WEALTH MANAGEMENT QUARTERLY REVIEW Q3

Autumn 2019


Welcome to the AUTUMN 2019 Finance Shop Wealth Management (FSWM) Quarterly Review.

 

The Finance Shop Quarterly Review provides clients in our Advisory Portfolio Management (APM) service a review of the financial world over the last three months, and how this may have affected their pension or investment. If you would like to read more about this service, please Click Here.

A key part of the reporting is the colour coding. Each FSWM portfolio is colour coded to enable you to spot which category applies to you. The relevant information is then presented in a clear and easy to understand way. However, if you require any further clarification, please do not hesitate to get in touch.

MARKET OVERVIEW - QUARTER THREE 2019

Markets saw a mixed quarter with North America and corporate bonds delivering the strongest returns. Sentiment remains fragile with conflicting signals continuing to muddy the waters. Data has continued to weaken led by the manufacturing sector with Europe and Asia impacted most, however US consumer spending and service data has remained robust. It is these conflicting signals that make the outlook so difficult to predict.

Equity markets led by the US are pricing in a shorter term soft patch with global growth recovering as more accommodative measures by central banks help growth to recover as we head towards the end of this year and in to 2020. Bond markets on the other hand paint a more subdued picture with further rate cuts and perhaps a longer term global slowdown on the cards.

Perhaps key to the direction of markets in the medium term remains the outcome of the US / China trade war, a more positive outcome would likely push markets higher and lead to an improvement in manufacturing, whilst a ratchet up in tensions could derail an already weak global outlook.

On the political front things remain deeply uncertain with Boris Johnson, if anything, having stoked hostilities further without making any visible progress. Unless Boris can pull a rabbit out of the hat, it appears increasingly likely that a further delay will ensue with an election to follow. Whilst this is not a great outcome, anything outside an outright Labour victory looks largely priced in to UK stock markets.

Market Overview5


FSWM PORTFOLIOS – QUARTER THREE 2019 PERFORMANCE

The graphs below show how the FSWM portfolios within the four Finance Shop risk categories have behaved over the last three months. The first graph shows the total return for the quarter whereas the second graph illustrates the “month by month” performance. The performance figures are aggregated so, for example, the green bar is made up of all the FSWM Multi-Asset Balanced portfolios across all product types. If you require specific performance figures for your plan, please contact your adviser.

Cumulative Performance3Discrete Performance4

 


PERFORMANCE REVIEW

Performance for the portfolios was positive across all mandates over the quarter, which was pleasing given the more volatile backdrop. Our Cautious mandates produced the best results as the greater exposure to fixed income strategies proved beneficial.

Elsewhere the prospect of a disorderly Brexit declined, pushing up sterling which weighed on some of our overseas investments.


FSWM PORTFOLIOS – ASSET ALLOCATION

There are six portfolios in the FSWM range, four growth and two income which are detailed below. Your FSWM pension or investment will be invested in one of these categories. The tables show the aggregate composition of the portfolios with some figures to show the potential risk and return of each category.

growth PORTFOLIOS

Cautious assall3Balanced assall5Strategic assall4Global assall4

INCOME PORTFOLIOS

There are two income portfolios which aim to produce an income within a target range as highlighted in the table below. The two portfolios cover the Cautious and Balanced Finance Shop risk categories.

Cautious INC assall2Balanced INC assall2


FSWM PORTFOLIOS - LONGER TERM PERFORMANCE

The first graph below shows how the FSWM portfolios have performed over 12 months. For comparison, the returns of cash (MoneyFacts 90 days notice 10K) and inflation (UK Consumer Price Index) are also shown. As with the Quarter Two 2019 Performance graphs, the figures for each category are aggregated.

The second graph illustrates how the portfolios have performed since launch (1st November 2008).

1 year performance2

Performance from launch3


FSWM FUND REVIEW POLICY

A key part of the FSWM service is to monitor the underlying performance of each fund within the portfolios for both risk and return. We have selected quality funds with strong track records and therefore do not envisage a high turnover of holdings. However, there will be occasions when the performance of an individual fund will lead to its expulsion from the portfolio(s). There are a number of factors that determine this decision, for example consistent under-performance, change of management team etc. It is also important, however, to have patience with a fund that is just suffering short-term under-performance.

We operate a “traffic light” system and will move a fund from a “green” to “amber” rating if the fund requires closer scrutiny at the next review. If a fund shows sufficient improvement, it will move back to “green”. If the fund consistently under-performs without good reason its status will change to “red” and the fund will be removed from the portfolio(s). A replacement fund will be selected and all clients holding the fund within their portfolio will be notified. Upon receipt of their authority, the client’s funds will be switched accordingly.


RESULTS OF FUND & ASSET ALLOCATION REVIEW

The Investment Committee meets on a quarterly basis and one of its primary functions is to review our existing fund range. Within this meeting we scrutinise any funds which we feel are performing significantly differently to their peer group or benchmark, with a number then run against our internal performance and risk measurements.

Ongoing political uncertainty, and a lower growth environment, has led us to believe that the backdrop for markets continues to be challenging as we head towards the end of 2019 and beyond. To reflect these factors the Investment Committee has recommended a number of changes to the current asset allocation of the FSWM portfolios.

Many clients holding a product using FSWM will receive a switch letter to recommend changing to the new asset allocation. It is important to sign and return this letter to us as soon as possible so your portfolio can be updated. The switch letter will contain further details of the changes, but our aim is to optimise returns whilst minimising risks.


ASSET ALLOCATION TABLES – IMPORTANT INFORMATION

The maximum quarterly gain and loss figures in the asset allocation tables above are taken from Financial Express based on the last 43 quarters of the longest running FSWM portfolios (up to August 2019). For the income portfolios, the figures are based on 24 quarters.

FE Risk Score: Financial Express have introduced FE Risk Scores to provide a single, easy to understand measure of risk across a range of investments. In the UK, Risk Scores measure the riskiness of any given investment in relation to the FTSE 100. Weekly volatility is measured over up to 3 years, with recent behaviour counting more heavily than earlier behaviour. The Risk Score is calculated weekly, and can be tracked over time. Cash type investments will have scores near zero, investment funds will tend to have scores in the 0 - 150 range.

The FTSE 100 is always 100. There is no upper limit to the scores.

The asset allocation figures are aggregated based on the current holdings within the FSWM portfolios for a new investor as at 12th August 2019. They will vary on a daily basis subject to market fluctuations. Rebalancing will be recommended if equity content exceeds the benchmark maximums. There is no guarantee that any of the model portfolios above will achieve their stated objectives. Each model portfolio may also experience more or less volatility than expected. The value of investments will fall as well as rise and are not guaranteed. Past performance is no guide to future performance. The Finance Shop Risk Categories are graded from 1 to 7. The above portfolios cover categories 3 to 6. For further information on all categories, please speak to your Finance Shop Independent Financial Adviser.


ADDITIONAL IMPORTANT INFORMATION

This report has been issued by the Investment Committee of the Finance Shop Wealth Management team using data provided by Financial Express. Care has been taken to ensure that the information is correct but Financial Express and Finance Shop neither warrants, represents nor guarantees the contents of the information, nor does Financial Express or Finance Shop accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein.

Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Currency fluctuations can also affect fund values. The above report does not constitute advice and you should speak to your Independent Financial Adviser before you make any alterations to investments or pension plans.

The instruments recorded above are weighted model portfolios created using Financial Express Analytics. Performance figures shown are based on the weighted models and may differ from the actual returns achieved by investors. Performance figures shown are based on bid to bid gross returns and do not include plan, contract or ongoing adviser charges / commission. Please refer to your policy documentation for further details.

Financial Express Limited Registration number: 2405213. Registered office: 7 Chertsey Road, Woking, Surrey, GU21 5AB. Telephone 01483 783 900. Website www.financialexpress.net

Finance Shop is a trading name of Finance Shop Limited. Company Number 07535053. Registered in England. Registered Office: North Wood Place, Octagon Business Park, Little Plumstead, Norwich, Norfolk NR13 5FH.

Finance Shop is authorised and regulated by the Financial Conduct Authority.


ABOUT FINANCE SHOP

Formed in 1990, Finance Shop has grown to become one of the region’s leading firms of Independent Financial Advisers.

As a locally owned, genuinely independent company, we pride ourselves on the quality of our advice and service to both personal and corporate clients. With over 150 years of financial services experience within the firm and over half a billion of assets under management, we have the expertise, experience and knowledge to be able to advise on all aspects of financial planning.

Our belief is that access to quality, independent advice is more important than ever and that is why we spend the majority of our time face to face with new and existing clients, explaining the key issues of today and helping them plan for the future.