FOL Wealth, which only began regulated work last year and comprises a team of just three, outsources its investment propositions. But managing director Abi Ladele said in the future he plans to bring everything in-house.
‘It makes sense for us to outsource in the first few years,’ he said. ‘But, as time goes on, we will have our own research team and make our own decisions.’
Different strokes
FOL Wealth currently has four propositions. It introduced a robo-advice service for younger clients; for example, children of existing clients looking to complete simple tasks such as topping up an ISA. The service is accessed online and monitored by one of Ladele’s administrative staff.
For this proposition, the firm uses passive specialist Vanguard, which keeps costs low, and technology from Intelliflo. The minimum investment is £1,000 and the maximum £50,000. But, in Ladele’s experience, clients using this service should have a maximum investment of around £20,000.
There are currently four clients on the firm’s robo-advice proposition. Ladele hopes robo clients will eventually cross over to become full service clients.
The firm’s second proposition is its goal-based model portfolios, which target clients with up to £100,000 to invest. Ladele has been working with SEI to develop seven portfolios, with risk grades ranging from defensive to aggressive. These portfolios are around 80% active and 20% passive.
Human touch
The model portfolios are aimed at clients with particular financial goals, such as buying a house or car. They are underpinned by a focus on human behaviour, an approach Ladele also uses to give advice. ‘You must try to understand how the brain works,’ he said. ‘If a client makes an emotional decision, they are likely to change their mind as time goes on.’
Ladele chose SEI for its unmatched technology. Moreover, there is no contract, so he and his clients are not tied to the company.
FOL Wealth’s multi-asset solutions are offered by Goldman Sachs, Architas and JP Morgan. These are aimed at clients with up to £250,000 to invest.
Potential proposition
Finally, FOL Wealth is in the process of introducing a discretionary service, offered by Seven Investment Management (7IM), for its wealthiest clients. ‘It’s still early days with 7IM,’ Ladele said. ‘They gave us a presentation a few weeks ago and we’re still having conversations.’
He likes the flexibility and independence offered by 7IM. Moreover, he added the company had agreed to discuss lowering its prices for FOL Wealth clients.
Ladele believes his higher asset propositions plug a gap between an impersonal service offered by retail banks and solution-focused services offered by private banks. This suits FOL Wealth’s typical clients, who are mid-sized business owners and entrepreneurs. ‘They are not yet multi-millionaires, but they want a little bit better for their money,’ he said.
Balance of both
The managing director does not have a particular preference for active or passive funds, but said active managers must justify their charges. ‘You cannot reward bad performance in any walk of life and, if you’re not delivering, you can’t expect to get paid for it.’
Ladele said he is considering a 2% fee cap, encompassing advice, platform and fund management fees. Hence he favours passives’ 0.7% average fee, which, combined with his 1% advice fee and a 0.3% platform fee, already hits this target.
However, he accepts there are times when active management is necessary. ‘In a volatile market, such as the bond market, you need an active manager to make decisions on a daily basis.’
Overall, Ladele believes it is vital to have a range of propositions. ‘For me, it’s just about having all the options available for a client.’
