Value Assessment Report

Introduction

Under new Consumer Duty rules, the Financial Conduct Authority (FCA) now requires all wealth managers to complete an annual value assessment for each product and service that we manage.

The value assessment process is an important part of Consumer Duty and a commitment that we take very seriously as part of our regulatory responsibilities. The new duty makes it even more vital that advisers have the tools they need to deliver for clients. Our value assessment is intended to boost information flow across the distribution chain.

The FCA defines ‘value’ as the relationship between the overall price the client pays for products or services and the benefits they are likely to receive. There is more detail in this report on the methodology behind our value assessment, alongside our key findings. Our goal is not just to simply meet the requirements of Consumer Duty, we want to keep improving the value we provide to clients, and we set out in this report exactly how we will do that.

The new duty also requires advisers to recommend products in line with their intended target markets. This requires information on identified target markets and distribution strategies. You can find this document on our website here.

Our approach to value assessments

For the purposes of Consumer Duty rules, Oakham Wealth Management Ltd (OWM) is a manufacturer of the investment services shown below.

Under Consumer Duty, the FCA expects a high level of communication and ongoing rapport between manufacturers such as OWM and professional advisers (distributors), to allow parties at all levels of the value chain to be able to assess that the products they create, offer or advise on, and demonstrate that they are delivering good outcomes for clients.

This means sharing all relevant information with you about our products and services such as this value assessment and any other information necessary for you to understand the characteristics of the product, as well as sufficient information for you to understand whether the product is suitable for any potentially vulnerable clients.

The value assessment is designed to make sure that your clients pay a fair price for our products and services. We will make sure that our prices are fair in relation to the:
– Key features and benefits of the product or service.
– Quality of service your client receives.
– Performance of the product or service.
– Price of comparable products or services.
– Costs we incur to deliver the product or service.

The report covers our assessment as at 30 April 2023.

Assessment of financial instruments

Where our services invest in third party funds, we assess the compatibility of these with the needs of end clients. Assessments include consideration of the client’s risk appetite, the impact of costs and charges, and the financial strength of any product manufacturers. We also consider manufacturers’ defined target markets and the knowledge of our client base.

To ensure that financial instruments distributed to clients are fully understood, our investment managers are required to complete detailed due diligence on investments. For all instruments used within our Investment Process, this due diligence is reviewed and approved by the Investment Committee.

We will obtain detail from manufacturers on the outcome of their value assessment to be satisfied that the investments included in our portfolios provide fair value.

In instances where adequate information is not publicly available from the manufacturer, we undertake additional due diligence to ensure that the target market can be determined with sufficient granularity.

Vulnerable clients

Across all our products and services, we have processes in place to ensure clients with characteristics of vulnerability are not disadvantaged.
We have policies in place to ensure:
– The needs of vulnerable clients are taken into account, and that they receive fair outcomes.
– A consistent approach to consumer vulnerability is understood and embedded across all areas of the business.
– Staff receive the required training, guidance and support to identify vulnerable clients and provide them with the additional levels of care required.

We appreciate that vulnerable clients may have needs that are more challenging and complex than the average client. Where vulnerabilities are identified, our staff will respond in a considered and tailored way and facilitate the necessary arrangements to assist them. For example:
– Flexibility in the applications of our policies and procedures where appropriate.
– Flexibility around appointment locations (for example, a client’s home), times of day and meeting duration. We also consider the accessibility of our office for those clients with health conditions/disabilities.
– Providing clients with a choice of ways of communicating. This could relate to the method of communication (eg audio/ face-to-face/ digital) or the service delivery (eg agreement to talk at a particular time of day depending on carers and medication /providing information in advance of meetings).
– Providing clients with accessible and simple communications to support the client to understand products and services.
– Offering clients the option of having a third party to support them at a meeting. We also have provided resources on our website to help advisers tackle the issues behind client vulnerability.

Methodology

Key features and benefits

We have considered the key features and benefits of our discretionary investment management services as they relate to four key areas, and the extent to which the service has the capacity to deliver individually for a client.
– Investment mandate – the breadth of options and degree of flexibility for clients in terms of their required investment objective(s), risk profile, and specific investment preferences/restrictions.
– Investment universe – nature and scope of economic and securities research and analysis required to deliver the investment mandate.
– Client updates and information – regular reporting, digital access, contact with our investment personnel/teams, and approach to ad hoc queries that your clients can expect.
– Custody and administration – the extent to which we undertake such activities on your client’s behalf.

Quality of service

We value our clients’ satisfaction, and all feedback helps us to keep refining the services we provide.

We also consider a variety of internal metrics as an indicator of client satisfaction including:
– The number and nature of client complaints.
– Client tenure and asset flows.

Performance

While investment returns are not guaranteed, we believe it is reasonable for your clients to expect us to deliver competitive performance over the medium to long term.

We believe the value we add is in the outperformance of our investment services relative to market benchmarks or peer groups. We have assessed rolling five-year historic returns on a quarterly basis for the available full track record, and have reviewed the proportion of data points where our portfolios have outperformed to evidence consistency. We have used total returns, net of fees.

Where applicable we have relied on independent data and analysis from providers such as Asset Risk Consultants (ARC), who create Private Client Indices and publish quarterly reports, and Morningstar.

For additional data and information about the historic performance of our investment management products and services, please refer to the factsheets and literature available on our website.

The bespoke nature of some services means that some clients will also benefit financially from tax efficiencies through our discretionary active management of product wrappers and tax allowances.

Price

We have considered the total cost of our discretionary investment management services to clients with reference to key components:
– Investment service fees – the fees we charge for providing clients with the investment service. This includes any initial fee, annual management charge, transaction charges, and foreign exchange charges (for non-sterling transactions).
– Underlying product charges – the costs of manufacturing and managing the underlying investments, eg funds, where costs are taken directly from these investments, includes one-off charges, ongoing charges, transaction charges, and incidental costs.
– Other administrative charges – associated with specific administrative activities, includes stock transfers, chaps payments, historic valuations and probate services, and Lifetime ISA withdrawals.

Whilst we have not included any costs associated with advice, we have taken into consideration in our value assessments that our discretionary services are sold via financial advisers who will charge fees for advice in addition to our fees.
We have also considered our investment service fees and the total cost to clients of our services in the context of the fees and costs charged by a selection of other UK discretionary investment management firms that provide similar services.

Where available we have relied on data and analysis conducted by independent research agencies. Where independent research is not available to us, we have undertaken our own analysis based on publicly available information sourced from providers’ websites.

We have also assessed the rates that our existing clients are currently paying and how that aligns with expectations based on our published pricing approach and rate cards. For full details on our charges for our services, please contact your OWM representative or email us at directors@oakhamwealth.com.

Costs

We have considered both the direct and indirect costs that OWM incur to deliver our discretionary investment management services to clients. These include:
– People who work exclusively to deliver the service eg Investment Managers, Portfolio Assistants and Administrators.
– People who support the provision of the range of services, eg Investment research and analysis, risk oversight and management, sales and marketing.
– Standard business overheads such as outsourced administration activities, technology and office costs, and other ancillary costs required to deliver our services.

Our overall findings

Our assessment has concluded that your clients are paying a fair price for our products and services.
– Key features and benefits – we have found that the range of features and benefits of our discretionary investment management services can meet a broad variety of client needs, providing a quality investment solution and ultimate peace of mind for clients.
– Quality of service – overall our service is of good quality, with high levels of satisfaction and a low number of client complaints.
– Performance – has been delivered over the medium to long term for our investment services, where any service has underperformed, we have provided an explanation of the market conditions which have impacted performance in our findings.
– Price – our charges and fee structures were found to be reasonable and appropriate for clients and are in line with other comparable services in the market.
– Costs – we have found that they are reflective of the cost to deliver the service and are effectively managed at a corporate level.

Next steps

We recognise that each of our clients has their own distinct needs and desired outcomes, and with this in mind, we are continually looking for ways to enhance our investment products and services.

We will continue to test our operational and marketing materials with clients and professional advisers to ensure that our documentation is relevant, clear and appropriate. To keep you well informed about our portfolios we also intend to further refresh and enhance our marketing materials and market outlooks.

We hope that these initiatives will help to enhance our reporting of value over time and we would welcome any feedback you might have on this inaugural value assessment.

Bespoke Portfolio Service (BPS)

Key features and benefits

This service is designed for clients who want an individual investment portfolio tailored to their personal requirements. It is offered on a discretionary basis, which means that a dedicated investment manager will make investment decisions on your client’s behalf, using their knowledge and expertise. The benefits:
– Investment mandate – your client’s investment mandate will be tailored to meet their individual requirements. Your client’s portfolio will be optimised, making use of appropriate tax wrappers and allowances.
– Investment universe – your client’s portfolio is actively managed by an investment manager who leverages our investment process which involves research and analysis across multiple asset classes and geographies to inform our house view and securities buy lists.
– Client updates and information – your client will receive a comprehensive personal portfolio valuation on a quarterly basis, an annual review, and access to an online portal, an online portal, which provides up to date portfolio valuations, a record of all transactions and tools to analyse and understand specific holdings. Your client also has direct access to their investment manager and a local support team who are responsible for all ongoing administration of your client’s portfolio and are available to respond to any of your clients’ questions or requests.
– All new clients are provided with a personal investment proposal which considers their individual circumstances and requirements.
– Custody and administration – your clients’ assets will be held in our custody and we will be responsible for all administration activity associated with their portfolio.

Quality of Service

The number of client complaints we have received remains very low. The majority of our BPS clients have been with us for at least fifteen years. We believe that clients’ satisfaction with this service is good. We will continue to closely monitor our management information so we can provide a high quality of service to clients.

Performance

Assessment of the performance of BPS portfolios relative to the ARC Private Client Indices shows client portfolios are consistently in line or perform better than Indices over a market cycle.

We acknowledge that sometimes portfolios will underperform during points in the investment cycle given their particular investment style. For additional data and information about the historic performance of our investment management products and services, please email directors@oakhamwealth.com.

The bespoke nature of this service means that some clients will also benefit financially from tax efficiencies through our discretionary active management of product wrappers and tax allowances.

Price

The service has a flexible pricing structure to accommodate the breadth of the offering and to ensure individual clients pay a fair rate.

Given the bespoke nature of the service, the current pricing approach means that clients will pay an appropriate investment service fee rate for their circumstances, on the basis of volume of both assets and anticipated transactional activity. For example, clients with large portfolios will not pay high nominal fees that cannot be justified by a commensurately larger management burden for OWM, and portfolios with less frequent or less voluminous trading are not paying unjustifiable costs associated with dealing activity.

Entry and exit fees are not typically charged for this service. Additional administrative costs are only levied when specific events that warrant them occur.

As this service invests significantly in third party funds, a material part of the total cost to clients will be the underlying product charges levied and collected by the fund manager. We actively monitor these costs and endeavour to ensure we get competitive rates.

In the context of OWM’s full range of investment products and services, this service has a higher cost to clients than others offered by OWM.

We have compared the total cost to clients of this service with other firms offering a similar service and found ours to be in line with our peers.

Given the bespoke nature of the service, it is expected that clients will pay different levels of fees. We have reviewed the actual rates paid by clients of the service to ensure the degree of dispersion amongst clients is in line with our expectations. Where we have identified any outliers paying higher than expected fees, we have taken action.

We regularly review our charges and fee structures to ensure that they are reasonable and appropriate for clients. We are currently in the process of conducting a separate, comprehensive review of pricing across our range of discretionary products and services. Our findings from this value assessment will be considered as part of that work.

Costs

A significant proportion of the total cost to OWM of delivering this service is the staff costs associated with providing clients with a comprehensive range of investment benefits with individual portfolio tailoring, and full servicing and administration. In the context of OWM’s full range of investment products and services, the service has a higher cost to deliver.

Effective management of costs is a key requirement for providing value to clients. We will continue to closely monitor the costs we incur to deliver this service and will seek to pass on any savings or reinvest back into our business to enhance the investment services we provide to clients.

Conclusion

We believe the total cost to clients of the Bespoke Portfolio Service is proportionate and fair in the context of its total benefits and that the service represents value for money for clients.

Managed Portfolio Service (MPS): Active, Passive and ESG Strategies

Key features and benefits

This is a managed portfolio service that provides clients with a choice of 10 model portfolios that are managed to specific investment objectives and risk levels, and using active, passive or responsible investment strategies. It is offered on a discretionary basis, which means that a team of investment managers will make investment decisions at a model level, using their knowledge and expertise.

The benefits:
– Investment mandate – each model portfolio has a specific investment objective and risk profile, the range of models available meet a variety of client needs including growth and/or income over five risk levels. The investment managers will follow the associated investment strategy of the model, investing in either actively managed funds, passively managed funds, or actively managed funds that aim to advance businesses that provide solutions to sustainability issues or have strong corporate policies and outputs relating to ESG criteria.
– Investment universe – each model portfolio is actively managed by a team of discretionary investment managers who leverage our centralised investment process which involves research and analysis across multiple asset classes and geographies to inform our house view and securities buy lists.
– Client updates – Individual factsheets are published monthly for each model to provide updates on performance and portfolio composition and additional insights including market commentary is available on our website.
– Custody and administration – your clients’ assets will be held in custody and administered by a third party, OWM has no involvement from this perspective.

Quality of service

We have had no client complaints related to this service.

The majority of our MPS clients have been with us for at least four years.

As client assets are custodied by third parties, we have limited visibility of day to day flows and client level detail. We rely on regular management information from third party platforms that allows us to monitor this.

We believe that clients’ satisfaction with this service is good. We will continue to closely monitor our management information so we can provide a high quality of service to clients.

Performance

Assessment of the performance of BPS portfolios relative to the ARC Private Client Indices shows client portfolios are consistently in line or perform better than Indices over a market cycle.

We acknowledge that sometimes portfolios will underperform during points in the investment cycle given their particular investment style. For additional data and information about the historic performance of our investment management products and services, please refer to the factsheets and literature available on our website.

Price

The service has an appropriate pricing structure to ensure individual clients pay a fair rate.

Given the standardised nature of the service, the current pricing approach means that clients will typically pay a similar investment service fee rate. There is a degree of flexibility to ensure clients with large portfolios will not pay high nominal fees that cannot be justified by a commensurately larger management burden for OWM.

As this service invests significantly in third party funds, a material part of the total cost to clients will be the underlying product charges levied and collected by the fund manager. We actively monitor these costs and endeavour to ensure we get competitive rates.

In the context of OWM’s full range of investment products and services, this service has a higher cost to clients than others offered by OWM.

We have compared the total cost to clients of this service with other firms offering a similar service and found ours to be in line with our peers.

Given the standardised nature of the service, it is expected that clients will pay a similar level of fees. We have reviewed the actual rates paid by clients of the service to ensure the dispersion is in line with our expectations. Where we have identified any outliers paying higher than expected fees, we have taken action.

We regularly review our costs and fee structures to ensure that they are reasonable and appropriate for clients. We are currently in the process of conducting a separate, comprehensive review of pricing across our range of discretionary products and services. Our findings from this value assessment will be considered as part of that work.

Costs

A significant proportion of the total cost to OWM of delivering this service is the staff costs associated with providing clients with a specific range of common investment benefits, with full servicing and administration. In the context of OWM’s full range of investment products and services, the service has a moderate cost to deliver.

Effective management of costs is a key requirement for providing value to clients. We will continue to closely monitor the costs we incur to deliver this service and will seek to pass on any savings or reinvest back into our business to enhance the investment services we provide to clients.

Conclusion

We believe the total cost to clients of the Managed Portfolio Service is proportionate and fair in the context of its total benefits and that the service represents value for money for clients.

Important Information

This information is provided for use exclusively by professional advisers. Any information provided in this document is current only as at the date of publication and OWM has no obligation to update or supplement any of the answers given. While the information in this document has been prepared carefully, Oakham Wealth Management Ltd gives no warranty as to the accuracy or completeness of the information. The price of investments and the income from them can go down as well as up and neither is guaranteed. Past performance is not a reliable indicator of future results. Investors may not get back the amount invested. Changes in rates of exchange may have an adverse effect on the value, price, or income of an investment. Investors should be aware of the additional risks associated with funds investing in emerging or developing markets. Tax treatment depends on individual circumstances and may be subject to change in the future. OWM does not provide tax advice and independent professional advice should be sought. The information in this document does not constitute advice or a recommendation and investment decisions should not be made on the basis of it. This document is for the information of the recipient only and should not be reproduced, copied or made available to others. ARC Private Client Indices (“PCI”) are based on historical information and past performance is not indicative of future performance. PCI are computed using a complex calculation and the results are provided for information purposes only and are not necessarily an indicator of suitability for your specific investment or other requirements. ARC does not guarantee the performance of any investment or portfolio or the return of an investor’s capital or any specific rate of return. ARC accepts no liability for any investment decision made on the basis of the information contained in this report. You should always complete your own analysis and/or seek appropriate professional advice before entering into an agreement with any PCI Data Contributor. The content is the property of ARC or its licensors and is protected by copyright and other intellectual property laws. Oakham Wealth Management Ltd is registered in England & Wales No: 05281855. Registered office: Berkeley Square House, London W1J 6BD, UK. Oakham Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.