Amid the pandemic, many individuals re-evaluated numerous aspects of their personal circumstances. This was no different for clients of wealth managers or those helping them to achieve their goals. While working for a traditional wealth manager for almost 20 years, many clients were increasingly questioning their long-term investment performance. I was also assessing whether I was continuing to provide them with the service and value for money they deserve.
Clients had every right to ask questions. After all, they were paying sizeable fees in the expectation of receiving a satisfactory (after fees) return on their investment. This therefore prompted me to review the wealth management market – for my family’s own needs, and to benefit those who trust us to manage their money efficiently.
I became familiar with Netwealth and started to follow them with more than a passing interest. It quickly became apparent they had an impressive offering – it was clear, transparent, user friendly, low cost and they had consistently outperformed their benchmark over six years through active asset allocation and passive implementation.
A different approach
Netwealth’s investment approach differs from typical traditional wealth managers, who generally implement their investment strategies either by using active fund managers or directly investing themselves in single company shares. The issue with the former is that while some active fund managers do outperform, this tends to be for only short periods over the economic cycle. Therefore, selecting the right style/blend of funds to provide consistent long-term outperformance is evidently extremely difficult.
When wealth managers invest directly into single company shares, this may reduce fund manager charges, but the approach is going to be far riskier and unlikely to produce the highest risk adjusted returns.
After all, funds usually hold anywhere between 80-120 shares (or other securities) and it would normally be sensible for a client portfolio to be invested across several funds (covering various geographical regions and asset classes) in order to achieve an appropriate level of global diversification. Therefore, a portfolio invested in only 100 (say) individual shares or securities will therefore contain a significantly higher level of company-specific risk.
Furthermore, large fund managers (such as Aberdeen, BlackRock and Schroders) have extensive research capabilities with hundreds of global research analysts, so it is not realistic that a relatively small investment team (eg, part of a domestically based wealth manager) can accurately appraise the full universe of companies across the globe.
To make matters worse, it’s not uncommon for wealth managers to offer a "bespoke" service to higher value clients. However, all that this succeeds in achieving is divergence away from the firm's best investment ideas at a higher cost.
As a traditional manager charges more for their services this eats into the net return provided to clients.
Netwealth’s investment approach is simple but effective: actively managed asset allocation implemented through using low-cost passive funds. The overriding premise being that the majority of returns are typically driven by asset allocation, thus keeping all other costs to a minimum is paramount in improving the risk adjusted returns for clients.
Looking under the bonnet
I decided to test drive the service further. The Netwealth online portal allowed me to register for free without becoming a client, and begin using the various sophisticated and intuitive online planning tools. These helped me to easily re-evaluate my own family’s financial plan. Furthermore, the online fee calculator demonstrated that significant savings could be made – with overall charges one third to a half that of a typical wealth manager – so a huge cumulative saving over time.
There were also no initial set up charges, which is typically the norm with most wealth managers and often a barrier for clients wishing to move.
It was evident that all aspects of the Netwealth service had been designed with one thing in mind – to do the best for clients. It really struck a chord when reading about why Charlotte Ransom and Tom Salter established Netwealth in the first place: they simply could not find a wealth manager on the market to cater for the needs of their families, so they built one that could! I completely shared their ethos and facing similar challenges, I subsequently became a client.
I was very impressed with the slick and seamless onboarding process – it was what I hoped for and admittedly, what I expected from a modern company who use technology to do the “heavy lifting”. Also, while costs were significantly lower than a traditional manager, this did not in any way result in an inferior level of client service – quite the opposite, with the team on hand to provide proactive support when needed.
Having experienced the whole Netwealth offering for myself as a client, I was now convinced I wanted to work for the firm. I directly approached them to see if I could join the team as an experienced adviser. Working for Netwealth would enable me to continue helping and advising clients, but now with some powerful proprietary financial planning tools at my disposal, complemented by a superior and lower cost investment offering.
These features would enable me to spend more of my time having valuable discussions about financial planning, rather than fee and performance related conversations.
I am now delighted to be embedded within the welcoming team at Netwealth and proud to be part of this innovative and modern wealth management proposition. Having first experienced the qualities and benefits of the service I can be enthusiastic and comfortable about offering it to clients, friends and family – knowing it is truly in their best interest.
If you would like to know more about how we can help you, please get in touch.
Please note, the value of your investments can go down as well as up.