bespoke is not always best

Whitechurch Securities' Gavin Haynes explains why running a bespoke service does not benefit your business or, for that matter, your clients.

bespoke is not always best


Haynes is managing director of Whitechurch Securities, a boutique discretionary manager of diminutive size compared to many of its bank-owned competitors. 

Given the firm’s scale, you might assume that custom-built solutions would help set it apart from other wealth managers. But while IFAs and their clients are given a personal service in terms of access to Haynes and his team, he is very much of the mindset that all investors should be given exactly the same opportunities.

“It’s all about best execution and making your deal at the optimum time,” Haynes says.

“If you take a view on what is the optimum time you want to be buying or selling a holding, then you should be doing that for all clients, otherwise you are not treating them fairly.”

Model-based services

The investment team offers two services – a Prestige service for clients with £100,000 or above to invest, and a portfolio management service. Both are model-based.

Haynes adds: “Our Prestige service tailors portfolios to clients’ risk profile and investment objective, but we have an optimum portfolio for each category within that. For example, if someone is a risk profile 5 [based on the Distribution Technology risk ratings] and they are looking for income and growth, then everyone within that portfolio would be managed as if that was my portfolio today and I was looking for income and growth and my risk profile was 5.

“We make sales across the board, and we believe that is a more efficient way of running money than having 500 clients with 500 different portfolios and calling them bespoke, because you can’t manage money effectively that way.”

Whitechurch recently celebrated its 30th anniversary, having been set up as an investment-led IFA by founder and chairman Kean Seager. The firm currently looks after around £300m of assets under advice, while the discretionary team has £185m under management.

Haynes’ process

Haynes himself joined the Whitechurch team in 1996, impressed by the firm’s boutique culture and the promise of a career that would progress much faster than if he joined a larger organisation.

His investment philosophy is very much top-down driven, built around a formal monthly asset allocation meeting considering the parameters for clients’ risk tolerance.

“There aren’t any assets we strictly have to invest in. If we don’t believe it is in the best interests of the client, then we won’t be forced to hold a particular area. The perfect example at the moment is gilts, which we don’t hold. In the past we have also held zero property. We won’t diversify for diversification’s sake,” he says.

Fund manager selection is relatively conservative in that individuals with a strong and consistent track record of operating well in different environments are preferred to newer funds. However, all have to sit in line with the Whitechurch team’s own top-down view, which is informed from the 200-plus meetings that they have each year with managers.

Haynes says: “We have a shortlist of managers for each area, and also a quantitative-driven process which looks at fund manager consistency as well as where they are adding alpha.

“It is important to have a reserve list in case something blows up in a portfolio, or if there is a manager change or performance doesn’t meet expectations or we want to change the style of how we invest within a certain market.”

Principles first

He adds: “There are times when you have to not ignore sentiment. There were times when, rather than fighting it, we could have gone along with it – for instance, it would have been more rewarding to have held gilts last year. But as a whole I think the key is to stick to your convictions rather than chase short-term investor sentiment. Sometimes you have to accept periods of short-term underperformance.”

An alternative yielding asset class to gilts is property, which the team does hold in small amounts in the balanced and cautious portfolios. 

Haynes says: “We see very little prospects for capital growth from property, but yields are attractive relative to gilts and prices are supported at the prime end of the market. This asset class helps dampen volatility during this risk-on/risk-off environment. Also, during the risk-off months, it trundles along and provides income-led returns.”

Individually assessed

Alternatives – including commodity and private equity funds – are also used in portfolios at the margin. Absolute return funds are used on occasion too, most notably the ever popular Standard Life Global Absolute Return Strategies (GARS) Fund, although Haynes remains wary of the sector as a whole and recommends judging each fund individually.

He explains: “The key change over the past decade has been the difficulty in making money from long-only equities, especially since 2000 when the market peaked and the tech bubble burst. That has resulted in the development of products to try and make a positive return irrespective of the direction of markets. Some have been good, others have been awful, and it is our job as fund selectors to drill down and see whether such investments do add value and justify the risk/reward trade or whether they are marketing-driven.”

And given the pressures on professional investors today to make the right call, picking the winners from a universe of many different strategies, you can understand why the promise of a true bespoke service may well be a step too far.



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