will then apply an active overlay around the portfolio by managing the strategic asset allocations on a day to day basis. With the Tatton service, any changes will be made automatically, without requiring your explicit agreement for each change.
The Model Portfolios
|Your Risk Profile||This portfolio is likely to be suitable for the following types of investor:||Portfolio Name||Portfolio Description|
|1||Cautious (low risk)||A cautious investor seeking to protect their wealth by investing in a wide range of asset types. This is to try to maintain the value of their assets when adjusted for inflation or to receive a higher income than traditional cash deposits. An investor more interested in avoiding losing money than in maximising potential investment gains. Someone who is prepared to tolerate small fluctuations in the value of the portfolio in order to achieve greater investment returns than a bank or building society deposit.||Defensive||The primary objective of this portfolio is to produce a higher level of income than the Bank of England base rate over the longer term. This can be achieved through investing in a range of relatively defensive diversified UK and international investments. Equity (stock market) exposure will follow the respective Morningstar strategic asset allocation risk profile target. Morningstar may adjust this allocation over the longer term for continued adherence to the stated risk limits. In the shorter term, Tatton may deviate from this by a maximum of ±12.5% to adjust actual portfolios to prevailing market conditions. Equity investment is likely to be limited to funds that invest in shares that pay higher than average dividends.|
|2||Moderately Cautious (low to medium Risk)||A conservative investor seeking to maintain capital over the medium to long-term. An investor who is prepared to accept a lower investment return than equity markets over the longer-term in exchange for trying to minimise potential losses. Someone who accepts that the portfolio will be subject to fluctuations in value.||Cautious||The primary objective of this portfolio is to produce a combination of income and growth. The portfolio gives limited exposure to capital markets through a range of diversified UK and international investments and aims to achieve above inflation investment returns over the longer term. Equity (stock market) exposure will follow the respective Morningstar strategic asset allocation risk profile target. In the shorter-term, Tatton may deviate from this by a maximum of +/-12.5% to adjust actual portfolios to prevailing market conditions.|
|3||Moderate (medium risk)||An investor who is comfortable with holding a significant proportion of their portfolio in higher risk investments in order to have the opportunity for a greater investment return. An investor who is prepared to accept investment losses in the short-term in order to achieve potentially greater investment returns over the longer-term. The portfolio will be subject to fluctuations in value.||Balanced||The primary objective of this portfolio is to generate both income and growth over the longer term, giving significant exposure to capital markets through a range of diversified UK and international investments. Equity (stockmarket) exposure will follow the respective Morningstar strategic asset allocation risk profile target. In the shorter-term, Tatton may deviate from this by a maximum of ±12.5% to adjust actual portfolios to prevailing market conditions.|
|4||Moderately Adventurous (medium to high risk)||An investor who is comfortable with holding a significant proportion of their portfolio in higher risk investments in order to have the opportunity for a greater investment return. An investor who is prepared to accept investment losses in the short-term in order to achieve potentially greater investment returns over the longer-term. The portfolio will be subject to significant fluctuations in value.||Active||The primary objective of this portfolio is to generate growth over the longer term. The portfolio will give significant exposure to capital markets through a range of diversified UK and international investments. Equity (stock market) exposure will follow the respective Morningstar strategic asset allocation risk profile target. In the shorter-term, Tatton may deviate from this by a maximum of +/-12.5% to adjust actual portfolios to prevailing market conditions.|
|5||Adventurous (high risk)||An investor who aims to produce significant long-term investment gains and is not concerned if the portfolio sustains regular large fluctuations (including large losses) in value.||Aggressive||The primary objective of this portfolio is to generate growth primarily from equity markets over the longer term. The portfolio will give significant exposure to capital markets through a range of diversified UK and international investments. Equity (stock market) exposure will follow the respective Morningstar strategic asset allocation risk profile target. In the shorter-term, Tatton may deviate from this by a maximum of +/-12.5% to adjust actual portfolios to prevailing market conditions.These investments do not include the same security of capital which is afforded with a deposit account. You may get back less than the amount invested.These investments do not include the same security of capital which is afforded with a deposit account. You may get back less than the amount invested.|
These investments do not include the same security of capital which is afforded with a deposit account. You may get back less than the amount invested.