THE FIDUCIA MASTERTRUST
“Simply a Smarter Way to Invest”
A Total Portfolio Management Service
Fiducia Wealth Management Limited
Dedham Hall Business Centre
Brook Street, Dedham
Colchester
Essex
CO7 6AD
Tel: (01206) 321045
Fax: (01206) 321044
Email: [email protected]
www.fiduciawealth.co.uk
Fiducia Wealth Management Ltd is authorised and regulated by the Financial Services
Authority
CONTENTS
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
1
Section One
• Introduction to Fiducia Wealth Management Page 3
• The Fiducia Mastertrust explained Page 4
Section Two
• Risk profile methodology Page 9
• Portfolio construction and investment process Page 12
• Charges Page 16
• Summary of the key benefits Page 18
Section Three
• Transact - financial strength and client security Page 21
Appendix
• Effect of discounted fund management charges Page 28
• Glossary Page 29
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
2
SECTION ONE
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
3
FIDUCIA WEALTH MANAGEMENT LIMITED
Fiducia is a leader in the provision of independent wealth management and
offers a distinctive service to meet the particular needs of private clients,
business owners, family groups, trustees and charities.
We understand that those who have higher income, more affluence and
significant wealth or are concerned about succession issues require a special
quality and scope of advice in order to take account of their more complex
needs.
The key features of that service are:
• Putting clients’ interests first at all times,
• Commitment to holistic financial principles that encompass a total advice
service,
• The adoption of open architecture principles in order to provide a truly
independent and client focused investment service,
• The Mastertrust Investment Account - an actively managed, risk
controlled, personal portfolio which enables all current and future
investments to be consolidated and managed in accordance with each
client’s personal risk profile.
• Our ‘own brand’ Self Invested Personal Pension (SIPP) and Small Self
Administered Scheme (SSAS) developed in association with leading
independent pensioneer trustees, which enables us to provide a truly
bespoke service. Where property purchase is involved, valuers, property
managers, banks and solicitors are appointed to suit our clients’ needs and
preferences.
• A close working relationships with private banks, tax strategists, trustees,
fiduciaries, lawyers, accountants and property specialists.
The result is a complete, independent and locally based wealth management
service.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
4
THE FIDUCIA MASTERTRUST
The Background
The concept of an integrated portfolio investment service can be traced back to the
development of ‘wrap accounts’ in the United States of America in the 1970’s, and the
equivalent ‘master trusts’ in Australia in the 1980’s.
There are a small number of companies in the UK that provide these electronic trading
and custodial platform facilities. We have undertaken due diligence in terms of
security, service and charges. At present, we actively work with three, which are:
• Investment Funds Direct, which is owned by Royal London.
• Integrated Financial Arrangements plc, otherwise known as Transact.
• Novia Financial plc.
The role they each fulfil is that of an execution only and custodial service, they do not
manage the client portfolios. Fiducia has its own investment management process and
is the investment adviser. The resulting buy or sell trades are then executed by the
platform on instruction.
In global terms, these accounts now hold hundreds of billions of investments and
pensions on behalf of private investors and the concept is being adopted on an ever
increasing global scale.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
5
WHAT IS A TOTAL PORTFOLIO MANAGEMENT SERVICE?
It comprises a bespoke investment account that can hold virtually the entire range of
traditional investments – such as the following collective funds:
• Unit Trusts, OEICS and ICVCs
• Investment Trusts
• UK approved funds domiciled offshore
• Shares registered on a UK Stock Market
• UK approved Offshore Funds.
We are for the first time able to create a single investment account for each client
which specifically reflects their risk profile. With the benefit of open architecture, the
antidote to the packaged products manufactured by the big brands of financial services,
this personal portfolio is created and managed for all of each client’s planning needs.
This has allowed us to create a suite of financial planning wrappers which include:
• Onshore Investment Bond
• Offshore Investment Bond
• ISA account
• The full range of Pension Plans
• A full range of Self Invested Pension Plans (SIPP) and Small Self Administered
Schemes (SSAS)
• An extensive range of Trusts.
• Investment Trusts
• UK approved funds domiciled offshore
The technology of the custodians has been integrated with our own processes enabling
us to transform our back office and embrace the latest technology. This in turn enables
us to achieve greater efficiency and accuracy by eliminating third parties who add no
or little value.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
6
WHAT ARE THE BENEFITS?
The Fiducia Mastertrust Account facilitates the consolidation of all existing,
uncoordinated, non-aligned investment assets and plans into a single integrated
investment account, which is a crucial development in the concept of holistic financial
planning.
We are able to work with each client to develop a personal portfolio style which
accurately reflects their financial objectives and risk profile.
That means one level of fees, one standard of paperwork and one point of contact.
Each client can check their portfolio on line whenever they wish. As a result, we are
able to spend more time adding real value for our clients and to help them focus on the
decisions that really matter.
It enables us to “un-bundle” individual investment plans and creates an “open
architecture” structure directly linked to each personal investment account. Clients
will still require tax based computations but those plans, which essentially deliver tax
based outcomes (such as ISAs and Pensions), are part of the overall financial planning
process no longer segregated arrangements, enabling reviews and decisions to be better
coordinated.
The single, overall investment strategy, reflecting the identified risk profile, can be
reviewed and the changes implemented at the same time for each of the underlying
plans. Fund selection is by our Risk Metrics analysis which considers all UK approved
funds in order to arrive at a “best of best” outcome.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
7
HOW DOES IT WORK?
The Fiducia Mastertrust Account is a portfolio builder, dealing service and tracking
device combined into one. It is part software, part process and part management
expertise which consolidates every activity into one investment process, which is then
documented into one central, integrated report.
It can accept existing as well as new investments. Most existing investments can be
transferred to the Account usually by a re-registration process. The entry levels are
appropriate for the service being provided and do have flexibility.
Fiducia, in its investment management role, provides advice in terms of the overall
investment strategy. When decisions are agreed the custodian will undertake the
appropriate transactions on instruction from Fiducia.
Those funds are either retained in a General Investment Account or allocated to the
range of tax based plans, such as, ISAs, Onshore Bond, Offshore Bonds, the whole range
of Pensions etc.
There are two further facilities:
• The Account is also able to hold shares which are traded on any of the London
Stock Exchanges.
• A deposit account offering instant access and paying a competitive rate of
interest.
Formal valuations are provided every six months including an end of tax year
consolidated tax certificate to accompany the Self Assessment Tax Return. Each client
also has secure internet access, via their account and PIN numbers, providing daily
valuations and fund information on a personalised web page.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
8
SECTION TWO
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
9
RISK PROFILE METHODOLOGY
We firstly assess each client’s risk profile which is a compromise between risk attitude
and risk capacity. To explain, risk attitude is a measurement of each client’s
willingness to risk a less favourable outcome in an attempt to achieve a more
favourable one – the “risk/return trade off”. Risk capacity however is about each
client’s ability to sustain a less favourable outcome without compromising their original
goals and objectives. Therefore, risk capacity is affected by:
I. time horizons, which can allow for the recovery of investment losses and,
II. total wealth, which can cushion the effect of a decline in portfolio value.
We take account of both factors and as a result the appropriate amount of risk is
generally the lesser of the two components.
Around fifteen years ago, academic studies on risk tolerance identified that, as with
intelligence and personality, this is a psychological trait, in other words one that
generally remains the same over time. This has led to an assessment process that meets
accepted psychometric principles.
In 1997 the School of Psychology at the University of New South Wales, Australia,
devised and tested a 25 point questionnaire.
This risk profiling model, known as FinaMetrica, is now widely recognized as a leading
risk profiling system and as a result we have adopted FinaMetrica as a key element of
our investment management process.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
10
HOW FINAMETRICA IDENTIFIES EACH CLIENT’S RISK PROFILE
1. The Questionnaire
The questionnaire which consists of 25 questions takes around 15 minutes to
complete and generates a personal risk profile report.
2. The Risk Profile Report
Each client is notified of their outcome and an explanation of how to interpret
the result. The report also identifies the most appropriate risk group and
investment style by means of a scoring algorithm.
3. Identifying Future Goals and Setting Priorities
This is the holistic planning overview, establishing agreement on where clients
are today in financial terms, where they want to be in the future and their
priorities.
We also gather the relevant factual and aspirational information to qualify those
statements in terms of financial values and timescales. Once that is achieved and
agreed, there are clear and measurable objectives for the investment planning
process.
4. The Gap Analysis
The FinaMetrica questionnaire asks each respondent to indicate the level of
return they would expect their portfolio to earn, taken as an average over ten
years and expressed in relation to current deposit interest rates.
FinaMetrica is also able to generate the historical returns achieved for each of
the preferred portfolios, over the period from 1 January 1970 to date.
The results may highlight a gap between expectations and those historical
returns. In these circumstances there are various options that need to be
discussed, for example:
• To take more risk to try to achieve a better outcome
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
11
• To increase the sums being invested
• To modify goals or extend timescales
Of course, in the happy event that the historical returns exceed expectations,
risk can be reduced as can the level of investment; goals can be accelerated,
raised or added.
These discussions on the gap analysis are key to the process of managing
expectations, by directly relating the historical and forecast rate of realistic
return that flows from the identified risk profile to the goals and timescales that
have been set.
5. Obtaining Informed Consent and Commitment
This is essential before any plan is implemented. The Risk Profile report is an
objective, robust, plain-English assessment.
If, in developing specific recommendations, trade-offs are required:
• They will have been made knowingly
• The pros and cons of the options will have been clearly qualified
• The final decisions will be agreed and recorded
Conclusion - This logical, statistical, psychometric process creates the means to identify
each client’s risk profile and achieve agreement as to the basis of the specific planning
strategy and timescale to be adopted.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
12
PORTFOLIO CONSTRUCTION AND INVESTMENT PROCESS
Risk Budgeting
The Risk Profile scores identified by FinaMetrica have enabled us to create six portfolio
styles:
• Cautious
• Prudent
• Balanced
• Growth
• Adventurous
• Bespoke.
Each of the portfolio styles has been carefully constructed to ensure that they are
aligned to the questions and outcomes of the FinaMetrica risk profiling questionnaire.
The degree of ‘risk’ taken within each style of portfolio is calculated directly from the
FinaMetrica questions and allows us to create a ‘risk budget’ for each of our portfolios.
The ‘risk budget’ is the maximum amount of ‘risk’ that we can expose each of the
respective portfolios to in order to achieve the rates of returns highlighted within the
FinaMetrica risk profiling questionnaire.
Asset Allocation
Asset allocation controls the risk in a portfolio; it creates diversification and ensures the
underlying investments do not have a high correlation in terms of their response to
particular market conditions. The overall objective is to achieve low correlation
especially within the low risk tolerance portfolios.
Inflation
Depending on the investment time scale, inflation can have a significantly adverse
effect by eroding the real value of investments. This is the major risk to capital left on
deposit. In the short-term i.e. 3-5 years, inflation is unlikely to have as great an impact
on capital values as volatility. However, over the longer term inflation is a greater risk
than volatility.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
13
FUND SELECTION BY RISK METRICS
The objective is to identify and select the individual funds to be included in each
portfolio. The sophisticated investment software we use enables us to gain direct access
to over 25 years of historical fund price data, which is updated daily and analyse the
performance of over 14,000 onshore and offshore funds.
Our objective is to identify the ‘best of best’ funds based on both quantitative and
qualitative assessments.
We have created a Risk Metrics based filtering model to identify the best performing
funds measured in terms of their Alpha, Standard Deviation, Tracking Error and Sharpe
Ratio. This identifies the leading funds in each asset class and sector.
We then undertake qualitative research in which we take account of factors such as:
• Strength of the investment process for each fund and how long it has been in
place,
• Continuity of investment personnel,
• Investment style and whether it has proved durable over time,
• The clarity of the stated investment objectives,
• Strong and consistent past performance record,
• Favourable risk adjusted returns,
• The individual stock selection process.
In order to evaluate information on a uniform basis we ask each investment house to
complete a detailed questionnaire before any of their funds are considered for our
approved fund list. We also have regular ongoing contact with the Fund Managers and
their senior representatives.
All the funds on that list are subject to ongoing review, as are the model portfolios. We
apply the same process to funds not on our approved list to ensure we do not overlook
any funds that at some future time may meet our criteria.
The individual funds that make up our approved list are subject to review at least every
month and potential changes are considered by the Investment Committee.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
14
Tax Planning
Once the portfolio risk profile has been agreed and the overall planning objectives
defined and prioritised, we are able to add further value by considering the best means
of mitigating or eliminating the payment of tax, whether personal income, capital
gains, inheritance or corporation tax.
The Mastertrust Account enables the funds to be applied in such a way as to achieve
the most tax effective outcome.
The overall effect is that the investment performance of the Mastertrust Account is
further enhanced by a separate layer of tax planning.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
15
THE CHARGES
There is a transparent cost structure which is achieved by segregating the service into
its three separate components, as follows:
The Cost of the Investments - The Fund Managers
The Cost of Transactions - The custodial platform
The Cost of Advice - Fiducia
The Cost of Investments
These are the fees charged by the fund managers who manage the underlying assets.
Discounts are negotiated by the custodian produce significant savings on the initial and
annual charges that would otherwise apply. The level of discount is constantly being
extended as the total value of funds with each custodian continues to grow. All the
discounts are passed directly to the investors and in many cases funds are now bought
on Institutional terms with no initial charge.
The Cost of Transactions
Custodial platforms provide an execution only service for which a custody and
transaction charge is made. The charges for the selected custodial platform are referred
to within the illustrations provided at the time specific recommendations are made. In
addition to the transactional fees, there may be a facility administration charges for any
of the specialist wrappers that are appropriate to the planning.
The Cost of Advice
As Wealth Managers, our role is to devise, establish and manage each portfolio. The
process by which we establish each client’s risk profile, undertake fund research and
manage the ongoing investment advice has been referred to earlier.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
16
That role requires not just technical, investment and tax knowledge but also a very
clear understanding of the individual circumstances, resources and future plans of each
client.
We do not take commission form any of the counterparties to the transactions. We are
paid by our clients for our services either from the portfolios or by a separate fee
arrangement.
Initial Fees discount
I. new funds up to £ 99,999 - 2.5%
II. £ 100,000 - £ 249,999 - 1.85% 26%
III. £ 250,000 - £ 499,999 - 1.50% 40%
IV. £ 500,000 - £ 999,999 - 0.95% 62%
V. above £1,000,000 - 0.60% 76%
This covers the meetings, analysis of existing arrangements, identifying, agreeing and
prioritising future planning, risk profiling, research, preparing, presenting and
implementing a financial plan.
Annual Fees
1% per annum of fund value. This covers the ongoing investment management service,
the annual investment performance review and recommendations, an annual meeting
to review the overall financial plan.
Total Typical Portfolio Charges
The overall initial and annual charges will vary slightly depending on the makeup of
each portfolio and the discounts obtained on the underlying fund management charges.
The figures shown on the next page are a guide and are based on our Balanced portfolio
as at January 2011.
Portfolio Values Total Initial Charge Total Annual Charge
I. £100,000
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
17
II £300,000
III £600,000
IV £1,000,000
Figures based on an average Investment fund initial of 0.17% and average AMC of
0.73% (See Appendix 2).
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
18
THE KEY BENEFITS OF THE FIDUCIA MASTERTRUST ACCOUNT
1. Investment Choice
Each client portfolio is able to invest in any UK registered Unit Trust, OEIC,
Investment Trust or approved onshore fund. It can also register any shares listed
on the London Stock Exchange, although Fiducia does not provide advice on this
class of asset.
2. Competitively Discounted Charges
Across all seven portfolios, the custodian facility charges are discounted
depending on the portfolio size. Our own charges for investment advice are also
discounted in line with valuations.
3. Daily Valuations
A current portfolio valuation is provided 24 hours a day via the custodian’s
website.
The portfolio valuation will show the total value of the portfolio, the value of
each sub-account and the value of the individual investment funds held within
each account plus the percentage movement in value since the fund was bought.
4. Records
Records of all transactions, including fees and other deductions can also be
viewed on line. At the end of each tax year each client will receive a
consolidated tax statement for both income tax and capital gains tax.
This means it is not necessary for clients to maintain their own records.
5. Periodic Reporting
• Portfolio valuation
• Cash account summary
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
19
As at 5th April annually
• Portfolio valuation report
• Statement of transactions
• Cash account summary
• Full dividend statement
• Tax voucher (if applicable)
• Realised Capital Gains Statement (if applicable)
6. Linked accounts for discount purposes
As the value of the invested funds grows there are automatic reductions in the
annual management charge made by the custodian who will also allow family
members and relatives who reside at the same address to have their portfolios
linked to one another for charging purposes, which means the entire family
group benefits from lower charges.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
20
SECTION THREE
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
21
INTEGRATED FINANCIAL ARRANGEMENTS PLC
[1] FINANCIAL STRENGTH AND CLIENT SECURITY
[1.0] INTEGRATED FINANCIAL ARRANGEMENTS PLC
Integrated Financial Arrangements plc (“IntegraFin”) was incorporated in 1999 and has
offered the Transact wrap service since 2000. It has net assets of more than £12.9
million, based upon the September 2007 audited accounts and, at the time of writing
(October 2008), its funds under direction exceed £5.5 billion. IntegraFin’s Board has
been careful to ensure that the holders of the company’s voting shares do not include in
their number any institution that could be seen to be competing with the company or
the advisers with whom it deals. As a result, no UK financial services product provider
or fund manager has a shareholding, and the register comprises mainly private
individuals.
IntegraFin has made profits in every month since June 2003; an achievement unusual
so early in the life of a new financial services company. Indeed, it has paid dividends to
shareholders in 2007 and 2008.
In addition to the standard visits and reviews by the relevant regulatory bodies,
IntegraFin has been the subject of independent financial strength and due diligence
reviews conducted by private capital investors, the Association of Investment Trust
Companies (on behalf of its members) and consulting actuaries AKG (on behalf of two
IFA networks). It has satisfied all parties.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
22
[1.2] REGULATORY STATUS & CAPITAL ADEQUACY
IntegraFin is authorised and regulated by the Financial Services Authority (“FSA”). It is
authorised, amongst other things, to:
· hold client money;
· hold customer assets; and
· pass and execute customer orders.
As part of FSA regulation, IntegraFin has to maintain a designated level of capital
adequacy. This requirement applies to all similar FSA regulated companies and is
designed to protect investors by ensuring that enough capital is reserved to allow the
FSA to supervise a suitable transfer of the business should there be a need to do so.
Based upon the audited FSA return for the year ending September 2007, IntegraFin’s
qualifying capital is more than £3.9 million above the designated requirement.
Additionally, as part of FSA regulation, IntegraFin’s executives and relevant senior
employees have to be assessed and found to be of good character and appropriately
experienced for the nature of the company's activities. The FSA also has powers to
undertake supervisory visits to our premises.
Over and above the standard programme of visits by the FSA, and IntegraFin’s own
programme of compliance work, IntegraFin has appointed external auditors to conduct
a programme of regular compliance monitoring of Transact’s systems and procedures.
The reports from these audits go directly to the board and are available for review by
the FSA.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
23
[1.3] PROCEDURAL CONTROLS
Internal procedures are designed to protect investor assets.
Upon opening a Transact portfolio, every investor nominates a bank account into
which they wish all payments from their portfolio to be made. This is the only account
into which any cash withdrawal from a Transact Portfolio can be paid and, although
investors are able to request transactions via the web, they can only change this
nominated account with an original “wet signature” request to IntegraFin.
Client Services Managers (the people responsible for the maintenance of clients’
Portfolios) are segregated from Investment Accountants (the people who handle
clients’ assets). The processes resulting from this segregation limit in number those who
have access to the various stages of a withdrawal payment such that any client payment
or withdrawal goes through at least three levels of access (and individuals) before the
resultant payment is made. IntegraFin has implemented more than just the regulatory
minimum series of checks and balances to ensure the protection of investors' assets.
[1.4] SYSTEMS SECURITY
IntegraFin has security in place to protect its systems from attack. Transact-Online, our
website is protected by two firewalls and all user PCs have anti-virus software installed
which is updated at least weekly.
[1.5] DISASTER RECOVERY
IntegraFin has a disaster recovery plan in place to enable it to restore operations in the
event that their premises are destroyed or become inaccessible because of a disaster.
Critical to this is the remote back up strategy which has full copies of all systems and
the data which is created daily which is stored off site in London and in Melbourne,
Australia.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
24
[2] CLIENT ASSET PROTECTION & COMPENSATION
[2.1] CUSTODY
IntegraFin has a wholly owned subsidiary called Transact Nominees Limited:
• whose business is limited solely to the holding of investments or activities
directly related to the holding of investments; and
• in whose name all investments belonging to its clients are registered as
nominee.
While Transact Nominees acts as a registered holder of title to investments, it retains
physical custody of almost no client assets as:
• client monies are held by FSA authorised banks in IntegraFin's name;
• almost all client assets are dematerialised (i.e. not held in a physical form);
and
• paper certificates are only held temporarily at IntegraFin’s premises (pending
dematerialisation).
IntegraFin’s activity is restricted to the maintenance of the registers detailing client
holdings and directions to buy and sell the assets according to client instructions.
This arrangement ensures that there is a clear and distinct separation of those assets
relating to Transact clients and those that are IntegraFin’s own business assets.
[2.2] THE FAILURE OF INTEGRAFIN
In the unlikely event that IntegraFin, or one of its group companies, should fail, the
segregation of client assets from company assets means that the vast majority of client
assets could be transferred back to clients “in specie”.
In the even more unlikely event that this process could not occur, investors may be
entitled to redress under the Financial Services Compensation Scheme (FSCS), or, in
the case of IntegraLife International Ltd, through the Isle of Man Government
Insurance & Pensions Authority under the Compensation of Policyholders Regulations
(IOMIPA).
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
25
We have been advised that the levels of compensation offered by these schemes are as
follows:
(a) FSCS for investments (GIA and Stocks and Shares ISA) - a maximum of £48,000 per
claim. This is made up of 100% of the first £30,000 and 90% of the next £20,000.
(b) FSCS for cash - if cash is held for investment business purposes (i.e. pending
investment), the FSCS would consider those investment funds to be an “investment”
loss and the investment compensation limit of £48,000 would apply. However, in all
other circumstances (including in Cash ISA deposits) cash is treated simply as cash and
would be subject to a £50,000 limit per client.
(c) FSCS for life policies (Personal Pensions & Onshore Bond) – a maximum of
100% of the first £2,000 and 90% of the unlimited remainder.
(d) It is our understanding that smaller occupational pension schemes, namely our
Executive pension plan (as a single member money purchase arrangements and our S32
contract, (now registered pension schemes), will fall within the remit of the protection
offered by the FSCS to personal pensions (as set out above).
(e) IOMIPA (Offshore Bond) – a maximum of 90% of the liability arising at the time of
the claim.
IntegraFin also has indemnity and fidelity insurance in place to protect investors' funds
in the event of misfeasance or defalcation.
[2.3] THE FAILURE OF BANKS
IntegraFin is required to treat all money held by it on any client’s behalf in accordance
with the rules set out in the FSA’s Handbook.
Our policy is currently to hold client money (“cash”) at a minimum of four FSA
authorised UK banks in client money accounts that comply with all the relevant
regulatory requirements for such accounts. At all times, at least two of these accounts
are established with full operational (rather than just deposit) functionality. This
ensures that there is always a fall-back position to protect both transactional
capability and liquidity.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
26
Each client’s cash is required to be held proportionally across all of our client money
accounts. Should any of these banks not be able to return deposits on a permanent basis
in circumstances when a claim could be made to the FSCS, then a limit of £50,000
would apply per client per bank.
Cash held in the Transact Onshore and Offshore Bonds is not protected under the FSCS
in the event of the failure of an underlying bank deposit. In the case of the Offshore
Bond, this is because the FSCS does not apply to offshore business. In the case of the
Onshore Bond, this is because the life company providers of UK life policies which do
not include a trust element (which means all onshore bonds) are not eligible claimants.
Instead, protection is provided to each wrapper in the circumstances and to the extent
described at [2.2(c)] and [2.2(e)] above.
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
27
APPENDIX
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
28
Appendix 1 – Effect of discounted fund management charges
An example of IFDL Succession discounted terms based on our Balanced Portfolio as at
March 2011.
Standard
Initial
Charge
Standard
Annual
Charge
Negotiated
Initial
Charge
Negotiated
Annual
Charge
0.00 0.00 0.00 0.00
3.00 1.00 0.00 0.50
0.00 0.50 0.00 0.48
3.00 1.00 0.00 0.50
5.00 1.25 0.00 0.63
3.75 1.50 0.00 0.75
4.00 1.50 0.00 0.75
4.00 1.50 0.00 0.75
4.00 1.50 0.00 0.75
5.25 1.50 0.00 0.75
5.25 1.50 0.00 0.75
5.00 1.50 0.00 0.75
4.00 1.50 0.00 0.75
4.25 1.50 0.00 0.75
4.00 1.50 0.25 0.75
4.00 1.00 0.00 0.75
4.00 1.50 0.00 0.75
5.00 1.50 0.00 0.75
4.25 1.50 0.00 1.00
0.50 1.50 0.50 1.50
4.00 1.50 0.00 0.75
5.25 1.75 0.00 0.88
5.00 1.50 0.00 0.88
3.76 1.33 0.02 0.73
Cash Deposit
M&G UK Inflation Linked Corporate Bond A Acc
Standard Life Inv Global Index Linked Bd Inst Acc
M&G Strategic Corporate Bond A Acc
Invesco Perpetual Tactical Bond Acc
Threadneedle Emerging Market Loc Ret Net Inc 1 GBP
M&G Global Convertibles Fund GBP A Acc
Invesco Perpetual Japan Acc
Aberdeen Emerging Markets A Acc
Insight -Absolute Fund of Funds A Acc GBP
Standard Life Inv Glo Abs Ret Strategies Inst Acc
Newton Real Return A GBP Inc
Schroder Global Property Securities A Acc
Ignis UK Property Acc
Invesco Perpetual High Income Inc
M&G Recovery A Acc
Aberdeen World Equity A Acc
M&G Global Basics A Acc
First State Global Listed Infrastructure Acc A
BlackRock Gold & General Acc
Allianz RCM Global Agricultural Trends - A - GBP
Newton Global Higher Income Inc
HG Capital Trust
Simple Average of Fund Charges
Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Colchester, Essex, CO7 6AD.
Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Services Authority. FSA No. 408210.
ww
w.f
idu
cia
wealt
h.c
o.u
k
29
Appendix 2 - Glossary
Alpha: This is a measurement of how well a fund has outperformed its benchmark.
Risk Metrics: The process by which funds are assessed as measured by the level of risk
undertaken by a fund manager. Risk metrics usually analyse the performance of a fund
to a relevant benchmark index over a defined 36 month period.
Sharpe Ratio: This is a measurement of a fund’s performance in accordance to the level
of risk taken.
Standard Deviation: This measures the volatility of returns over a defined period of
time.
Tracking Error: This describes the volatility of the difference in returns between a fund
and its benchmark.