For generations wealth managers have operated within a comfortable and unchallenged niche: they would invest money on behalf of their clients and update them of their progress once a year. A kind of “don’t bother us and we won’t bother you” approach to wealth management.
This approach has become a major issue for investors. Not only can they not see how their portfolios are performing, but they have had very little, sometimes no, idea how much they are being charged until way too late.
A change for the better, shaped by our experience
When Thomas Salter and I founded Netwealth, after years of working in financial services, we knew enough to realise that there was no wealth manager in the market that could meet our financial needs and those of our families.
We didn’t want anything particularly special. Simply a well-run, professional, transparent investment service that would help us reach our own financial goals as well as those for our children, our parents and potentially our broader families – all at the right price.
With advances in technology, and a small team of outstanding professionals who shared our vision of what wealth management should look like in the 21st century, we were able to design our service from scratch – based on what really matters to clients like us. So what are these attributes?
Our clients naturally expect Netwealth to offer a professional service, run by a highly experienced team, so let’s instead examine three key factors which make us different.
1. More control over your money
Time and time again, in surveys we have seen or conducted ourselves, a service that is easy to use is one of the most important attributes for individuals. As in all aspects of life, we want things to be simpler – investing wisely can be complicated and frustrating, so can we make it less off-putting?
At Netwealth, we smooth out the bumps in a typical investment journey by:
2. The benefits of transparency and lower fees
Transparency is not a cliché to us, it is fundamental to our service: how and where we invest, our investment process, our clients’ portfolio performance and how much we charge. This is a vital component of how we communicate and manage relationships with our clients.
Once things are transparent, it’s all the simpler to understand costs, and we know that lower fees matter greatly to investors. This comes as no surprise given the remarkable impact of lower fees over the long term.
We make it our business to make what we charge transparent, and at a cost which is dramatically lower than is typical.
3. Sharing economies of scale via the Netwealth Network
For Netwealth’s clients, having a wealth manager that extends the benefits to their family and friends is a dramatic step forward. We offered the Netwealth Network from the outset with a view to helping families drive economies of scale by offering a collective investment service – a feature unique to the UK.
Clients can invite up to seven people to join their Network, for a minimum investment each of £5,000 rather than £50,000. Each account is independent so members can pursue their own unique financial goals, while paying even lower fees based on the total amount invested by their group.
The Network is proving extremely popular, with 70% of our clients having taken up the service to share the benefits with those they care about.
How we think about money
Earlier we addressed why we set up Netwealth, which was to revitalise the outdated wealth management experience. It is also worth summarising how we think about where your finances should ideally be apportioned and what not to worry about too much.
When we invest there are many factors that we can’t control, such as inflation, the ebb and flow of markets, and the economic outlook. So when we talk to clients we always recommend an approach which serves us well: to 'Control the Controllables'.
While it pays to be mindful of the factors we can’t influence, and prepare where we can, it is better to focus our energy on such controllables that have a material effect on our capital such as fees, staying invested and being well diversified.
We should also think about the ideal allocation of our finances, a philosophy we put into practice using what we call the Three Pot Theory™ and which we examine in detail here.
In a nutshell, the theory helps to make managing our money easier by allocating different pots for our funds: 1. For our everyday expenses; 2. For our long-term stable investments or ‘sleep well’ money; and 3. For our passions and less liquid investments (such as holiday properties or private equity holdings). Netwealth’s focus is on Pot 2, to provide a stable core to your overall investments.
While the ‘Controllables’ and the Three Pot Theory explore our thinking, how we practically apply these is straightforward and consistent – to provide a modern investment service for people who don't have the time or the resources to invest efficiently themselves.
Minimising the bumps in the road
What makes Netwealth different is based on the way we designed our business, to meet the needs of time-poor professionals and their families who want someone to help them make their money work harder for them while still keeping it in plain sight.
By combining decades of financial expertise with cutting-edge technology, by being open on how our portfolios work and reducing fees, we aim not to reinvent the wheel, but instead to make the investment journey a lot smoother and more enjoyable.
Please remember that when investing your capital is at risk.